Nov 22, 2015

Estate tax figures for 2016

The federal lifetime estate tax exemption will increase modestly next year. Effective January 1, 2016, the exemption will be $5,450,000 per person (an increase of $20,000 from 2015). This means that you are able to pass to your family - whether during your lifetime or through your estate after you have passed, or a combination of both - a total of $5.45 million, free of any estate tax. Once you pass the $5.45 million cap, the unified federal gift and estate tax  kicks in. The tax rate will hold at 40% for anything in excess of the cap.

Married couples would be able to pass twice that amount, $10.9 million. But be warned: that's not automatic.  The surviving spouse must take steps to take advantage of the deceased spouse's unused exemption. See my prior post on portability.

The annual gift tax exclusion will remain unchanged in 2016. As much as $14,000 may be given to any one individual, to as many individuals as you wish, without affecting your $5.45 million lifetime exemption. Married couples can double that amount. You are not limited to $14,000 if you want to pay for someone's medical expenses or tuition, however. So long as you write the check directly to the medical or educational provider, there is no maximum amount. 

Keep in mind that many states, such as New York, New Jersey and Maryland, still impose an estate tax on residents.
In some cases those state taxes kick in at a lower level than the federal estate tax. For an interactive map from Forbes showing the states' 2015 estate taxes, click here.

Beyond 2016, who knows? Some presidential candidates have made their views clear, some not. Not surprisingly, billionaire Donald Trump favors repealing the estate tax entirely, as does Jeb Bush. Bernie Sanders would knock it back down to $3.5 million. Stay tuned.

Nov 20, 2015

Spouses lose two Social Security-maximing strategies

Some say the federal budget passed in October closes Social Security loopholes that needed closing. Others say it cuts off a necessary financial lifeline for married seniors who rely on Social Security benefits to get by. Either way, the bottom line is that Social Security is now eliminating two techniques that in the past allowed married couples to leverage their benefits: 

After April 30, 2016 "File and Suspend" will no longer be available. Since the technique will soon be defunct, l will provide just a brief description of how it works (or worked): The higher wage earner, Spouse A, files for benefits upon reaching full retirement age. That allows the other spouse, Spouse B, to begin collecting spousal benefits based on A's earnings history. Spouse A then suspends benefits payments. The net effect: both spouses delay their retirement benefits, allowing their earnings to grow, and collecting a larger benefit upon reaching age 70. You can read more about file and suspend here.

Effective April 30, 2016, workers can still file and suspend, but their spouses cannot collect spousal benefits during the suspension period.

Restricted applications are eliminated effective January 1, 2016. Right now, a married person at full retirement age can apply for spousal benefits, and then, at age 70, switch over to receiving his/her own benefits. This allows the person to take advantage of delayed retirement credits on his/her own earnings history. But effective January 1, 2016, the Social Security Administration will no longer permit restricted applications. It will assume that you are applying for the larger benefit, either the one based on your spouse's earnings or the one based on your earnings, whichever is larger. You are allowed only one type of benefit.

Nov 16, 2015

Medicare to cover end-of-life care preference counseling

Beginning in January 2016, Medicare will cover counseling sessions for patients who wish to discuss their end-of-life care options with their physician. Counseling sessions will be voluntary. Medicare will pay $86 for the first 30 minutes of advance care planning if the counseling takes place in a physician's office, $80 if in a hospital setting. An additional 30 minutes of consultation time, in any setting, will be covered up to $75. The dollar amounts may adjusted by locale, depending on the prevailing rates in that geographic region. Medicare recipients may request counseling at any time: when they are well, or have received a serious diagnosis, or are receiving palliative or hospice care. 

Responses to the original proposal were overwhelmingly positive, and the Obama Administration's ruling has been strongly supported by the American Medical Association and American Hospital Association. The challenge remains, however, to make sure doctors and families are on board and honor a patient's end-of-life wishes.

Read more about legal plans for end-of-life legal planning here.

Read more about the new Medicare ruling here

Nov 11, 2015

Veterans Day tribute to all veterans, and one in particular: my uncle

My brother Marshall Karp posted a touching tribute on his Facebook page for our Uncle Irving (aka Uncle Icky). All our veterans deserve the same respect, admiration and assistance from our nation.

American Hero
By Marshall Karp 
Nov. 11, 2015

Everyone called him Uncle Icky.

