American Taxpayer Relief Act Brings Estate Tax Relief

After some last minute political posturing, in the wee hours of January 1, 2013 the U.S. Senate passed the American Taxpayer Relief Act ("ATRA") by a margin of 89 to 8. The U.S. House of Representatives, after initially balking at the provisions of ATRA, which does not include any significant spending cuts, ended up passing the bill around 11 p.m. on January 1 by a margin of 257 to 167. Shortly after the House passed ATRA, President Obama made a public statement in support of it and then within 30 minutes was whisked away to his Hawaiian vacation home, where he signed the bill into law using an autopen on January 2, 2013.

Now that we have been delivered from the precipice of the so-called fiscal cliff, below is a summary of what ATRA means for American taxpayers in 2013 as well as some retroactive changes for 2012.

Initially, though, you will probably hear more about what ATRA did NOT change. The temporary reduction of the Social Security payroll tax that went into effect in 2011 and was extended for 2012 was not addressed by ATRA, so in 2013 the share of the Social Security payroll tax paid by workers will increase from 4.2% to 6.2% for employees and 10.4% to 12.4% for those who are self-employed.  This increase will likely result in actual take-home pay remaining the same for many taxpayers, despite wage increases for 2013. Since this is the most effect of ATRA that most taxpayers will realize, many taxpayers won't see ATRA as real "relief.'    

Estate Tax, Gift Tax and Generation Skipping Transfer Tax

ATRA makes the rules governing estate taxes, gift taxes and generation skipping transfer taxes that went into effect under the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010 ("TRUIRJCA") permanent for 2013 and beyond, with one exception - the maximum tax rate for each of these taxes is increased from 35% to 40%. Since TRUIRJCA unified the estate tax, gift tax and generation skipping transfer tax exemptions and provided for inflation indexing of these exemptions beginning in 2012, the 2013 exemption for each of these taxes is $5,250,000.

"Portability" of the Federal Estate Tax Exemption Becomes Permanent

 In addition, TRUIRJCA introduced the concept of portability of the estate tax exemption between married couples, and so ATRA has made portability permanent.In 2009 and prior years, married couples could pass on up to two times the federal estate tax exemption by including "AB Trusts" in their estate plan. TRA 2010 eliminated the need for "AB" Trust planning for federal estate taxes in 2011 and 2012 by allowing married couples to add any unused portion of the estate tax exemption of the first spouse to die to the surviving spouse's estate tax exemption, which is commonly referred to as "portability of the estate tax exemption."

New Year's Resolution: Planning for Incapacity

The Ohio statutory living will declaration has affixed to the first page
 the seals of the various legal and medical organizations that
approve the content of the document greatly
adding to its practicality  

If you have not done so, you should discuss incapacity planning with an estate planning lawyer as soon as possible.

Incapacity planning is important for people of all ages.  Although the risk of disability might increase with age, the possibility of , short or long-term,disability, incompetency, and/or incapacity is ever present. 

Incompetency planning necessarily concerns both health care and financial issues, and therefore requires several legal documents to implement.  The document most people are familiar with, however, is a living will. 

One need look no further than the case of Terri Schiavo to appreciate the importance of a living will. This young woman fell into a vegetative state after suffering full cardiac arrest while she was in her 20s.  She had not executed a living will expressing her own wishes with regard to being kept alive by way of the use of artificial life support measures. As a result, a highly publicized court battle ensued between her husband and her parents.

You should also consider and execute "practical," and "legally enforceable" durable powers of attorney. These documents are "practical" if they are in a form and format that health care institutions and professionals are accustomed to seeing and accepting.  They are "legally enforceable" if they meet state law requirements, including prior notifications that may be required, and requirements for execution, such as signature, attestation or acknowledgement, and witnessing or notarization.  Many states have statutory forms, and it is wise to first consider use of a statutory form rather than a form prepared without regard to the practicality of the most commonly used and accepted forms.  With these instruments you select proxies to act on your behalf in the event of your incompetency or incapacity. 

You must also consider the Health Insurance Portability and Accountability Act (HIPAA) when you are planning for the possibility of incapacity. This act makes it necessary for you to sign releases to allow people to access your health care information.  HIPAA covers medical records, but it also covers a whole host of medically related financial records,  Consequently, relying upon only a durable medical power of attorney is short-sighted.  Your incapacity planning should include a HIPAA authorization so your health care proxy and your financial attorney-in-fact is able to access needed health care information.

You may also wish to include a financial power of attorney or trust to permit a person you choose to make financial decisions on your behalf if you are incapacitated.  Your financial attorney-in-fact or trustee need not be the same person as your health care proxy.

The new year is a good time to turn your attention to these important planning documents.

