Friday, June 24, 2005 - Some Heirs Find A Costly Surprise: Bill From Medicaid

Category: Elder Law - Some Heirs Find A Costly Surprise: Bill From Medicaid: "As Medicaid spending surges, many states are embracing an aggressive way to recoup some of their costs: going after the estates of Medicaid recipients when they die."

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Thursday, June 23, 2005

Time for Your Annual Checkup: Key Questions for Small Business Owners

Category: Business Law and Planning

Time for Your Annual Checkup: Key Questions for Small Business Owners: "Robert Half Management Resources has identified 10 key questions for small business owners to address when conducting their annual business checkup, and offers tips for maximizing personnel resources."

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SCORE - Free advice to Small Businesses

Category: Business Law and Planning

Many times a startup business client comes to the lawyer with questions beyond business formation, organizational strucutre and partnership arrangements. As a counselor to the business, the client also asks business development questions in areas such as marketing, employee hiring, training and retention, financing, and a "score" of other areas. A successful small business needs to have a team of advisors, including an attorney, accountant and a "business mentor".

SCORE "Counselors to America's Small Business" is an excellent place to find a "business mentor". It is an organization dedicated to helping the budding entrepreneur with a great idea take that idea from concept to successful reality.
SCORE offers retired executives as "business mentors" to help a person develop their business from concept to reality with real-life experience and advise. And the best part - it is FREE.

SCORE describes itself as:

"SCORE "Counselors to America's Small Business" is the best source of free and confidential small business advice to help you build your business—from idea to start-up to success. The SCORE Association, headquartered in Washington, D.C., is a nonprofit association dedicated to entrepreneurial education and the formation, growth and success of small businesses nationwide.

SCORE’s extensive, national network of 10,500 retired and working volunteers are experienced entrepreneurs and corporate managers/executives. These volunteers provide free business counseling and advice as a public service to all types of businesses, in all stages of development. SCORE is a resource partner with the U.S. Small Business Administration.

SCORE offers Ask SCORE email advice online.

Face-to-face small business counseling at 389 chapter offices.

Low-cost workshops at 389 chapter offices nationwide.

Click here to find the SCORE chapter office in your area. Having a seasoned, experienced, wise guide in your corner can make a big impact in your confidence, motivation and ultimate business success."

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Wednesday, June 22, 2005

Planning for Family Members with Special Needs

Category: Estate Planning

Do you have a mentally or physically disabled family member? If so, giving money to that family member, or leaving it to him or her in your Will, without considering the consequences of that action, could cause that person to lose benefits and actually become less secure then before the money was transferred to them.

If a person is mentally or physically disabled, the federal government, the state, and private organizations may all provide aid to this person. Many times, qualification for this aid depends on the person's assets and income. Just giving the person money could actually disqualify him or her from benefits that they are already receiving, including jobs and housing benefits.

Furthermore, if a person is disabled, can he or she manage money? If not, is there a Guardian or other person who should be the manager?

With proper planning, the special needs of a disabled individual can be easily met. A "Special Needs Trust" or "Supplemental Needs Trust" can be created to manage any gift or inheritance in such a manner that the disabled person continues to be eligible for benefits and aid, but has an additional nest egg of assets. The trust can be created as a separate trust document or in your Will. A "Special Needs Trust" or "Supplemental Needs Trust" typically describes a trust where the Trustee is granted unlimited discretion in making distributions to the beneficiary, with the caveat that the distributions should be made in such a manner as to not jeopardize any other benefits and aid the person might be receiving. For example, instead of giving the beneficiary money to purchase a new home, the trust could purchase the home and allow the beneficiary to live there.

If your child is incompetent, and they are an adult, it is critical that you become the child's Guardian. First, this grants you the legal authority to make decisions on behalf of your adult child. Second, it establishes the need for the Guardianship - if you were to die, would another person know where all the medical history is to easily establish the need for the Guardianship in court? Third, it allows you as the Guardian to suggest to the court who an appropriate successor Guardian might be.

Regardless of all the critical reasons to do special needs planning, if you haven't taken any steps to date, you are not alone. A survey discussed in the article
Financial Planning For Kids With Special Needs - found:

* 88% of parents who have children with special needs haven't set up a trust to preserve eligibility for benefits such as Medicaid and Supplemental Social Security.

