Estate hassles start here

Prince’s Estate Hits the IRS with a Multi-Million Dollar Lawsuit

Filing probate documents was just the beginning of a process that still hasn’t ended the bad news from Prince’s estate. The megastar did not have a spouse or children, but Prince had half-brothers and half-sisters, says a recent article from Forbes titled “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value.” There were a number of claims against the estate, and claims by Prince’s estate as well, including a wrongful death action that was eventually dismissed. For Prince or anyone else who dies without a will, probate can be lengthy and expensive. Things also get complicated quickly, especially with an estate of this size.

One of Prince’s half-sisters, Tyka Nelson, sold a portion of her share of the estate to Primary Wave, a music publisher. So did another sibling. And then the tax troubles began. Cash poor or not, larger estates must pay a federal estate tax of 40%. A federal estate tax return needs to be filed, and while audits are rare, almost every estate of this magnitude is audited by the IRS. The estate reported a taxable value of $82 million, but the IRS isn’t satisfied.

Estate tax fights with the IRS can go on for a long time. Michael Jackson’s estate battle with the IRS is still going on—and he died in 2009.

Papers filed by Prince’s estate in the U.S. Tax Court show that the estate reported a taxable value of $82 million, but the IRS claims that the value is really $163 million and wants an additional $38.7 million. In every case, Prince’s estate has obtained appraisals to support its reported values, but the IRS has its own appraisers who disagree.

Even if Prince had a will, there still could have been problems. Heath Ledger had a will, but it was five years old when he died and there was no provision made for his daughter. James Gandolfini had a will, but his estate gave the IRS $30 million of his $70 million. These stories make estate planning attorneys cringe. Seymour Hoffman, Heath Ledger, and James Gandolfini’s estates all ended up with wills in probate, which is public, expensive, time-consuming and unnecessary. A will does have to go through the court process, but the use of a revocable trust could have disposed of their assets outside of probate. A simple pour-over will would have given everything to the revocable trust, simply, and privately in terms of the ultimate inheritance disposition.

Estate planning attorneys advise clients to update wills and trusts every time there is a birth, marriage, divorce, etc. It is good advice for both celebrities and regular people. Probate is complicated.

You can give an unlimited amount to your U.S. Citizen spouse during life or on death. Prince’s estate may face a 40% estate tax, but if he had been married and left his estate to his spouse, there would not have been any federal estate tax until the death of the spouse.

A lesson for the rest of us: have an estate plan, including a will and make sure that it includes tax planning.

Reference: Forbes (Oct. 7, 2020) “Prince’s Estate Sues IRS Over Claimed $135 Million Tax Value”

Social Security Cost-of-Living Adjustment

How Big Is the Social Security Cost-of-Living Adjustment?

“The 1.3 percent cost-of-living adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million [Supplemental Security Income] beneficiaries will begin on December 31, 2020,” the Social Security Administration said in a news release. That’s a smaller increase for retirees once again.

As The Federal Times reports in its article, “Retiree cost of living adjustments sink for the second year in a row,” the Bureau of Labor Statistics calculates the cost-of-living adjustment — known as the COLA — each year based on the consumer price index for workers. It looks at the changing prices of common goods to which the average worker would be exposed.

However, the National Active and Retired Federal Employees Association has for many years had an issue with that type of calculation. That’s because it fails to take into account the differences in costs experienced by the elderly, who receive Social Security benefits, rather than the standard worker.

“This insufficient COLA fails to keep up with inflation experienced by seniors, further eroding their purchasing power. The cost of health care continues to rise faster than other goods. Seniors spend more on health care than any other segment of the population — just as the nation struggles to contain a virus that poses particular danger to older Americans. And federal retirees will almost certainly be further burdened by significantly higher Federal Employees Health Benefits program premiums, which have yet to be announced for 2021,” NARFE National President Ken Thomas said in a statement.

“This didn’t need to happen. For years, NARFE has urged Congress to address the inequity of COLAs that don’t keep up with rising health care costs by passing legislation requiring the BLS to calculate COLAs based on the consumer price index for the elderly instead of the consumer price index for workers.”