Estate Planning for Your Online Assets

There is no question that our real lives have more virtual reality than ever before, and executors and successor trustees are increasingly tasked with unraveling the legal disposition of online assets, accounts, and resources.   Dispensing with tedious recitation of examples from recent articles regarding the legal and practical impediments to identifying and recovering these assets, for example or retrieve email, facebook accounts, online assets such as blogs, and the like, which are appearing more frequently each day, I posit a simple question: Is there any doubt that identifying, cataloging  and planning for the disposition of your online accounts and virtual assets is preferable to simply leaving them to whichever family member steps forward to handle your estate to figure out?

To those who appreciate the importance of this type of planning, I commend the excellent infographic, Step By Step Expert Guide To Protect Yourself Online Before You Die. With advice from Evan Carroll, author of one of my favorite websites, The Digital Beyond,  and Nate Lustig,  of  SecureSafe, the infographic defines digital assets, presents the various digital estate planning services, and discusses how to leave a digital legacy. Check it out here.

Ohio Spends Less than Budgeted for Medicaid

Ohio has spent fewer dollars on Medicaid than expected under its current two-year budget.

The following is from an article published in the Alliance Review: 

State officials have been working to rein in the cost of the $19.8 billion health program for low-income people. The slowdown in spending comes as Gov. John Kasich prepares to unveil his next two-year spending blueprint in February. 

In the budget year that ended in June, state figures show that Ohio spent $590 million less in state and federal dollars than it had anticipated. 

Medicaid spending for the current fiscal year is also tracking below projections. The state has spent about $6.2 billion on Medicaid since July. That's about $219 million -- or 3 percent less -- than it is expected to spend through November, according to the latest data available. 

Ohio Medicaid Director John McCarthy credited the slowdown to changes in provider reimbursements, more conservative budgeting and better contract negotiations. He also said a new system for processing claims has meant that the state is better at rejecting claims that should have been paid by Medicare or those that don't fit Medicaid rules.

Still, he noted that while the savings seem significant, they're still just a fraction of the federal-state program's cost.

Medicaid spending accounts for roughly a third of all funds Ohio gets from state and federal dollars, fees and other sources.

Homeless Heir to $300 Million Clark Copper Fortune Found Dead

Huguette Clark (right) c. 1917 (age approximately 11)
 with her sister Andrée (left)
 and her father William A. Clark (center)

According to Bill Dedman, an Investigative Reporter for NBC News, a relative of the reclusive heiress Huguette Clark, who stood to inherit $19 million of her $300 million fortune had he stepped forward to make a claim, has been found dead under a Union Pacific Railroad overpass in Wyoming.

"Children sledding found the body of Timothy Henry Gray, 60, Thursday afternoon in Evanston, a small mining town in southwestern Wyoming near the Utah border. The coroner said it appeared he died of hypothermia. The low temperature that day was 10 degrees, and had hit zero in the previous week. [T]here was no evidence of foul play, and Gray was wearing a light jacket. Gray's siblings said they hadn't heard from him since their mother's funeral in 1990, when he disappeared without a word.  It wasn't clear whether Gray was living under the overpass, where transients have been known to camp.

Tim Gray was an adopted great-grandson of former U.S. Sen. William Andrews Clark, known as one of the copper kings of Montana, a banker, a builder of railroads and the founder of Las Vegas. The senator's youngest daughter, Huguette Clark, was a recluse who died in 2011 in New York City at age 104, after living in hospitals for 20 years while her palatial homes sat unused. Gray was her half great-nephew."

Huquette Clark left no part of her conservatively estimated three hundred million dollar estate to her family, leaving it instead to her nurse, goddaughter, attorney, accountant, hospital, doctor, favorite museum and various employees, as well as  to an art foundation to be set up at her oceanfront estate in Santa Barbara, Calif.  None of her relatives had seen Clark in at least 40 years, though some had been in touch with her through holiday cards and occasional phone calls.  Nineteen of Clark's relatives contested her will in a New York court.  The case could go before a jury in 2013, though settlement talks have begun.

To read the whole article, click here.  To read more about Huguette Clark, click here.

Immortality Aided By Good Viral Email

Viral Photograph of Mr. Allen Swift alongside his 1928 Rolls-Royce

Picadilly Phantom-1 Roadster?  

Mr. Allen Swift of Springfield Massachusetts has attained a measure of immortality. He received a beautiful brand new two-tone green 1928 Rolls-Royce Picadilly Phantom-1  Roadster from his father as a graduation gift in 1928. He would go on to drive it for nearly eight decades until shortly before his death in October, 2005.  He was 102 years old.  

According to the Hartford Courant,  Mr. Swift "drove arguably the most distinctive car in town" for eight decades- a  world record for the longest period of  ownership of a new automobile.  In fact, he may be a Guinness recognized record holder. 

