Jan 27, 2015

V.A. proposes look-back, penalty periods for aid and attendance benefits

Applicants (or applicants and their spouses) are not eligible for V.A. Aid and Attendance benefits if they have a net worth in excess of $80,000. At present there is no look-back period for asset transfers, as there is for Medicaid benefits, which have a five-year look-back. 
I noted in prior posts that a V.A. look-back period could be on the horizon. My April 2014 post reported the Senate's failure to pass SB 1982, which would have established a three-year look-back. I also warned that the V.A. has the authority to amend its regulations without going through Congress. And that is what is happening now. 
The January 23, 2015 Federal Register includes a proposal by the V.A. to establish, among other regulations, a three-year look-back for transfers, and corresponding penalty periods during which V.A. pension would not be available, even if the veteran qualifies in all other respects. You can read the proposal here. Comments on the proposal are due by March 24, 2015.
Keep checking this blog and my website for updates on this issue. You can also subscribe to my monthly e-newsletter here

Jan 19, 2015

Inheritances, from the priceless to the peculiar, featured on TV reality show


Bug collections. Baseball cards. From the practically priceless to the plain old peculiar, people inherit all kinds of things. A new television show, Strange Inheritance, will delve into these stories, featuring families who have inherited an array of interesting objects. The show debuts January 26. Here's how the show bills itself:

"Love, loss, and a legacy left behind. "Strange Inheritance" is a ground-breaking new reality program from the Fox Business Network. From multi-million dollar treasures, to truly bizarre collections and one-of-a- kind artifacts, this series tells the stories of how families decide what to do with their newly acquired possessions. Shocking secrets are discovered, gut-wrenching decisions are made about priceless heirlooms and fascinating histories are uncovered along the way."

Should be interesting! Learn more here.





Jan 15, 2015

Experts weigh in on common estate planning mistakes



The Wall St. Journal recently ran an excellent article featuring experts' views of the most common estate planning mistakes. The most common error? Failing to do it entirely. 

The main reasons for the neglect? Fear of talking about death; not wanting to upset family members; avoiding difficult conversations. Sadly, ignoring the issue means that the state in which you reside will have the last say over who gets what from your estate. States Larry Zimpleman of Principal Financial Group: "Anyone who will have assets in their estate at death (regardless of amount) should consider the need for estate planning. If you don’t plan how to distribute your assets at your death, then your state of residence will often impose its rules for how your assets will be distributed. It’s very unlikely your view on how to distribute assets is consistent with what your state laws might say."

Consumer Advocate Eleanor Blayney says that failure to keep a plan updated is a big mistake. An estate plan cannot be a "once and done" deal because as long as you keep on living, things change. "Life has a habit of changing, and so must the best laid plans," she writes. "But it’s hard to stay alert to all the 'triggers' for making plan changes. A better solution is to review the plan every year, ideally with a competent legal and financial professional." 

Michele Perry Higgins of California Financial Advisors notes that often, a person with a trust will fail to transfer assets into it. Some just forget to do it. Others mistakenly assume their lawyer will do it. However it occurs, assets that have been omitted from a trust will have to go through probate, causing the family to incur the costs and hassles that the trust was intended to circumvent. 

Wealth manager George Papadopoulos says people frequently name the wrong beneficiaries on retirement accounts. Retirement plans pass to the individual listed as the beneficiary, not through your will. Beneficiary designations must be kept updated. He also advises refiling beneficiary forms even if your designations have not changed, if the financial institution holding your retirement account is taken over by a different institution. 

To read the original article in its entirety, click here.

Jan 10, 2015

James Brown's complicated life led to complicated estate problems


He was the Godfather of Soul, the Founding Father of Funk. James Brown had fortune, fame, frequent run-ins with the law, and a family life  more convoluted than most. So perhaps it's not surprising that the late entertainer's estate problems have been every bit as complicated and torturous as his life.

When Brown died he was married - maybe - to his back-up singer Tomi Rae Hynie. He had filed previously for annulment of the marriage, claiming Hynie was still married to another man when she tied the knot with Brown. However, Brown dropped the action when Hynie signed a form stating she would never claim to be his common-law wife. She also signed a prenuptial agreement waiving all rights to his estate. Brown had other marriages in his past, too, several of which produced the six children he recognized. 

