Monday, January 29, 2007

Another Hidden Cost of Dying - The Surety Bond

Category: Estate Planning, Probate and Estate Administration

A spot-on examination of the requirement for a surety bond in an estate administration from Joel Schoenmeyer, Esq. at Death and Taxes Blog.

On the Subject of Surety Bonds: "Surety bonds are like an insurance policy for an estate and its beneficiaries. What are you insuring? That the executor or administrator isn't going to run off to Tahiti with the estate's assets."

I also use Tahiti as an example of where the nefarious fiduciaries are going with you money.

Surety bonds can be expensive and fall into the category of "things to be avoided". How to avoid the expense to your estate - create as will. As Joel points out in his posting: "The executor doesn't have to obtain one if the decedent's Will waives the surety bond requirement. If the Will DOESN'T contain such a waiver, or if the decedent died without a Will, the executor will have to make surety arrangements."

Also, if you have a Will, but don't have a named Executor or Successor Executor, you will also need a surety bond in NJ. This means that if your Will from 15 years ago names your spouse and then your father, who has since died, a codicil is in order at a minimum to name appropriate successor executors to avoid the bonding requirement.

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Wednesday, January 24, 2007

April 17 is the 2007 Tax Filing Deadline

Category: Tax Law and Planning

The IRS announced today that taxpayers will have until Tuesday, April 17, to file their taxes this year. This is because "April 15 falls on a Sunday in 2007, and the following day, Monday, April 16, is Emancipation Day, a legal holiday in the District of Columbia."


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Tuesday, January 23, 2007

You Die - Your Passwords And User Names Die With You

Category: Estate Planning, Probate and Estate Administration

As part of every Estate Planning consultation these days, I ask not only "Where do you keep your assets" (ie: what institutions do you use for banks, brokerage accounts) but "How do you access your assets?" The point of the second question is to find out if the client takes advantage of electronic account access, and if so, who else shares access to those accounts.

I was reminded for the importance of this from the article: - When Passwords And User Names Die With The User: "Security experts warn us to keep our passwords and user names under lock and key. But what happens after a loved one dies? How do survivors get access to information and documents kept squirreled away in safe deposit boxes and hard drives for years?"

The questions is even more prevalent when there is no hard data. Many people don't receive paper account statements and only access bank and brokerage accounts online. Or there are direct deposit or direct withdrawals set up only online. In this case, an executor may not even know about the assets until a tax statement comes in January, or by running an escheated asset search (escheated assets are assets that are turned over to that state if the institution can't find the owner).

First, the motivation for taking the steps below is avoiding the alternative - going to court for an order to get access to the accounts (if your executor even knows where the accounts are).

The best way to address concerns raised by assets in the electronic age from an estate planning and estate administration perspective is to employ some practical advice:
  • Each spouse keeps a spreadsheet of Institution Name, Website, Account Number, User Name, Password
  • The spreadsheet is updated WHENEVER a change is made
  • Save the spreadsheet to a removable media format (CD, DVD-R, USB Flash-Drive, etc).
  • Save the removable media format in a safe location that your spouse, power of attorney, key adult child(ren) and attorney are aware of (safe deposit box, fireproof vault, drawer in the house where the important stuff is)
  • If you password protect the file, you need to make sure that your spouse, power of attorney, key adult child(ren) and attorney are aware of

If putting all this in a safe place and telling key people of it concerns you because the key people have access to your accounts, you need to rethink the key people.

MOST IMPORTANT - If you make any changes to the information on the spreadsheet, update the spreadsheet and put in back in the safe (but well communicated) location.

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Monday, January 22, 2007

Famous Deaths - Infamous Litgation over Who gets What (and how much)

Category: Probate and Estate Administration

Courtesy of Juan Antunez, Esq. of Florida Probate Litigation Blog (with a thanks to Phil Bernstein, Esq. at the New York Probate Litigation Blog for mentioning the post on his blog):
An AP article entitled Family Feuds Follow Famous People After Death has fun rounding up all the latest celebrity probate cases in one nice package. I've written about some of the cases mentioned in the linked-to article (James Brown, Billy Graham), noted two celebrity cases not mentioned in the article (Jimmy Hendrix, Celia Cruz), and was amused to find bits of probate gossip I'd missed (Ted Williams, Peter Lawford, Marlon Brando, Ray Charles).