He was born and raised in a tough neighborhood in upper Manhattan. He was an outstanding athlete, a devoted son and brother, and a true patriot. At 18 he enlisted in the NY National Guard. In 1940 his unit was federalized. A year later came Pearl Harbor, and he was in the first wave of troops to be sent to the Pacific.

He spent the next four years in combat.

If you asked him where he was stationed, he’d just smile. He was never stationed. He went from island to island to island. He was a moving target. One day in Saipan, he didn’t move fast enough. He was shot.

They told him at the hospital that he needed six months to recover so they could get the shrapnel out. Then he’d be shipped back to the states. He said no. He was a platoon leader. He wasn’t going home while his men were still on the front lines. He went back into combat.

Over the course of the war, he was offered two battlefield commissions, but he turned them down, because that might mean he would have to operate from behind the lines, and he wanted to be on the front with his men.

Then he got wounded again. Okinawa. Artillery blast. He recovered from his wounds and went back into combat until the war ended.

He spent a total of five years and five days in service. I once asked him if he were brave, patriotic, stubborn, or stupid. His answer — all of the above.

I don’t think so. There are no stupid heroes.

Uncle Icky was a Staff Sergeant with Company A, 102nd Engineers, 27th Division. He was a distinguished Member of the Military Order of the Purple Heart, receiving two Purple Hearts, as well as the Presidential Unit Citation, the American Defense Service Medal, the American Campaign Medal, the Asiatic Campaign Medal with Bronze Star, the New York State Conspicuous Service Cross and Star, and many other citations for his bravery, leadership, and patriotism.

The photo above was taken at the Veteran’s Day Parade on November 11, 2007, by Craig Ruttle, a photographer for The Associated Press. Within minutes it was on the home page of Yahoo, Fox News, and countless other news websites. While I have never met Mr. Ruttle, I would like to thank him for capturing the image of a true American hero that has become deeply meaningful to our family, and a fitting public tribute to be shared with the world.

On Sunday, November 23, 2008, Uncle Icky had a true American Hero’s Farewell, complete with a military Honor Guard, a bugler sounding Taps, followed by the precision folding of the United States flag that draped his casket. Thirteen folds, representing the 13 original colonies, leaving only a triangular blue field with white stars — the shape emblematic of the tri-cornered hat worn by the Patriots of the American Revolution.

And finally, the flag was presented to the hero’s sister, my Aunt Pearl, with those heart-wrenching words, that you hear in movies, but rarely get to experience in life:

This flag is presented on behalf of a grateful nation and the United States Army as an expression of appreciation for your loved one’s honorable and faithful service.

It was a touching private tribute to a great American. But I’ve decided that the old soldier deserves a public tribute as well. And so, I’ve posted this.

I share it with you, because Uncle Icky was a man who put his family and his country above himself. Which means he lived his life as much for you, as he did for me.

So, I guess he’s not just my Uncle Icky. He’s yours.

Nov 6, 2015

Is there common law marriage in Florida?

In my estate planning practice, I advise many clients who have been living together for a long time, sometimes for decades. They are committed to one another, take care of one another, and often refer to each other as spouses. But they have chosen not to marry, typically because (1) there are children from prior marriages whose inheritances they wish to protect, and/or (2) each one wishes to shield his/her assets if the other requires long-term nursing care.

These individuals often ask me if Florida considers them to be common-law married. In most cases, the answer is no. Florida recognizes common law marriage only if the marriage is valid in one of nine states that recognize it, or if it occurred in Florida prior to January 1, 1968. In all my years of practice, I have run across only one case of a couple whose union would be considered a common law marriage.

Not being considered married is a relief to most unmarried clients, because it allows them to avoid the above-mentioned legal entanglements. But there's a downside, too: they are denied the automatic privileges they may want, such as property rights, or even something as simple as the right to talk with their partner's doctor in the event of a medical emergency. From a legal perspective, unmarried couples are no more connected than two strangers.

