InterActive Legal Blog

No Time to Waste

© 2019 by Jonathan G. Blattmachr & Martin M. Shenkman. All Rights Reserved.

With the estate, gift and GST exemption at nearly $11.5 million and scheduled to grow until 2026 when they will be cut in half, few advisers are focusing on wealth transfer tax planning for their clients. And even fewer clients at wealth levels that are not significantly in excess of the current exemptions, e.g. couples perhaps under $25 million, are considering planning options. That may all prove a costly mistake. But nothing seems ever to stay static. And if the political winds turn sharply Democratic, there is a real likelihood that tax changes of extraordinary measure may occur. The good news for some is that the deduction for state and local taxes may be fully restored. There may be bad news for others, such as those holding stock in corporations that may have their income tax rates increased dramatically.

In any case, there are proposals (many of which have been made before) that would drastically affect estate tax planning. Many of the components of the proposals include restrictions on estate tax planning similar to those contained in President Obama’s Greenbook. The climate has also changed. There is an increasing chorus of complaints to the effect that the “wealthy are not paying their share of taxes.” This sentiment may have been compounded by the recent scandal of wealthy and famous people paying bribes to secure college acceptances for their children. Overall, this environment should cause worry for those of wealth and motivate them to act while they can. And because most estate tax planning typically takes years to produce significant positive results, it seems appropriate for practitioners to consider that impact of the proposals on their clients, advise them of potential changes and, at least in many cases, encourage them to act now. There are also significant benefits to beginning planning earlier, rather than waiting for more certainty that the law might in fact change. Every practitioner remembers the rushed transactions at the end of 2012 when it was believed that the exemption might decline from $5 million inflation adjusted to $1 million in 2013. Many of the plans were implemented with inadequate thought and planning, too short of a duration between asset transfers and trust funding and more. These problems were not the result of practitioners and clients both not knowing the risks, but rather were the inevitable result of the compressed time frame during which planning had to be completed. No one should want a repeat of that scenario.

One set of proposals is set forth in Senate Bill S. 309 introduced by Bernie Sanders. S.309 — 116th Congress (2019-2020), dubbed "For the 99.8 Percent Act" (“Proposal”). The title alone reinforces the anti-wealthy sentiment that seems to be growing. Here are some highlights of the bill and a brief discussion as to what the changes mean for certain clients and, perhaps, what they should do.

No One Can Read My Email, (And Other Myths in the Practice of Law Today)

By Michael L. Graham, Esq.

Your law firm email is secure, right? If it were not, you would have issues with your state’s ethical rules requiring you to keep client confidences. As a summary and guide for the multiple state ethical rules, ABA Model Rule of Professional Conduct §1.6(a) provides:

A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

Carrying this focus further, §1.6(c), provides:

A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.

First, are your laptop and desktop computers password protected, do they have locators on them so that they can be tracked if lost, and do they contain remotely activated erase software so that one can remotely erase the hard drive if someone tries to connect a stolen laptop to the internet? Is this important? ABA Formal Opinion 477R (revised May 22, 2017) tells us:

A lawyer generally may transmit information relating to the representation of a client over the internet without violating the Model Rules of Professional Conduct where the lawyer has undertaken reasonable efforts to prevent inadvertent or unauthorized access.

A New Face for Estate Planning

©2019 by Jonathan G. Blattmachr & Daniel J. Scott. All Rights Reserved.

Introduction

For decades, the primary focus of estate planning lectures and publications was about preserving the maximum value of an estate, primarily through estate tax planning. The emphasis was paying less tax in order to transfer more wealth to future generations using techniques such as irrevocable life insurance trusts, corporate and partnership “freezes,” grantor retained income trusts (GRITs), qualified personal residence trusts (QPRTs), grantor retained annuity trusts (GRATs), installment sales to grantor trusts, (family) limited partnerships (FLPs) and making lifetime gifts under the protection of the gift tax annual exclusion or to avoid transfer tax on gift tax paid. This seemed to make sense for many Americans when the estate and gift tax exemptions hovered around $600,000 or $1,000,000. In some states, the combined state and federal estate tax could exceed 50%. As a result, an individual dying with $1 million in assets could end up leaving her heirs less than $500,000. Virtually all of these arrangements involved changing the nature of what was owned by the time of transfer, whether during lifetime (by sale or gift) or at death. For example, the value of a limited partnership received in exchange of other assets, such as market securities, likely was lower than the value of the assets transferred to the partnership. The adage was: lower the value and thereby lower the tax.

Are Your Estate Plans Prepared for Digital Assets?

By Lee Poskanzer, CEO of Directive Communication Systems

The time to address digital assets as part of your client’s estate plan may have begun to run out. We’ve all heard about digital assets, cryptocurrency and occasional lawsuits by family members against social media giants like Yahoo! and Facebook. But now the topic of digital assets will necessarily have landed on your desk when you begin the estate planning process for a client.

Are you fully prepared to help your clients plan for this new asset class, and to protect yourself and your practice from doing the wrong thing?

Digital assets are the new frontier for Trust and Estates practitioners. It’s time to get up to speed about this important asset class.

For the purposes of this discussion, we will limit the focus to the most critical area of digital property: the disclosure of an account’s contents. Closing an account, removing the name from a family share plan and other “action” oriented events will be saved for another day.

