Caring for Pets As Part of Your Estate Plan

April 21, 2016

Many if not all of us have had a pet during our lifetimes.  But what happens to that pet if the owner becomes incapacitated or dies?  Virginia (Section 64.2-726), Maryland (Section 14.5-407)  and the District of Columbia (Section 19-1304.08) all have statutes that permit the creation of a trust for the care of a pet.  In determining how to provide for a pet during incapacity and/or at death, here are a few items to remember:

1.  The owner should ensure that, at a minimum, they have a Power of Attorney giving someone authority to take care of their pets using the owner’s monies to do so.   In addition, the owner should ensure that instructions for caring for the pet have been provided for in their estate plan.  This can be done in various ways including specific provisions in a Last Will and Testament or through a Revocable Living Trust.

2.  An owner of a pet may want to carry information in a wallet or purse that identifies the fact that he or she owns a pet, what kind of pet, where the pet is located and any special instructions regarding care.  The thought is that if the owner is unable to return home those going through the wallet or purse will find this information and ensure the pet receives the proper care.

3.  Along with other important papers relating to one’s estate plan, there should be a document that summarizes all pertinent information relating to the pet including any medical history, veterinarian’s contact information, allergies, likes/dislikes, etc.  The information carried in the purse or wallet would also be included and further detail provided, if necessary.

4.  Many pet owners now post a notice near their front door that they have pets in the house to alert anyone entering the home to be on the look out for the animals.

5.  If the owner is considering establishing a Pet Trust, then the following questions must be asked:
     a. Who will be named as caregiver for the pet?
     b. Will there be different caregivers for different pets? 
     c. Is the proposed caregiver willing to serve? 
     d. Who are the alternate caregivers?
     e. Who will be Trustee of the Pet Trust? 
     f. Will the Trustee be the same as the caregiver?
     g. Who will be successor Trustee?
     h. How much money should be set aside for the pet or pets that the Trustee will manage?
     i. What special care instructions should be included in the Pet Trust?
     j. How should the Trustee make distributions from the Pet Trust (i.e., to the caregiver or directly to the vendor)?
     k. Should any monies be paid to the caregiver from the Pet Trust?
     l. What should happen to any remaining monies upon the death of the pet or pets?
     m. Are there any specific burial and/or cremation instructions for the pet or pets?

There is certainly more information that can be included in the Pet Trust depending on the kind of pet, the standard of care, the amount of money to be set aside and the overall goals and objectives of the owner.   But these items will help you to start thinking about what happens next for your pets who are more likely than not a part of your family, and therefore, need to not be forgotten in any estate plan.  #pettrust #estateplanning #incapacityplanning #caringforanimals

National Healthcare Decisions Day – April 16

April 14, 2016

Previous posts have talked about you controlling your final moments and also how you want to be remembered.  April 16 is National Healthcare Decisions Day and provides a reminder that having a living will in which you express your wishes regarding life-prolonging procedures or choosing not to have a living will are crucial components in every estate plan.

To that end, during this past legislative session of the General Assembly of Maryland, a bill was introduced that would authorize a qualified individual to request aid in dying.  The Richard E. Israel and Roger “Pip” Moyer End of Life Option Act would have allowed individuals meeting certain criteria to request and receive from their physician a lethal dose of a particular medication.  The bill was withdrawn from consideration as it lacked enough support, but not before sparking public conversation about the topic.  At this juncture, there are four states that have death with dignity statutes: Washington, Oregon, Vermont and California.  In fact, California’s statute is so new it will only take effect in June.  Montana does not have a statute, but a 2009 Montana Supreme Court case (Baxter v. State of Montana) examined whether a physician could prescribe a fatal dose of medication to a terminally ill individual without being charged with a crime because consent was involved.  In the end, although attempts have been made to pass aid in dying legislation, Montana does not have a statute legalizing the practice and the Baxter case addressed a very narrow aspect of the practice.