Upon his death, Mr. Swift donated the vehicle as part of a one million dollar donation to the Connecticut Valley Historical Museum in Springfield, Connecticut for the purpose of a establishing a new industrial heritage museum. The donation permitted the museum to establish a separate museum dedicated to industrial heritage.  According to the Hartford Courant: 

[t]he car [went] on display in Springfield in a new industrial heritage museum made possible in part by a $1 million bequest from Swift.

Mr. Swift's car will be one of the centerpieces of the collection. It still works and runs very, very quiet," said Guy McLain, director of the Connecticut Valley Historical Museum in Springfield. "His initial gift gave us the seed money to make this new museum a reality. Having that $1 million enabled us to raise the $8 million for this project."

Swift, general manager of his family's precious metals business in Hartford, drove the car carefully around town and sometimes piloted it in the town's holiday parades. Some of the town's older residents remember seeing the elegant car on the road, said Ned Skinnon, program director with the West Hartford Senior Center.

No matter where it went, the car stood out, like an emerald parrot in a flock of starlings. His model was a Piccadilly Roadster, chassis number S273FP, built in the plant that Rolls-Royce had in Springfield from 1921 through 1931 for its American market.

R.D. Shaffner, director of the Rolls-Royce Foundation in Mechanicsburg, Pa., knew Swift for 30 years, had the chance to drive his car and was pleased that Swift loaned his car to the foundation in 2003 for display when the foundation opened a new building.

He actually received this car as a graduation gift from his father in 1928 and, of course, kept it all his life - and as such earned the respect and admiration of many people - and holds the record [in Guinness] as the longest standing original owner, and I believe last surviving original owner of a Springfield car," Shaffner wrote in an e-mail response to a query about the vehicle.

Henry Hensley, chairman of the Phantom I Society, said that the Piccadilly is one of the most sought-after bodies on the early Rolls-Royce automobiles. Swift's car is one of about 2,500 Phantoms made in Springfield. About 60 percent of those made still exist, most of them in private collections.

I did not find any mention of Mr. Swift, or his bequest on the museum's website.  I also did not see the Rolls-Royce listed as an exhibit of the museum. Whether some have forgotten Mr. Swift, he has managed to attain some level of immortality.   Mr. Swift is made even more famous as a result of a viral email, often forwarded with the subject, “Oldest running car and driver in history...”  There are various versions of the email, some of which make additional wild claims, such as that the mileage on the vehicle exceeded one million miles.  The vehicle apparently had only “170,000 miles on it and an engine that still purrs like a sewing machine.”  But Snopes.com does have a thread for the email under its topic "Fauxtography," which may suggest the picture is not accurate.  Regardless, Mr. Swift is immortalized in the virtual world as the email travels from inbox to inbox. 

A good friend and client recently forwarded the email to me, but I had seen it previously several times over the past few years.  So I researched the real story, which I hope you have enjoyed. 

Nursing Home May Sue Resident's Daughter for Breach of Contract

A Connecticut trial court has ruled that a nursing home may sue a resident's daughter for breach of contract because she agreed to use her mother's assets or Medicaid to pay for the nursing home, even though she did not sign as a personal guarantor. Cook Willow Health Center v. Andrien (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012).

Judy Andrien admitted her mother to a nursing home and signed an admissions agreement as her mother's responsible party. She agreed to take steps to ensure the nursing home was paid out of her mother's assets or by Medicaid.

The nursing home sued Ms. Andrien for breach of contract, alleging that she did not use her mother's assets to pay the nursing home or apply for Medicaid when the assets were near depletion. Ms. Andrien filed two special defenses. She argued that the admissions agreement was void and unenforceable because it made Ms. Andrien personally liable for the cost of her mother's care. She also argued the agreement was a surety contract, so the nursing home was required to meet certain preconditions before enforcing the contract. The nursing home moved to strike Ms. Andrien's two defenses.

The Connecticut Superior Court granted the nursing home's motion to strike the special defenses. The court rules that the contract does not contain a personal guarantee, so it did not violate federal law prohibiting nursing homes from requiring a third-party guarantee as a condition of admission. The court also ruled that the contract is not a surety contract, i.e., a guarantee of one party for the obligation of another to a third party.  According to the court, the nursing home's "complaint is not based upon a breach of a promise to answer for the debt of another, but rather a breach of contract."  The contract, according to the court, "does set forth a scenario in which the responsible party would be liable for any costs of care and services for the resident incurred should the resident make a transfer rendering him/her ineligible for Medicaid payment or assistance."  The Court wrote that the Complaint alleged no facts that would indicate such a scenario, but nonetheless, set aside all of Ms. Andrien's affirmative defenses, and permitted the action to proceed.   

For the full text of this decision, click here.

Gifting to Avoid Nursing Home Costs- Too Many Planning Intentional Impoverishment

Health care costs continue to be a top retirement concern, yet few Americans know about their options or the potential dangers of improper planning. More importantly, the most common "simple" plans compromise, unnecessarily, important goals and objectives due to misconceptions. 

