Using ‘529’ plans for grandchildren’s college can backfire

Grandparents often want to help with their grandchildren’s college tuition bills. But you should be very careful about using a 529 plan for these expenses.

The reason? College financial aid programs generally don’t consider parents’ contributions from a 529 plan as student income, but they typically do consider grandparent 529 contributions as income. As a result, these contributions could reduce a student’s eligibility for grants, subsidized loans, and work-study programs.

Only 11% of grandparents are aware of this problem, according to a recent study by Fidelity.

If a student expects to be eligible for financial aid, in many cases it might be preferable for grandparents simply to give money directly to the parents in order to help out – even though this means forfeiting the tax-sheltered advantages of a 529 plan. Grandparents can also contribute to the parents’ own 529 plan, although not all states allow a tax benefit for doing so. [Read more…]

Your ‘power of attorney’ can name more than one agent

A power of attorney document allows someone else to act as your agent and handle your legal and financial affairs. It’s critical to have such a document in case you become incapacitated.

Sometimes, people want to name more than one agent. For instance, a person may have two children, and not want one child to feel that the other is being favored. Sometimes a parent will name two children and give them both access to all his or her affairs, so one child won’t suspect that the other is abusing the power.

Naming more than one agent has some advantages. For one thing, if one agent is hard to reach in an emergency, the other may be able to step in. [Read more…]

How to ‘fix’ a trust that isn’t working as intended

Sometimes, despite everyone’s best efforts, things change and the terms of an older, irrevocable trust just don’t work as well as they could in the present circumstances. But there’s a movement afoot to allow people in such a situation to solve the problem by moving the assets from an older trust into a newer one with more appropriate rules.

This is sometimes called “decanting” a trust, because you’re basically pouring the assets from an older container into a newer one.

Today, some 22 states allow decanting of irrevocable trusts in some circumstances. That’s up from 11 states just three years ago, so there’s a lot of momentum behind the change. [Read more…]

Some older wills can cause unnecessary capital gains taxes

As a result of changes in the law, a lot of wills that were drafted even relatively recently may now result in a capital gains tax issue, and if you have such a will, you might want to consider revising it to save taxes.

Here’s the background: When a person dies, he or she can leave an unlimited amount of assets to a spouse without incurring the federal estate tax. If assets are left to anyone else, including children, then everything above the “exemption amount” is subject to a very significant tax.

In the past, the exemption amount was not very large. As recently as 2001, it was only $675,000. Back in 2008, it was $2 million. [Read more…]

Parents disagree as to when children can handle an inheritance

If you’re wondering at what age your children or grandchildren will be old enough to handle an inheritance, well, you’re not alone.

U.S. Trust recently conducted a survey of wealthy Americans (with assets of $3 million or more) and asked them that precise question. The issue is important because many parents leave assets in a trust for children or grandchildren until they reach a certain age, so the parents have to choose an age at which to release the funds.

The survey answers varied widely. Here’s a closer look at the results:

Age 18-24: 4%

Age 25-29: 23% [Read more…]

Should you tell your children about your estate planning?

Often, one of the hardest decisions people make in the estate planning process is how much (and when) to tell their children or other heirs about their plans.

There’s no single right answer for everybody; what to do depends on the nature of your planning and your family circumstances. But it’s worth giving the issue some consideration.

Many people are very hesitant to reveal the details of their family’s expected inheritances. A recent survey by UBS of almost 3,000 investors showed that only 54% had discussed their estate plans with their heirs, and only 34% had mentioned specific dollar figures. [Read more…]

You should have your estate plan reviewed if…

Some people think that once they’ve written a will and implemented an estate plan, they can forget all about it. Of course, that’s not true; an estate plan must be reviewed periodically and updated, or it can become out-of-date and actually frustrate all your good intentions.

As a general rule, an estate plan should be reviewed at least every five years to make sure it still reflects your personal and financial situation, your wishes, and the current tax laws.

