Ronald Morton's Elder Law Blog

Roth may become more compelling planning option

If the current proposal before congress to eliminate the stretch IRA provisions from the tax code go into effect, it presents an even more compelling reason to convert traditional IRA's into Roth IRA's.  While most people are reluctant to pay taxes now on a tax deferred account, the ability to pay taxes now under current rates, rather than under future rates which are likely to be higher.  Now with the potential loss of the ability of beneficiaries to stretch withdrawals when they inherit, thereby paying the taxes on the account within 5 years of their inheritance, the case for the Roth becomes more compelling.  Under the proposal, Roth beneficiaries would continue to enjoy required minimum distributions over their lifetimes, rather than accellerated 5 years.  Their growth and distributions would be tax free - unless, of course, congress eliminated the tax free character of the Roth IRA.  But they would never break a promise like that (unless, of course, you count their original promise not to tax social security benefits). 

Saying so long to the Stretch IRA?

The most recent proposed transportation legislation before congress has a provision that removes the ability of inheriting beneficiaries of traditional IRA's to take out the inherited funds over their lifetimes (because that has a lot to do with transportation infrastructure).  The so-called Stretch IRA provisions that have been contained in tax code for close to a decade now, permitted people that were named as beneficiaries of an IRA to withdraws their inheritance over their actuarial lifetimes, thereby keeping the majority of their funds in the IRA growing tax deferred.  Under the current proposal, that "gift" contained in the tax code would be removed, and beneficiaries would be required to withdraw the funds within 5 years of the owner's date of death, thereby accelerating the income tax owed on those previously tax deferred funds.  We all know that congress is looking for ways to increase revenue without looking like they are raising taxes.  Accelerating "income" by taking away the stretch may be an easy way for them to do it.  More info here.  Allowing the sunset of the current exemption for estate tax can't be far down the list.  After all, they won't be passing an increase, but simply allowing the law that was previously passed expire the way it was intended to when it was passed. 

New VA Pension Aid & Attendance Payments Announced

The first cost-of-living adjustment since 2008 has recently been made, bringing a 3.6% increase in pension benefits for aid & attendance recipients. 

The new payments are effective December 1, 2011, for benefits payable January of 2012.  The new A&A pension payments are as follows:

Single Veteran: $1,704
Married Veteran: $2,020
Surviving Spouse of a Veteran: $1,094

These funds can be used by wartime veterans to pay for in-home care, assisted living costs, and nursing home costs.  If you are a wartime veteran with at least 1 day of wartime service and a minimum of 90 consecutive days of service to our country, you may be eligible for this very valuable benefit.

Financial Planning for an Alzheimer’s Patient

Alzheimer’s not only affects the individual and his/her family, but their finances as well. A recenbt article lays out some planning methods to carry out once an individual has been diagnosed with Alzheimer’s. The Alzheimer patient needs a team of individuals to help make sure their planning goes the way they intended. A certified Elder Law Attorney and a Certified Financial Planner are some of the individuals that need to be involved in helping make sure the Alzheimer patient’s planning goes according to plan. See here.

Frequently Overlooked Estate Planning Tool: Prenuptial Agreements

In addition to more traditional estate planning documents like wills and trusts, a prenuptial agreement can be another estate planning tool. These agreements are not only for the rich and famous.  Anyone getting getting married who has already accumulated a separate estate should consider executing a prenuptial agreement prior to marriage. This document can help protect your family during death or divorce by providing certainty and predictability should one of those events occur. Fro a good article on the subject, see here.  While not the most romantic pre-marriage conversation, for couples on their second marriage, it is a conversation worth having, especially if one spouse has children from a prior marriage.  Without a prenuptial agreement, the death of one spouse may result in many if not all of the deceased spouses assets being paid to the survivor, to the complete exclusion of the dead spouses children.  Conversely, the death could result in the lion's share of the estate being paid to the children, even though the plan was for those assets to support the surviving spouse during his or her remaining lifetime. 

