February 10th, 2010
As you may know by now, the Federal Estate Tax has been repealed. Many people are wondering what this means for them. Here is some background to shed some light:
The federal tax on estates in the year 2009 was based on the 2001 Tax Act, a law that gradually reduced the maximum rate of federal estate tax to 45% and gradually increased the amount of property that was exempt from federal estate tax to $3.5 million per person.
Now, for 2010 only, there is no federal estate tax. But, the federal estate tax is set to return again on January 1, 2011, only at a much lower, $1 million, exemption and a higher maximum tax rate of 55%.
While some people think the repeal of the federal estate tax is cause for celebration, others are left in an uncertain and alarming situation. Prior to January 1, 2010, many tax professionals assumed that Congress would simply extend the 2009 provisions, and some anticipate that Congress will act during the next several months to pass a new law that might be retroactive to January 1, 2010. There is concern regarding the constitutionality of a retroactive law, and it will likely be challenged if passed.
The 2001 Tax Act has also created uncertainty for taxpayers regarding capital gains tax liability for inherited property, which will impact more middle class families than the estate tax (more on this issue in our next post).
These changes may require extra planning. Be sure to review your estate plan and speak with your attorney to ensure that your property will be distributed according to your plan, with the minimum exposure to estate tax.
October 16th, 2009
Achieving Medicaid eligibility with Elder Law methods techniques is accomplished using a series of sophisticated planning tools. One of the most important techniques involves transferring assets to family members or to trusts, so that your total financial profile is within Medicaid’s eligibility requirements. One option for transferring money is by means of non-taxable and non-reportable gifts.
Under our tax laws, the annual gift allowance has been increased to $13,000. What this means is that you can make a monetary gift of up to $13,000 per year to anyone you choose, without paying any gift tax, and without reporting it. If you give a son or daughter $13,000 now, you have also removed that amount from your estate, and have avoided eventual estate taxes on it.
The beauty of this simple procedure is that you can make as many of these $13,000 gifts as you like each year. For example, if you have three children and five grandchildren, you can transfer $104,000 ($13,000 x 9 = $104,000) to them free of gift or estate taxes, and help yourself to gain eligibility for Medicaid benefits.
A well-designed Elder Law plan achieves Medicaid eligibility and also commonly helps preserve assets for your heirs. Oftentimes, it allows them to receive or inherit cash and property they otherwise wouldn’t. Making non-taxable and non-reportable gifts is sometimes an important part of the plan.
There are additional considerations in using gift and other transfer strategies when in comes to Medicaid eligibility. You can get a preliminary overview of them here, depending on your particular situation. Your best option of course is to get a consultation with an experienced Elder Law attorney who can advise you appropriately.
