Orlando Florida Estate Planning Attorney Linda Solash-Reed P.L writes about issues related to Estate Planning, Elder Law, Florida Medicaid, Special Needs Planning, Long-term Care Planning, Estate Taxes and Inheritance, Guardianship, and Probate Administration.
America's aging population is drawing attention to a large health care gap in the country: long-term care. Covering this gap could prove difficult and costly, but there are some ways that it can be done.
Americans in most demographic groups are living longer than ever before. Unfortunately, on average they are not living any healthier than previous generations of elderly people. That means that people will need ever increasing lengths of nursing home stays or long-term home health services.
The big problem with this is that most people do not have a good way to pay for that care. They either have to deplete their own assets and then fall on Medicaid to cover the rest of the costs or they have to have private long-term care insurance, which can be costly and is sometimes difficult to obtain.
This creates a gap in the country's health care coverage that needs to be addressed. In "Should Medicare Add A Long-Term Care Benefit?" Forbes columnist Howard Gleckman discusses a couple of different proposals to help fill this gap.
One proposal would add a long-term home health benefit to Medicare. Patients could receive up to $400 a week of in-home services with a co-payment required the amount of which would be based on their income.
As this plan would require an increase in payroll taxes and many politicians think Medicare is too expensive already, it could be difficult to get political support for this option. The other proposal would create a new public universal long-term care insurance program.
Other proposals exist as well, but as of now no proposal has a broad consensus behind it in Congress.
The Obama administration's proposal to change how doctors are reimbursed for administering some prescription medications might cover only a relatively small portion of Medicare spending on prescription medication, but that has not stopped the battle over it from growing heated.
Prescription medication costs Medicare too much money. That statement is something on which many interest groups can generally agree. Politicians on both sides of the aisle in Washington also generally agree on the issue.
However, forming a consensus on how to lower the costs has been difficult as the Obama administration is again discovering with its latest proposal to change how doctors are reimbursed for administering certain prescriptions to patients.
Currently, doctors are paid the cost of the medication plus a percentage of that cost. This gives them a financial incentive to prescribe more costly medications even when a cheaper drug is just as effective. The administration proposes an experiment to see if changing how doctors are reimbursed to lessen that financial incentive will lead to lower costs for Medicare.
For example, cancer doctors say the proposal will harm patients as smaller, often rural, clinics will not be able to afford to administer the drugs and could even close. On the other hand, primary care physicians are in favor of the proposal and accuse the other side of using scare tactics to turn patients against it.
The experiment has not begun yet, but it appears unlikely that the Obama administration will change its mind about it.
People often think that estate planning is only about deciding who gets big ticket items, such as a house, a car and a stock portfolio. However, the little items of personal property can be just as important.
A typical will often goes into great detail about a relatively small number of items. Wills carefully describe who gets particular pieces of real estate, for example. Wills often describe who gets any cash and how much they get.
The majority of assets, personal property items, are often dealt with simply by providing that they should be divided between various family members. A typical clause might state something like, "Everything else should be equally divided between my children and their descendants."
The problem is that the small items of tangible personal property are often the biggest source of disputes between family members. If multiple people want the same item, then they might fight about it. Parents of minor children instinctively know this.
No parent with two teenagers would bring home one iPad and tell the children to decide between themselves which one of them should have it exclusively. Adult children are not always all that different when they are told to decide between themselves who gets what.
For this reason it is important to spend some time thinking about items of tangible personal property when planning your estate. If you think certain items might be a source of contention, then you can direct who gets them beforehand. You can also suggest that family members take turns picking items or that they use some sort of service, such as software or a professional, to help divide things peacefully and equally.
People who inherit IRAs are often confused about the different rules and options concerning those inheritances. There are a few things that they should know.
The rules concerning IRAs are different for people who inherit the accounts than they are for people who initiate the accounts. This is often a source of confusion for those who inherit, especially when it comes to required minimum distributions.
People who create their own Roth IRAs are not required to take minimum distributions. However, those who inherit them are required to do so.
All of the money in an IRA does not need to be taken out at once. Those who inherit can elect to take required minimum distributions based on their own life expectancy. This option must be initiated by December 31 of the year following the death of the original account holder.
People who choose not to take out required minimum distributions must withdraw the full amount of the IRA within five years of the account owner's death. This option is available when the account originator passed away before reaching the age of 70½.
Spouses can choose to treat the IRA as their own or as an inherited IRA. The rules must then be followed for whichever option the surviving spouse elects.
Transferring an inherited IRA can only be done by moving it directly from one custodian to another. The funds cannot be withdrawn by the inheritor and later moved into a new IRA.
The terms of a settlement between the daughter of late actor Paul Walker and the estate of the driver of the vehicle that Walker was riding in when the car crashed, killing the actor, went unnoticed for a year and a half.
Paul Walker was a passenger in a Porsche driven by Roger Rodas at high speed in 2013. The car went out of control and crashed into trees and utility poles. Both Walker and Rodas were killed in the accident.
Walker's sole heir is his 17-year-old daughter Meadow Walker. She initiated a wrongful death suit against Rodas' estate and, only recently, the terms of the settlement were revealed. Interestingly, the settlement was reached in November of 2014, but because it was filed as "Meadow W." it eluded public attention until now.
Under the settlement the estate paid $10.1 million, which was placed in trust for Meadow Walker.
Rodas was determined to only be partially responsible for the crash that led to Walker's death. It is still possible, though improbable, that Meadow Walker could receive more money from Porsche AG.
She claims the car company failed to put safety measures in the vehicle that could have prevented the crash or at least kept the occupants alive. However, investigators at the time concluded that speed was the sole cause of the crash and a similar suit by Rodas' estate against Porsche AG recently failed in federal court.