* 84% haven't written a letter of intent outlining an agreement for the future care of the child.

* 72% haven't named a trustee to handle the child's finances.

* 53% haven't identified a guardian for their child.

These statistics are scary in that the failure to plan will result in an additional burden and costs for the disabled person and his or family.

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Monday, June 20, 2005

Don't just deed your house to your child

Category: Elder Law, Estate Planning, Tax Law and Planning MAIL BAG: Mom made a costly error in deeding house to child is an example of good intentions coupled with a lack of understanding of tax laws resulting in a large unexpected tax.

While the owner of their own primary residence enjoys an exemption from capital gains tax on the sale under IRC Section 121, a non-resident owner does not. See IRS Publication 523 for more information.

Here, mom gifted her house to son, and when he went to sell it to pay for mom's care, he found out that he owed capital gains tax on over $400,000 on the sale of the house. He (mistakenly) believed there was no tax on the sale of a home. He misunderstood that the tax exemption only applied (1) to his primary residence, not any residence he owned, and (2) only up to certain dollar limitations ($250,000 for a single person and $500,000 for a married couple).

This situation described in this article could have been avoided by considering several other alternative plan with the house such as:

  • Mom selling house to son for a note - mom's sale is sheltered from tax through IRC Section 121, and son's basis in the house is the purchase price,
  • Mom and son joining together to take out a home equity line so that she can keep the house but pay for her care,
  • A reverse mortgage,
  • A gift to son with mom retaining a life estate so she can always live in the house. The life estate would also include the house in her taxable estate, which in turn means that upon her death the son's basis is the fair market value at time of death (a "step-up" in basis under IRC Section 1014) - son can rent the house to generate income to pay for mom's care if she can no longer live at home.

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Sunday, June 19, 2005

Checklist for Surviving Spouses -

Category: Probate and Estate Administration

Checklist for Surviving Spouses -

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Friday, June 17, 2005

Get what you want from a Financial Planner

Category: Financial Planning

Marshall Loeb's Daily Money Tip: Getting what you want from a financial planner - General News - Personal Finance A quick guide to what you can expect a financial planner to do for you.

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Thursday, June 16, 2005

Are you really liable if someone trespasses on your property and gets hurt?

Category: Miscellaneous Musings

As a property owner, do you ever wonder what happens if someone comes onto your property uninvited and gets injured? A burglar breaks into your business and hurts himself by tripping over carpet that is not tacked down, sues you and wins - an urban legend or not? A child climbs your fence and gets into your pool and is injured - are you at fault?

From a legal perspective, "negligence" can be defined as a "failure to act with the prudence that a reasonable person would exercise under the same circumstances". You need to be aware that the "reasonable person" may be found to have different standards of reasonableness then you do. Also, more then one party can be negligent in a single accident.

As a property owner, you have a responsibility under the law to keep your property clear of items that might cause harm to other, or to notify others of their existence (ie "Keep Out - Dog" or "Keep Out - Well"). You have a heightened responsibility to protect any "attractive nuisance" such as a pool, from children, as the law tends to assume that children will wander and are not as knowing as adults (not to mention they may not be able to read those signs you put up).

So even in a situation where you took no action to cause harm to another, you may be found liable to some degree because you didn't take any action to prevent harm to another.

However, being found to be partially at fault for harm to another is not the end of the inquiry. Instead, depending on how much "at fault" you are deemed to be, and how much "at fault" another party is deemed to be, and where the accident took place, will determine if you are required to pay damages to anybody else.

There are several theories of sharing responsibility when negligence causes harm to another.

  • Pure Contributory Negligence - If the damaged party is even 1% at fault, that party is entirely barred from recovery. If your trespasser is deemed 5% at fault for the damages, and you 95% at fault, the trespasser is totally barred from recovery.
  • Pure Comparative Negligence - The damages that can be awarded to the party at fault are proportionately reduced by the amount to which they are deemed at fault. If your trespasser is deemed 95% at fault for the damages, and you 5% at fault, you will be liable for 5% of the total damages.
  • Modified comparative Negligence - A combination of the two. The damages that can be awarded to the party at fault are proportionately reduced by the amount to which they are deemed at fault. However, if the damages party is more then 50% or 51% at fault (depending on the state) they are totally barred. So, if your trespasser is deemed 60% at fault for the damages, and you 40% at fault, you will have no liability. However, if your trespasser is deemed 40% at fault for the damages, and you 60% at fault, you will be responsible for 60% of the damages.

