You and Yours Blawg

You and Yours Blawg is Moving

2009-08-06T14:48:00.000-04:00

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

You and Yours Blawg is moving its platform over to New Jersey Estate Planning and Elder Law Blog. My thoughts on happenings in the world of Estate Planning and Elder Law can be found there, including tax law happenings. You and Yours Blawg will stay alive for now with reference to business law issues that relate to entrepreneurs and closely held businesses. I appreciate you updating your reader and links. Happy reading!

- Deirdre

Haven't Paid NJ Taxes? Now Might Be the Time

2009-03-20T16:12:00.000-04:00

Category: Tax Law and Planning

Courtesy of JH Cohn:

New Jersey Enacts Tax Amnesty Program

"New Jersey Governor Jon Corzine has signed a bill creating a 45-day New Jersey state tax amnesty period that will end no later than June 15, 2009. Presumably the program will begin on or about May 1, allowing the New Jersey Division of Taxation some time after the April 15 filing deadline to gear up for the program.

Under the program, taxpayers who pay outstanding state tax liabilities for tax returns due on or after January 1, 2002 and prior to February 1, 2009, plus one-half of interest owed as of May 1, 2009, will not have to pay the other half of the interest owed, nor will they be liable for collections costs or civil or criminal penalties. Taxpayers under criminal investigation for a state tax matter are ineligible for the program. On the other hand, taxpayers involved with civil tax audits are eligible.

Similar to the most recent New Jersey tax amnesty program conducted in 2002, a five percent "amnesty eligible" penalty will be imposed after the amnesty period concludes on any additional taxes found due by a taxpayer that were not paid during the amnesty period for a tax period falling under the amnesty program."

Lets get Banks Lending - SBA Loan Guarantee Amount to 90%

2009-03-16T15:45:00.001-04:00

Category: Business Law and Planning

As reported by NJBIZ, in an effort to get banks lending again, "Starting today, the U.S. Small Business Administration is raising to 90 percent the federal guarantee on most SBA loans and temporarily suspending a fee that is charged to banks, but passed along to borrowers. "

"The 90 percent guarantee will be on loans up to $1.5 million. The portion of the loan above $1.5 million, up to the maximum SBA loan of $1 million, will be subject to a lower guarantee amount. "

Tax Changes in Stimulus Bill that may Impact You

2009-02-19T10:16:00.004-05:00

Category:Tax Law and Planning

Well, the behemoth stimulus package has passed - what now? And how will it affect you? A summary of the tax law changes in the bill courtesy of JH Cohn.

Economic Stimulus Bill Contains Numerous Tax Changes

On February 17, 2009 President Obama signed The American Recovery and Reinstatement Act of 2009 into law. The legislation commonly referred to as the economic stimulus bill is a close to $800 billion stimulus package that includes nearly $300 billion in tax relief. The major tax provisions are as follows.

Making Work Pay Credit - a tax credit calculated at a rate of 6.2% of earned income up to $400 for individuals and $800 for joint filers applied retroactively to the start of 2009 continuing through 2010. The credit will be claimed either through a reduction in wage withholding or in a lump sum when filing one's tax return. The credit is phased out at a rate of 2% above adjusted gross income (AGI) of $75,000 ($150,000 in the case of joint filers). Employer FICA taxes are not changed.

Economic Recovery Payment - a one-time payment of $250 to Social Security recipients, railroad retirees and disabled veterans (reduces any Making Work Pay credit that the individual is entitled to).

AMT Patch - what has become an annual legislative exercise in recent years; the 2009 AMT exemption amounts have been raised slightly above their 2008 levels to insulate approximately 26 million middle-income taxpayers from the grasp of the AMT.

First-Time Homebuyer Credit - for purchases of a principal residence between January 1, 2009 and November 30, 2009, the credit has been increased from $7,500 to $8,000 and does not need to be repaid unless the house is sold within three years of the purchase. The credit phase-out remains for taxpayers with AGI in excess of $75,000 ($150,000 for joint filers).

New Car Deduction - individuals purchasing new vehicles in 2009 on or after the date of enactment can deduct sales taxes and excise taxes "above-the-line" attributable to the first $49,500 of the purchase price of any one vehicle. This deduction will be phased out once AGI reaches $125,000 ($250,000 for joint filers). Sales taxes paid on a lease agreement are not included.

Unemployment Compensation - in addition to increasing and extending unemployment compensation benefits for various workers, the first $2,400 of unemployment compensation is excluded from income for 2009.

Bonus Depreciation - extended through December 31, 2009 allowing for 50% first-year depreciation.

Sec. 179 Expensing - the increased 2008 limits have been extended to 2009. The maximum Sec. 179 expense will continue at $250,000 and the phase-out will not begin until fixed asset additions exceed $800,000.

Net Operating Loss (NOL) Carryback - this measure was scaled back significantly from earlier proposals. A 2008 NOL can be carried back up to five years (current law permits a two-year carryback) but only for qualified small businesses with average gross receipts of $15 million or less.

Transit Benefits Parity - the current $120 per month income exclusion for transit passes and van pooling is increased to $230 per month starting in March 2009, thus equalizing it with the $230 per month permitted for parking.

Qualified Tuition Programs - for 2009 and 2010 distributions from Sec. 529 plans will be tax-free when used to pay for computers and computer technology, including internet access.

Residential Energy Property Credit - the new law increases the credit from 10% to 30%, raises the maximum cap to a $1,500 aggregate amount for 2009 and 2010 installations, and eliminates the $500 lifetime cap. There are other energy incentives including credits for electricity produced from renewable sources such as wind and for plug-in electric vehicles.

COBRA Benefits - an individual who is involuntarily separated from employment between September 1, 2008 and January 1, 2010 can elect to pay 35 percent of his/her COBRA coverage with the former employer paying the remaining 65 percent. The former employer will receive a credit against income tax withholding and payroll taxes it is otherwise required to remit to the federal government.

To find out how these changes impact you, contact your J.H. Cohn service professional at 877-704-3500.

Prevent Identity Theft

2009-02-16T10:52:00.003-05:00

Category: Financial Planning

HOW TO PREVENT IDENTITY THEFT - Courtesy of Valeria and Carolyn Messina of http://www.messinamortgageinfo.com/

What is Identity Theft?

Identity theft is the unlawful use of another person’s identification, and may take many forms. Common methods of identity theft include credit card or other financial institution fraud, phone or utility services theft, and the taking of government documents or benefits.

Unfortunately, every day thieves are finding new ways of using the identities of their victims.

Identity thieves typically get this information from:
Stolen wallets and purses
Stolen mail
Unauthorized access to computers
Telemarketing scams
Sharing of passwords
Fraudulent e-mails
Dumpster diving (searching through your trash can)

How can I keep my identity safe?
Check your credit reports and scores on a regular basis.
Shred any documents and mail that contain your Social Security Number (SSN), account numbers and other personal information.
Don’t carry your Social Security card in your wallet or purse. Memorize your SSN.
Check financial statements and bills as soon as they arrive. Report any unauthorized transactions to the companies immediately.
Lock your mailbox. Deposit outgoing mail containing checks in a postal box—don’t leave it sitting in your unlocked mailbox or apartment lobby.
At home, secure sensitive information like bank and credit card statements, insurance records, etc., where they can’t be seen by visitors or workers.
At teller machines (ATMs), shield the PIN keypad while entering credit and debit card passwords.
Try to keep an eye on your credit card when you give it to a merchant or waiter.
When you order new checks, look out for them. Make sure they are delivered to a locked mailbox.
Change your passwords regularly and do not share them with anyone.
Nver respond to requests by phone or e-mail for personal information, no matter how urgent the request seems. Find the number of the company online and call to ask if the request is legitimate.
Don’t give out personal information on the phone, through the mail, or on the Internet unless you’ve initiated the call or you are absolutely sure you know the company or person you’re dealing with.
Read your bank’s privacy notice so that you understand how it uses your information for marketing. If you don’t want to get preapproved credit offers, call 888-5OPT-OUT (567-8688) to stop them.
Be careful about giving away information about yourself. Question why a business needs your SSN, mother’s maiden name or other information.
Monitor your mail for missed bills, credit card statements and other mail that you expected. A missing bill might mean that a thief has taken over your account and changed your billing address.
Investigate mysterious purchases, charges, bills or collection calls immediately. If you receive a credit card you didn’t apply for, find a strange charge on your credit card or get calls or letters from debt collectors about bills you don’t recognize, call the companies immediately to address the problem.
Question credit offers. If you know you have good credit but your application for a new credit card is denied, it could signal identity theft. When you are denied credit, you can get a free copy of your credit report from the credit bureau used by the lender.

Silver Alert Legislation Making its Way Through Trenton

2009-01-27T08:50:00.000-05:00

Category: Elder Law

A good and reasonable new law to help families of those suffering from dementia and other diseases is making its way through Trenton.

Baroni Silver Alert Legislation Approved by Committee New Jersey Senator Bill Baroni NJ District 14: "The Senate Law and Public Safety Committee approved bill S1551/S1844, establishing a “Silver Alert System” for missing people who are believed to be suffering from dementia or other cognitive impairments."

"This emergency alert plan is based on the “Amber Alert” used by State Police to locate missing children. The alerts will include a description of the missing person and other information deemed appropriate by the State and local law enforcement agencies."

It's A GO! New Jersey Combines Medicaid Waivers For Seniors & Adults With Physical Disabilities

2009-01-05T17:59:00.000-05:00

MediLexicon News - It's A GO! New Jersey State Combines Medicaid Waivers For Seniors & Adults With Physical Disabilities: "Department of Health and Senior Services (DHSS) Commissioner Heather Howard announced today the State has received approval from the U.S. Centers for Medicare and Medicaid Services to consolidate three Medicaid-supported home and community-based service programs currently operated by DHSS into a single program known as Global Options (GO) for Long Term Care."

This is great news and hopefully will proivded needed efficiencies and consolidated review of services.

Category: Elder Law

Changing your 529 Investment - Not so Fast

2008-10-29T09:35:00.000-04:00

Category: Financial Planning

I learned something new this week - 529 plans (Qualified Tuition Plans under Internal Revenue Code Section 529) only allow one (1) investment change a year. So, if you reallocated in February, you can't do it again in September. Now, prior to the recent market turmoil, I don't know if many parents gave it much thought. With the recent market turmoil, I am sure the performance of 529 Plans has become a priority conversation topic at kitchen tables round the country. One possible solution offered - tranfer the 529 Plan to a plan operated in a different state, so you can have "new" investment options.

A Different Approach to $700,000,000,000.00 "Bailout"

2008-09-24T14:46:00.001-04:00

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

I can't seem to stop reading about this "bailout" or No Banker Left Behind Act. It is like watching a car wreck in slow motion - you would do something if you could, but you don't have the power to stop it.

Then, I came across the below that I think offers a better way to look at a bailout. Apparently, Sweden found itself in a strikingly similar bank credit crisis back in 1992: "The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent." Sound familiar?

How Sweden Solved Its Bank Crisis - NYTimes.com: "But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.

Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government."

The article goes on to say that Sweden spent about the same percent of its GDP (4-5%) on is 1996 bailout of the banks, but took equity back so the out of pocket to the government (ie the taxpayers) was really only 2%.

I am thinking I am liking the Swedish plan much better than take all my money, do what you like, have no oversight, and no real change plan I see now - oh, and I really love that we have to do it NOW or life as we know it will end, when as we know it is already long past.

The No Banker Left Behind Act

2008-09-22T10:42:00.000-04:00

Category: Miscellaneous Musings

To all Taxpayers - the proposed $700,000,000,000.00 (yeah, that is a real big number - looks much more menacing with all the zeros spelled out) bailout represents a cost of $2,310.23 per each man, woman and child in US. For a family of 4, that amounts to $9240.92 of money our government currently does not have going to a group of institutions that not only have made horrendous investment decisions, but already profited from them.

Per the International Herald Tribune December15, 2006:

NEW YORK: Lehman Brothers Holdings and Bear Stearns, the Wall Street firms most dependent on the fixed-income market, crowned their best year with record fourth-quarter earnings, bolstered by corporate bonds and derivatives.

Profit at Bear Stearns rose 38 percent to a record $562.8 million, and Lehman's earnings rose 22 percent to $1 billion in the quarter ended Nov. 30. While both beat analysts' estimates, they lagged behind Goldman Sachs Group, which reported a better- than-expected 93 percent jump in quarterly profit this week.

If I were going to be investing $9240.92 this week, it would certainly not be in financial institutions. While some sort of government action may be necessary, an un-critiqued $700,000,000,000.00 blank check cannot be the answer. Call, write to, or email your Congressperson. Regardless of your beliefs, demand that they take the time to analyze the No Banker Left Behind Act. Congress should give as much attention to this bill as you would to you investing $2,310.23 in the current market for every member of your family.

To reach your Represenatives in the House of Representatives:

https://forms.house.gov/wyr/welcome.shtml

To reach your Senator:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

Fein Such Awarded for Excellence in Workplace Flexibility

2008-09-15T16:34:00.001-04:00

Category: Miscellaneous Musings

As a pat on the back to our firm and its wonderful employees, Fein Such is a proud recipient of the Alfred P. Sloan Awards for Business Excellence in Workplace Flexibility . The Sloan Awards recognize organizations that are dedicated to making work “work” for both the employer and the employees by creating effective and flexible workplaces that meet the needs of the 21st century.

New Moves for Permanent Estate Tax Reform

2008-09-03T11:26:00.002-04:00

Category: Estate and Inheritance Tax

Courtesy of Donald Vanarelli, Esq. Bipartisan Senate Bill Would Fix Estate Tax at 2009 Level

"Senate legislation, S.3284, was introduced July 17, 2008, by Sens. Tom Carper (D-DE), Patrick Leahy (D-VT) and George Voinovich (R-OH). The bill would create a lifetime estate tax exemption of $3.5 million, indexed for inflation, and impose a top tax rate of 45 percent." Note that this is the Estate Tax reform proposed by Sen. Obama (see What's the Tax Plan Mr. President in Waiting)

"That amounts to 11,000 estates by 2012. By comparison, 50,000 estates were taxed in 2001 when the tax started being phased out. "

On July 15, 2008 "Rep. Jim McDermott (D-WA) introduced an estate tax reform bill in the House. H.R. 6499 would freeze the current $2 million estate tax exemption and impose other reforms, including providing for estate and gift tax reunification by permitting lifetime gifts up to a maximum of $2 million rather than the $1 million gift tax limit under current law. "

A link to the Senate bill can be found here - Senate Bill
A link to the House bill can be found here - House Bill

Long-Term Care Costs Rising - NJ Averages $280 a day

2008-08-18T14:35:00.002-04:00

Category: Elder Law

It is no surprise that a lead NJBiz article is "Long-Term Care Costs on the Rise". It is less of surprise that NJ is on the high side of average for the cost of long term care nationwide.

Average long-term care costs have jumped between 5 percent and 13 percent
nationwide since 2006, according to a study released today.
In New Jersey, the average daily rate for a private room in a nursing home in the Somerset area is $280 per day, or $102,200 annually, according to the "2008 Long-Term Care Cost of Care" report by Prudential Financial, Inc. (NYSE: PRU). In the U.S., the average cost is $217 per day, or $72,205 per year.
"Many Americans mistakenly believe that Medicare or private health insurance will pay for their long-term care needs," said Andy Mako, senior vice president of long-term care insurance at Newark-based Prudential Financial. "The reality is long-term care risk is substantial, and under current Medicare and Medicaid policy, much of it
is the uninsured private responsibility of individuals."
Other average long-term care costs highlighted by the study include:
Semi-private room in a nursing home
N.J.: $254 per day
U.S.: $194 per day
Assisted-living facility
N.J.: $3,538 per month
U.S.: $3,241 per month
Home care from a home-health aide or certified nursing assistant
N.J.: $26 per hour
U.S.: $21 per hour

"Legal Eagles" at Fein, Such, Kahn and Shepard, PC

2008-08-15T11:15:00.002-04:00

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

Fein, Such, Kahn & Shepard PC Shareholders Jim Shepard, Eric Kapnick, and Deirdre Wheatley-Liss were featured in local newspaper Parsippany This Week "Legal Eagles". I bet you don't know the best advice Jim got from his parents, Eric's craziest experience, or Deirdre's favorite part of practicing law. You can find out and catch the full article on-line here:

http://www.parsippanythisweek.com/apps/pbcs.dll/article?AID=/20080813/NEWS01/808130309

While FSKS provides legal services to clients throughout the Garden State, we are proud to be part of the fabric of Parsippany and Morris County. Our neighbors rely on us when buying or selling a house, creating a Will, starting or growing a business, dealing with aging parents, or exercising their rights in court.

