New Jersey Estate Planning & Elder Law Blog

It's Going to Cost More to Go to Court in NJ - But Don't Blame the Lawyers

Deirdre Wheatley-Liss — Tue, 01 May 2012 11:58:24 -0500

$50 million a year - that is what the Christie administration is hoping to raise by increasing court fees in New Jersey. According to the Daily Record, there hasn't been an across the board increase is court fees since 1991. While this represents an increase of 70%, the fees are apparently going to be used to modernize (please, please, please) the court system, as well as various justice related programs.

"The money would go toward three categories of spending, including $25 million to help fund various justice-related programs in the state budget that aren’t directly part of the court system, such as the State Police laboratory, DNA testing and the Victims of Crime Compensation Office.

Another $17 million would go toward the development of a statewide digital “e-court” system, a step toward eliminating paper in the courts by requiring electronic filings and providing public access to court records, similar to the federal courts’ PACER system. One key difference between New Jersey’s plan and PACER is that the state doesn’t plan to charge the public fees for looking at digital documents."

If the increase is passed, neither the Governor nor the Legislature will determine which fees will increase by what amount. Instead, discretion is given to our Supreme Court to determine where the increases will take place.

Curious how much it costs to run our judicial system in New Jersey? The Daily Record prepared a historical chart, together with the interesting fact that only about 10% of the judicial branch's budget comes from court fees - the other 90% is from the state's general budget.

FEE HIKE

Only about 10 percent of the state judiciary’s budget is currently supported by court fees, with the balance coming from the general state budget. The proposed fee increase is expected to generate $52 million a year -- a increase in revenue of more than 70 percent, though the money wouldn’t fund the judiciary’s general budget.

COURT FEES, without fee increase: JUDICIARY, state budget:
· 2013 … $72,008,000 2013 … $672,981,000
· 2012 … $68,667,000 2012 … $670,481,000
· 2011 … $65,120,000 2011 … $637,503,000
· 2010 … $71,562,000 2010 … $608,196,000
· 2009 … $68,455,000 2009 … $609,750,000
· 2008 … $68,764,000 2008 … $605,482,000

New Jersey Tax Refund Status - Where's my money?

Deirdre Wheatley-Liss — Mon, 16 Apr 2012 08:39:58 -0500

Wondering where your refund is? As soon as the filing is done, that is always the next question, isn't it? The New Jersey Division of Taxation has just unveiled a new online service that allows taxpayers to see what the status of their income tax refund is online.

Using this service (you will need your social security number and the amount of the refund reflected on your return to access) you can find out if and when your refund was mailed. If you filed electronically, and requested direct deposit, you can see when the refund was transferred to your account. Note that if you filed a paper return, the information won't be in the system for 6-8 weeks (yet another reason to file electronically if you don't already).

Don't like to look up sensitive information online? You can always call for your refund status at 800-323-4400 (toll-free within NJ, NY, PA, DE, and MD) or 609-826-4400 (anywhere) .

The Fein Print - For Business Owners and their Advisors

Deirdre Wheatley-Liss — Tue, 03 Apr 2012 09:55:06 -0500

The second issue of The Fein Print is being distributed today. This issue is addressed at the needs of business owners and their advisers. Topics covered include:

Q&A on Tax Cuts expiring in 2012 - With the Bush tax cuts set to expire at the end of 2012, what can I do in my business now to take advantage of these lucrative laws? Read more here ....
Customers Dont' Pay? We can help. This article talks about how a business can use the services of our Collection Department to turn accounts receivable into cash and what clients experience during the collection process. Read more here ....
Employee Responsibility for Payroll Taxes. While most business owners know that all owners and officers of a business are personally responsible for any failure to pay payroll taxes, not all are aware that the liability may extend to some of their employees. Read more here ....

The Fein Print is issued to subscribers monthly and contains inforation on a variety of topics that reflects the questions that our clients are asking us.

Thoughts for Families - Every other month The Fein Print will focus on personal planning questions surrounding real estate, tax planning, estate planning and administration, personal litigation and elder law.
Thoughts for Businesses - The other half of the year The Fein Print will focus on questions important to business owners on topics such as business operations, employee issues, mergers and aquisitions, tax law, and financing.

To sign up for issues of The Fein Print, click here.

Did you miss the first issue? You can see it here. Topics included:

Real Estate Tax Appeals - good for next year as the April 1 filing date just passed.
Your New Year's "Will-Power" - a guide for reviewing your estate plan
What is Elder Law? A primer to a holistic approach to this growing need
2011-2012 Tax Sale Video - Gift taxes are on sale for this year only. This is a video guide to how congress's largess can benefit your family.

Any ideas for future topics? Post a comment or contact me.

Long Term Care Insurance May Become a Thing of the Past

Deirdre Wheatley-Liss — Mon, 26 Mar 2012 10:50:58 -0500

It seems that the insurance companies really boggled it when it came to pricing out long term care insurance policies. Long term care policies have been hit by a triple whammy - historically low interest rates, policy holders living longer, and policy holders not dropping coverage at the rates the insurance companies expected.

Some of the huge insurance carriers have washed their hands of the whole situation and have left the market. Prudential Financial, Inc. announced earlier this month it would stop selling long term care policies to the individual market. MetLife ended sales of long term care polices in 2010. Unum announced In March 2012 that it would discontinue sales to employees of corporations. Over the past 5 years, 10 of the 20 largest writers of long term care have exited the market.

John Hancock, one of the top 5 largest writers of individual long term care policies isn't exiting the business, but is actively trimming its book of business as it is asking each state to allow it to hike the premiums for existing customers by an average of 40%. Elderlawanswers.com reports that in one case an Illinois couple received a premium increase showing a 90% hike, from $3893.40 a year to $7385.52 per year (see The Chicago Sun-Times).

