Friday, June 30, 2006

10 Financial Urban Legends

Category: Financial Planning

Every once in a while, I get a call from someone saying they had heard "income tax is illegal" or "revocable trusts avoid taxes" or other such things that are just untrue. Here is a list of "10 Financial Urban Legends" from - things that just aren't true. A basic rule of tax law is that "fat pigs get don't be a pig", which is another way of saying the old adage that if something looks to good to be true, it probably is. So if you get an email about one of these, hit "delete" please, not "forward".

Myth No. 1: You can float a check longer if you write in red ink.
Myth No. 2: You don't have to pay income tax -- it's illegal.
Myth No. 3: I'm under 18, so I can't be held accountable for a debt.
Myth No. 4: My hotel key card has my credit-card information.
Myth No. 5: Boycotting a few gasoline brands brings gas prices down.
Myth No. 6: It's better if you don't sign the back of your credit card.
Myth No. 7: You can make a pile of dough by helping a foreigner solve his money problems
Myth No. 8: You can now opt out of having credit bureaus give your information to anyone who asks.
Myth No. 9: You can buy your way out of points on a speeding ticket.
Myth No. 10: Hotel Bibles often have $100 bills tucked into them.

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Wednesday, June 28, 2006

Estate Tax Repeal - Off Again, On Again, On Hold Again

Category: Estate and Inheritance Tax

The on-again, off-again, on-again saga of federal estate tax repeal, is on hold again. reports in part:

"Senate Majority Leader Bill Frist postponed a vote on a measure to exempt most multimillionaires from federal estate taxes after conceding Republicans lack the votes to pass legislation adopted by the House last week.

The delay is the third since Frist began his quest to repeal or reduce the tax last year and the second time this month his ambitions were thwarted by Democrats who say the government needs the revenue generated by the tax. The House passed the legislation 269-156 on June 22 after Frist urged it to act before the Independence Day recess next week.

[Senator John] Kyl said Senate Republicans are determined to pass the legislation this year, though they want to ensure they have the 60 votes needed to withstand a challenge by Democrats. Republicans control 55 seats in the chamber; 60 votes are required to overcome filibusters, the legislative maneuvers that can kill legislation.

House Measure

The House legislation would spare all but about 2,800 multimillion-dollar estates from federal tax by exempting the first $10 million of a couple's estate from any tax. Estates valued between $10 million and $25 million would be taxed at the capital-gains rate, while estates of more than $25 million would be taxed at top rates of 30 percent to 40 percent.

The measure, which would take effect in 2010, also includes a tax break for timber companies intended to lure Senate Democrats from timber-producing states such as Washington, Arkansas, and Louisiana.

The measure, characterized as a take-it-or-leave-it offer by House Ways and Means Committee Chairman Bill Thomas, a California Republican, has had a lukewarm reception in the Senate.

2,800 Estates

Under current law, 12,600 estates -- or less than 1 percent of all people who die -- will be subject to the tax this year, according to estimates by the Tax Policy Center, a non-partisan research institution in Washington. The center estimated that a plan similar to Thomas's would reduce the number of taxable estates to 2,800 and would cut their tax rate to as low as 15 percent from about 45 percent.

The legislation also repeals a federal deduction for tax payments to the 23 states that retain their own estate or inheritance taxes, including Washington, Tennessee, Ohio, New York, New Jersey and Connecticut. That would subject residents of those states with large estates to double taxation, said Harley Duncan, executive director of the Federation of Tax Administrators, a Washington-based association of state tax officials. "

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Tuesday, June 20, 2006

Failure to Exercise Spousal Right of Election a Transfer for Medicaid

Category: Elder Law, Probate and Estate Administration

A new New Jersey ruling affects estate plans where one spouse leaves assets to another spouse in a testamentary trust, and the surviving spouse then needs to apply for Medicaid for his or her long term care needs. The case is I.G. v. Department of Human Services (N.J. Super. Ct. App. Div., No. A-0006-05T5, June 13, 2006).

In New Jersey, a surviving spouse has a right to an "elective share" of a deceased spouse's estate. The "elective share" statute, N.J.S.A. 3B:8-1 to -19, essentially provides that the surviving spouse must receive 1/3 of the "augmented estate" of the deceased spouse. The "augmented estate" is defined to include both probate and certain non-probate assets (to prevent a person from disinheriting a spouse by merely ensuring that all assets pass to a non-spouse via a non-probate vehicle, such as joint ownership or the use of a beneficiary designation). Per N.J.S.A. 3B:8-1 the "'augmented estate' consists of the value of all property of both the deceased and surviving spouse as well as other property transferred to third parties without adequate consideration before the decedent's death."