That judge found no evidence of liability against the company.
The 1983 law that started taxing Social Security benefits on the wealthiest seniors has never been updated. That means that it now taxes far more people than originally intended and if not changed, will tax more and more people in the future.
What to do about the anticipated revenue shortage for Social Security that will reach its breaking point in 2035 is a big issue in Washington D.C. and in the current Presidential election. This is not the first time politicians have been concerned about the long term prospects of Social Security. In the early 1980s the system was also in need of saving.
One idea floated back then, and sometimes mentioned now, some form of "means testing" for benefits. In other words, that means giving reduced or no benefits to taxpayers defined as wealthy. However, that has never been a politically popular option with seniors.
For example, instead of doing that in 1983, lawmakers decided that some Social Security benefits would be taxed for wealthy people. At the time it was anticipated that only about 10% of beneficiaries would be taxed on any portion of their benefits. Nevertheless, the law included no mechanism to adjust for inflation.
New Jersey has some of the highest tax rates in the nation. News that the state's wealthiest resident has moved to a state with much lower tax rates has caused some lawmakers to call for changes to New Jersey's tax structure.
It is not known for certain why hedge fund manager David Tepper decided to move his residence and business operations from New Jersey to Florida recently. Tepper was believed to be New Jersey's richest resident with an estimated net worth of $10.4 billion.
Many New Jersey lawmakers, however, have placed the blame of their state's tax structure.
New Jersey has the lowest state estate tax exemption in the nation at only $675,000. It has the highest property tax rates in the U.S. It has a top income tax rate of 8.97%. Additionally, New Jersey is one of only two states in the country to have not only an estate tax but also an inheritance tax.
Florida, on the other hand, has neither an estate tax nor an income tax.
While Tepper's move has many state lawmakers concerned about the state's high taxes and the loss of revenue from wealthy citizens moving to states with lower tax burdens, it is not certain that any changes to the state's taxes will be forthcoming. To date, the Republican governor and Democratic controlled legislature have been unable to reach agreements about changing the state's tax code.
Also, it is also not clear how much revenue the state is losing overall.
In the past few years the percentage of New Jersey residents with incomes exceeding $1 million has increased. However, the ability of wealthy residents to move to avoid state estate taxes has many state legislatures concerned about their own respective state tax rates.
IRA growth after retirement has previously been limited by required mandatory distributions. A new deferment option now allows seniors the opportunity for more retirement account growth.
Required minimum distributions from retirement accounts such as IRAs and 401Ks have been problematic for many seniors who do not necessarily need to take money out of their accounts to meet their expenses. The rules have required seniors to withdraw minimum amounts from their retirement accounts beginning at age 70½ based on their life expectancies as determined each year by complicated IRS charts.
The new policy allows account holders to defer up to $125,000 or 25% of the total amount in their accounts, whichever is lower. The amount deferred does not factor into the required minimum distribution calculation.
The deferment can be taken until age 85, but the money must be placed in a qualified longevity annuity contract as the only premium payment of that annuity. The money placed into the annuity will continue to grow and payments will be made on the annuity when the deferment age is reached.
For seniors who do not need to take money out of their retirement accounts, this new option allows them to continue to increase their income if they wish to preserve those accounts as part of their estates or if they anticipate living longer and might need the money later.
Law enforcement agents in the U.S. are not the only people who would like Apple to create a way to bypass the iPhone's security features.
The dispute between the FBI and Apple over the iPhone of the San Bernadino shooter appears to have been resolved. The FBI wanted Apple to create a way to bypass the security on the shooter's device so that the agency could try to determine if any information about the shooting or future terrorist acts was stored on the phone. Apple refused citing customer privacy. However, before a judge could decide the dispute, the FBI created its own way to bypass the iPhone's security and access the information on the device. As ABC 17 News reports in "Grieving father pleads with Apple to unlock his dead son's iPhone" that does not solve the problem that Apple's policy creates for everyone.
An Italian man, Leonardo Fabbretti, has been trying to get Apple to unlock his son Dama's iPhone for months. Dama passed away in 2015 from bone cancer. Fabbretti was able to unlock the phone by using his fingerprint. However, after the phone did a complete restart that option was no longer available. To access the information on the device a password is now needed and Fabbretti does not have it. Because of this he is unable to view the photographs of his son stored on the phone.
This is another in a long list of examples of how the policies of tech companies have an impact on estate law and grieving families. Allowing families to access digital information after a loved one passes away will continue to be an important legal battle for the foreseeable future.
Gun trusts are a great way to keep firearms in a family. They have offered a cheaper and easier way to pass certain firearms between generations. However, new rules will make them somewhat less beneficial.
Certain firearms, such as machine guns and silencers, can be very difficult to transfer. A person-to-person transfer requires notice to the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. Local law enforcement has to sign off on the transfer and a $200 transfer fee must be paid. Fingerprints and background checks must also be obtained. Gun trusts have offered a way around many of those burdens and allowed families to pass on their firearms without having to cut through too much red tape. However, as Private Wealth reports in "It Will Soon Get Tougher To Create A Firearms Trust" that is about to change.
As of July 13, 2016, new rules will be in place that will make transferring firearms into a gun trust more difficult. Every "responsible person" in the trust will need to go through fingerprinting and background checks. This includes the trust grantor, trustee and some beneficiaries. Notice will also need to be given to local law enforcement, however they will not need to sign off on the transfer.
Fortunately, gun trust applications received prior to July 13, 2016 will be grandfather into the existing rules. That means that if you are considering a trust as a way to pass on your firearms, now is the time to discuss it with a wills and trusts attorney. Please let me know if I can assist.