Steer clear of non-lawyers offering Medicaid planning services

As the U.S. population ages, more non-lawyers are starting businesses that offer Medicaid planning services to seniors. While using one of these services may be cheaper than hiring a lawyer, the ultimate costs may be far greater.

If you use a non-lawyer to do Medicaid planning, they may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won’t help them qualify for Medicaid and may actually make it more difficult. The consequences of taking bad advice can include the denial of benefits, a Medicaid penalty period or a tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. [Read more…]

Rule requiring retirement advisers to put their client’s interests ahead of their own is delayed

President Donald Trump has signed an executive order calling for a review of the so-called fiduciary rule, which was intended to prevent financial advisers from steering their clients to bad retirement investments by requiring these advisers to act in the best interests of their clients. The order delays the rule, which was scheduled to go into effect in April 2017, and the rule may ultimately be repealed.

Prompted by concern that many financial advisers have a sales incentive to recommend retirement investments with high fees and low returns to their clients because the advisers get higher commissions or other incentives, the Department of Labor drew up rules in April 2016 that would require advisers to act like fiduciaries.

The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest. Currently, financial advisers only have to recommend suitable investments, which means they can push products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. Advisers also would have to disclose any conflicts and charge reasonable compensation. [Read more…]

What is undue influence, and how can it be avoided?

Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does the term mean?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats or isolation. Often the influencer separates the individual from loved ones in order to coerce him or her. The elderly and infirm are usually more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting that it took place. However, if the alleged influencer had a “fiduciary relationship” with the loved one (meaning that the loved one placed a high degree of trust in the influencer to handle his or her affairs), the burden may be on the influencer to prove that there was no undue influence. People who have a fiduciary relationship can include a child, a spouse or an agent under a power of attorney. [Read more…]

Understanding the tax consequences of inheriting a Roth IRA

Passing down a Roth IRA can seem like a good idea, but it doesn’t always make the most sense. Before converting a traditional IRA into a Roth IRA to benefit your heirs, you should consider the tax consequences.

Earnings in a traditional IRA generally are not taxed until they are distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. By contrast, contributions to a Roth IRA are taxed, but the distributions are tax-free. You also do not have to take distributions from a Roth IRA.

Leaving your heirs a tax-free Roth IRA can be used as part of an estate plan. However, in figuring out the best type of IRA to leave to your beneficiaries, you need to consider whether your beneficiary’s tax rate will be higher or lower than your tax rate when you fund the IRA. In general, if your beneficiary’s tax rate is higher than your tax rate, then you should leave your beneficiary a Roth IRA. Because the funds in a Roth IRA are taxed before they are put into the IRA, it makes sense to fund it when your tax rate is lower. On the other hand, if your beneficiary’s tax rate is lower than your tax rate, a traditional IRA might make more sense. That way, you won’t pay the taxes at your higher rate. Instead, your beneficiary will pay at the lower tax rate. [Read more…]

Medicaid’s benefits for assisted living facility residents

Assisted living facilities are a housing option for people who can still live independently but who need some help.  Costs for these facilities can range from $2,000 to more than $6,000 a month, depending on location.  Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes. [Read more…]

How to pass your home to your children tax-free

Giving your house to your child or children can have tax consequences, but there are ways to accomplish this tax-free. The best method to use will depend on your individual circumstances and needs.

Leave the house in your will

The simplest way to give your house to your children is to leave it to them in your will. In 2017, as long as the total amount of your estate is under $5.49 million it will not pay estate taxes. In addition, when your children inherit property it reduces the amount of capital gains taxes they will have to pay if they sell the property. Capital gains taxes are paid on the difference between the “basis” in property and its selling price. If children inherit property, the property’s tax basis is “stepped up,” which means the basis would be the value of the property at the time of death, not the original cost of the property.

There are some downsides to this approach. Some states have smaller estate tax exemptions than the federal exemption, meaning that leaving the property in your estate may cause it to owe state taxes. Also, if you were to need Medicaid at any time before you died, a lien might be put on the property and it might need to be sold after your death to repay Medicaid. [Read more…]

IRS: Account transcripts can serve as estate tax closing letter

A recent IRS notice confirms that an account transcript issued by the IRS qualifies as a substitute for an estate tax closing letter, as long as the transcript includes the proper transaction code.