But sometimes it’s good to look at an estate plan more often. For instance, if your plan contains any provisions for saving taxes, and it hasn’t been reviewed since the enormous changes in the federal estate tax laws that occurred at the beginning of 2013, it would be a good idea to reconsider whether there are now much more advantageous ways of accomplishing your goals. [Read more…]

Some real estate agents are specializing in helping seniors

Seniors who are buying or selling a house often have very different issues from younger buyers and sellers. They may be contemplating downsizing, moving to a more accessible home, searching for an active adult community, or looking for a way to age in place.

Because of this, some real estate agents have now begun specializing in helping people who are age 50 and older.

A “Seniors Real Estate Specialist,” or SRES, is an agent who has completed a series of courses conducted by the National Association of Realtors on how to help seniors and their families with real estate issues. They can help seniors look at all the options available, including making modifications to a current home, buying or renting a new home, and moving to an assisted living facility. [Read more…]

A quick look at Medicare, Medicaid, and nursing homes

Many people are surprised to discover that Medicare actually provides very limited coverage for nursing homes.

In theory, Medicare Part A covers up to 100 days of care in a skilled nursing facility for each spell of illness. However, this is true only if the nursing-home care follows at least a three-day admission to a hospital. Further, after 20 days, you must pay a copayment of $157 a day (although this may be covered by Medigap insurance).

In addition, the definition of “skilled nursing” and the other conditions for obtaining this coverage are quite stringent. As a result, very few nursing home residents actually receive the full 100 days of coverage. In fact, Medicare pays for less than a quarter of long-term care costs in the U.S. [Read more…]

IRS increases long-term care insurance deductions for 2015

The amount you can deduct on your taxes as a result of buying long-term care insurance has been increased by the IRS for 2015.

If you itemize your deductions, you can generally claim a deduction if your premiums, together with your other unreimbursed medical expenses, amount to more than 10% of your adjusted gross income (or 7.5% if you’re 65 or older).

The maximum amount of the premiums you can deduct each year depends on your age at the end of the year: [Read more…]

Should you buy long-term care insurance? How to decide

One of the most difficult financial decisions for middle-aged and older people is whether to purchase long-term care insurance.

On the one hand, LTCI premiums are generally high, they’re likely to increase in the future, and if you’re in your 50s or 60s, the need is probably decades away.

On the other hand, many people have been saved by having LTCI. It enables them to choose their own care setting, hire help without dipping into savings, and preserve an inheritance for their children.

Because it’s a difficult decision, it’s tempting just to put it off. But unless your circumstances are likely to change drastically in the future, the best time to decide about LTCI is now. Every year you wait, you’ll face higher premiums, and you’ll also run the risk that a health care event will make you ineligible for coverage. [Read more…]

Legal issues to consider when parents are living with their adult children

Did you know that 17 percent of the U.S. population – that’s more than 50 million Americans – are living in households with two adult generations?

Some of these are homes where “boomerang” children have returned home after college. But in a great many cases, seniors who no longer want to live alone (or are no longer able to live alone) are living with their middle-aged children. Sometimes the senior moves in with the children, sometimes the children move in with the senior, and sometimes both generations pool resources and buy a new home together.

In most cases, this works out well for everyone. But there are a lot of financial and legal issues that arise from such a relationship, and you’ll want to make sure you’ve accounted for them in your real estate, tax and estate planning. Not doing so at the beginning can cost a lot of money and stress down the road. [Read more…]

Estate Planning 2014 newsletters

Proposed Modification to Veterans Pensions

The Department of Veteran’s Affairs is seeking to modify its regulations for Veterans Pensions without submitting its proposals to Congress.

Currently, a veteran who served during wartime and has either a non-service connected disability or is over the age of 65 can receive a “Veterans Pension” to help pay for long-term care. Currently, the veteran must meet income and asset requirements. The veteran with a dependent may receive a maximum of $2,120 per month to offset the costs of long-term care. A surviving spouse may qualify for the pension as well, but at a reduced amount with a maximum of $1,149. These amounts help offset the costs of assisted living and in home care, which keep the veteran out of the more costly nursing home and off of Medicaid. [Read more…]

‘Crowdfunding’ businesses have obligations to investors

More and more start-up businesses are seeking funding on websites such as Kickstarter or Indiegogo, promising small rewards to individual investors in return for micro-contributions.

