In the wonderful film,"The Descendants" starring George Clooney, an important topic in estate planning is tackled: incapacity. Without giving away too much of the plot, part of the story deals with him caring for his wife who is lying in a coma in a hospital bed. When people think about estate planning, they tend to [...]
Planning for Incapacity:Although it is difficult to think about, mental incapacity can arise from traumatic injuries or long-term illnesses. Would you like to choose the people who manage your healthcare and financial decisions if you become mentally or physically incapacitated or would you rather leave that decision up to a judge who doesn’t know you? [...]
He pointed out that farms are valued at their current agricultural use value, as opposed to being valued for commercial or residential development. This is asignificant benefit that can save family farms from being broken up and lost to the family because of estate tax liquidity.
With a new Republican Governor and Republican control over both the Ohio House and the Ohio Senate, a move is afoot to eliminate Ohio’s estate tax. The secretary/treasurer of a county farmers union addressed the need for keeping the estate tax and how small family farmers can avoid losing their farms because of the estate tax in a letter to a Dayton newspaper.
He also pointed out that there is a “Qualified Family-owned Business Interest Deduction” up to $675,000. In fact, the author points out, with some reasonable estate tax planning, family farmers can exclude around $1.5 million of value from the calculation of Ohio’s estate tax. These and other things point to possibly raising the amount exempted from the estate tax, rather than repealing the tax, altogether.
Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney
Paul A. Nidich
http://paulnidich.webs.com
The sad reality is that many Americans do not do any meaningful estate planning. A recent survey revealed that as many as 80% of the families with children under 18 do not have an estate plan. There are a number of reasons– I call them myths that come into play. Perhaps the most frequent reasons [...]
The “old saw” in litigation is the answer to the question, “What is a good settlement.” That answer is “when no one walks away happy.” We are in the situation we’re in because of everything that has gone on in the past. We are in the situation we’re in because every national (and most local) politician thinks that the most important legislative or administrative decision is to make sure the politician gets re-elected.
President Obama appointed a bi-partisan Commission to study the country’s deficit problems and make recommendations. The Co-Chairs’ Proposal was released, yesterday. This is just a preliminary document. The Final Report is expected to be released next month. Not surprisingly, the recent comments by the two chairmen have hit a brick wall.
The fact is no one is going to accept the final product in its entirety. Everyone is going to complain about some piece whether it is the proposed tax increases, changes in entitlement programs, cuts in the Pentagon budget, whatever. Each element of the final report will step on the toes of at least one special interest, but that is what’s going to be necessary. Every special interest is going to have to give some to get some.
As the parent of a 26 year-old son with autism, and as an attorney who prepares special needs trusts and spends quite a lot of time talking with parents who are having difficulties getting the kinds of educational services required by existing law from their school systems, I am greatly distressed by this announcement. Grants totaling $19.9 million dollars is not even a beginning to giving students with disabilities “the world-class education they [and all students] deserve.”
Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney
Paul A. Nidich
http://paulnidich.webs.com/
On Monday, October 4th, the U.S. Department of Education announced grants totaling $19.9 million for training special educators. Press Release Arne Duncan, Secretary of the Department of Education commented: “President Obama and I believe that every child deserves a world-class education regardless of his or her skin color, nationality, ethnicity, or ability. These grants will support the preparation of special education teachers and leaders in their work to give students with disabilities the world-class education they deserve.”
Government cannot do everything. However, providing seed money to support special educators is an entirely appropriate expenditure for the federal government. But $19.9 million is such a drop in the bucket, I would think Secretary Duncan would be embarrassed to issue a press release. If all he can find in the Department’s budget is this tiny bit of money, I would think he would try to avoid publicity, not seek it.
Chairman Levin decried the lack of civility and bi-partisanship that has been building over the many years he has been in Congress. Ohio Rep. Steve Driehaus pointed out that the Democrats have quite divergent views in their caucus but have been able to arrive at compromises in order to move critical pieces of legislation forward. For example, Rep. Driehaus said, the Democrats in the House reached a compromise to pass a bill to fix the estate tax problem last year, but the Republicans in the Senate have been holding the bill hostage. Rep. Driehaus also noted that quite a few pieces of legislation contained amendments put forward by Republicans, yet few, if any, Republicans vote in favor of the legislation when it comes up for a final vote.
Rep. Driehaus and Chairman Levin agreed that if the Republicans don’t start to work with the Democrats to fix the tax problems this year, the prospects for legislative compromise in the new Congress in 2011 will likely be worse. Even if the Republicans increase their numbers in Congress, they probably won’t win control of both houses. No pundit has even suggested that the Republicans can win a majority in the House and the 60 seats in the Senate needed to get the legislation passed it is promising the public.
At lunch today, Sandy Levin, Chairman of the House Ways and Means Committee, told a small group of business people, tax attorneys, and accountants that he had no idea what was going to happen with the mess left by the Bush income tax and estate tax situations. The tax cuts, of course, are due to expire at midnight on December 31st, and the estate tax will come roaring back with a vengeance at the same time.
Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney
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Paul A. Nidich
http://paulnidich.webs.com/
A few sites where you can find information on the Internet are:
Each state has its own system, and it is important to consult with local tax officials to find out exactly what the qualifications are, where the applications can be acquired, and where and when the applications must be filed. (Some states may have suspended this tax exemption due to budget problems.)
Most states provide people 65 and older with a reduction on their property tax bills called a homestead exemption. Frequently, this tax reduction is also given to people with disabilities who own their own homes, veterans, and others. The reduction usually must be applied for, and the application period typically begins in January and runs through April. Some application periods run through the first Monday in June, as is the case in Ohio.
A recent news story has reported a trend that could be costly to life insurance beneficiaries and could risk the stability of the financial system. In order to retain the assets of life insurance proceeds, some insurance companies send checkbooks to beneficiaries, instead of the insurance proceeds. These checkbooks are tied to investment accounts from which the insurance company profits, are not insured by the federal government, and could upset an already unsteady financial system.
This encourages the beneficiary to use the checks instead of receiving the full proceeds of the life insurance policy. Although the money is in an interest-paying account, the insurance company pays the beneficiary only a portion of the investment income and prevents the beneficiary from making his or her own investment decisions.
Since these investment accounts are not insured by the federal government, something that may not be known or understood by the beneficiary, the beneficiary is at risk of losing the whole proceeds if the insurance company goes under. Further, if enough beneficiaries decide to demand all of their money at the same time, the life insurance company may not be able to meet the demand, causing the kind of “run on the bank” government insurance and regulation is intended to prevent.
In a letter to a member of Congress, the Internal Revenue Service recently re-iterated its position that the costs related to buying, training, and maintaining a service animal may be a deductible medical expense for a taxpayer. The tests regarding the deductibility of expenses for service animals are not different from other expenses that qualify for medical expense deduction.
Medical care includes amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of a disease or affecting any structure or function of the body. Service dogs have been widely used in the past to mitigate the effects of physical disabilities. More recently, service animals are being used to mitigate the effects of conditions such as autism and other types of mental disabilities.
Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney
To learn more or to discuss tax issues, please contact me at 513.563.1595.
The expense must be for a mitigation related to the diagnosed medical condition and not merely the general health of an individual.
Paul A. Nidich
http://paulnidich.webs.com/
I had a new client come to my office recently. She was looking for Medicaid planning advice for her husband’s parents. (This is a very frequent occurrence.) Her mother-in-law was suffering from dementia but was still able to live at home. Her father-in-law was 85 years old but in good health and led a fairly active life.
She told me that about 7 years ago, her in-laws had wills, a living will, and a revocable living trust drafted. She said her parents’ total assets were worth about five hundred thousand dollars, and the revocable trust was drafted solely to avoid probate. I was dumfounded that the attorney who drafted the plan did not draft a durable financial power of attorney nor discuss Medicaid planning with the couple. After all, the husband was already 78 years old!
I explained that Medicaid had a five-year look-back period on transfers of assets for less than fair market value. I suggested that her in-laws might want to have a new irrevocable trust drafted. We also discussed the possibility of an irrevocable grantor trust, a special type of irrevocable trust that causes income to the trust to be taxed to the individual’s personal return, rather than taxed at the higher trust rates.
As stated in my last few blogs, there are certain things you should think about when designing a trust for a beneficiary. Also remember, this list takes a very conservative approach and can be modified according to specific state law. The list continues as follows: 7) Consider selecting a state to settle the trust or [...]
Houston billionaire Dan L. Duncan became the unwitting poster child for the 2010 estate tax lapse when he died in March, allowing his $9 billion fortune to pass to his children and grandchildren tax-free. Had he died three months earlier, his estate would have been poorer by 45 percent â in other words, thatâs $4 [...]
Paul A. Nidich
http://paulnidich.com
The Department of Health and Human Services has created a web site to help people search out information about the new health care reform legislation. Health Care There is a lot of misinformation about the new law, some of which goes into effect this year.
Your Cincinnati Tax, Probate, Elder Law, and Estate Planning Attorney
If you have particular questions about the new law, try this web site, first, before getting second- or third-hand information that might very well be wrong.
The Section 7520 rate, a minimum interest rate that the IRS makes you use, is at 2.8% for July. This rate is published on a monthly basis. An example of when this rate is used is when you create a note. Recently, I prepared a short term note, less than three years, using an interest [...]
If your phone contact list includes both a pediatrician and a gerontologist, welcome to the sandwich generation, that growing demographic segment of the population who are taking care of their parents and their kids at the same time. Besides healthcare, many of us are also taking on more responsibility for helping older parents manage their [...]
A Family Limited Partnership (FLP) provides four considerable advantages that are unavailable through any other asset protection vehicle. These advantages are: Asset Shield â a FLP can be used to protect business and personal assets from creditor judgment since a creditor of a partner cannot seize assets of the partnership to satisfy a debt. Deter [...]