Law that relaxes IRA distributions creates confusion

Ordinarily, people over 70½ are required to receive a minimum distribution from their retirement plan each year. But this minimum payout won’t be required in 2009, thanks to a law passed by Congress.

However, this law is creating widespread confusion, and if you’re concerned, you might want to ask for advice quickly on how to handle your particular situation. [Read more…]

Be Aware of the Dangers of Joint Accounts

Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones, and such accounts are sometimes referred to as “the common person’s estate plan.” But while joint accounts can be useful in certain circumstances, they can have dire consequences if not used properly. Adding a loved one to your bank account can affect your eligibility for Medicaid as well as expose your account to the loved one’s creditors.

When a person applies for Medicaid long-term care coverage, the state looks at the applicant’s assets to see if the applicant qualifies for assistance. While a joint account may have two names on it, most states assume the applicant owns the entire amount in the account regardless of who contributed money to the account. If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to it. [Read more…]

Probe Finds Nursing Homes Are ‘Dumping Ground’ for Mentally Ill

Elderly nursing home residents are increasingly living alongside young and middle-age people with mental illness, with sometimes tragic results, according to a 50-state investigation by the Associated Press. It appears that in many cases this potentially dangerous trend is a violation of federal law.

According to the AP, nearly 125,000 non-elderly adults with serious mental illness were living in U.S. nursing homes in 2008. This is a 41 percent increase from 2002. Younger mentally ill people now account for more than 9 percent of the nation’s nearly 1.4 million nursing home residents. [Read more…]

Online Services Offer Estate Planning for Digital Assets

Once upon a time, the key to a safe deposit box was all loved ones needed to unlock the secrets of a life recently ended. Today, many aspects of our lives – both financial and personal – are lived in places accessible only by password. We have e-mail addresses, online brokerages and banks, Facebook and MySpace profiles, and accounts with PayPal, eBay, and more. In addition, many people have formed relationships with people they know only through game or social networking sites.

When a person dies, access to these accounts and contacts can be lost or extremely difficult to retrieve. As a result, a small online industry has sprung up to help people pass on the digital keys to their online lives should they die or become disabled. Call it “digital estate planning” or creating a “virtual executor.” [Read more…]

Take advantage of the recession to lock in estate planning gains

Nobody likes a recession, but any time when real estate values, stock prices and interest rates are low is a great time to do estate planning.  You can transfer assets to your heirs now at a low value and save them a huge estate tax bite later.

One way to do this is with a “grantor retained annuity trust” or GRAT.  The idea is that you create a trust and fund it with income producing assets, while keeping the right to receive a certain amount of income from the trust each year.  When the trust expires after a certain number of years, the assets go to whatever beneficiaries you choose. [Read more…]

Tips for Preventing Financial Abuse of the Elderly

As the economy worsens, reports of elder financial abuse are on the rise. The elderly are particularly vulnerable to scams and to financial abuse by friends, acquaintances, caregivers and family members in need of money.

A recent MetLife study, Broken Trust: Elders, Family and Finances, found that up to one million older Americans may be targeted yearly. Family members and caregivers are the culprits in 55 percent of cases, although financial losses are usually higher with investment fraud scams. [Read more…]

This is a good time to make family loans

With interest rates at historic lows, this can be a good time to make loans to your children so they can buy a home, start a business, or invest.  Giving your children an outright gift can subject you to the gift tax, but giving your children a loan doesn’t have any effect on estate or gift taxes as long as your children pay you back at an interest rate set by the IRS.  Right now, the IRS rate is extremely low- and considerably lower than the rate banks usually charge for a mortgage or business loan.

In effect, the difference between what your children pay you in interest and what they would have to pay the bank amounts to a completely tax free gift from you.  Plus, any appreciation in their investment is an additional gift on which you don’t have to pay a gift tax. This can be an especially good idea for children who would have trouble getting a bank loan because they don’t have a good credit score, don’t have sufficient credit history or don’t have enough of a down payment for a home.

Estate Taxes: What’s a Taxpayer to Do?