Gifting Assets May Risk Home Health Care 

For example, according to a recent survey of financial advisers by Nationwide Financial, 42% of financial advisers say their clients are currently considering giving away their assets to their children so they can qualify for Medicaid to avoid paying for a nursing home.  There are obviously some circumstances making such gifting appropriate.  But, many Americans do not understand the adverse consequences of relying on Medicaid to pay for their long-term care costs.  

Perhaps the most important of these is that the senior abandons control over their long term care and short term health care planning.  Such a result flies in the face of one of the most important objectives most senior's claim to have, and that is to maintain control of their care.  In fact, according to the  Nationwide Financial survey, maintaining control is the most important aspect of retirement health care planning to most seniors.

Many seniors also underestimate the risks of gifting.  Knowing their children to be responsible and loving, they assume the assets will remain as a safety net for their later needs.  But, what if a child is unfortunate, and suffers economic catastrophe through no fault of their own?  Gifting subjects assets to numerous other risks, such as the claims of creditors of children, loss through divorce or disability, and additional long-term care risks.  Moreover, most seniors have no idea what happens if their children predecease them.  Simply, gifting means, for all intents and purposes, that the senior may never see those assets again, regardless of need. 

Asset Protection Planning- "Keep it Secret; Keep it Safe."

A stark warning to those engaged in asset protection planning comes from Jay Adkisson,  a Partner in the Newport Beach, California, law firm of Riser Adkisson LLP, who practices in the areas of creditor-debtor law, in an excellent article for Forbes Magazine, entitled, "Kilker - Asset Protection Intent In Making Transfers To Protect Against Future Creditors Means Disaster When Creditor Appears." Simply, as the wizard Gandalf instructed the Hobbit Frodo, in Lord of the Rings: "Keep it secret; keep it safe."  Identifying asset protection planning as a purpose of your estate plan is, perhaps, the first step to losing the protection.  

Attorney Adkisson writes:  

"Taking this opinion at face value, the lesson here is simple and commonsensical but is one that is often ignored by planners: Asset protection planning should rarely be undertaken in its own name or for that stated purpose.

If the Engineer here had not admitted that he put this structure in place for asset protection purposes, and to defeat the rights of future claimants who might sue him over soil studies gone bad, then the result might have been very different on this point.

There is rarely a need to announce to the world that something was done for asset protection purposes, to call something an “asset protection trust”, to send an “asset protection” engagement letter, or any of the like. Yet, bad planners and do-it-yourselfers do it every day.

To the contrary, asset protection planning should almost exclusively be undertaken for some other purpose than creditor planning.  Do it for estate or succession planning reasons, do it for general business or financial planning reasons, do it for health reasons, do it because you’re trying to look out for an heir, but don’t state that you’re doing it for creditor reasons. (emphasis added).

There is great risk in boldly and publicly identifying an estate, business or financial plan as an asset protection plan.  Yet the market is replete with estate plans employing documents entitled "Asset Protection Trusts," or which have other, often imposing, titles such as fortress Trusts," or "The Castle Plan."  Perhaps my personal favorite is the "Complete Asset Protection Plan," which I reviewed for a client that had transferred only the personal home and a single bank account to the dubious plan, thereby rendering the supposed benefits of the plan far less than "complete." 

Proper asset protection is not easily accomplished, and it is easily lost.  If you want to incorporate asset protection planning in your estate, business, or financial plan, you are best advised to seek, and maintain a relationship with an attorney.  From conception to development, and through implementation of the plan, care must taken to ensure that the plan is as carefully protected as are the assets.  Finally, proper use of the plan as a shield requires counsel regarding presentation of the plan.

"Keep it secret; keep it safe."  It sounds simple, but it isn't.  If your assets are important enough for you to want a plan to protect them from risk of loss, they are important enough to ensure that the plan is properly drafted and implemented. 

Most Men Unaware that Early Retirement Adversely Impacts Their Spouse's Social Security Benefits

According to a recent study released by the Center for Retirement Research at Boston College (http://crr.bc.edu), most men begin drawing on their Social Security retirement benefits at age 62 or 63, rather than waiting until their full retirement age or even age 70.  The early receipt of benefits means that both the husbands and their wives will receive less each month than they would if they waited.

According to the study, written by Steven A. Sass, Wei Sun and Anthony Webb, this early election has no effect on average on the men.  On average, though men will receive a smaller benefit check each month, this will be offset by the checks they receive between the ages of 62 and normal retirement age.  Because this is based, on average, there are obviously exceptions.  For example, men who are in ill health would do better to take early retirement and men who expect to live a long time should postpone their receipt of benefits for as long as possible.

The same statements also hold true for single women, meaning on average they do about as well in terms of lifetime Social Security benefits no matter whether they start earlier and get more smaller checks or start later and receive fewer larger checks.