I find this a bit outrageous. The policy-holders have paid into their policies all these years and held up their end of the bargain - I pay you money today, and you pay me money tomorrow if I get sick and meet all of your other requirements. It looks as if the insurance companies are fearful that, oh no, the policy holders might actually (gasp) try to collect on the insurance polices for which they have been dutifully paying their premium all these years. So, to prevent that from happening, we will tell people that are living on a fixed income (which also hasn't seen any increases due to the low interest rate and inflation environment) that they will either pay up to 90% more, or we will cut them off and all that money that they spent will be for naught.

Now I am not saying the insurance companies can't do this, of course they can, it's in the contract. What I am saying is that it is the insurance companies, the experts in defining the risk the themselves, who made the "bad deal", and they are the only ones who profit, because they got all those premiums and never had to pay out on all the people who will be forced to cancel their coverage.

As a taxpayer, I find this particularly disturbing, because there are 3 ways to pay for long term care - you money, long term care insurance, and Medicaid. In this situation the people who tried to plan for their own care by getting long term care insurance, which is precisely what we as a society would like people to do - plan for their own needs - are going to end up dropping coverage and perhaps ending up needed Medicaid to pay for their care.

As an attorney, I counsel people to consider long term care as a responsible investment in their future. I don't sell it, I don't get compensated in any way when somebody else sells it, but I have seen families have oodles of more options when dealing with long term care issues when those very high costs can be offset by new dollars coming in. I just can't help but feeling that the stupendous increase in premiums is like the trick where you try to pull the tablecloth off the table, but everything comes crashing down.

Image: sscreations / FreeDigitalPhotos.net

Estate Administration - The 3 Stages

Deirdre Wheatley-Liss — Tue, 20 Mar 2012 08:50:33 -0500

While each estate administration presents different facts - the terms of the Will or Trust, the amount and composition of the assets, each estate in New Jersey goes through the same 3 stages:

· Probate. The first stage is when the Will is offered for probate at the local Surrogate’s Court. This is a very simple process in which your executors present the Will, and then they are issued Letters of Testamentary, which will give the Executor(s) the authority to carry out your wishes as set forth in your Will. This is done by making an appointment with the Morris County Surrogate’s Court (10) ten days after the date of your death. Alternatively, if the Executor(s) decide to attain an attorney to assist them, the attorney’s office can often have the documents signed at their office. If there is no Will, an Administration is opened where your Administrators are issued Letters of Administration. Letters Testamentary and Letters of Administration give your representative the power over your assets and to settle any liabilities.

· Gather Assets; Pay Liabilities. The second stage is gathering together all your assets, determining their value, paying any debts or liabilities (including taxes if any) and filing any necessary tax returns. Until the tax returns are filed and approved (or a waiver is completed because no taxes are due) New Jersey has a lien on your assets and they cannot be fully distributed.

· Closing the Estate. Once the tax returns are approved, New Jersey will issue a Waiver, which releases its lien on the assets. The Executor then normally accounts to the beneficiaries what came into the estate, what went out, and what is left to distribute. This informal accounting is coupled within a “Release and Refunding Bond” where the beneficiaries agree to their distribution, waive any claim to be entitled to more, and release the Executor from liabilities. The accounting and “Release and Refunding Bonds” will act to close the Estate. You should anticipate that the entire Estate Administration process will be a 14-24 month process.

The Executor/Administration has many responsibilities beyond these. We find that since people are generally taking on the job of Executor/Administrator for the first time, it appears overwhelming. By looking at the job in stages, it becomes more manageable and doable. Many Executors/Administrators seek professional advice because even if they can consider the job in stages, their lack of experience in that role, and not knowing their responsibilities and questions to ask, potentially opens them up to liability and claims from the beneficiaries or tax authorities.

NJ Medicaid Key Figures - 2012

Deirdre Wheatley-Liss — Thu, 15 Mar 2012 09:04:56 -0500

The key figures for Medicaid eligibility are updated frequently. These figures will determine if a person qualifies for long term health care to be paid under Medicaid, as well as what assets a spouse can maintain if one spouse enters a nursing home. These figures change frequently, some on an annual basis as a result of inflation, and other by administrative action. Unfortunately, they are not broadcast by the Department of Human Resources as frequently. Here is where they stand as of January 2012:

New Jersey Medicaid Reference – January, 2012

Minimum Community Spouse Resource Allowance	$ 22,728
Maximum Community Spouse Resource Allowance	$113,640
Resource Allowance for an Individual	$ 2,000
Resource Allowance for a Couple (both husband and wife in a nursing home)	$ 3,000
Minimum Monthly Maintenance Needs Allowance	$ 1,839
Maximum Monthly Maintenance Needs Allowance	$ 2,841
Monthly Personal Needs Allowance	$ 35
Standard Utility Allowance	$ 435
Divestment Penalty Divisor	$ 7,282
Income Cap Amount	$ 2,094
Home Equity Limit	$786,000

If you have questions about New Jersey Medicaid eligibility you can contact Stacey C. Maiden, Esq. at smaiden@feinsuch.com.

IRS Offers New Help to Struggling Taxpayers - Fresh Start for Federal Tax Liens

Deirdre Wheatley-Liss — Mon, 12 Mar 2012 10:38:11 -0500

Tough times are all around, and apparently the IRS recognizes this as well. The IRS recently announced a series of new initiatives to " to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. "

The changes center around how the IRS files liens against taxpayers for failure to pay their taxes, and include 5 key provisions:

Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens. This is being done to address inflation.

Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement. This will apply to taxpayers with $25,000 or less of unpaid taxes, interest and penalties who have entered into a payment plan with the IRS. You can see a video about the Direct Debit Installment Program here.

Creating easier access to Installment Agreements for more struggling small businesses. This will be done by increasing the program participation threshold of unpaid taxes, interest and penalties from $10,000 to $25,000.

