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2011 Seminar Page Updated
Nov 11, 20102010 will soon be brought to a close, and we are having our final workshop seminar this Tuesday, November 16th at Sunrise Assisted Living in McCandless 6:30pm. Looking ahead to 2011 we are already scheduled at several locations around the Western Pennsylvania area, and you can now go to the Seminar Tab of our website for information on the seminars for the upcoming year.
We look forward to seein you there!
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Health Care Reform 101: What Does It Mean For Seniors, Medicaid
Mar 31, 2010Many senior citizens worry about the effect that the health care reform bill may have on them. After all, they generally use the health care system more than do younger people. And those living on fixed incomes may have little leeway in their budgets to help if their health costs rise.
Here are some specifics on these changes:
Medicare cuts
Under the healthcare reform bill, government payments to Medicare Advantage – plans that are run by private insurers such as Humana and are an alternative to traditional Medicare – will be cut by $132 billion over 10 years. (Those plans currently get somewhat more per person from the government than traditional Medicare does.)
Medicare Advantage plans often offer extra benefits that seniors in traditional Medicare don’t get. It is possible that these extras will be dropped as Medicare Advantage plans feel a budget squeeze.
In most areas of the United States, this reduction will be phased in over three years, beginning in 2011, although in some places it will take longer.
The bill does not contain cuts to traditional Medicare benefits. However, Medicare payments for home healthcare would be reduced by $40 billion between now and 2019. And certain payments to hospitals would be cut by $22 billion over that same period.
Medicare enhancements
The bill would bolster the existing Medicare prescription-drug benefit by addressing part of its “doughnut hole” problem.
Right now, after a senior has spent $2,700 on drugs in a year, coverage stops until that same person has spent $6,154 on drugs, when it starts up again.
Hence the “doughnut hole” nickname.
Beginning in 2010, people who fall into this hole will get $250 from the government to help. Thereafter, according to the bill, the US will gradually increase the percentage of drug costs it pays within this gap. By 2020, the US will pay 75 percent of senior drug costs between $2,700 and $6,154.
Medicare will also begin to pick up the tab for annual wellness visits.
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$6.4 million fine for companies guilty of scamming seniors with pricey legal plans
Oct 22, 2009A case in Ohio is serving as yet another warning for seniors about the dangers posed by pricey and unnecessary legal plans. The state Supreme Court ordered two companies to pay an unprecedented $6.4 million fine for swindling thousands of senior citizens.
The companies, American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc. are both based in California and are co-owned by Jeffrey and Stanley Norman. In addition to the record setting fine, going forward neither company may do business in Ohio.
According to court documents, the companies convinced elderly customers to pay unfairly high prices for legal plans and annuities that they either did not need or were limited to the point of not being worth the money.
The ruling was based in part on the determination that employees at the two companies were selling legal plans despite the fact that they were not attorneys. In the state of Ohio it is illegal for non-lawyers to practice law, and selling legal plans is considered practicing law.
Co-owner Jeffrey Norman has defended his companies, despite the fact that he is also facing legal action in North Carolina, Florida and Pennsylvania in addition to Ohio. Mr. Norman claimed that the case against him was flawed, and that the Supreme Court panel was biased against him.
As a result of the ruling the companies must turn over their customer lists to the Columbus Bar Association. The Association will then contact the individuals on the list to let them know that they can sue to recover the money they spend on the plans and annuitites.
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Preparing a living trust for your children? Don’t forget to name a guardian
Sep 30, 2009It’s a depressing scenario: one parent dies, leaving the other one to raise their children. While both parents or the living parent may have thought to create a living trust to provide for their children in the event that the surviving parent passes away unexpectedly, the question of guardianship must also be considered.
Unfortunately it happens all too often – children are left behind when both parents die, and somebody has to take care of them. As uncomfortable as it may be to consider the options, parents must think about who they want to act as their children’s guardian should the worst happen.
Without a named guardian, if both parents pass away the job of finding a home for the children falls to the courts. If nobody steps up to take responsibility of the children, they could end up in foster care – not a future that any parent would want for their children if it could be avoided.
When considering whom to name as a legal guardian in your will, keep in mind that it does not need to be a relative. Sometimes good friends are closer and share important values more so than blood relatives. What’s important is that you pick somebody you feel comfortable raising your children if the need arises – don’t leave it up to fate.
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Can you make your trust a beneficiary of your IRA?
Aug 31, 2009When considering your estate planning options as you near retirement age, you may wonder what you can do with your IRA to maximize your tax situation and protect your assets.