Update Jan. 23, 2015: A South Carolina judge has ruled that Brown and Hynie were married at the time of Brown's death, making her his legal heir. However, that does not necessarily mean she will inherit any of the estate, since she waived her rights in a pre-nupital agreement.

Prior to marrying Tomi Rae and the birth of their son, James II, Brown executed a will. Signed on August 1, 2000, it earmarked the bulk of his estate -- estimates of its value vary from $5 million to nearly $90 million - to be placed in a trust to fund education for needy children. (Brown himself had not made it past seventh grade.) He left $2 million to his grandchildren, to be used for their education, and left his personal property to be divided among his six children. There was no mention of Tomi Rae. He appointed as his executors (called personal representatives in Florida) his attorney, his accountant, and a retired judge. Brown also left an audiotape explaining his wishes. 

Brown, a South Carolina resident, died in 2006 from congestive heart failure, and a flurry of lawsuits followed soon after. Tomi Rae claimed that she was James' widow, and that she and her son were entitled to some of the estate assets. Other children sued the estate for a bigger piece of the pie, claiming that the singer's judgment was hampered by drug use and that he had been unduly influenced by the executors, who were mismanaging funds. 

By 2008 the legal situation was so out of hand that South Carolina's Attorney General stepped in, saying it was his office's duty to protect charitable trusts like the one that Brown's estate plan sought to establish. The Attorney General formulated a plan to distribute the assets as follows: half to the charitable trust; one quarter to Hymie; and one quarter to Brown's children. A new executor was appointed, too.

The morass dragged on and in 2013 the Attorney General's plan was struck down by the South Carolina Supreme Court, ruling that the Attorney General had overstepped his legal authority, and that there was no evidence to support the conclusion that the will was anything but a true expression of Brown's wishes. The Attorney General's actions would "undermine any confidence citizens may have in their ability to do with their personal assets as they wish..." the court concluded. The court also questioned the ethics of the original three executors, but did not find that sufficient reason to invalidate the will.

So what did the Supreme Court decision resolve? To date, not much. More lawsuits are pending. The lower court has not yet complied with the State Supreme Court's ruling to appoint new executors. Several children want the Attorney General's prior plan reinstated. Even Brown's body is in limbo, temporarily located at a mausoleum on the property of one of his children. It had been his wish to be interred at his home on Beech Island in South Carolina, which his adult children want to turn into a tourist attraction. But until the estate is settled, Brown's body remains where it is. The estate is continuing to make money from the singer's music, but the only ones benefiting from the debacle are, you guessed it, the lawyers.

Although there is no way to make anyone's estate 100% lawsuit-proof, there are additional steps that Brown, given his unique situation, could have taken. Had he been my client, I would have advised him to revise his will after his marriage to Hynie and after the birth of his son. Mindful of his history of drug use, I would have counseled him to have his capacity confirmed by a mental health professional just before the execution of his will.

Thankfully, most of us lead lives far more conventional than Brown's. Most of us don't leave millions behind, either. Still, with today's divorces, remarriages and blended families, creating a sound estate plan that avoids legal challenges requires thoughtful planning. When it comes to matters involving family and money - in any amount - one must always be mindful of Murphy's Law, to wit, if anything can go wrong, it probably will. That is why it is essential for your estate plan to have every i dotted, every t crossed. Your estate plan must speak for you, unambiguously, when you can no longer speak for yourself.

Jan 5, 2015

Courts direct Florida to recognize same-sex marriage


The courts have directed Florida to recognize same-sex marriage. Unless the U.S. Supreme Court rules otherwise, Florida same-sex unions are recognized, and same-sex spouses enjoy all the rights and obligations as any other married couple in this state. 

There are currently about 48,500 cohabiting same-sex couples in Florida, according to the Williams Institute at UCLA Law School. No doubt many of them will want their relationships legally recognized. (Couples who wish to marry in Florida may find the answers to their questions about securing licenses, waiting times and other procedures here.)