What happens from a Medicaid perspective if (1) the first spouse's will leaves everything in a trust to the surviving spouse, and (2) the surviving spouse does not make an elective share claim?

According to I.G. v. Department of Human Services, the failure of the surviving spouse to make an elective share claim is a "transfer" for Medicaid purposes. The court found that the failure to elect the elective share was a transfer of an amount equal to 1/3 of the deceased spouse's estate.

What is the effect of this case?

First, if your estate plan calls for all your assets to pass into a discretionary trust for the benefit of your spouse, or if you disinherited your spouse altogether, in the hopes of shielding assets in the future from a Medicaid spend-down, you need to re-examine your plan as it likely will not meet your goals.

Second, if a surviving spouse (or his or her fiduciary if he or she cannot act) fails to seek the elective share, this failure to act will (1) create a penalty period, during which the surviving spouse will not qualify for Medicaid, and (2) that penalty period will come into effect at the time when (a) the surviving spouse has exhausted all of his or her assets outside the trust, and (b) the surviving spouse is in a nursing home. The elective share claim must be made within 6 months from the date of death.

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Monday, June 19, 2006

New Life for Estate Tax "Reform"?

Category: Estate and Inheritance Tax

Ah, politics and pork. One of my least favorite things about the political process is the institutionalized blackmail of slipping a legislative item that has nothing to do with a package of legislation into said package, and saying "I vote 'yes' if you keep my item, or 'no' if you don't". This is how the pork gets into the package.

In keeping with this fine tradition, and other sources have indicated that the Republicans who lost the estate tax repeal vote earlier this month may try it again by putting the repeal legislation in a pending pension reform package.

Estate Tax Changes May Be Slipped Into Pension Legislation - Elder Law Answers Articles: "Republican lawmakers, who so far have been unable to win Senate approval of either full estate tax repeal or a significant reduction in the tax that wealthy heirs pay, are now considering another tactic: slipping estate tax 'reform' into a pension bill now in a House-Senate conference committee.

The pension legislation, H.R. 2830, which seeks to put the nation's defined benefit pension plans on a sounder footing, is being finalized by a conference committee reconciling different House and Senate versions.

The 'primary advocate' for attaching estate tax reform to the pension bill, according to the National Underwriter, an insurance industry publication, is Sen. Trent Lott (R-MS). Lott said he doubts that a deal on reducing the estate tax can emerge in the Senate, and so is viewing the pension bill conference report as an alternative vehicle."

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Thursday, June 15, 2006

Medicare Rejects your Claim? Appeal, and Chances are You Win!

Category: Elder Law, Financial Planning

What do you do when Medicare rejects your claim for benefits? Why appeal of course.

According to the Medicare Rights Center, a national nonprofit organization "Appealing is easy and most people win so it is worth your while to challenge a Medicare denial,". The denial of coverage may be due, for example, to a simple coding error in your doctor's office.

People have a strong chance of winning their Medicare appeal. According to Center, 80 percent of Medicare Part A appeals and 92 percent of Part B appeals turn out in favor of the person appealing.

The Medicare Rights Center offers the following tips to maximize your success when appealing your denial:
  • Write "Please Review" on the bottom of your Medicare Summary Notice (MSN), sign the back and send the original to the address listed on your MSN by certified mail or with delivery confirmation.
  • Include a letter explaining why the claim should be covered.
  • When possible, get a letter of support from your doctor or other health care provider explaining why the service was "medically necessary."
  • Save photocopies and records of all communications, whether written or oral, with Medicare concerning your denial.
  • Keep in mind that you only have up to 60 to 120 days from the date on the MSN (depending if you are in a private Medicare plan, like an HMO or a PPO) to submit an appeal.
Click here for more information from the official Medicare website, including appeals forms.

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Tuesday, June 13, 2006

Some Summertime Tax-Cutters to Consider

Category: Tax Law and Planning

From James A. Jimenez, CPA, partner at Fass & Co. in Parsippany, NJ:

"Take Advantage of Some Summertime Tax-cutters

Make your summertime fun even more enjoyable by adding tax savings. With some advance planning, you can make it happen. Here are some tax-saving ideas.