COLA adjustments have varied widely each year. For example, in 2015, there was no increase, and in 1980, the bump was 14.3%!

In the past 20 years, COLA increases have only twice been more than 4%. The good news is that military veterans will also see an increase to some of their benefits based on the COLA increase.

In September, Congress okayed plans to link a COLA in veterans benefits with the annual Social Security increase. Under current law, Congress must approve the veteran’s benefits increase each year, but Social Security beneficiaries get the boost automatically.

The benefits for vets include disability compensation, compensation for dependents, clothing allowances and dependency and indemnity compensation checks.

Those receiving Social Security benefits should be notified of their new benefit amount beginning in early December. Most recipients should also be able to see the notice in their online Social Security accounts.

Reference: The Federal Times  (Oct. 13, 2020) “Retiree cost of living adjustments sink for the second year in a row”

Suggested Key Terms: Social Security, Retirement Planning, VA Benefits, Veterans, Military, Legislation

Moving extends your life.

Little Things Add Years to Your Life

Get moving, says a 20-year study conducted with nearly 15,000 residents of the United Kingdom age 40 to 79. The study found that lifestyle changes could add years to your life.

And you are probably not surprised. We’ve seen the connection with lifestyle and reduced risk of Alzheimer’s before.

This new research was conducted by the MRC Epidemiology Unit at the University of Cambridge, and the results were published in The British Medical Journal.

Considerable’s recent article entitled “This small lifestyle change can add years to your life” explains that the subjects who kept or increased to a medium level of activity were 28% less likely to die than those who stayed at a low level of activity.

The researchers split the sample into three groups who engaged in low, medium, and high levels of activity. They monitored changes to their activity for about eight years. Then they looked at the health effects over the next 12½ years.

The researchers found that those who stayed or increased their level of activity from low to medium were 28% less likely to die during that second phase than those who kept a low level of activity.

Moreover, those subjects who’d been moderately active but raised their activity level achieved a significant 42% increase in survival, compared to the low-activity subjects.

This impact was present even for those respondents who ate an unhealthy diet or had experienced a health condition, like high blood pressure, high cholesterol, or obesity.

So, the big question is just how much activity is required?

The study defined the activity levels according to the following guidelines:

  • Low: Less than the guideline of 150 minutes per week of moderate intensity activity
  • Medium: achieving the guideline of 150 minutes of moderate-intensity activity per week; and
  • High: The guideline of 300 minutes of moderate-intensity weekly activity.

The high level also allowed for an equivalent, like 75 weekly minutes of high-intensity activity, or 60 minutes of high-intensity activity and 30 minutes of medium-intensity activity per week.

The researchers think that their study will motivate more people to take it up a notch, regardless of their age.

“These results are encouraging, not least for middle aged and older adults with existing cardiovascular disease and cancer, who can still gain substantial longevity benefits by becoming more active, lending further support to the broad public health benefits of physical activity,” the authors commented.

Reference: Considerable (Sep. 22, 2020) “This small lifestyle change can add years to your life”

 

Medicare Advantage Premiums

Are Medicare Advantage Premiums Going Down?

You’ve heard the cable TV ads this month. And as the celebrity spokespersons tell it, there’s a Medicare Advantage plan out there that will practically make your coffee in the morning. Maybe not, but change is coming and a lot of it sounds good this time. Choices are going up and premiums are coming down. “The Medicare Advantage average monthly premium will be the lowest in 14 years (since 2007) for the over 26 million Medicare beneficiaries projected to enroll in a Medicare Advantage plan for 2021,” The Centers for Medicare & Medicaid Services (“CMS”) said in a press release.

Health Payer Intelligence’s recent article entitled “Big Premium Drop, More Medicare Advantage Benefits Slated for 2021” explains that the high enrollment projections would represent a 44% enrollment increase since 2017. This includes a newly eligible population of end stage renal disease patients, which some say will up the costs for health plans. However, other patient populations and Medicare Advantage beneficiaries as a whole will have access to a wider range of benefits in 2020 and save money. There are numerous potential implications for elder law and estate planning.