People call us because "We fix problems". Please feel free to use us as your resource when evaluating legal issues. We invite you to forward the article along as it shows that attorneys are people too!

Most companies in US avoid federal income taxes - Yahoo! News

2008-08-12T08:19:00.000-04:00

Category: Tax Law and Planning

While there are certainly causes for issue with Washington and the tax code, the misleading tone of this article from the top Yahoo News stories today is creating an issue where none exists:

Most companies in US avoid federal income taxes - Yahoo!: "WASHINGTON - Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period. Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

'It's shameful that so many corporations make big profits and pay nothing to support our country,' said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich."

Well, duh! The only companies that pay corporate level tax - that is to say that the company itself is the taxpayer instead of its owners, are C-Corporations and Professional Corporations. An S-Corporation, LLC, or partnership is a tax-reporter, but the actual tax is paid by its owners. There is no tax avoidance here, the tax is paid either by the corporation or its owners - trillions of dollars of revenue are still created.

I think it is shameful that Sen. Dorgan is misconstruing true statistics to create an issue that does not exist - perhaps Congress should focus on more taxing problems?

Welcome to NJ - The most expensive place to live and die

2008-08-11T08:44:00.000-04:00

Category: Tax Law and Planning

From Tax Girl: New Jersey is #1!: "According to the Tax Foundation, New Jersey residents paid the highest percentage of state and local taxes. Folks from New Jersey paid a whopping 11.8% of income in state and local taxes, more than 2% above the national average. New York residents just eked out a second place finish, paying 11.7%."

But wait, there is more - New Jersey is also the most expensive state to die in, as there are state level estate taxes on estate's over $675,000, the lowest estate tax threshold in the country. With all these taxes, isn't it amazing our state in broke?

Gov't Borrows Money to Give to Banks to Give to People who Can't Pay Back Current Loans???

2008-07-30T11:34:00.004-04:00

Category: Miscellaneous Musings

According to Yahoo News, the US government is borrowing an additional $27 BILLION dollars. This is because the business that is our country spends more than it takes in. President Bush also just signed the new housing law package. "As part of the housing measure, Congress voted to increase the national debt limit by $800 billion from $9.815 trillion to a new limit of $10.615 trillion."

So, the US government is borrowing money to give to banks, so that the banks (who ran out of money due to their own bad lending practices) can give money to borrowers, who already can't pay back the money they already borrowed?

What??? And who is going to be responsible at the end of the day? You, me and anyone else who pays taxes, as that is the only way to raise revenue.

See Government announces plans to borrow $27 billion

Resources for sunset planning for aging parents

2008-07-28T10:52:00.002-04:00

Category: Elder Law,

This question was asked on www.linkedin.com:

What approach have you taken when faced with sunset planning for aging parent(s)?I am looking for information related to resources available for helping surviving children understand and execute their aging parent(s) wishes in the sunset years. Specifically, what resources did you turn to and/or what research did you do to determine the ideal solutions related to your aging or terminally ill parent(s) living conditions, medical benefits and options, estate planning, funeral arrangements, etc?

My reply:

When dealing with these issues, the family needs to consider a team of professionals to educate them on the options that will best meet your parents goals. There are a host of people out there who can help you, but their existence isn't always well known, and the type of care depends on your family’s needs. Speaking as an elder law attorney, I often work with and refer to various other professionals as needed. I have listed them below.

Note that the single most important thing is to find one of more of these professionals who you feel comfortable with who can be your trusted advisor and get you to other professionals as needed.

Elder Law Attorney - will advise you on what documents to have in place to give authority to execute the wishes, as well as how to structure assets to best pay for long term care (using private assets, long term care insurance, Medicaid) and the pros and cons of transferring assets.

Financial Planner - Where children may find themselves in the position of managing parents assets, it is critical that the assets be gathered and centrally located and the investments critically reviewed sooner rather than later. Consolidate investments to a single location, with on-line access for children to monitor. Make sure the investments are appropriate for the seniors age and income needs - many times we see seniors who have entered into investments that may not really be appropriate to their income needs.

Geriatric Care Manager - This is essentially a private social worker who can make an independent assessment of the seniors needs and create a plan of action to fulfill those needs in the reality of a family. They address the tough questions of if mom can live at home and what kind of assistance might be necessary to make that a reality, or what if they move in with a child or to a continuing care community or just senior community, as well as facilitate referrals to home care agencies, assisted living and nursing facilities and/or hospice.

Other professionals you may want to bring in:

Insurance Professional - Long Term Care insurance may be appropriate depending on the ages and needs.
Reverse Mortgage Specialist - To reach their goals, it make may sense to use the equity in the home.
Home Care Agency - These will provided nursing and companion care at home or at an assisted living or nursing home facility.
Realtor specializing in Seniors - He or she can maximize the value of the largest asset by addressing the marketing realities of a home that has likely been lived in and not updated for decades (cleanout, donation, upgrades, staging).
Therapist - Parenting your parents in hard. A qualified therapist can give family members tools to cope with emotional issues.
Accountant/Bookkeeper - Bill paying services and tax information.

Links:http://www.seniorsourcessite.com http://www.naela.org http://youandyoursblawg.blogspot.com/

A Check-Up on your Health Care Provider

2008-07-25T15:49:00.003-04:00

Category: Elder Law

Sometimes I run across the question of if a senior (or any person for that matter) is receiving the best possible health care. A site I was introduced to gives consumer feedback on health care (http://citehealth.com/ ). Health care is a choice - just because you saw a doctor once doesn't mean that he or she is best for you needs. Like any decision, you should feel you are getting the most value for your dollar. With health care, value often comes in the form of surroundings, staff attitudes, waiting times, communications, and approach to health care.

Welcome to CiteHealth

Give your Health Care Providers a Check Up
Ensure you are receiving the best care. Give your hospitals, nursing homes, rehab centers, home care agencies and other providers a free check up with our reports. We combine data from government and commercial data sources, direct verification, and people just like you give a complete picture of each provider.

Longer Life Puts Women at Risk in Retirement

2008-07-09T15:03:00.002-04:00

Category: Financial Planning

We ladies have it hard enough dealing with glass ceilings, boys networks, balancing family and careers, and caring for older family members. Even with balancing all this, we statistically live longer than men. The problem with this? Our "family first" and "go along to get along" attitudes can cost of down the road when we live longer, save less, and have higher health care costs.

Longer lives, less pay — women not saving enough - Yahoo! News: "NEW YORK - Women may not earn as much as men or fly up the corporate ladder as quickly, but They get the last laugh since they live longer. Right? ADVERTISEMENT As it turns out, women probably aren't saving enough to bankroll those extra years in style.
They invest more conservatively, start saving later and are more likely to be in and
out of the work force, according to a study released Wednesday by Hewitt Associates, a human resources consulting firm. Suddenly, retirement isn't looking so rosy.
Women live an average of 22 years after retirement versus 19 years for men and medical costs are rising, so women will need to save 2 percent more than men every year over 30 years to maintain their standard of living upon retirement, the study found."

Did the Seniors You Know Get Their Tax Stimulus?

2008-06-23T08:22:00.004-04:00

Category: Elder Law, Tax Law and Planning

As many of us who work with seniors blogged about when the tax stimulus package came to pass , while great in theory, the need to file a tax return to get the stimulus payment had a big hole from an action plan standpoint. Many seniors don't need to file tax returns, and haven't done so in years. This small fact is easy to forget about because for working folks the tax stimulus payment came as a matter of course from filing the return.

The result? PressofAtlanticCity.com reports that: "About 156,800 New Jersey retirees and disabled veterans, including about 1,300 in Atlantic City alone, have not yet submitted paperwork to claim their stimulus payments, according to the IRS. The IRS is asking the public for help in reaching this population with information on how to file. While 74 percent of eligible members of the group have filed, a substantial minority have yet to be contacted. The IRS this week announced a new summer campaign to reach them."

So, for those who have seniors as neighbors, clients, congregation members, or otherwise, see if they got their tax stimulus payment. It is up t0 $600 for singles and $1200 for couples. For details see prior posting: Economic Stimulus Package Now Law.

Hybrid Long Term Care Insurance

2008-06-22T11:56:00.003-04:00

Category: Elder Law, Financial Planning

The appeal of a hybrid car is more than greater bang for your buck - it is about making an investment you feel good about. When it comes to Long Term Care insurance, the only people who seem to feel good about the investment are those who have been caregivers, and have seen the devastating costs of spending every single penny of a person's savings (or at least down to the few last pennies) and it still not being enough to cover the costs of care. However, with teh US's aging population, many more families are going to find themselves in the position of caring for loved ones, and asking the question of: Where does the money come from?

Long Term Care Insurance may be a solution, but in many ways it has a bad reputation. The premiums seem very expensive, especially as the people looking at it tend to have just retired and are on a fixed income. Unscrupulous people have taken advantage of seniors with the product, tarring all long term care insurance professionals with the same suspicious brush. Another common thought is that if you never get sick, you just threw a lot of money down the drain.

A possible solution I was recently introduced to? Hybrid Long Term Care Insurance. The basic idea is that you take a lump sum of dollars and purchase Long Term Care Insurance. The dollars buy several things:

A total pot of greater dollars available to pay for long term care (a $100k investment might buy you $250k of long term care, depending on your age)
A death benefit greater then what you paid in that is "returned" to you heirs if you die and don't use the policy (A $100k investment might buy $200k in death benefity, depending on your age)
The ability to withdraw the lump sum you paid in at some point in the future if you need it (you get your $100k back)
A lump sum payment is a fixed investment - no need to pay ongoing premiums from your fixed income (you pay and "forget" it)

The cost? The loss of use of the lump sum and the growth on the lump sum unless you use the long term care benefits or the life insurance benefits.

The Street.com examined these hybrid polices in Hybrid Long-Term Care Might Be Right for You and highlighted some points to consider:

You have significant liquid assets available. With a single premium payment ranging from $50,000 to $100,000, a hybrid policy is only for those with significant cash available that can be reallocated.
You understand the risk to your portfolio. Once you have accepted that you may need care someday and that this care may be very expensive, the next step is to take a good look at what that will mean to your retirement portfolio.
A stand-alone, long-term care policy is not an option. If you are not interested in paying premiums indefinitely on a policy you may never use, then the hybrid product -- with a death benefit built in -- may be an option.
You have been planning to self-insure. If you haven't already recognized the financial risk of the cost of long-term care, you are not ready for this product.
The ability to get something back for your premiums and retaining control of your money is important to you. You will, at minimum, get the use of your full premium either through long-term care benefits, a death benefit or by requesting a return of premium.
Simplicity is important. While the long-term care portion of the policy contains the same framework of coverage as a stand-alone policy, there are fewer bells and whistles to add -- or to complicate the deal.

What's the Tax Plan Mr. President-in-Waiting

2008-06-19T16:57:00.004-04:00

Category: Estate and Inheritance Tax, Tax Law and Planning

Now that the candidates are known, what is that next question? What they propose to do with your taxes of course. A quick summary rundown courtesy of National Center for Policy Analysis - YOUR TAX BILL: HOW MCCAIN, OBAMA DIFFER:

Income taxes:

McCain wants to make permanent the current federal income-tax rates.

McCain opposes Sen. Obama's plan to lift the earnings cap on the Social Security payroll tax, saying such a move would be bad news for the economy.

Obama wants to raise the top ordinary income-tax rate from 35 percent to 39.6 percent on families making more than $250,000 a year.

Obama's plan includes increased taxes not only on ordinary income such as salary but also on capital gains and most corporate dividends.

Obama also plans to impose higher Social Security taxes on workers making over $250,000.

Investment income:

McCain wants to keep the current structure of tax rates on capital gains and
dividends.

Obama wants to raise the long-term capital-gains rate for families making more than $250,000 from its current rate of 15 percent to around 20 percent, or even higher.

Estate taxes:

Neither candidate wants to kill the estate tax permanently, as President
Bush has proposed.

Under current law, the federal estate-tax exemption this year is $2 million, and the top rate is 45 percent; in 2009 that exclusion is set to rise to $3.5 million, with the rate remaining at 45 percent.

McCain proposes raising the exclusion to $5 million and cutting the tax rate to 15 percent.

Obama proposes a $3.5 million exclusion while keeping the top rate at 45 percent.

Gas Costs Bringing Your Business Down

2008-06-06T13:44:00.003-04:00

Category: Business Law and Planning

The skyrocketing costs of gas are hitting all of us. Business owners are especially concerned as to how this will hit their bottom line, both directly in the costs of materials and shipping, and indirectly, as employees look to balance the cost of getting to work against their paycheck.

It appears that the New Jersey Assembly is trying to help. NJ Biz reports that Bill Would Allow Gas to be Sold at Cost or Below:

"A bill designed to lower gas prices by removing the state''s gasoline "price floor" was approved by an Assembly panel yesterday. "

"Service stations with convenience stores or auto-repair shops make the most of their revenue from those more profitable services, not the sale of gasoline, [Assembly Person] Burzichelli said. Allowing gasoline to be priced below cost would allow stations to lower prices to attract more customers for those services while simultaneously providing a much-needed price break at the pump, he said.

New Jersey has required gas station owners to price their fuel above cost since 1938, when many states enacted laws to protect consumers from gas companies that would undercut competitors in sparse marketplaces to gain a monopoly on fuel sales, Burzichelli said."

Other employers are looking to take their own action to control the indirect costs of gas prices. Some ideas and concerns:

Provide gas allowance - note however this must be included in the employees income each year

Foster telecommuting - make sure that you have an appropriate security policy in place in your employment agreement, employee handbook, or other policy regarding remote access of computers. You may also want to invest in a program to be able to track an employee's productivity while out of the office

Adopt a flex workweek of 4 day / 10 hours, or 9 days/9 hours every 2 weeks - while you need to make sure your critical daily activities are covered, this may allow you to get all the work done for the week in a shorter period, and be a cost free "bonus" to the employees who not only have to commute less days, but get an extra day to address their out of office obligations (perhaps making for more productive employees)

Assisted Living Company Sued for Forcing Out Elderly Residents

2008-06-02T13:48:00.003-04:00

Category: Elder Law,

From NJ Biz.com, a report that the New Jersey Public Advocate has filed papers against Assisted Living Concepts Inc., operating eight assisted-living facilities in southern New Jersey, for "allegedly forcing out elderly residents once they have run out of savings and qualify for Medicaid."

In the Article Assisted-Living Co. Charged with Forcing Out Residents, Scott Goldstein reports that "The Public Advocate is investigating allegations that ALC is involuntarily discharging elderly residents, or threatening to discharge them once they have exhausted all of their own funds, or "spent down" their life savings, and therefore qualifies for Medicaid payments to cover the cost of their assisted-living apartment. "

The company under investigation "owns and operates eight assisted living facilities in New Jersey: Baker House in Vineland, Goldfinch House in Bridgeton and Maurice House in Millville, all in Cumberland County; Lindsay House in Pennsville, Salem County; Mey House in Egg Harbor Township, Atlantic County; Chapin House in Rio Grande, Cape May County; Granville House in Burlington, Burlington County; and Post House in Glassboro, Gloucester County."

