Wednesday, June 27, 2012

Federal Court Rules That Gay Widow Is Entitled to Estate Tax Refund

Finding that the Defense of Marriage Act's (DOMA's) denial of equal benefits to same-sex couples violates the Equal Protection Clause of the Fifth Amendment, a federal court judge has awarded the surviving spouse of a lesbian couple reimbursement for the tax bill she paid on her wife's estate.

Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. Ordinarily, spouses can leave any amount of property to their spouses free of federal estate tax. But when Ms. Spyer died in 2009, Ms. Windsor, now 82, had to pay Ms Spyer's estate tax bill because of DOMA, a 1996 law that denies federal recognition of gay marriages.

Although New York State considered the couple married, the federal government did not and taxed Ms. Syper's estate as though the two were not married. Ms. Windsor sued the U.S. government seeking to have DOMA declared unconstitutional and asking for a refund of the more than $350,000 in estate taxes she was forced to pay.

Federal court judge Barbara Jones from the U.S. District Court for the Southern District of New York ruled that there was no rational basis for DOMA's prohibition on recognizing same-sex marriages. Jones stated that it was unclear how DOMA preserves traditional marriage, which is one of the stated purposes of the law.

As ElderLawAnswers reported last year, President Obama decided to stop defending DOMA, so members of Congress formed an advisory group to defend the law. This is the fifth case to strike down DOMA.

To read the court’s decision, click here.

(Reprinted with the permission of ElderLawAnswers)

Friday, June 22, 2012

$500,000 Found in House Walls Belongs to Estate, Not Homeowners

You buy a dilapidated house and in the course of renovations you find a huge amount of money hidden in the walls.  The cash is yours, right?  Not according to an Arizona appeals court, which recently ruled that $500,000 found in the walls of a house belongs to the heirs of the man who put it there, not to the house’s current owners. 

Robert A. Spann had a habit of hiding cash and other valuables in unusual places in the homes he lived in.  His two daughters knew of his pattern, and for seven years after he died in 2001 they found stocks and bonds, as well as hundreds of military-style green ammunition cans, some of which contained gold or cash, hidden throughout his Paradise Valley, Arizona, home.

In 2008, the daughters sold the rundown house “as is” to a couple.  The couple did some remodeling, in the course of which a worker for the contracting company found two ammunition cans full of cash in the kitchen wall and another two inside the framing of an upstairs bathroom. The cash totaled $500,000.  After the worker reported the find to his boss, the boss took the cans but did not tell the couple who owned the house about them. The worker, however, eventually informed the couple of the discovery and the police ultimately took control of the $500,000.

The couple and the contractor sued each other for the money.  In the meantime, Robert Spann’s daughter Karen Grande, who was the personal representative of his estate, filed a petition in probate court on behalf of the estate to recover the money. The two cases were consolidated in June 2009.

The trial court ruled that the money belonged to the estate and the couple appealed, claiming that Mr. Spann’s family had abandoned the cash by leaving it in the house when it was sold “as is.”  

In a May 31, 2012, ruling, the Court of Appeals of Arizona agrees with the trial court.  The court rules that while “finders keepers” may work on the schoolyard, in Arizona in order to abandon personal property, “one must voluntarily and intentionally give up a known right.” The court finds that because there is no evidence that Mr. Spann’s estate intended to relinquish any valuable items in the house, the money is more properly characterized as “mislaid” and still belongs to the estate.

To read the full text of the Arizona appeals court’s decision in the case, Grande v. Jenningsclick here.

Interestingly, an Oregon appeals court came to a different conclusion in a very similar case four years ago.  For details, click here

(Reprinted with the permission of

Wednesday, June 20, 2012

A Letter of Instruction Can Spare Your Heirs Great Stress

While it is important to have an updated estate plan, there is a lot of information that your heirs should know that doesn't necessarily fit into a will, trust or other components of an estate plan. The solution is a letter of instruction, which can provide your heirs with guidance if you die or become incapacitated.

A letter of instruction is a legally non-binding document that gives your heirs information crucial to helping them tie up your affairs. Without such a letter, it can be easy for heirs to miss important items or become overwhelmed trying to sort through all the documents you left behind.

The following are some items that can be included in a letter:
  • A list of people to contact when you die and a list of beneficiaries of your estate plan
  • The location of important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
  • A list of assets, such as bank accounts, investment accounts, insurance policies, real estate holdings, and military benefits
  • Passwords and PIN numbers for online accounts
  • The location of any safe deposit boxes
  • A list of contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
  • A list of credit card accounts and other debts
  • A list of organizations that you belong to that should be notified in the event of your death (for example, professional organizations or boards)
  • Instructions for a funeral or memorial service
  • Instructions for distribution of sentimental personal items
  • A personal message to family members
Once the letter is written, be sure to store it in an easily accessible place and to tell your family about it. You should check it once a year to make sure it stays up-to-date.

(Reprinted with the permission of ElderLawAnswers)

Monday, June 11, 2012

Low Interest Rates Force Long-Term Care Insurance Prices Up

Prices for long-term care insurance policies jumped between 6 and 17 percent in the past year, according to an industry survey.    

A 55-year-old couple purchasing long-term care insurance protection can expect to pay $2,700 a year (combined) for about $340,000 of current benefits, according to the 2012 Long-Term Care Insurance Price Index, an annual report from the American Association for Long-Term Care Insurance.  The same coverage would have cost the couple $2,350 in 2011.

The steep price rise is primarily due to historic low interest rates and yields on fixed-income investments, explained Jesse Slome, the Association’s executive director, in a press release. Between 40 and 60 percent of the dollars an insurer accumulates to pay future claims comes from investment returns, Slome said, noting that for every one-half percent drop in interest rates an insurer needs about a 15 percent premium increase to maintain the projected net profit.

The Association annually analyzes what consumers will pay for the most popular policies offered by ten leading long-term care insurance carriers. The study found that the average cost for a 55-year-old single individual who qualified for preferred health discounts is $1,720 for between $165,000 and $200,000 of current coverage. In 2011, the same coverage would have cost an average of $1,480 annually. 
The policies the Association priced all include a 3 percent compound inflation growth factor, meaning that a 60-year-old couple buying $340,000 of current coverage today would see their benefit pool grow to $610,000 when they reach age 80.  According to the report, the couple could expect to pay about $3,335 a year if both spouses qualified for preferred health discounts.

The study suggests that it’s more important than ever to shop around for coverage because the range between the lowest-cost and the highest-cost policy has increased compared to the prior year. "For the 55-year-old single policy applicant the highest-priced policy cost almost 80 percent more than the lowest-priced policy," Slome noted. "For some categories, the difference was as much as 132 percent and no single company always had the lowest nor the highest rate, which is why we stress the importance of comparison shopping."  Nearly three-quarters of buyers opt for a 3- to 5-year benefit period, the Association reports.

Policyholders can experience rate rises after they purchase, although long-term care insurers are allowed to raise prices only on a class of policyholders, not on individuals ones, and they must receive state approval for the rate hike.

The complete 2012 Price Index will be published in the Association's 2012 Long-Term Care Insurance Sourcebook. For more information, visit the American Association for Long-Term Care Insurance's Web site.

For an article on how to cope with long-term care insurance rate hikes, click here.

For more on how to reduce long-term care insurance costs, click here.

For more on long-term care insurance, click here.

(This article is reprinted with the permission of