Tuesday, May 30, 2006

Estate Tax Repeal - Windfall Oil Company Execs and Cabinet Members

Category: Estate and Inheritance Tax

While obviously partisan, an interesting report from US Representative Henry A. Waxman, Ranking Member, Committee on Government Reform, and the Committee on Government Reform Minority Office. It is a numerical look at who (naming names) might benefit from a total repeal of the estate tax. It caught my eye in that the report is entitled "New Report Reveals Estate Tax Repeal Would Give Over $200 Million Windfall to Oil Company Executives" given that I am spending $3.00 at the pump these days (and thus not feeling particularly inclined to "give" any more to the oil industry).

Tuesday, May 30, 2006 -- Next week the Senate is scheduled to consider legislation (H.R. 8) to repeal the estate tax. Repealing the tax, which has been law since 1916, is estimated to cost $1 trillion from 2011-2021. Although the tax affects few Americans, repeal will give some families extraordinary windfalls. The CEO's of major oil companies, for instance, would get enormous benefits if H.R. 8 were enacted. The family of one oil executive, Lee Raymond (the former ExxonMobil CEO), alone could receive a tax break worth over $160 million.

This report analyzes the impact that repeal would have on the families of the senior executives for the major oil companies. In 2005, the minority staff of the Government Reform Committee released a similar analysis showing that repealing the estate tax repeal would save the President, Vice President, and 11 cabinet members as much as $344 million.

Estimated Estate Tax Savings of Oil Company CEOs

2005 Analysis: Estimated Tax Savings of Bush Cabinet

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Wednesday, May 17, 2006

An Educated Public Prefers Keeping or Reforming the Estate Tax

Category: Estate and Inheritance Tax

From Juan Antunez, Esq. at The Florida Probate Litigation Blog:

New Poll Shows 57% Prefer Keeping or Reforming the Estate Tax:
"New Poll Shows 57% Prefer Keeping or Reforming the Estate Tax

As the Senate prepares for a May vote on estate tax repeal, increased budget deficits and a more educated public are spurring greater numbers to join a movement begun by some of America's millionaires in 2001 to keep the federal estate tax. A new national poll shows that 57% prefer keeping the tax as is or reforming it. Only 23% favor repealing the tax. The number favoring preservation or reform rises to 68% when respondents learn more information about the estate tax, with 23% again favoring repeal.

For more facts and figures related to estate tax repeal, see here."

To become more educated about the role of the estate tax, see my prior post Truths About the Estate Tax - Debunking the Popular Myths, putting to rest some of the bad facts popularized about the estate tax .

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Monday, May 15, 2006

NJ EASE - A Clearinghouse for Info on Services available to NJ Seniors

Category: Elder Law

As I was considering the Medicare Part D Prescription Drug Plan debacle, characterized lack of real communication, poor information, or no information, I was wondering what is a GOOD place for seniors to get information about services available to them.

One such excellent source in NJ EASE, self-described as:

What is NJ EASE?
NJ EASE (New Jersey Easy Access, Single Entry) is the easy
way for seniors and their families to get information about and access senior
NJ EASE is one toll-free telephone number to put you in touch with
someone to help you learn about and apply for important programs and benefits.
NJ EASE promotes independence, dignity and choice for New Jersey’s older
When you call NJ EASE a person (yes, a real, live, human) from an agency in your county dealing with seniors will answer the phone and direct you to services available to seniors. They do not give recommendations for certain companies; instead, they act as a clearinghouse to find local companies to assist seniors with things such as:

Healthcare * Insurance * Home Care Services * Long Term Care Options * Transportation * Social Activities * Nutrition * Volunteer Opportunities

Although NJ EASE does have a website, it is a telephone based service, so those seeking more information should call 1-877-222-3737.

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Friday, May 12, 2006

Tax Breaks - Roth IRA, 15% Capital Gains and Dividends, AMT

Category: Tax Law and Planning

From Wills, Trusts & Estates Prof Law Blog May 10, 2006:

Status of Tax Reconciliation Package
The United States Congress is in the final stages of its work on tax reconciliation legislation. Below are some of the highlights of the current version of the bill as reported in Jeanne Sahadi, Tax bill agreement reached, CNNMoney.com, May 9, 2006:

  • IRA Conversion. The bill would allow traditional IRAs to be converted to
    Roth IRAs even if the taxpayer's adjusted gross income is over $100,000.
    This provision may actually raise revenue because IRA holders would be required
    to pay tax now, that is, at the time of the conversion.
  • Long-term capital gains and dividends tax rate to remain at 15% for two more
    years (that is, through 2010).
  • Enhanced relief from the alternate minimum tax.
And from May 12, 2006:

Yesterday, May 11, 2006, the Senate approved the [tax cut] bill 54 to 44. On Wednesday, May 10, 2006, it passed the House. Accordingly, it is now being sent to President Bush who is expected to sign the legislation.

