Asset protection planning is about protecting your assets from creditors -- and it is not just for the super-wealthy.
Anyone
can get sued. Lawsuits can stem from car accidents, credit card debt,
bank foreclosures, or unhappy customers, among many other things. If
someone wins a monetary judgment against you, your family could become
bankrupt trying to pay it off.
To keep your assets away from creditors,
you need to move them somewhere where creditors can't reach them. Asset
protection techniques include maximizing contributions to IRAs, moving
funds to an irrevocable trust, retitling various assets, or using
limited liability companies or family limited partnerships.
To
develop an asset protection plan, you need to talk to your attorney.
Your attorney can discuss your short- and long-term financial goals and
help you create a plan that will work for you.
It
is important to note that asset protection planning only works if you
act before you are sued. Under the law, you may not defraud current
creditors. If you are already being sued or if you know you are going
to be sued and you transfer assets so that creditors can't reach them,
the court will reverse the transfer. That is why it is a good idea to
put a plan into place now -- before it is too late.
For more information on asset protection planning, click here.
Thursday, April 26, 2012
Friday, March 9, 2012
When Should You Update Your Estate Plan?
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Once you've created an estate plan, it is important to keep it up to date. You will need to revisit your plan after certain key life events.
Marriage
Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your heir once you get married. Depending on state law, your spouse may have to share your estate with other relatives. You need a will to spell out how much you wish your spouse to get.
Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a difficult discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.
Even if you don't have children, there may be family heirlooms or mementos that you want to keep in your family. For more information on estate planning before remarrying, click here.
Children
Once you have children, it is important to name a guardian for your children in your will. If you don't name someone to act as guardian, the court will choose the guardian. Because the court doesn't know your kids like you do, the person they choose may not be ideal. In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for your children when they get older.
Similarly, when your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.
Divorce or Death of a Spouse
If you get divorced or your spouse dies, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan -- for example, as beneficiary, executor, or power of attorney. If you have a trust, you will need to make sure your spouse is no longer a trustee or beneficiary of the trust. You will also need to change the beneficiary on your retirement plans and insurance policies.
Increase or Decrease in Assets
One part of estate planning is estate tax planning. When your estate is small, you don't usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. For example, the New Jersey estate tax is due on estates as small as $675,000. As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things. For more information about estate taxes, click here.
Other
Other reasons to have your estate plan updated could include:
Once you've created an estate plan, it is important to keep it up to date. You will need to revisit your plan after certain key life events.
Marriage
Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your heir once you get married. Depending on state law, your spouse may have to share your estate with other relatives. You need a will to spell out how much you wish your spouse to get.
Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a difficult discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.
Even if you don't have children, there may be family heirlooms or mementos that you want to keep in your family. For more information on estate planning before remarrying, click here.
Children
Once you have children, it is important to name a guardian for your children in your will. If you don't name someone to act as guardian, the court will choose the guardian. Because the court doesn't know your kids like you do, the person they choose may not be ideal. In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for your children when they get older.
Similarly, when your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.
Divorce or Death of a Spouse
If you get divorced or your spouse dies, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan -- for example, as beneficiary, executor, or power of attorney. If you have a trust, you will need to make sure your spouse is no longer a trustee or beneficiary of the trust. You will also need to change the beneficiary on your retirement plans and insurance policies.
Increase or Decrease in Assets
One part of estate planning is estate tax planning. When your estate is small, you don't usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. For example, the New Jersey estate tax is due on estates as small as $675,000. As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things. For more information about estate taxes, click here.
Other
Other reasons to have your estate plan updated could include:
- You move to another state
- Federal or state estate tax laws have changed
- A guardian, executor, or trustee is no longer able to serve
- You wish to change your beneficiaries
- It has been more than 5 years since the plan has been reviewed by an attorney
Wednesday, February 29, 2012
Bankers Life Long-Term Care Insurance Policyholders Report Problems Getting Paid
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Buying long-term care insurance is supposed to be a good thing--it means you are prepared to meet your long-term care needs. But the purchase can turn into a nightmare if the insurance company refuses to pay for your care. One long-term care insurance company in particular, Bankers Life and Casualty, is gaining a reputation for not paying claims.
