Aging in Three Simple Questions

At a recent Moms at Work event hosted by Claire M. S. Meade, discussion was held about those who are part of the “sandwich generation”, that is those who have young children, but also older parents.  In particular, the conversation centered on questions to ask retired or retiring parents to help facilitate a discussion about aging.  Many earlier articles have addressed estate planning, including planning for incapacity and planning for death.  But this discussion highlighted three basic questions that MIT AgeLab identified as key when considering what it means to be retired.  The simple questions are: (1) Who will change my light bulbs?  (2) How will I get an ice cream cone?  (3) With whom will I have lunch?  These seem like very basic questions, but when you start to think beyond the initial concept to the considerations that each question raises, you realize that there are a lot of details to address in each question as it relates to retirement and aging.   Check out the MIT AgeLab article for more details and think about beginning the conversation with your retired or retiring family member to avoid finding yourself in a situation where it is too late to plan.  @bgnthebgn @josephcoughlin #incapacityplanning #estateplanning #aginginplace #retirementplanning #sandwichgeneration

National Healthcare Decisions Day – Week Long Event for 2017

Earlier articles have talked about how you can control your final moments and also how you want to be rememberedThis year National Healthcare Decisions Day is a week long event beginning April 16 and ending on April 22.  Such recognition provides a reminder that having an advance medical directive and a living will in which you express your wishes regarding medical care, if you cannot decide, and whether you want life-prolonging procedures, are crucial components in every estate plan.  Several states and the District of Columbia have addressed end of life decision-making through death with dignity statutes.  But, regardless of your position on death with dignity statutes, end of life decision-making and advance healthcare planning is a necessary conversation to have and to share with your loved ones and National Healthcare Decisions Day (or for this year week) helps remind us of the need to begin the dialog on the subject.  @deathwdignity @NHDD #livingwill #estateplanning #endoflife #advancedirective #NHDD

New Virginia Legislation Addresses Thorsen Case

The Virginia General Assembly has passed SB 1140 and HB 1617 both of which address the issues raised in Thorsen v. Richmond Society for the Prevention of Cruelty to Animals (786 S.E.2d 453 (Va. 2016).  As may be recalled, the Thorsen case involved an error in the drafting of a Last Will and Testament that resulted in the intended beneficiaries receiving a smaller amount than was originally expected.  In connection with a lawsuit for legal malpractice, the Virginia Supreme Court found that a third-party beneficiary may sue to enforce its rights even though those parties are not known for many years, which is very often the case in estate planning matters. 

Now under the aforementioned legislation, the statute of limitations for legal malpractice relating to estate planning is five years if the representation was based on a written contract and three years if the representation was based on an unwritten contract.  The statute of limitations begins to run on the date representation is complete.  Furthermore, a third-party has standing to sue “only if there is a written agreement between the individual who is the subject of the estate and the defendant that expressly grants standing…”  This legislation is effective July 1, 2017.  Fortunately once in force, the potential chilling impact the Thorsen case had on the estate planning process will hopefully be overcome, and attorneys and clients will be able return to having an attorney-client relationship without having to watch out for disgruntled beneficiaries who may appear decades later.  #estateplanning #estateadministration #Thorsen @bgnthebgn

Update from the Virginia Tax Department

(h/t to my colleague, David A. Lawrence, Esq. who recently attended the Annual Virginia Tax Roundtable and provided the summary below.  The Roundtable hears from the Virginia Tax Commissioner, his staff, the Virginia Attorney General’s staff, local Commissioners of Revenue and a U.S. Tax Court Judge about current issues and ways to improve tax administration in Virginia.)

Identity Theft – Refund Fraud Dramatically Rising
Identity theft and refund fraud continue to rise dramatically in Virginia & other states. Over $54 million in 2015 & 2016 of refund fraud was caught in Virginia before the state issued the fraudulent refund checks. It’s taking a significant amount of Tax Department resources and time to review more refund returns, collaborate with other states & the IRS, and match data before letting refund checks go out. It sounds like people should continue to try to file their returns as early as possible before others attempt to file fraudulent claims, using information they can find out about you. It seems that federal agency employees who are slow to get their W-2s are at a greater risk for fraud claims.