See Edmund L. Andrews, Senate Approves 2-Year Extension of Bush Tax Cuts, NY Times, May 12, 2006.

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Friday, May 05, 2006

Implications of a Life Estate -- A Medicaid Planning Option

Category: Elder Law

From Newsday.com, an excellent outline, not in legalese, of a possible Medicaid Planning technique under the current law where a parent is moving into a child's home.

Implications of a life estate:
"The problem: My 80-year-old mother's health is declining, and she's moving into our home. After selling her house, she'll have about $300,000. Can she purchase a life estate in our home in order to preserve her money if she someday has to enter a nursing home?

The expert: Robert J. Kurre, certified elder law attorney, Robert J. Kurre & Associates, P.C., Great Neck.

The rules: Under the Deficit Reduction Act of 2005, a person who purchases a life estate interest in another's home for fair market value - and then lives there for at least a year - does not face an ineligibility period for Medicaid nursing home benefits. There is pending litigation challenging the constitutionality of the overall federal act, and it has not been implemented in New York. However, it's likely that the law will eventually be enacted, retroactive to Feb. 8, 2006.

The strategy: If she's expected to live in your home for at least a year, your mother could purchase a life estate interest in your home, which gives individuals not considered owners of a property certain rights to that property, including the right to live there. Consult with a qualified elder law attorney to determine whether this is the best strategy for her. The attorney also can help you determine the amount for which the life estate should be purchased, based on your mother's age and your equity interest in the home.

How it works: A life estate has no value for purposes of determining an individual's eligibility for Medicaid. The holder of the life estate (the 'life tenant') has the legal right to live on the property for life without paying rent. Upon the life tenant's death, the life estate is extinguished.

The results: Your mother's purchase of a life estate in your home could protect the proceeds from the sale of her house. But if she purchases the life estate, and you decide to sell your home during her lifetime, your mother would have to sign the new deed and a portion of the sale proceeds would be payable to her as the life tenant. Those proceeds would count as her resources for Medicaid purposes and, depending on the situation, could cause her to incur adverse tax consequences."

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Wednesday, May 03, 2006

US Supreme Court - Medicaid May Only Lein against a Settlement to the Exent of Medical Expenses Awarded

Category: Elder and Disability Law

A very important unanimous ruling from the US Supreme Court for disabled persons - in the case of a personal injury settlment or award, a State may only recover payments it has made on a disabled persons behalf (ie: meidical care provided under Medicaid) from that portion of the personal injury settlment or award that was allocated to medical expenses in the award. In other words, if there is a $300,000 personal injury award, and it is allocated $150,000 to medical expenses, and $150,000 to pain and suffering, and the State has expended $200,000 in medical care, then the State may only recover up to $150,000 of costs, the amount of the personal injury settlment or award allocated to medical expenses.

An excellent summary of the new key ruling from Elderlawanswers.com - High Court Rules States May Place Lien Only on Medical Portion of Settlement:

The U.S. Supreme Court has unanimously ruled that an Arkansas statute requiring Medicaid applicants to assign to the state the entirety of any settlement violates the federal Medicaid law's "anti-lien statute," and that the state may recover only from those portions of third-party awards allocated for medical expenses. Arkansas Department of Health and Human Services, et al. v. Ahlborn, 547 U.S. ____

Heidi Ahlborn was rendered permanently disabled as the result of a car crash. While being treated for her injuries, Ms. Ahlborn applied for and began receiving Medicaid benefits. In applying for benefits, she assigned to the Arkansas Department of Human Services Arkansas (ADHS) her right to the entirety of any third-party payment — not just that portion made for medical care – as required by Arkansas law. Ms. Ahlborn subsequently received $550,000 in a lump-sum settlement from the tortfeasor. The Director of ADHS asserted a lien against Ahlborn's settlement for the amount of benefits ADHS provided, $215,645.30.

Ms. Ahlborn sued, arguing that ADHS can recover only that portion of her settlement representing payment for past medical expenses, estimated to be $35,581.47. She contended that the Arkansas recovery scheme conflicts with the federal "anti-lien" statute," 42 U.S.C. § 1396p(a)(1). Arkansas countered that the settlement remains property of the tortfeasor until the state is fully reimbursed for all funds expended on Ms. Ahlborn's medical care. Among other cases, the state cited Houghton v. Dep't of Health, 57 P.3d 1067, 1069 (Utah 2002).

The district court ruled that the state may recover from Ms. Ahlborn's settlement the total amount of benefits provided under the Medicaid program, regardless of whether the settlement funds represent payments for the cost of medical services. Ms. Ahlborn appealed.