Age is not a factor in Estate Planning

No matter how old or young you are you should have some kind of estate planning in place. A collegue in Florida accounts a recent encounter with a young couple who did not plan.  The couple was young and a second marriage, and had a young child.  The two of them executed identical wills and then the wife died a month later. While the couple did do some planning, the wife failed to change beneficiary on a retirement account from ex-husband to her new husband or child. As a result, it was the ex husband, not the child or new spouse, who was beneficiary of her retirement.  When you have children and assets involved no matter your age you should consult an estate planning attorney, so that they make sure your estate plan plays out the way you intended. See here for the complete story.

Transfers to Spouse Not Presumed to be under Undue Influence

The Mississippi Supreme Court has ruled that a lifetime transfer of property to a spouse is not presumed to be because of undue influence.  Typically, the law provides that transfers of assets to a person with a confidential relationship to the giver are presumed to be due to undue influence by the reciever.  So, for example, when a parent gives the majority of their wealth to their caregiver child, to the exclusion of their other children, the excluded children can claim that the caregiver child influenced the transfer.  Because the caregiver child is in a confidential relationship with the giver, the presumption is that the transfer is the result of undue influence.  That presumption then, must be overcome by evidence from the gift reciever that the gift was made of the giver's free will, and not the result of undue influence. In the case of  Langston v. Williams however, the giver was not a parent, but a spouse.  The parent later died and the children sued their decedent's spouse.  The Court held that, in the case of transfers between husbands and wives, there is not an automatic presumption of a undue influence, despite the existance of a confidential relationship.  This brings the state's rule in line with the rule for testamentary gifts as well.  So, where a challenge is made against the spouse of a giver, whether the gift is by will or lifetime transfer, the burden falls on the person challenging the transfer.  No presumption arises against a spouse.  But, that does not mean that a gift made under undue influence cannot be reversed, merely that the burden of proving it is on the challenger, not the spouse gift recipient. 

Homestead Property not subject to Medicaid Recapture

The Mississippi Court of Appeals recently ruled that real property that is "exempt" from creditor claims within a probated estate, are not subject to Medicaid's recapture rights.  Federal law requires all staets that participate in the Medicaid program to recover the costs of care of a beneficiary against that beneficiary's estate.  This practice is commonly known as "Estate Recovery."  However, Mississippi probate law also provides that certain assets, like a person's homestead, pass to the heirs free and clear of any other debts of the Estate.  These two provisions of state law where Medicaid asserts a lien against an estate that contains homestead property.  In the case of Stinson v. Medicaid, the Court of Appeals resolved this issue in favor of homeowners and beneficiaries.  The Court held that Medicaid's recovery right did not place it in any special position not enjoyed by every other creditor, and therefore held that the home property passed free of indebtedness to Medicaid.   The full case is here: Stinson  Medicaid has appealed the case to the Mississippi Supreme Court. 

This ruling opens up tremendous planning opportunities for sheltering assets.  If you need assistance in protecting the assets of a loved one that is residing in a nursing home, or may reside in one soon, feel free to contact my office for a complementary phone consultation.  (601)925-9797.    

 

The elderly and disabled could face detriment to their future care over the next decade due to President Obama’s proposed Medicaid reductions.

President Obama is proposing to save the federal government $100 billion over the next decade by making changes to the way the federal government aids states to pay for their elderly and disabled. This proposal in the end could lead to the states cutting back on services that they provide to the elderly and disabled, because of the cutback from the federal government. See here.

Times Change - Your Estate Plan Should Too

We recommend that our clients review their plans at least every 3 years to ensure that their planning is up-to-date with their faimly situation and the law.   A family will go through many changes over the course of years, and that often should also mean changes to their estate plan. Unfortunately many people simply create their plans and think they are done.  By not revisiting your estate plan from time to time, they run the risk of their plan not working. Sometimes this means changes to executors, beneficiaries, or even guardians of children that may have passed away or are no longer in your life. You will want to take the necessary steps to replace or remove those individuals as soon as possible. Not only do family changes take place, but also laws and even your assets. The following article demonstrates an example of why you should keep your estate plan up-to-date. See here.  We provide our clients with a no-charge review of their plans ever 3 years.  Other cliens want even more frequent reviews, and for those clients we offer our Client Annual Maitenance Plan (CAMP), which provides annual reviews and updates on a subscription basis.