If you have summer travel plans and the primary purpose of your trip is business, you can deduct all the travel costs to and from your business destination and all other business-related costs even if you add on a few extra days for pleasure. You can’t deduct costs related to the pleasure portion.

Including a spouse or friend on your trip is permissible, but you can’t deduct the additional costs for that person. For example, the added cost of a double room over a single room won’t be deductible. Be sure to keep track of your itinerary, as well as your receipts, so you can clearly establish the business purpose of your trip and support your deductions.

If you own rental property, the expenses you incur to inspect your investment are deductible. These would include your travel expenses, lodging, and 50% of your meals.

If you itemize your deductions, you can deduct the mortgage interest and property taxes paid for your vacation home. A boat or RV can qualify as a vacation home if it has sleeping quarters, cooking facilities, and a bathroom. If a retreat also serves as rental property, you can control your tax deductions by changing the number of days you use it for vacation.

If you and your spouse work, the cost of sending your children to a summer day camp may qualify for the child care credit.

If you own a business, consider hiring your child for the summer. Your child can earn up to $5,150 tax-free this year, and your business is entitled to a deduction for the wages paid. You must pay your child a reasonable wage for the work performed. If your business isn’t incorporated, a child under 18 is not subject to FICA taxes. "

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Friday, June 09, 2006

Judge's Order: Rock, Paper, Scissors - No Joke

Category: Miscellaneous Musings

Sometimes it can be hard to love a lawyer - we have all heard the jokes (my favorite one dealing with a shark and "professional courtesy") - but the below real order issued from a judge takes the cake. Apparently, two lawyers were being as adversarial as possible, and the case was getting no-where. So the judge (obviously a very practical soul) ordered a game of rock, paper, scissors between opposing counsel to settle the matter. From

Robert Ambrogi's LawSites: Judge's Order: Rock, Paper, Scissors:

Following is the text of the order:

AVISTA MANAGEMENT, INC., d/b/a Avista Plex, Inc.,







This matter comes before the Court on Plaintiff's Motion to designate location of a Rule 30(b)(6) deposition (Doc. 105). Upon consideration of the Motion – the latest in a series of Gordian knots that the parties have been unable to untangle without enlisting the assistance of the federal courts – it is

ORDERED that said Motion is DENIED. Instead, the Court will fashion a new form of alternative dispute resolution, to wit: at 4:00 P.M. on Friday, June 30, 2006, counsel shall convene at a neutral site agreeable to both parties. If counsel cannot agree on a neutral site, they shall meet on the front steps of the Sam M. Gibbons U.S. Courthouse, 801 North Florida Ave., Tampa, Florida 33602. Each lawyer shall be entitled to be accompanied by one paralegal who shall act as an attendant and witness. At that time and location, counsel shall engage in one (1) game of "rock, paper, scissors." The winner of this engagement shall be entitled to select the location for the 30(b)(6) deposition to be held somewhere in Hillsborough County during the period July 11-12, 2006. If either party disputes the outcome of this engagement, an appeal may be filed and a hearing will be held at 8:30 A.M. on Friday, July 7, 2006 before the undersigned in Courtroom 3, George C. Young United States Courthouse and Federal Building, 80 North Hughey Avenue, Orlando, Florida 32801.

DONE and ORDERED in Chambers, Orlando, Florida on June 6, 2006.

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Thursday, June 08, 2006

News - Estate Tax Repeal Defeated, Compromise Package Up for Consideration

Category: Estate and Inheritance Tax


The U.S. Senate voted to block a repeal of the federal tax on multimillion dollar estates, dealing a setback to Republicans and the Bush administration.

The Republican proposal failed to clear the 60-vote threshold necessary to overcome a procedural hurdle. The 57-41 vote ends for now the hopes of opponents that the levy, dubbed a ``death tax'' by Republicans, will be permanently repealed.
Senate Minority Leader Harry Reid, a Nevada Democrat, said Republicans were focusing on a tax that affects less than 1 percent of the population while ignoring higher priority items such as gas prices, uninsured workers, a rising national debt, and an outdated minimum wage.

``The estate tax is not high on the agenda of people in Nevada,'' he said. ``I think we're wasting precious days.''

