New York Estate Tax Changes Have Unintended Outcome

April 23, 2014

Filed under: Estate Tax — admin @ 1:49 pm

Taxes (Photo credit: Tax Credits)

Changes in estate tax rules approved in New York this month were supposed to help those with estates valued up to $5 million and keep things the same for those worth more, with the top rate remaining at 16 percent.

But an article in Crain’s says a White Plains attorney has found that when wealthy New Yorkers die, the taxable portion of their estates could be hit by a 164 percent tax.

The article suggests the tax could drive aging New Yorkers to lower tax states — the opposite of what the new law was intended to do, which was keep them in New York.

The idea of the law backed by Gov. Andrew Cuomo was to increase what New Yorkers could pass on to their heirs tax free, eliminating the tax for 90 percent of the estates that were larger than the old $1 million exemption. The threshold would rise to $5.8 million by 2019, equalling what the federal exemption will be at that time.

But for estates worth more than that, attorney Kevin Matz and others say there is a huge predicament — code in the law that could impose tax bills higher than the worth of the estate.

He said the result for a New Yorker who dies in 2017 with an estate worth $262,500 more than the $5.25 million exemption is a tax bill of $430,050, a marginal tax rate of 164 percent.

The state budget office agreed that such a scenario could occur.

The state Society of CPAs is urging the law be fixed. It says the culprit for the unintended problem is the phasing out of a tax credit that the wealthy have long used to shrink the size of their estates.

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Nip Inheritance Feuds In The Bud

April 16, 2014

Filed under: Beneficiaries,Estate Planning,Family,Inheritance,Wills — admin @ 9:00 am

Fighting over money, stocks or other valuable assets is common among family members after a relative dies. But the most heated, knock down, drag out fights are often over worthless trinkets. Go figure.

At least half of lawsuits over inheritances involve items worth less than 10 percent of a person’s estate, says an article on

Passport US

Passport US (Photo credit: Wikipedia)

And family members are fighting over trinkets because they have emotional not financial value. One family battled over their mother’s passport.

These type of fights can be avoided, however, by starting he conversation early. Either generation may initiate this talk, but the goal is to get an idea of who wants what.

Tips for avoiding fights over family heirlooms include:

  • Making an inventory of your possessions and giving it to your attorney.
  • Sharing the list with family members.
  • Appraising your property. If one or two particular items are worth way more than everything else, you may want to have those things sold and the money spread among your heirs.
  • Setting up a jury system. If there are disputes, votes can be taken. Or you can designate your executor to draw straws or roll dice.
  • Including a list of your personal property in your will. Specify who gets what.
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Long Term Care Insurance Pitfalls

April 9, 2014

Watch out when shopping for long term care insurance.

Long term care costs are out of sight and can fast erase one’s savings, so many boomers are now seeking to buy long term care insurance. But what are they buying? It can be confusing.

When it comes to buying long term care insurance, you better do your homework, says an article in the Seattle Times.

Nursing Home

Nursing Home (Photo credit: LOLren)

It is estimated that 9 million Americans now aged 65 or older will need care over a long period of time. And the typical cost of a private room in a nursing home is about $84,000 a year, often as much as $120,000 in some places. Assisted living is less, but still expensive, about half the cost of a nursing home. In-home care can cost about $20 an hour or more.

So it is clear that the costs of long term care can add up quickly. It explains why so many are looking into long term care insurance.

But a lot of people who bought policies are having a hard time getting their benefits, the article warns. And, many times, the policyholders are too old or sick to take on the task of fighting the insurance companies.

As a result, hiring an attorney who specializes in long term care issues is the best way to go. Without such an attorney on your side, the companies can just keep denying you, according to the article.

Nevertheless, the story recommends long term care insurance — but only from a reputable company. Reputable firms will cover care in a variety of settings. And it is cheaper to buy a policy when you are younger than older. In many cases, if you have a pre-existing condition, you will be turned down.

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Discuss Finances Before The Wedding Day

April 2, 2014

Filed under: Beneficiaries,Estate Planning,Finances,Insurance — admin @ 2:37 pm

Planning a wedding anytime soon?

Bride and Groom at Scarborough-3=

(Photo credit: Sheba_Also)

Then there are many things to think about. But one of the key issues that should be on your mind is finances. It may not be romantic, but you must talk about money with your future spouse.

Discussing finances may be nearly as important as talking about the reception or honeymoon. It could be more important.

