The Obama Budget

As you are likely to have heard, President Obama unveiled his budget proposal not too long ago and it packs a wallop. We are living in an era of fierce partisanship, and election season hasn’t exactly put a damper on that. As a result, the media and the critics have been quick to pounce on a number of points, to include accusations that the President’s proposal is mere election-season partisanship.

That media din aside, it truly is an important proposal to understand, especially when you are planning your estate. Why? Because you can at least attempt to hedge your bets against political tides, if not also plan for what may become law.

Fortunately, there are a few straightforward analyses of the proposal from an estate planning perspective, like this one from the Wills, Trusts & Estates Professor (and the second part, here).

Here are a few topics to whet your appetite:

Wealth Transfer Taxes: The proposed budget would permanently roll back the Estate, Gift, and Generation-Skipping Transfer (GST) taxes to their 2009 levels. The exemptions and rates would remain unified and “portability” between spouses of unused exemptions would also become permanent. However, that means going back to an exemption amount of $3.5 million and a taxation rate of 45%, thereby saving us from the possible default of falling to 2001 levels (a $1 million exemption at a 55% rate), but still representing a serious hike from the current exemptions and rate (at $5 million and 35%, respectively).

Grantor Trusts: Grantor trusts, and grantor retained annuity trusts (GRATs) in particular, get some special attention. For GRATs, the proposal calls for longer “minimum” terms, with 10 years as the minimum. For those of you familiar with the device, you know this makes the prospect inherently more risky, since you have to “outlive” the term of the GRAT before transfer of the trust assets. There’s more to GRATs, but even with Grantor trusts in general the proposal is intended to beef up transfer taxes. Why? Because, as a class of trusts, they have been so useful for disseminating wealth.

Those are two of the bigger – and to a certain extent, less nuanced topics – but it ought be clear that there are myriad changes in the works (also see the changes regarding “valuation”) and you are well-advised to stay tuned and keep informed.

It is politics, of course, and not yet actual law. On the other hand, it can help you understand the evolving debate and your own estate plans. If these changes were to become law, the impact would be expansive.

At Idaho Estate Planning, we can help you find the resources you need to put your estate plan together. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

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Are You Listening?

Remember when your parents were lecturing you on the rules for taking the car for a spin? Dad would put his face in front of yours and say, “Are you listening?” Of course you would say “sure” even though your mind was miles away on the adventure to come.

Today, as adults, the children who received the counsel and wisdom of their parents are facing a reverse situation in their lives. They are finding themselves concerned about their aging parents and what their needs will be as their health and mental abilities fail them. In some cases the children must take the role as parent in securing the safety and well being of an elderly family member.

Julie lives 600 miles from her mother. Knowing her mother’s health is frail and she lives alone, Julie calls her every evening after work. The conversation always goes like this;

“How are you doing today Mom”, Julie asks?
“Everything’s fine”, Mother replies.
“Are you taking your pills?”
” Yes, everything’s fine.”
” Do you need anything?”
” Everything’s fine.”

Julie does not get much more conversation from her mother. Perhaps everything is fine, or perhaps Julie’s mother just wants Julie to think she can take care of herself. Even worse, mother could think all is fine and be forgetting her medication and not eating properly.

Is Julie really listening? ARE YOU LISTENING?

It may be time to put your face in front of your parent and listen.

Assuming that all is well and that your elderly family member knows and does what is best for them, may be putting them at risk.

Become a partner with them in their care. The best time to form the partnership is before a crisis happens.

Donna Schempp, a licensed clinical social worker and program director at the Family Caregiver Alliance, states that in talking to your parents, “The sooner, the better.” If you bring up the subject before your parents need any extra support, “then it’s not crisis driven,” she explains. “It’s not a way of saying, ‘Mom, Dad, there’s something wrong with you.”

A good way to begin is to sit with your parents and ask questions like, what are your concerns for the future. Do you want to remain in your home? Are you worried about losing your independence? Listen to their answers. You might relate your concerns as well, or you desire to be of help.