But for today's seniors, most wives' benefits are based on their husband's work record.  If husbands choose to take benefits before the full retirement age, their wives are penalized twice -- first while their husband's are alive when they get a reduced benefit, usually half of the husband's benefit, and second when the husband dies (which often happens due to women's greater life expectancy) when they receive their husband's benefit rather than their own.

If these decisions were based upon informed appreciation of the adverse impact upon the spouse's benefits, perhaps we could dismiss them as simple life choices. The researchers conclude, however, that they are not, that instead most retiring men simply don't understand the implications of claiming benefits early.  More education may change their behavior, although the researchers note that "financial education has not been especially effective in changing behavior." As an alternative, they suggest a number of potential policy changes, such as requiring spouses to sign off on the decision to claim Social Security before the beneficiary's full retirement age.

Interestingly, while the Social Security Administration's Web site (www.ssa.gov) has a number of excellent calculators to assist beneficiaries in deciding when to retire, none appear to calculate spousal benefits.  Based on the Boston College report, adding such calculators would be a good first step.

To read the report, go to:  http://bit.ly/10PhPBr.

Avoiding the Nursing Home - New Technologies Help Keep Seniors Safe and Healthy at Home

eNeighbor® Remote Monitoring System by  Healthsence®

A recent New York Times article explains how new technology is being used to help ensure the safety and health of elderly individuals who live at home. One such technology, called  “eNeighbor,” a system of sensors that are placed all over the home, is used to monitor the movements of elderly citizens and alert emergency responders if any non-typical movements occur, or if usual movements do not occur. The article relates the story of Bertha Branch to illustrate how eNeighbor works. Bertha is 78 and lives alone in her home. One morning, a wireless sensor under her bed detected that she had gotten out of bed, but other sensors in the house registered that she had not been to any of the other rooms in the house, including the bathroom attached to her bedroom. After it became clear that either Bertha was standing in the same spot when she normally would have already visited her bathroom or had fallen, eNeighbor system made phone calls to neighbors, family, and finally to 911. When firefighters arrived, Bertha had been on the floor, where she had fallen and found herself unable to get up, for less than an hour.

Other systems are used to remind and assist people in checking their vitals each day. The same machine can assess and record your weight, blood pressure, temperature, and send all of the information to a monitoring program. If your vitals show evidence of a risk to your health, a nurse from the monitoring program will call you and ask that you see your doctor right away. These, and other technologies also remind you to take medications, and ask questions that prompt new instructions. Machines may, for example ask questions like: “Are you experiencing more difficulty breathing today?” or “Are your ankles more swollen than usual?”

Of course, technologies like eNeighbor are new and unproven. They are also often expensive and are not yet covered by government benefits or private insurance plans. Doctors are also not yet trained to treat patients using remote data, and currently have no mechanism to be paid for doing so. And like all technologies, the devices — including motion sensors, pill compliance detectors and wireless devices that transmit data on blood pressure, weight, oxygen and glucose levels — may have unintended consequences, substituting electronic measurements for face-to-face contact with doctors, nurses and family members. 

But as similar technologies become more mainstreamed and dependable, they could be used to help ensure a higher quality of life for elderly citizens who live at home, and could allow them to stay at home much longer than they would have been able to before such technology existed.

Real the full New York Times article.

Reverse Mortgages Are Causing Some Homeowners to Lose Their Homes

A reverse mortgage can be a great tool in the right circumstances, but if you aren't careful you could end up losing your home. A recent front-page article in the New York Times lays out some of the problems homeowners are encountering with these mortgages.

You must be 62 years or older to qualify for a reverse mortgage, which allows you to use the equity in your home to take out a loan. The loan does not have to be paid back until you sell the house or die, and the loan funds can be used for anything, including providing money for retirement or to paying for nursing home expenses.

It all sounds like a no-lose proposition, but there are downsides. For example, these loans carry large insurance and origination costs, they may affect eligibility for government benefits like Medicaid, and they are not ideal for parents whose major objective is to safeguard an inheritance for their children. There also have been complaints about aggressive marketing techniques.

In addition to these drawbacks, the Times points out two more important potential pitfalls:

• Pay attention to whose name is on the mortgage. When purchasing a reverse mortgage, be sure to put both spouses' names on the mortgage. If only one spouse's name is on the mortgage and that spouse dies, the surviving spouse will be required to either pay for the house outright or move out. This might happen if only one spouse is over 62 when the mortgage is signed. According to the Times, some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way.

• Watch out for a lump-sum loan. Usually reverse mortgages come in a line of credit with a variable interest rate. This allows homeowners to take money only when they need it. According to the Times,some brokers have been pushing lump-sum loans because the brokers earn higher fees. The problem is these loans have a fixed interest rate. The interest charges are added each month, so that over time the total amount owed can surpass the amount of the original loan.