After almost a decade of changes in the federal estate tax laws – and many states shifting their tax structure in response to the federal changes – clarity appears to be on the horizon. Congress’s recently passed budget resolution would make the current estate tax rules permanent, taxing only estates over $3.5 million in value with the tax rate set at 45 percent. Although no legislation has yet been voted on, the nonbinding budget resolution sets guidelines for Congress to follow when writing tax and spending legislation later this year.

In light of this and other changes, taxpayers need to review their estate plans with the following issues in mind: [Read more…]

‘Green leases’ are raising legal issues

More and more commercial buildings are being designed to meet environmentally friendly, or “green,” standards. In addition, a growing number of communities around the country are adopting “green ordinances” that mandate certain environmental standards for large commercial buildings or developments.

As a result, commercial leases in these buildings need to take green issues into account. And since this is a new area, how these issues should be handled isn’t always clear, and can lead to considerable negotiation between the parties. [Read more…]

Real Estate downturn creates an estate planning opportunity

Real estate prices have been falling all over the country.  While no one likes to think that their home is worth less than it used to be, the downturn has created an opportunity to give your home to your eventual heirs while saving a large amount of estate and gift taxes.

This can be done with a “Qualified Personal Residence Trust”, or QPRT.  The idea is that you put your home into a trust for a certain period of time – five years, 10 years, 15 years or whatever period you choose.  At the end of that time, the trust expires and ownership of the home goes to the beneficiaries you name. [Read more…]

Fannie Mae makes it harder to get a condo mortgage

New rules from Fannie Mae are making it harder to get a mortgage for a condominium unit. Effective this past March 1, the mortgage giant will no longer purchase mortgages for condo units in new buildings unless at least 70% of the units are sold or under contract. Previously, Fannie would purchase mortgages as long as at least 51% of the units had been sold.

As a result of the change, a number of people who thought they would have no trouble getting a mortgage suddenly found out otherwise. They might be able to get out of their purchase and sale agreement, assuming they have a mortgage contingency clause. [Read more…]

Vacation homes, investment properties may be cheap

While the average price of a primary residence declined last year, the average price of vacation homes and investment properties declined even further, suggesting that many of these properties might now be available at an attractive cost. The median sales price of a vacation home was $150,000 last year, down from $195,000 in 2007, according to the National Association of Realtors. That’s a 23% drop in one year.  A typical investment property cost $108,000 last year, down from $150,000 in 2007. That’s a drop of 28%.

 Sales of these properties have been off, which might explain the price declines. Sales of primary residences were down 13% last year, but investment-home sales were down more than 17% and vacation-home sales were down 31%. Vacation-home buyers appear to be looking at their properties as a long-term investment. Some 58% of purchasers say they expect to keep the property for 11 years or longer.

Chicago ‘historic area’ zoning case being watched across the country

Can a city block property owners from making improvements to a building or a neighborhood on the grounds that doing so would destroy its value as a historic landmark?

A closely watched case in Chicago could answer that question. Although the case is specific to Chicago, cities and property owners across the country are paying attention to it because the same issues could be brought up in many other places. [Read more…]

Most landlords make mistakes on their income tax, U.S. says

A majority – some 53% – of individual landlords in the U.S. make mistakes on their income tax when it comes to reporting rental income and expenses, according to a study by the U.S. Government Accountability Office.

That means that out of about 8.9 million individual landlords in the country, nearly 5 million aren’t paying the correct tax.

And of those 5 million, fully a quarter paid too much tax and should have had a lower tax bill, the government says. The agency’s figures are based on a comprehensive review of landlords’ returns that have recently been audited. Altogether, landlords misreport their income by about $12.4 billion every year. [Read more…]

Accused employee can’t sue his accuser

A manager at the Cambridge Marriott hotel who was fired after he was accused of sexually harassing a bartender can’t sue the bartender, according to the state Appeals Court. The manager sued the bartender for defamation, claiming she slandered him to the hotel and wrongly caused him to lose his job. But the court said that a person can’t be sued for defamation for statements made in relation to a court case.

In this situation, the bartender hadn’t yet filed a court case when she complained about the manager to the hotel. However, by that point she had decided to file a lawsuit and to make a complaint to the state Commission Against Discrimination, and that was enough, the court said.