Expanding a streamlined Offer in Compromise program to cover more taxpayers. The income limits will be increased to $100,00, and the tax liability threshold doubled from $25,000 to $50,000.

A federal tax lien is a tool of the IRS whereby they have a legal claim to the property of a taxpayer who has not paid their taxes. It includes all property owned by the taxpayer at the time filed or after acquired. Needless to say, a federal tax lien dramatically decreases your credit worthiness.

Questions on addressing federal tax liens are handled through the Firm's Tax Department, or complete a request for more information to the right ------>

Points to Consider with Continuing Care Retirement Community (or other senior housing options)

Deirdre Wheatley-Liss — Tue, 06 Mar 2012 07:35:15 -0500

You are into your retirement, selling your home because "it is getting to be too much" and looking at different housing options. One considerations needs to be "Can I easily be cared for in my new home if I get sick?". Stacey C. Maiden, Esq., of Counsel to our Tax, Trust & Estates, and Elder Law Department has put together some points to consider if one of those housing options includes a Continuing Care Retirement Community or CCRC.

There are a number of housing options for seniors outside of staying at home or moving in with adult children, such as 55-Plus communities, Assisted Living Communities, Skilled Nursing Facilities. Another senior housing option is the Continuing Care Retirement Community (CCRC).

CCRCs combine housing, supportive services and health care, all within a campus or country club like setting. Residents of a CCRC enter into a lifetime lease with the facility and receive a continuum of care, and residency levels include Independent Living (IL), Assistance-in-Living Services and Skilled Nursing. The services and lifestyle a CCRC offers may meet you or your loved one’s needs. But how do you know that the CCRC you are looking into moving to is the right place?

Clyde Sutton, LNHA, the Associate Executive Director of Harrogate in Lakewood, New Jersey, recent;y gave an excellent and informative presentation on CCRCs to the Estate and Financial Planning Council of Central New Jersey. Below, with Clyde’s permission, is a helpful summary of what a prospective resident should research and question when considering relocation to a CCRC (or any other senior living facility).

q    Costs

q    Are taxes/utilities included?

q    Services/amenities

q    Does the facility offer Home Care services?

q    Maintenance costs

q    Financial health of the facility/Credit ratings

q    Safety and security systems

q    Does the community offer flexibility or choice?

q    Staffing levels and certifications

q    Social life and activities

q    “Life care”

q    Condition of physical plant

q    Capital Budgets

q    Landscaping

q    Are pats Allowed

q    Single facility or chain?

q    “For Profit” or “Not for Profit”

q    What is the size of the community? How many residents?

q    Resident involvement/committees

q    Ratings and Survey results (advisory standards)

q    Insurance (Facility, LTC, Medicare, Health)

q    Tax benefits

q    “Disclosure Statement”

q    Visit property, sample food, talk to residents

From Clyde Sutton, LNH, Associate Executive Director, Harrogate, Inc., Lakewood, NJ. www.harrogate-lifecare.org

Actions to Improve Your Financial Life in 2012

Deirdre Wheatley-Liss — Tue, 28 Feb 2012 08:47:55 -0500

I recently received an email from The Kelly Group at Morgan Stanley Smith Barney with some good practical advice on a financial checkup that everyone should do once a year. The email resonated with me so I thought to share it with you by putting the text of it below. My suggestion? Take time over the next week to answer these questions for yourself.

Have questions once you go through this list? Reach out to your financial advisor. As the Kelly Group puts it, your financial advisor should "love to hear from you and about you!"

Success always begins with a plan.

Here are some financial planning items that you can review after the hectic holidays and before the year gets into full swing:

Review your debt. How much do you really owe? What are the rates and terms?

Check your employer retirement plan.Are you contributing the max? Have you rebalanced?

Update your Annual Savings Goals. Are you paying yourself first?

Simplify your financial life. Do you know where all your retirement savings are?

Make sure you are adequately insured.

Review you homeowner’s and auto policies. Check those deductibles and coverage.

Evaluate your life insurance policies.

Make sure you have an Umbrella policy.

Pull out those Estate Planning Documents. When were your will, trusts and powers of attorney were last updated?

Rebalance Your Investments. Remember that we can help you rebalance your investments to remain in line with your goals, time horizon and risk tolerance.

Weigh Investment Opportunities and Risks. Is your portfolio positioned for your future?

As attorneys, we are not financial advisors, but we work hand-in-hand with the advisors our clients rely on to help our clients reach their goals. Our sphere of knowledge is the law and how it might be navigated to a person's advantage. A financial advisor looks to what assets your have and how you can use them to reach your goals. The world has gotten so complicated it really does take a team at times to make sure that you have all the information that you need to get to where you want your family to be to feel secure and meet your goals.

Tax Primer for Filing your 2011 Taxes

Deirdre Wheatley-Liss — Tue, 21 Feb 2012 09:39:19 -0500

It's that time of year when we are all hunkering down getting our documents together to file our income taxes. While we recently blogged about proposed changes to the tax code, filing your taxes deals with the laws that are in place here and now.

So, what do you need to know? Marty Abo, CPA at Abo and Company apparently spent last weekend putting together a punch-list of what you need to know for the 2011 tax season:

"From tax credits, exemptions and deductions for individuals and Section 179 expensing for small businesses, here's what Abo and Company thinks you may want to know about the tax changes for 2011."

So, here is your tax season checkup checklist reproduced with permission from the email alerts sent to clients and friends of Abo and Company, Certified Public Accountants - litigation & forensic consultants. www.Aboandcompany.com. I found it valuable and Marty was happy to allow us to share it with you.

Individuals

From personal deductions to tax credits and educational expenses, many of the tax changes relating to individuals remain in effect through 2012 and are the result of tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

Personal Exemptions - The personal and dependent exemption for tax year 2011 is $3,700, up $50 from 2010.