The Consumer Financial Protection Bureau, which was created in the wake of the mortgage crisis in part to scrutinize consumer mortgages, is working on new rules to better regulate reverse mortgage lenders and provide disclosures to seniors.

To read the New York Times article about reverse mortgages, click here

Single? You Still Need an Estate Plan

Many people believe that if they are single, they don't need a will and other estate planning documents. However, estate planning is just as important for single people as it is for couples and families.

Estate planning allows you to ensure that your property will go to the people you want, in the way you want, and when you want. If you do not have an estate plan, the state will decide who gets your property and who will make decisions for you should you become incapacitated. An estate plan can also help you save on estate taxes and on court costs for your loved ones.

The most basic estate planning document is a will. If you do not have a will directing who will inherit your assets, your estate will be distributed according to state law. If you are single, most states provide that your estate will go to your children or to other living relatives if you don't have children. If you have absolutely no living relatives, then your estate will go to the state. You may not want to leave your entire estate to relatives -- you may have close friends or charities that you feel should get something. Without a will, you have no way of directing where your property goes.

Many single people have significant others, perhaps with whom they live.  Unfortunately, without a will, it is unlikely that any of your estate will benefit your significant other, even if you live together.  Moreover, your significant other may lose important real or personal property, creating great hardship.  At a minimum a simple will can resolve some of these issues.

If you are single and have a child, you may be initially comforted by the fact that your estate benefits your child upon your passing.  What may concern you, however,  is that without an estate plan, you can't be sure who manages the estate you leave to your children.  Often, the determination of who manages your estate makes a difference in whether the assets are best managed for the benefit of your child.   

The next most important document is a durable power of attorney. A power of attorney allows a person you appoint -- your "attorney-in-fact" or "agent" -- to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer.

In addition, you should have a health care proxy. Similar to a power of attorney, a health care proxy allows an individual to appoint someone else to act as their agent, but for medical, as opposed to financial, decisions. Unlike married individuals, unmarried partners or friends usually can't make decisions for each other without signed authorization.

If you are planning to give away a lot of your money, there are ways to do that efficiently through the annual gift tax exclusion and charitable remainder trusts. Other estate planning documents to consider are a revocable living trust and a living will.

Don't think that because you are single, you don't need an estate plan. Contact your elder law attorney to find out what estate planning documents you need.

Live Up to Your Commitment to the Nursing Home, or Beware

A recent Connecticut case highlights the risk to family members of nursing home residents who don't live up to their financial commitments to such facilities.

When her mother was admitted to the Cook Willow Health Center, Judy Andrien signed an admission agreement on behalf of her mother as "responsible relative," agreeing to take steps to ensure that the nursing home would be paid from her mother's assets or by Medicaid.

The facility sued Ms. Andrien, claiming that she did not live up to this commitment. Ms. Andrien asked the court to dismiss the case, arguing that she cannot be held liable because she did not agree to use her own funds to pay for her mother's care.  

The Superior Court of Connecticut has ruled in the facility's favor, stating that the claim is not that Ms. Andrien personally guaranteed payment, but that she is in breach of contract for not using her mother's funds to pay the nursing home or taking steps to get her mother Medicaid coverage. The court's ruling means that the case will continue to trial on the nursing home's claim, which it still must prove.

Nursing Homes Overcharge Medicare More than One Billion Dollars Annually

Hundreds of nursing homes overcharge Medicare every year for so-called skilled services, adding $1.5 billion in annual costs to the program, according to a federal report.  About one-fourth of Medicare bills from facilities examined in the report were incorrect. The majority of these claims involved  "upcoding," where a nursing home or other provider inflates the cost of its bill to Medicare by claiming more intensive services were done than actually performed.

 In other cases, nursing homes provided treatments that were inappropriate for the patient.  Documents show that facilities billed for high-intensity work, such as speech therapy and occupational therapy, that went to patients who couldn't benefit from it. One patient under hospice care refused physical therapy but was given the therapy anyway, and Medicare was billed, officials said.

The report was prepared by the The Office of Investigations (OI), which  conducts criminal, civil, and administrative investigations of fraud and misconduct related to Health and Human Service programs, operations, and beneficiaries.  OI utilizes its resources by actively coordinating with the Department of Justice and other Federal, State, and local law enforcement authorities.  The investigative efforts of OI often lead to criminal convictions, administrative sanctions, and/or civil monetary penalties.

In recent years, the Office of Inspector General had identified a number of problems with billing by skilled nursing facilities (SNF), including the submission of inaccurate, medically unnecessary, and fraudulent claims.  Further, the Medicare Payment Advisory Commission has raised concerns about SNFs’ improperly billing for therapy to obtain additional Medicare payments.  In fiscal year (FY) 2012, Medicare paid $32.2 billion for SNF services.