Getting divorced? Be careful with tax returns

If you’re in the middle of a divorce and your spouse is preparing a joint income tax return, remember that even though you’re splitting up, you’re still jointly responsible if you sign the return and your spouse has done something wrong.

In a recent case, a couple was still married but living separately with separate checking accounts and credit cards. The husband prepared the couple’s joint tax return and gave it to the wife to sign. She checked to see if her information was correct, but didn’t question his items on the return. [Read more…]

Woman can’t be turned down for job because she has children

A company can be sued if it didn’t promote a woman because it was afraid she would have trouble balancing her job and raising four children. That’s the result of a ruling from the federal appeals court in Boston. The woman, who worked for an insurance company, was one of two finalists for a management job. She had an 11-year-old son and six-year-old triplets, and was taking one course a semester at a local college.

She claims that when she was turned down, a manager told her, “It was nothing you did or didn’t do. It was just that you’re going to school, you have the kids, and you just have a lot on your plate right now.” According to the woman, this was sex discrimination, because the company wouldn’t have had the same concerns about a man in her position. The manager (a woman) said she wasn’t discriminating and merely gave that explanation to the applicant in an effort to soften the blow. The court said the case should be decided by a jury.

Watch out for ‘business compliance’ scams

A number of Massachusetts companies have been receiving official-looking letters recently offering to file corporate minutes with the government for a fee. These appear to be scams designed to trick business owners, according to the Secretary of State’s office.

Many businesses have received letters from something called “Compliance Services” offering to file corporate minutes statements with the state and asking for payment of a $125 “annual fee.” The trick? There is no requirement to file corporate minutes in Massachusetts. And the $125 fee is confusing because it’s the exact same amount as the fee for filing an annual report. Before you respond to any such letter, make sure you know what the actual reporting requirements are and whether you’re being taken advantage of.

Resident sues condo association after slipping on snow and ice

A condo resident can file a lawsuit after he slipped on snow and ice while taking out his trash, according to the state Appeals Court. After a 16-inch snowfall, a landscaping company hired by the condo association plowed out the area. However, it plowed a large pile of snow up against the dumpster. The resident attempted to make his way through the snow in order to dispose of his garbage. He slipped and fractured his wrist, and missed five months of work as a lithographer.

He sued the condo association, the property manager and the landscaper. He claimed he had previously complained about the danger caused by the company’s method of snowplowing. The court said that while “snow falls in Massachusetts” and “it is no person’s fault,” this case was different because the resident didn’t slip on a natural accumulation of snow, but rather on an unnatural and arguably dangerous pile left by the landscaper.

Company sued for telling employees why someone was fired

Staples, the office-supply retailer, can be sued for firing an employee and then sending a mass e-mail to other employees saying why it fired him. That’s the word from the federal appeals court in Boston. The employee can sue Staples for “libel” … even if what it said about him was true.

In most states, truth is a defense to libel. But Massachusetts is unusual. In Massachusetts, it’s illegal even to broadcast the truth about someone if (1) you do it with malice or ill-will, (2) you’re not a newspaper or other traditional news source, and (3) the person is a private individual and not a public figure such as a celebrity or politician. [Read more…]

Probate law in Massachusetts is changed

A brand new law in Massachusetts will make many changes in the way people’s estates are handled.

The “Uniform Probate Code,” signed into law by Gov. Patrick, includes the following new rules for what happens if someone dies without a will:

  • In many cases, an estate representative can begin distributing assets to heirs before getting a formal court judgment.
  • If the dead person’s spouse is raising young children from the marriage, the spouse will in most cases collect the entire estate. Before, that wasn’t always true. [Read more…]

Fired employee has to pay income tax on his settlement

A fired employee who received a $65,000 settlement has to pay income tax on this amount, according to a decision from the U.S. Tax Court. The employee was fired after working for 30 years at the “Story Land” amusement park in New Hampshire. He claimed he was wrongfully terminated and that Story Land officials subsequently damaged his reputation. The $65,000 was agreed to during a mediation session.

In general, people who receive a jury award don’t have to pay income tax on it if it was for physical injury or physical sickness, or was intended to compensate them for psychological treatment for emotional problems. The employee in this case claimed he suffered physical problems as a result of the firing, including depression, a sleep disorder, and elevated blood sugar levels, and that he saw a psychologist as a result.