A common move in estate planning is for you to name a trust as a beneficiary of your IRA. This is a way for you to avoid taxes and protect your beneficiaries – two important goals in estate planning. This would be an especially useful tactic if you have young children who are not yet able to manage their own money or if you have a special needs child who will need life-long assistance.
A knowledgeable estate planner needs to help you with properly preparing the necessary documentation to make your trust a beneficiary of your IRA. It is important that strict IRS guidelines are followed when the trust is written so you don’t run afoul of the law.
You should also know that some trusts pay higher income tax rates than individuals, so you’ll have to evaluate this possibility when you are trying to decide whether or not this option makes sense for your situation. Care must be taken so our IRA funds don’t get trapped in the trust because of a mistake or oversight in the trust’s preparation.
If you try to transfer funds from your IRA into a trust, the transfer would be likely trigger immediate taxation because such a move would be considered an IRA distribution. Some estate planners suggest a technique to move funds from an IRA to a trust that they say does not cause immediate taxation, but be aware that the IRS may not agree with your estate planner’s assessment. Without a ruling from the IRS – which can be expensive – you should not try to get around being taxed for an IRA distribution.
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An unusual type of trust is becoming popular
Aug 31, 2009A form of trust called an “intentionally defective grantor trust” is becoming very popular with some estate planners, as people look for ways to protect their assets in these uncertain financial times.
It may seem counterintuitive to trust your assets to a fund that has the words “intentionally defective” in the title, but the unappealing name hasn’t dampened their appeal. However, there are drawbacks to this form of trust.
According to some estate planners, the benefits of an intentionally defective grantor trust include:
- Assets can be passed on to grandchildren
- Heirs can receive more money than they would with another form of trust
- It is possible to withstand IRS scrutiny with this type of trust
Drawbacks of these trusts:
- The IRS may be more likely to investigate a trust set up this way; they’ve challenged these trusts in the past and have never officially sanctioned them
- Losses from poorly performing assets could be magnified in this type of trust
How do intentionally defective grantor trusts work? Here is a brief overview of one way they can be used:
- A trust is created, and then you lend the trust money to buy your assets (i.e. securities, real estate, or a business interest)
- Typically the asset bought is one that is expected to appreciate significantly in value
- You receive interest payments for a set number of years in return for lending the trust money
- The lower the interest rate that you select for the trust to repay you, the more your heirs will benefit
- Depending on the maturity rate that you choose, interest rates right now run from between 0.83% to 3.67%
A knowledgeable estate planner can discuss the pros and cons of this type of trust, and determine how to best help you meet your goals.
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Financial elder abuse cases on the rise as economy continues to struggle
Jul 29, 2009The sour economy is having an unexpected impact on elder Americans: their children are increasingly turning to them for financial help. Unfortunately, some family members are crossing the line when seeking financial assistance from their elderly relatives, leading some financial planners and attorneys to claim abuse.
Elderly individuals who are mentally or physically frail are the most at risk of being taken advantage by others, either because they can’t push back or because they are not capable of making decisions in their own best interest. Sadly, some family members use emotional blackmail to get what they want, as elders fear losing contact with loved ones if they don’t accede to demands.
There are a variety of way that elders can be taken advantage of financially. For example, a child could convince an ailing parent to put their home into joint tenancy ownership so that when the parent passes away the child inherits the entire house – even if the parent intended to split the home among all children.
Sometimes children take advantage of being in control of a trust or power of attorney for a parent. A cash-strapped child may take money to pay off debts when the funds should be used to care for the parent or should be distributed fairly among siblings upon the parent’s passing.
To avoid being taken advantage of, experts recommend that elders have a trusted friend or family member regularly review financial documents for inconsistencies or signs of abuse.
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Seniors warned to be wary of living-trust scams
Mar 27, 2009Living trust scams are a problem for seniors all over the country. Authorities in Pennsylvania are warning senior citizens about probate and living trust con artists who could cost them thousands of dollars.
Unscrupulous individuals often try to sell living trusts to elderly people. These individuals are often nothing more than sales agents trying to earn a commission by selling investments or living trusts that may be of questionable value.
Probate and living trusts are not a “one size fits all” issue, which is why it is important for anyone interested in estate planning to contact a qualified, reputable source for information. Scam artists thrive on selling useless plans and advice to people concerned about their future, and senior citizens are a favored target of such individuals.
Individuals seeking to start a living trust are urged to do their homework, steer clear of offers involving high-pressure sales tactics, and look beyond fancy sounding credentials.
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What Next For the Estate Tax?
Aug 05, 2010The recent death of 80-year-old George Steinbrenner has thrust the estate tax back into the spotlight.