An estate tax closing letter indicates that the IRS has accepted an estate tax return and that the estate’s federal tax liabilities have been satisfied. Once the letter has been received, it makes it clear to the executor of the estate that it can proceed with finalizing the estate administration process.

The receipt of the closing letter is often needed to meet requirements for state law probate proceedings. It’s rare for the IRS to reopen an estate tax return after a closing letter has been issued, except in certain extreme circumstances such as fraud or a major error by the IRS. [Read more…]

Retirement accounts: Tips for taxpayers turning 70 1/2

It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts.

The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each of the accounts. If a taxpayer has multiple IRAs, the payouts can be uneven. That is, the entire amount can be taken out of one IRA, if the taxpayer chooses. [Read more…]

New law allows individuals to create special needs trusts

Buried in a new federal law is a tiny change that will now allow individuals to set up their own special needs trusts.

The sum total of the change is two words — “the individual” — intended to correct a more than 20-year-old error. The change is called the Special Needs Trust Fairness Act.

Authorized under the Omnibus Budget Reconciliation Act of 1993, special needs trusts protect assets and allow an individual to maintain eligibility for governmental benefits such as Supplemental Security Income (SSI) and Medicaid.   [Read more…]

In will contest, no need to oversell decedent’s capacity

Imagine a situation where a loved one dies and there is a contest over the validity of the will. The question arises: What was the decedent’s mental state in drafting the will?

A typical, knee jerk answer is that the decedent had a perfectly clear state of mind.

However, testamentary capacity doesn’t require such a high level of clarity in communication and comprehension. Further, overstating a decedent’s capacity might actually lead a trier of fact to become skeptical of the will proponent, especially if other evidence exists that the decedent’s mind wasn’t as clear as stated. [Read more…]

Changes proposed by Trump could open up big estate planning opportunities

With proposals to repeal the federal estate tax and the generation-skipping transfer (GST) tax on the table, the new administration may be opening up some rare estate planning options.

Under President Donald Trump’s proposal, the current step-up in basis for income tax purposes on assets owned at death would be limited to $10 million of assets. The intention, according to the proposal, is to exempt small businesses and family farms.

It’s likely that assets exceeding $10 million in value would be either subject to carryover basis rules of some kind or would be subject to capital gains tax at death. Under Trump’s proposal, the current capital gains tax rate of 20 percent would be retained. [Read more…]

2013 unclaimed tax refunds

The IRS announced that an estimated one million taxpayers who did not file an income tax return in 2013 could claim their share of $1 billion in unclaimed refunds for the 2013 tax year. The law gives most taxpayers a three-year time period to claim a tax refund. After that time, the money belongs to the U.S. Treasury. So if you did not file in 2013, to be safe, send your 2013 tax return via certified mail to arrive at the IRS by April 18.

Springtime remodeling – know the tax impacts

Spring fever often influences homeowners to update and remodel. Maybe you’re considering a new project, too. You may need to replace your deck or remodel your kitchen. If you have a remodeling project coming up, you should understand the tax consequences.

If your project qualifies as an improvement to your home, you’ll enjoy some tax benefits. But if the project is a repair, there’s generally no tax benefit. Unfortunately, it’s not always easy to tell the difference.

An improvement is defined by the IRS as something that adds value to your home or extends its life. Putting in a new kitchen, building an extension or adding a new deck are considered improvements because they add value. Replacing the roof is an improvement because it extends the life of your home. [Read more…]

IRS interest rates remain the same for second quarter 2017

Interest rates charged by the IRS on underpaid taxes and applied by the IRS on tax overpayments will remain the same for the second quarter of 2017 (April 1 through June 30). Therefore, the rates will be as follows for individuals and corporations:

For individuals:

  • 4% charged on underpayments; 4% paid on overpayments.

[Read more…]

Apply for an extension if you can’t file by April 18

Tax time can be stressful, but don’t panic if you can’t file your tax return on time. There’s still time to get an automatic six-month deadline extension.

There are four ways to obtain an extension:

  1. File a paper copy of Form 4868 with the IRS and enclose your payment of estimated tax due.
  2. File for an extension electronically using the IRS e-file system on your computer.
  3. Using Direct Pay, the Electronic Federal Tax Payment System, pay all or part of your estimated income tax due and indicate that the payment is for an extension.
  4. Have your tax preparer e-file for an extension on your behalf.