Standard Deductions - In 2011 the standard deduction for married couples filing a joint return is $11,600, up $200 from 2010 and for singles and married individuals filing separately it's $5,800, up $100. For heads of household the deduction is $8,500, also up $100 from 2010.

The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50.

Income Tax Rates - Due to inflation, tax-bracket thresholds will increase for every filing status. For example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000 for a married couple filing a joint return, up from $68,000 in 2010.

Estate and Gift Taxes - The recent overhaul of estate and gift taxes means that there is an exemption of $5 million per individual for estate, gift and generation-skipping taxes, with a top rate of 35%. For married couples the exemption is $10 million.

Alternative Minimum Tax (AMT) - AMT exemption amounts for 2011 are slightly higher than those in 2010 at $48,450 for single and head of household fliers, $74,450 for married people filing jointly and for qualifying widows or widowers, and $37,225 for married people filing separately.

Marriage Penalty Relief - For 2011, the basic standard deduction for a married couple filing jointly is $11,600, up $200 from 2010.

Pease and PEP (Personal Exemption Phaseout) - Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations do not apply for 2011, but these are set to expire at the end of 2012.

Flexible Spending Accounts (FSA) - Under new standards, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer's plan.

A similar rule went into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

Long Term Capital Gains - In 2011, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket. For taxpayers in lower tax brackets, the long-term capital gains rate is 0%.

Individuals - Tax Credits

Adoption Credit - A refundable credit of up to $13,360 for 2011 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit - If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit - The $1,000 child tax credit has been extended through 2012. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Energy Tax Credits for Homeowners - Energy tax credits for homeowners expire at the end of 2011 and are not as generous as in previous years. In addition, a taxpayer who has claimed an amount of $500 in any previous year is not eligible for this tax credit.

Homeowners can claim an Energy Star window tax credit of up to $200 maximum as well as a water heater tax credit, which includes electric, natural gas, propane, or oil, up to a maximum of $300. The same maximum ($300) applies to air conditioners, but insulation, doors, and roof credits are capped at $500. The furnace tax credit (includes natural gas, propane, oil, or hot water) and is capped at $150 maximum and efficiency must be at 95%.

Earned Income Tax Credit (EITC) - The maximum EITC for low and moderate income workers and working families is $5,751, up from $5,666 in 2010. The maximum income limit for the EITC has increased to $49,078, up from $48,362 in 2010. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals - Education Expenses

Coverdell Education Savings Account - For two more years, you can contribute up to $2,000 a year to Coverdell savings accounts. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit (Higher Education) - The expansion of the Hope Scholarship Credit by the American Opportunity Tax Credit has been extended through 2012. For 2011, the maximum Hope Scholarship Credit that can be used to offset certain higher education expenses is $2,500, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Employer Provided Educational Assistance - Through 2012, you, as an employee, can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.

Lifetime Learning Credit - A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2011, the credit is fully phased out at $122,000 adjusted gross income for joint filers and $61,000 for others.

Student Loan Interest - For 2011 and 2012, the $2,500 maximum student loan interest deduction for interest paid on student loans is not limited to interest paid during the first 60 months of repayment. The deduction begins to phase out for higher-income taxpayers.

Tuition and Related Expenses Deduction - For 2010 and 2011, there is an above-the-line deduction of up to $4,000 for qualified tuition expenses. This means that qualified tuition payments can directly reduce the amount of taxable income, and you don't have to itemize to claim this deduction. However, this option can't be used with other education tax breaks, such as the American Opportunity Tax Credit, and the amount available is phased out for higher-income taxpayers.

Individuals - Retirement

Roth IRA Conversions - There is no longer an income limit for taxpayers who want to convert regular IRAs into Roth IRAs. The difference is that taxpayers who convert to Roth IRAs in tax year 2011 must pay taxes on the conversion income now instead of deferring it in later years as was the case in 2010.

Businesses

Standard Mileage Rates - The standard mileage rate increases to 51 cents per business mile driven (19 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations) for the first half of 2011. From July 1, 2011 to December 31, 2011 however, the rate increases to 55.5 cents per business mile. This increase is a special adjustment by the IRS and reflects higher gasoline prices.

Health Care Tax Credit for Small Businesses - Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000. The credit can be claimed in tax years 2010 through 2013 and for any two years after that. The maximum credit that can be claimed is an amount equal to 35% of premiums paid by eligible small businesses.

Section 179 Expensing - In 2011 (as well as 2010), the maximum Section 179 expense deduction for equipment purchases is $500,000 ($535,000 for qualified enterprise zone property) of the first $2 million of certain business property placed in service during the year. The bonus depreciation increases to 100% for qualified property. If the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2 million, the $500,000 amount is reduced, but not below zero.

Thank you again Marty and the team at Abo and Company for this very useful information!

This Will Impact Your Wallet - Tax Changes Proposed in Obama 2012 Budget

Deirdre Wheatley-Liss — Fri, 17 Feb 2012 08:18:58 -0500

President Obama’s fiscal year 2013 budget has the potential to trim the deficit by Four Trillion ($4,000,000,000,000.00) Dollars through a combination of spending cuts and tax increases. These proposals will effect all taxpayers, but have particular impact to top earnings, business owners, and those with asset in excess of $5 million.

President Obama unveiled his fiscal year 2013 budget on February 13, 2012 amidst a cloud of uncertainty relating to Bush era tax cuts and the more immediate the fate of the payroll tax cuts (which news channels advise are to be extended later today). President Obama’s fiscal year 2013 budget proposals incorporate initiatives from his “Blueprint for America” as described in his 2012 State of the Union address. While some of the President’s proposals were immediately rejected by the GOP, others could move along quite quickly. The expected extension of the Employee Side Payroll Tax Cut could serve as a vehicle to move some of the proposals, such as an extension to the 100% bonus depreciation.

