Thursday, February 09, 2006

Looking for the Perfect Valentine's Day Gift - Create A Love Drawer

Category: Estate Planning, Probate and Estate Administration

Now, before you get thinking "those" thoughts, a "love drawer" here is not what you might think. It is a catchy term for giving your family the gift of having all your financial records in one place, and letting them know where that place is.

From CBS News Setting Up A Love Drawer February 7, 2006�13:34:28: "Still looking for that perfect Valentine's Day gift? Presents like candy, flowers or jewelry are always nice - but financial author and radio host Dave Ramsey tells The Early Show co-anchor Rene Syler that a real gift of love can be giving your family peace of mind in case something happens to you.

Ramsey has come up with a concept he calls the 'love drawer.' It's a place where you keep together important documents, such as wills, insurance and financial information.

'It's an ideal Valentine's Day gift if you're smart enough to put chocolates and roses with it,' Ramsey jokes. 'It's an ideal gift. When you're a real man, a real woman, the way you say 'I love you' to your family is you're prepared. You've got your act together if something happens to you. "

The need for a "love drawer" is very real. In assisting a family with administering the estate, sometime the most difficult part of the process is finding out what the deceased person had. Not to be facetious - but given the nature of an estate administration, you can't exactly ask the person "where is your original will??". Not only is this frustrating, but can be very costly in terms of increased legal fees (if a copy of a will needs to probated for example, or the time spent tracking down whether or not an asset even exists before a date of death value can be obtained) as well as increased expenses (banks and brokerage houses charge for having to go back through their records when you don't have them).

So consider setting up a "love drawer". In there should be copies of:
Living Will.
  • General Durable Power of Attorney.
  • Last Will and Testament.
  • And all Trusts created by you, where you are a Trustee, or where you are a beneficiary
  • Last years statement for all bank accounts, investment accounts, annuities, IRA's, 401(k), life insurance (basically, anywhere you have assets).
  • Any stocks or bonds you hold in certificate form. To do your family a real favor, transfer those stock certificates to a brokerage account.
  • A list of your advisors and their contact information, including your attorney, accountant, financial planner, investment advisor, insurance agent.
  • Your burial wishes.
  • A list of who should get what personal property.

So give a little love this Valentine's Day season.

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Wednesday, February 08, 2006

Death, Taxes, and Bush Budget Proposal

Category: Estate and Inheritance Tax

"The President aims to end estate taxes for the wealthiest Americans. He also wants to scrap a $255 death benefit for the poorest"

In a not unbiased article, Death, Taxes, and George W. Bush, a brief outline of the budget proposal that will effect the cost of dying in America. (There is also a nifty reader comment section that gives voice to a variety of opinions).

President Bush and his administration have been anglign to kill the so-called death tax since they were first elected into office. In prior posts (Only .5% of US Estimated to Pay Estate Tax (and other op-eds for reform, Effects of the Federal Estate Tax on Farms and Small Businesses - Congressional Budget Office Paper ) , I have questioned the emotional and economic elements of this proposal. While eliminating a tax can be something to cheer about, New Jersey and New York residents need to bear in mind that each state will continue to impose its own estate tax outside of and federal estate tax.

As to the Social Security death benefit, it is little known and a small amount. The article describes the issue around repeal of it as follows:

"According to the Bush budget, the benefit would be eliminated "because it no longer provides a meaningful monetary benefit for survivors yet requires significant administrative resources." The Social Security Administration estimates that eliminating the benefit would save the government about $190 million next year.

A spokesman says the benefit has not been increased since 1954 and "no longer bears a relationship to funeral costs.""

However, the death benefit is a real benefit to the person who was relying on social security, and whose last check was just automatically withdrawn as you need to survive the month to earn your social security - the payment for the month you die must be returned.

It is sure that the debate will rage on.

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Tuesday, February 07, 2006

Sounds too Good to be True? Financial Scams Targeting Seniors on the Rise

Category: Elder Law, Estate Planning, Financial Planning

An article on an unfortunate trend from - Financial scams expected to boom as boomers age addressing the issue of aggressive marketing of estate and financial planning seminar to seniors, where the products offered through the seminars don't meet, or are inappropriate for the senior's needs.

