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Thursday, November 3, 2016

Is your Estate Plan up to Date with Technology?

One of the biggest complications in estate planning is that the law is forever catching up to technology. Obviously, for privacy concerns, access to the content of communications such as emails, text messages and social media accounts must be specifically given to an Executor or Power of Attorney Agent. These specific instructions should be placed in your will, trust, power of attorney or similar document. Does your Power of Attorney or Will or Trust mention access to digital access or on-line accounts?

There may come a time when someone needs lawful access to your online accounts and the current default (similar to laws of “intestacy,” when someone dies without an estate plan) is to follow a companies’ terms of services agreements. Some companies like Facebook, LinkedIn and Twitter have developed policies to deal with the accounts of deceased users, but many are still unaware of these policies.


Read more . . .


Monday, October 24, 2016

How to Plan for Long-Term Care Costs

By Peter J. Gilbert

At least seven out of ten Americans age 65 and over will need long-term care at some point. Most people simply underestimate the cost of long-term care, or they think that Medicaid will cover the costs. So what is your best defense against long-term care costs? Advance planning with professional help.

Medicaid won’t pay until almost all the assets of a person/couple are spent, so many people must pay for these costs out-of-pocket until they are nearly out of money; an unnecessary occurrence.


Read more . . .


Monday, November 9, 2015

Husband’s Will Leaves Second Wife Broke!

By Mark J. Manta, Esq.

Benjamin’s second wife, Julia, was a decade younger than her sixty year old husband.  They had one son, Brad, who has Down’s syndrome. Before Julia, Ben was married to Sarah for twenty years and had two children, John and Mary, who were estranged from Ben and were now adults living on their own.  Ben and Sarah divorced ten years ago, but Ben had always hoped for a reconciliation with his children and indeed sent them money on their birthdays every year.

Julia had never given a second thought to Ben’s finances or will as he had always taken good care of her and Brad.  Ben’s work in the healthcare industry provided well for his family. They had a large home in an upscale development.  Since he started working, Ben put his money into an IRA, and it was now worth over $2 million. Julia didn’t know much about it, Ben got e-statements from Vanguard and she only saw references on the tax return she signed.

A week ago Ben had fallen asleep reading, but this time he didn’t stir as Julia approached the couch. The day after the funeral she found his will in an envelope in the antique secretary. Her heart sank when she saw that it had been drafted before they had Brad.  The will left his estate to be split evenly, half to his estranged children the other half to Julia. She didn’t think Ben would have given John and Mary this much today, not with Brad’s special needs.  When she got in touch with Vanguard regarding the IRA, they told her that Ben had never changed the beneficiary from his first wife.

She couldn’t comprehend it. She won’t have any of the IRA; it all goes to Sarah.  Ben’s estranged children will each get $125,000 and Julia gets $250,000, the house and the cars. It’s not enough. Julia realizes she will have to sell the house and she doesn’t know how she’ll provide for Brad and his special needs.

Do you think this is how Ben wanted to take care of his family? Estate planning attorneys know a lot about the law, but to tell the truth, there’s a lot we don’t know. We don’t know when you’re going to die, what the law, or your family situation, or your assets will be like then. So how do we make sure your plan (your Will or your Trust) works correctly at that future time? We’ve found that the common-sense way to keep your plan on track is to get together every so often to review things and make any needed changes. We call this program ACE Advantage.

It’s not just about having the documents. If Ben and Julia had an easy way to keep in touch with their estate attorney, the changes in their lives would have been incorporated into their estate plan.  With our ACE Advantage platform, clients of HighPoint Law Offices have access to services to keep their plan up to date.  Both Ben and Julia would have been able to make informed decisions about how best to care for Brad.  With the ability to call with quick questions or make changes, there would not have been any dark surprises waiting in the secretary.  The difficult time in dealing with the death of a spouse would have not been compounded by the consequences of an estate plan that no longer worked.


Monday, February 23, 2015

PA Inheritance Tax Exemption for Qualified Family Owned Business Interests

When a loved one passes away in Pennsylvania, the Commonwealth will impose an Inheritance Tax on all the beneficiaries of that estate. Typically a beneficiary may have to pay between 0 and 15 percent inheritance tax depending on their familial relationship to the decedent on everything that they receive from the decedent. (For a list of the inheritance tax scroll to the bottom of this post). But recently an exemption to the inheritance tax for those transferring an interest in a qualified family owned business to a qualified transferee was enacted by the Legislature.

