‘Gifting’ May Be Penalized By Medicaid
March 11, 2014
While people can “gift” up to $14,000 each to anyone they want to each year without tax penalty, that tactic is not going to fly if it is being done to “spend down” in order to get Medicaid to pay for nursing home care.
Centers for Medicare and Medicaid Services (Medicaid administrator) logo (Photo credit: Wikipedia)
In order to be eligible for Medicaid to pay for nursing home care, an individual can have no more than $14,400 in countable resources. Certain assets, such as a home, may be exempt in certain circumstances.
But if a person is “gifting” money to family or friends in order to spend down to reach the resource limit for Medicaid nursing home coverage, it better be done five years ahead of time, according to an article in the New York Daily News.
Gifts made within five years of applying are likely to disqualify the gift giver from obtaining coverage for a period of time based on how much was given. The larger the gifts, the longer the wait.
Medicaid will presume the gifts were made to get around the criteria for coverage.
The penalty period is likely to be in place even if the gifts were put into a trust.
Because Medicaid planning and the use of trusts is complex, the article suggests consulting with a qualified estate planning or elder law attorney.
Florida Court Ruling Provides Guidance For Those Using Trust For Asset Protection
March 6, 2014
A recent appellate court ruling in Florida gives former spouses the legal grounds to take funds from a type of trust that was thought to be unavailable to them.
State flag of Florida (Photo credit: Wikipedia)
Discretionary trusts are set up by the wealthy to give a trustee the authority to make or not make distributions from the trust. But the ruling late last year in Florida gives ex-spouses and the children of beneficiaries more leeway to gain access to those funds in certain circumstances.
However, estate planning experts are divided over whether this ruling establishes a precedent for other states, according to an article on fa-mag.com.
In this case, Bruce Berlinger challenged a lower court ruling that allowed his ex-wife, Roberta Casselberry, to obtain funds from a discretionary trust fund after he stopped paying her $16,000 a month alimony. The trust had been paying the money directly to her and not to him.
Usually, a creditor may not garnish funds in a discretionary trust if the trustee does not make the distributions to the beneficiary. In this case, the court ruling the ex-spouse was deemed to be an “exception creditor “and could seek distributions from the trust to satisfy her alimony requirements.
About 30 states have some form of “exception creditor” provision in their trust codes.
Hoffman’s Will Raises Legal Issues
March 5, 2014
Actor Phillip Seymour Hoffman, who died of a drug overdose in February, had not updated his will in years. The mistake could prove troublesome for two of his daughters and their mother.
Philip Seymour Hoffman (Photo credit: Wikipedia)
The will was signed in 2004 when the actor had just one child, Cooper, now 11. But he subsequently had two daughters, Tallulah and Willa, neither of whom are mentioned in the will.
This may or may not be a problem.
The award-winning actor, who was just 46 when he died, left everything to his longtime companion, Marianne O’Donnell, the mother of his three children. But that’s just the beginning of the story, according to an article on Forbes.com.
Since Hoffman and O’Donnell were not married, she does not get any of the estate tax breaks available to spouses. You can give an unlimited amount to your spouse during life or in an estate plan, with no federal or state tax applied.
Hoffman was worth an estimated $35 million at the time of his death. The federal estate tax exemption is $5.3 million, but the rest is taxed at up to 40 percent. New York has its own estate tax of up to 16 percent for non-spouses, with a $1 million exemption.
In all, Hoffman’s estate will be taxed at more than $15 million. And since they were not married, any assets that remain at O’Donnell’s death would be taxed again.
There may be a way out for O’Donnell, however, The will allows for her to turn down all or part of her inheritance and put it into a trust. Any assets that go into the trust bypass her estate and cannot be taxed when she dies.
But the fact that only Cooper was mentioned in the will, complicates the matter. The will provides that he get half the principal of such a trust when he turns 25 and the other half when he turns 30. However, the law of New York and most states protects children not named in a will that has not been updated from being disinherited.
The article suggests that O’Donnell, who is the executor of the will, should appoint a guardian to represent the two sisters.
Other matters that could complicate matters include if Hoffman had set up a retirement account or a life insurance policy.
But all the confusion could have been avoided if Hoffman had included a clause in the will stipulating that any reference to Cooper includes any other children born after him.