A recent report by CBS News highlighted some of the problems Bankers Life customers have been experiencing. The report recounts the story of 93-year-old Timber Harwood, who paid long-term care insurance premiums for years. When he needed home health care after a serious fall, the insurance company gave his family the runaround, repeatedly claiming for almost a year that hundreds of pages of paperwork were missing.
Consumer complaint message boards such as PissedConsumer.com, ConsumerAffairs.com, and ComplaintsBoard.com have lit up with complaints about Bankers Life either denying claims outright or using delaying tactics to wear down policyholders.
This is not news to Massachusetts elder law attorney and ElderLawAnswers president Harry S. Margolis, several of whose clients have experienced problems with Bankers Life. "After paying in premiums for years so that their eventual need for long-term care will be covered, they have received denials for a range of invalid reasons," Margolis reports. When Margolis's firm has gotten involved -- sometimes threatening litigation -- Bankers Life has ultimately paid the claims. Although that is a great result, customers have to pay out of pocket while they wait for the claim to be paid, which is stressful.
Bankers Life's behavior is nothing new. In 2008, 40 states found Bankers Life's parent company Conseco, Inc. (now called CNO), committed a pattern of consumer harm in the long-term care insurance business. While not admitting any wrongdoing, the company agreed to pay $2.3 million in fines and $30 million for system improvements and restitution. A 2007 New York Times article described how Conseco and Bankers Life employees were prohibited from calling policyholders in order to make things so hard for policyholders that they would either give up or die.
In addition, a long-term care policyholder has initiated a class action lawsuit against Senior Health Insurance Co. of Pennsylvania, which was previously owned by Conseco before it was transferred into an independent trust. The lawsuit alleges the company tried to avoid reimbursing policyholders for long-term care by ignoring or taking an unreasonably long time to respond to claims and requiring unnecessary paperwork and medical examinations. For more information about the lawsuit, click here.
Bankers Life responded to our request for comment with this statement:
If you experience a problem with your long-term care insurance company, contact an elder law attorney.
This article is reprinted with the permission of Elder Law Answers.
Buying long-term care insurance is supposed to be a good thing--it means you are prepared to meet your long-term care needs. But the purchase can turn into a nightmare if the insurance company refuses to pay for your care. One long-term care insurance company in particular, Bankers Life and Casualty, is gaining a reputation for not paying claims.
A recent report by CBS News highlighted some of the problems Bankers Life customers have been experiencing. The report recounts the story of 93-year-old Timber Harwood, who paid long-term care insurance premiums for years. When he needed home health care after a serious fall, the insurance company gave his family the runaround, repeatedly claiming for almost a year that hundreds of pages of paperwork were missing.
Consumer complaint message boards such as PissedConsumer.com, ConsumerAffairs.com, and ComplaintsBoard.com have lit up with complaints about Bankers Life either denying claims outright or using delaying tactics to wear down policyholders.
This is not news to Massachusetts elder law attorney and ElderLawAnswers president Harry S. Margolis, several of whose clients have experienced problems with Bankers Life. "After paying in premiums for years so that their eventual need for long-term care will be covered, they have received denials for a range of invalid reasons," Margolis reports. When Margolis's firm has gotten involved -- sometimes threatening litigation -- Bankers Life has ultimately paid the claims. Although that is a great result, customers have to pay out of pocket while they wait for the claim to be paid, which is stressful.
Bankers Life's behavior is nothing new. In 2008, 40 states found Bankers Life's parent company Conseco, Inc. (now called CNO), committed a pattern of consumer harm in the long-term care insurance business. While not admitting any wrongdoing, the company agreed to pay $2.3 million in fines and $30 million for system improvements and restitution. A 2007 New York Times article described how Conseco and Bankers Life employees were prohibited from calling policyholders in order to make things so hard for policyholders that they would either give up or die.