If you are in a committed, non-married relationship, the good news is that there are affirmative legal steps you can take to protect one another and secure some of the benefits married couples enjoy. Here are a few of the most important issues you should consider and discuss with your estate planning attorney:
  • Who will get to make your health care decisions if you are incapacitated? It's not uncommon for a patient's children and partner to lock horns over those decisions; emergency room waiting areas are frequently where such battles begin. If you want your partner to make your decisions, to participate in the decision-making with other family members, or even have the right to talk to your health care providers, you need to make your wishes clear with the appropriate written documents, such as a health care power of attorney.
  • Unmarried couples often live in a home owned by just one of them. Unlike a married couple, the survivor has no legal right to stay in the home after the owner passes away, and could be forced out - unless the appropriate arrangements have been made to prevent that from happening. These arrangements should be carefully built into your will or trust.
  • Take a look at your IRA, 401K, life insurance, etc. People tend to forget about these items as the years go by. Make sure your beneficiary designations reflect your wishes and are up-to-date.
To discuss your options, contact The Karp Law Firm and we will be happy to talk with you.

Nov 5, 2015

Florida to establish office to more closely monitor court-appointed guardians

In a post earlier this year I told you about why it is important to establish plans to avoid becoming the subject of court-ordered guardianship. Vulnerable seniors without such planning can too easily get swept up in the guardianship system, lose control over their money and just about every other aspect of their lives. If this isn't bad enough, investigative reports have revealed lax oversight in our state's public guardianship system, which too often exposes elderly wards to financial and other types of abuse by predatory "professional" guardians. 

To address these problems, a Florida law passed earlier this year sought to put more safeguards into the guardianship system, making it easier for ward's rights to be restored, and introducing additional controls on who may serve as guardian and how guardians are compensated. 

Now, another new bill seeks to further tighten oversight. Among other measures, Florida Senate Bill 232 would create an  Office of Public and Professional Guardians to certify and monitor court-appointed guardians, and also establish a system more responsive to complaints. You can read the text of the proposed bill here. The legislature is expected to take it up in 2016.

Not surprisingly, there are those who feel that the proposed legislation falls far short of what is needed. Chief among its critics is the organization Americans Against Abusive Probate Guardianship, which points out that the legislation effectively permits the fox to watch the henhouse. Dr. Sam Sugar writes:

"Senate Bill 232 creates an entirely new bureaucracy in the Dept. of Elderly Affairs which is intended to administer administrative discipline with a carrot and stick approach. However the stick is more like a twig in that the worst punishment an abusive criminal Guardian can get from this proposed department is loss of certification. This is not an adequate deterrent when billions of dollars are at stake, when there’s absolutely no likelihood of crimes against the elderly leading to jail time and when the system is rigged from top to bottom with get out of “jail free cards” for the criminal guardians and every other stakeholder in the abusive system of probate guardianship."

You can read the full text of AAAPG's response to the new legislation here. We'll keep our readers posted on developments in this important topic, which has the potential to affect so many Florida citizens. 

For a Wall Street Journal article on the growing problem of guardianship abuse, click here.

Nov 3, 2015

"Strange Inheritance" second season debuts November 11

"Strange Inheritance" returns to television for a second season beginning November 11th at 9:00 p.m. The program's 26 episodes will explore the true-life stories of families dealing with unusual inheritances, from the priceless to the just plain unusual. This season's inheritances include Winston Churchill's teeth and George Washington's wallet!  "Strange Inheritance" airs on Fox Business Network. More information here.

Oct 29, 2015

Change in Florida Health Care Surrogate Law: What It Means for You

Florida Health Care Surrogate Statutes have changed. The creation of Florida Statute 765.2035, and the changes to Florida Statute 765.202, became effective October 1, 2015. The change is very important for those with minor children. However, even those who do not have minor children may be impacted and should determine whether any action is needed. Below I provide the facts and recommendations:

If you have minor children


Florida has never had a law specifically authorizing the parent of a minor child to designate a competent adult to serve as the minor's health care decision maker. Obviously many parents want to name someone for this job, should the parent be unavailable. For this purpose, in the past The Karp Law Firm drafted a document in which our clients empowered a health care decision-maker for their minor child. Without going into the finer legal points, we believe that legal instrument has a firm basis in common law - but as noted above, no specific statutory authority

Now, Statute 765.2035 has been created, giving parents of a minor child the specific authority to create a written instrument called a Designation of a Health Care Surrogate for a Minor. If you are the parent or guardian of a minor child, you will want to create such a document in order to protect your child. Contact The Karp Law Firm for assistance.

  If you do not have minor children


Florida Health Care Surrogate Statute 765.202 provides one of two methods by which a Florida resident may empower someone to make health care decisions for him/her should incapacity strike. (The other method, the Health Care Power of Attorney, is the method The Karp Law Firm uses for clients.) Whether you are affected by the changes in the surrogate law will be determined by what type of documents you presently have, if any, as well as when they were drafted.