For those people that pass away after 2013, who transfer an interest in a qualified family owned business to a qualified transferee, there could be no inheritance tax on that transfer if certain specific requirements are met. To understand how this exemption works, we must understand what the Commonwealth considers a qualified family owned business interest (QFOBI) and who is a qualified transferee (QT).

To be deemed a QFOBI, the business must meet certain criteria. The QFOBI is a sole proprietorship or an interest in an entity carrying on a trade or business that:

  1. has fewer than 50 full-time employees;
  2. has a net book value of less than $5 million (net book value, NOT net fair market value);
  3. has been in existence for five years prior to the decedent’s death (the decedent does not have to own the interest for all five years prior to death, ONLY that the business/trade was in existence for five years prior to death and the decedent owned their interest at the time of their death);
  4. is wholly owned by the decedent or the decedent and members of their family that will qualify as a qualified transferee; and
  5. is engaged in trade or business, the principle purpose of which is not the management of income producing assets or investments.

To be deemed a QT, the transferee must be either:

  1. a husband or wife of the decedent (same sex spouses qualify in PA);
  2. a son, daughter, grandchild or great grandchild of the decedent;
  3. a sibling of the decedent or a sibling’s lineal descendants (nieces/nephews); or
  4. an ancestor (parent/grandparent) or an ancestor’s sibling (aunt/uncle).

There are some stipulations that also must occur to receive the exemption such as:

  1. the interest must continue to be owned by a QT for seven (7) years after the transfer;
  2. the interest must be reported on a PA inheritance tax return;
  3. certification must be filed every year by the QT for the seven year period;
  4. the interest must be owned by a QT (not always the original QT, but a QT nonetheless) for the entire seven year period; and
  5. property transferred to the QFOBI within a period one-year prior to the decedent’s death is not eligible for the exemption.

If all these requirements are met, then the Commonwealth exempts the QFOBI from the inheritance tax. However, if one of these situations fails, perhaps the interest is not owned by a QT for the entire seven year period, then the inheritance tax will be imposed on the transferee(s) for the amount that would have been due at the time of death.

While this exemption is not applicable to everyone, those able to benefit from this exemption could garner an inheritance tax savings of zero for spouses, but $225,000 for children, $600,000 for siblings, or $750,000 for other beneficiaries (based on a transfer value of the QFOBI at the $5 million cap). If you think that you and your business qualifies for this exemption, you should speak with an estate planning attorney that can help you set up your plan to maximize this exemption.

*** PA Inheritance Tax Rates: 0% for spouses; 4.5% for children, grandchildren or parents; 12% for siblings; and 15% for all other beneficiaries. ***


Tuesday, January 6, 2015

What can a Special Needs Trust Pay For?

There is one question that our client’s always ask when designing a Special Needs Trust (SNT) for a loved one, “What can the Trust pay for?”

It is a great question and a very important question. If funds from a trust are not used properly, then the loved one that the trust was set up to provide for could be at risk of losing their government benefits for a period. Supplemental Security Income (SSI) is a major government benefit affected by payouts from a special needs trust, so this blog will focus solely the rules involving SSI.

There is one basic rule that applies to everyone with a special needs trust that receives SSI: A special needs trust for an SSI beneficiary should, for the most part, never give the beneficiary cash, a cash equivalent (gift cards), or pay for the beneficiary’s food or shelter.

Understanding the rules regarding cash payouts from the trust to the beneficiary are pretty cut and dry. If an SSI recipient receives cash or a cash equivalent from the trust (or really from anyone), the recipient’s SSI benefit will be reduced on a dollar for dollar basis up to the point that they lose SSI completely for that period. Therefore, if an SNT pays out $200 to a beneficiary in cash, that beneficiary will lose $200 from their SSI payment from that payment period. This is a hard and fast rule and should not be disregarding lightly.

The food and shelter rules are a bit more complicated, so let’s try to simplify them just a little for clarity. If the trust pays for a beneficiary’s food or shelter directly, then the beneficiary could lose up to one-third of their SSI payment. This includes payments of bills for house-related expenses such as the mortgage/rent, real estate taxes, utilities or condo fees. All those payments can incur a loss of one-third of the payment for that period. Although a one-third reduction might not seem like much to some (for PA SSI recipients, that could be a $240 reduction), if the recipient also works or receives additional income from another source, then they could lose SSI and its accompanying Medicaid benefits completely.

Outside of the cash payout, and the food and shelter rules, a special needs trust can typically pay for almost anything the beneficiary needs to supplement their lifestyle, including but limited to: medical care, dentistry, therapy, medical equipment, a car, furniture, televisions, computers, trips, family visits and other tangible item that would enrich or benefit the beneficiary’s life. Your best idea is to sit down with an attorney that understands these rules and discuss your options.