The Senate was the last hurdle for groups that have lobbied for repealing the estate tax for more than a decade. The House of Representatives voted 272-162 in April 2005 to repeal the tax on a permanent basis, and the Bush administration says it wants to abolish the levy. The Senate fell six votes short of repealing the tax permanently in 2002.

An alternative approach championed by Republican Senator Jon Kyl and Finance Committee Chairman Charles Grassley would only tax estates valued at more than $10 million at rates of between 15 percent and 30 percent.

Reid, a Nevada Democrat, said the alternative proposal is an ``absolute farce'' because it would still spare wealthy decedents from paying up to 90 percent of the estate taxes they would otherwise owe. ``Someone who is worth $30 million net -- that's a lot of money -- they would be paying less taxes than someone who works at a plant in Henderson, Nevada,'' Reid said.

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Wednesday, June 07, 2006

A Shout Out to Fellow Attorney Bloggers

Category: Miscellaneous Musings

I was recently reading this post on More Ghostwriting and Websites at Death and Taxes - The Blog and it got me to thinking about why I blog and all my fellow bloggers. I agree with Joel Schoenmeyer's comment that "if you are using a website to market your practice, then you are at least in some way trying to convince potential clients of your legal abilities. Posting articles you have written is one way to do this. Posting articles someone else has written doesn't accomplish much".

The value to me in blogging is not only being able to educate the public and potential clients about subjects near and dear to my heart (what lawyer doesn't like getting up on a soapbox), but in being part of a community of attorneys who focus in my practice areas and who give their time to think about the law and their clients problems in their blog postings.

In light of this I would like to give a shout out to some of my fellow attorney bloggers (many of whom are the sources are articles you have read here, and all of whom are linked from this blog). Please let me know of any great blogs that I should add to my list.

  • A Taxonomy of Legal Blogs - Ian Best, an amazingly enterprising 3L (third year law student) has organized hundreds (maybe more) of legal oriented blogs into one, very accessible, hierarchy.
  • Death & Taxes - The Blog (Illinois) - Commentary on estate planning, estate administration, and real estate issues from Chicago-area attorney Joel A. Schoenmeyer (who also very kindly pointed me in the right direction when I started blogging).
  • Tax and Business Law Commentary - A commentary on tax and business law developments by Maryland attorney Stuart Levine, with an emphasis on federal tax law.
  • Wills, Trusts & Estates Prof Blog From the Law Professors Blog Network, Gerry W. Beyer, Governor Preston E. Smith Regents Professor of Law at Texas Tech Univ. School of Law (and a former Property Law professor of mine when he was teaching in Boston).
  • Rubin on Tax (Florida) - Keep current on tax and legal issues relating to federal and Florida tax, estate planning, probate, and miscellaneous business matters from Charles Rubin in Boca Raton, Florida.
  • The Florida Probate Litigation Blog - By Juan C. Antunez in Miami, Florida, it promises to keep you abreast of every new Florida probate decision, as well as speaking to areas of estate planning, business planning and tax.
  • Utah and Nevada Estate Planning Blog - The name well describes the topics posted by Brian L. Olson.
  • California Estate Planning Practice Blog - A Compendium of Matters Involving Estate Planning and Probate in California by Michelle Renee Drake and Jennifer Nicole Sawday.
  • Massachusetts Estate Planning and Elder Law - A discussion of estate planning, elder law and health insurance matters in Massachusetts by Leanna Hamill.
  • California Estate and Business Law Blog - By Clark Allison and focusing on tax, business and estate planning.
  • Rule of Law (Canada) - Proving a perspective on legal issues from the county to our north, British Columbia attorney Stanley Rule discusses wills, trusts and estates law, elder law and estate litigation.

For those who read You and Yours Blawg, the above offerings should be on your watch list as well.

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Monday, June 05, 2006

Medallion Guarantee of Stock Certificates - A Good Thing, But to be Avoided

Category: Estate Planning, Probate and Estate Administration

Have any stock certificates? Real ones, on the fancy, colorful paper? If so, at some point you, or your Personal Representative (Power of Attorney, Executor, Trustee, etc.) will need to deal with having those stock certificates "Medallion Guaranteed" in order to sell or transfer them.