The Report made a number of recommendations.  Recognizing that the Centers for Medicare & Medicaid Services (CMS) had recently made several significant changes to SNF payments, the Report stated that    "more needs to be done to reduce inappropriate payments to SNFs."  Accordingly,   it was suggested that   CMS:  (1) increase and expand reviews of SNF claims, (2) use its Fraud Prevention System to identify SNFs that  are billing for higher paying services, (3) monitor compliance with new therapy assessments, (4) change the current method for determining how much therapy is needed to ensure appropriate payments, (5) improve the accuracy of Minimum Data Set items, and (6) follow up on the SNFs that billed in error.  CMS concurred with all six recommendations.

A Minnesota probate court rules that language in the state's constitution that prohibits all people under guardianship from voting violates the United States Constitution and is therefore invalid.  In re Guardianship of Erickson(4^th Jud. Dist. Ct., Minn., No. 27-GC-PR-09-57, Oct. 4, 2012).

Brian Erickson was placed under guardianship in 2009 because he suffers from schizophrenia and dysthymia with psychotic tendencies that make it difficult for him to perform many activities of daily living.  In July 2012, Mr. Erickson's guardian filed a petition with the Hennepin County Probate Court seeking a declaratory judgment clarifying that people under guardianship retain the right to vote unless a court order removes that right. 

The petition was filed because there is a conflict between Minnesota Statute 524.313, which states that "unless otherwise ordered by the court, the ward retains the right to vote," and Article VII of the state constitution, which explicitly states that all people under guardianship are not allowed to vote.  Mr. Erickson attempted to reconcile these two provisions by claiming that since the state constitution did not define guardianship, the legislature could "effectuate the constitutional mandates" by passing statutes that limited the state's ability to disenfranchise people under guardianship.

Actor Sherman Hemsley Remains Not Laid to Rest as Legal Dispute Continues

Sherman Hemsley died at his home in El Paso, Texas on July 24. But three months on, the star of the CBS series “The Jeffersons” has yet to be laid to rest as the beneficiaries of his will, and even his cause of death, have been called into question.

A worker at the Eastside location of the San Jose Funeral Home in El Paso, Texas confirmed that Hemsley was still at the home, and that they were waiting for a court order telling them what to do with his body.

It was revealed in August that Hemsley’s body had not been buried amid a legal dispute between his former manager and self-proclaimed business partner and live-in best friend Flora Enchinton – who was named as the sole beneficiary in his will – and a Philadelphia man, Richard Thornton, who claims to be the actor’s brother. Thornton filed a civil lawsuit disputing the validity of the will, signed by Hemsley one month prior to his death.

Read more: http://www.foxnews.com/entertainment/2012/10/29/sherman-hemsley-still-not-buried-3-months-after-death-bizarre-legal-dispute/?intcmp=features#ixzz2Ai8pneZS

Things to Consider Before Retiring Abroad

Retiring to another country can be a very attractive option. Lower cost of living and health care expenses along with exotic locales and temperate climates persuade many seniors to retire outside of the United States. If you want to ensure a smooth transition, however, there are many issues to consider and steps to take before packing up and moving.

Local Laws 

You should familiarize yourself with the local laws, and should seek professional legal advice before settling abroad.  Determine whether your trust, will and powers of attorney are legally enforceable in your country of destination.  If not, you will want to draft and implement legally enforceable planning documents.  Some documents, such as health care powers, even if enforceable, may be more practically accepted locally if in the form and format common among the local population. Specific legal advice is necessary and advisable.

In addition to your lawyer in the United States, the U.S. embassy or consulate can provide you with a list of local English-speaking lawyers willing to assist U.S. citizens.  Especially in local real estate matters, it is important to understand any contracts you are asked to sign. Review the local traffic laws and licensing requirements if you intend to drive.  Some countries have a changeable political environment with different legal systems than you are accustomed to.  Be sure to find out what civil liberties and political rights you will have as a foreign resident.

Bank Accounts 

One of your first considerations should be where to keep your money. When you move abroad, you will most likely need to open a bank account in the new country in order to pay local bills. Opening a bank account in a foreign country can be difficult because of the Foreign Account Tax Compliance Act (FATCA), passed in 2010. The law requires banks to disclose data on American clients to the IRS, and many banks are refusing to accept clients from the United States because they don't want to deal with the requirements. Your best bet may be to look for a big bank that has routine dealings with the United States.

Once you have a bank, you will need to consider how much money you want to put into the local account as well as the best way to transfer money into the local currency.  If your money remains in a U.S. bank and the exchange rate changes suddenly, the value of your money can change drastically. Another option is a foreign exchange specialty firm that may be able to provide you a fixed rate for transferring money. Before moving, you should consult with a financial planner to determine the best way to protect your money.

Currency Exchange 

Navigating currency markets is an often unexpected and complicated consequence of retiring abroad.  Hidden foreign-exchange fees are, according to some, the No. 1 culprit in dwindling your hard-earned retirement savings in another country. Exposure to the volatile currency markets on a daily basis can add up quickly in the form of unwanted fees.