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Friday, January 19, 2007

FAQ: General Durable Power of Attorney

Category: Estate Planning, Financial Planning

Following numerous recent questions about what a General Durable Power of Attorney is and can do, a primer from

FAQ: Durable Powers of Attorney for Finances
Learn about the simple way to arrange for someone to make your financial decisions should you become unable to do so yourself.

How does a durable power of attorney work?
When does a durable power of attorney take effect?
What does an attorney-in-fact do?
How do I create a durable power of attorney for finances?
What happens if I don't have a durable power of attorney for finances?
I have a living trust. Do I still need a durable power of attorney for finances?
Can my attorney-in-fact make medical decisions on my behalf?
When does a durable power of attorney end?

An important caveat - in New Jersey and many other states, your attorney-in-fact cannot make gifts unless the power to make gifts is specifically authorized. This is very important from many perspectives: a failure to include a gifting provisions can stunt the ability to Medicaid planning, while, on the other hand, a gifting provision can be abused if the attorney-in-fact uses the gifting provision to transfer assets to himself or herself.

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Thursday, January 18, 2007

Played the market this year? Can you report it right on your Tax Return?

Category: Tax Law and Planning, Financial Planning

Did you buy, sell, or trade stocks in 2006? Planning on doing it in 2007? Did you remembers that you need to record each and every sale on your income tax return? Many investors expect that their end of year statement from their broker will give them everything they need to file their taxes - this is not necessarily true. Your year end statement will give you the sales price, but will not necessarily provide you with all the other key information necessary to file your return. As an investor, it is your responsibility to know the following for each and every security sold to properly reflect the transaction on your tax return:
  • Name of the security
  • Your cost basis (ie: what you paid for it, adjusted by splits, etc.)
  • What you sold it for
  • Date of sale
  • Gain or Loss (sales price - adjusted cost basis)
If you were a successful investor in 2006, but didn't track this information well, April 15th may present a headache this year. But luckily, this headache is avoidable in future years if you track your purchases and sales as you make them - then all you need to do is print out the spreadsheet, and voila, taxes done.

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Monday, January 15, 2007

Worry about 'death tax' for the right reasons

Category: Estate and Inheritance Tax

From the Op-Ed Section of the Houston Cronical a pointed look at the federal estate tax in Worry about 'death tax' for the right reasons:
"A couple of weeks ago, my 13-year-old son came home complaining about the death tax.

It was his first foray into the murky quagmire of politics versus policy. He did the best he could.

Did you know, he asked me, that if you die and leave me money, that the government will take half of it?

That line of thinking floats around blogs, water coolers and holiday parties like conversational spam, so there's no telling where he picked it up. I calmly told him that he should be so lucky."

The article goes on to describe the estate tax debate as "the stuff of political irony. It draws the ire of millions of people who are unaffected by it." as well as its limited reach to taxpayers in comparison to funds collected.

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Caregiving Contracts Valuable Tool Between Family Members

Category: Elder Law

From - Put Caregiving Arrangements in Writing, Lawyers Advise. The article emphasizes some valuable points about the need for a Caregiving Contract.

"A formal caregiver contract can outline the responsibilities of a caregiver, and specify the payment he will receive for services rendered and expenses, the article states. A contract ensures that the cost of care is paid at the time it is received and is not left for family members to wrangle over as part of a later division of assets."

Importantly, in the New Jersey, without a Caregiving Contract in place, payments to the family member caregiver from the senior family member can be deemed a transfer/gift from the senior family member to the family member caregiver, and disqualify the senior family member from Medicaid.

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Friday, January 12, 2007

Telephone Tax Refund with your 2007 Taxes

Category: Tax Law and Planning

Believe it or not, the government overtaxed you, apologizes, and wants to give you your money back. For several years the federal government levied taxes on long-distance phone charges that have since been overturned. To rectify their error, they are giving you either (1) a standard refund between $30 and $60, or (2) a larger refund that you can determine by going through your old bills from 2/28/03 to 8/1/06.