Regardless of your position on death with dignity statutes, end of life decision-making and advance healthcare planning is an important conversation to have and to share with your loved ones and National Healthcare Decisions Day helps remind us of the need to begin the dialog on the subject.  @deathwdignity @NHDD #livingwill #estateplanning #endoflife #advancedirective #NHDD

New Department of Labor Rules May Impact Your Retirement Accounts

April 7, 2016

Recently, the Department of Labor issued new rules that may impact your relationship with your financial advisor as it relates to your individual retirement accounts.  The rules are an attempt to require investment advisors who provide retirement investment advice to put a client’s best interest first translating to the parties signing a ‘best interest contract‘.  The effort to create these new rules began in 2010 with proposed rules issued last year, and after a period for comments, the new rules being issued now.  Implementation of the rules will be staged over the next couple of years with compliance required by January 1, 2018.   

So, what does this mean to an individual investor?  The ultimate impact is still being determined, but it does mean that individuals should reach out to their investment advisors to determine how their relationship may change, if at all, and whether fees will be impacted.  And how does such news correlate to estate planning?  Since almost every estate plan involves disposing of financial assets, and for most individuals that means passing on retirement assets, having your financial plan in order and understanding your rights as an investor is part of the process of structuring your estate plan so that your plan will meet your goals and objectives. #DOLnewrules #retirement #money #bestinterestcontract          

Alternative Living Solutions – “The Granny Pod”

April 2, 2016

As the population ages and the costs of entering and living in a continuing care retirement community (CCRC) or an assisted living facility (ALF) continue to rise, families are looking for alternative living arrangements for their loved ones.  One alternative is ‘the granny pod‘ or ‘MedCottage.’  In general, these tiny houses are comprised of a bedroom, bathroom, kitchen area and living space.  The pod is meant to reside in the backyard of an existing residential location and be a safe living area for an aging family member.  So, instead of families looking to buy a bigger home or to construct a large addition to accommodate their family member, the pod gives everyone the space they need.  Arguably, the cost is less than several months at an assisted living facility or the entry fee for a CCRC (depending on location).  Of course, one cannot simply move a pod into the backyard without first ensuring compliance with zoning ordinances, permit requirements for construction and hooking up utilities, insurance coverage and an overall fit for the family lifestyle and the care needs, among other considerations.  However, the idea is unique and innovative and may relieve a lot of stress and avoid family arguments during what may already be difficult times. #alternativeliving #grannypod @KennethDupin #elderlaw

ALERT – UPDATE 2.0 – New Rules for Basis Consistency

March 26, 2016

In an earlier post I described the new rules for basis consistency about which executors and their advisors must be aware.  In an update to that earlier post, I highlighted the regulations that had been issued.  The deadline for complying with the new rules was March 31, 2016.  On March 23, 2016, the IRS issued another notice further extending the deadline to comply with the new rules until June 30, 2016.   This extension gives executors and their advisors more time to digest the new rules and regulations, and hopefully, more accurately complete Form 8971 and Schedule A.  #estateadministration #taxplanning #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax

The ABLE Act – Proposed Legislation Will Modify Certain Provisions

March 22, 2016

An earlier post gave a brief summary of the Achieving a Better Life Experience Act of 2014 or the ABLE Act.  Three different pieces of legislation were introduced on March 17, 2016 that would change some of the provisions of the ABLE Act.  Below is a brief summary of each proposed change.

  1.  Current law limits eligibility for the creation of an ABLE account to individuals with disabilities where the disability occurred before turning 26 years old.  H.R. 4813 would increase that age from 26 to 46.
  2. H.R. 4794 would allow for rollovers between 529 accounts and ABLE accounts.
  3. Finally, H.R. 4795 would permit individuals with disabilities to save additional monies to an ABLE account above the annual maximum ($14,000.00) now in place.  Such additional contributions would be allowed for those individuals with disabilities who work and earn income.  The additional contribution would equal the lesser of (a) his or her “compensation…for the taxable year” or (b) “an amount equal to the poverty line for a one-person household, as determined for the calendar year preceding the calendar year in which the taxable year begins.”