Staffing Changes & Budget Cuts continue at State & Local Tax Levels
For several years in a row, many long-time employees of state & local tax offices continue to retire. The government is trying to replace the loss of institutional memory with newbies and technology. But continued budget cuts are hitting technology upgrades & the ability to make some new hires.

Tax Appeals
Appeals of tax cases – particularly income tax – continue to increase 3 years in a row, while sales tax decisions are down significantly in Virginia. But with strained staff, it’s taking a lot longer for appeals to be completed. If a taxpayer doesn’t fully document the appeal, then the Tax Commissioner is dismissing the appeal – so don’t be sloppy out there. Local tax appeals continue to drop – it appears the Tax Department doesn’t like dealing with local tax appeals & the localities don’t like being told they’re wrong by the Tax Department.

Updating Tax Regs; Little Tax Legislation
The Tax Department is in the process of updating its Regulations, especially any which are over 4 years old. Based on the few inquiries from the General Assembly, there doesn’t appear to be a lot of new tax legislation expected this coming legislative session.

Local Taxes Being Pursued
Local tax offices are getting much more active in capturing tax revenue, and using more technology to find taxpayer nexus and tax it. Restaurants are big targets for meals & sales taxes; as well as their owners & managers who are pursued on a responsible officer type of liability. Large businesses, especially multi-state ones, are filing 1-3 years back refund claims. Localities are complaining that those claims are hitting the locality’s budget, and thus are fighting the refunds, making the taxpayers work at those claims. Local tax collectors are documenting their defense, expecting tax appeals. So the taxpayers had better document their claims and arguments as well.

US Tax Court Practice Tips
Beginning in 2017, the Tax Court will have electronic filing.  Other practical suggestions were offered involving pretrial memoranda, stipulating facts, objections to IRS experts and post-trial briefs. 

As tax season is upon us, if you have questions regarding your taxes, please feel free to reach out to your professional advisor.  #taxplanning #estateplanning #taxseasonishere @bgnthebgn

Five New Year’s Resolutions for Your Estate Plan

Happy New Year!  Very often the New Year brings all sorts of ‘changes’ for individuals, particularly after having spent any time with family members and friends over the holiday season.  Here is a quick list of five resolutions to consider for your estate plan.

  1. Is it time to update your plan?  If a plan is in place, when was the last time you reviewed it? Is it simply a binder of documents you received several year ago when you finished the estate planning process and you haven’t looked at since?  Have circumstances changed that are not captured in the documents?  Who are the fiduciaries (i.e., executor, trustee, healthcare power of attorney, financial power of attorney, guardian, etc.) listed?  Are the fiduciaries still capable of serving?  Does the plan do what you want it to do?  There have been a lot of changes to estate tax laws in recent years, is your plan from before 2013?  In some cases, does ‘updating’ your plan, actually mean finishing the process?  Or does it mean starting the process so that your theoretical plan is memorialized? 
  2.  Are there beneficiary designations?  When was the last time you checked beneficiary designations on life insurance, retirement accounts (i.e., 401(k), IRAs, 403(b), 457, etc.) and annuities?  What about any payable on death (POD) or transfer on death (TOD) designations you have on bank accounts or brokerage accounts…do those designations reflect your wishes?  For government employees, are beneficiary designations up-to-date on your Federal, state or local benefits? 
  3. Families come in all shapes and sizes -Family Fiduciaries.  Are you named as a fiduciary in any family member’s or friend’s plan?  Have you touched base with that person recently to see how they are doing both health-wise and financially?  Do you understand what your role is as the fiduciary?  Do you know the family member’s or friend’s goals and objectives?  Are you able to still serve, that is, are you distracted by a health event or financial crisis and perhaps you should not take the role?  Have you considered options for a care manager if you are caring for an elderly family member or friend? How about looking at assisted living or skilled nursing or home health aides, if the circumstances warrant such considerations? 
  4. Are you charitably inclined?  Do you have a charitable giving plan for this year? For future years? For at your death?  Have you researched your options including direct giving, donor advised funds, private foundations and/or charitable trusts?  Is there a planned gift that you would like to consider?  Is now the time to investigate annual giving? 
  5. Succession planning occurs at many levels.  Who will be in charge of any business whether it is a limited liability company, partnership or corporation?  Are shareholders’ agreements and operating agreements up-to-date?  And beyond a business interest, who will be in charge of your pets?  Are there monies set aside for their care?  What about digital assets?  Have you ensured a smooth transition of online accounts to a successor?  What about your tangible personal property?  Is there an inventory? Appraisals? Designated recipients?