For more information, go to the source: IRS - Telephone Tax Refund Questions and Answers.

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Thursday, January 11, 2007

Create a Will instead of a Role for "Probate Genealogists"

Category: Estate Planning, Probate and Estate Administration

I just came across this press releaseGrowing Role for Probate Genealogists and thought to myself, "What is a probate genealogist?" not having heard the term before. Looking into it more, it seems that "probate genealogist" encompasses "heir-search" companies that identify to heirs to an estate through their biological relationships.

In my practice, finding heirs has been an issue on several occasions - all of which had one thing in common - the person who died had assets and no Will. These people died intestate (without a Will), and the assets were distributed to relatives per the New Jersey intestacy statutes (otherwise known as "the Will the State of New Jersey created for you that you didn't know about").

I am surmising that needing to use a "probate genealogist" is an expensive process. It also implies that you have no idea who will be receiving an inheritance from you, because if they were known to you, they would probably know you were dead and could claim their rights without being "located" by a third party.

Taking the time to make a Will seems like such a simpler and more logical alternative. Some things to consider in this example:
  • If you don't make a Will, the State where you reside has one for you via its Intestacy Statues
  • The Intestacy Statutes may give you assets to people you either don't know (remote relatives) or don't like (close relatives)
  • You are not required to give your money to your relatives - you can leave it to a friend, church, charity, organization, or even your pet in many states.
  • You worked hard to create your assets - shouldn't you make the effort to direct where they go if you aren't here? I have never come a across a person who truly "didn't care" where there assets went after being asked a few questions.

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Wednesday, January 10, 2007

Tax Cuts Offer Most for Very Rich, Study Says - New York Times

Category: Tax Law and Planning

Bottom line from the recent New York Times article Tax Cuts Offer Most for Very Rich, Study Says: "Put another way: rich families were the undisputed winners from President Bush’s tax cuts, but people in the bottom half of the earnings scale were not paying much in taxes anyway."

This article is a summary of a recent nonpartisan Congressional Budget Office study about the impact of President Bush's tax cut programs since he has been in office. Some points of interest:

"Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study."


"Economists and tax analysts have long known that the biggest dollar value of Mr. Bush’s tax cuts goes to people at the very top income levels. One reason is that two of his signature measures, tax cuts on investment income and a steady reduction of estate taxes, overwhelmingly benefit the wealthiest households.

But the Congressional study offers additional insight because it incorporates information about what people paid in 2004, the first year in which taxpayers could take full advantage of the cuts on stock dividends and capital gains.

The study estimates that the effective federal income tax rate, which excludes payroll taxes for Social Security and Medicare, declined modestly for people in the middle- and lower-income categories.

Families in the middle fifth of annual earnings, who had average incomes of $56,200 in 2004, saw their average effective tax rate edge down to 2.9 percent in 2004 from 5 percent in 2000. That translated to an average tax cut of $1,180 per household, but the tax rate actually increased slightly from 2003.

Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000.

In its report, the Congressional Budget Office estimated that the overall effective federal tax rate edged up to 20 percent in 2004, from 19.8 percent the year before.

But even with that increase, Americans faced lower tax rates than any time since 1979. If President Bush has his way, those rates could decline even more as the estate tax on inherited wealth is gradually phased out by the start of 2010.

Mr. Bush and his Republican allies in Congress want to permanently extend that tax cut and almost all of the others that Congress passed in his first term. The cost of doing that would be more than $1 trillion over the next decade, a cost that would hit the Treasury at the same time that the spending on old-age benefits for retiring baby boomers begins to soar."

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Tuesday, January 09, 2007

New Year Resolution for your Business - Get a Business Plan

Category:Business Law and Planning

I my representation of small businesses and their owners, a self-evident truth is that those with a business plan are more likely to succeed. While attorneys don't develop business plans, we are often involved in transactions that would benefit from a business plan having been in place (notice that I didn't say being created) such as investor financing, bank financing, mergers, employee equity plans, acquisitions.