In addition, a long-term care policyholder has initiated a class action lawsuit against Senior Health Insurance Co. of Pennsylvania, which was previously owned by Conseco before it was transferred into an independent trust. The lawsuit alleges the company tried to avoid reimbursing policyholders for long-term care by ignoring or taking an unreasonably long time to respond to claims and requiring unnecessary paperwork and medical examinations. For more information about the lawsuit, click here.
Bankers Life responded to our request for comment with this statement:
Bankers Life and Casualty is committed to the highest standards for ethics, fairness and accountability, and strives to pay all claims in accordance with policy contracts in a timely manner. We take all complaints seriously, and work with all parties to resolve issues as soon as possible. We fulfill our obligations to our policyholders based on specific policy language, state requirements and the claim information submitted. In 2011, Bankers paid in excess of $400 million on long-term care claims and benefits to our more than 300,000 long-term care customers nationwide.
This article is reprinted with the permission of Elder Law Answers.
Monday, February 13, 2012
Economists Say That Tightening Medicaid Rules Would Barely Increase Demand for Private Insurance
It is sometimes claimed that reducing the amount of assets an individual can keep while qualifying for Medicaid would increase the purchase of private long-term care insurance coverage.
Now, two professors of economics have estimated that tightening Medicaid asset rules would do little to encourage the purchase of long-term care insurance policies.
Although Medicaid recipients may keep only about $2,000 in assets in most states, their spouses may retain between $22,728 and $113,640, depending on their particular state. The minimum and maximum are determined by federal law but individual states’ limits may set their own limits within these parameters.
In an article published in the Fall 2011 issue of the Journal of Economic Perspectives, Jeffrey R. Brown of the University of Illinois and Amy Finkelstein of the Massachusetts Institute of Technology estimate that a $10,000 decrease in the level of assets an individual and their spouse can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points.
“To put this in perspective,” they write, “if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law, this would decrease average household assets protected from Medicaid by about $25,000. This, in turn, would increase the demand for private long-term care insurance by only 2.7 percentage points. While this represents a large increase in insurance coverage relative to the baseline ownership rate, the vast majority of households would still find it unattractive to purchase private insurance.”
Overall, Brown and Finkelstein are pessimistic about the prospects for encouraging more Americans to buy long-term care insurance unless Medicaid is completely restructured or done away with altogether. They note that long-term care insurance is a poor deal, particularly for men, who get back only about 33 cents on the premium dollar they spend, and that for a 65-year-old man of average wealth, 60 percent of the private insurance benefits would have been paid by Medicaid.
But the authors say that even if the implicit Medicaid “tax” on long-term care insurance were eliminated, “other factors could still prevent the market for long-term care insurance from developing.” These factors include the availability of informal insurance provided by family members, the liquid assets in the home serving as a “buffer stock of assets,” and the difficulty many individuals have in “making decisions about long-term, probabilistic outcomes.”
To read the article, “Insuring Long-Term Care in the United States,” click here.
For a commentary on the article in Forbes magazine, click here.
For more on Medicaid's rules, click here.
This article was reprinted with the permission of ElderLawAnswers.com.
Now, two professors of economics have estimated that tightening Medicaid asset rules would do little to encourage the purchase of long-term care insurance policies.
Although Medicaid recipients may keep only about $2,000 in assets in most states, their spouses may retain between $22,728 and $113,640, depending on their particular state. The minimum and maximum are determined by federal law but individual states’ limits may set their own limits within these parameters.
In an article published in the Fall 2011 issue of the Journal of Economic Perspectives, Jeffrey R. Brown of the University of Illinois and Amy Finkelstein of the Massachusetts Institute of Technology estimate that a $10,000 decrease in the level of assets an individual and their spouse can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points.