What To Do When Your Elderly Parents Move In With You
March 4, 2014
Filed under: Caregivers,Elder Law,Finances — admin @ 5:36 pm
More and more, elderly parents are moving in with their grown children. With the increasing costs of nursing homes, this makes financial sense for many people. But what should you and your parents do to prepare for such a dramatic move?
English: My parents. (Photo credit: Wikipedia)
Issues that must be considered range from the financial to the emotional, according to an article on elderlawanswers.com.
The first thing to consider is the financial details. If the adult children who are taking in their parents have siblings, they should work something out so that the other siblings (those not taking in the parents) contribute something towards the costs of rooming and boarding the parents.
Costs can mount up. Besides food, one may need to do renovations or hire a home care aide.
Consider having your parents sign a contract under which they pay their children for taking them in. Maybe the parents can contribute to the remodeling or gift their own house to their children. There may be tax consequences to these actions to consider.
To avoid or reduce resentment and guilt down, family members should discuss everything out in the open at the outset. An elder law attorney can help work these things out.
Once the decision has been made, one should consider making the home senior-friendly. This may involve putting on an addition to the home, installation of grab bars in the bathrooms, installation of ramps or conversion of a room on the first floor into a bedroom if necessary.
You may also be able to take a tax deduction by claiming your parents as dependants.
And make sure to seek out support from organizations such as local agencies that work on aging issues.
The Right Way to Plan for Your Special Needs Child
February 27, 2014
Parents of special needs children have unique needs when it comes to estate planning. As a recent article explains, parents of special needs children who have not yet created an estate plan should put it on the top of their to-do list.
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Unlike the majority of non-special needs children, many special needs children will require constant care for the remainder of their lives. Additionally, many special needs children are not able to work or otherwise earn the income necessary to pay for their care. Therefore, planning for a special needs child includes not only leaving the proper amount of resources for procuring the proper care, but also helping to determine how that care will be provided.
However, planning for special needs children is not as simple as leaving ample resources and a plan for that child’s continuing care. This is because most special needs children already receive government benefits to assist in paying for their care. However, these benefits are need-based and will cease if the child no longer qualifies to receive them. Therefore, many parents of special needs children employ a special needs trust. This trust, rather than the child, owns the child’s inheritance. By using this trust, the money is not considered to be the child’s and he or she will continue to receive government benefits.
The Fifteen Best Countries for Overseas Retirement in 2014
February 26, 2014
It is not uncommon for Americans to spend significant time away from their home state in order to take advantage of more favorable living conditions. Be it to live for less, for diversity investments, or to simply enjoy one last adventure, more and more Americans are choosing to retire abroad. A recent article discusses the 15 best countries for Americans to retire in 2014.
The Annual Global Retirement Index created the list based on a series of factors, including the price of necessary goods and services such as groceries and utilities, average temperature, and friendliness of the locals. As executive editor Jennifer Stevens explains, the list is “designed to be a real-world snapshot of the places we deem most worth a potential-retiree’s attention today.”
English: View of the Chagres River in Gamboa, Panama. (Photo credit: Wikipedia)
Topping the list for 2014 is Panama. As Stevens explains, Panama offers American retirees a “great combination of variety and value…No matter what it is you’re hoping to find, Panama is a good place to look for it.” The remaining rankings are as follows: (2) Ecuador, (3) Malaysia, (4) Costa Rica, (5) Spain, (6) Colombia, (7) Mexico, (8) Malta, (9) Uruguay, (10) Thailand, (11) Ireland, (12) New Zealand, (13) Nicaragua, (14) Italy and (15) Portugal.
Taking advantage of overseas options does not always mean changing your place of residence, but precautions should be taken to make sure that your estate plan is appropriately adjusted for your travel. To determine your unique considerations before booking your tickets, consult with a qualified estate-planning attorney.
Are You a Sitting Duck? Four Asset Protection Strategies to Consider
February 25, 2014
Many investors are so focused on their return on investment that they fail to consider or implement asset protection strategies. As a recent article explains, an investor who has not protected his investments is a mere sitting duck. If you haven’t considered asset protection for your investments, below are four strategies you should consider:
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1. Insurance: This is an important part of any asset protection plan because it shifts the risk of loss to somebody else. Insurance can be purchased for almost any asset or activity.