The first such fee is what's known as a transfer fee, which can cost $15 to $100 per transfer of money to the foreign location of your choice. If there are regular transfers on a monthly basis, those fees will rapidly add up.  But the biggest expense factor can be the exchange rate itself.  Currency specialists, such as USForex offer tools and calculators to structure and protect nest eggs against currency exposure.  But you will want to shop local services and solutions, because these may prove more or less expensive.  Be careful, though, because unexpected and undisclosed costs are, sadly, common in the currency exchange industry.

Reporting

The United States wants to prevent citizens from hiding money in overseas bank accounts, so there are special reporting requirements. If you have $10,000 or more in a foreign bank account you will have to fill out an annual Report of Foreign Bank and Financial Accounts (FBAR) with the Department of Treasury. FATCA (see above) also has its own reporting requirements. If you are married and have a foreign account with more than $400,000 at the end of the year (or more than $600,000 at any time during the year), you will need to file a special form with your income taxes. If you don't comply with the requirements, you could face stiff penalties.

Taxes

Moving to another country doesn't mean you don't have to pay taxes in the United States anymore. All U.S. citizens have to pay taxes, regardless of where they live, and if you still have a residence in a U.S. state, you may also have to pay state taxes. In addition, you will likely have to file a tax return in the country you are living in. If you pay taxes to a foreign country on a source of income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for the foreign taxes paid. For more information, click here.  It is important to consult with a tax professional who is familiar with taxes in the country you are moving to.  

Investments

You may want to invest some money in the local currency so that your assets keep pace with cost-of-living increases. Having investments in the currency of the country you are living in also protects the value of your investments from drops in the value of the dollar.

Real Estate

Purchasing real estate is not always straightforward in another country. Before deciding to buy, it is important to understand the rules of the country you are moving to. For example, in Mexico foreigners are prohibited from owning property within 31 miles of the coast, so property is often held inside corporations or trusts, which can create tax issues for U.S. citizens. In addition, there may also be different inheritance laws that could affect property. For example, in France children have priority over a surviving spouse.

Health Care

Most countries have a national healthcare system that covers all residents, and monthly premiums are often less than $100. It’s relatively easy to become a resident of another country, which typically involve proving you’ll have at least a modest amount of income, perhaps $1,000 a month.  Traditional Medicare does not provide coverage for hospital or medical costs outside the United States, so if you are retiring in another country, you will need to purchase health insurance from another source.

Quality of health services varies, so research carefully, especially if you have medical problems. Even in countries with well-rated health care systems, the best services are centered around metropolitan areas.  Emergency care and emergency response time may be important considerations when considering the idyllic village off the beaten path.  

Regardless, Medicare may remain an important part of your health care plan, however, because If you return to the United States, you will still be covered by Medicare Part A, which covers hospital stays.  Unless you paid the premiums for Medicare Part B while you were away, however, you may have to pay a penalty to enroll in Medicare Part B. Of course, you could continue to pay the Part B premium.  For more information about Medicare while traveling or living overseas, click here.

Safety and Security

Consider carefully safety and security issues too. Use the State Department’s Retirement Abroad advisory for information for country-specific reports on crimes, infrastructure problems and even scams that target Americans abroad.

Retirement funds are an attractive target for charlatans and scammers who make false promises of romance, friendship, or financial gain.  Scammers operate primarily through the Internet, email, and phone, but personal targeting at airports, bus stations, and market places are also common.  For more information,  review the State Department's information on International Financial Scams. Information on scams common in your destination country can also be found in each country's Country Specific Information.

Accessibility and Accommodations

If you have mobility difficulties or use a wheelchair, determine access to areas such as swimming pools, public facilities, restaurants, bars, toilets, etc.  Determine if shopping and entertainment are accessible.  For more information, check out the State Department's section on Traveling with Disabilities. 

Prepare for Emergencies

Leave emergency contact information and a copy of your passport biographic data page with family and trusted friends.  Carry emergency contact information for your family in the United States with you when you travel (be sure to also pencil it in the emergency contact information section of your passport).  Know the contact information for the nearest U.S. embassy or consulate and provide that information to your family and friends.  If there is an emergency where you are staying, such as civil unrest, disrupted transportation, or a natural disaster, prevent undue worry or concern by contacting your family and friends as soon as possible.

A secure way to maintain your emergency contact information is to enroll with the Smart Traveler Enrollment Program.  Your information is stored securely and enables the Department of State, U.S. embassy, or consulate to contact you, your family, or your friends in an emergency according to your wishes.  

For more information, consider International Living's "Best Places to Retire."   AARP also writes about retiring abroad and Expatinfodesk.com publishes relocation guides.

Updated 4/1/2015