Updates will be posted as the legislation moves forward.  #specialneeds #ABLEact #estateplanning #proposedlegislation

The ABLE Act – An Additional Resource for Families and Advisors

March 15, 2016

In 2014, the Achieving a Better Life Experience Act of 2014 or the ABLE Act was signed into law.  Under the ABLE Act, certain savings accounts could be established for individuals with disabilities.  Such accounts allow for monies to be set aside for an individual with disabilities without disqualifying the individual from public benefits such as Social Security Income (SSI) or Medicaid.  The total annual contributions are currently capped at $14,000, but the accounts can grow and be funded up to state mandated limits.  Virginia and Maryland limit these accounts to $350,000 while the District of Columbia caps the accounts at $260,000.  Various other restrictions apply including restrictions that may impact an individual’s SSI benefit for a period of time and require any remaining amounts in the account to be used to pay back for Medicaid benefits that are received; generally known as a “Medicaid pay-back” provision.

Recently, the ABLE National Resource Center, an organization founded and managed by the National Disability Institute (NDI), went live with an informative website for families and professional advisors interested in learning more about the ABLE Act and establishing an account for an individual with disabilities.  In addition, the website provides state specific information since each state has implemented the ABLE Act differently.   Families of individuals with disabilities now have another resource in addition to consulting with their professional advisors if they are considering creating an account to ensure such planning fits within their overall goals and objectives.  #specialneeds #ABLEact #estateplanning @RealEconImpact

ALERT – UPDATE: New Rules for Basis Consistency

March 6, 2016

I previously posted about the new rules for basis consistency about which executors and their advisors must be aware.  I noted that the IRS had indicated that regulations would be forthcoming.  Late last week the proposed regulations were released relating to both Section 1014(f) and Section 6035 and I have highlighted a few points below.

One of the biggest issues about which clarity was being sought was whether an executor of an estate in which an estate tax return is being filed to take advantage of portability needs to complete and file Form 8971.  The proposed regulations exclude such returns from the requirement; that is, if an executor is simply filing for portability, then Form 8971 is not required. 

For those who are required to file an estate tax return, the regulations provide some additional guidance as to how an executor is to go about satisfying this new requirement.  For example, if at the time the Form is due, the executor does not yet know what assets a beneficiary will receive, then the executor must report all assets the beneficiary may receive. This ultimately means that the same assets may be reported to several different beneficiaries.  This also means that an executor will be required to supplement the initial filing of Form 8971 and make it clear to the beneficiaries which filings are the final ones.

Moreover, it now appears that when a beneficiary who originally received an asset from an estate subsequently transfers that asset to another family member or entity, the transferring beneficiary will also be required to file Form 8971 with the IRS and report the basis to the family member or entity.  This requirement impacts many individuals who otherwise had no reporting requirement to the IRS and may not be paying attention to the fact they now have these requirements.

Lastly, the new rules, as clarified by the regulations, do not allow for a step-up in basis (a discussion from an earlier post) in certain circumstances.  After discovered assets that should have been disclosed on the estate tax return and were initially not, will have a zero basis, and therefore, be subject to greater income taxes consequences when sold unless certain corrective measures are taken.

What these new rules and proposed regulations tell us is that if you are dealing with a taxable estate, then you should consult with your professional advisor about various filing requirements to avoid missing a filing and incurring the resulting penalties.  #estateadministration #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax

The IRS and Its “Dirty Dozen”

March 1, 2016

Last week I passed along a few tales of identity theft and phone scams involving the IRS.  The IRS also annually posts a list of the “Dirty Dozen” tax scams that may impact you or for which they look when reviewing tax returns. Number 1 on the list was identity theft and number 2 centered around phone scams.  As you can see, fraud and identity theft involving the IRS is becoming more common and you need to be aware of the most likely scams.  Moreover, the threat has increased now that it has been revealed that the recent IRS hack will impact many, many more taxpayers.  Be sure to talk to your professional advisors about possible ways to protect yourself.  #identitytheft #IRShacked #taxfraud #dirtydozen #protectyourself

Identity Theft and the IRS

February 22, 2016

Many of you may have seen that the IRS was hacked again recently and personal data was compromised.  My partner, Wayne Zell, was one such victim and he recently blogged about his arduous experience of proving who he was to the IRS once he received a letter from them.