A discussion about your finances — budgets, insurance, savings and the like — could be essential to ensuring a happy marriage, according to a story on

Pinning down a specific time to sit down and hash out how you want to organize your marriage is key. Are you going to have joint checking accounts or separate ones? Which of you is going to manage the money and pay the bills? These are just a few of the questions that must be asked.

Setting a budget and putting your expenses and financial goals down on paper is also important.  Each partner must be okay with the other’s spending habits.

If there are disputes, the couple may want to seek the advice of a marriage counselor or financial advisor.

Other areas to discuss are life insurance ( a “must” for most couples, the article says); debt, if any; disability insurance; homeowners insurance; health insurance; and even an estate plan, or at least a plan to designate beneficiaries in case of one partner’s death.


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Private Long-Term Care Program Drawbacks

March 26, 2014

Filed under: Long Term Care,Medicaid/Medicare,Nursing Homes — admin @ 12:58 pm

While everyone has been scrutinizing the Affordable Care Act, another change in the way health care is being delivered and paid for is underway, but without much attention. There are serious concerns about it, however.

New York is among at least 26 states that are rolling out mandatory programs that will put billions of public dollars into long-term care plans managed by private companies. The plan seeks is to keep people in their homes longer and find alternatives to nursing homes.

Firms running the programs are promising profits for investors and savings for taxpayers.

But there may be hidden pitfalls in the new programs, according to a story in the New York Times.

It profiles a program in Tennessee that has been hailed as a model. The Times says the growing costs of care plus the need to return profits to investors is putting pressure on the care being given. In many cases, care has been denied.

In the past, severely debilitated people were placed into nursing homes with the costs shared by the state and federal government under Medicaid. The new program gives such patients the choice of staying in their homes with daily help and then go to a nursing home only when absolutely needed. Medicaid pays a fixed amount to a private insurance company to cover and coordinate the care.

The government saves money because the amount it pays is less than what it would have paid to a nursing home and the private company makes money because the amount it spends on the patient is less than it is being paid by the government.

According to the story, a patient was summarily denied care by his insurer once he developed dementia. He was no longer deemed eligible for nursing home care under Medicaid because the rules for admission were tightened up as part of the new program.

Similar problems in other states that have adopted similar programs were also detailed in the article.

Worst Places To Die

March 19, 2014

Filed under: Estate Planning,Estate Tax,Tax Planning — admin @ 10:00 am

The federal estate tax exemption has been increased to a hefty $5.3 million, but the policies in the states remain varied and in flux.

Despite the large federal exemption, estate taxes still pose a worry in many states. In fact, 19 states as well as the District of Columbia impose estate taxes. The list includes New York.

Seal of New York.

Seal of New York. (Photo credit: Wikipedia)

Each state’s rules are a bit different, making it perplexing should one be considering moving for whatever reason, whether it be to save tax money or to be closer to grandchildren.

As a result, some wealthy individuals are now looking to estate planning attorneys to help them with what has become known as “domicile planning,” to assist them not escape income taxes but estate taxes, according to an article on

The federal estate tax exemption of $5.3 million is now permanent, with a 40 percent tax applied to anything over that number.

States usually have far lower exemptions and impose up to a 16 percent tax on anything over the exempt amount. New York’s exemption is $1 million. So the estate of a person dying in New York with $5.3 million would owe no federal tax, but would owe New York $431,000. The top rate is 16 percent.

But some states are making changes. Illinois reinstated its tax in 2011. Delaware made its “temporary” tax permanent.

For these reasons some estate planning attorneys are counseling some clients to move to Florida where there is no income tax and no estate tax. To benefit, you have to consider Florida to be your home at the time of your death even if you don’t live there all the time. It is a subjective evaluation.

Meanwhile, there are moves afoot in some states to try and repeal the tax. Your estate planning attorney will know the latest changes that are being passed or considered.

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If You Consider Your Home a Cash Cow, Think Again

March 12, 2014

Filed under: Asset Protection,Finances,Real Estate — admin @ 1:42 pm

For years, “smart savers” would put large percentages of their incomes into their homes.

Brick house, Cambridge, Mass.

(Photo credit: Joel Abroad)

Often, they would buy a house just slightly above their price range, figuring they’d get regular raises that would offset the stretched mortgage payments.

In time, they would make improvements, put on additions, finish basements, redo the kitchen and, in theory, increase the value of those homes.

Nobody ever thought the value of their house could go down. But then the housing market crashed.

Today, the market is coming back and with interest rates still very low, buying a home seems like a good investment. But, according to an article on, that may be a misconception.