A chart listing the theory of how responsibility for negligence is shared by state can be found at

Matthiesen, Wickert & Lehrer, S.C. - Contributory Negligence/Comparative Fault Chart.

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Tuesday, June 14, 2005

Thoughts before making that Charitable Contribution

Category: Tax Law and Planning

Good tips to consider before you make that charitable contribution - you should know what you are contributing to, with what result.Bluefield Daily Telegraph

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Midyear Financial and Tax Planning Checkup

Category: Tax Law and Planning, Financial Planning

Portsmouth Herald Financially Speaking by Holly Hunter: Mark calendar for midyear financial checkup - If your spring cleaning resulting in a pile of papers to go through, or you resolved to make some financial housekeeping changes this year, some food for thought.

Also, some views from James Jimenez, CPA, a partber at Fass & Associates, certified public accountants located in Parsippany, New Jersey as to mid-year tax tuneups:


It’s summertime! Probably the last thing on your mind is tax planning. The problem is that if you wait until December to think about your 2005 taxes, there won’t be enough time for any tax strategy to take effect. But if you take the time to plan now, you still have six months for your strategy to work this year. So set aside some time for tax planning right now. Begin by pulling out your 2004 tax return.

* Review your income and deductions for last year. Did you lose any credits or deductions because your income was above a certain threshold amount? If so, find out what you can do to keep this year’s income below the threshold in order to save the tax break.

* Evaluate your investment portfolio. By now you should have an idea whether you’ll be selling any investments this year. Taking losses by pruning your portfolio can be an effective way to manage income.

* Build a retirement fund and cut taxes too. Take advantage of the new higher contributions allowed for IRAs, SIMPLEs, SEPs, and 401(k) plans. If you will be 50 or older by December 31, take advantage of the additional “catch up” contributions you can make to your retirement plan.

* Check out education tax breaks. If you or your children are in college, review the education tax breaks for 2005. These include the deduction for higher education expenses, a deduction for student loan interest, and contributions to Section 529 plans or education savings accounts.

* Don’t overpay your taxes. Finally, if you received a large refund on last year’s taxes, consider reducing your withholding for this year. To adjust your withholding, file a new Form W-4 with your employer."

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Friday, June 10, 2005

Connecticut Restores Estate Tax in Move to Balance Budget

Connecticut Restores Estate Tax in Move to Balance Budget - New York Times: Connecticut has followed the path of New Jersey and New York in its new budget, approved June 7, 2005, by the reinstitution of a state estate tax. As with New Jersey and New York, this new tax will be generating dollars offset by the the current federal estate tax roll-back, which was partially funded by eliminating the sharing of federal estate taxes with the states. Connecticut's estate tax will tax estates valued at $2 million or more, beginning at about 5 percent and topping out at about 16 percent.

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Thursday, June 09, 2005

Military Deployment of Owners and Employees - Small-Business Owners Fail to Plan

Military deployment is tough on small-business owners / Reservists rarely have a plan set up to continue to run their business provides food for thought for business contingency plans that small businesses need to consider where owners and employees are National Guard Reservists.

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Tuesday, June 07, 2005

A Profile of Older Americans: 2004 - Statistics from the Administration on Aging

AoA - Statistics - A Profile of Older Americans: 2003: "A Profile of Older Americans: 2004" is an interesting study in what are the demographics of seniors. For example, New York has more than 2.5 million residents over 65, and New Jersey more than 1 million.

Some other interesting facts and figures from the study:

  • In 2002, over 12.7 million persons aged 65 and older were discharged from short stay hospitals. This is a rate of 3,575 for every 10,000 persons aged 65+ which is more than three times the comparable rate for persons aged 45-64 (which was 1,159 per 10,000).
  • In 2002, older consumers averaged $3,741 in out-of-pocket health care expenditures, an increase of 45% since 1992. In contrast, the total population spent considerably less, averaging $2,416 in out-of-pocket costs.
  • While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increases dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+.
  • About 3.6 million elderly persons (10.2%) were below the poverty level in 2003. This poverty rate was not statistically different from the poverty rate in 2002. The historic lowest level of 9.7% was reached in 1999. Another 2.3 million or 6.7% of the elderly were classified as "near-poor" (income between the poverty level and 125% of this level).