Monday, December 22, 2014

ABLE Act: What is it?

On December 19, 2014, the President signed into law the Achieving a Better Life Experience Act of 2014 (H.R. 647), commonly known as the ABLE Act. The Act now becomes Section 529A of the Internal Revenue Code and is modeled loosely on the Section 529 college savings programs already within the Code.

According to the Act, its purpose is to “encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life,” by providing “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits,” provided by private insurance, Medicaid, Supplemental Security Insurance (SSI), the beneficiaries employment, and other sources.

That statement says many things in Legalese, but what does it mean in English and how does it apply in the real world…

Who is eligible to have an ABLE Account? The beneficiary of an ABLE Account must be entitled to receive benefits from SSI or SSDI based on blindness or disability; the beneficiary must have been disabled prior to age 26 and meets the Social Security Income program’s standard for disability; and the individual will file a disability certification under rules the IRS will write.

What is a disability-related expense? Any expense related to education; housing; transportation; employment training and support; assistive technology and personal support services; health, prevention, and wellness; financial management and administrative services; legal fees; expenses for oversight and monitoring; funeral and burial expenses; and any other expenses approved by the Secretary of the Treasury under the regulations.

How does the money in the ABLE Account affect my eligibility for SSI and Medicaid? Amounts up to $100,000 in an ABLE Account will be disregarded in determining eligibility for SSI, except those distributions made for housing expenses. Amounts exceeding $100,000 in the Account will cause a suspension of SSI until those excess resources are spent. Medicaid eligibility is completely unaffected by the amount of funds in an ABLE Account.

Who can establish and contribute to an ABLE Account? The beneficiary or any family member of the beneficiary can contribute to the Account; however the primary beneficiary has to be the owner of the ABLE Account.

What is the tax treatment of the ABLE Account and distributions made from it? All amounts in an ABLE Account are exempt from taxation while remaining in the Account. Any distribution from the Account to a beneficiary for a qualified disability-related expense is also considered a tax-free distribution to the beneficiary.

 

Sounds too good to be true, what’s the catch? There are limitations within the ABLE Act, but the most important ones appear to be the following:

  1. A disabled person can be the designated beneficiary of only one (1) ABLE Account;
  2. A disabled person can only have an ABLE Account in the State in which they reside, or a State that provides ABLE Account services for their home state;
  3. All contributions to an ABLE Account must be after-tax income (cash);
  4. Annual contributions to an ABLE Account cannot exceed the annual federal gift-tax exemption (in 2015, that is only $14,000 per year);
  5. Aggregate contributions to an ABLE Account cannot exceed the State’s limit on current 529 account contributions (in Pennsylvania the limit is $452,210 and in New Jersey the limit is $305,000); and
  6. Upon the death of the beneficiary, all amounts remaining in the ABLE Account shall be distributed back to the State in an amount equal to the total medical assistance (Medicaid) paid for the beneficiary after the establishment of the Account.

i.e.: The beneficiary establishes an ABLE Account in 2015, he begins receiving medical assistance in 2020, and he passes away in 2050. If there is $300,000 remaining in the Account in 2050 and the State provided $279,000 in medical assistance from 2020-2050, then the State takes $279,000 from the Account and the remaining $21,000 will be distributed to the beneficiary’s descendants.

The ABLE Act is a big leap forward in legislation for disabled people, but there are many factors that go into planning for the future of a disabled loved one. It is important to understand how an ABLE Account works and then decide whether it may or may not be the right choice to include, based on the unique situation, in your disabled loved one’s plans for the future.


Tuesday, December 16, 2014

The Kiddie Car Syndrome, submitted by a Valued ACE Advantage™ Client

Many of us know someone who advocates for the health of a beloved spouse or parent.  Here's a unique insider's view from one of our ACE Advantage™ clients who offered to share her story.


Read more . . .


Wednesday, December 10, 2014

How to Avoid the Need for a Probate Lawyer in Bucks and Montgomery Counties

If you are dealing with an estate that has to go through the probate process in Pennsylvania, your smartest move is choosing to work with a local probate lawyer.  There are cases where very simple estates will move through fairly easily, but there is still a matter of paperwork, accounting, etc. to consider; and a probate lawyer can save you an incredible amount of time and hassle.

The best way to avoid the need for a probate lawyer in Pennsylvania is to make sure that your estate planning has been done in advance.  This means that you’ve set up wills, trusts, and any other applicable legal documents so that those you leave behind won’t have to deal with taking the entire estate through the court system.  Trusts, such as a revocable living trust, are one of the most common tools for avoiding probate, but there are some other possible options.