While Forbes magazine has estimated Mr. Steinbrenner's estate at $1.1 billion, his heirs pay no federal estate tax because he died in 2010. If Mr. Steinbrenner had died in 2009 when the federal estate tax exemption was $3.5 million and the top tax was 45 percent, his estate would have paid taxes of about $500 million.
If he died next year, things could be even worse for his heirs.
The problem is no one has a clue what the law will be next year, and there's a chance it might also squeeze people who identify more closely with the middle class.
"We really are in a state of uncertainty now, and it's difficult to advise clients," said Don Linzer, a partner at the Schneider Downs wealth management firm, Downtown.
People who stand to inherit wealth owe no federal estate taxes on their windfall this year because Congress has not voted to replace the tax law that expired in 2009.
If Congress takes no action on passing a new estate tax law, the exemption will automatically fall to $1 million with a top tax rate of 55 percent on all assets above $1 million.
"If Congress extends the exemption for the first $3.5 million, it only hits the wealthiest 1 or 2 percent of Americans," said Dan Nigito, vice president of Merion Wealth Partners in Bethlehem. "If the exemption is only $1 million, if you own a home, a retirement account and some insurance and investments, you are suddenly taxed like the wealthiest Americans when you are only middle-class."
Mike Freker, a wealth manager at AXA Advisors in Carnegie, said that if the exemption falls back to $1 million, the estate tax will become more of a reality for a far greater percentage of the population.
"There's more people affected than you think," he said. "Small-business owners represent about 65 percent of all employers.
If the business you work for is affected by the tax, it could trickle down."
As part of the tax cuts approved by President George W. Bush in 2001, the federal estate tax exemption started at $1 million and over the course of nine years increased to $3.5 million in 2009. The law eliminated the federal estate tax in 2010.
However, the 2001 tax cut requires the estate tax to revert back to $1 million in 2011, so it is up to Congress to pass a law that would raise the exemption and extend the tax break. So far, the political bickering on Capitol Hill has stymied any efforts to pass a new law.
"The problem is you've got a bunch of people in Congress who can't agree on what day of the week it is, and now they are supposed to come together and decide how to handle the estate tax provisions of the sunsetting Bush tax cuts," Mr. Nigito said.
Jeff Condon, an estate tax attorney at Condon & Condon in Santa Monica, Calif., said that if Congress keeps spinning its wheels and we end up with only a $1 million exemption on the estate tax, it will result in more complex estate plans.
"As an attorney who takes pride in reducing the estate tax for my clients, that's a real backward slide," he said. "Now they have to pay me and lawyers like me more money to do fancy, sophisticated and hard-to-understand techniques that do the same thing as a high-exemption amount -- reduce their estate tax."
While there is no federal estate tax this year, states can set their own taxes on estates.
In Pennsylvania, the inheritance tax applies regardless of the size of the estate. It is technically a tax on the beneficiary's right to receive the dead person's property.
Spouses with rights of survivorship pay no inheritance taxes in Pennsylvania. Charities also are exempt from tax. However, children, grandchildren and stepchildren pay a tax of 4.5 percent, meaning if they inherit $100,000 they will pay $4,500 in taxes to the state.
Brothers and sisters pay a 12 percent tax, while nieces, nephews and all others pay a tax rate of 15 percent.
Life insurance proceeds, on the other hand, are exempt from Pennsylvania's inheritance tax.
Marvin Feldman, president and CEO of Life Foundation, an insurance education organization based in Arlington, Va., said life insurance could be an effective tool to use for paying the federal estate tax.
"The only thing we know for sure is there will be an estate tax," Mr. Feldman said. "We just don't know at what level it will start -- whether that's $1 million, $3.5 million or some other number chosen by Congress.
"Life insurance can be an excellent alternative to writing a check for the full amount of the inheritance tax."
He said it was important, however, to make sure the life insurance policy was not part of the dead person's estate to avoid being taxed by the federal government.
It should be owned outside the estate by either an irrevocable trust or by one of the insured's children.
"One of the most gruesome aspects of this inaction by Congress is: I would not want to be on life support in December 2010," said Albert Isacks, director of estate services at Malin Berquist CPAs in Erie.
"It's putting the family in the extremely awkward situation of wondering if you keep someone alive with the hope that they'll regain their faculties or allow them to die to avoid the estate tax," he said.
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The Growing Rate of Dementia and Alzheimer's
Mar 09, 2010The United States is currently experiencing the early stages of what is expected to be an epidemic of Alzheimer's Dementia. It is predicted that the current number of cases of Alzheimer's Dementia will double by 2020, and double again by 2040. Some unfortunate individuals are born with genes that strongly predispose them to developing Alzheimer's Dementia. However, this is true for only a minority of people.
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