In prior columns I noted the special estate planning challenges gay couples have faced when trying to provide for and protect one another. While it's a different ball game now, the challenges haven't disappeared - they have just changed. Those changes will impact not only same-sex spouses creating an estate plan, but also anyone who wishes to leave assets to someone in such a marriage:

Here are the rights Florida same-sex marrieds now enjoy:
  • The right to an elective share of the spouse's estate.
  • The right to a life estate in the spouse's homestead, or one-half ownership in that property.
  • Consideration as the natural health care proxy for the spouse, second only to a court-ordered guardian.
  • The right to hold assets as tenants by the entireties, which provides certain creditor protections.
  • If a same-sex spouse dies intestate, the survivor is now entitled to 50% of the estate if there are children from the decedent's prior marriage, or 100% if the decedent has no children from a prior relationship.
Of course, since the repeal of the federal Defense of Marriage Act, same-sex couples legally wed in any state have access to these benefits:

  • Social Security: Like their heterosexual counterparts, a surviving spouse in a legal same-sex union may opt to collect the decedent's Social Security benefits if those benefits are greater than what the survivor is currently receiving. Also, while both spouses are alive and collecting Social Security, the lesser-earning spouse can elect to receive 50% of the higher-earning spouse's benefit.

  • V.A. Benefits: All the benefits that heterosexual married couples have enjoyed are now available to same-sex marrieds. For example, if the spouse is entitled to pension with aid and attendance, the survivor will also be entitled to those benefits, provided of course that he/she meets all other criteria. 

  • 401-ks: Under federal law, the spouse is the automatic beneficiary.

  • Individual Retirement Accounts: A deceased spouse's Individual Retirement Account can be rolled over into the survivor's account without being taxed, and the survivor may take minimum required distributions based on his/her own life expectancy, and then let the ultimate beneficiary stretch it out.

  • Medicare: All the spousal privileges and benefits that apply to opposite-sex married couples are available to same-sex marrieds. Spouses of Medicare recipients can enroll in the program even if they lack the requisite work history. 

  • Income taxes: Same-sex married couples may file joint returns.
Please call upon our experienced Florida estate planning attorneys for assistance.

Jan 4, 2015

Saluting the last of World War II vets in Congress

 
 U.S. Representative and World War II veteran Ralph Hall

U.S. Representative and World War II veteran John Dingell

We salute the last of the World War II veterans of the U.S. Congress: Representative John Dingell, Michigan Democrat, and Ralph Hall, Texas Republican, have left Capitol Hill, making the 2015 Congress the first in 70 years with no World War II veterans among its members. The end of that war saw a great influx of veterans; their numbers included John F. Kennedy and Richard Nixon.

So this is the end of an era. Dingell describes himself and Hall as the "last leaves on a tree." We thank them for their military and their political service. We salute all the aging and disabled veterans who have served us. Aid and attendance benefits may be available for certain veterans who need help paying for their care. To find out more, click here.

Dec 28, 2014

New law: Some fixed pensions may not be safe


Some retirees with fixed pensions funded by multi-employer pension funds are discovering that those pensions may not be so... well, fixed. This ominous news can be found deep in the spending bill Congress passed just before it recessed.

Employers in several industries participate in multi-employer plans, which are managed by professional trustees. Some of these plans are on shaky ground, due to the financial crash of 2008, greater longevity of retirees and other factors, jeopardizing their ability to meet their obligations to retirees. To save dangerously underfunded multi-employer pensions from collapse, the just-passed law allows  trustees to reduce benefits to retirees, even to those who are fully vested.

To be eligible to reduce benefits, the fund would have to be below 60% funded and declining, and a majority of active and retired workers would have to agree to the reduction. In addition, the Treasury Department could initiate the reductions if the solvency of the Pension Benefit Guarantee Corporation, which insures the funds, is at risk. 

The law prevents any cuts to pensions of retirees age 80 and above. Workers age 75 to 80 could see benefits reductions, with younger retirees subject to the largest reductions. Retirees in so-called "red zone" pensions could be affected. Many potentially affected retirees had union jobs and have generous pensions.