Small Estates

Some people think that having a will means that your estate will bypass the process.  Any reputable probate lawyer in the Greater Philadelphia area will tell you, however, that this isn’t the case.  Having a will is certainly still important, as it provides important directions for the dissemination of your estate, but it doesn’t get your heirs off the hook when it comes to probate.

If the estate is truly a “small” one, then you may be able to avoid probate.  This can happen in cases where there the only thing left behind is personal property.  In these situations, there is no real estate to be inherited.  The laws regarding the allowable value of an estate to be considered in this group does change, so it might be helpful to at least chat with your local probate lawyer to see if the estate qualifies.  If so, the heir may be able to create an affidavit that will work instead of going through probate.  There may also be some simplified court procedures available to heirs of these very small estates.

Transfer-on-Death Deeds

Many states allow for real estate to be transferred after death without going through probate.  Again, laws change regularly, so it’s a good idea to check with a local probate lawyer or estate planning attorney to ensure that this is an option for you.  This kind of deed needs to be created in advance and will specify that it doesn’t take effect until the owner of the property has died.  Fortunately, transfer-on-death deeds can be revoked if the situation changes before the owner passes away.  This is not just a “gentleman’s agreement” and requires legal preparation, signatures, and notarization before being filed.

These are just a couple of tools available to those who want to avoid the eventual need for a probate lawyer.  If they have not been put into place, or you’re not sure if these rules apply to you, it’s advisable to speak with a qualified attorney in advance.


Friday, November 14, 2014

There is only one certainty in life and death… TAXES.

 

Benjamin Franklin wrote that “There are only two certainties in life… death and taxes.” What Ben did not know then was that when you die in the United States today, you might still have to pay taxes in the form of either an Estate or Inheritance Tax. So maybe we should alter his quote a bit. Here is a quick primer on Estate and Inheritance Taxes.


Read more . . .


Thursday, November 13, 2014

Congratulations to everyone who participated in the Autism Race for Resources this past weekend!

 We are so proud to have had our name listed among the sponsors of the Autism Cares Foundation's 5k Run-10K Run, Family Walk and Autism Expo! Our illustrious attorney, David Siegel, braved the chilly autumn morning to support the event and raffle off tickets to Sky Zone - that new, fun trampoline place.  Check out the photos on our Facebook page by clicking HERE

 

 


Tuesday, October 7, 2014

My Special Needs Child is Turning 18

I often ask clients who are parents of a special needs child, “Have you decided who will be responsible for your child’s financial and healthcare decision-making after their 18th birthday?” 99% of the time the response is, “What are you talking about? I’m their parent so I will be the decision maker after they’re 18… (long pause)… right?” Wrong.

 

In Pennsylvania the law states that a person reaches the age of majority (adulthood) upon their 18th birthday whether they have special needs or not.  What this means is that when your special needs child turns 18, the Commonwealth considers them adults capable of making their own decisions. But what if they can’t?

 

An adult with special needs is considered incapacitated if they are unable to evaluate information and communicate decisions effectively, or are impaired to the extent that they are partially or totally unable to manage financial resources or meet the essential requirements for physical health and safety.

 

If your child is deemed incapacitated, then as their parent or legal guardian, you can petition a court to assign Guardianship for them. There are two kinds of guardianships: a Guardian of the Person, who provides shelter and makes the necessary healthcare decisions; and a Guardian of the Estate, who controls the financial decision making. A court will decide what is in the best interest of the incapacitated person and choose who the guardian(s) shall be. This process takes time and can be fairly costly, so parents are counseled to begin preparing for a guardianship situation about 6 months prior to their child’s 18th birthday.

 

If your child is considered to have legal capacity, then they can assign their financial or healthcare decision-making (or both) to whomever they choose through Powers of Attorney documents. Most often a child will choose their parents to be powers of attorney and there is a smooth transition upon their 18th birthday. Powers of attorney take much less time, effort, and expense for the family.

 

Whether you think your special needs child needs guardianship or powers of attorney, knowing that you can still be legally included and involved in the decision making for their life will provide you with peace of mind as you approach their 18th birthday.


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HighPoint Law Offices assists clients with Estate Planning, Probate and Estate Administration, Medicaid Planning and IRA Preservation in Chalfont, Pennsylvania and surrounding areas including Bucks, Montgomery, Philadelphia, Lehigh, Monroe and Northampton Counties.



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