In become a partner in planning for care and helping your loved one, you need to know what legal and financial arrangements are in place. By asking, “What if you had a stroke, Mom, I would need to know where your medical and insurance documents are and what you would have me do in your behalf.”

The next step might be to accompany them to their doctor appointment so to understand what their medical needs are and help create a plan for future needs.

Idaho Estate Planning is part of the Senior Resource Network of Idaho, a non-profit network of elder care professionals available to provide information on what we discussed above and much more. Let us know your concerns and we will help you find the resources you need.

In addition to caring for your parents or other family members, it is also important to consider your own concerns for the future. How will you maintain your independence as you grow older? What effect would a costly health issue have on your quality of life? The more planning you do now the less difficulty there will be later. Remember, good planning is no accident.

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Medicare Misunderstandings Can Be Costly

When an elderly person is ready for the nursing home, some families are entirely understanding, in agreement, and financially able. As a result, the transition happens smoothly. Unfortunately, for a far larger number of families and elderly persons, some trip to the hospital will happen in between and may even immediately precipitate the transition to nursing home care.

If that’s the case, then there are important hospital and Medicare policies of which you should be forewarned. Enter “observation care” which can make for a big bill upfront and even far bigger ones down the line.

According to a recent article in the Wall Street Journal, and their sources at the Medicare Rights Foundation, the number of “observation hours” has been steadily growing for years. Tragically, such observation hours count as “outpatient services,” even if the service lasts for several days (as it sometimes does with the elderly) and Medicare pays for inpatient and outpatients services in entirely different ways.

As you likely know, Medicare Part A pays for inpatient bills, so those are usually taken care of, but Medicare part B is what takes care of outpatient services. And those services can add up to a far greater cost.

It’s often vital to know the distinction between the two types of services from the hospital, and yet it’s also fairly difficult. Medicare advises to simply ask, but then there are certain documents such as the “Important Message from Medicare” which accompanies inpatient care, but not outpatient. Still, the hospital can switch with little to no notice.

It’s actually even more important than the size of the immediate bill. Medicare will only pay for nursing home expenses if the person was admitted inpatient at a hospital for at least three days, excluding the discharge day.

For so many families that’s the sole reason why it takes a hospital visit to arrange for the transition to nursing home care in the first place, but if you are put under observation or other so-called “outpatient” care, and without your notice, it can literally mean thousands of dollars out-of-pocket down the line.

Bottom line: It all hinges on hospital practice and Medicare definitions.

Trying to keep up to date on Medicaid, Medicare or any other issues faced by America’s Elderly can be a daunting task. At Idaho Estate Planning, we understand these challenges. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

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Alzheimer’s & National Politics

With budget plans just now coming to a head it is good news for many of us that Alzheimer’s has become one of the “we can’t wait” initiatives on the national scene.

Such measures still need to be passed through Congress, and positive advances may not be immediately forthcoming. However, it is heartening to see fiscal support for an issue that affects so many of us and our loved ones.

If congress approves the actions the budget will earmark an infusion of $156 million for Alzheimer’s research and care.

In many ways it’s the flesh and bones to an earlier announcement from the current administration regarding a national plan toward treating Alzheimer’s that came out to some guffaws due it’s lack of a clear source of funding. The full details on allocation are still forthcoming, but at least a small portion of that infusion, some $26 million, is intended for immediate use and care of Alzheimer’s patients. The rest is to go toward research and the hope of improving future care, and also perhaps systematic prevention.

How this news will affect us, and whether it will weather violent political and economic seas is yet to be seen, but it’s a powerful promise for many.

Idaho Estate Planning is concerned about the health and legal issues faced by our seniors. Issues of aging include senior housing and home care, long-term (or nursing home) care, guardianships and health care documents, Medicare and Medicaid. If you or family members are facing these types of issues we can help. Call Idaho Estate Planning today, remember good planning is no accident.

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Single Member LLCs Can Be Tricky

LLCs or “Limited Liability Corporations” can be excellent vehicles to accomplish just what their names suggest – limiting liability.