But the court said that wasn’t good enough. It said the settlement in this case was for wrongful firing and defamation. While the employee might have suffered emotional distress, the settlement was intended as being in place of wages and wasn’t designed primarily to compensate him for a physical injury or a psychologist’s bills. In the end, the employee had to pay more than $13,000 in back taxes, as well as a $2,650 penalty to the IRS.

Independent contractor can sue for injury on the job

An independent contractor can sue for injuries on the job – even though the workers’ compensation law generally bars lawsuits for workplace injuries, according to an appeals court in California. The worker was hired by a subcontractor to install a canopy at a gas station. He fell into a hole at the construction site and was injured.  He sued the general contractor and the subcontractor. The defendants argued that the suit should be thrown out because of the workers’ comp law. But the court said the suit could go forward because the worker was a contractor, not an employee. An independent contractor isn’t eligible for workers’ comp benefits, so the ban on lawsuits doesn’t apply, the court said.

Worker who is afraid to drive isn’t ‘disabled’

A nurse who worked as a family case worker – and who had to drive to various people’s homes to evaluate their situation – suffered post-traumatic stress disorder after a car accident. As a result, she had difficulty driving. She took multiple leaves of absence, received unsatisfactory evaluations, and eventually left her job. Later she sued, claiming she was discriminated against because of a disability.

So the question was, is “fear of driving” a disability? Not under federal law, a federal appeals court in Chicago decided. Under the law, a “disability” is something that substantially restricts a person in a major life activity. And the court said that driving doesn’t count as a major life activity. Many Americans choose not to drive, and there is no inherent right to drive, the court said. However, the court noted that an employee’s fear of driving might amount to a disability if it somehow interfered with some other activity that qualified as a major life activity.

Police department can prohibit religious dress

A police department can refuse to allow a female police officer to wear a traditional Muslim headscarf, a federal appeals court has decided. This didn’t amount to religious or sex discrimination.

The officer had asked to wear a headscarf that would cover her hair and the back of her neck, but the police department’s dress code didn’t contain a provision for religious attire. The court sided with the police department, saying it would be an “undue hardship” for the department to have to allow religious dress. It noted that the police commissioner had testified that it was vital for the department to promote the appearance of religious neutrality in dealing with the public and in working together cooperatively.

Worker could be fired when he returned from medical leave

An employer who fired a worker for performance problems that were discovered while he was on medical leave didn’t violate the Family Medical Leave Act, a federal appeals court has ruled. The employee requested leave for a health condition that required hospitalization. While on leave, the company hired replacement workers who discovered multiple problems with the employee’s work. The company terminated the employee the day he returned from leave. The employee sued, claiming the firing was in retaliation for his taking leave. But the court disagreed, finding that there was undisputed evidence that the company discovered the problems during the leave, investigated the problems, and determined he was responsible for them. As a result, the firing was fair and wasn’t merely retaliation.

Can employees be forced to arbitrate their claims?

Can an employer demand that employees give up their right to go to court with employment disputes, and instead submit any case to arbitration? Many companies have been doing so lately. They often prefer arbitration because it is quicker, less expensive and more private.

However, it’s still unclear whether – and when – employers can legally do this. One result has been that many employees are now going to court to resolve the question of whether they can go to court. Here are three of the latest cases that have addressed this issue: [Read more…]

COBRA changes help laid-off workers – but could ensnare employers

Laid-off workers will have to pay less to maintain their health insurance as a result of changes enacted by Congress – but these changes are creating new problems for employers who must take steps to comply with the law. The changes affect a federal law known as COBRA. The COBRA law says that fired or laid-off employees who had been eligible for health insurance through their employer have a right to continue receiving that insurance for up to 18 months. Normally, the employees have to pay their full share of the premiums – with no employer subsidy – but even so, this is usually much cheaper than buying health insurance individually and not as part of a group plan.

However, under the new changes from Congress, employees who are fired or laid off between September 1, 2008 and December 31, 2009 get a break. They only have to pay 35% of the cost of the insurance. The employer must pay the remaining 65% – although the employer can then be reimbursed for this amount by taking it as a credit against federal payroll taxes. [Read more…]