The article cites good investments as ones that generate consistent cash flow. Homes do not do that.

You pay out money every month for 30 years and in the end you end up with a somewhat liquid asset that has perhaps increased in value at the rate of inflation.

Of course, this thinking applies to homes you live in, not rental properties.

The article says buying a home may be a good idea for you, but cautions against thinking that it is a good place for your investment dollars. It suggests buying a home that you can comfortably afford and putting investment dollars into assets that are likely to perform better over time.

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Retirement Planning and Job Changes

March 5, 2014

A career change can be one of the most confusing times in a person’s life. One particular cause for confusion concerns how a person’s retirement plans might change as a result of the transition. A recent article discusses what to do with your retirement plan if you change jobs.


Retirement (Photo credit: LendingMemo)

In general, financial planners agree that individuals should not cash out their retirement plans. However, this is often the case. A recent study conducted by benefits consultant Aon Hewett reveals that the current trend among young adults in their 20’s is to cash out their 401(k) plans when they change jobs. Of those changing jobs in their 50’s, approximately one third cash out their plans.

The article suggests three questions an individual should consider concerning his or her retirement plan when changing jobs:

    1. Can I leave my money in the retirement account at the other job?

    In most cases, an individual can leave money in his account so long as he or she contributed over $5,000. If the amount is below $5,000, the employer may let the individual retain the account, but is not required to.

    2. What are the steps to complete a rollover?

    If you would like to rollover the funds from your first job to the pension account for your new job, the human resources department of your new job will be able to assist you with this process. If your new job does not offer a retirement account, you can also roll the funds over into an individual IRA.

    3. What if my old employer mailed me a check for the money in my retirement account?

    If the balance of your retirement account was below $5,000, your former employer may have closed the account and mailed you the balance. If you receive a check and decide you would like to put it into an IRA, you have 60 days in which to do so.

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What is a Charitable Lead Trust?

February 26, 2014

Filed under: Charitable Giving,Estate Planning,Tax Planning,Trusts — admin @ 10:00 am

One of the many tools people utilize in order to give to their favorite charitable causes is the charitable lead trust (CLT). As a recent article explains, former first lady Jacqueline Kennedy Onassis put a large amount of her assets into a CLT that was designed to pay out to her selected charities for 24 years. In 2018, her heirs will receive the remainder of the assets within the trust. This recent article discusses the basics of CLTs.

English: Jacqueline Kennedy in Fort Worth, Tex...

Jacqueline Kennedy (Photo credit: Wikipedia)

Like most trusts, a CLT is used to transfer assets while avoiding tax liability. A charitable lead trust makes a fixed payment to a charitable entity for a fixed period of time. This could be a set number of years, or the duration of a person’s life. After this period expires, anything left in the trust is paid out to a third party. This could be the trust creator, or his or her heirs.

If an individual designates that the CLT will return the trust assets back to him or her, he or she will receive an income tax deduction at the creation of the trust. If the trust is designed to pay the remainder assets out to another beneficiary, any tax liability that would otherwise have been imposed is reduced or eliminated. CLT’s are therefore a popular option for those looking to give to their favorite charity, while still leaving assets to their loved ones and avoiding transfer tax liability.

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Is Online Recordkeeping Hindering Your Estate Plan

February 19, 2014

Filed under: Estate Planning,Finances — admin @ 3:01 pm

An estate plan is an important document, however it cannot stand alone. Whoever you select to execute your estate plan will require a multitude of other documents and information in order to fully implement your wishes. As a New York Times article discusses, the growing tendency for individuals to keep important information electronically means that these individuals may be hindering the implementation of their own estate plans.

Wikipedia login page

(Photo credit: Wikipedia)

Once upon a time, everyone stored his or her important documents in a file cabinet, safe-deposit box, or with a trusted adviser. Even where these documents were disorganized or incomplete, they provided a paper trail. Now, sensitive information is contained on computers or online and password protected or encrypted. In this absence of a paper trail, your executor will find it difficult or impossible to carry out your wishes.

The problems that stem from digital recordkeeping are most prevalent in cases where a person is incapacitated, rather than deceased. This is because a person who is merely incapacitated often has bills and other expenses that need to be taken care of despite the incapacity.

In order to manage your online accounts, as well as any sensitive information that is stored online, it is important to maintain a list of accounts, login names, passwords, and the answers to any security questions. Be sure to update this document regularly. Finally, keep the document in a safe place where only people that you trust can find it.

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