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Monday, June 06, 2005

Law Professor Blogs

For those of you interested in the theoretical underpinnings of the law, any maybe some more esoteric musings and thoughts, I have come across Law Professors Blogs, self described as:

"a network of web logs ("blogs") designed from the ground-up to assist law professors in their scholarship and teaching. Each site focuses on a particular area of law and combines both (1) regularly-updated permanent resources and links, and (2) daily news and information of interest to law professors. Our editors are leading scholars and teachers who are committed to providing the web destination for law professors in their fields."

These are forums for thoughtful discussions and questions about the law, and provide a perspective distinct from a practitioner. They are also seeds for thought for ideas discussed here.

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Friday, June 03, 2005

Gifting and Gift Tax Series

Joel A. Schoenmeyer, Esq., of the Chicago area, and owner and moderator of Death and Taxes: The Blog, has an informative 3-part (so far) series on gift tax issues here. The series discusses the facts about gifts - including debunking some misconceptions.

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Thursday, June 02, 2005

Tenants by the Entirety - Asset Protection of your Home in New Jersey

For doctors and other professionals exposed to potentially large personal liability, a common question is "How can I protect my house from a judgment creditor". This question is usually motivated by the desire to protect your spouse and children given the litigious nature of a person's chosen profession. Holding the deed jointly with your spouse as Tenants by the Entirety may address some of these concerns.

Asset protection planning ranges from the very simple to the highly complex. The risks and benefits of various planning techniques also runs the gamet. Absent a fraudulent conveyance (a topic for another day) if you give away an asset, your creditors cannot reach that asset. By giving away an asset to a spouse, you can maintain some influence over the asset - by having a continuing relationship with your spouse - yet put the assets beyond your creditors. Of course, the problem always arises of what happens if at some point in the future you no longer have influence over your spouse due to death, divorce, or your spouse's own liabilty concerns.

Generally speaking unless one spouse has taken steps to guarantee the debt of another, one spouse is not responsible to use his or her own assets to pay the obligations of the other spouse (with the glaring exception of disability and Medicaid). Although it is a gross oversimplification of asset protection planning, if Wife has significant assets, and Husband has none, a judgment creditor cannot attach assets of Wife to satisfy the debts of Husband. If Husband transfers assets to Wife (absent any fraud), so that all of the family assets are held by Wife, then a judgment against Husband in the future cannot attach to the family assets held by Wife. The downside to this is (1) a future divorce, where Wife now has all assets, and (2) assets being deemed to Husband through the Wife because Husband continues to exert control over the assets.

For many people, the home is the largest asset. There are also obvious emotional ties to the home that drive people to protect it from creditors. Real estate owned by a husband and wife in New Jersey can have a special form of joint ownership called Tenants by the Entirety. When a deed conveys property to two people as husband and wife, a Tenancy by the Entirety is automatically created. A Tenancy by the Entirety is similar to Joint Tenants with Rights of Survivorship, in that the surviving spouse will take title to the entire property outside of probate. However, it also includes the additional benefit of protecting the property from some creditors. A home held as Tenants by the Entirety may only be reached by creditors of joint debts of both the husband and wife. In the event of an individual debt of or judgment against a husband or wife, the property may not be partitioned, sold, or encumbered without the permission of both spouses - in essence, protecting the property from a forced sale as the non-debtor spouse is unlikely to consent to the sale. Further, neither spouse may convey his or her interest in the property without the consent of the other.

To understand the downside of a Tenancy by the Entirety as an asset protection device, you must first understand the underlying rationale of why creditors cannot partition the home. The rationale of a Tenants by the Entirety is that it would be patently unfair to the non-debtor spouse to force a sale of the primary residence to satisfy a debt the non-debtor spouse did not incur. However, this does not prevent the creditor from placing a judgment lien on the property - just from forcing the liquidation of the property to exercise the lien. This leads to the downside....if the non-debtor spouse dies, sole title to the property by operation of law passes to the debtor spouse; if the debtor spouse has sole title to the property, there is no bar to the creditor forcing the liquidation of the property to satisfy the judgment. This means that Tenancy by the Entirety can be an extremely effective asset protection plan - but only if there is never a divorce or death of the non-debtor spouse. Since these events are out of the potential debtor's control, a person very concerned about liability protection might look at other methods.

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