That said, I stumbled across a recent message of caution regarding some LLCs, and the court case of Martin v. Freeman, ___ P.3d ____, 2012 WL 311660, 2012 COA 21 (Colo.App., Feb. 2, 2012) to back it up, both of which are worth sharing.

You might say that an LLC is one thing, but a SMLLC, or a “single member” LLC, is a different beast entirely, at least from an asset protection point of view. To wit, the above article points out that a single member LLC is “an alter ego case waiting to happen.”

The case of Martin v. Freeman is, as you might have imagined, a “veil-piercing” case as Freeman was the sole owner of an LLC involved in some hefty litigation and sold the LLC’s property to, at least in part, help cover the legal fees of the litigation. Of course, that left the LLC with no assets to satisfy the judgment that came down against it and only one place to turn for that satisfaction: Freeman himself.

After all, Freeman had just under-capitalized the LLC, and did so by distributing funds to himself only to turn around and help pay legal fees for the LLC. “Undercapitalization” is the great leveler of corporations when it comes to asset protection and with little difference on record between “Freeman the LLC owner” and “Freeman the individual,” the corporate veil fell apart. Freeman was held personally liable.

This is one more lesson on a subject that always bears repeating. Single member LLCs aren’t exactly flawed by nature, but they are often the easiest to muck up. In the end, keeping things straight between yourself as the “business owner” and yourself as the “individual” requires some vigilance and diligence.

Understanding the complexities of LLCs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Medicare Confuses Many Seniors

As many readers will know, it’s fairly critical to understand the rules for filing for Social Security. Likewise, the rules for filing for Medicare benefits can make or break your retirement. Unfortunately, it’s also fairly easy to forget about the basics of Medicare filing, as a recent article out of Reuters highlights the importance of filing earlier rather than later.

For each full 12-month period that a senior could have had coverage but didn’t sign up, the monthly Medicare Part B premium jumps 10 percent. The average monthly cost of Part B coverage is $99.90, so just a few years delinquency will result in $20, $30, or more a month; that adds up, is unnecessary waste, and is permanent.

Suffice it to say that the government really wants you do sign up when it’s time. But why is that difficult? Well, for one, the full retirement age for Social Security is no longer the age for Medicare enrollment. As a result, many otherwise forward-thinking people are waiting until age 67 to enroll in Social Security (for the maximum monthly benefit), but 65 is the age for Medicare.

In addition, with so few people actually leaving the workforce it’s easy to forget (or fail to realize, since you’re not really retired) that it might be time for Medicare. That also can depend on the nature of your employment. For example, if you are still working at age 65 and your employer has fewer than 20 employees, Medicare is the primary payor; at companies with more than 20 workers, the employer’s plan is primary. In the latter situation, a senior can postpone filing for Parts A (hospitalization) or Part B, although many choose to enroll for Part A anyway, since it doesn’t require premium payments. If you delay your Part B coverage, you can enroll without penalty when you do retire for up to eight months following that point.

The bottom line is to keep all of this on your radar, regardless whether you will be relying on Medicare. In fact, not relying on Medicare may be the source of the problem.

If you are employed it may be worth a visit with the company accountant to be sure on which side of the line the company falls, and therefore what your insurance ought to be like.

Trying to keep up to date on Medicaid, Medicare or any other issues faced by America’s Elderly can be a daunting task. At Idaho Estate Planning, we understand these challenges. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

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Succession Planning – Three Deadly Mistakes

It’s said that a little knowledge can be a dangerous thing (“drink deep, or taste not
the Pierian spring”). However, what is less often said, yet is ultimately just as true, is that just a little planning can be a dangerous thing. Improper and rushed planning will do you no good (and perhaps even harm).

This is especially the case with succession planning. Oftentimes, the lifeblood of a business is at stake even more than its assets. In that vein, then, a recent article in Registered Rep magazine described the three deadly mistakes of succession planning. The original article has an emphasis on financial advisors, but with a little rhetorical tweaking these mistakes are universal in application.

Don’t “build the wrong bench.”

Don’t stock your management team with the wrong people. Who are the wrong people? That depends on your business, but certainly for a family business that can mean a disinterested family member. It can just as easily mean someone who doesn’t share enough in the business goals or, in the other direction, one who doesn’t think outside of the box enough to see past them.

