IRS Announces Another Extension for Estate Tax Filing Deadline
September 14, 2011
Just a few weeks ago the IRS announced the November 15, 2011 estate tax filing deadline for large estates of decedents who passed away in 2010; but some executors might be relieved to know that the IRS recently extended the deadline to January 17, 2012.
This extension gives executors of large estates more time to determine whether or not its in the best interests of the heirs to take advantage of the 2010 estate tax repeal. The decision facing executors of the 2010 estates is this:
* Choose not to pay estate taxes, but subject the assets of the estate to carryover basis rules (meaning heirs will pay capital gains taxes based on the price of an asset when it was initially acquired by the decedent); or
* Pay estate taxes under the 2011 rules, with a $5 million per-person exemption and a 35 percent top rate, but with a stepped-up income tax basis (meaning heirs will pay capital gains taxes on the price of an asset when it was inherited.)
For any executors who haven’t already made the decision, they can now take more time to weigh the pros and cons, and maybe even enlist the advice of an estate planner, tax planner, or probate attorney to help walk them through any possible unexpected consequences. If you are an executor or an heir faced with this particular and time-sensetive issue, please don’t hesitate to contact our office for assistance.
How Does Your State Rank on the Long-Term Care Scorecard?
September 9, 2011
One of the primary concerns of the aging population is long-term care. As the life expectancy of Americans goes up so does the expectation that they will someday need some form of long-term care. You may not know whether that care will happen in a hospital, a nursing home, or in your own home, but you can be sure that it will be expensive.
How expensive will long term care be? It turns out the answer to this question depends a great deal on where you live. The AARP, The Commonwealth Fund, and The SCAN Foundation recently released a report which they call “The Long Term Scorecard,” which compares states and ranks them according to categories. The website Web MD has an article explaining how to use the scorecard and what it means.
The article in Web MD states that “Long-term care is unaffordable for middle income families, according to [The Long Term Scorecard report.] Even in states where nursing home care is most affordable, such care averages 171% of an older person’s household income. The national average is 241%.”
Some states, however, have been making the issue of long-term care a priority, and have been wrestling with questions such as how to make it more affordable to residents and how to provide support to family caregivers. According to the article in Web MD, they’ve broken down the information in “The Scorecard” to help readers understand which states provide the best support (either financial, social, emotional or legal) for the elderly and their caregivers.
The article “ranks states’ performance according to four categories: 1. Affordability and access, 2. Patient choice of both provider and setting, 3. Quality of life and care, and 4. Support for family caregivers.” The states ranked highest overall were Minnesota, Washington, Oregon, Hawaii and Wisconsin; while the lowest ranking states turned out to be Mississippi, Alabama, West Virginia, Oklahoma and Indiana. (For more information on how the states were ranked and what each ranking means please read the article here.)
Perhaps the most important lesson to take from all this is that no matter where you live, or what your health is like right now, it is very likely that you will need some kind of long-term care in the future, and that that care will be expensive. Burying your head in the sand or choosing to “think about it when the time comes” will only make things worse for you and for your family. Call our office and let us help you prepare now for whatever the future may bring.
Are You Hurting Your Own Chances At Retirement?
August 26, 2011
According to a recent article in the Wall Street Journal, many Baby Boomers are no longer worried about when they will be able to retire, but if they will be able to retire at all. In many cases the reason for this worry stems not so much from any kind of selfish inability to save, but from a tendency to be too generous.
In addition to a growing trend (hinted at in the WSJ article above) of Baby Boomers tapping their own retirement funds to help pay for the care of their elderly parents, this article in USA Today warns of the all-too-common danger of Boomers shorting their own retirements to pay for their children’s college educations.
“People are willing to go to extreme measures because they value a college education so highly… Among parents who are planning for their children’s college, 24% say that they tap their retirement accounts. And that doesn’t reflect people who reduce or halt retirement contributions [to make tuition payments.]”