What you will find striking in the summary outlining the budget proposal is the effect directly on individuals and businesses. The most significant issue are:

Reinstatement of the top individual income tax rates at the 36% and 36.9% tax brackets
Reinstatement of the personal exemption phase out/limitation of itemized deductions for taxpayers earning more than $200,000 a year for individuals or joint returns with incomes over $250,000
Return of a $ 1million lifetime gift tax exemption
Capping the federal estate tax and generation skipping tax exemptions at $3.5 million per person (with portability between spouses)

Click here for a complete summary.

Insolvent Estates - Who gets paid What when an Estates Debts are more than its Assets?

Deirdre Wheatley-Liss — Tue, 14 Feb 2012 08:00:05 -0500

A decedent doesn't always leave assets to his or her heirs - instead there may only be a pile of debt. An estate is known as an "Insolvent Estate" when its liabilities exceed its assets. What to do in that situation?

When determining if there are any assets that will pass to heirs, it is first important to understand that certain assets in New Jersey are excluded from satisfying a decedent's debts. There are special categories of assets, such as retirement plans (IRA, 401(K), 403(b)) and life insurance, that are exempt from the claims of creditors under state law in New Jersey. Accordingly, there could be beneficiaries of a 401(k) plan and a life insurance policy who will receive assets as a result of the decedent's death, but creditors will go unpaid because there are not sufficient assets outside of the retirement plan and life insurance to satisfy the decedent steps. Look to NJSA 25:2-1 regarding the exclusion of retirement plans, and NJSA §§ 17B:24-6 regarding the exclusion of life insurance. See here for a great guide of creditor protection for life insurance in all states. One important caveat is that if the "estate" is the named beneficiary of the retirement plan or the life insurance policy, then the proceeds will be available to satisfy the claims of creditors. Therefore, to get the benefit of creditor protection it is important to name a person or trust as the beneficiary of that asset, and not the "estate".

The next question in this case is if the person is named as the Executor under the Will wants to take on that role under the Will. If there are no assets that are distributable to heirs, and the Executor is only going to be acting for the benefit of creditors, the Executor may be concerned about taking on that role and liability. Remember, being named as a Executor is only a nomination to that role – the Executor is free to decline for any reason.

In paying the claims of creditors, certain claims have priority over other claims. The theory behind this is that if certain claims were not paid, there will be no incentive to provide the necessary services to an estate that may be insolvent. The priority of payment is (See NJSA 3B:22-32):

Reasonable funeral expenses;
Costs and expenses of administration (including attorney fees, accountant fees, surrogate fees, executor commission, and other costs necessary to the handling of an estate);
Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
Debts and taxes with preference under federal law or the laws of this State (including any current or back taxes, interest and penalties);
Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him;
Judgments entered against the decedent according to the priorities of their entries respectively;
All other claims.

If there is more than one claim in any class of claims, and insufficient dollars to pay all of that class of claims, then the claimants of the same class will be paid in proportion to the amount claimed. This might happen if there were six different medical bills dealing with the decedent's final illness, and not enough dollars to pay all those bills. See NJSA 3B:22-32.

Executors dealing with insolvent estates therefore have to be very carefully aware of (1) what assets of the estate are available to satisfy claims, and (2) a plan to address a situation where there are not enough assets to pay all debts.

Asset Protection - The Wrong Way

Deirdre Wheatley-Liss — Thu, 09 Feb 2012 08:41:39 -0500

In a case of "you have got to be kidding me" a Florida man adopts his girlfriend (in her mid-40's) as part of an "oh no - I should have done this sooner" dubious asset protection plan. Steven A. Loeb, Esq. points out that there is a right way and a wrong way to approach asset protection and talks about the situation in more detail below. Aside from the shake your head in disbelief factor, the take-away here is that key to asset protection planning is having a plan - and a plan is something that is put into place to address an issue before that issue happens.

Before we get to the details of this case, it is important to understand that while asset protection planning can be part of an estate plan - as in, "I want my daughter's inheritance protected in case she gets a divorce", it can also be a stand alone plan for individuals who are concerned about personal liability. The clients we work with tend to be professionals (doctors, lawyers, accountants, veterinarians, dentists and architects), as well as real estate developers and closely-held business owners. The liability risk profile of these individuals is more elevated than the general population, and they may have accumulated some wealth that they wish to shelter from risk of litigation. For a greater understanding of what asset protection entails, look at a more in-depth article on our website "Asset Protection Trusts - How to Plan Correctly"

But now, lets find out more about our Florida friend:

A recent case against John Goodman, founder of the Polo Club of Balm Beach, is another reason individuals should consider asset protection planning prior to a lawsuit being initiated. The facts of this case (click here for details) are unusual; however an individual running a stop sign is unfortunately an every day occurrence. Proper planning is critical in order to protect one's assets from creditors and unknown situations. Unfortunately for John, it appears he did not have a proper asset protection trust in place prior to the accident. It would appear from the facts that a potential purpose of adopting Mr. Goodman's girlfriend would be to provide access to an irrevocable discretionary trust originally created for his then living children; however the ability for Mr. Goodman to have access to those dollars by adopting his girlfriend (and hence make her a 1/3 beneficiary of said trust given she is now his issue) is suspect. This may be a case of first impression in Florida given the circumstances.

Yeah, we couldn't believe the facts when we read them either. But it does serve to illustrate the negative alternative to proper planning.

Image: Grant Cochrane / FreeDigitalPhotos.net

Win Big on the Superbowl? Surprise - Those gambling winnings are income.