Since the creation of business plans in out of my core area of practice, but essential for my clients, a introductory resource I recommend is The site is packed with Q&A about business plans, tutorials for the entrepreneurs starting a business, income and expense calculators, and business plans for purchase or free download (free of course being key to a startup). There is also bplans blog, which offers commentary on startups, small business, business planning and growth strategy.

Look for future posts on those areas of a business plan where your business attorney can offer the most resources.

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Monday, January 08, 2007

Empirically - NJ Property Taxes have Skyrocketed (its not just you)

Category: Tax Law and Planning

From the New Jersey Star Ledger January 7, 2007:
Property taxes balloon despite push to reform: "As lawmakers scrambled to enact a property tax reform plan last year, the problem grew by a record $1.4 billion, a Star-Ledger analysis has found.

Local government agencies hit landowners with a $20.9 billion levy in 2006, of which $15.4 billion was billed to homeowners. That pushed the average residential tax bill up 6.8 percent to $6,170 -- an increase of $390.

In the mid-1990s, the state's property tax levy -- the total amount collected to run local government and schools -- took three years to rise by a similar amount. But with costs increasing and aid from Trenton relatively flat, local officials have passed more than a billion dollars of their costs onto landowners every year since 2002.

The largest increase prior to 2006 was $1.2 billion in 2003."


"In 2000, only six communities had an average property tax bill over $10,000. Now, homeowners in 55 towns can expect to pay five-figures to support schools, police and other local services, according to the analysis."

A proposed solution is: "The short-term fix is a tax credit of up to 20 percent for those earning $100,000 or less, with smaller reductions for those earning between $100,000 and $250,000." However, the dollar limitations on income are likely to mean that those with the 5 figure tax bills will not see any real relief.

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Thursday, January 04, 2007

Elder-Care Costs Deplete Savings of a Generation

Category: Elder Law

From the Wills, Trusts & Estates Prof Blog (authored by my former property law professor, Gerry Beyer) I found this recent NY Times Article Elder-Care Costs Deplete Savings of a Generation (By JANE GROSS, Published: December 30, 2006).

The article introduction tells a sad, but all too common, tale of a child being overwhelmed by the sheer enormity of the task of caring for an aging parent - and the financial, emotional and health costs to the child:

To care for her ailing 97-year-old father over the past three years, Elizabeth Rodriguez, a vice president at the Federal Reserve Bank in New York, has borrowed against her 401(k) retirement plan, sold her house on Staten Island and depleted nearly 20 years of savings.

The money has gone to lawyers’ fees ($50,000) to win a contested guardianship. It has gone for home-care equipment like the mattress for his hospital bed (about $3,000 in all) and for a food service to deliver meals ($400 a month).

It has gone for a two-bedroom rental apartment big enough for herself, her dad and a home aide ($1,600 a month more than a one-bedroom apartment in the same building), and for a wheelchair-accessible van to get him to doctors’ appointments ($330 a trip).

Asked to tally the costs, Ms. Rodriguez, 58, said she had no idea how much she was spending. "A shower chair, body cream with no alcohol, new shoes," she said. "You don't stop and calculate. You just buy what you have to buy."

How does this happen? As the article states: "The burden is compounded by ignorance, according to a study by AARP, released in mid-December, which found that most Americans have no idea how much long-term care costs and believe that Medicare pays for it, when it does not." To calbelief befallacy falicy is a gross understatement - as the lack of understanding the costs of long term care prevent the planning for it.

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Retirement Accounts and Beneficiary Designations - Myths and Misconceptions

Category: Estate Planning, Tax Law and Planning

At the start of the new year, many people take a look at their qualified retirement plans (IRA, 401(k), etc.) as they plan savings goals for the new year. But what if you aren't the one getting the benefits, because you have died? How are the benefits getting to your family? Below is a list of some Myths and Misconceptions about Retirement Plan benefits (which can also be thought of a as a list of what NOT to do).