Many nursing homes and assisted living facilities have a "key-money" requirement that essentially says that a person must spend $X of their own money before the facility will accept Medicaid for the costs of their care. So if a facility has a 12 month "key-money" requirement, and costs $5000 a month, then they will only accept a person who has at least $60,000 to pay for their care. After it is spent, if the person then qualifies for Medicaid, New Jersey will pay the cost of care, usually at a rate below the private pay rate. Here, the New Jersey Public Advocate appears to be alleging that ALC took the "key-money" and then maneuvered to have residents discharged when Medicaid took over payments.

Is Favoring a Caregiver Child in a Will Unequal?

2008-05-13T10:44:00.002-04:00

Category:Estate Planning

Joshua C. Tate, Esq., a professor at Southern Methodist University - Dedman School of Law; University of Pennsylvania Law School, writes a compelling new article about the need for revised thinking is testamentary planning to incorporate unequal distributions to reflect the contributions of a caregiver child.

Abstract: Almost all U.S. states allow individuals to disinherit their descendants for any reason or no reason, but most of the world's legal systems currently do not. This Article contends that broad freedom of testation is defensible because it allows elderly people to reward family members who are caregivers. The Article explores the common-law origins of freedom of testation, which developed in the shadow of the medieval rule of primogeniture, a doctrine of no contemporary relevance. The growing problem of eldercare, however, offers a justification for the twenty-first century. Increases in life expectancy have led to a sharp rise in the number of older individuals who require long-term care, and some children and grandchildren are bearing more of the caregiving burden than others. Recent econometric studies, not yet taken into account in legal scholarship, suggest a tendency among the American elderly to bequeath more property to caregiving children. A competent testator, rather than a court or legislature, is in the best position to decide how much care each person has provided and to reward caregivers accordingly. Law reform, therefore, should focus on strengthening testamentary freedom while ensuring that caregivers are adequately compensated in cases of intestacy.

Slow Medicine - A Different Approach to End of Life Care

2008-05-06T12:10:00.003-04:00

Category: Elder Law

A recent New York Times article "For the Elderly, Being Heard About Life’s End" describes the benefits of of "“slow medicine,” an approach that encourages less aggressive — and less costly — care at the end of life."

There is an institutionalized bias to give any and all medical care. However, when a person is in their late 80's or 90's this aggressive care may hinder their quality of life and control over the quality of that life.

Aggressive medical care is sometime an exercise is substituted decision making - I can, so therefore I will. What "slow medicine" seems to promote is the question of - you can, but should you?

The article advised that "slow medicine" is "Grounded in research at the Dartmouth Medical School, slow medicine encourages physicians to put on the brakes when considering care that may have high risks and limited rewards for the elderly, and it educates patients and families how to push back against emergency room trips and hospitalizations designed for those with treatable illnesses, not the inevitable erosion of advanced age."

And the irony to this. As a class of population, the treatments are the most expensive, although the results may be limited. "The costliest patients — the elderly with chronic illnesses — are the only group with universal health coverage under Medicare, leading to huge federal expenditures that experts agree are unsustainable as boomers age. "

Survey Says! Majority of Americans don't have Wills

2008-05-05T17:03:00.003-04:00

Category: Estate Planning

In looking for some statistical evidence of the extent to which Americans don't have an estate plan, I came across this Lexis-Nexis Press Release: Majority of American Adults Remain Without Wills, New lawyers.comSM Survey Finds. Of note:

"[O]ver half (55 percent) of all adult Americans do not have a will, a new survey shows, a percent that has remained virtually unchanged over the past three years."
"Among non-white adults, the lack of wills is even more pronounced. Only one in three African American adults (32 percent) and one in four Hispanic American adults (26 percent) have wills, compared to more than half (52 percent) of white American adults."
"Living wills (also known as medical directives) have jumped in popularity since 2004. Two in five adults (41 percent) now have living wills in place, a full ten percent more than those who had one just three years ago. "
"[T]wo in five (38 percent) American adults report assigning a power of attorney for healthcare purposes, compared to 27 percent in 2004."

Any for answers to the key question "Why don't you have a Will?" Survey Says! the top three are:

"• Ignorance is bliss: One in ten (10 percent) American adults who do not have any elements of an estate plan say it’s because they don’t want to think about dying or becoming incapacitated.
• Where to begin?: Similarly, nearly one in ten (9 percent) adults say they don’t have an estate plan in place because they don’t know who to talk to about creating such documents. This percentage nearly doubled from 2004 (5percent).
• But I don’t need a will: Nearly one in four (24 percent) of adults say their biggest reason for not having an estate plan is a lack of sufficient assets. This was also the top reason cited in the 2004 survey (21 percent)."

Ah, but since a Will is the only place to name guardians for your children, shouldn't that be "sufficient"?

Paid Family Leave now Law in NJ

2008-05-02T15:15:00.004-04:00

Category: Elder Law, Business Law and Planning

Hot from njbiz.com, Corzine Signs Paid Leave Bill in 'Legacy Moment' New Jersey's Governor Corzine today signed paid family leave into law. "Calling it a "legacy moment" and a "moral necessity," Gov. Jon S. Corzine today signed into law a bill that will give government and private-sector workers six weeks of paid leave to care for newborns or seriously ill immediate family members."

New Jersey becomes only the second state in the nation to have 6-weeks mandatory paid family leave. The new law is not without its detractors. "Supporters of the bill say the new law will help workers balance their work and family life. Business lobbyists and other critics argue that employers—especially small ones like doctors' offices and car repair shops—cannot afford to lose key workers for up to six weeks at a time. The critics say that becoming the first state in the region to mandate paid leave would further damage the state’s image as a place to do business."

Business owners are obviously concerned that they can't afford key employees to be gone for 6 weeks at a time, regardless of who is paying for the time off. On the flip side, caregivers should take heed of a law that may allow them to devote their full time and efforts to a family emergency without fear of losing their job and all of their salary.

The article outlines the details of the new law are as follows:

"Under the law, workers will get two-thirds of their regular pay, up to $524 per week. Employees could collect the money for up to six weeks and employers would have the option of requiring the workers to first take two weeks of fully paid vacation or sick leave.
The program would be funded by workers, who would pay about 75 cents a week more into the existing state Temporary Disability Insurance fund through payroll deductions. That translates into about $35 per year.
State and federal law now entitles workers to 12 weeks of family leave, but it is unpaid and employers with fewer than 50 employees are exempt. While the new paid family leave bill covers all employers, those with fewer than 50 employees are not required to hold open jobs for workers on paid leave.
Payroll deductions would start on Jan. 1, 2009, with workers able to take paid leave starting July 1, 2009, according to the bill. The Department of Labor estimates that approximately 38,000 individuals, or about 1 percent of New Jersey's work force, will collect benefits annually, but business lobbyists have argued it will be much higher."

Tax Evasion - If it sounds too good to be true, it probably is

2008-05-01T13:15:00.003-04:00

Category: Tax Law and Planning

Actor Wesley Snipes has been given the maximum jail sentence of 3 years in federal prison for his failure to pay over $15 million in taxes. Snipes legal team essentially relied on the age old excuse of "but he said it was OK" in trying to sway the judge that he shouldn't be held responsible for following some one's advise to just stop filing tax returns. The "he" in this were a group of "tax protesters" who sold a system to thousands under the auspices of "taxes are illegal and you don't have to pay". There are more details in the Orlando Sentinel. Well, life is tough ladies and gentlemen, and just because you don't want to do something doesn't mean that you don't have to do it anyway (think of kids who have to eat their vegetables).

It is hard to say what is most offensive about the Snipes case. It could be that we all pay our taxes, and who are other people to simply choose not to participate? If you want the tax laws change, that is what the elective process and democracy (and hiring lobbyists) is all about. Or, it could be that some people (look at any recent story from Entertainment Tonight for a list) believe that because they have wealth, they don't have to play by the same rules. Well, let me clue you in on one of Benjamin Franklin's most lasting adages "Certainty? In this world nothing is certain but death and taxes" (and there wasn't even an income tax back then). Or maybe it is that the role of a tax professional is and should be to make sure a person pays their fair share under the law - not more, and not less. Here, "tax protesters" bilked thousands of people that they had the secret of getting rich quick - no more taxes. And I am sure they made millions by selling this idea to people with a lot less resources then Mr. Snipes, whose suffering for their bad decisions will never make the front page (not that there should really be any sympathy for those who bought into the system - but what about their spouses and families?).

Well, we will just have to see how Mr. Snipes looks in his orange jumpsuit what it is not coming from a Hollywood costume trailer.

Parsippany lawyer's practice a senior matter

2008-04-28T09:18:00.003-04:00

Category: Elder Law

Elder law is pressing for seniors and their families. The biggest barrier to planning is lack of information. I was happy to do my part this past Sunday in the Daily Record article "Parsippany lawyer's practice a senior matter".

Parsippany lawyer's practice a senior matter
She's one of 39 N.J. attorneys who specializes in elder law
By MARK KITCHIN • Daily Record • April 27, 2008

Deirdre Wheatley-Liss gets the same type of phone call several times a week. It's usually from a man, often a war veteran in his 60s. The house he bought 40 years ago for $4,000 is worth $400,000 now. He and his wife have spent their life raising their children and putting a little bit of money away for their retirement.

Now, one of them is sick and perhaps in need of long-term care and they are wondering, because of the skyrocketing costs of health care, if they will be able to keep their house.
"People call up thinking that their problems are so much different than everybody else," Wheatley-Liss said. "In reality, a lot of them are looking at the same problems."
And those problems are getting larger and more numerous.

Click here for the entire article.

Mandatory Arbitration May be Coming Out of Nursing Home Contracts

2008-04-18T09:03:00.004-04:00

Category: Elder Law,

As I have blogged before in Nursing Home Admission Contracts, Be Aware, Be Very Aware, a careful review of these contracts is a must. A growing concern is that they are drafted to take advantage of a family in the direst of circumstances by using the terms of the the contract to limit their own liability. This can leave a family with no contractual recourse when their loved one does not receive the care they deserve. One example of this is a damages limitation clause to $10,000 - this is obviously inadequate to address damages from a sub-standard level of care. Another favorite is the mandatory arbitration provisions - which eliminates the family's right to go to court. Instead, any disputes are decided by a panel of industry experts. As J. Michael Young, Esq. points out in his posting Mandatory Arbitration, in his new blog Texas Probate Litigation not only can arbitration be much more expensive than litigation (you are paying the arbitrators as well as your attorney):

Apart from the cost issue, Defendants often prefer mandatory arbitration because the arbitrators are drawn from the industry and perceived to be more conservative than a jury in awarding damages. For that reason, mandatory arbitration clauses are often attacked as unfair, particularly when the parties are in positions of unequal bargaining.
These clauses are becoming increasingly favored by nursing homes trying to limit liability for substandard care. However,nothing would seem more unequal than an elderly patient "negotiating" with the management of a nursing home. The reason people are admitted to nursing homes is because of failing physical and/or mental
health. Not an ideal circumstance for well informed, arms-length negotiating.
As this article details, Congress has become concerned and a bipartisan bill in the US Senate would curtail the use of such clauses, particularly as a pre-requisite for care.
I imagine this bill has a decent chance of passage, but would likely face a veto from President Bush.

A senisble bill coming out of Congress - who would have thunk it? But note the veto forecast.

Is your Life Insurance Rated due to Travel?

2008-03-27T12:40:00.003-04:00

Category: Financial Planning

Life insurance companies are allowed to "rate" policies, i.e.: charge higher premiums, based on factors such as health or lifestyle. Up until yesterday, in New Jersey, one of those lifestyle factors was travel. However, Governor Corzine just signed legislation prohibited insures to rate policies based on travel.

From Scott Goldstein at NJBiz - Corzine Signs Bill Ending Life Insurance Denial Based on Travel

Life insurance companies can no longer charge higher premiums to people based on past and future travel plans to places like Israel and Indonesia, according to a bill (A-1586) signed into law yesterday by Gov. Jon Corzine.

The new law, which takes effect immediately, prohibits companies from determining premiums or denying insurance "based on an individual's intent to travel abroad, unless the decision is based on sound actuarial principles."

What does this mean to you? If your present policy was rated for travel (which applies to many New Jersey executives of global companies) you may want to look at replacing the policy as you may get a lower premium.

Estate Tax in the Spotlight Again

2008-03-26T12:01:00.003-04:00

Category: Estate and Inheritance Tax

Congress is again considering a permanent modification to the federal estate tax.

At present, US residents have a $2 million exemption from federal estate tax. That exemption is scheduled to increase to $3.5 million in 2009. There is NO federal estate tax in 2010, and the federal estate tax in re-instituted in 2001 with a $1 million exemption. (Doesn't congress just make the clearest laws).

The Senate recently voted 99-1 in favor or a proposal to fix the exemption permanently at the 2009 levels. This would be good as it would impose some certainty on planning, and remove the incentive for wealthy heirs to have the parents not survive past 2010 (the dark side to a 1 year repeal). Of course, this is merely a resolution, not a law, but it is interesting that it comes to the forefront again in an election year in the midst of a recession.

Enticing the "elderly" to turn in their driver's licenses?

2008-03-19T09:59:00.005-04:00

Category: Elder Law, Miscellaneous Musings

We all complain about other drivers, particularly here in New Jersey where we probably have the most awful traffic, road conditions and convoluted traffic patterns (we can't just turn left - we have a lovely invention called jug-handles instead) in the country.

Elderly drivers tend to get much of the ire - for right or for wrong. In Japan, they are trying to entice "elderly" drivers to turn in their licences ("elderly" is in quotes as they define it as 65 - odd for the country with the one of the longest life expectancies). Yahoo News reports:

Tokyo businesses are to start offering benefits to elderly people who give up their drivers' licences, backing a police effort to cut back on the ballooning number of traffic accidents caused by drivers over 65.

Among more than 30 special offers, one small bank will give higher interest rates, while Mitsukoshi department store chain plans to provide free delivery from its Tokyo stores and a hotel will offer a 10 percent discount on meals in a program starting next month, Tokyo police said on their Web site.

"Have the courage to give up your licence," the police say on the site. "If you have lost confidence in your driving ... if your family says they are worried about you driving ... please think about handing in your licence."

What about some sort of accelerated re-licensing system instead after a certain age? And where does 65 come from (John McCain is 72 after all, and he claims to be spry enough).

Seniors - File a Tax Return with "Stimulus Payment" at the Top to get your Rebate

2008-03-13T13:24:00.006-04:00

Category: Tax Law and Planning

Dailyrecord.com tells Seniors about the Tax Rebate: "Get this straight: If you can pick up an easy $300 or more by summer, it's worth the trouble."

As the Article illuminates, the problem with the tax rebate ($300 for singles, and $600 for couples) is that to get the tax rebate you need to file a return. Many seniors haven't filed a return in years and have no idea how to go about it. Well, here's the answer:

From "Rebates could return some seniors back to filing taxes - Simplified steps in place to allow taxpayers on limited income to qualify for check"

If you normally file a tax return, file the return as usual. Otherwise, follow these steps.

• First, get a 1040A or 1040 form from a post office, local library, http://www.irs.gov/ or by calling the IRS at (800) 829-3676. If you're filling out a form by hand, get the 1040A. If you're using software, it might be easier to use a 1040.
• If you normally do not have to file a tax return, write "stimulus payment" on the top of the form.
• Fill out your name, address and Social Security numbers for you and your spouse at the top of the form.
• Fill out the tax filing status.
• Fill out exemptions for yourself, spouse and dependents. Be sure to list all qualifying children on line 6c to get any possible rebate money for them.
• Go to Line 14a of Form 1040A or Line 20a of Form 1040. Here's where you list Social Security benefits. See Form 1099-SSA, which the Social Security Administration sent out earlier this year to report 2007 benefits.
If you do not have a Form 1099-SSA, you may estimate your annual Social Security benefits. Take your monthly benefit and multiply it by the number of months that you received it in 2007.
If you normally do not have to file a return and do not owe taxes, you're going to fill out the entire amount of Social Security benefits, plus other benefits like some veterans' and Railroad Retirement benefits.
Supplemental Security Income, or SSI, cannot be used to count as qualifying income in order to get this economic stimulus rebate.
• If this applies to you, see Form 1099-RRB for Railroad Retirement benefits to report those benefits on Line 14a of Form 1040A or Line 20a of Form 1040.
• Or, if this applies to you, you're going to need the sum of veterans' disability compensation, pension or survivors' benefits received from the Department of Veterans Affairs in 2007. You can estimate the annual benefit by taking the monthly amount you receive and multiplying it by the number of months in 2007 that you received the benefits.
• Sign the return, date it, fill in your occupation and give a daytime phone number. If you're filing a joint return, your spouse must sign the return as well.

