Interactive Legal Blog

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.

The ING, Gifting, and O-Zone Investing: An End-of-Year Retrospective on the Opportunities Created by the TCJA

By Vanessa L. Kanaga

As any estate planner knows, the 2017 law commonly referred to as the "Tax Cuts and Jobs Act" or "TCJA" (Pub. Law 115-97) changed the landscape of estate planning, perhaps not permanently (because what tax law is ever permanent?), but for the near future. The Basic Exclusion Amount (the amount that can pass free of gift or estate tax) doubled to over $11 million under the TCJA, making estate tax planning far less important for most clients and their estate planners. In truth, this merely accelerated a decline in the importance of transfer tax planning that had been the trend for several years, or at least since the American Taxpayer Relief Act of 2012 "permanently" increased the Basic Exclusion Amount to $5,000,000, adjusted for inflation. The good news, at least for estate planners, is that the TCJA also enacted new provisions relating to the federal income tax that affect a number of estate planning clients, and provide new opportunities for the attorneys advising them.

Income Tax Planning Opportunities Using Non-Grantor Trusts

The $10,000 limit on the deduction for state and local taxes unrelated to a trade or business (sometimes referred to as the "SALT" deduction), in new Section 164(b)(6) of the Internal Revenue Code (the "Code"), has the potential to increase the federal income tax bill of many clients, particularly those in states with high income or property tax rates. In response to this new limitation, estate planners have devised new planning techniques involving Incomplete Non-Grantor Trusts and Non-Grantor Spousal Access Trusts (referred to in the InterActive Legal programs as the "ING" Trust and the "SALTy SLAT," respectively). These techniques are intended to effectuate the transfer of assets to trusts in order to avoid state income tax, or divide ownership among multiple taxpayers, each of which is entitled to its own SALT deduction. I mention these techniques as an example of the shift in focus to income tax planning under the TCJA regime, and will not go into detail here. If you are interested in learning more, I recommend watching the webinar recently presented by Martin Shenkman, Bill Lipkind, and InterActive Legal Editor-in-Chief Jonathan Blattmachr, INGs: Extraordinary Planning Tool to Reduce Income Tax Even for Those in Income Tax Free States, available on the Shenkman Law website.

Law Practice Management Tips & Tricks: 9 Ways to Use Adobe DC Like a Pro

By Audrey Ehrhardt, JD, CBC, Founder/CEO Practice42

Are you one of the many people who want to learn how to use Adobe, but just don’t know how? The numerous features that Adobe has makes it very appealing to the customer, but it also makes it a complicated tool to learn quickly. Teaching yourself Adobe without any assistance can be a daunting (see multi-hour) task. The good news? There are a great quantity of resources, support and community forums out there for you to get the most out of Adobe, even from the company itself on the Adobe Support website.

Looking for practice enhancements to add? Adobe offers multiple products; InDesign for design work, PhotoShop for your photos, and Document Cloud (DC) for your workflow, just to name a few. You can license one or multiple products in your office. Specifically in this article, we are discussing getting started and the use of Adobe DC.

Grave Robbing in the 21st Century

By Betsy Ehrenberg

In today’s increasingly connected world, identity theft has become a serious problem.

It is estimated that 17.6 million Americans are the victims of some form of identity theft every year. Of those attacks, 2.5 million happen to someone who is deceased. This means 2,200 deceased Americans will be deliberately targeted and have their identities stolen every single day. Another 1.6 million Americans will have their identities stolen by chance when fabricated Social Security numbers happen to match those belonging to deceased individuals. Identity thieves fraudulently apply for loans, drain bank accounts, acquire credit cards, and even establish cell phone plans, according to research conducted by ID Analytics. Identity theft is the 21st Century’s version of grave robbing.

When a loved one passes away, worrying about protecting their identity or erasing their electronic footprint isn’t usually a family’s top priority. On average, an American has over 150 locations where their electronic footprint resides—from credit card accounts to grocery store rewards. The electronic footprint is composed of electronic records and digital assets.

The 20 Key Performance Indicators of a Successful Law Firm

By Wendy Witt, JD

With only a glance, you have instant access to your car’s dashboard, displaying exactly what you need to know to diagnose a problem and determine what action to take next: fill the gas tank, change the oil, check the engine, or adjust your speed.

Your doctor uses a dashboard where she tracks lab results, examination notes, and your comments. That dashboard empowers her to diagnose and recommend treatment. In addition, successful business owners use dashboards. They track their business’s KPIs (key performance indicators) so they can diagnose problems, identify opportunities, and make good decisions. If you own your law firm, you’re a business owner too and need your own dashboard.

In fact, you’re not just a business owner, you’re a CEO. Tracking your numbers empowers you to make good decisions and know what to do when. For example, wouldn’t it be nice to know what needs to be tweaked to increase cash flow? Or, wouldn’t it be nice to how much you can draw from the firm without worry? Or, wouldn’t it be nice to not throw money at something that’s unnecessary? Dashboarding works in firms of all sizes and even for individual attorneys who want to think entrepreneurially, increase revenue, and build the department or law firm and life they love.

Geriatric Care Management: An Untapped Resource for Elder Law Attorneys

By Jennifer Traglia, Gerontologist

It’s been two weeks since you last spoke to Jack. His mother, your client, has just fallen – again. This time it sounds serious. As far as you know, she is still in the hospital, with a long road of rehab ahead. Naturally, as a trusted family attorney, you feel responsible.