"While people 60 and older make up 15% of the U.S. population, they account for about 30% of fraud victims, estimates Consumer Action, a consumer-advocacy group.

As this gargantuan generation of boomers starts to retire, 'You're going to see more of these seminars and more of these sales pitches,' says James Nelson, assistant secretary of state in Mississippi. 'Wherever retirees are congregated, you're going to have these people preying on them.'"

There is real money controlled by baby-boomers, which unfortunately can make them targets for unscrupulous marketers of products. The article states that "[b]oomers have more than $8.5 trillion in investable assets. Over the next 40 years, they stand to inherit at least $7 trillion from their parents, research firm Cerulli Associates estimates."

This does not mean that all seminars geared to estate planning and financial planning are scams - just the opposite is more likely true. Seminars are a wonderful opportunity for attorneys and financial planners to educate the public about complex areas of the law that may effect them, as well as investment opportunities to reduce those risks. But, you should exercise some caution and common sense in following up from these seminars. Some things to keep in mind.

  • Only a licensed attorney in your state can prepare a Will, or should prepare any estate planning document, including a trust. You can contact your state or local bar association to see if the attorney is in good standing and if any complaints have been successfully filed against him or her.
  • You and your goals and needs should be an attorneys first concern - not the goals of your children, the financial planner, or the attorney. If you don't feel that your goals and needs are the first priority, see some-one else.
  • There are no magical solutions to estate and tax planning - there are tried and true techniques that an experienced estate planner can apply to your situation. If someone claims to have the secrets of a good estate plan, you need to know that there are no secrets.
  • There is no one magic financial product that solves all woes - as with estate planning, the right product for you must be tailored to your specific asset mix, income, needs and goals. An experienced financial planner will not recommend a product until he or she has analyzed your needs. And be sure to ask for (1) the charges for the product, (2) the agent's commission, and (3) any penalties that might exist in liquidating the product.

If you do think you have been a victim of fraud, there is a sidebar in the article talking about your options.

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Monday, February 06, 2006

Personal Property Distribution in Your Will - The Small Stuff Really Matters

Category: Estate Planning

This article from a local Maryland Paper - the Herald-Mail reminded me of one of the strange truths about administering an estate after someone dies - the biggest issues are often over the items with the smallest extrinsic value, but the largest emotional value. For the most part, if you have a will, the distribution of your "main assets" (bank account, stocks, bonds, real estate, etc.) is pretty cut and dried - liquidate the assets, pay expenses, and divide up by the percentages set forth in the will. In most cases, that means that each child gets an equal share, and there are limited issues (unless there is a claim of undue influence, etc.).

However, it is not so cut and dried when it comes to your "stuff" - think here clothes, furniture, jewelry, decorations, family photos - items that may have no value to anyone outside of your family, but a huge value to your family members. Combine that with the fact that most personal property clauses in a Will are something like "To my then living children, to be divided among them as they shall determine, or if they cannot agree, as my executor shall determine. Any items not so distributed shall be liquidated, and the proceeds distributed to such children."

The problem comes in when the children don't agree - and this disagreement is set against a context of a lifetime of family jostling between siblings. You may think neither child would want your collection of crystal pigs for example - but wait to see the fireworks that fly when one child takes the pigs because "Mommy wanted her to have them" and the other children don't agree. The issue here isn't the thing itself, as much as the memories attached to it. Memories are harder to divided up into equal percentages than a bank account.

Some possible solutions?

In New Jersey, pursuant to NJSA 3B:3 11, you can write a letter stating who gets what for your personal stuff and sign it - no need to go through the formalities of a Will. This informal letter can only control the distribution of your "stuff", not your hard assets. However, it is very useful as you can keep changing it without having to go back to the attorney.

In other States (like New York) that do not allow for a personal property distribution, one idea is to a formal codicil (amendment)to your will to address personal property. You should see your attorney each time you want to change the codicil, but at least you will only be changing a smaller document.

Another idea is the "Stand in Line and Pick" concept - somewhat like the football draft. It goes something along the lines of kids drawing numbers, and then child with the highest number getting to pick any item (or from a specified group of items such as photo albums, jewelry, keepsakes collections, guns) and then the next in line can pick and so forth.