• Keep a copy of the return.

• Mail the return to Department of the Treasury, Internal Revenue Service Center,
at the address for your state.

Find that at the IRS Web site, click on Individuals in the tabs across the top of the page, then click on Where to File under IRS Resources in the left rail. Then click on the link that says "Individual Taxpayers -- Where to File Your Own Individual Return" and a map of the states will pop up. Click on your state.

Use the address for your type of form and the one where you won't be sending in any money.

• Know that the first rebate checks won't go out until May.

Ledger's will leaves nothing to daughter - Parental Responsibility to Prepare a Will?

2008-03-10T16:36:00.005-04:00

Category: Estate Planning

While Heath Ledger's death may have been an accident, his failure to provide for his minor child is an example parental hubris I see all too often in parents of young children.

Yahoo News reports that Ledger's will leaves nothing to daughter : "Heath Ledger's will leaves nothing to his former girlfriend and their 2-year-old daughter because it was never updated after they became part of his life."

Parents of young children don't intend to die, but part of being a parent is being responsible for life of another person who cannot take care of themselves. Yes, you are young. Yes, you are healthy. Yes, life is good. However, as Mr. Ledger's unfortunate example shows, you can have it all, and bad things can happen to you too.

What I find particularly concerning is that Mr. Ledger was undoubtedly surrounded by scores of financial advisers - accountants, money mangers, attorneys. While I have probably heard all the reasons why a person can't make out a Will to protect their kids ("I don't have time", "I don't have enough money for it to matter", "I can't pick a guardian") all of these seem rather weak in retrospect. I assume if Mr. Ledger could have predicted his untimely death, he would have made sure his daughter was taken care of. While his family has said they will step up to the plate, shouldn't a parent do more then leave their child's future to the best intentions of others? Shouldn't a parent take the time to map that future out - just in case?

February Dubbed "Let's Review our Will Month"

2008-02-28T09:26:00.003-05:00

I have dubbed February as "Let's Review our Will Month" and it is rapidly coming to an end. To help you and those in your network look at this critical document and determine if what the Will says continues to meet the maker's goals and needs, I have developed an Estate Plan Review Checklist.

The Estate Plan Review Checklist is a detailed checklist poses questions to help a person evaluate the suitability of their current estate plan. Some questions posed include:

* Do you have a (i) Last Will and Testament, (ii) General Durable Power of Attorney, and (iii) Health Care Power of Attorney/Health Care Proxy/Living Will? Every complete estate plan must contain at least these 3 documents.

* Have you moved since you last updated your estate planning documents? If you moved from one state to another, there may be questions of the interpretation or validity of your existing estate planning documents in your new state of residence. Generally, estate planning documents executed in one state will be valid in another state, but your new state of residence may have specific statutes or tax laws that are not addressed in your existing estate planning documents. You may want to contact an attorney in your new state of residence to advise you as to what might need to be updated.

* Do you have a separate personal property designation? This is a separate writing where you indicate who should receive specific items of your personal property such as photographs, jewelry, art work, etc. If you have one, you should review it and make sure that it is still is an expression of your wishes. If you don’t have a personal property designation, you may want to consider creating one so that specific items will go to specific people.

* Is any person receiving your personal property a minor (under 18)? If so, your estate plan should make provisions for that property to be held by the minor’s Guardian until he or she attains an appropriate age.

* Do you have any specific gifts or bequests you want to make? Any gift of a cash amount or of an asset other than personal property should be stated in your Will. If you have given away a specific asset to a person in your existing Will (i.e. your shore house), be sure that the asset still exists. Also, your Will should provide for what happens if the specific asset is sold during your lifetime.

and many more.....

Economic Stimulus Package now Law

2008-02-13T15:27:00.003-05:00

Category: Tax Law and Planning

President Bush signed the new Economic Stimulus Package into law today. For an excellent and detailed summary look to CCH 2008 Tax Alert.

Some quick hallmarks:

Tax Rebates for induvidual taxpayers with incomes less than $87,000/$174,000: At least $300 to almost everyone earning a paycheck, including low-income earners. Social Security recipients and disabled veterans making too little to pay income taxes would receive $300 checks as well, as long as they have at least $3,000 in income from various sources in 2007.

Families with children would receive an additional $300 per child. The full rebate would be limited to individuals earning $75,000 or less and couples with incomes of $150,000 or less, but a partial rebate would go to individuals earning up to $87,000 and couples earning up to $174,000. The caps are higher for people with children. Illegal immigrants are disqualified.

_Business tax write-offs: So-called bonus depreciation and more generous expensing rules to spur investment.

_Housing rescue: Allow more subprime mortgage holders to refinance into federally insured loans by raising the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas. Increase the availability of mortgages by providing a one-year boost to the cap on loans Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.

Information Courtesy of:
Assocaited Press

The package amounts to about 1% of U.S. gross domestic product.

Taxpayers will not have to apply for the rebate; it would come automatically based on their 2007 tax return.

Economists who have analyzed the numbers say it will give the economy a much-needed boost in the middle of the year. But almost every economist agrees that the business tax breaks will have very little impact on the economy this year. See Capitol Report.

Surveys show most consumers say they'll save the tax-rebate money, or use it to pay down debts. Only a minority of consumers say they'll spend it. To be an effective short-term stimulus to the economy this year, the money would have to be spent.

Information Coutesy of:
marketwatch.com

Estate Planning - Men v. Women (these are the jokes)

2008-02-01T16:46:00.002-05:00

Category: Miscellaneous Musings

A totally non-serious estate planning tale, but good for a chuckle....

Estate Planning

Dan was a single guy living at home with his father and working in the family business. When he found out he was going to inherit a fortune when his sickly father died, he decided he needed a wife with which to share his fortune.

One evening at an investment meeting he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away.

"I may look like just an ordinary man," he said to her, "but in just a few years, my father will die, and I'll inherit 20 million dollars."

Impressed, the woman obtained his business card. Three days later, she became his stepmother.

Women are so much better at estate planning than men.

How Long Should you be keeping Financial Documents

2008-01-15T12:10:00.002-05:00

Category:Tax Law and Planning, Financial Planning

I met with a client yesterday to go through decades of files to answer the question of "what papers do I still need to keep?" This seems to come up often around tax time, so much so that the question was posted on Yahoo Answers today. Yahoo's answers with my comments are below:

Dear Yahoo!:
How long should you keep personal financial records like bank statements, receipts, tax statements, etc.?

Our first stop was a web page from Bankrate.com with the perfect title: "What financial records to keep and how long to keep them." The information is laid out in an easy-to-read table format. Here's a quick overview -- for details, check out the web page.

Taxes -- Seven years. The IRS has three years from your filing date to audit your return if it suspects good faith errors, and six years if it thinks you underreported your gross income by 25 percent or more. DWL adds - Keep your returns and all the supporting information (W-2, 1099, etc.) that you relied on to fill out the return.

IRA contributions -- Permanently. DWL adds - To "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

Retirement/Savings plan statements -- From one year to permanently. Keep the quarterly statements until you receive your annual summary; keep the annual summaries until you retire or close the account. DWL adds - Make sure the summaries are correct before you toss the interim. And remember that scanning is your friend.

Bank records -- From one year to permanently. Throw away checks that have no long-term importance, but keep checks related to your taxes, business expenses, and housing and mortgage payments. DWL adds - If you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Brokerage statements -- Until you sell your securities. DWL adds - If you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Bills -- From one year to permanently. In most cases, when you receive the canceled check, the bill can be tossed. However, you should keep bills for big purchases (e.g., jewelry, appliances, cars, collectibles, etc.) for proof of their value in the event of loss or damage. DWL adds - Again, to "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

Credit card receipts and statements -- From 45 days to seven years. Keep the statements seven years if they document tax-related expenses. DWL adds - Again, if you can get on-line statements and save electronically, you can back those up separately and rid yourself of the statements and checks.

Paycheck stubs -- One year. If your W-2 form matches your stubs, you can toss your stubs.

House/Condominium records and receipts -- From six years to permanently. DWL adds - Again, to "keep" does not mean you need paper files - an annual scanning program, with a copy back-up'ed elsewhere, is encouraged.

We found a couple of other helpful articles in the search results -- one from Kiplinger.com and another from BlueSuitMom.com. Kiplinger.com suggests you keep your tax returns forever, while the blue-clad mother says it's a good idea to routinely purge and file your receipts on a monthly or quarterly basis.

All the sites offer the same piece of advice -- whether you use a filing cabinet, shoebox, or desk drawer, find a system that works for you and stick with it.

Key NJ Medicaid Figures - Starting 2008

2008-01-08T10:51:00.002-05:00

Category: Elder Law

In starting 2008, some key Medicaid figures for New Jersey:

Minimum Community Spouse Resource Allowance - $20,880.00

Maximum Community Spouse Resource Allowance - $104,400.00

Resource Allowance for an Individual - $2,000.00

Resource Allowance for a Couple (both husband and wife in a nursing home) - $3,000.00

Minimum Monthly Maintenance Needs Allowance - $1,711.25

Maximum Monthly Maintenance Needs Allowance - $$2,610.00

Monthly Personal Needs Allowance - $35.00

Shelter Standard - $514.00

Standard Utility Allowance -

$344.00 – heating
$210.00 – non-heating
$29.00 – telephone

Divestment Penalty Divisor - $6,655.00

Income Cap Amount - $1,869.00

Home Equity Limit - $750,000.00

Your Estate is Going to the Dogs

2007-12-30T10:21:00.000-05:00

Category: Estate Planning

This news story about estate planning for pets is not as rare as you might think. For many people, the care of their beloved pets is a primary concern should they become ill or pass away.

3 Md. dogs enjoy $800,000 inheritance - Yahoo! News: "The dogs — named Buckshot, Katie and Obu-Jet — inherited $400,000 and a house in Hagerstown with the death last year of owner Ken Kemper. Altogether, their estate is worth about $800,000.

The beagle and two Labrador mixes were strays when Kemper adopted them. They now live at their house with caretaker Roy Grady.

They might not be aware of their wealth, but they do know that on one night a week Grady treats them to spaghetti dinner, with meatballs and garlic bread."

Interestingly, I find that people with pets and people with small children share the same rationale/excuse for not preparing an estate plan "We can't agree on who to name to care for our children/our dogs should we die." Now, I remind people with children that not naming guardians is a true dis-service to your kids because if you don't name Guardians a total stranger who you have never met will name Guardians - and you might not like who they name.

The difference is that with children the law provides a mechanism to provide someone to be in charge of them and the cost of caring for them if you can't (not that this should be an excuse for not creating a Will and naming Guardians). With pets, there is no built-in protection of laws to provide for a home, costs of food, medicine, etc., and most important, loving guidance and supervision. You the owner must do that or your best friend may end up in the pound. This doesn't need to be a difficult or insurmountable task - it just requires a bit of forethought and planning. Some ideas:

+ Leave your pets to a relative who will love and care for them. Give the person a cash bequest to cover potential costs of care.

+ Don't know who to leave the pets to? Direct your Executor to find an appropriate home, and give your Executor the ability to make a cash bequest up to a certain amount to cover the costs of care.

+ Create a "Pet Trust" for the care of the your pets during their lifetimes. In the news article above, the pets house went in the trust and the trust paid to maintain their home, as well as acquire a care-giver for them. Make sure you consider mechanism to have an outside party verify the caregiver is doing a good job.

+ Research an "old-age" home for pets and leave your pets to them together with the requested bequest from the pet home.

Whatever you do, tell the person who is the immediate caregiver if you are hurt that they need to take the pets into their care immediately. After all, your pets can't call in the phone to order a pizza if nobody gets out their chow at the normal time.

Whats missing from the Candiates Quick Fixes for the tax code?

2007-12-27T15:53:00.000-05:00

Category: Tax Law and Planning

Op Ed pieces about taxation are usually so "Opinion" and so "Editorial" that they might better be called infomercials for a better tax system. So, when I stumble on a piece that is equally critical of all of the candidates vying for the Oval Office in 08, I stop to take a look.

What's missing in tax talk - Opinion - USATODAY.com: "Set aside for a moment the biggest issue of all, which is uncontrolled spending. Tax revenues, even without further cuts, are nowhere near the level necessary to cover the massive increase in costs that will come with the retirement of the baby boomers and relentless health care inflation. Every candidate knows this, but fiscal responsibility is painful, so the campaign debate is focused mostly on tinkering."

The author goes on to tout simplification as the goal all the candidates are missing, and points out very valid items of "the other side" to all their tax plans. But to the author's main point, while having a "simplified" tax code is a wonderful goal, the idea that reducing the size of the tax code would solve all tax problems is, in a word, and "oversimplification." The tax code is the main means by which government can influence behavior - and whether you think they should be or not, government is in the business of behavior modification. Want to smoke? It will cost you more. Want to get a mortgage instead of a loan for your car? It will cost you less. So maybe the candidates need to better address the role of "governance" then use the tax code to take from one hand and give to the other.

Good - Avoiding AMT; Bad - Waiting for your Tax Refund

2007-12-21T09:23:00.000-05:00

Category: Tax Law and Planning

As with all things dealing with tax law, when the government giveth, it also takes away. Per USATODAY.com - Tax change may mean delay in refunds : "More than 20 million taxpayers will escape the alternative minimum tax this year, thanks to a stopgap measure Congress approved Wednesday. But lawmakers waited so late in the year to vote that many early filers could have to wait until March to get their refunds."

The article contains a good explanation of the AMT or Alternative Minimum Tax - a tax originally designed to prevent very wealthy taxpayers from essentially "deducting" their tax returns down to a zero tax. The AMT is a parallel calculation of tax, that does not incorporate certain deductions. While the theory behind the AMT is sound, the problem is that the income levels that AMT impact were not legislated to be adjusted for inflation. As such, as income grows through inflation, such that salary is higher, but wealth is not necessarily greater, the AMT captures more and more taxpayers, but not necessarily those taxpayer the law was intended to address.

If you were counting on that refund any time soon, this is another example of why you should try to minimize your refund instead of giving the government an interest free loan.

3 New Years Resolutions for the Small Business Owner

2007-12-19T14:56:00.000-05:00

Category: Business Law and Planning,

I am always in favor of lawyers who can speak English instead of Legalease - here is a 1-2-3 New Years Resolutions for Small Business owners, courtesy of Jean D. Sifleet, Esq. I added some emphasis here and there for some points to really take to heart.

You’ve heard it all before, but year-end is a great time to reflect on your accomplishments and plan for the future. This year, try the 1-2-3 approach.
Succession, retirement and estate planning are closely linked for the small business owner. If a small business owner dies without a succession and estate plan, chaos occurs in the business and for the family. If the small business owner does not have a retirement plan, financial security for the later years of life is uncertain and remains tied to the business.
Doing nothing can have extremely severe and unintended consequences. There are many sad horror stories of family fights and legal battles about how the estate of a small business owner will be divided up by the survivors. Businesses have been forced to sell property to pay taxes owed or close as a result. Many of these problems can be avoided.
As you pull together your year-end financial results, it’s a good time to make your plans for the future. Recent changes in the law make it easier to put more money away for retirement in a tax advantageous manner. This is the time to think about reducing your taxes by funding your retirement plan.
Try the 1-2-3 approach to New Year’s Resolutions.
Resolution (1): Take action.
Taking action before a crisis arises is much better than reacting under stressful circumstances. If your will and estate planning documents were prepared years ago when the kids were little, as is frequently the case, they need to be reviewed and updated. If the small business owner’s will or trust says, “equal shares to my children,” there can be a disaster in the making. Similarly, if you have put retirement and benefit plans in place over the years, it is important to review them from time to time.
Resolution (2): Articulate your long-term goals.
Planning for your succession, retirement, death is never easy. Your goals should drive the planning process. Hence, articulating your long-term goals is a critical step in the planning process. Answering the following questions will help to articulate your goals and establish a framework for planning.
– Do you plan to retire? At what age?
– Do you plan to transfer ownership and/or management within the family?
– Do you plan to transfer ownership and/or management to employees?
– Do you plan to sell the business?
The succession plan is a critical element of estate planning. A succession plan provides for the orderly transition of ownership and management of your company. Basically, the plan becomes a contract amongst the parties. Family members who are active in the business should be treated differently from family members who are not participating in the business. There are ways to equalize the relative shares that each of the children receives, while avoiding the potential for a power struggle in the business.