2. Wait for Social Security: Social security is an important safety net for an individual or couple as they age. By waiting as long as possible before withdrawing benefits, an individual or couple can increase their ultimate return.
3. Execute and Update an Estate Plan: An estate plan accomplishes many tasks. Not only does it provide for your loved ones after your death, but it can also utilize various tools to reduce the tax liability on your estate and your heirs.
4. Consider Business Ownership for a Favorable Tax Rate: Ownership of assets by a business entity rather than an individual often means a lower tax liability on the assets. If you have a home business or simply a large amount of assets, consider forming a corporate entity to lower your tax liability.
About an Angel: Estate Planning Lessons from Farrah Fawcett
February 20, 2014
Recently, a number of legal battles have stemmed from Farrah Fawcett’s death. Perhaps most notably, the University of Texas sued Fawcett’s partner Ryan O’Neal for taking Andy Warhol’s famed Farrah Fawcett painting from Fawcett’s home after her death. A recent article discusses what can be learned from the legal mess.
Farrah Fawcett (Photo credit: rocor)
Although most families do not own million dollar items such as Warhol paintings, it is not uncommon for families to get into similar legal fights concerning valuable or sentimental property left behind after a loved one dies. These fights are also common when a person gifts a piece of personal property before his or her death. Often, these gifts are inconsistent with the person’s estate planning documents, leading to a fight over whether the gift was valid.
In order to avoid similar fate, it is important to make your wishes concerning specific personal items exceedingly clear. If you are aware of a particular object that may cause fighting amongst your heirs, explain its disposition in your will. If you would like to give it away before your death, discuss the gift with your other heirs. If they understand your reasoning, they will be less likely to file suit after your death.
Four Actions to Take Before Your Death
February 19, 2014
The end of a person’s life can be a difficult and confusing time. However, it doesn’t have to be. A recent article discusses four actions that every person should complete as they prepare for the next life. By completing these four actions, an individual can get the most out of his or her final days.
- Estate Planning: Estate planning is a process. Every person should execute his or her first estate plan upon becoming an adult. Importantly, however, a person should not neglect his or her estate plan. It is good practice for individuals to update their estate plans every three to five years, as well as after an important family event such as a birth, death, or marriage.
Cover of The Bucket List
- Making Decisions for End of Life Care: The method through which a person wishes to leave this world is a highly personal decision. Unfortunately, many people don’t realize that they can take control over how they spend their final days. This control is gained through a living will and medical power of attorney.
- Bury the Hatchet: It is impossible to know when the end will be. While some people may have the time and notice necessary to atone and make amends with the individuals they have hurt or from whom they have otherwise become estranged, others will pass on suddenly without any warning. It is therefore important to take care to not carry old grudges or remain estranged from former friends or family members.
- Bucket List: The idea of a bucket list has been gaining in popularity since the 2007 movie of the same name. A bucket list is a list of things that an individual or couple would like to do before “kicking the bucket.” If you have any such desires, consider documenting them as the first step toward making them happen.
Tax Avoidance Scheme for Wealthy: Move Assets Across State Borders
February 18, 2014
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Not all states are created equal when it comes to income taxes. As part of their estate planning and asset protection schemes, wealthy Americans are taking advantage of this inequality by moving billions of dollars’ worth of assets to newly created trusts in states that do not impose income taxes. A recent article discusses this tax avoidance scheme.
(Photo credit: LendingMemo)
The scheme is similar to that employed by large corporations that move operations or assets overseas to avoid or reduce taxes. Popular states for tax avoidance include Delaware and Nevada. The legislatures for both states have passed laws in order to make their state more appealing for wealthy Americans considering moving their trusts. While Nevada has no state income tax, Delaware allows out-of-state beneficiaries to avoid income tax liability.
Estate planners shifted their focus to income tax avoidance after Congress significantly narrowed the field of individuals who will be responsible for paying federal estate tax. Currently, federal estate taxes only apply to those who have an estate with a total value of $5.34 million.
However, this practice is not without scrutiny. Officials in the state of New York are particularly concerned, as this practice drains an estimated $150 million per year from the state. Recently, a New York tax commission recommended laws that would limit the use of out-of-state trusts.
To evaluate your options in setting up a trust, please contact us at 732-521-9455.