#GivingTuesday – 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 2017-191, 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 526 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 make specific charitable donations.  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.  #GivingTuesday @CFNOVA @bgnthebgn #donoradvisedfunds #taxplanning #charitablegiving

Tax Update – 2018 Estate and Gift Tax Exemptions and More…

The IRS recently announced the estate and gift exemption levels for 2018 and they continue to increase as per legislation passed in January 2013.  The applicable exclusion amount from Federal estate tax will increase to $5.6 million per person allowing a married couple to shelter $11.2 million from Federal estate tax, the rate for which is currently set at 40%.  The lifetime exemption from gift tax remains coupled with the exemption from Federal estate tax, and therefore, this exemption will also increase to $5.6 million per person.  The annual gift exclusion amount will also increase for the first time since 2013 and will be $15,000 per person.  Virginia continues to not impose a state level estate tax.  Maryland’s exemption from estate tax will increase to $4 million while the District of Columbia’s now $2 million exemption will rise to meet the Federal exemption beginning in 2018 so long as there is a revenue surplus. 

Additionally, in the last article, the fate of the proposed valuation discounting regulations was still up in the air.  However, Treasury issued a second report to the President in which those regulations were withdrawn.  Therefore, the availability of valuation discounting on certain transfers of interests held in closely held or family owned businesses remains available and is currently no longer under threat.

For seniors and those with disabilities, a cost-of-living adjustment (COLA) for Social Security and Social Security Income (“SSI”) will increase monthly benefits by 2.0%.  In addition, the cap on the amount of earnings subject to payroll tax will increase to $128,700.  Finally, the tax brackets, standard deductions, Pease and PEP limitations, kiddie tax and other credit and deduction levels for 2018 were announced. Many are watching the tax reform debate to see if any of these numbers will change, so stay tuned… #taxreform #estateplanning #estatetax #taxplanning #taxtime #COLA2018 @bgnthebgn

Valuation Discounting Regulations Await Final IRS & Treasury Report

A year ago Treasury proposed new regulations to Section 2704 of the Internal Revenue Code that would significantly reduce or eliminate the ability to use valuation discounting in certain transactions where business interests are transferred.  The proposed regulations would mean that the parties to those types of transactions could incur estate or gift tax.  Towards the end of last year, a public hearing on the regulations was held in which many expressed concerns about how these proposed regulations would impact small businesses and the like.  However, at the time the future of the regulations was unknown given the change of administration, 

Earlier this year, the President issued Executive Order 13789 in which the President instructed Treasury to review all “significant tax regulations” and identify those regulations that (a) impose an undue financial burden, (b) add undue complexity to our tax laws, and (c) exceed statutory authority of the IRS.  Treasury issued Notice 2017-38 in which the proposed regulations to Section 2704 were identified as meeting these criteria.  A comment period followed the issuance of the Order and has now closed.  During the comment period, a study was submitted by The S Corporation Association that showed the detrimental impact of such regulations should they be finalized.  A final report is due to the President within the next month that is to suggest possible reforms to the identified regulations ranging from modification to the regulations to a full appeal.  Until the future is certain, valuation discounting remains available.  #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

Back to School – Three Documents Every College Student Should Have

Going back to school is right around the corner…what!?   How can that be?  However, it is true that as August approaches families will be sending kids back to school.  For those families with children starting college, this time is fraught will all sorts of emotions, checklists, logistics and large bills.  It is also often a time that parents forget that their little one, who has now grown to an adult, is treated as an adult in the eyes of the law.  Furthermore, this is also a time when ‘adult’ children are not fully independent of their parents, but their parents may not be permitted to help because the child is deemed to be an adult.  Age 18 is the age of majority for pretty much every activity, including signing contracts and making healthcare decisions.  To avoid circumstances where parents and their children are separated by legal requirements, here are three key documents every 18-year-old should have. 

General Durable Power of Attorney – This document permits the child to name his or her parents to help make financial decisions.  It allows the parents to deal with financial institutions, housing issues, such as speaking with a landlord, insurance questions, like car insurance or renter’s insurance, and generally stand in the shoes of the child.  It also allows parents to speak with the educational institutional and gain access to their child’s grades, which may be a downside for the child and he or she may hesitate to sign the financial power of attorney.  However, most other sources on the subject argue that if the parents are footing the bill for the education, the parents have a right to make certain demands and receive certain information like the child’s grades.  But, regardless of the motive, the discussion surrounding the need for a financial power of attorney should hopefully generate some thoughtful discourse between parents and children regarding how financial transactions and other legal, contractual transactions will be handled.