One thing that both of these articles agree on is that when it comes to saving money, Boomers need to put their own needs first. While the immediate financial needs of an elderly parent or college-bound child may feel more pressing, it’s a very bad idea to short your own retirement account (and your future) to cover their costs. If you have an elderly parent in need, before you dip into your own savings contact a good elder law attorney who can help you review your (and your parent’s) options, and help navigate the VA Benefits or Medicaid system if applicable.
As far as college tuition goes, by neglecting your own retirement to pay for your children’s college education you may simply be perpetuating a dangerous cycle, putting your children in the position of having to pay for your expenses when your savings runs out in the future. Financial advisors, college admissions counselors, and the school’s financial services center may be able to help you explore your options for paying for tuition.
Some Tax Saving Strategies from the Wall Street Journal
August 24, 2011
Income, estate, and other federal tax levies have commonly been a bone of contention between those with different political ideologies; but the current conflict has reached unusual heights, with various million- and billionaires publicly expressing their views (pro or against) about current tax laws. Of course, million- or billionaires aren’t the only ones with strong opinions about taxes.
If you feel that you pay too much in taxes, Brett Arends of the Wall Street Journal has some tips to help you save on taxes in the future. Much of his article is tongue-in-cheek, but the suggestions are valuable ones. Of special interest to our firm and our clients are four of the tips nestled in the middle of the article:
Give to your family. “Until the end of 2012 you can give $5 million, tax-free… In addition you can give $13,000 a year to each recipient — each child or grandchild — and a spouse can do the same. So a married couple with, say, three children and eight grandchildren can give another $286,000 a year, on top of that one-off $10 million. Over ten or twenty years that really adds up.”
Put your grandkids—and great grandkids—through college. “Money paid directly to schools or colleges escapes estate taxes.” Furthermore, if you contribute to a 529 educational savings account that money can be tucked away—and eventually used by the student for whom it is intended—tax free (so long as it is used for educational purposes.)
Buy life insurance. Proceeds from a life insurance policy can go to your beneficiaries tax-free upon your death, although you may have to make some arrangements ahead of time. The article states that “Typically you put the policy in an Irrevocable Life Insurance Trust… The premiums that you pay annually are gifts to the beneficiaries… And when you die, the proceeds of the policy go to the trust, for the beneficiaries, free of estate tax.”
Talk to an estate planner. “There are other moves that can cut your estate tax, too. A Qualified Personal Residence Trust can slash the estate taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them on an investment portfolio. So, too, can setting up a Family Limited Partnership. Financial planners say this is a great time to put investments — like stock — into a GRAT.”
If you have questions about these tax-saving strategies, or other strategies that can help you preserve your estate for your heirs, please contact our office. We can help you determine what your best options are to help protect your assets—and your family—in the years to come.
Executors of 2010 Estates Have Until Nov. 15 to Make Estate Tax Decisions
August 19, 2011
Everyone will remember the “wonderful boon” that was the 2010 estate tax repeal, which (in theory) allowed decedents to pass on their assets free of any estate taxes. However, the situation was complicated in December of 2010 when, as this article in Bloomberg puts it, “Congress extended the tax retroactively [giving] executors of estates of people who died that year a choice. They could decide to skip the estate tax or pay the tax with a $5 million per-person exemption and a 35 percent top rate, the same as in 2011.”
Executors have had almost a year to consider their options, but now it is just about time to make the decision, because “the Internal Revenue Service is giving executors of estates of people who died in 2010 until Nov. 15 to opt out of the estate tax.” According to the IRS the forms and instructions for 2010 estate tax returns will be made available early this fall.
But executors don’t have to wait until the forms are available to consider which tax option might be the most profitable one. Many financial planners and estate planning attorneys have already done their research, and they’ve found that opting not to pay estate taxes may end up costing you more in the long run. This article in Forbes explains: “Opting out of the estate tax regime means opting out of stepped-up basis (for income tax purposes)… and opting into the modified carryover basis rule… One of the main plusses about estate tax is that it is paired with a stepped-up income tax basis. You should not be paying both estate tax and income tax on the same assets.”
Of course, each estate will be different depending on a number of factors, including the size of the estate, the nature of the assets, the preferences of the beneficiaries, and any previous planning the decedent may have done. Executors should consider their options carefully, and consult with an experienced estate planning attorney before deciding whether opting out of the estate tax is really in their best interest.