However, if you absolutely want an item to go to someone (1) let all your children know, while you are alive, that it is your wish for your engagement ring to go to your eldest grandson for example, not just the family you are leaving the item to, so there is no miscommunication down the road, (2) write down, whether formally or informally as your state allows, where you want your assets to go.

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Thursday, February 02, 2006

New Medicaid Law Passed by Congress

Category: Elder Law


Congress Passes Bill Containing Punitive New Medicaid Transfer Rules: "By a vote of 216-214, the U.S. House of Representatives has passed budget legislation that will impose punitive new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. The Deficit Reduction Act of 2005 now goes to President Bush for his promised signature. "

A more detailed excerpt from the article:

The Impact on the Elderly

The legislation will extend Medicaid's "lookback" period for all asset transfers from three to five years and change the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters a nursing home and would otherwise be eligible for Medicaid coverage. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning she cannot afford to pay the nursing home.

Because the change in the penalty period start date will likely leave nursing homes on the hook for the care of residents waiting out extended penalty periods, ElderLawAnswers has dubbed the bill “The Nursing Home Bankruptcy Act of 2005.” Nursing homes will likely be flooded with residents who need care but have no way to pay for it. In states that have so-called "filial responsibility laws," the nursing homes may seek reimbursement from the residents’ children.
The bill also will make any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000.

The legislation also:

  • Establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
  • Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
  • Sets forth rules under which an individual's CCRC entrance fee is considered an available resource.
  • Requires all states to apply the so-called “income-first” rule to community spouses who appeal for an increased resource allowance based on their need for more funds invested to meet their minimum income requirements.
  • Extends long-term care partnership programs to any state.

In addition, the legislation incorporates provisions in the original budget bill passed by the Senate closing certain asset transfer "loopholes," among them:

  • The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
  • Funds to purchase a promissory note, loan or mortgage will be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.
  • States will be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.
  • States will be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.
While the federal law applies to all transfers made on or after February 1, it also gives the states time to come into compliance. This gives families in most states a little time to plan. The deadline for states to enact their own laws varies from state to state, but generally is the first day of the first calendar quarter beginning after the end of the next full legislative session.

The bottom line is if you have been hesitating about seeing an attorney about long-term care planning, hesitate no longer. If you have considered protecting some assets for your loved ones in case you later require long-term care, you should contact a qualified elder law attorney now.

For the full text of the Deficit Reduction Act of 2005 in PDF format, click on: The section on the transfer provisions begins on page 222.

For the full text in HTML, go to and type "S 1932" in the Search Bill Text box. Then click on the fourth version of the bill (S. 1932 EAS).

For an Associated Press article on the vote, click here.

Related ElderLawAnswers articles:
New Medicaid Law Means Adult Children Could Be on Hook for Parents' Nursing Home Bills
Many Poor Will Lose Medicaid Under Budget Bill, Report Predicts

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Wednesday, February 01, 2006

Tax Deductions Not to be Forgotten About - Look here before you file

Category: Tax Law and Planning

Courtesy of James Jimenez, CPA of Fass and Associates in Parsippany, New Jersey:

Don’t Miss These Often Overlooked Deductions

If you itemize deductions on your tax return, every additional deduction you find will save you money. Here’s a sampling of often-missed deductions. As you review the list, be aware that certain miscellaneous deductions are deductible only to the extent they exceed 2% of your adjusted gross income (AGI), and medical expenses are deductible only to the extent they exceed 7.5% of your AGI. Also, itemized deductions are limited for higher-income taxpayers.

Often-missed deductions:

  • Disaster losses not reimbursed by insurance.
  • Job-hunting travel and telephone expenses.
  • Employment agency and job counseling fees.
  • Costs for resume preparation.
  • Union or professional association dues.
  • Specialized work clothing or small tools used at work.
  • Points paid by you on a new home loan.
  • Points paid by a seller on your behalf.
  • Points paid on refinancing your home mortgage (deductible pro rata over the life of the loan).
  • Remaining undeducted points on a prior refinancing when you refinance again.
  • Your actual expenses or 14¢ a mile for driving in doing charitable work (larger deduction if driving is in conjunction with 2005 hurricane charity work).
  • Gambling losses, but only to the extent of your winnings.
  • Fees paid for the preparation of your tax return. "

And an extra from me, certian legal fees.

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