Beneficiaries with diabetes are now able to select from more than 1,600 Medicare Advantage and Part D prescription drug plans—they all will have insulin for a copay of $35 per month in 2021. That’s because of the Part D Savings Model that CMS announced in March 2020, primarily in response to the coronavirus pandemic. Additional plans have joined this model, which has a fixed insulin copay rate for the coverage gap phase of Medicare coverage. CMS said that more than 1,750 Medicare Advantage and Medicare Part D plans would participate in the model.

In addition, roughly 500 Medicare Advantage plans will offer lower copayments or supplemental benefits to enrollees with specific chronic diseases and other conditions. About 900 plans will offer benefits that aren’t primarily health benefits (such as meal delivery) to help enrollees manage their chronic diseases.

Enrollees will also have added access to supplemental benefits. Approximately 730 plans are offering their three million enrollees benefits like in-home support, therapeutic massage and adult day health services. Just over 50 Medicare Advantage plans are also offering palliative care and integrated hospice care. A total of 94% of Medicare Advantage plans will provide extra telehealth benefits, a 36% increase from 2020.

The good news is that Medicare Advantage beneficiaries will pay less for these benefits this year than they have in the past. The average Medicare Advantage premium should go down about 11% to $21 in 2021. The decreases vary by states, and some will see up to a 50% decrease from their 2017 premiums.

In fact, premiums have been dropping since 2017, so beneficiaries have saved around $1.5 billion in premiums, CMS estimated. The number of Medicare Advantage plans is also going up. There will be 76.6% more Medicare Advantage plans available in 2021 than in 2017 (2,100 more health plans). The average number of plans per county will rise 78.5% since 2017 and from 39 plans in 2020 to 47 plans per county in the new year.

Medicare open enrollment began on Oct. 15, 2020 and ends Dec. 7, 2020.

Reference: Health Payer Intelligence (Sep. 29, 2020) “Big Premium Drop, More Medicare Advantage Benefits Slated for 2021”

 

COVID worries older Americans

New Survey Conducted on Keeping the Elderly Safe in the Pandemic

Older Americans are more distrustful of senior living and care operators than younger generations, according to a new survey. They just don’t believe institutionalized settings will keep them safe from COVID-19.  And who can blame them?  Richmond nursing homes and senior living facilities have all battled the virus.

Nearly half (49.5%) of baby boomers said they don’t trust senior living and care providers to keep residents safe, while 43.9% of the Silent Generation reported the same distrust.

Younger people are more trusting: 42.3% of Generation X reported distrust, 31.8% of millennials and 38.2% of Generation Z.

McKnight Senior Living’s recent article entitled “41% don’t trust assisted living, nursing homes to keep residents safe during pandemic: survey” notes that 43.1% of baby boomers responded that they trust facilities “somewhat,” as did 51.4% of the Silent Generation respondents.

Some of this mistrust may come from the extensive media coverage of coronavirus deaths in nursing homes because senior residents are especially vulnerable to the illness. We’ve certainly seen our share in Virginia homes.

Some say that it goes further than that: the quarantine and social distancing has added to families’ stress and anxiety over the safety and mental well-being of seniors who live in these facilities because they aren’t able to visit as often as they want.

An online survey from ValuePenguin.com and LendingTree of more than 1,100 Americans recently found that COVID-19 has generated a rush of loneliness and worry among older adults.

According to the results, 36% of older adults feel lonelier than ever. In addition, more than 70% of seniors said that they have worries about the virus’ effects on their younger relatives. Those concerns were equally expressed by younger generations for their older relatives. Almost 50% of both age groups are worried that their relatives will catch the virus.

However, the pandemic looks to have a silver lining for family communications. An overriding sense of concern for the mental and physical health of elderly loved ones has led to more contact since the pandemic began.

Nearly 44% of the younger survey-takers stated they’ve spoken to their older relatives more frequently during the pandemic, about 25% of young people reported visiting their older relatives in person more frequently.

The top request from respondents aged 75 and older to their loved ones, is to call more frequently.