Deirdre Wheatley-Liss — Mon, 06 Feb 2012 08:39:55 -0500

The Giants won big yesterday, and you might have also if you participated in an office pool, or bet on the over/under, the coin toss, the number of Clydesdale's in Budweiser ads, or any other of the myriad of ways to wager your dollars on Superbowl Sunday. What you may not know is that those wager winning are taxable income.

The IRS has issued Tax Tip 2010-34 "Gambling Winnings Are Always Taxable Income" - I guess the name of that Tax Tip says it all. They go on to give you the top 7 facts the IRS wants you to know about gambling winnings.

Gambling income includes – but is not limited to – winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other non-cash prizes.
Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment.
The full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040.
You cannot deduct gambling losses that are more than your winnings.
It is important to keep an accurate diary or similar record of your gambling winnings and losses.
To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

Want to know more? Look to IRS Publication 529 "Miscellaneous Deductions" or Publication 525 "Taxable and Nontaxable Income".

Doctrine of Laches means you are "Out of Time"

Deirdre Wheatley-Liss — Tue, 24 Jan 2012 08:02:47 -0500

In a continuation of our "rosetta stone" of "legalese" to English, Stacey C. Maiden, Esq. of our Estate Planning and Elder Law Department, talks about a recent case that gives life to the dusty doctrine of "laches". Aren't latches what you use to close a door ? Not if you are a lawyer - to us "laches" means "too bad, you are out of time", as in, "that door is now locked".

Defendants often raise the “doctrine of laches” as an affirmative defense in answers, but it is seldom applied by the Court. What exactly is laches? The doctrine of laches is based on the maxim that “equity aids the vigilant and not those who slumber on their rights.” (Black’s Law Dictionary). The outcome is that a legal right or claim will not be enforced or allowed if a long delay in asserting the right or claim has prejudiced the adverse party. Elements of laches include knowledge of a claim, unreasonable delay, neglect, which taken together hurt the opponent.

A New Jersey Court recently put the doctrine of laches to use in dismissing claims made by a surviving spouse in an estate matter. In the unpublished case Buie v. Estate of Buie, Chancery Div., Probate Part (Essex Cty.) (Koprowski, J.S.C.), the decedent died testate, leaving his property in Newark to be divided among his six children equally. One week after his death, the plaintiff, his wife, who received non-probate assets of $95,000, left the house in question and returned to South Carolina with co-plaintiff, her son with the decedent.

14 years later [and yes, that is a long time later], the plaintiff/surviving spouse filed an action demanding her intestate share under N.J.S.A. 3B:5-3 as an omitted spouse under 3B:5-15 or an elective share of her husband's estate under 3B:8-1. The court held that the omitted spouse claim was barred by the doctrine of laches since there has been a substantial delay in bringing the action, the plaintiff was the cause of the delay, and defendants have been prejudiced as a result of the delay.

The court also held that plaintiff’s claim under the Elective Share statute was time-barred and that no good cause existed to extend the time to file. Under New Jersey statute, plaintiffs must file claims for elective share within 6 months of the appointment of a personal representative. (N.J.S.A. §3B:8-12):

What is the take-away from this? If you have a legal claim, you have to act on it in a timely manner. While some claims may have to be brought in a specific period because of a statue-of-limitations (like the Elective Share in the example above), all claims must be made in a reasonable time frame from when you knew about the claim. It is very difficult to have to tell a client while they may have the best case in the world, they aren't able to get relief because they didn't act quickly enough. Luckily, the Doctrine of Laches is entirely avoidable if you get legal advise from an attorney at the time that you have a legal question.

Image: numanzaa / FreeDigitalPhotos.net

Top 10 Elder Law Cases of 2011

Deirdre Wheatley-Liss — Fri, 20 Jan 2012 08:39:02 -0500

New Jersey accounted for 30% of the most important court rulings on elder law issues in 2011. The crib notes version? Stay within the line and intent of the law to get the results that you want. The courts are supporting Medicaid's ability to create a period of denial because of a transfer of assets to family members. This is in line with one of the core principals of Medicaid eligibility - the state will pay for your long term care if you have a dire financial need, but not if you manufactured that need in the past 5 years by transferring assets to your family.

The key takeaway - effective plans are put into place well before they are needed and fully conform to the law.

This "Top 10" list comes courtesy of elderlawanswers.com:

1. Medicaid Applicant's Penalty Period Does Not Begin Until Returned Assets Are Spent Down
The U.S. Court of Appeals, Third Circuit, rules that a New Jersey Medicaid applicant who transferred assets and then had some of the transfers returned cannot get credit toward her penalty period for the time before the transfers were returned that she was resource-eligible. Marino v. Velez (U.S. Ct. App., 3rd Cir., No. 10-2324, Jan. 10, 2011).

What do you need to take away? If you made a gift in the 5 years before you applied for Medicaid, and you lost the "bet" that you wouldn't need Medicaid for 5 years, the ENTIRE gift needs to be returned, and spent down, before you will qualify for Medicaid. To be successful, you need to plan early so that you have a greater likelihood of not needing care for 5 years.

2. State Cannot Recover Assets That Were Transferred Before Medicaid Recipient Died
In a case pursued by ElderLawAnswers member attorney Peter C. Sisson, an Idaho district court rules that the state cannot recover assets from the estate of a Medicaid recipient's spouse that were transferred to the spouse before the Medicaid recipient died. In Re: Estate of Perry (Idaho Dist. Ct., 4th Dist., No. CV-IE-2009-05214, March 16, 2011).

3. Federal Court Rules Ahlborn Does Not Bar Medicaid Recovery From Future Medical Expenses
A federal district court rules that a state Medicaid agency may recover the cost of a beneficiary's medical care from the portion of her personal injury settlement that was allocated to medical expenses, regardless of whether the funds were allocated to past or future medical care. Perez v. Henneberry (D. Colo., No. 09-cv-01681-WJM-MEH, April 26, 2011).