Resolution (3): Develop a written plan.
It’s critical that the plan be in writing because people have selective memories and memory fades with time. The importance of communication … and more communication amongst family members and key players … cannot be overstated. The plan can be reviewed, discussed, and revised over a period of time.
To avoid problems down the road, succession, retirement and estate planning should be done with professional assistance. Do not just sign over property or give away stock. A proper estate plan is truly a kindness to your survivors. Having a professional review of your plans gives you a clear understanding of what revenue stream you are likely to have in retirement and how your affairs will be handled if you die or become disabled.
Planning ahead is the best way to achieve your goals. Doing nothing can have severe and unintended consequences. So this year, try the 1-2-3 approach. It’s the best gift you can give your family. Best wishes for the New Year!

In NJ Continuing Care Retiremetn Communities must have a Resident on Board

2007-11-05T11:54:00.001-05:00

Category: Elder Law

Under newly enacted S-425/A-3989, New Jersey's 27 Continuing Care Retirement Communities (CCRC) must now have at least one resident of the CCRC on their governing board. In addition the CCRC is required to discuss certain items, including the financial condition of the CCRC, with the governing body, as well as with the residents themselves at least quarterly.

A CCRC offers independent, assisted living and nursing care to its residents as needed. They promise appropriate care for life in return for the investment the residents make in the community.

Given the very large financial investment people make in a CCRC - usually several hundreds of thousands of dollars at the outset and thousands more monthly, this new law will allow will allow the residents to keep a better eye on their investment.

Do your heirs a big favor: Choose IRA (and other) beneficiaries

2007-10-22T15:31:00.000-04:00

Category: Estate Planning

While I have blogged on this idea before (Retirement Accounts and Beneficiary Designations - Myths and Misconceptions ), the intro to this article Do your heirs a big favor: Choose IRA beneficiaries reminds me of what we commonly see at the death of the second spouse - the Will had provided for contingencies, so no new estate planning was done. Unfortunately, the second spouse had no idea who was named as a contingent beneficiary on insurance, retirement plans, etc., and sometimes those dollars go to unintended beneficiaries (whether they be children or Uncle Sam).

"After the recent death of his mother, James B. from Santa Barbara had a sit-down talk with his father, covering family finances.
'My father doesn't need to change anything, he's set up for life,' James said in an e-mail, 'but not changing anything means he wants to leave everything exactly as he had it with Mom. He says that his will sorts everything out, but I'm afraid we're missing something here.'
What James' father is missing is a named beneficiary on his individual retirement account; his wife was the beneficiary, but her death and the absence of a contingent beneficiary means the money will go the estate. The will eventually will sort things out, but the error will turn a lifetime of savvy investing into a Stupid Investment of the Week."

Why is not looking at your IRA beneficiaries not wise? Because often the default beneficiary is the estate. From and IRA perspective, and estate is not a favored beneficiary. Human beings as beneficiaries have the right to stretch-out their inherited IRA's over a period of time - thus deferring any income tax on the dollars in the IRA. Estates as beneficiaries must have the entire IRA distributed within 5 years, thus triggering payment of all the income tax on the dollars.

Death and taxes - A British Perspective

2007-10-11T11:13:00.000-04:00

Category: Estate and Inheritance Tax

As the Estate Tax Debate is likely to heat up as we head into the 2008 election season, I found the below articleNew Statesman - Death and Taxes from British political philosopher Martin O’Neill debating Great Britain's Inheritance Tax (which is structured similarly to our federal estate tax) excellent reading and very enlightening.

The Article begins "In a letter to his friend Jean-Baptiste Leroy in 1789, Benjamin Franklin famously opined that “in the world nothing can be said to be certain except death and taxes.” Franklin was surely right about this, just as his judgment was sound in so many other matters – after all, this was the man who told us that “beer is living proof that God loves us and wants us to be happy”. But it is astonishing how often passions become enflamed, and good sense goes out the window, when we encounter the heady mix of mortality and tax. "

It goes on to highlight some on the mis-perceptions about the British Inheritance Tax that are very similar to the many time unwarranted fears about the US estate tax:

(1) Most People Pay Nothing (or at any rate not very much…)At the current £300,000 threshold, only the richest 6% of estates pay anything. One common form of misjudgement is that many people who will not be affected IHT nevertheless think that they will be. A striking example of this kind of thinking comes from the U.S., where the Estate Tax threshold kicks in only at $2,000,000, or for the top 1% of estates. Nevertheless, Bush’s attempt at repealing the estate tax enjoyed widespread public support among the less well off. Surveys found that 20% of Americans believed that they were in this top 1%, with a further 20% expecting to come into this bracket in the near future!

The emphasized text speaks for itself.

(2) Arguments About ‘Double Taxation’ are Bad Arguments:Perhaps the strangest,
and yet most pervasive, aspect of opposition to IHT is that many people say that
‘double taxation’ is intrinsically unfair. But, if this were true, then it would
be intrinsically unfair to levy any form of tax on the expenditure of post-tax
income.

The reality is that in a tax system that has parallel forms of taxation (federal, state, local), there is double taxation. Federal income tax supports the United States. Sales tax supports New Jersey. Real estate tax supports my local town. The reality is that all these governmental entities need funds to operate. And the estate tax REPLACES the capital gains tax for heirs due to the step up in basis that eliminates tax on appreciation in assets during lifetime (and all Americans benefit from this, not just those in the 1% that pays the estate tax).

(3) If not Inheritance Tax, then what?Inheritance Tax is a tax that falls disproportionately on the old (the typical case is of 60 year-olds inhering from 80 year-olds) and the rich. If we wish to repeal it, or raise IHT thresholds, then, unless we want to reduce government expenditure, the shortfall needs to be raised elsewhere. The chances are that it will be raised to a greater degree from those who are younger and poorer than those affected by IHT. Many of the opponents of IHT would be less sure of their position if questions about IHT were framed in a different way. Instead of “Would you like inheritance tax to be reduced?” the question should be “Would you like to replace inheritance tax with increased income tax or corporation tax?”. Here again, thinking of IHT as part of a tax system, rather than in abstract isolation, helps to make the issues clearer.

This point is my main concern with the charge to repeal the estate tax. Assuming that government expenditures remain exactly the same, if the government takes in less revenue from elimination of the estate tax, where is it going to get the shortfall from? Likely you and me.

(4) Why Free Market Conservatives Should Love Inheritance Tax. Inheritance Tax is often seen as a policy of the Left rather than the Right, and it’s certainly true that there are lots of good egalitarian reasons that support IHT. But this is only half of the picture. Those on the Right, and especially those who believe in the usual justifications for the free-market, should be just as enthusiastic as the staunchest socialist about the preservation of IHT. Here’s why. Let us assume that we believe in the glories of the free market economy. If we give people responsibility, and set them on their own two feet, then they’ll work hard and prosper. A free market in trade and employment gives us, let us suppose, a dynamic, innovative and thriving economy. It does this by incentivizing hard work, and letting economic rewards flow to those with the best ideas and the greatest capacity for hard graft.
But, if this is our vision of society, we surely must admit that the unearned windfall gains of inheritance tax distort this picture. Large inheritances distort the level
playing field which would allow the dynamic and innovative to prosper. If welfare payments cause listlessness and sap dynamism, then we can only assume that large unearned windfalls will do likewise. Indeed, these were precisely the sorts of arguments given by Teddy Roosevelt when he proposed an American federal
estate tax in 1906. As Andrew Carnegie (another proponent of IHT) put it “the
parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and leads him to lead a less useful and less worthy life than he otherwise would.” One need hardly point out that neither Roosevelt nor Carnegie were approaching these issues from the left.
The solution? Inheritance tax can be used to fund education so as to create that level playing field and broad opportunities, or, perhaps, used to fund capital grants to young entrepreneurs. This is exactly the sort of scheme favoured by Bruce Ackerman and Anne Alstott, in their book The Stakeholder Society, where they advocate capital grants to each individual of $80,000 at the start of their working lives, funded by a progressive estate tax. One of the interesting features of this sort of scheme is that it is all about using the state to facilitate individual responsibility and to create opportunities, rather than simply doling out welfare. This is a much purer vision of a free market society than societies that are gummed-up and ossified by inherited advantage.

I took a tax theory class once long ago that echoed how the estate tax supports the capitalist society we are and is not merely a form of socialism. While I don't know if the government taking to give is realistic (I would rather save my own $80,000), the estate tax does support current government expenditures that could not exist without funding.

(5) Why the Left Needs To Be Less Defensive about Inheritance Tax. Just like the Democrats in the US, the Labour Party has tended to be somewhat defensive when reacting to proposals to abolish or reduce IHT. Rather than simply emphasizing that not all that many people pay IHT, Labour should be trying the difficult task of transforming public opinion on the issue. Perhaps the strongest arguments for IHT appeals to ideas of reciprocity and fairness that are very commonly shared.
Teddy Roosevelt took the view that “The man of great wealth owes a peculiar obligation to the State, because he derives special advantages from the mere existence of government.” There would be no good in being wealthy if one could not enjoy stable property rights, the protection of the police, and the peace of a well-defended country, all of which need to be paid for. And individuals do not make their money in a vacuum, but by building on a broad history of innovation and development. This sort of reciprocity argument is also made by Bill Gates, Sr., father of the Bill Gates of Microsoft, in his book Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes. This sort of argument can get broad purchase with those of every political stripe, as is demonstrated by the fact that Roosevelt and Gates are hardly “soak the rich” firebrands or loonie lefties.

This point underscores the basic element of a progressive tax system - those who have more pay more because they have more disposable dollars (dollars not needed for the basics of food and shelter) for the community. Unless we go to a flat tax, a progressive tax system is what we have to work within.

When do I need to look at my Wills again?

2007-10-08T09:22:00.000-04:00

Category: Estate Planning

Congratulations! Unlike the vast majority of Americans, you have a Last Will and Testament. You have created an appropriate distribution scheme to take into account your family, assets, and goals. Now what?

To continue to fit your needs, a Last Will and Testament, and indeed your entire Estate Plan, need to evolve over time. Not only does the law change, but you change - your family situation, your financial situation, your goals.

Courtesy of Florida Estate Planning Lawyer Blog, here is a list of those occurrences that should trigger you looking at your Wills again:

All of this should be reviewed on a regular basis and always when one of
the following happens:
(1) Marriage, divorce, death of spouse.
(2) Birth of a child.
(3) Children become financially independent.
(4) Birth of a grandchild.
(5) New business venture.
(6) Substantial growth in your business.
(7) Job promotion.
(8) Retirement.
(9) Purchase of life insurance.
(10) Move to a different state.
(11) Substantial increase or decrease in wealth.
(12) Decision to make large charitable gifts.
(13) Increase in risk of being subject to a lawsuit.
(14) Substantial amounts of property are in joint names.
(15) You purchase real property (including a time share) in another state.

Even if none of these have happened recently, an estate plan needs a "check-up" every 3-5 years. What does this mean? Get our your copy of your documents and read them. If they don't match your recollection, or are no longer appropriate (you no longer have a relationship with your successor executor for example) make whatever changes are needed so your Will and Estate Plan continues to fit you.

Long Term Care Insurance Premiums on the Rise

2007-10-02T12:51:00.000-04:00

Category: Elder Law, Financial Planning

Just like in the mortgage market where making mortgages too cheap in years past is making them more expensive today, the Long Term Care insurance market is in the midst of an upward adjustment. While many people may think that Long Term Care insurance is expensive, having to pay out of pocket for long term care is much more so ($100k - $120k a year is not unusual in northern NJ). When insurance companies began underwriting Long Term Care Insurance policies 10-15 years ago, they didn't have a great pool of actuarial data to set the premiums. And unlike life insurance, where there is a fixed cost to the insurance company (the set death benefit), there is no known fixed cost to Long Term Care. Add to that the fact that insurance companies are in business to make money for their shareholders, it should come as no surprise that Long Term Care insurance premiums are on the rise.

What has come as a surprise to some people, however, is that even "guaranteed fixed premiums" are subject to change if the insurance company goes back to the banking and insurance commission of the state to show that all their underwriting assumptions were wrong. This can lead to either an unanticipated increase in premiums (hard to swallow on a fixed income), or a reduction in scheduled benefits.

What should you do? If you have Long Term Care insurance, call your insurance company and ask for a current benefits statement. Check that against your original policy so you can speak to the issuing agent about any discrepancies. If you don't yet have Long Term Care insurance, the price is only going to go up as you get older and the insurance companies readjust their prices.

For more, see Long-Term Care Insurance Giant Raises Premiums on Existing Customers for First Time at elderlawanswers.com.

Do the Presidential Candidates think like you do?

2007-09-26T13:18:00.000-04:00

Category: Miscellaneous Musings

Much of what I blog about here is subject to the whims of Congress and the President, particularly in the area of Taxation and Elder Law. One of the greatest things about our country is that we have the opportunity every 4 years to say who should be the President who will represent us. All of the candidates have offered positions on a variety of issues - the question is, which candidates represent your opinion on important issues?

On Select a Candidate, you can use a non-political tool to see which candidates most closely align their positions with your desires. You may be surprised at who best represents you. If you are, use your voice to make your position heard. There will be rallies around the nation, in person and online, that give us, the voters, the opportunity to tell the presidential candidates what we want in our most important representative.

The Presidential Candidates on Taxes - A look at what might be

2007-09-19T15:10:00.000-04:00

Category: Tax Law and Planning,

A look at positions of some of the 2008 presidential candidates on taxes. Note that there is no real secret to tax laws - its like dieting where you eat less and exercise more to lose weight. Either spend less and to tax less, or tax more to spend more. Some of the proposals courtesy of the Associated Press:

DEMOCRATS:

_New York Sen. Hillary Rodham Clinton: Tax proposals are so far focused on universal health care plan, including tax credits to make insurance more affordable. Also, tax a portion of health insurance benefits provided to workers making more than $250,000 and repeal some of President Bush's tax cuts for them.

_Former North Carolina Sen. John Edwards: For middle and low-income people, set up tax-free savings accounts and have government match the first $500 in savings, expand earned-income and child and dependent care tax credits, and exempt the first $250 of investment income from capital gains taxes. Raise rate on capital gains tax to 28 percent from 15 percent for those making over $250,000. Repeal the Bush tax cuts for families making over $200,000. Tax cuts to be paid for by the tax increases on wealthier Americans.

_Illinois Sen. Barack Obama: About $80 billion in tax breaks mainly for low-income workers and the elderly, including tax credit worth up to $500 a person to offset payroll taxes and elimination of tax-filing requirement for older workers making under $50,000. A mortgage-interest credit could be used by lower-income homeowners who do not take the mortgage interest deduction because they do not itemize their taxes. Raise corporate taxes and the top rate on capital gains and dividends to pay for the cuts.
___
REPUBLICANS:

_Former New York Mayor Rudy Giuliani: Make permanent the Bush tax cuts that expire in 2010 and eliminate the inheritance tax. Also, hold the line on marginal tax rates or reduce them, and establish a permanent child tax credit. Index the alternative minimum tax to inflation. Income tax deduction of $7,500 per taxpayer to defray health insurance costs. Cost breakdowns not spelled out.

_Arizona Sen. John McCain: Opposed some of Bush's tax cuts because they were not wedded to spending cuts, now says the tax cuts should be made permanent. Eliminate alternative minimum tax.