  1. My Retirement Plan is distributed the same as my Will. WRONG! Your Retirement Plan is distributed according the Beneficiary Designation you complete for each Retirement Plan.

  2. If I don't name a Beneficiary, my Retirement Plan will be distributed to my Estate. MAYBE. Some Retirement Plans say that if there is no beneficiary, it will pass to your Estate. Others give a list of people who will receive the plan in order of priority (spouse, children, etc.). However, if a Retirement Plan is payable to your Estate, there are negative income tax consequences (remember - you haven't paid any income taxes on these assets yet) that are best avoided. Also, for domestic partners or similar, there are never any default provisions for payment to the surviving partner - a Beneficiary Form must be completed.

  3. If my spouse is named as Beneficiary and we are divorced, she is automatically no longer the Beneficiary. WRONG! Unless you act to change your Beneficiary Designation, your ex-spouse is still your primary beneficiary - not a situation you want to be looking down on from the great beyond. File the Change of Beneficiary when you file for separation.

  4. If my minor children are named as Beneficiaries, and I created a trust for them in my Will, then the Retirement Plan will be distributed subject to those trust terms. WRONG! Unless you name the trust created for your children as the Beneficiary of the Retirement Plan, your darling angels will get access to all the Retirement Plan funds at the mature age of 18 (or 21).

  5. I know who are my Designated Beneficiaries. MAYBE. Many times a person thought they filed out a Beneficiary Designation, but didn't, or thought they named Contingent Beneficiaries, but didn't, or thought they named a trust for this children, but didn't. You should check or change your Beneficiaries today. A Change of Beneficiary form can usually be downloaded right from the website holding the assets.

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Wednesday, January 03, 2007

Check out that Employee - Hiring Checklist

Category: Business Law and Planning

The new year tends to be a time when business owners scrutinize practices and procedures to improve productivity in the new year. I came across the posting Employment Law: Hiring Checklist on Lady Bird Deed Blog, which caught my eye in the opener:

"2006 ended with one of my small business clients running into a flury of employee problems. Employees on drugs, allegations of sexual misconduct in the workplace and theft to name a few. "

Wouldn't it be great if you never hired the people that you might end up in court about? The checklist is practical advice. I emphasize the use of background checks to avoid (or at least be knowledgeable about) potential problems, and strongly urge that if you don't have an employee handbook, you create one (as it may be your saving grace if you do end up in a lawsuit.)

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Tuesday, January 02, 2007

Blawg is Back

Category: Elder Law, Estate Planning, Estate and Inheritance Tax, Business Law and Planning, Tax Law and Planning, Probate and Estate Administration, Financial Planning, Miscellaneous Musings

After a fall hiatus, You and Yours Blawg is back providing commendary on all the topics above.

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For Medicaid Recipient, Either Spouse's Annuity must Name State as Beneficiary

Category: Elder Law,

Courtesy of, the DRA has been "corrected" to clarify that an annuity owned by a Medicaid recipient or his or her spouse must name the state as the primary remainder beneficiary for Medicaid benefits paid to either spouse, not just benefits paid on behalf of the owner of the annuity.

Tax Bill Makes Change in DRA Annuity Provision - Elder Law Answers Articles: "The recently enacted Tax Relief and Health Care Act of 2006, H.R. 6111, includes several “technical corrections” to the Medicaid provisions of the Deficit Reduction Act of 2005 (DRA). One was made to the annuity rules in the Deficit Reduction Act of 2005 (DRA) transfer-of-asset provisions.

The DRA requires that Medicaid long-term care applicants name the state as the remainder beneficiary of annuities in which they have an interest, in an amount equal to what the enrollees receive in coverage from the state, 42 U.S.C. §1396p(c)(1)(F)(i). The DRA provided that state remainder rights were equal to the amount paid on behalf of an “annuitant”; the Tax Relief bill replaced this with “institutionalized individual.”

Thus, if the wife of a nursing home resident purchases an annuity, under current law she must name the state as the remainderman for her own potential benefits. Under the change, she may have to name the state as the remainderman for her husband’s care instead. The change is retroactive to the bill's enactment."

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