The Ohio Legacy Trust: A New Asset Protection Trust

Ohio has joined the growing list of states, which have enacted domestic asset protection trust legislation. The "Ohio Legacy Trust Act" (the “Act”), takes effect on March 27, 2013, and permits, for the first time, statutory protection for the creation of self-settled spendthrift trusts called “legacy trusts”. One of the purported reasons for the Act is to enhance the attractiveness of Ohio as a jurisdiction in which to remain after retirement, rather than encouraging residents to move to other states that better protect assets. There are eleven states that now have domestic asset protection trust statutes, i.e., Alaska, Delaware, South Dakota, Nevada, Missouri, Tennessee, Wyoming, Oklahoma, Rhode Island, Utah and New Hampshire, and other states, such as Florida, have greater homestead protection than the State of Ohio.

The case for the necessity of an asset protection trust in Ohio was capably made by The Estate Planning, Trust and Probate Law Section of the Ohio Bar Association:

We live in a litigious society and adequate insurance may not be reasonably obtained at an affordable price to protect an insured from most claims. Some claims will exceed the available limits, in other cases coverage may be denied or the insurance company might fail. 

As an example: an executive was working from his home one weekend and had a business delivery at his house. The UPS delivery person slipped on his son’s skateboard and broke his back. The company insurance did not cover the accident, because it occurred off business premises. Both the homeowner’s insurance and the executive’s umbrella insurance policy declined coverage because it was a business delivery. Instead, the executive was personally liable for the entire judgment amount. 

Under the Act, creditors are generally prohibited from bringing any action: (1) against any person who makes or receives a qualified disposition of trust assets from a legacy trust; (2) against any property held in a legacy trust, or; (3)  against any trustee of a legacy trust. “Qualified disposition” means a disposition by or from a transferor to any trustee of a trust that is, was, or becomes a legacy trust. 

Long Term Care Insurance Will Soon Cost Women More




The cartoon is a link to "The Growing Need for Long-Term
 Care Insurance- Part 1" authored by Desiree Baughman,
 writer for InsuranceQuotes.org (link removed upon request)

The long-term care insurance (LTCI) market will soon change dramatically as companies start charging higher premiums for women.  Life insurance has long employed gender-based pricing, by gemder, but LTCI insurance companies have avoided the practice. For the first time this year, starting with policies from Genworth Financial Inc, the nation's largest seller, the industry will move to gender-based pricing.

The industry's goal is to reflect actuarial realities.  Women live longer and plan more for their futures by buying LTCI policies. Genworth says two-thirds of its LTCI claim payouts go to female customers, and overall, women account for 57 percent of all policy sales in 2011, according to data from LIMRA, the insurance research and consulting group.

Genworth will introduce gender-specific policy pricing by this spring, if the plan passes regulatory hurdles. That will boost the cost of new policies for women by 20 to 40 percent, depending on the applicant's age and benefit package, according to the American Association for Long-Term Care Insurance (AALTCI).

According to Reuters, Genworth spokesman stresses that the pricing will be applied only for women applying on their own - 10 percent of its policy applicants. The company will continue to offer lower rates to married couples who purchase joint coverage, and the changes won't affect current policyholders.  Gender-based pricing will likely be adopted by other carriers - both for individuals and married couples.

Gender-based pricing is seen as a necessary step for companies struggling in the current low interest rate economy to earn enough on their fixed income portfolios to fund benefits. 

Premiums have generally beeen on the rise regardless,  For new customers, policies in 2012 cost anywhere from 6 to 17 percent more than in 2011, according to AALTCI, and they are 30 to 50 percent higher than five years ago. Competition also reduced as a long list of major insurance companies have stopped writing new individual policies, including Prudential Financial Inc, Metlife Inc., and Allianz Finance Corp.

Gender pricing is just the latest sign that our approach to long-term care isn't working. The private market is limping along as a small niche business - overall penetration remains less than 5 percent of the total possible market, according to LIMRA.

If you have been thinking about LTCI,  buy it now.  Better, consider a life insurance policy or annuity that will provide a leveraged death benefit during your life specifically for long term care.  These "linked-benefit" policies are an attractive alternative to traditional long term care insurance.