These include the Veronica Mars movie, which raised millions of dollars by promising small contributors posters, DVDs and movie scripts, and a space telescope project that offered “space selfies.”

But keep in mind that these promises are a legal obligation – so if you end up getting hundreds or even thousands of contributors by offering small rewards, you’ll have to follow through on each one of them. [Read more…]

Companies can’t force workers to accept ‘payroll cards’

Companies cannot require workers to receive payment of their wages via “payroll cards,” according to the federal Consumer Financial Protection Bureau.

Payroll cards have become popular recently, especially in the retail and food service industries. But under federal law, a company can’t make the cards the exclusive way it offers to pay wages.

State laws may impose further restrictions on the cards. [Read more…]

You can be sued for interfering with someone else’s contract

If you sign a licensing agreement to sell someone else’s products, but that person already has an exclusive license with a third party to sell the same products, you could be legally on the hook.

That’s a lesson that J.C. Penney learned the hard way, after it signed an agreement with Martha Stewart to sell a variety of her housewares in special dedicated sections of its stores.

The problem was that Martha Stewart had previously signed an exclusive licensing agreement with Macy’s covering sales of her kitchen, bed and bath products. So while J.C. Penney could legally sell other Martha products such as window treatments, rugs and lighting, sales of the kitchen and bath products violated the agreement. [Read more…]

Company not liable for employee who assaulted customer

A car dealership couldn’t be held liable in court for a salesman who sexually assaulted a customer, according to the Texas Court of Appeals.

The customer had brought her car in for service and was waiting for a shuttle bus to take her home. The salesman offered to drive her home in his personal car, and she claimed that along the way, he made improper advances. The dealership immediately fired the salesman.

The customer sued the dealership, but the court said the dealership had done nothing wrong.

The dealership hadn’t been negligent in hiring the salesman, it said, because it wasn’t aware of any indication that he might do something like this. Although there was some suggestion that he might have engaged in misconduct in the past, there was no evidence that he had ever engaged in sexual misconduct. [Read more…]

If someone falls outside your business, are you liable?

If you lease a store or other business and someone trips and falls outside the building, are you legally responsible?

That often depends on what’s in your lease – so this is something you may want to think carefully about when you negotiate.

This issue came up recently when a woman named Sabena Beriy fell on what she claimed was a poorly maintained curb outside a P.F. Chang’s China Bistro restaurant. P.F. Chang’s had leased the property from a landlord as part of a larger development. The lease said that P.F. Chang’s was responsible for any injuries on its “premises,” and that the landlord was responsible for any injuries that occurred outside of those premises.

P.F. Chang’s claimed that Sabena’s fall occurred in the common area of the development, not in its restaurant. It also claimed that the landlord was responsible under the lease for designing and maintaining the parking areas, driveways and curbs. [Read more…]

Supreme Court: No patent for doing ordinary things online

You can’t obtain a patent for taking some ordinary process in the real world and coming up with a computer program that makes it easier, according to the U.S. Supreme Court.

The decision is important because many companies have been trying to patent their apps and other programs to keep competitors from taking their business away.

In the Supreme Court case, a company called the Alice Corporation tried to patent an online system to reduce risk in financial transactions. Alice’s program was little different from a third-party clearinghouse or escrow service, except that it all happened automatically online. [Read more…]

Social media marketing can create legal traps for businesses

If you’re using social media to market your business, that’s terrific – but you should be aware that the same legal rules that apply in the “real world” also apply to Twitter, Facebook, Pinterest and other venues.

Many companies have rushed into social media marketing plans without considering the legal issues. Here’s a quick look at some of the problems that can result:

Improper endorsements. Many social media campaigns solicit endorsements, testimonials and favorable reviews from consumers, and then promote them. That’s fine – but keep in mind that if you offer anything in return for such endorsements, you may have to disclose this fact. [Read more…]