To find out if your pension plan has liquidity troubles that put it in the "red zone," check out the Department of Labor's website here. If you find your pension listed, you can determine the potential reduction to your benefits from the Pension Rights Center online calculator here.

While some groups, including the unions and AARP are opposed to the law, its proponents point out that there is a longstanding precedent for cutting pensions, and that reductions may be unavoidable in order to protect the most workers from the most harm. 


They say there are no guarantees in life, but most Americans cling to the notion that fixed pensions are the exception to the rule. Perhaps that is why statistics show that those with fixed pensions tend to save less than those without them. This latest development puts the lie to the belief that fixed pensions are sacrosanct. And although at this juncture the new law applies to only a certain type of pension, who knows what will happen in the future with our national economy?  The takeaway: All workers should be socking away as much as they can in 401Ks, IRAs and other self-directed retirement vehicles. 


This new development should also give pause to clients who, anticipating a large fixed pension, have decided to "self-insure" for long-term care costs. While you may not be able to count with absolute certainty on your pension, you can count on long-term care costs continuing their relentless upward spiral, which ultimately could result in your income being insufficient to cover the cost. If you have a large fixed pension and plan to self-insure, you may want to reconsider obtaining long-term care insurance. 


For an interesting perspective on many of the additional implications of the new law, check out this Bloomberg article.

Dec 21, 2014

Florida Medicaid eligibility criteria changes for 2015

Effective January 1, 2015, changes occur to several eligibility criteria for Florida Medicaid benefits for long-term care costs. A summary of the changes:

Asset cap for the community (well) spouse: The well spouse is entitled to retain up to $119,220 in assets, plus exempt, non-available and income-producing assets. Prior figure was $117,240.

Income cap for Medicaid applicant: The Medicaid applicant's gross monthly income cannot exceed $2,199, up from $2,163. If the applicant's income exceeds that level, a qualified income trust (also known as a Miller Trust), composed solely of the applicant's income, must be established in order to establish eligibility. 

Homestead: The applicant's equity interest in the homestead may not exceed $552,000.  The prior figure was $543,000.

Look-Back: Effective January 1, 2015, there is a 5-year look-back for all uncompensated transfers.

Dec 20, 2014

Good news for military families with a disabled child: Survivor Benefit Plan funds may now be left to Special Needs Trust


Congress has given military families and their disabled children an early holiday gift. Under the recently passed 2015 National Defense Authorization Act, servicemen and women now can name a Special Needs Trust as beneficiary of their Survivor Benefit Plan.

As I noted in my July 2013 post, until now military personnel could defer up to 55% of their retirement benefits and leave it to a surviving spouse or child. However, the benefits had to be left directly to the individual. This presented a vexing problem if the benefits were left to a special needs child: the very funds intended to assist with the child's long-term needs would disqualify the child from receiving essential supports through means-tested programs such as Social Security Disability and Medicaid.

Now, a provision in the 2015 Defense Authorization Act allows a deceased person's Survivor Benefits Plan to be put into a Special Needs Trust (also known as a Supplemental Needs Trust) for a disabled child. The funds in a properly drafted Special Needs Trusts are not counted when determining an individual's eligibility for means-tested programs, and thus will not jeopardize the child's government benefits. Well done, Congress.

You can read the text of the legislation here - it is very long, and you will need to scroll to page 264 for the section that concerns the new provision.

Dec 18, 2014

Make sure your tax-deductible donations do the most good


Are you thinking about making gifts to a charity as the year comes to a close? Remember, not every "charity" is equally charitable. Even legitimate organizations differ widely in the percentage of dollars devoted to administrative costs and their stated causes. And some charities are just plain rip-offs (check out Charity Watch's "Hall of Shame."

If you are going to make a year-end contribution to a charity - out of the goodness of your heart or for tax purposes or both - you will want to know that your money is going where it does the most good. Today that is relatively easy to do if you have an internet connection. Check out these charity-rating sites:


Guide Star 

Happy holidays and happy giving.
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