4. Court Upholds Nursing Home Resident's Eviction Prior to Resolution of Medicaid Appeal
A Kentucky appeals court holds that a nursing home may evict a resident for nonpayment despite a pending Medicaid appeal. King v. Butler Rest Home, Inc. (Ky. Ct. App., No. 2010-CA-001467-MR, June 17, 2011).

5. Payments to Caregivers of Dementia Patient Are Deductible Medical Expenses
The U.S. Tax Court rules that payments to caregivers of a dementia patient are deductible medical expenses, even though the caregivers were not licensed health care providers. Estate of Lillian Baral (U.S. Tax Ct., No. 3618-10, July 5, 2011).

What do you need to take away? This is a win for caregivers. Catastrophic medical expenses in excess of 7.5% of your adjusted gross income are deductible. This may offset some of the costs of care.

6. Third Circuit Affirms That N.J. May Count Promissory Notes As Available Resources
In a long-running case that has bounced back and forth between two federal courts, the Third Circuit Court of Appeals rules that New Jersey's Medicaid agency may analyze promissory notes as trust-like devices and count the notes as available resources. Sable v. Velez (U.S. Ct. App., 3rd Cir., No. 10-4647, July 12, 2011).

What do you need to take away? While the court specifically advised that this case was not precedential, if you are making loans, they need to be real and fit within the requirements of the law. They need to be in writing, actually repaid, and consistent with the law.

7. Transfer of Medicaid Applicant's House to Son Falls Within Caregiver Child Exception
A New Jersey appeals court rules that the transfer of a Medicaid applicant's house to her caregiver son is not subject to a Medicaid penalty period because it falls within the caregiver child exception. V.P. v. Dept. of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept. 2, 2011). To read the full summary, click here.

What do you need to take away? The Medicaid applicant was successful because the caregiver child was able to prove that he actually provided a high level of care including walking, bathing, and cooking. In short, he had good facts. If you are a caregiver child looking to someday keep your home by taking advantage of this exemption, you will also need good facts. Start keeping a log of what you do now.

8. U.S. Court Rules Connecticut Likely Cannot Refuse Spousal Refusal Doctrine
Ruling that a state statute violates federal Medicaid law, a federal district court grants a preliminary injunction preventing Connecticut from denying Medicaid benefits to an applicant seeking to disregard his spouse's assets using the doctrine of spousal refusal. Fortmann v. Starkowski (D. Ct., No 3:10cv1562 (JBA), Sept. 28, 2011).

9. Medicaid Applicant's Transfer to Daughter Created Trust-Like Device
A federal district court rules that when a Medicaid applicant transferred money to her daughter with the intention that the daughter pay for her care during the resulting penalty period, she created a trust-like device, so the money is still an available resource. Pfeffer v. AHCCCS (U.S. Dist. Ct., D. Ariz., No. CV-11-0891-PHX-GMS, Sept. 29, 2011).

10. Irrevocable Trust Set Up by Medicaid Applicant's Children Is Available Asset
A Wisconsin appeals court rules that a Medicaid applicant who transferred funds to her children, who then put them in an irrevocable trust for her benefit, is ineligible for Medicaid because the trust is an available asset under state law, even though the transfer occurred 17 years before she applied for Medicaid. Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011).

Image: Idea go / FreeDigitalPhotos.net

Deconstructing a Trust - A Rosetta Stone for Trust Terms

Deirdre Wheatley-Liss — Mon, 16 Jan 2012 17:08:23 -0500

It is a fact of life (or a result of law school) that attorneys tend to speak "legalese". This means that we can take a perfectly well known English word - like "income" - ascribe a very specific meaning to it, and then bandy the word about without you having the benefit of knowing the specific definition we are referring to. So what is "income", or "principal" for that matter, from a trust or estate planning perspective? And what makes up a trust anyway?

Trusts are a legal construct (see - more legalese). This means that a trust doesn't exist in a tangible sense. Instead, it is "formed" on paper (the "Trust Agreement") and given life by the people who carry out the terms of the trust. Who are those people?

"Grantor" or "Settlor" - The person who creates the trust.

"Beneficiary" - The people the trust is made for, or intended to benefit.

"Trustee" - The person who operates the trust for the benefit of the Beneficiaries.

If you think of a trust like a small business, the Trustee is akin to the President, and the Beneficiaries are like the Shareholders. Everything that the Trustee/President does is for the benefit of the Beneficiaries/Shareholders.

A Beneficiary can be further described as having rights to "income" and/or "principal".

Income - For trust purposes income is defined as interest and dividends. Capital gains are generally not part of the trust definition of income. So a person entitled to income would be entitled to any interest on bond payments, or any dividends on stock, but not the proceeds from the sale of an asset that resulting in a capital gain.

Principal - Principal is the bulk of the trust. This is what the Trustee invests and distributes to the beneficiaries. Any capital gain would be added back to income to be reinvested.

There are myriad ways how income and principal can be designed to be allocated to the beneficiaries, and the level of discretion the Trustee has regarding those distributions. However, that is a subject for another post.

Don't Be that Person - Craziest Lawsuits of 2011

Deirdre Wheatley-Liss — Tue, 10 Jan 2012 08:19:01 -0500

You have all heard the lawyer jokes ("Why didn't the shark eat the lawyer?" ... "Professional courtesy"). Unfortunately, some of that tarnished reputation comes from our own brethren who assist clients in making the most ridiculous claims. As a humorous, or ironic, look at last year, Findlaw.com has published The 5 Most Outrageous Lawsuits of 2011. To share some:

Kidnapper Sues Hostages for Breaching 'Contract' to Hide Him

The most outrageous and strangest lawsuit to come out of 2011 might be this one. A convicted kidnapper in Colorado sued his former hostages for breaching an oral contract to hide him when he was a fugitive. He sought damages to compensate him for injuries incurred during his arrest.