What will happen to the house? Will she move, or will her only son (who lives 900 miles away) set up in-home care? Surely, Jack will need to take more time off work to sort this out. If only there were a resource or professional to handle all of this…

A New Age of Aging

The statistics of our aging population are astounding. Nearly 10,000 baby boomers are turning 65 each day! The “oldest old,” those 85 and above, have more health care needs than any other age group and are proportionately the fasted growing segment of the aging population. The medical community is not the only service segment struggling to keep up with these growing demands. Due to established long-term client relationships some attorneys also see things reaching a boiling point. Estate planning and elder law firms are feeling the effects of the aging population and are increasingly being asked to act as frontline service coordinators.

Congratulations, Deslin, on 15 years!

InterActive Legal is delighted to commemorate 15 years of dedicated service by Senior Application Developer, Deslin Simmons. A veteran member of the team, Deslin worked with InterActive Legal authors and principals, Mike Graham and Jonathan Blattmachr, on the very first version of InterActive LegalSuite, released in 2003. In her primary role as a HotDocs Developer, Deslin works with the authors and on-staff Content Attorneys to develop and maintain the code that powers the program content. In her decade and a half with InterActive Legal, Deslin has proven an invaluable part of the company, not only as an integral member of the Content Team, but as a core contributor in all aspects of product development and subscriber support.

Consistent with her motto, "Keep Moving Forward," Deslin inspires and motivates her colleagues to continuously provide the content, knowledge, and support that has positioned InterActive Legal as the leading provider of drafting solutions for estate and elder law planners. "Deslin is simply part of the core and fabric of InterActive Legal. Few realize the level of dedication she has to our subscribers. Deslin was without power for several months on St. Croix following hurricanes Irma and Maria last year, yet every morning she started up a gasoline electric generator and worked all day with the sound of a generator out her window," remarked CEO, Mike Graham. Director of Education and Support Services, Teresa Bush, who apart from Jonathan and Mike has worked with Deslin the longest, commented that “Deslin is tireless, logical, and has one of the strongest work ethics I’ve ever seen; she continually goes above and beyond, to the benefit of our subscribers. We often ask her to move figurative mountains, but only because we know that she can move them – and she does.”

In addition to being a committed and professional co-worker to those at InterActive Legal, Deslin is a devoted wife and mother of five children. Her sense of humor and level-headed approach to problem solving endear her to her friends and colleagues. In the words of Mike Graham, "Deslin’s joy in others, particularly children, is part of what many do not realize. She has one of the biggest hearts of anyone I know." Please join the InterActive Legal principals and staff in congratulating Deslin and thanking her for her continued dedication to the company and its subscribers.

 

New VA Regulations for Aid & Attendance (Part 3): Deductible Medical Expenses

By Elizabeth Q. Boehmcke, Esq.

This is the third and final installment of a three-part series on the recently released final regulations that impact the Veterans Aid & Attendance pension benefit ("Aid & Attendance"). In the prior blog posts, I discussed the look-back period and transfer penalties that are now being imposed on certain transfers of assets within the 36-month period immediately prior to the aid & attendance application and the new net worth rules. This installment will focus on the expanded definition of deductible medical expenses and how it will be beneficial in allowing many veterans and their surviving spouses to qualify for Aid & Attendance.

Deductible Medical Expenses

Another major change in the final regulations concerns the deductibility of unreimbursed medical expenses from income for purposes of determining net worth. Pursuant to 38 U.S.C. 1503(a)(8), certain unreimbursed medical expenses paid by the veteran, the veteran's spouse or surviving spouse, or by the veteran's child in excess of 5% of the maximum annual rate of pension are deductible. The rule itself has not changed; however, the expenses that may be claimed as medical expenses have. 

New VA Regulations for Aid & Attendance (Part 2): The Look-Back Period and Transfer Penalties

 
By Elizabeth Q. Boehmcke, Esq.

This is the second of a three-part series on the recently released final regulations that impact the Veterans Aid & Attendance pension benefit.  In the prior blog post, I discussed the new net worth regulations, including the new bright-line test for net worth currently set at $123,600, the exclusion of certain assets like the primary residence from net worth and the VA's view on how assets and income can decrease.  

The big news coming out of the regulations is that the VA is imposing a 36-month look-back period on asset transfers.  For planners, the news is a bit of a mixed bag.  As will be discussed, while the imposition of a look-back period and transfer penalty at all is a tremendous change in how veterans plan for the pension benefit, as compared to Medicaid, there are some differences that benefit the veteran - with only certain transfers being subject to penalty, with the penalty period beginning as of the first of the month after the transfer instead of the date of application and a five-year penalty cap (although arguably a well-planned application for Aid & Attendance should never trigger a five-year penalty).

Look-Back Period and Transfer Penalty

Prior to these regulations, veterans were able to transfer assets by gift in any amount on Day 1 and apply for the Aid & Attendance pension benefit on Day 2.  This process was unlike Medicaid which imposes a transfer penalty for uncompensated transfers within the look-back period (currently 60 months).  The VA did not, however, wholly adopt Medicaid's transfer penalty system and just shorten the look-back period.  Not all asset transfers will result in an imposition of a penalty.  Only those transfers which, had they not occurred, would cause or partially cause the claimant's net worth to exceed the net worth limit will create a penalty.  §§3.276(a)(2) and 3.276(8)(e).¹   In other words, if the claimant, at the time of transfer, has a net worth below the net worth limit, no penalty will be applied.  The VA's policy is enshrined in the regulations as follows:  "VA pension is a needs-based benefit and is not intended to preserve the estates of individuals who have the means to support themselves.  Accordingly, a claimant may not create pension entitlement by transferring covered assets."  §3.276(8)(b).