HIPAA – The Health Insurance Portability and Accountability Act of 1996 (“HIPAA“) regulates the use and disclosure of protected health information.  HIPAA was intended to add a layer of protection for individuals so that their medical history or health status could not be wrongfully used against them.  However, HIPAA brought with it many more hoops to clear in order to receive medical information.  Having a familial relationship, like parent and child, does not get around the requirement that an adult child has to have given their parents access to their medical records.  Thus, if a child is in a car accident and ends up in the hospital unable to communicate and there is no HIPAA release in place, the parents may be left in the dark regarding their child’s status.  A separate HIPAA release allows the child to nominate individuals who can give and receive medical information.  It does not necessarily mean that those same people have a right to make medical decisions.  It does, however, at a minimum, allow parents to be present.  

Advance Medical Directive – This document permits the child to name his or her parents to make medical decisions.  College is a time when lots of new adventures occur, and sometimes, those adventures go awry.  There are times when accidents do indeed just happen, like car accidents or a slip and fall.  In those circumstances, if a child is at a medical center on campus or off campus, the parents have no right to find out what is going on and to help make decisions unless their child has given them access and authority to do so.  Access can be granted by way of the HIPAA release mentioned above, which could also be a part of the Advance Medical Directive.  But, actual authority to make decisions is only granted by way of an Advance Medical Directive or healthcare power of attorney, if the child is unable to communicate or make decisions for themselves.  Without an Advance Medical Directive, parents may be able to be present, if a HIPAA release is in place, but have no right at the decision-making table.  Thus, similar to the financial power of attorney, the discussions surrounding the need for a healthcare power of attorney should help enlighten parents and children about medical wishes and desires.  It is also a good time to talk about extraordinary measures if a catastrophic event occurs, which may lead to conversations supporting the creation of a Living Will (a fourth document).  Although, for an 18-year-old, it may be too difficult to focus on that specific possibility.

At this back to school time when checklists are aplenty, add these key documents to the checklist.  Having these documents in place will help avoid added stress during emergent situations.  Moreover, both parents and children get to plan their journey during life’s next chapter.  #estateplanning #collegebound #backtoschool #incapacityplanning #powersofattorney @bgnthebgn

Revision to Proposed Rule Banning Arbitration Clauses in Nursing Home Admissions Agreements

Last year, the Centers for Medicare and Medicaid Services (“CMS”) issued a rule banning the use of binding pre-dispute arbitration agreements by nursing homes that accept Medicare and Medicaid patients.  The result of the new rule would have been that families who have an issue with a nursing home regarding care, abuse, and the like, would have been able to sue in court to have their case heard versus having to go through a binding arbitration process.  However, the American Health Care Association along with four long-term care providers filed suit against the Health and Human Services Secretary and CMS arguing that the agencies overstepped their authority in issuing the rule.  Injunctive relief was granted preventing the rule from going into effect.

In May of this year, the U.S. Supreme Court in Kindred Nursing Centers L.P. vs. Clark, overturned a ruling by the Kentucky Supreme Court in which the Kentucky Supreme Court stated that durable powers of attorney must explicitly permit an agent to enter into an arbitration agreement or otherwise risk violating the Kentucky Constitution where access to the courts and a trial by jury is ‘sacred’ and inviolate’.  Instead the U.S. Supreme Court held that Kentucky’s ruling violated the Federal Arbitration Act by treating arbitration agreements differently.    

As a result, earlier this month CMS issued proposed revisions to its arbitration agreement requirements for nursing homes and long-term care facilities.  CMS is no longer proposing a ban on arbitration agreements in admissions agreements, but it is requiring greater transparency as to the meaning and understanding of such provisions in admissions agreements.  Thus, it appears at this juncture that CMS is trying to find some middle ground between a complete ban on arbitration agreements and the decision in the Kindred case, but only time will tell if that middle ground has been found between the rights of the families of patients and the long-term care facilities.  #elderlaw #elderabuse #nursinghome #arbitration #CMS #SCOTUS @bgnthebgn

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

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