Unfortunately, his experience is becoming all too common. Another partner, Eric Horvitz, also recently had an experience in which he received robot calls on his cell phone supposedly from the IRS telling him that he would be sued within days unless he returned the call. Although Eric knew it was a scam, he was curious and returned the call using his office phone and was asked to provide personal information. Once the person on the other end of the line knew that Eric understood this was a scam, the person hung up. Eric then provided the following valuable reminders:

  1. The IRS will never initially contact you by phone.  You will first receive a letter.  If you paid all of your taxes for a prior tax year, then a legitimate letter from the IRS likely will say that your tax return is being audited in some fashion.  If you did not pay all of your taxes for a prior tax year, then a legitimate letter from the IRS likely will be a bill that requests payment.  Your failure to address an initial IRS letter in a timely fashion will result with a follow up letter from the IRS in some fashion.

  2. If after receiving a letter (or likely letters) from the IRS, the IRS does call you. The IRS employee always will provide his name and should give his IRS employee number.  Ask what office the IRS is calling you from and later verify that the given IRS office does exist.  A legitimate phone call from the IRS likely means that you have ignored all prior letters from the IRS.  The person calling you likely is either a “revenue agent” – the IRS employee who will audit your return – or a “revenue officer” – the IRS employee who will demand payment.

  3. The IRS will never call you threatening to sue you.  Again, you always will get some sort of letter in the mail.

  4. Never call these scam artists back.  They are out to get your personal information in any way and your money.  Simply by calling them back on the telephone number on which they called you will give them a source of information with which they can steal your identity.

  5. The IRS neither asks nor requires you to use a specific payment method for your taxes, such as a prepaid debit card – the 21st century version of cash — which likely will have no origin through the banking system.

  6. The IRS will never threaten that the “police” will arrest you.  The IRS does have its own police officers.  They are called “special agents.”  If you are contacted by a special agent, then you likely will know why the IRS has contacted you.  In that case, tell the special agent to have a nice day and also tell him that your attorney will contact the special agent.  Then, get an attorney.  You will need one.

As if matters are not already difficult when dealing with the theft of your own identity, for those who have recently lost loved ones and are having to deal with filing final tax returns, the process has become even more complex because of the amount of identity fraud. It is not uncommon for a fraudulent tax return to be filed using a deceased person’s social security number that claims any refund. Usually, executors do not know it has happened until they go to file the final tax return and their filing is rejected.

The process for undoing the damage of the stolen identity can and will take months to resolve. Because there has been so much fraud, the IRS has started responding to requests for information about a deceased’s person’s tax returns with a letter indicating that they will not provide any such information until the executor (or perhaps the CPA or attorney) calls and proves the executor has authority to ask for and receive the tax information.  The call alone can take hours with you just sitting on hold.

There are ways that you can notify the IRS of your authority as an executor through particular IRS forms that are filed with the IRS. An experienced estate and trust administration attorney or CPA can guide you through that process and help complete the forms and get them filed in the proper order. The hope in submitting the IRS forms is that you can avoid hours lost on hold with the IRS and prevent fraudulent filings that create stress during any already stressful time after a loved one has died.

Ultimately, whether you are having to deal with identity theft or fraud involving the IRS at a personal level or as an executor, you should consider speaking with a tax professional, such as a CPA or an attorney. #taxplanning #identitytheft #IRSfraud #estateadministration