MEDICARE ALERT!

Posted by Thomas J. Bogar on January 14, 2010  |  No Comments

In today’s economy, I am finding more clients asking advice and assistance for an elder parent or relative about to enter a nursing home.  The application and qualification process for Medicaid can be overwhelming, and the consequences for a poorly executed plan can be devastating and may be as serious as Federal criminal prosecution. Because of the resource restrictions on Medicaid eligibility, the transfer of assets by gift to a relative was once a common means for preserving assets from the costs of care in a nursing home. Since the enactment of the Deficit Reduction Act on February 8, 2006 (“DRA”), transferring assets for less than value in order to qualify for Medicaid has now become much riskier.  In fact, the DRA increased the look-back period from 3 to 5 years and the penalty period has been changed as well.  Poor planning without knowing all of the risks involved could jeopardize any chances for Medicaid leaving the senior with no ability to pay for nursing home care.  There are exceptions to these rules, however, but they are complex.  Anyone considering placing a spouse or a relative into a nursing home should consult with an experienced elder law attorney.

The Upside to the Down Economy

Posted by Thomas J. Bogar on December 16, 2009  |  No Comments

Take the following advice very seriously.  No better time than the present for estate planning has existed in decades.  Low interest rates, depreciated assets, and estate tax rates and legislation all create an ideal planning opportunity.  However, you had better act now while interest rates remain low and before Congress enacts proposed changes to the estate and gift tax laws next year which will eliminate many planning incentives.

 When things are down, an optimist may tell you to look at things as if the glass is half-full rather than half-empty.  For estate planning, the glass is half-full when considering the planning opportunities that now exist because of  low interest rates, depreciated asset values and current tax rates.  But these opportunities will not be around long because Congress is poised to eliminate many of the tax savings benefits next year. 

 Interest rates for estate and gift tax purposes are at their lowest levels in decades.  For several wealth preservation and succession planning devices designed to pass appreciated assets from an estate at discounted rates, lower interest rates mean more of the asset can pass from the estate at a lower estate tax rate. 

 In addition, the Treasury Department has published a “Green Book” which includes a general explanation of the Administration’s 2010 revenue proposals.  Included are plans to limit IRC 2704 valuation discounts which may consequently effect gift-planning, specifically planning that involves family limited partnerships and business succession planning.  Also included are plans to limit to ten years the term for a Grantor Retained Annuity Trust (GRAT-essentially it is a trust intended to pass portion of appreciating assets, at discounted rates, from a taxable estate over a term of the grantor’s years, while the grantor retains the benefit of the assets during the term of the trust).

 Clients should consider taking advantage of the current market before Congress acts and before interest rates rise. Plans should include shorter term transfers of wealth, particularly those that may pass into a trust for the benefit of the grantor, like a GRAT. 

For more detail and how the proposed legislation may effect you, speak with a qualified estate planning attorney.

CONGRESSIONAL ALERT: HOUSE EXTENDS FEDERAL ESTATE TAX FOR 2010

Posted by Thomas J. Bogar on December 4, 2009  |  No Comments

Yesterday, by a vote of 225 to 200, the House of Representatives voted to permanently extend the Federal estate tax exemption.  Under the current rules, the first $3.5 million of an estate, or $7 million for married couples, is exempt from Federal estate taxes. Net estates over the exemption are subject to 45% tax.  However, the bill still needs to pass the Senate.  If it does not pass the Senate, the estate tax will lapse for 2010 with no taxes charged against estates of decedents dying in 2010, but then return again in 2011 at 55% rates for estates over $1 million.

Uncertain on the future of the estate tax, clients and their planners are left in a particularly delicate position and will either need to plan accordingly for an evolving tax code, or proactively engage clients, at additional cost, to periodically review and revise estate planning documents each time Congress makes changes.

 Stand fast.  This is a moving target.  I will provide updates as they become available.