True, there are a lot of questions and not a lot of answers here, but that is the planning process.  One has to begin with the questions to reach the answers.  Working with a professional advisor can both provide you with the guidance needed to navigate these questions and ensure that you complete the process.  #planyourjourney #lifeplanning #legacyplanning #estateplanning @bgnthebgn

A New Year Means New Exemptions from Estate Tax

Welcome to the New Year!  As with any new year, there are usually changes to a variety of important numbers for estate planning and elder law purposes.  This year the applicable exclusion amount from Federal estate tax is set at $5.49 million per person.  The lifetime exclusion from gift tax is also $5.49 million per person and the exemption from generation skipping transfer tax is $5.49 million.  The annual exclusion from gift tax remains at $14,000.  The annual exclusion for gifts to non-U.S. citizen spouses increased to $149,000.

For local jurisdictions that have estate tax, the District of Columbia increased its estate tax exemption from $1,000,000 to $2,000,000.  Maryland’s exemption from estate tax has increased to $3,000,000.  Virginia continues to have no state level estate or inheritance tax.

In the elder law field, the Medicaid spousal impoverishment numbers were released increasing the minimum community spouse resource allowance (CSRA) to $24,180 and the maximum CSRA to $120,900.  The maximum monthly maintenance needs allowance is now $3,022.50 while the minimum remains at $2,002.50.  The minimum home equity limit is now $560,000 and the maximum is $840,000, but be aware that local jurisdictions may apply these limits differently. 

If you have questions regarding the new limits and how they may impact your estate planning, your should consult your professional advisor.  #estateplanning #taxplanning #elderlaw @bgnthebgn

The Future of Valuation Discounting…

Earlier this month, a long awaited hearing was held on the proposed regulations that would reduce the availability of valuation discounting when transferring closely held business interests.  Close to forty individuals testified at the IRS hearing and all but one individual opposed the proposed regulations.  Among several of the reasons why critics opposed the regulations included the following: (a) the potential for a ‘deemed put right’; (b) the creation of a three-year look back period; (c) the forced use of the ‘investment value’ standard for determining fair market value versus the ‘willing buyer – willing seller’ standard; and (d) the use of family attribution rules that could extend the reach of the proposed regulations.  An attorney-advisor from the Treasury Office of Tax Legislative Council tried to assuage some of the concerns and even commented that it would be surprising if the regulations were finalized given the new administration. 

What does the hearing mean for planning?  It means that planning is still very much up in the air.  For some, there has been a push to complete transactions by the end of year before the regulations are finalized.  For others, any potential transactions are now on hold.  Either way, the issue is not dead, but may be tabled until the next election and individuals and their advisors would be wise to monitor the situation to avoid getting caught without having planned. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

Five Considerations for Year-End Charitable Giving

As the year draws to an end, many of you look to make your charitable donations or are advising individuals regarding their charitable donations.  Of course, there are a variety of ways in which one can make such a charitable gift.  The IRS recently published IR-2016-154, which is part of a series of articles providing taxpayers with relevant information so they can be ready for the next tax season.  In this recent article, the IRS reminded taxpayers of certain aspects of charitable giving in an effort to help taxpayers avoid problems come tax time.  I have summarized these helpful tips below. 

For starters, individuals can only receive a tax deduction if the charity to which they donate is an ‘eligible organization.’  The IRS has a website, Select Check, that is a searchable online database of ‘eligible organizations’ that can be used to verify the status of an organization.

Next, charitable donations can only be deducted if the taxpayer itemizes their deductions.  For some this can be a hassle because that means maintaining accurate records and receipts.  If the gift is larger than $250 to the charity, then a written acknowledgement is required.  The IRS has provided Publication 56 on charitable contributions to help explain what records are necessary.   