New York Becomes 29th State to Pass Alert System for Vulnerable Adults Legislation
August 15, 2011
Last month saw some good news for seniors and their families in the state of New York. State Governor Andrew Cuomo announced on his website that he “signed a law to create a statewide alert system for missing vulnerable adults, similar to the nationwide Amber Alert program, which will help authorities locate cognitively impaired persons who go missing.” By signing this law Governor Cuomo added New York to the growing list of states with similar programs in place to help find and protect seniors with Alzheimer’s who may wander away from their homes in confusion.
The first state-wide public notification system for vulnerable adults, sometimes called “Silver Alert” programs, was passed in Oklahoma in 2006. Since then 28 states have joined Oklahoma in passing Silver Alert legislation (or something similar) and five states have some kind of vulnerable adult alert legislation pending.
According to Governor Cuomo’s announcement, New York’s new Amber Alert for Seniors program “provides for the rapid public dissemination of information regarding adults with dementia, Alzheimer’s, or other cognitive impairments who go missing. Under the new law, the same Amber Alert mechanisms used to find missing children will be activated for missing vulnerable adults, including the printing and distribution of photographs and posters, a toll-free twenty-four hour hotline, a curriculum for training law enforcement personnel, and assistance for returning missing vulnerable adults who are located out of state.”
New York’s program—and the similar programs in all participating states—are a comfort to the families of seniors afflicted with Alzheimer’s or dementia. Too often we read news stories about seniors who have wandered away from their homes and are not found until it’s too late. If you worry that your elderly relative may be at risk for wandering, check the laws of your state to find out which programs are available to you and how to enroll (if necessary).
If your state does NOT have a program in place you may want to consider enrolling your elderly loved one in the MedicAlert® + Alzheimer’s Association Safe Return® program. To learn more about this nation-wide emergency response service click here.
After A Tempestuous Life Amy Winehouse Leaves Clear and Certain Will
July 27, 2011
Following the death of British singer Amy Winehouse there have been a number of news stories and blog posts about her turbulent career and the last few years of her life. In the midst of all this scrutiny, perhaps the most surprising discovery is the fact that Winehouse’s affairs were in incredibly good order, with a carefully crafted will leaving all of her sizeable estate to her parents and brother instead of to her incarcerated ex-husband.
This timely article in U.S. News and World Report remarks that “celebrities and non-celebrities alike often leave their estates in disarray when they die. That lack of awareness and planning can make death more stressful and more costly for family members as they struggle to quickly plan a funeral and think about dividing up family property while grieving.”
All too often our office is contacted by family members who are overwhelmed with the task of probating or administering a poorly planned estate. Sometimes these bereaved relatives are dealing with overwhelming and confusing debt, or terrible family infighting, but more often than not they are simply trying to make their way through the long and arduous process of probating an estate without the benefit of a will or trust.
One of the many things we can learn from the life and death of Amy Winehouse is that even in the midst of troubled times it is possible to think clearly about the future. If you’d like to start planning for your family’s future, please contact our office today.
The Best Laid (Estate) Plans…
July 15, 2011
A recent story in the Chicago Tribune will be of interest to anybody who has created, or is considering creating, an estate plan—regardless of state of residence. The article tells of Heather Rooney, the widow of wealthy businessman Thomas McNamee, and her ongoing fight to get the inheritance she believes her deceased husband wanted her to have.
Approximately six months before his death Thomas McNamee found out he had a deadly form of brain cancer. After learning that his cancer treatments had failed McNamee took steps to get his affairs in order; these steps included marrying Rooney, his girlfriend of 15 years, and setting up a $3.5 million trust fund for the benefit of Rooney and other family members.
It seems like he took care of everything—prenuptial agreement signed before the wedding, trust created before he became too sick to manage his affairs—what could go wrong?