_Former Massachusetts Gov. Mitt Romney: Tax breaks to those earning less than $200,000, including eliminating capital gains, interest and dividend taxes for most. Estimated cost of $32 billion a year to be paid in part by keeping growth of non-defense spending under inflation rate. Details not spelled out. Also, make permanent the Bush tax cuts that expire in 2010 and eliminate estate tax.

Family Contracts to Make Siblings Get Along for the Care of Aging Parents

2007-09-17T16:31:00.000-04:00

Category: Elder Law

One of the biggest issues an Elder Law attorney faces is not how to plan for their elderly clients to reach their goals, but how to implement the plan with the dynamics of the family. Gender equalization not-withstanding, daughters (and daughters-in-law) bear most of the brunt of caregiving. Often times there are large financial differences between children, and accompanying differences in financial outlook and responsibility. And all of this occurs in the context of families - where resentments from years past have lingered or even festered.

What's an Elder Law attorney to do? Many times asset protection planning for seniors involves a transfer of assets. How can assets be transferred if children, or their spouses, do not appear trustworthy to the other siblings involved? Or, if one child feels he or she "deserves" more?

One solution that I commonly employ is for a transfer to be made to a trust, not to any one or more children outright. A group of the children, or a third party, can then act as a Trustee to safeguard the assets from waste, greed, etc. during the seniors lifetime, and then distribute them evenly at death.

Another creative solution I have been reading about is a "Sibling Contract". This came to my attention through the Louisiana Estate Planning and Elder Law Blog. In her post she cites a well done article "Caring for Pops: Put it in writing - Lawyer suggests sibling contract to avoid court case over aging parents" out of the Dallas Morning News, where Dallas lawyer Walter Hofheinz discusses how Sibling Contracts have evolved in his practice to avoid costly guardianship and probate disputes.

First came divorce agreements. Then there were prenuptial agreements. Now get ready for sibling agreements.

Dallas lawyer Walter Hofheinz knows from specializing in estate planning and probate law for 23 years that conflicts can erupt in even the most loving families when it's time to figure out how to care for an aging parent. Issues that should have been decided around the kitchen table escalate into disputes fought out in lawyers' offices and court. To manage that familial strife, Mr. Hofheinz has come up with what he calls a "memorandum of understanding" between siblings. The contract spells out each adult child's responsibilities and holds that person accountable for them.

"Ideally, an older person tells his children how he wants to be cared for, but that rarely happens," he said. Instead, the topic never gets discussed, and often something bad happens – the parent has a stroke, or his mind starts to fail. Suddenly, brothers and sisters argue over where Dad will live, how his savings will be spent and even how he will die.

"A little planning can avoid a lot of animosity and a lot of money in attorney fees on the back end," Mr. Hofheinz said.

Elder-law experts say the time is ripe for ideas like the Dallas lawyer's, because they're seeing more sibling disagreements grow into bitterly fought guardianship battles that land in probate courts and decimate families.
Read Entire Article Here

A Sibling Contract looks to be a necessary tool to get all the parties on the same page and focused on the real issue - how to best help the people who brought them into this world and raised them, instead of how to better themselves or get even for the slight that occurred 30 years ago. (guilt intended)

Credit Crunch and the Mortgage Industry - How did this happen?

2007-09-07T13:26:00.000-04:00

Category: Financial Planning

Courtesy of Valerie & Carolyn Messina at Millenia Mortgage (973-575-5557) an excellent summary, in plain English, about how we got to where we are in the mortgage industry today. They take us back 8 years so the lightbulb will go off about how the mortgage industry created the credit crunch of today.

The TRUTH about what’s happening in the mortgage industry today!

It seems obvious to state that much is happening within the mortgage industry of late. We get an incredible amount of emails and questions each day about the state of our industry, so we thought we would take a few minutes to try my best to break down what has occurred and focus a little on how Valerie and I are situated and going to adjust to this rapidly changing environment.

Basically, to understand what has occurred we have to go back more than 8 years. It all started in the late 90's with the dot.com crash. Following the bursting of the tech bubble, there was a filtering of funds out of stocks into other investment tools in search of higher returns. The best opportunity for a significant increase of returns was to invest in the real estate market, which remained rather stagnate since the early 90's. So, money began pouring out of the stock market to the real estate marked in record amounts. People began buying speculatively, investing in properties, holding them a few months, and selling them for a quick profit.

Then a tragic day in the history of the United States happened; after September 11th, the economy basically nose-dived into a recession. This prompted the Federal Reserve, trying to spur economic growth, to begin lowering the Fed Funds rate which ultimately leveled off at an unprecedented level of 1% in 2003. This led to the lowest rates in the mortgage industry in 40 years. What this did was further exacerbate the already rising interest in the real estate and mortgage market. Mortgage volume hit an all time high in 2003 with 3.8 trillion dollars funded, well above the original high set in 1998 of 1.8 trillion in mortgages.

We obviously know what happened next, the interest in the real estate market exploded. Mortgage rates were incredibly low, home prices were rising, and the tidal wave that was to later occur was nothing more than a ripple in the oceans current. Toward the end of the record year in 2003, spending became robust and the fear of inflation began to rise. With an overnight rate as low as 1% in 2003, an exorbitant amount of liquidity made its way to the hands of every individual and corporation who wanted to borrow money, flooding the market with dollars; the obvious risk of inflation grew.

As the fear of inflation, rose so did long term interest rates hedging themselves against the imminent possibility of the Federal Reserve increasing the Funds rate. As this fear of inflation rose, and with it interest rates, the record volume of 2003 declined. As the worries of declining volume spread throughout the mortgage industry, another problem began to emerge. An unprecedented pricing war began in 2004 and would eventually last almost 30 months. Amidst it the Federal Reserve, fearing an overheated economy, would begin increasing the Fed Funds rate in what would amount to be 17 times ending in mid 2006 at 5.25%.

Despite their attempt to raise long-term rates to offset the over-stimulated sector, rates remained historically low. This may have been due to an incredible surge of foreign investment in our long term treasuries helping to keep yields lower; but what really affected mortgage rates on the street was the battle of price occurring between lenders. To fight for the declining mortgage volume, lenders cut their margins, narrowed their credit spreads, and simply began losing money. There were record losses now coming from most lenders.

However, midway through 2005, an uprising began. Shareholders of publicly traded banks and owners of private institutions decided they could no longer accept this dismal level of return on investment. Mortgage prices needed to rise to sustain growth, especially as volume continued to decline. This adjustment to price was the
first step toward the eventual collapse we are currently seeing today.

As banks and mortgage companies raised their price to gain profitability, they sought a way to stay competitive. Without price to drive growth, they leaned towards credit. So what began as a price war, now became a credit war. Every bank and mortgage institution began relaxing their credit standards, some worse than others. Stated Income, No Documentation, No Money Down, Lower FICO requirements, No Reserve Requirements… the list goes on and on. Instead of gaining market share by aggressively pricing their mortgage products, they made a ludicrous, but conscious, decision to ease their guidelines. This led to the worst lending practices ever seen in the mortgage industry. All universal laws of mortgage lending were broken.

To think that our industry was going to lend a 1st time home buyer with 520 credit score 100% of the value of their home and ask for stated or no documentation regarding their income or assets was insane. To expect this borrower not to default was ridiculous. Now here we are 2 years after the credit war began. 145 mortgage lenders have disappeared since 2006, 11 hedge funds have imploded in the last several months as well as two European Banks. There are 1.7 million foreclosures expected just this year compared to 300,000 to 500,000 usually seen in a normal market.

The expectations are that the peak in foreclosures will not occur until early 2008. So the record number of defaults has led to the ominous amount of foreclosures, which has led to increased underwriting standards, a rapid change to guidelines, tightening of liquidity and on and on and on and on.

House Bill to Modify Estate Tax

2007-09-04T10:53:00.000-04:00

Category: Estate and Inheritance Tax

Courtesy of Elderlawanswers.com, the House has introduced a bill to modify the federal estate tax as follows:

With the estate tax set to expire in 2010, a bipartisan bill (H.R. 3170, click here. ) has been introduced in the U.S. House of Representatives that would increase the estate tax exemption by $250,000 every year from 2009, when the exemption is set to be $3.5 million, until 2015, at which point the exemption would have increased to $5 million. From 2015 on the exemption would rise at the rate of inflation.
The bill, introduced by Reps. Harry Mitchell (D-AZ) and Christopher Shays (R-CT),
would also create two tax rates: 15 percent for estates worth $25 million and
less and 30 percent for estates worth more than $25 million. Under current law,
the top tax rate will be 45 percent in 2009.
Earlier in the year, the U.S. Senate voted 51-41 to reaffirm its support for a budget resolution that establishes the current-law 2009 estate tax rules through 2012.

While this would simplify matters from a certainty viewpoint (it is very difficult to do planning for a tax code with an expiration date), my initial reaction is concern about the rates. When a person dies, capital gains are essentially eliminated through IRC Sec. 1014 where there is a "step-up" in basis - the heirs basis is date of death value; any gains accumulated during the decedent's lifetime are wiped out. If the estate tax rate of 15% is lower then the capital gains tax rate (currently 15%, but again scheduled to expire), the economic disincentive to sell stock during your lifetime continues. Perhaps if the desire is to lower the estate tax rate, it would make sense to have it match the capital gains tax rate so that death essentially becomes a realization event for tax purposes.

Surprise! Forgiveness of a Debt is Taxable Income

2007-08-21T16:35:00.000-04:00

Category: Tax Law and Planning

A recent New York Time article "After Foreclosure, a Big Tax Bill From the I.R.S." highlights a not well publicized fact of income tax law - discharge or forgiveness of debt is income to the taxpayer.

A simple fact pattern - You have a house with a mortgage of $100,000. You can't make your mortgage payments, and the house is foreclosed for $80,000 and total forgiveness of the mortgage. You now have no house and no debt obligation. However, you originally borrowed an additional $20,000 that the bank did not receive from the sale, and that you no longer have to pay back. Under Internal Revenue Code Sec. 61(a) (12), you have earned $20,000 dollars of income that you now owe tax on. The problem? You never got $20,000 in hand - instead, it is "phantom income" to you, upon which you need to pay tax in real cash ($4000 of tax at a 20% tax bracket).

Why are you deemed to have earned $20,000? Because your total net worth has increased as a result of not have to pay back the $20,000 (assets - liabilities = total net worth; if liabilities go down, total net worth goes up).

This fact pattern also applies where credit card or other debts are forgiven - ie: the creditor accepts as full payment less than the total amount borrowed.

IRC §61 - Gross Income Defined
61(a) GENERAL DEFINITION. --Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

61(a)(12) Income from discharge of indebtedness;

Where a debt is forgiven, is discharge of indebtedness income always the case? No. Where you have (1) filed bankruptcy under Chapter 11 (IRC Sec. 108 (a)(1)(A)), or (2) are insolvent at the time of the discharge (IRC Sec. 108(a) (1) (B)), then IRC Sec. 61(a)(12) does not apply.

The first exemption is easy - you either filed Chapter 11 or you haven't. The second is not so easy - you may feel you have no assets but not be insolvent under the Code.

To avoid a nasty surprise, make sure when paying off a debt for less than full value that you get in writing what they will be supplying to the IRS about the transaction.

Aging at Home - A Community Bands together to buck Institutional Care

2007-08-17T14:43:00.000-04:00

Category: Elder Law

Aging in place. It is no secret that most seniors want to stay in their homes. It is also no secret that long term care today has a bias towards institutional care, and not towards allowing a person the resources need to stay at home. From the New York Times is an uplifting report about communities of seniors banding together to buck the system and enjoy their golden years at home.

A Grass-Roots Effort to Grow Old at Home

On a bluff overlooking the Potomac River, George and Anne Allen, both 82, struggle to remain in their beloved three-story house and neighborhood, despite the frailty, danger and isolation of old age.

George and Anne Allen hope to continue living at their Washington home with help from a community group under development. Mr. Allen has been hobbled since he fractured his spine in a fall down the stairs, and he expects to lose his driver’s license when it comes up for renewal. Mrs. Allen recently broke four ribs getting out of bed. Neither can climb a ladder to change a light bulb or crouch under the kitchen sink to fix a leak. Stores and public transportation are an uncomfortable hike.

So the Allens have banded together with their neighbors, who are equally determined to avoid being forced from their homes by dependence. Along with more than 100 communities nationwide — a dozen of them planned here in Washington and its suburbs — their group is part of a movement to make neighborhoods comfortable places to grow old, both for elderly men and women in need of help and for baby boomers anticipating the future.

click here for full story

Be Nice to Your Banker - An Investment in your Business

2007-08-10T11:42:00.000-04:00

Category: Business Law and Planning

A nice posting about the unsung partner of every business - no, not the tax authorities - the Bank (or any other investor who expects a fixed return of capital and interest). This is especially true where there is an environment of shrinking capital (see today's market news). Business Insights from Legacy Blog post of "What is Your Banker's Involvement?" is an excellent refresher of the ongoing banking - or investor - relationship any business should be maintaining. The article ends with some excellent advice:

If you haven't been meeting with your banker regularly, start now by trying this:
• Pick up the telephone and call your banker.
• Ask him/her to lunch this week.
• Be prepared to discuss... the good, the bad, and the ugly about your business.
• Tell him the truth about the status of your business and describe the challenges that you face.
• Also, use this time to get to know him/her more personally.

Business Owners - Don't Fail to Plan

2007-08-06T12:55:00.000-04:00

Category: Business Law and Planning

It is a truism that "Business owners often feel that they -- and the business -- will always be around. But without some thoughtful planning about succession, it's common that businesses wither when the owner passes away or leaves."

In Keep Business Alive With Succession Plan from the Small Talk Column of WSJ Online, the author highlights "four steps to making sure your business lives beyond you." These are common-sense concepts to spur you to action. Some key points to consider:

* You need to have a plan as to what will happen to your business if you get hit by a bus.

* Your plan needs to be in writing

* Know who your successors are let them know so you can groom them to succeed

* Be able to finance your succession, whether through a buy-sell agreement, life insurance, etc.

Another truism all business owners should consider: Nobody plans to fail, just fails to plan.

ABA Webite adds Blawg Directory - Must Bookmark

2007-08-05T10:00:00.000-04:00

Category: Miscellaneous Musings

The PA Elder, Estate & Fiduciary Law Blog tipped me off that "The American Bar Association now lists, on its home page, a link to "more than 1,000 legal blogs". This is a must bookmark site.

The blogs or blawg are listed by category according to legal practice area. Your and Yours Blawg is listed in Elder Law (13), Tax Law (20) Trusts & Estates (36), Business Law (58) and New Jersey (10) (the numbers in parenthesis are the total listing of blawgs to date in that category).

A neat feature is that if you click on any blawg listing, you can
* see all the related categories of that blawg, which will let you drill down to related blawgs;
* get the RSS feed
* see all the recent blog postings headlines

For example, click here for ABA Blog description of You and Yours Blawg.

Nursing Home Admissions Agreements - Be Aware, Be Very Aware

2007-08-01T15:11:00.001-04:00

Category: Elder Law,

Admitting a loved one to a nursing home can be very stressful. In addition to dealing with a sick family member and managing all the details involved with the move, you must decide whether to sign all the papers the nursing home is giving you. Nursing home admission agreements can be complicated and confusing, so what do you do?

It is important not to rush, but rather to read. Read the agreement carefully because it could contain illegal or misleading provisions. If possible, try not to sign the agreement until after the resident has moved into the facility. Once a resident has moved in, you will have much more leverage. But even if you have to sign the agreement before the resident moves in, you should still request that the nursing home delete any illegal or unfair terms.

Two items commonly found in these agreements that you need to pay close attention to are a requirement that you be liable for the resident's expenses and a binding arbitration agreement.

Responsible party
A nursing home may try to get you to sign the agreement as the "responsible party." It is very important that you do not agree to this. Nursing homes are prohibited from requiring third parties to guarantee payment of nursing home bills, but many try to get family members to voluntarily agree to pay the bills.