“To put this in perspective,” they write, “if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law, this would decrease average household assets protected from Medicaid by about $25,000. This, in turn, would increase the demand for private long-term care insurance by only 2.7 percentage points. While this represents a large increase in insurance coverage relative to the baseline ownership rate, the vast majority of households would still find it unattractive to purchase private insurance.”
Overall, Brown and Finkelstein are pessimistic about the prospects for encouraging more Americans to buy long-term care insurance unless Medicaid is completely restructured or done away with altogether. They note that long-term care insurance is a poor deal, particularly for men, who get back only about 33 cents on the premium dollar they spend, and that for a 65-year-old man of average wealth, 60 percent of the private insurance benefits would have been paid by Medicaid.
But the authors say that even if the implicit Medicaid “tax” on long-term care insurance were eliminated, “other factors could still prevent the market for long-term care insurance from developing.” These factors include the availability of informal insurance provided by family members, the liquid assets in the home serving as a “buffer stock of assets,” and the difficulty many individuals have in “making decisions about long-term, probabilistic outcomes.”
To read the article, “Insuring Long-Term Care in the United States,” click here.
For a commentary on the article in Forbes magazine, click here.
For more on Medicaid's rules, click here.
This article was reprinted with the permission of ElderLawAnswers.com.
Wednesday, January 25, 2012
Giving Your Home to Your Children Can Have Tax Consequences
Many people wonder if it is a good idea to give their home to their children. While it is possible to do this, giving away a house can have major tax consequences, among other results.
When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form.
Also, under current law you can gift a total of $5 million over your lifetime without incurring a gift tax. If your residence is worth less than $5 million, you likely won't have to pay any gift taxes, but you will still have to file a gift tax form. (And Congress may change the gift tax exemption, which is now scheduled to revert to $1 million at the end of 2012 unless Congress acts.)
While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000. If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.
Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property’s tax basis would be "stepped up," which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.
Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care.
There are other options for giving your house to your children, including putting it in a trust or selling it to them. Before you give away your home, consult an elder law attorney who can advise you on the best method for passing on your home.
This article was reprinted with the permission of ElderLawAnswers.com.
When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form.
Also, under current law you can gift a total of $5 million over your lifetime without incurring a gift tax. If your residence is worth less than $5 million, you likely won't have to pay any gift taxes, but you will still have to file a gift tax form. (And Congress may change the gift tax exemption, which is now scheduled to revert to $1 million at the end of 2012 unless Congress acts.)
While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000. If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.
Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property’s tax basis would be "stepped up," which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.
Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care.
There are other options for giving your house to your children, including putting it in a trust or selling it to them. Before you give away your home, consult an elder law attorney who can advise you on the best method for passing on your home.
This article was reprinted with the permission of ElderLawAnswers.com.
Monday, January 23, 2012
TSA Sets Up Hotline for Air Travelers With Disabilities or Medical Conditions
Concerned about negotiating the airport security checkpoint with a frail elderly or disabled traveler? Now there is a dedicated hotline that travelers with disabilities or medical conditions and their families can call with questions or concerns about the security screening process.
According to the Transportation Security Administration (TSA), the new hotline will provide travelers with information about navigating often arduous airport security checkpoints. Although not spelled out in detail, the TSA's press release seems to offer hope that by calling 72 hours prior to arrival at the airport, travelers with disabilities or medical conditions will somehow be able to notify airport security officers of their trip, with the hope that those officers will be better prepared to handle their needs when they actually reach security.
The hotline, which has been named TSA Cares (presumably because the TSA is trying to counter numerous incidents where elderly or disabled passengers encountered problems at checkpoints), is available Monday through Friday from 9 am to 9 pm EST at 1-855-787-2227.
"TSA Cares provides passengers with disabilities and medical needs another resource to use before they fly, so they know what to expect when going through the screening process,” said TSA Administrator John Pistole. “This additional level of personal communication helps ensure that even those who do not travel often are aware of our screening policies before they arrive at the airport.”