According the Securities and Exchange Commission article “Signature Guarantees: Preventing the Unauthorized Transfer of Securities":

If you hold securities in physical certificate form and want to transfer or sell them, you will need to sign the certificates or securities powers. You will probably need to get your signature "guaranteed" before a transfer agent will accept the transaction. Although it's an inconvenience to get your signature guaranteed (emphasis added) the process protects you by making it harder for people to take your money by forging your signature on your securities certificates or related documents. Transfer agents insist on signature guarantees because they limit their liability and losses if a signature turns out to be forged. One way to avoid having to get your signature guaranteed is to have your securities held in street name, meaning that your securities are held in the name of your brokerage firm instead of your name emphasis added).

An investor can obtain a signature guarantee from a financial institution – such as a commercial bank, savings bank, credit union, or broker dealer – that participates in one of the Medallion signature guarantee programs.

A Medallion imprint or stamp indicates that the financial institution is a member of a Medallion signature guarantee program and is an acceptable signature guarantor. By participating in the program, financial institutions can guarantee customer signatures with the assurance that their guarantees will be immediately accepted for processing by transfer agents.

Transfer agents can refuse to accept a signature guarantee from an institution that does not participate in the Medallion program or that is not recognized by the transfer agent. While guarantor firms can charge a fee for their services, they often don't and offer them as part of their customer services.

While getting stock certificates Medallion Guaranteed may not be impossible, it is a hassle (the SEC actually calls it an “inconvenience” in the article) – especially when you are not the owner, but the owner’s fiduciary (executor, trustee, attorney-in-fact, etc.). More importantly, it is a hassle that can be very easily avoided by taking all your stock certificates to a broker and turning them over into a brokerage account. The discount broker fees are very small. You are not giving up any control. You are gaining a huge amount of convenience (to buy and sell yourself without getting a Medallion Guarantee) as well as giving a “gift” to your fiduciary by making your estate infinitely easier to manage. Also, if there is a fire or other disaster, your brokerage accounts won’t disappear, but your stock certificates might. If you aren’t here to have them re-issued, those assets may never pass to your family.

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Friday, June 02, 2006

Successful Family Business Succession Planning

Category: Business Law and Planning

I came across this interesting statistic about successful family business succession planning from Succession Planning and the Family Owned Business - Perspectives - Inside INdiana Business with Gerry Dick:

"The United States Small Business Administration reports the odds of surviving a transition from the founding generation to the next are a mere 30 percent. The figures are even more uninspiring for the third generation with survival rates at less than 20 percent. Given these odds, it makes sense for family business owners to begin treating the succession planning process much as they would treat retirement and estate planning. While each business succession is unique, there are some common misunderstandings that can bring added complexity to the transition of a family owned business."

I have found in my own practice that numerous issues can prevent a family business transition, including the value to the senior generation, the transfer of control, equalizing children who are not in the business, all against the backdrop of the emotional entanglements family members have.

The article highlights and expands on some points that can make family business succession planning more successful:

  • The child wants to run the business and is capable of running it
  • The family treats the succession like an arm's length transaction
  • The heir has the liquidity to buy out the owner or the willingness and capability of borrowing from institutional lenders
  • The transaction acknowledges parties beyond the seller and buyer
  • Even though it’s in the family, the sale is a “business transaction”
  • The seller’s involvement after the sale

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Thursday, June 01, 2006

Estate Planning Throughout Your Life - A Series of Articles

Category: Estate Planning

From The Motley Fool, a great quick series of articles about Estate Planning at any stage of your life, from young single adult to retirement.

Estate Planning Throughout Your Life [ Commentary] May 31, 2006: "This series of articles will address common estate-planning needs for the situations that typical people face during various stages of their lives. Although the topic is vast and complicated, with lots of traps for the unwary, these articles will give you the basic information you need to ask informed questions and to get appropriate assistance along the way.
To read all of the articles in the series, click below:

Estate Planning: Winding Down
At a certain point in life, things begin to get simpler again. Children grow and start out on their own. Thanks ...

Estate Planning: Bringing Up a Child
As any parent knows, caring for a child involves a huge amount of responsibility. Infants and toddlers need full ...

Estate Planning: Single and Starting Out
At first, the concept of estate planning for the young seems silly. You might ask, "Why do I need estate planning? ...

Estate Planning: Single and Getting Ahead
After a few years of earning money, you've done all the right things. Perhaps you've used the Fool's Credit Cards ...

Estate Planning: Retired and Comfortable
You've made it to the end of your working life, and now it's time to reap the benefits of all of your hard work. ...

Estate Planning: Two's Company
Getting your individual estate planning under control is a significant step on the path to financial security. ...

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