If possible, the resident should sign the agreement him- or herself. If the resident is incapacitated, you may sign the agreement, but be clear you are signing as the resident's agent. Signing the agreement as a responsible party may obligate you to pay the nursing home if the nursing resident is unable to. Look over the agreement for the term "responsible party," "guarantor," "financial agent," or anything similar. Before signing, cross out any terms that indicate you will be responsible for payment and clearly indicate that you are only agreeing to use the resident's income and resources to pay.

Arbitration provision
Many nursing home admission agreements contain a provision stating that all disputes regarding the resident's care will be decided through arbitration. An arbitration provision is not illegal, but by signing it, you are giving up your right to go to court to resolve a dispute with the facility. The nursing home cannot require you to sign an arbitration provision, and you should cross out the arbitration language before signing.

Other provisions
The following are some other provisions to look out for in a nursing home admission agreement.
* Private pay requirement. It is illegal for the nursing home to require a Medicare or Medicaid recipient to pay the private rate for a period of time. The nursing home also cannot require a resident to affirm that he or she is not eligible for Medicare or Medicaid.
* Eviction procedures. It is illegal for the nursing home to authorize eviction for any reason other than the following: the nursing home cannot meet the resident's needs, the resident's heath has improved, the resident's presence is endangering other residents, the resident has not paid, or the nursing home is ceasing operations.
* Waiver of rights. Any provision that waives the nursing home's liability for lost or stolen personal items is illegal. It is also illegal for the nursing home to waive liability for the resident's health.

Pets - More Than Companions to Seniors

2007-07-30T09:31:00.000-04:00

In an odd bit of news re elder care, a cat that offers comfort to nursing home patients in their final hours. While it is a touching story, it highlights for me how many seniors die alone, and how many have pets that are their constant companions in later life that will need continuing care and provisions when their owner passes away.

Cat plays furry grim reaper at nursing home: "PROVIDENCE, R.I. - Oscar the cat seems to have an uncanny knack for predicting when nursing home patients are going to die, by curling up next to them during their final hours." Click here for full article.

Many seniors are truly worried about what will happen to their feline and canine and other companions if they are no longer able to take care of them. A client may have adult children, grandchildren and even great-grandchildren who are settled and secure, but when they come to see me, they have stress about providing for the loved one in their life who can't provide for themselves. A couple of thoughts:

Put practicality first. Make sure people know you have a pet, and arrange for a family member or friend to agree to be responsible for "emergency care" if you fall ill. This person needs to be able to get to the pet (has keys to the house) and be aware of the pets needs.

Arrange for long term care for your pet in your Will. This can take a variety of forms, such as a direction as to who gets the pets, matched with a monetary bequest or not, or a pet trust, or making arrangements with a company that provides care for pets for the balanace of their lives when their owners have died.

A Practical Approach to a Power of Attorney

2007-07-11T12:37:00.000-04:00

I always tell clients that just having a General Durable Power of Attorney is not enough - you need to have a broad and flexible General Durable Power of Attorney that will aid your attorney in fact, not hinder them. Remember that this will need to be used to make financial decisions for you, when you cannot otherwise make them for yourself. This is not the time to be entering into a debate about what limitations you might have been intending - make limitations clear, or not at all.

In a recent blog posting Make Your Durable Power of Attorney Work, Elder Law Answers echos this point in discussing the practical elements of a General Durable Power of Attorney. Some key points below:

An essential part of any estate plan is the durable power of attorney, through which you appoint someone else to handle your financial and legal issues in the event you are unable to do so because of illness, disability or incapacity. The problem with these documents is that not all financial institutions accept them all the time, and it's hard to predict which will and which won't ahead of time.

Why won't your bank or investment house accept your validly executed power of attorney? Because they are worried about liability in the event:

* The document in fact was forged.
* You had revoked the power of attorney before its use.
* The person you appoint exceeds the powers you gave him in the power of attorney.

In any of these cases, the financial institution may be held liable for any losses you incur. On the other hand, it may also be held liable for losses you incur if it unreasonably refuses to honor your power of attorney.

So, what can you and your estate planning attorney do to make it more likely that your appointment of an agent will be accepted? This question is answered by Daniel A. Wentworth, Esq., Senior Legal Counsel with Fidelity Investments in the November/December 2003 issue of the American Bar Association's Probate & Property journal. Attorney Wentworth recommends taking the following steps:
* Grant general powers in the document so that there is no risk the agent exceeds her authority.
* Also include specific powers clearly authorizing the actions the agent is likely going to need to take.
* Don't use "springing" powers of attorney that don't go into effect until you are incapacitated or, if you do, be very clear about what triggers their effectiveness.
* If you're appointing more than one person, clearly permit them to act separately (unless you really don't want them to).
* Sign several originals so that they are available for different financial
institutions to review.
* Sign a new power of attorney every few years so that there's less likelihood that it may have been revoked and there's a long-term record of your desire to appoint your particular agent.
* If available, also sign any powers of attorney form offered by the financial institutions in which you have funds.

To read the Probate & Property article, go to: http://www.abanet.org/rppt/publications/magazine/2003/nd/wentworth.html

Charitable Deduction Denied - Single Trust has Charities and Non-Charities as Beneficiaries

2007-07-03T07:48:00.000-04:00

Category: Estate Planning, Estate and Inheritance Tax,

The U.S. Court of Appeals for the Third Circuit (which controls District Court decisions in New Jersey) finds that the Internal Revenue Code prohibits an estate from claiming a charitable deduction when the proceeds of a single trust are distributed to both charitable and non-charitable beneficiaries. Galloway v. U.S. (3rd Cir. 6-21-2007), No. 06-3007.

James Galloway created a single trust under which the beneficiaries -- his two children and two charitable entities -- would receive an equal, one-quarter share in the proceeds. Upon Mr. Galloway’s death, the Pennsylvania Department of Revenue determined that $399,079.33 would be distributed to charitable entities.

Before reading on, some better solutions to meet Mr. Galloway's goals might have been have been:

Flat amount bequest to chartity
Percentage bequest to charity before transferign the balance to a trust (ie - make the division to the charities and then directe that the amoun to the children go in a trust)
Set up a Charitable Remainder Trust or Charitable Lead Trust, which are statuorially authortized divisions of bequests between a charity and one or more induviduals
Name the charity as a beneficiary on a non-probate asset such as an IRA or other retirement plan

The trustee of the estate, Edmond Galloway, then claimed a charitable deduction in that amount on the federal estate tax return. Based on Internal Revenue Code § 2055(e), the IRS disallowed this charitable deduction and computed the estate’s liability to be $306,604.57. Mr. Galloway paid the additional tax due and then filed a refund claim, which was denied by the IRS.

Mr. Galloway filed a complaint in the U.S. District Court for the Western District of Pennsylvania claiming that the trust did not fall under the purview of IRC § 2055(e). Mr. Galloway argued that the only kind of such “split-interest” trusts that Congress intended § 2055(e) to cover are trusts in which a non-charitable beneficiary has a life interest and the charitable beneficiary has a remainder interest. The complaint was denied and Mr. Galloway appealed.
The U.S. Court of Appeals, Third Circuit, affirms and holds that the clear, unambiguous language of IRC § 2055(e) disallows any charitable deduction where an interest in the same property passes to both charitable and non-charitable beneficiaries.

To download the full text of this decision in PDF format, go to: http://www.ca3.uscourts.gov/opinarch/063007p.pdf .

DWL Speaking at Financial Conferenece

2007-05-01T15:13:00.000-04:00

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

I am excited to be speaking at the Garden State Women Magazine 6th Annual Financial Conference & Networking Event on May 12 at the Park Avenue Club in Florham Park. This is an exciting day where New Jersey’s top insurance, real estate, legal and financial professionals will provide women with the information and guidance needed to take charge of their financial future. Click here for more details.

IRS E-File Suspensions/Terminations

2007-04-07T13:26:00.000-04:00

Category: Tax Law and Planning

Recently, the IRS has been auditing and suspending Registered e-filers who are not in compliance with the regulations and publications promulgated by the IRS. Fein, Such, Kahn & Shepard, P.C. has become involved in defending tax preparers suspended from e-filing tax returns.

Don't Be Anna - Name Guardians for Minor Children

2007-03-12T15:09:00.000-04:00

Category: Estate Planning

Continuting our series of what we can learn from the Anna Nicole Smith situation, she did not name a Guardian for her daughter. Putting the unique questions of paternity aside, this case highlight why all parents must have Wills.

I have said it before, but it bears repeating - If you have minor children, you MUST HAVE A WILL TO NAME GUARDIANS IF YOU DIE. If you do not have a Will, you HAVE NO GUARDIANS.

General statistics say 7 out of 10 people don't have a Will. The reason I most frequently hear when I ask why people don't have a Will at semiars: "I don't have enough assets." My response: "Do you have children?" Because if you do, the Will is the only place that you can name a Guardian. The reason I most frequently hear about why there is no Guardian: "We can't decide between Relative A and Relative B." While this is a hard decision, as parents it is one you need to make. If you can't decide, you expect a judge who doesn't know you, your family, your children or your value to make a better decision? And, if you are concerned enough that your children aren't raised by Relative A, shouldn't you make provisions so that can't happen? Putting it in the hands of a court is like playing roulette with your children's rearing. A clear case of "Don't Be Anna".

Don't Be Anna: Take a Look at the Will

2007-03-02T09:10:00.000-05:00

Category: Estate Planning, Probate and Estate Administration

While wholeheartedly agreeing with Joel Schoenmeyer's initial comments below, I too find Anna Nicole Smith's Last Will and Testament fascinating, for all the wrong reason.

Problems with Anna Nicole Smith's Will :: Death and Taxes Blog: "I've stayed away from blogging about the Anna Nicole Smith situation so far, as I'm not particularly interested in the tabloid aspects of Ms. Smith's life. However, another estate planning attorney e-mailed me a copy of Ms. Smith's Will (here as a pdf), and I had to take a look. I found it fascinating for reasons other than the fact that Ms. Smith lived a very messy life."

Joel goes on to look at a mess of contradictions in the Will about who is to inherit. You would think that a person who had legal representation up to snuff enough to take her husband's probate issue before the United States Supreme Court on a question to true legal merit, would be more careful about her own will. Not that I have a crystal ball, but I predict this one will be tied up in court for just as long.

Don't Be Anna - Make Burial Instructions

2007-02-27T08:22:00.000-05:00

Category: Probate and Estate Administration

In the wake of the travesty that is the Anna Nicole Smith saga, I am beginning a series of posts on what you can do to avoid some of the problems her lack of planning have caused. Now, most people's death would never come close to being the global circus of Anna Nicole's, but within your own family circle, a failure to plan can have potentially devastating consequences. So - Don't be Anna.

A basic tenent of estate planning is that it has to be clear, because, by definition, you won't be here to describe your intent.

One area that you have the right to direct are your burial wishes. In New Jersey, NJSA 45:27-22 grants you the right to control your funeral wishes by a written statement in your will. If you have no statement, various people, in descending order, have the right to make the decision for you. But give your family members a gift - tell them what you want in your Will, instead of leaving them to make guesses, or worse, disagree.

22. a. If a decedent, in a will as defined in N.J.S.3B:1-2, appoints a person to control the funeral and disposition of the human remains, the funeral and disposition shall be in accordance with the instructions of the person so appointed. A person so appointed shall not have to be executor of the will. The funeral and disposition may occur prior to probate of the will, in accordance with section 40 of P.L.2003, c.261 (C.3B:10-21.1). If the decedent has not left a will appointing a person to control the funeral and disposition of the remains, the right to control the funeral and disposition of the human remains shall be in the following order, unless other directions have been given by a court of competent jurisdiction:
(1) The surviving spouse of the decedent.
(2) A majority of the surviving adult children of the decedent.
(3) The surviving parent or parents of the decedent.
(4) A majority of the brothers and sisters of the decedent.
(5) Other next of kin of the decedent according to the degree of consanguinity.
(6) If there are no known living relatives, a cemetery may rely on the written authorization of any other person acting on behalf of the decedent.

For some more in depth thoughts on this problem, look at Will Your Family Honor Your Funeral Instructions?

NBC Nightly News Series - Trading Places

2007-02-20T15:14:00.000-05:00

Category: Elder Law

NBC Nightly News has an ongoing series about caring for your parents. In the series, they focus on how some well known NBC personalties are taking on this responsibiliy. Links to informative clips are below:

• Click to share your stories
• Video: Dealing with dementia
• Video: Practical advice to care for parents
• Video: Vermont funds home nursing care
• A generation caught between two others
• Tom Brokaw: Having is easier than not
• Ann Curry: At 77, Dad embraces life
• Dr. Nancy Snyderman: A new chapter
• Tim Russert: It takes a team
• Brian Williams: A little help from angels

529 Plans in a Nutshell

2007-02-07T09:14:00.000-05:00

Category: Financial Planning

529 Plan. What exactly do those 3 little numbers mean for those saving for college? Joel A. Schoenmeyer, Esq. has 20 Short Facts about 529 Plans (Part 1) and (Part 2) on his blog Death and Taxes, The Blog. In short, precise detail, Joel goes into the history, advantages, disadvatages and nuts and bolts of a 529 Plan.

Dutch Tax Shelters for Royalties (from licensing intellectual property, not nobility)

2007-02-06T09:03:00.000-05:00

Category: Tax Law and Planning

If you have income producing intellectual property, it turn out that the Netherlands may be the place to own it. Previously thought of only in terms of tulips and windmills, Dutch Tax Law is incredibly favorable to royalties (produced from licensing copyrights and patents) - so favorable in fact, that royalties are not taxed there.

The article The Netherlands, the New Tax Shelter Hot Spot from the New York Times describes how the Rolling Stones and others who derive huge amounts of revenue from licensing have significantly reduced taxation by taking advantage of Dutch Laws designed to attract royalty producing assets. The most impressive statistic from the article (and making it a worthwhile read): "Over the last 20 years, according to Dutch documents, the [three of the members of the Rolling Stones] have paid just $7.2 million in taxes on earnings of $450 million that they have channeled through Amsterdam — a tax rate of about 1.5 percent, well below the British rate of 40 percent." Wow.

LAST spring, Keith Richards, the craggy-faced and hard-partying lead guitarist for the Rolling Stones, fell from a tree at a beach resort in Fiji, slamming his head against the trunk on his way down. Mr. Richards was flown to New Zealand, where a surgeon provided emergency care to treat swelling in his brain. While the accident forced the Rolling Stones to cancel part of their summer tour, Mr. Richards, 62, handily survived his plunge.

“It’s not the first brush with death I’ve had,” Mr. Richards later told Rolling Stone magazine. “I guess what I learned is, don’t sit in trees anymore.”

What two of the other three Rolling Stones apparently learned, including Mick
Jagger and Charlie Watts, was that Mr. Richards’s near-death experience meant that it was time to think about their heirs. For that, the aging rockers turned to a reclusive Dutch accountant, Johannes Favie, whose company, Promogroup, has helped them minimize their tax bills for more than 30 years. (The fourth Rolling Stone, Ron Wood, handles his finances apart from Promogroup.)

And so, last August, according to details disclosed in documents maintained by the Handelsregister, the trade registry of the Netherlands, Promogroup helped the three performers set up a pair of private Dutch foundations that will allow them to transfer assets tax-free to heirs when they die. Other Dutch shelters that Promogroup has arranged for the three have already paid off handsomely; over the last 20 years, according to Dutch documents, the three musicians have paid just $7.2 million in taxes on earnings of $450 million that they have channeled through Amsterdam — a tax rate of about 1.5 percent, well below the British rate of 40 percent.

A Technological Alternative to Moving a Senior From Their Home

2007-02-05T08:53:00.000-05:00

Category: Elder Law

This article In Elder Care, Signing on Becomes a Way to Drop By from the New York Times describes a technology based alternative to home health care, assisted living, or nursing home care for seniors - instead of moving a senior to a safer location, why not make their home safer for them to live in alone?