The U.S. Court of Appeals for the Eighth Circuit reversed, ruling that Ms. Ahlborn's right to a settlement was her "property" and that the state could not "circumvent the restrictions of the federal anti-lien statute simply by requiring an applicant for Medicaid benefits to assign property rights to the State before the applicant liquidates the property to a sum certain." Ahlborn v. Arkansas Dept. of Human Services (8th Cir., No. 03-3377, Feb. 9, 2005).

Arkansas appealed. In a unanimous opinion written by Justice Stevens, the United States Supreme Court affirms, ruling that federal Medicaid law does not authorize the state to assert a lien on Ms. Ahlborn's settlement in an amount greater than the amount allocated for medical expenses, and that "Arkansas' statute finds no support in the federal third-party liability provisions, and in fact squarely conflicts with the anti-lien provision of the federal Medicaid laws." The Court also rejects the argument of the state (and its amici, including the United States) that under its ruling parties to a tort suit will simply "allocate away the State's interest," in the Court's words.

For the full text of this decision, go to: http://www.supremecourtus.gov/opinions/05pdf/04-1506.pdf.

For an analysis of the Ahlborn case's implications written prior to the Supreme Court's ruling by ElderLawAnswers member John J. Campbell, click here.

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Tuesday, May 02, 2006

Probate Myths Debunked

Category: Probate and Estate Administration

I am really not quite sure why "probate" has gained a reputation as a such a bad word in estate planning. This article from the Florida Bradenton Herald - There are two major advantages of living trusts - is a prime example of bad information about probate being promulgated as fact:

"Also, except for very small estates, probate court proceedings are usually required when a person dies without a will, thus delaying distribution six to 18 months, and often longer.

Another reason to avoid probate court proceedings is state law determines the attorney and administrator fees, ranging from 6 to 22 percent of estate assets. However, these fees are negotiable so don't hesitate to negotiate if you are an estate heir."
These statements are just plain not true, particularly in New Jersey, and I suspect in other states.

First - Probate is the start of the estate administration process. In New Jersey, it generally involves (1) offering the Will to the Surrogate, (2) offering identification to the Surrogate that (a) you are the person named executor, or (b) that if there was no Will, you are the person who has the right to administer the estate under state law (first the surviving spouse, and then the adult children). That's it. The Surrogate then issues you Letters Testamentary (in the case of a Will ) or Letters of Administration (if there is no Will) and off you go empowered to administer the estate. This can all be accomplished in a 1-2 hour meeting at the Surrogates office - it does not take months, or even days.

What does take many months (or even years) is the Estate Administration Process. This is separate from Probate, and needs to be gone through whether you die with a Will, with no Will, or with a Revocable or Living Trust. The Estate Administration Process involves (1) gathering all the assets of the estate, (2) paying any liabilities of the estate, (3) calculating and paying taxes, (4) waiting for the tax calculations to be accepted by the authorities, and (5) finally making a distribution of the assets of the estate.

Second - In New Jersey, it is ILLEGAL for an attorney to charge a legal fee on the basis of a percentage of the estate. The legal fee must be reasonable to the work involved. Even in states where there is a statutory percentage fee, it is true that the executor or administration (not the heirs) can enter into a different percentage with your attorney. However, I don't know of any statutory fee of 22% of the estate, since this is higher than most states estate tax rate.

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Monday, May 01, 2006

Supreme Court Says...Anna Nicole Smith gets another Shot at Hubby's Estate

Category: Probate and Estate Administration

I have previously written about the probate issues being raised by the unlikely source of the notorious Anna Nicole Smith, which the White House backed at the Supreme Court level (see Marshall v. Marshall - Or, Anna Nicole Smith Goes to Washington for the legal issues at bar) Today, a unanimous Court finds in favor of the blonde.

From Yahoo News: Supreme Court Backs Ex-Playmate's Effort:

"The Supreme Court ruled Monday that one-time stripper and Playboy Playmate Anna Nicole Smith could pursue part of her late husband's oil fortune.

Justices gave new legal impetus to Smith's bid to collect millions of dollars from the estate of J. Howard Marshall II. Her late husband's estate has been estimated at as much as $1.6 billion.

Smith has been embroiled in a long running cross-country court fight with Marshall's youngest son, E. Pierce Marshall. The court's decision, which was unanimous, means that it will not end anytime soon.

Justice Ruth Bader Ginsburg, writing for the court, said Smith should have a fresh chance to pursue claims in federal court. "

"At issue in the legal battle was competing court jurisdiction. A Texas court held a five-month trial before deciding that Smith was entitled to nothing from Marshall's estate. Smith brought a separate claim in federal court in California."

Justices said Monday that the 9th U.S. Circuit Court of Appeals was wrong in ruling that federal courts could not handle Smith's case. "

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