[Read more…]

What’s due on April 18?

Tuesday, April 18, is a major tax deadline. Here are some of the tax filing and related deadlines:

  • 2016 individual income tax returns.
  • Calendar-year 2016 C corporation income tax returns.
  • 2016 annual gift tax returns.
  • 2016 IRA contributions.
  • 2017 individual estimated tax first quarter installment.
  • 2013 individual tax return amendments unless the 2013 return had a filing extension.

Can you make a trust trump a will

ADDITIONAL INFORMATION:

My Grandfather died leaving money and assets to my father who was alive when my grandfather died, now my grnadmother still lived but went behind my fathers back and made a trust to kick him out of the will and had thier attorney never settle the will after my grandfather died and now doesnt want to give my father anything. they told us she made the trust to trump the will can they do that without contacting the parties in the will and go to court for the change?

ATTORNEY ANSWER BY MARGARET L. CROSS BELIVEAU:

Your grandfather’s Will only governs probate property. If all of his assets were owned jointly with your grandmother, then those assets are hers to do with as she sees fit. I am not sure what you mean by not settling the will. I am assuming that the probate was not opened. One would not have been needed if the assets were held jointly.
If a probate was opened, you can obtain a copy of the Will from the probate court to review for yourself. If your grandmother took assets without authority, your father will need to hire an attorney to intervene in the situation.

Legal Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on since each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. A lawyer experienced in the subject area and licensed to practice in the jurisdiction should be consulted for legal advice.

Beliveau Law Group: Massachusetts | Florida | New Hampshire

The estate administration attorneys at the Beliveau Law Group provides legal services for probate, estate administration, and trust administration. The law firm has offices and attorneys in Naples, Florida; Waltham, Massachusetts; and Salem, New Hampshire.

What can we do about a discrepancy between a verbal agreement and the wording in a will?

ADDITIONAL INFORMATION:

My husband’s mother asked us to move to her property to take care of it after she remarried when her husband died. She would then give the house and five acres to us in her will. She gave money to her oldest son and said she would take an equal amount off what the youngest son owed on a loan. Their mom has passed away. The will states the house and acres go to my husband. However it does not say this is separate from the rest of the estate. His older brother has passed away. Now his other brother says the house goes back into the pot and that he never received anything. Everyone,including this brother was aware of the verbal agreement.

ATTORNEY ANSWER BY MARGARET L. CROSS BELIVEAU:

You need to submit the Will for probate and follow the terms of the Will as it is written. You have no authority to change the terms. If the younger brother wishes to challenge the Will, he will need to do so through the probate process. If there is already contention, you should hire an attorney for the probate process.

Legal Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on since each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. A lawyer experienced in the subject area and licensed to practice in the jurisdiction should be consulted for legal advice.

Beliveau Law Group: Massachusetts | Florida | New Hampshire

The estate administration attorneys at the Beliveau Law Group provides legal services for probate, estate administration, and trust administration. The law firm has offices and attorneys in Naples, Florida; Waltham, Massachusetts; and Salem, New Hampshire.

My mother died so I was appointed the PR over the estate when I did the deed of distribution I did it in all Four heirs name

ADDITIONAL INFORMATION:

My brother has been told he has cancer so it was to my understanding that the estate would be left to the other three to keep things straight ; then after his sickness 2 heirs had words leaving their share to the youngest of their gran children is this possible ?

ATTORNEY ANSWER BY MARGARET L. CROSS BELIVEAU:

As personal representative, it is your responsibility to distribute the estate assets according to the terms of your mother’s heirs as named in her Will or according to the intestate statute if she didn’t have a Will. You have no authority to distribute property to anyone else other than the heirs. If you do, you will create a title problem. Your siblings can transfer their ownership of the property to whomever they wish after you deed the property to them.

Legal Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on since each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. A lawyer experienced in the subject area and licensed to practice in the jurisdiction should be consulted for legal advice.

Beliveau Law Group: Massachusetts | Florida | New Hampshire

The estate administration attorneys at the Beliveau Law Group provides legal services for probate, estate administration, and trust administration. The law firm has offices and attorneys in Naples, Florida; Waltham, Massachusetts; and Salem, New Hampshire.