CONNIE ARAPS, 57, of Delray Beach, Fla., thought that her father, Tom Araps, 87, was managing just fine on his own. But when he came to stay with her for a few months in 2005, she found that he was skipping meals, sleeping all morning and not taking daily walks.

To satisfy her father’s desire to live alone, but to ease her mind about his safety, Ms. Araps found an apartment for him less than a mile from her home and had it equipped with QuietCare, a home health alarm system provided by ADT Security Services.

She drops by his apartment often, and logs into a Web site several times a day to check on him. Motion sensors track how often Mr. Araps opens the refrigerator, when he gets out of bed and how long he stays in the bathroom. If his normal patterns vary, the alarm company alerts her. One day, the company called her to say that no one had entered or left the apartment all day. It turned out that a home health aide had failed to show up, and her father had not received his diabetes medication. Ms. Araps rushed over and made sure that her father took his pills.

The article does recognize that this technology is no a cure-all - who will monitor it? can they respond effectively if a change is shown? what about privacy concerns? But for some families, this can be an effective and economical solution to satisfy both the parents and the children's concerns.

Another Hidden Cost of Dying - The Surety Bond

2007-01-29T09:51:00.000-05:00

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.

April 17 is the 2007 Tax Filing Deadline

2007-01-24T17:36:00.000-05:00

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."

You Die - Your Passwords And User Names Die With You

2007-01-23T11:37:00.000-05:00

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: wcco.com - 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.

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

2007-01-22T09:27:00.000-05:00

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).

FAQ: General Durable Power of Attorney

2007-01-19T16:11:00.000-05:00

Category: Estate Planning, Financial Planning

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

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.

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

2007-01-18T10:29:00.000-05:00

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.

Worry about 'death tax' for the right reasons

2007-01-15T20:00:00.000-05:00

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.

Caregiving Contracts Valuable Tool Between Family Members

2007-01-15T09:32:00.000-05:00

Category: Elder Law

From Elderlawanswers.com - 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.

Telephone Tax Refund with your 2007 Taxes

2007-01-12T16:59:00.000-05:00

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.

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

2007-01-11T10:38:00.000-05:00

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.

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

2007-01-10T10:28:00.000-05:00

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 BushÂs 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 BushÂs tax cuts, according to a new Congressional study."

snip

"Economists and tax analysts have long known that the biggest dollar value of Mr. BushÂs 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."

New Year Resolution for your Business - Get a Business Plan

2007-01-09T08:00:00.000-05:00

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 bplans.com. 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.

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

2007-01-08T13:23:00.000-05:00

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."

snip

"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.

Elder-Care Costs Deplete Savings of a Generation

2007-01-04T22:48:00.000-05:00

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 lawyersÂ 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 doctorsÂ 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.

Retirement Accounts and Beneficiary Designations - Myths and Misconceptions

2007-01-04T13:50:00.000-05:00

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).

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.
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.
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.
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).
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.

Check out that Employee - Hiring Checklist

2007-01-03T09:36:00.000-05:00

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.)

Blawg is Back

2007-01-02T11:10:00.001-05:00

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

2007-01-02T11:10:00.000-05:00

Category: Elder Law,

Courtesy of Elderlawanswers.com, 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 Âtechnical correctionsÂ 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. Â§1396p(c)(1)(F)(i). The DRA provided that state remainder rights were equal to the amount paid on behalf of an ÂannuitantÂ; the Tax Relief bill replaced this with Âinstitutionalized individual.Â

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 husbandÂs care instead. The change is retroactive to the bill's enactment."

Caregiving Tools - For Those Caregiving and Those Advising

2006-08-15T11:26:00.000-04:00

Category: Elder Law

From the Family Caregivers Alliance, some excellent tools for Caregivers and professionals who work with Caregivers.

Those who are caring for an elderly or disabled family member have unique needs and concerns.

"Approximately 44 million American families and friends provide unpaid care to another adult, sometimes around the clock. Wives, daughters, sons, partners, fathers, nieces, brothers: they provide approximately 80 percent of the long-term care in the United States."

For Caregivers, Caregiving Info & Advice has a wealth of resources on topics ranging from hands on skills to Caregiver depression (an all too common result ofCaregivingg).

For professionals who work with Caregivers, there is a Caregivers Count Toolkit, described as:

"It's a step-by-step resource filled with practical information and resources. It's designed for program administrators and practitioners to:

1. Sharpen your awareness of famiCaregiversers as an at-risk population in need of assessments to determine their own physical, emotional and financial problems.

2. Give you new knowledge and skills so you can create and put to useCaregiverver assessment that works in your particular practice setting."

What is the Medicaid Look-Back Period under the DRA

2006-08-08T08:42:00.000-04:00

Category: Elder Law

What is the appropriate Medicaid Look-Back period under the DRA?

This is an important question for anyone making a Medicaid application in that the local office will request financial records for the time period of the Look-Back. I find it can be very difficult to gather 3 years of records for a senior who now requires Medicaid to pay for his or her long term care - 5 years is an even greater burden.

So what is the Look-Back Period? I had been going with 60 months, as until recently all the States that had created the DRA enacting legislation had used that timeframe.

However, in Most States Fudging DRA Look-Back Change from Elderlawanswers.com, there is an excellent analysis that the states may have the changes to the Look-Back Period wrong.

In New York's enacting legislation, they have taken note of the fact that that DRA did NOT in fact changes the Look-Back Period from 36 months to 60 months. Instead, it said that IF there had been a transfer in the 60 months after enactment, THEN there was a 60 month Look-Back for the transfers.

New York then has taken a staggered approach to the Look-Back Period, since 60 months obviously have not expired since the DRA was enacted. For the first 36 months, the Look-Back Period remains 36 months (since any transfers would be before the DRA was enacted). The Look-Back Period then extends to 37 months in the 37th month after the DRA to capture any transfer in that month, until it finally reaches 60 months.

This approach appears to resolve the issue of the 60 month Look-Back for transfers after 2.8.06 with the 36 month Look-Back period in the Code not being changed by the DRA.

One would hope that in creating its enacting legislation to the DRA that New Jersey would take such a measured approach as well.

Most States Fudging DRA Look-Back Change - Elder Law Answers Articles:
"Since 1993, the look-back date on a Medicaid application for long-term care coverage has been 36 months, 42 U.S.C. S. 1396p(c)(1)(B), and this figure was not erased by Congress in the amendments to the statute it made through the DRA. Instead, the 36-month figure was preserved and a 60-month look-back date was added to the statute but made applicable only to transfers that occurred after the DRA effective date.
The last time Congress made any modification to the look-back date was in the Omnibus Budget Reconciliation Act of 1993, P.L 103-66 (OBRA-93), when it simply deleted '30' from the statute and replaced it with '36,' and thereby left little doubt that it intended to increase the look-back period on all prospective applications to 36 months. But Congress chose not to make the change in the same manner in its DRA amendments. In keeping the 36-month figure in the statute, Congress was clearly indicating that a 36-month look-back date is still applicable in some fashion. By attaching the 60-month look-back date to transfers made after the DRA enactment date, as opposed to applications filed after that date (a la OBRA-93), the design was obviously to at least phase in the extended look-back date over time. Based on the language Congress used in the DRA, the look-back period cannot be greater than 36 months until at least February 2009, because that will be the first point at which an
individual will have possibly made a transfer that occurred more than 36 months after the DRA enactment.
Agreeing with this reading of the DRA statute, New York keeps the look-back period at 36 months (60 months for trusts) until February 1, 2009. Beginning on that date, Medicaid offices will require resource documentation for the past 37 months (60 months for trusts). "

Estate Tax Repeal Vote Down Again (3rd time the charm?)

2006-08-04T08:11:00.000-04:00

Category: Estate and Inheritance Tax

Last night the US Senate voted against the minimum wage hike, estate tax reform, other tax breaks bill recently passed by the House in an effort to push through estate tax repeal for the third time in the past few months.

From Bloomberg.com

"Senate Republicans bet on luring Democrats into voting for a reduction of the estate tax by combining it with an increase in the minimum wage and popular tax breaks. Last night they lost.

The Senate fell four votes short of the 60 needed to move forward on what Majority Leader Bill Frist called the ``trifecta'' legislation.

``The bottom line is that we bet on the wrong horses,'' said Finance Committee Chairman Charles Grassley, an Iowa Republican. ``Maybe we should've taken a bet that was more likely to pay off.''

The Senate, just before recessing for the rest of August, did approve 93-5 a measure to overhaul the U.S. private pension system that now heads to President George W. Bush's desk. Left behind are the pieces of the trifecta legislation. "

More coverage from The Washington Post - Senate Rejects Estate, Minimum Wage Bill

NJ Real Estate Tax Rebate Filing Extended to October 31

2006-08-02T08:16:00.000-04:00

Category: Tax Law and Planning

In NJ, the state with the most out of control property taxes in the Union, there is a plan known as "NJ FAIR" (I make no comments on the name). The purpose of the program is to give a property tax rebate to home-owners and tenants.

All NJ homeowners should have recently received an package in the mail with instructions for calling in to file for the rebate. The rebate can also be filed online. NJ tenants can file a Form TR-1040, FAIR tenant rebate application, either by paper or online. For more information, residents and tenants should go the the New Jersey Division of Taxation.

You can check the status of your rebate filing online as well.

What will all this filing get you? Anywhere between $200 and $350 if you are under 65, and don't have income greater than $200,000; and between $500 and $1200 if you are over 65, and again don't have income greater than $200,000. See Chart Here.

CMS Issues Guidance on DRA to State Medicaid Offices

2006-08-01T09:23:00.000-04:00

Category: Elder Law,

Courtesy of Elderlawanswers.com, at long last, the Centers for Medicare and Medicaid Services (CMS) has finally given guidance to the State Medicaid directors on the provisions of the Deficit Reduction Act (DRA).

Some of the guidelines provided:

The lookback period is 60 months for any transfer of assets made on or after the date of enactment of the DRA (February 8, 2006).

The period of ineligibility will begin with the later of the first day of a month during or the month after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance under the state plan and is receiving institutional level of care services that, were it not for the imposition of the penalty period, would be covered by Medicaid.
Once a penalty period is imposed, it is not tolled but instead will continue to run if an individual subsequently stops receiving long-term care.
The state must be named as a remainder beneficiary on an annuity purchased on or after February 8, 2006. CMS states that the provisions of 1917(c)(1)(G), which set forth required criteria if an annuity purchased by or on behalf of an annuitant who has applied for medical assistance is not to be treated as a transfer of assets, are "in addition to those specified in 1917(c)(1)(F) pertaining to the State's position as remainder beneficiary." [boldface in original]
If the state is not named as a remainder beneficiary, the purchase of the annuity will be considered a transfer for less than fair market value. CMS interprets the statute to mean that the full purchase value of the annuity will be considered the amount transferred.
Any transaction that changes the course of payments to be made by the annuity or the treatment of the income or principal of the annuity (including additions of principal, elective withdrawals, requests to change the distribution of the annuity, elections to annuitize the contract and similar actions) taken on or after February 8, 2006, will cause all transfer provisions of the DRA to apply to the annuity.

The guidelines also cover the following topics:

The application of the income first rule under spousal impoverishment.
Disqualification for long-term care coverage for individuals with more than $500,000 in equity in their house.
The treatment of continuing care retirement community entrance fees.
The expansion of state long-term care insurance partnerships.

The full text of the documents is available from the National Senior Citizens Law Center:

Read the CMS Documents:

New NJ Tax on Purchase Commercial Real Estate

2006-07-31T14:51:00.000-04:00

Tax Law and Planning

Starting August 1, purchasers of commercial real estate for more than $1,000,000 will have an additional tax, or "fee", to contend with. Chapter 33, Laws of 2006, calls for a 1% fee to buyers of commercial property purchased for over $1 million. This brings the fees for purchasing commercial real estate in line with the purchase of residential real estate, which for several years has been subject to a "mansion tax" of 1% to buyers of residential property valued at more than $1 million. Sellers of property will still need to contend with the Realty Transfer Tax, regardless of whether buyers are subject to the additional 1% fee.

There will be several exceptions to the 1% fee on transfer of commercial property:

* Where the real property transfer is incidental to a corporate merger or acquisition, if the real property value represents less than 20% of the total assets subject to the merger or acquisition.

* The purchaser is recognized by the IRS as exempt from income tax (ie: a public charity or private foundation).

The 1% fee also applies in certain non-deed transfers. For example, if a controlling interest in an entity that owns commercial real estate valued at more than $1 million is transferred, then the buyer will pay the 1% fee. This would apply, for example, if an LLC owned commercial real estate valued at more than $1 million, and the LLC itself was sold.

For more information, see the Division of Taxation Website.

Estate Tax Repeal Provisions NOT Included in Pension Reform Bill

2006-07-26T09:05:00.000-04:00

Category: Estate and Inheritance Tax

From Dow Jones Market Watch, news that Estate Tax Repeal Provisions will not be slipped into the Pension Reform Bill.

Last week as reported here there was an unannouced Senate vote to permanently repeal the Estate Tax. It was defeated 57-41 (60 needed to break a filibuster). The Republican Majority then said they would add the Estate Tax Repeal provision to the Pension Reform Bill under debate. Now news from Washington that Estate Tax Repeal will NOT be added to the Pension Reform Bill, but be part of a new package later this year. Hopefully, this time the vote on the Estate Tax Repeal will be announced to the public so as to be open for public debate.

Tax provisions may be dropped from pension bill - MarketWatch: "Senate Republicans gave up Monday on efforts to add language that would reduce the estate tax to legislation designed to overhaul the nation's pension laws, Senate Majority Leader Bill Frist said Tuesday.
And Republican lawmakers may also remove a range of other less-controversial tax measures from the bill, including renewal of the already-expired research-and-development tax credit, in hopes that those measures can be combined with the estate-tax measure at a later date, congressional aides said.
Meanwhile, House and Senate negotiators continued to haggle over provisions of the pension bill, including easier funding terms for troubled airlines and whether to allow financial-services firms to provide investment advice to 401(k) and investment retirement account holders, in the hope of producing a final piece of legislation before Friday, when House members are scheduled to begin a five-week summer recess. "

IRS Eliminating Jobs of 50% of Estate Tax Auditor/Attorneys

2006-07-25T09:06:00.000-04:00

It seems that estate tax repeal has gone even further underground - can't get it done out in the open, then backdoor your way into it - ahh, the American political machine.

Last week I wrote about a stealth estate tax repeal vote - that was again defeated.

This week, we learn that the IRS is eliminating the positions of about 50% of the attorneys who audit estate tax returns. So, if you can't use the political process to eliminate a tax which only effects the top 2% of the wealthiest Americans, you eliminate the jobs of the people who are trained to enforce the tax? One of the reasons I often just want to shake my head.

Courtesy of Charles Rubin, Esq. at Rubin on Tax:

Rubin on Tax: IRS TO SIGNIFICANTLY REDUCE TRANSFER TAX AUDIT STAFF:
"IRS TO SIGNIFICANTLY REDUCE TRANSFER TAX AUDIT STAFF

The IRS intends to eliminate the jobs of almost half of the lawyers who audit gift and estate taxes. The IRS presently has 345 estate tax lawyers. The jobs of 157 of them will be cut in less than 70 days.

Kevin Brown, an IRS Deputy Commissioner, indicated that the staff cuts are occurring because far fewer people are now subject to estate taxes under the legislation enacted a few years ago than was previously the case. Others however, believe that the cuts are an attempt to effect estate tax repeal through the back door - that is, to significantly reduce audit activity on wealthy Americans.

Whether the staff cuts will have any impact on transfer tax enforcement depends on which side you believe. If there has been a significant reduction in audit activity due to the estate tax changes, then perhaps the staff cuts will not have much of an impact on enforcement. However, if audit activity has not been substantially reduced by reason of the tax cuts, then one would expect the staff cuts to hamstring the IRS in its enforcement efforts. Of course, even if less returns are being filed, the IRS could still retain the audit personnel and then simply conduct more audits on a percentage basis of all returns filed. However, Brown indicated that the incremental benefit of auditing more estate tax returns would not produce enough revenue to be worth the cost."