Unfortunately, according to Heather Rooney, the arrangements left after his death were not what her husband actually intended. “According to [Rooney’s] suit, [McNamee] intended to leave Rooney a $500,000 trust fund to maintain her at the 24-acre Dundee-area property where the couple lived. He also intended to leave her two parcels in East Dundee, including one with a beauty salon that Rooney operated.” Rooney also claims that she was coerced mere minutes before their wedding into signing a prenuptial agreement that did not accurately reflect her or Thomas McNamee’s true wishes.
At this point, we can’t know for certain what McNamee’s true wishes were. It certainly seems as if he created a thorough plan which would accurately reflect his wishes not only for his widow but also for other family members. But one would think a person as savvy as McNamee would have informed his spouse of his plans ahead of time, eliciting her grudging agreement, if not her wholehearted approval.
Unfortunately, even the best laid plans can be contested by unhappy relatives. But with the help of an experienced attorney you can make your plan as strong or as flexible as you believe is necessary to ensure that your wishes are followed and your loved ones are provided for.
As Priorities Change, So Does Your Estate Plan
July 13, 2011
Estate plans have been changing quite a bit over the past few years, not only because of changing laws and new tools for protecting your assets and your heirs, but also because our priorities as a society are changing and growing. A recent article in the Wall Street Journal sums up the situation well:
“Even the simple question of who your heirs will be is getting more complicated. Nowadays more people are considering pets and even children posthumously conceived from genetic material in their estate-planning mix, say financial advisers. That often means setting up trusts that just a few years ago would have been unthinkable.”
Some of these “new” trust arrangements include:
Pet trusts: Money set aside in trust to be distributed to your pet’s caretaker as per your instructions. Some people choose to make the caretaker the trustee of the trust as well, others choose to have a separate trustee who can ensure the caretaker is caring for your pet according to the guidelines in the trust.
Trusts for posthumously conceived children: As fertility treatments get more and more advanced, “a growing number of states are passing laws defining the inheritance and Social Security rights of posthumously conceived children. Earlier this month, legislation took effect in Iowa granting posthumously conceived children the right to participate in trusts. Texas, Washington, Colorado and North Dakota confer similar rights.”
As technology advances, and as the legal system works to keep up with it, you have more and more options when it comes to protecting your family and passing on your estate as you choose. If you have questions about unique estate planning choices please don’t hesitate to contact our office.
Estate Planning Challenges (and Benefits) for Same-Sex Couples
July 8, 2011
There are many changes going on nation-wide for same-sex couples as more and more states legalize gay marriage. But there are still a few areas of the law—estate planning being one of them—which present challenges no matter what your state of residence. This article in the Wall Street Journal points out just a few of the challenges same-sex couples still face, and one of the highest on their list is death and inheritance.
“The biggest problems [for same-sex couples] may not come until death do you part. Although same-sex spouses are legally entitled to inherit assets from each other whether there’s a will or not, since inheritance is governed through state law, they don’t have federal rights.”
In states which have legalized gay marriage (including Massachusetts, Vermont, New Hampshire, Connecticut, Iowa, and now New York) same-sex couples are still inhibited by federal law in the following ways:
- Same-sex partners aren’t able to inherit retirement plans with the same ease that opposite-sex partners have. “Unlike opposite-sex spouses, same-sex spouses would have to transfer [401(k) and other] accounts to inherited IRAs and start taking distributions each year, rather than allowing the tax-deferred assets to continue to potentially accumulate tax-free earnings.”
- Same-sex partners still won’t get the federal marital deduction—the ability to “leave each other unlimited assets without owing any estate tax”—regardless of their state of residence. These assets may be considered joint by the couple and by the state, but not by the federal government. This means assets will be taxed once upon the death of the first partner, and may be taxed again upon the death of the second partner.
But there may be one opportunity not available to traditional married couples which same-sex couples can take advantage of: gay couples are legally entitled to “set up a ‘grantor-retained income trust,’ a type of trust that family members aren’t allowed to create for one another. You put an asset into a trust and retain the right to income from it.”
No matter where they live, same-sex couples are simply going to have more challenges creating estate plans that will hold water on both a state and federal level. The good news is that in spite of these challenges it is possible, with the right help, to plan to protect yourself, your partner, and your family now, and in the future.