New VA Regulations for Aid & Attendance (Part 1): Finally! VA Releases Regulations for Needs-Based Benefits

The first article in a series reviewing the Impact of the NEW VA Regulations on Aid & Attendance

By Elizabeth Q. Boehmcke, Esq.

In January 2015, the Department of Veterans Affairs (the "VA") published proposed regulations amending eligibility requirements for its needs-based programs, including the veteran's aid and attendance pension benefit for veterans and their surviving spouses (referred to herein as the "Aid & Attendance pension benefit"). The VA reports that it received over 850 comments to the proposed regulations during the public comment period, which ended in late March 2015. Since then we have been waiting to learn to what extent the VA would make changes to those proposed regulations, unsure whether the final regulations would impact clients' applications that were in process when the final regulations were finally published. The final regulations were published on September 18, and are effective as of October 18, 2018. For professionals who work with veterans, their surviving spouses and families, the final regulations bring significant changes to the considerations that bear on their planning for such individuals.

The final regulations made major changes in three areas that will impact planning for the Aid & Attendance pension benefit: the calculation of net worth, an expansion of the types of expenses which can be taken as unreimbursed medical deductions from income, and the imposition of a three-year look back period for certain transfers, and penalties for such transfers. I will discuss each change in detail over the course of three installments. It should be noted that some changes to the proposed regulations may well be very favorable for claimants notwithstanding the new penalty for certain transfers. This post will concentrate on the new net worth regulations, because the transfer rules really cannot be understood without first comprehending the net worth rules. (Unless otherwise noted, all section references are to 38 C.F.R., Part 3.)

How the Elder Law Attorney Can Help the Personal Injury Attorney

By Joanne Marcus, MSW, and Karen Dunivan Konvicka, Esq., Commonwealth Community Trust



This article was originally published in "NAELA News."  The opinions expressed in this article are those of the authors and are not to be construed as an endorsement by NAELA or InterActive Legal.

When the call comes from the plaintiff’s attorney asking what should be done about the client’s public benefits, be prepared to answer. The case is about to settle, or the verdict is in, and now the client wants to know how will it affect his or her benefits. First, you will likely have to help the personal injury (PI) attorney assess the type or types of benefits the client is receiving and determine if the settlement puts the benefits in jeopardy. How did the client receive these benefits — through means-testing or due to work history? Perhaps the PI attorney has not considered benefits, but understands that the client is incapacitated and will need the assets managed; or perhaps public benefits may be necessary in the future.

Medicaid, the means-tested public benefit for people with disabilities who are also impoverished, will need to be protected. More than $2,000 in resources and the client will lose this valuable benefit; personal injury proceeds are plainly resources. Medicare, the benefit received by workers with disabilities who have earned enough quarters to qualify for disability benefits, may also need to be protected as well. In addition, Supplemental Security Income (SSI) and Social Security Disability Income (SSDI) need to be considered. Both of these benefits provide a monthly income to people with disabilities. SSI is means-tested, just as Medicaid is, but SSDI, like Medicare, is not; therefore, SSI income will need to be considered when planning. 

SSA Clarifies Sole Benefit Rule: Trustees May Breathe a Little Easier

by Elizabeth Q. Boehmcke

Practitioners who regularly work with special needs clients are probably aware that the Social Security Administration ("SSA") released revisions to the Program Operating Manual System ("POMS") on April 30, 2018.  But since many of us are still processing the revisions, I hope to highlight some of them for those of us who are between CLE sessions. 

These revisions may come as welcome news to attorneys who draft special needs trusts or advise trustees of special needs trusts.  I am unfortunately limited herein primarily to highlighting the sole benefit rule revisions.  However, there were a number of important changes and if you want more details, you may want to review the full article I drafted, which you can find here.

InterActive Legal Named “10 Best Technology Solution Providers of 2018” by Industry Era Magazine

InterActive Legal was recently certified by Industry Era, a digital technology magazine that features enterprise solutions that can play a key part in redefining the business goals of organizations, as one of the “10 Best Technology Solution Providers of 2018”.

Firmly established at the forefront of the industry, Estate Planning and Elder Law professionals turn to InterActive Legal’s flexible and intuitive drafting systems as their main resource for the latest in planning strategies, education, and professional collaboration.

Read more about how InterActive Legal is continuing to change the landscape of the technology industry with its dynamic solutions.

You’re Not Doing Yourself Any Favors if You’re Not Coaching Your Team

by Candace Wells, COO and Law Business Strategist, Attorney Alchemy

You’ve spent months, years - maybe even decades - serving your clients and building your business. You’ve probably spent just as long assembling the team that helps you do it all. You brought them onboard, trained them; you know they know what they’re doing and they do a good job. You may even give your team pretty regular feedback so they continue to improve and learn how to do new things. Maybe you go a step further and conduct a formal review every year. This is probably the time that you discuss job performance and maybe dole out a raise or two. Bravo! These are all the trademarks of a good boss and you’re probably miles ahead of the curve. But, have you ever coached your team? If you’re not sure what I mean, read on.

InterActive Legal Promotes Vanessa Kanaga to President

Melbourne, FL - InterActive Legal, a knowledge company and software solutions provider in the legal arena of trusts and estates, elder law, and special needs planning, announced this month the promotion of its 5-year veteran Director of Content Development, Vanessa Kanaga, to the office of President effective July 1st, 2018.  She will be involved in directing the day-to-day operations of the company, and will work with CEO, Michael L. Graham, to guide the company's future direction.