Until now, the Florida Health Care Surrogate statute allowed you to empower your health care surrogate to make decisions only if you were determined to be incapacitated. Additionally, the statute did not provide a legal basis for your surrogate to get your HIIPAA-privileged information from your health care providers.

Now, the statute has been modified in two ways:
  • First, you can authorize your surrogate to make health care decisions on your behalf even if no determination of incapacity has been made.
  • Second, you can authorize your surrogate to have immediate access to your medical information that would otherwise be confidential under federal HIPAA law.
Actions to be considered now:
  • Clients of The Karp Law Firm for whom we prepared a Health Care Power of Attorney in 2004 or later: You need not take any steps. Here is why: First, it is unlikely that you would want to authorize a surrogate to make your medical decisions prior to your incapacity. Second, if you executed the Health Care Power of Attorney we created for you in 2004 or later, it has a HIPAA waiver incorporated into it that gives your agent immediate authority to receive your confidential medical information. Thus, you will gain nothing from creating a Health Care Surrogate - unless for some reason you want to give immediate authority to someone to make your health care decisions.
  • Clients of our law firm for whom we prepared a Health Care Power of Attorney prior to 2004, and who have not had their document updated since then:  Changes may need to be made to ensure your Health Care Power of Attorney complies with HIPAA laws. Contact us for assistance.
  • Individuals who are NOT clients of the Karp Law Firm:  Our firm can assist you. You should have your documents reviewed to ensure that they allow your decision-makers to have immediate access to HIPAA-privileged information. Contact us here.

Read more about the Florida Health Care Power of Attorney, Health Care Surrogate, Living Wills and other advance directives here.  

Read the Florida Health Care Surrogate Statute here

Oct 28, 2015

IRS announces deductions for long-term care premiums in 2016

Taxpayers who purchase long-term care insurance policies that meet certain criteria may deduct a portion of the premiums from their federal taxes. In 2016, the deduction amount will increase. The deduction is pegged to attained age at the end of the year. Also, for individuals over the age of 65, premiums are deductible only to the extent to which they and all other unreimbursed medical expenses exceed 7.5% of adjusted gross income; for those under 65, to the extent that they exceed 10% of the adjusted gross income. (The rules are slightly different if you are self-employed; check with your accountant.) 

The 2016 deductions are as follows:
  • Age 40 or less: $390
  • More than 40, not more than 50 years of age:  $730
  • More than 50, but not more than 60 years of age: $1,460
  • More than 60, but not more tan 70 years of age: $3,900
  • Over 70 years of age: $4,870
These tax advantages are available to individuals with qualifying policies. To be considered qualified, the policy:
  • If issued after Jan. 1, 1997 must be in compliance with the regulations established by the National Association of Insurance Commissioners, and offer inflation and non-forfeiture protection (whether or not the insured party chooses those options). Additionally, the policy must contain certain 'triggers' under which benefits can be paid. The insured individual may be able to collect benefits only when he/she requires assistance with two of six "activities of daily living" for at least 90 days; or when a physician certifies that there is cognitive impairment to warrant supervision for safety purposes. 
  • If purchased before Jan. 1, 1997, the policy is grandfathered in and treated as qualified, so long as it has been approved by the insurance commissioner of the state in which it was sold. Read more about qualified policies here.
For more information on long-term care policies that qualify and related issues, see IRS Publication 502.

Oct 20, 2015

National Estate Planning Awareness Week: Are you and your family protected?

National Estate Planning Awareness Week is October 19 - 25. The U.S. House of Representatives in 2008 designated the third week of October as a time for individuals and families to think about whether they have the proper plans in place to protect themselves, their assets and their families, and to take the appropriate action if they do not. The research shows that most Americans do need to take action: an estimated 59% of us lack estate plans or up-to-date estate plans.

Good planning will help you to:
  • Preserve the assets it has taken you a lifetime to build.
  • Minimize the stress - financial, legal and psychological - to your loved ones in the event you become sick or pass away.
  • Ensure that the assets you leave behind go to the people you want to get them.
  • Minimize your heirs' tax burden. Avoid becoming the subject of court-ordered guardianship. 

You can read the text of House Resolution 1499 establishing National Estate Planning Awareness week here.

If you've been putting off your estate planning, this is a good week to move ahead! Read more about the steps you can take to protect yourself, your family and your assets at The Karp Law Firm website.
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