'Bad Mothering' Lawsuit: Kids Sued Mom over Empty B-Day Card

Attorney Steven A. Miner helped his kids file a lawsuit against his ex-wife for being a "bad mother." The kids said that they were subjected to empty birthday cards, clothing budgets, seat belts, and their mother's "forgetfulness."

Most lawyers don't get involved in such cases that have no real substance - just like most attorney's practices aren't what you see on TV. Your attorney's role should be as a trusted advisor to you - someone who educates you about the law, learns what your goals are, are helps you create and take a path through the law towards your goals. Oh, and your attorney should be able to laugh at any good lawyer jokes.

Image: Master isolated images / FreeDigitalPhotos.net

New Year's Resolution - Look at that Will or Estate Plan

Deirdre Wheatley-Liss — Tue, 03 Jan 2012 11:09:46 -0500

Early January is a great time of year. Everyone is full of enthusiasm for all we are going to accomplish this year. Maybe you even sat down over the weekend and made a list of goals for 2012. One of your 2012 goals may very well be "Get a Will", "Review my Will", of "Find out if I need a Will." Luckily, unlike some other New Year's Resolutions, meeting these goals is easy.

First, why do you need a Will? We have answered this an some other estate plan "overview" questions with "Why do I need a Will? And other frequently asked questions about Estate Planning". You can use this short article as a starting point about:

Why do I need a Will?
What happens if I die without a Will?
What is a "Living Will"?
Do I need a Power of Attorney?
What is a Trust?
What is a Living Trust or Revocable Trust?
Will a Will or a Revocable Trust help me save taxes?

Next, if you have an estate plan or Will already, is it still working for you? Have you planned for today's tax laws, as opposed to the ones in place when you originally put the plan together? Are your named fiduciaries (Executor, Trustee, Guardian) still appropriate? Has there been a material change in your circumstances so your current Will or estate plan just doesn't fit you anymore? To address these questions and many others we have created a detailed "Estate Plan Review Checklist" to help you determine the suitability of your current estate planning documents. The Checklist includes both questions to ask about your estate plan, and explanation of why to ask them. Questions asked on the Checklist, and the reasons for them, include:

Do you have the 3 documents every estate plan must contain? (Will, Living Will/Health Care Proxy, Power of Attorney)
Have you moved since you last updated your estate planning documents?
Do you have a separate personal property designation?
Is any person receiving your personal property a minor (under 18)?
Do you have any specific gifts or bequests you want to make?
Are your total combined assets, including life insurance death benefits, greater than $675,000?
Do you own assets held in joint accounts, or where you have a named beneficiary?
Are your residuary beneficiaries correct?
Are assets being distributed to your beneficiaries outright or in trust?
If you currently have a trust established, are the terms still appropriate?
Do any of your beneficiaries have special needs?
*Does your estate plan contain provisions to allow you and your family to be as flexible as possible in meeting your goals?
*What authority does the Trustee have to distribute the assets in the trust?
Are your alternate beneficiary designations appropriate?
Are your Executors, Trustees, and Guardians still the appropriate people, in the appropriate order?
If you have a taxable estate (assets exceeding $675,000), have you and your spouse reallocated ownership of and title to your assets to minimize estate taxes?
Is your General Durable Power of Attorney more than 10 years old?
Does your General Durable Power of Attorney continue to name appropriate attorneys-in-fact?
Does your General Durable Power of Attorney allow for Medicaid planning?
Does your Health Care Power of Attorney continue to name appropriate Health Care Representatives?
Does your Health Care Power of Attorney reference the Health Insurance Portability and Accountability Act (“HIPAA”)?
Does your Living Will clearly state your desire about what medical treatment you want to receive or refuse in a terminal situation?
Does somebody know where all of your estate planning documents are?

Considering that 88% of New Years Resolutions fail, why not look at your estate plan to find out how to keep at least one of those resolutions this year?

Happy 2012!

Image: Grant Cochrane / FreeDigitalPhotos.net

2011 Year End Tax Planning Tips

Deirdre Wheatley-Liss — Tue, 20 Dec 2011 10:36:36 -0500

The end of the year is crunch time to finalize what your tax bill will look like come April 15, 2011. Eisner Amper has just issued a terrific 2011 Year-End Tax Planning Goals Chapter of its upcoming 2012 Personal Tax Guide. I urge you to peruse the tips and information to see if there are any actions you can take between now and December 31, 2011 to lower your 2011 tax bill.

Some ideas include:

Setting tax planning goals - including deferring taxes, reducing taxes managing cash flow, retirement and education planning

Year end tax planning tips - timing can be everything

AMT Planning - if you are in the AMT for 2011 or 2012, you won't get any benefit from prepaying state and local taxes, real estate taxes or certain miscellaneous itemized deductions,so save your money

Prepayment of Expenses - the most common deductible expenses that need to be incurred before December 31 to deduct this year are charitable contributions, state and local income taxes and real estate taxes (see AMT above), mortgage interest, margin interest, business equipment purchases.

Timing of Income - look to defer income to future years if you believe you might be in a lower tax bracket at that time.

Bunching miscellaneous deductions to get over the 2% floor - if you got over the floor this year, you may want to prepay some expenses that otherwise might not be deductible next year.

Manage your refund/payment - adjust year end withholding or make and estimated payment to avoid underpayment penalties

Manage Business losses and Passive Activity losses - discuss the ability to take tax free distributions or close out an investment with your accountant

Review Incentive Stock Options - the timing of exercise of an ISO can have a huge impact on its taxation, especially if you are in the AMT

Estate Planning - consider year end annual gifts($13,000 per recipient) to beneficiaries

See the Eisner Amper year end tax guide for more details and great Tax Tips.

Image: renjith krishnan / FreeDigitalPhotos.net