IRS Reminder: 2010 Roth Conversions May Require Income Reporting on 2012 Return

The Internal Revenue Service reminds taxpayers who converted amounts to a Roth IRA or designated Roth account in 2010 that in most cases they must report half of the resulting taxable income on their 2012 returns.

Normally, Roth conversions are taxable in the year the conversion occurs. For example, the taxable amount from a 2012 conversion must be included in full on a 2012 return. But under a special rule that applied only to 2010 conversions, taxpayers generally include half the taxable amount in their income for 2011 and half for 2012, unless they chose to include all of it in income on their 2010 return.

Roth conversions in 2010 from traditional IRAs are shown on 2012 Form 1040, Line 15b, or Form 1040A, Line 11b. Conversions from workplace retirement plans, including in-plan rollovers to designated Roth accounts, are reported on Form 1040, Line 16b, or Form 1040A, Line 12b.

Taxpayers who also received Roth distributions in either 2010 or 2011 may be able to report a smaller taxable amount for 2012. For details, see the discussion under 2012 Reporting of 2010 Roth Rollovers and Conversions on IRS.gov. In addition, worksheets and examples can be found in Publication 590 for Roth IRA conversions and Publication 575 for conversions to designated Roth accounts.

Taxpayers who made Roth conversions in 2012 or are planning to do so in 2013 or later years must file Form 8606 to report the conversion.

As in 2010 and 2011, income limits no longer apply to Roth IRA conversions.

Credit Card Debt Will Follow the Younger Generation to the Grave

Younger Americans not only take on relatively more credit card debt than their elders, but they are also paying it off at a slower rate, according to a first-of-its-kind study conducted by Ohio State’s Center for Human Resource Research.

The findings suggest that younger generations may continue to add credit card debt into their 70s, and die still owing money on their credit cards.

“If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said Lucia Dunn, co-author of the study and professor of economics at Ohio State University. Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies.”

The results suggest that a person born between 1980 and 1984 has credit card debt substantially higher than debt held by the previous two generations: on average $5,689 higher than his or her “parents” (people born 1950-1954) and $8,156 higher than his or her “grandparents” (people born 1920 to 1924).  In addition, the results suggest younger people are paying off their debt more slowly, too.  The study estimates that the children’s payoff rate is 24 percentage points lower than their parents’ and about 77 percentage points lower than their grandparents’ rate. 

But the study also did uncover some good news: Increasing the minimum monthly payment spurs borrowers to not only meet the minimum, but to pay off substantially more, possibly eliminating their debt years earlier.

The study underscores the challenges younger folks are facing that cause and encourage debt.  In addition to the economic woes under which we all labor, are cultural changes that encourage spending.  Stuart Vyse, professor of psychology at Connecticut College, describes them in his book "Going Broke: Why Americans Can't Hold On to Their Money."  Professor Vyse argues that the mountain of debt burying so many of us is the inevitable byproduct of America's turbo-charged economy and, in particular, of social and technological trends that undermine self-control, including the rise in availability and use of the credit card, increase in state lotteries and casino gambling, and expansion of new shopping opportunities provided by toll-free numbers, home shopping networks, big-box stores, and the Internet which create twenty-four hour instantaneous marketplaces.  Professor Vyse reveals how vast changes in American society over the last 30 years have greatly complicated our relationship with money. 

These trends and harsh realities should inform our financial, estate, and business succession planning. 

California Doctor Shortage Frustrates Affordable Care Act

According to the Los Angeles Times, as California moves to expand healthcare coverage to millions of Californians under the Affordable Care Act, it faces a major obstacle: There simply aren't enough doctors to treat a crush of newly insured patients.

The obstacle, while acute in California, is not unusual.  There exist regional doctor shortages throughout the United States (see map), and these are likely to worsen.  The Association of American Medical Colleges estimates that there will be a shortage of 63,000 doctors by 2015 and 130,600 by 2025. The tidal wave of newly insured patients has to be served somehow and US Medical Schools and Residency Programs cannot supply anywhere near these numbers of new physicians in such a short time frame.

Some lawmakers want to fill the gap by redefining who can provide healthcare.  They are working on proposals that would allow physician assistants to treat more patients and nurse practitioners to set up independent practices. Pharmacists and optometrists could act as primary care providers, diagnosing and managing some chronic illnesses, such as diabetes and high-blood pressure.

For the complete article, click here.