Additionally, if an individual is looking to donate tangible personal property like clothing or household items, those items have to be in ‘good used or better’ condition.  Household goods include furniture, furnishings, electronics, appliances and linens.  The taxpayer must obtain a detailed receipt in which the donated items are described for donations worth $250 or more.  Items in which a deduction of more than $500 is claimed usually have to include a qualified appraisal. 

Another factor to keep in mind is if the taxpayer receives any ‘benefit’ in the form of merchandise, meals, tickets or other items.  The value of such ‘benefit’ will reduce the available deduction amount.  For example, a contributor membership to the Kennedy Center is valued at $120, but only $80 of that amount is eligible to be deducted.

One alternative to keeping lots of records and receipts from every organization is the creation of a donor advised fund.  An individual can make a single larger contribution to his or her donor advised fund and from that donor advised fund specific charitable donations can be made.  There are a variety of terms and conditions to follow, but the single contribution means that is what is reported on one’s tax returns.   Here is just one person’s rationale behind the creation of a donor advised fund that also allowed her to get more involved with her community. 

Ultimately, any gift is welcomed by the charity and you should feel free to reach out to the charity or your professional advisor if you have questions or need assistance in making year-end charitable donations.  @CFNOVA @bgnthebgn #donoradvisedfunds #taxplanning #charitablegiving

Notice of Observation Status – Update on Implementation

money-2In August 2015, Congress passed the Notice of Observation Treatment and Implication for Care Eligibility Act (the Notice Act“).  The Notice Act requires hospitals to give individuals who are receiving observation services as an outpatient for more than 24 hours, oral and written notification of observation status within 36 hours of the beginning of such services.  This notice is critical for individuals on Medicare because Medicare will only cover nursing home care following a hospitalization if the individual is classified as an inpatient for three (3) days prior to needing nursing home care.  If the individual is not classified as an inpatient, Medicare will not cover the hospitalization or subsequent care, such as rehabilitation or skilled nursing, which can be financially devastating to a family. 

Implementation of the Notice Act was to have taken effect in August of this year, and the Centers for Medicare and Medicaid Services (“CMS”) indicated that the final rules associated with the Notice Act would be effective October 1st. However, the written notice does not become effective until 90 days following approval of the Medicare Outpatient Observation Notice by the Office of Management and Budget and such written notice does not yet have approval.  What this all means is that the Notice Act has not yet been fully implemented and may not be until early next year.  In the interim, the Center for Medicare Advocacy has created an infographic to help individuals understand observation status and what it means as it relates to the cost of their care so that families can be engaged in the process.  #AskAboutObservation #elderlaw #observationstatus @bgnthebgn

FLASH UPDATE: The Medicare Outpatient Observation Notice and instructions are now available online.  The standardized form is giving individuals notice of their ‘observation status.’ Hospitals and critical access hospitals are required to start using this Notice no later than March 8, 2017.

Special Needs Trust Fairness Act – Update

open-bookAn update for those interacting with seniors and disabled individuals as it relates to the creation of special needs trusts.  In September, the House of Representatives passed the Special Needs Trust Fairness and Medicaid Improvement Act (the “SNT Fairness Act“), which the Senate had passed last year.  The SNT Fairness Act fixes an omission in Section 1917(d)(4)(A) of the Social Security Act where the disabled individual was not listed as someone who could create a first-party or self-settled special needs trust.  Under the SNT Fairness Act, the disabled individual will have the authority to create such a special needs trust thereby eliminating the need, in certain circumstances, for court intervention.  Unfortunately, the earlier House and Senate bills had some differing provisions and the bills could not be signed into law.  Recently the House passed a major health care package known as the 21st Century Cures Act that includes the SNT Fairness Act (buried at Sec. 5007 of the close to 1000 page bill).  The SNT Fairness Act will apply to trusts created on or after enactment.  Provided the Senate passes this health care package, it is expected that the SNT Fairness Act will be signed into law giving disabled individuals more control in managing their assets and benefits.   #SNTFairnessAct #SpecialNeeds #estateplanning

FLASH UPDATE: Senate has passed H.R. 34 in which the SNT Fairness Act was included. The President signed the bill on December 13th.