Don’t turn succession into a contest.

It makes for a great story when we read or hear about executives jockeying into position for a spot at the top, whether on TV or in real life. However, this jockeying doesn’t make good business sense (and come to think of it that’s usually the moral of the story when it is on TV). Competition for succession within a business can be destructive rather than character-building, and the business itself is what suffers.

Don’t act out of fear.

It’s the most obvious and yet also the most difficult when you’re facing big questions. Rather, it’s important to center yourself on the task and get appropriate legal counsel to ensure the success of the process.

Understanding the complexities of Succession Planning is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Successful Asset Protection Requires Proper Planning

It’s unclear how long this economic slump will last. One thing is certain, however, it’s not likely to change anytime soon. And, while the “times” have taken their toll on people, so have “creditors.”

If you want to protect your assets from “future creditors,” then know that planning must take place well in advance.

As a reminder of some of the basics of asset protection, I happened upon this article on the topic of “fraudulent conveyance.” Simply put, creditors and the laws that protect them have every reason to be wary of those last minute tricks some people try to pull to hide their assets (it would be pretty difficult to be a creditor if last minute tricks were allowed).

As a result, laws are set up to void slick moves to defraud just creditors. In fact, they are aptly designated “fraudulent transfers.” Bottom line: If there’s already a creditor in the picture, and one that’s sniffing around no less, then it’s already too late.

Of course, you have every reason to want to protect your assets. Who doesn’t? Accordingly, make sure you seek qualified legal counsel before making moves with your assets that will be ineffective… or get you in legal trouble.

Understanding the complexities of Asset Protection is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Elder Law

On the topic of disclosures, a reader inquired about what to do about her family of eight siblings and one elderly father. Long ago the siblings got together and put two of the sisters in charge of their father, largely because his will and other directives advised as much. As a result, they were granted power-of-attorney and access to his accounts.

Now, the reader has discovered that they aren’t forthcoming with information about their father, his care, and his finances. The reader is worried that she won’t hear anything until there’s a demand for money to care for their elderly father, and, perhaps, that the original funds weren’t adequately used.

The response of Craig Reaves is tailored to the reader’s unique situation, but his advice is applicable for many in this same or similar position. As a preliminary caveat, there are specific state laws (i.e., like those regarding “powers of attorney”) that govern the authority, responsibility and liability of agents and fiduciaries.

You can read Craig Reaves’ enlightening response in his original post.

At Idaho Estate Planning, we understand the challenges faced by elder Americans. We have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. Remember, good planning is no accident.

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Estate Tax Planning Perspectives

Don’t be lulled into a false sense of security when it comes to estate law. That’s the lesson from a recent article out of Investment News, a gentle reminder that the estate law trap may be closing soon.

As many taxpayers are well aware, the current laws related to wealth transfers (i.e., the estate tax, the gift tax, and the generation-skipping transfer (GST) tax) were set just over a year ago in the final days of December. Those laws offered fairly generous policies, effective rates, and exemption amounts, generous enough to surprise even the experts and to calm the thousands of families just spared from the estate tax. According to a Trusts & Estates magazine survey of legal and financial advisors, over the past year tax avoidance dropped from the primary concern of many to the fourth place concern.

The gentle reminder: The laws are only good until 2013 and, barring any sudden outburst of non-partisan productivity at Capitol Hill, are set to expire within a year’s time.

Snap, the tax trap shuts!

While tax avoidance need not be your primary concern when it comes to planning, it’s likely to be a very important factor for purely economic reasons and, since estate planning is about the long haul in the first place, you can’t base it on short-term laws.

Of course, however you rate the importance of tax avoidance when it comes to estate planning; it is rarely the sole concern. This lull in the taxes also can help clarify your goals in other areas.

If tax avoidance dropped from number 1 to number 4, what did people start thinking about? According to the survey, people began planning in earnest to avoid chaos and discord among beneficiaries, to avoid probate, and to protect children from mismanaging their inheritance.

Understanding the complexities of Tax Planning is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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