Mobility International, a foreign exchange organization for people with special needs, offers a host of tips for navigating airport security on their Air Travel Tips for People with Disabilities page.
This article reprinted with permission from ElderLawAnswers.com
According to the Transportation Security Administration (TSA), the new hotline will provide travelers with information about navigating often arduous airport security checkpoints. Although not spelled out in detail, the TSA's press release seems to offer hope that by calling 72 hours prior to arrival at the airport, travelers with disabilities or medical conditions will somehow be able to notify airport security officers of their trip, with the hope that those officers will be better prepared to handle their needs when they actually reach security.
The hotline, which has been named TSA Cares (presumably because the TSA is trying to counter numerous incidents where elderly or disabled passengers encountered problems at checkpoints), is available Monday through Friday from 9 am to 9 pm EST at 1-855-787-2227.
"TSA Cares provides passengers with disabilities and medical needs another resource to use before they fly, so they know what to expect when going through the screening process,” said TSA Administrator John Pistole. “This additional level of personal communication helps ensure that even those who do not travel often are aware of our screening policies before they arrive at the airport.”
Mobility International, a foreign exchange organization for people with special needs, offers a host of tips for navigating airport security on their Air Travel Tips for People with Disabilities page.
This article reprinted with permission from ElderLawAnswers.com
Thursday, November 10, 2011
Attention Vietnam Veterans and Their Families!!!
Are you a Vietnam Veteran who suffers with (or the loved one of a veteran who died of) Parkinson's disease, ischemic heart condition, or a B-cell leukemia or another condition that can be linked to one of these?
Did you (the veteran) or the deceased veteran serve in the Republic of Vietnam, the waterways of Vietnam, or on the Korean DMZ any time from January 9, 1962 thru May 7, 1975?
Did you (the veteran), the deceased veteran, or the deceased surviving spouse (or deceased child or parent) previously file a claim for benefits based upon the veteran having or dying of one of these conditions and was this claim denied?
If the answer to all of the above three questions is "Yes", you may now be able to go back and have this previous claim re-opened as a Nehmer class member if you were the original person who filed the claim OR have the original claim opened for accrued benefits owed to this deceased person if you are a family member.
Normally, if benefits are granted on the basis of a new regulation, the law states that the effective date of the award may not be earlier than the date on which the regulation went into effect. Nehmer has changed all of this for these Agent Orange claims, making the effective date of the award the later of the date the claim was filed or the date the disability arose. This can result in a HUGE amount of retro-active benefits; possibly tens to hundreds of thousands of dollars for the claimant.
Accrued benefits paid in the case where the original Nehmer class member has died may be paid to a spouse (regardless of marital status), a child (regardless of age or marital status), parents, or even the estate of the deceased class member.
Because these three conditions are all combat related, a retired military veteran who is receiving military retirement from the Department of Defense can also apply for Combat Related Special Compensation (monetary) benefits from the DOD. This is a matching amount of money to what the VA has awarded in service connected compensation, provided that the veteran is rated at least 10%. It is an offset to military retirement, but is non-taxable; whereas, military retirement is taxable income.
In the case of a surviving spouse, please remember that one may be able to go back on prior spouses for VA Dependency Indemnity Compensation (DIC) benefits and it may also be possible for a parent of a single soldier/veteran who died service connected to file for DIC, regardless of that parent's age or when the soldier/veteran died. Also remember that assets never matter in a DIC claim and income matters only in a parent's claim.
The VA is currently going back and re-opening hundreds of thousands of claims and attempting to contact both veterans and survivors to see if benefits are owed. Meanwhile, we have an obligation to mention Nehmer to those client's who may have family and friends who served in Vietnam. Obviously, the VA cannot possibly keep track of everyone.
Reprinted with permission by:
Karen McIntyre, R.N., VA Accredited Agent
President Veterans Information Services, Inc.
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