Reference: McKnight Senior Living (Sep. 11, 2020) “41% don’t trust assisted living, nursing homes to keep residents safe during pandemic: survey”

 

keeping elderly save

C19 UPDATE: Keeping Ourselves and Our Elderly Loved Ones Safer

We have all been warned that our elderly loved ones are at heightened risk during the coronavirus pandemic. Not only are they weaker, but they may live in concentrated senior communities and have underlying health concerns. If you are a caregiver for someone in this high-risk population, here are some tips from Dr. Alicia Arbaje, who specializes in internal medicine and geriatrics at Johns Hopkins.

  1. Keep Yourself Well
    Be sure to follow all the guidelines and precautions about social distancing, hand washing, and cleaning to keep yourself well.
  2. Limit In-Person Visits
    It may be emotionally challenging but keeping in-person visits to a minimum is the best way to reduce the risk of infection. When you can’t be there in-person, use technology to stay in touch. Teach your older loved ones how to use video chat applications. Remember to add captions to your videos if they are hearing-impaired. Also, encourage others to telephone or send cards or notes as well.
  3. Be Creative About Home-Based Projects
    Now may be a great time to encourage your loved ones to record their personal stories, organize family photos or reconnect with old friends online.
  4. Decide on a Plan
    Discuss now your emergency response plan. Who will be the emergency contact? Do you know where the estate planning documents are and can you quickly access them, especially health care directives?

If you or your loved one do not have an updated will or trust and health care documents, please reach out to our office. We can help get planning in place quickly and easily and are even offering virtual meetings now to keep everyone safe.

What if your elder loved one starts to develop symptoms?

If you or your loved one learn that you might have been exposed to someone diagnosed with COVID-19 or if anyone in your household develops symptoms such as cough, fever or shortness of breath, call your family doctor, nurse helpline or urgent care facility. For a medical emergency such as severe shortness of breath or high fever, call 911.

Resource: Johns Hopkins Medicine, Coronavirus and COVID-19: Caregiving for the Elderly, https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/coronavirus-caregiving-for-the-elderly

Charles Nance Richmond Virginia Attorney

C19 UPDATE: The CARES Act Essentials for Individual Taxpayers and Small Business Owners

The recently enacted CARES Act is designed to provide emergency relief to Americans experiencing economic hardships resulting from the COVID-19 Virus.

For Individuals

  • One-time direct deposits of up to $1,200 for individual taxpayers with incomes up to $75,000 and $2,400 for joint filers with incomes up to $150,000. An additional $500 for each eligible child can also
  • Extended unemployment insurance for the self-employed, independent contractors, and gig economy workers–such as Uber drivers.
  • Rules and penalties for some retirement fund distributions and loans have been adjusted or delayed.

For Small Businesses

  • Employers can defer the payment of their portion of 2020 payroll taxes until 2021 and 2022.
  • $350 billion is dedicated to small business relief to prevent layoffs and business closures and includes:
  • Paycheck protection program for up to 8 weeks of payroll coverage.
  • Economic Injury Disaster Loans and Loan Advance federal disaster loans for businesses, private non-profits, homeowners.
  • The 80% rule from the the Tax Cuts and Jobs Act (TCJA) net operating loss is lifted, and losses can now be carried back five years.
  • The excess loss limitation (ELL) rules for pass-through entities are suspended.
  • The limitation on the deduction for business interest expense increased from 30% to 50% for tax years 2019 and 2020.
  • $150 billion is dedicated to state and local governments that are beginning to introduce their own business grant and loan programs in states like Florida, Michigan, and New York. Find specific provisions for your state through your governor’s website; see a full list on the National Governors Association site.

Read more about disaster relief efforts under way on our website.

Resources: Read the full text of the CARES Act: https://assets.documentcloud.org/documents/20059055/final-final-cares-act.pdf

Reference for summary of highlights: https://www.forbes.com/sites/leonlabrecque/2020/03/29/the-cares-act-has-passed-here-are-the-highlights/#257f7e6a68cd

fundamental estate planning

What Is So Important About Powers Of Attorney? (Especially Now?)

Powers of attorney can provide significant authority to another person, if you are unable to do so. These powers can include the right to access your bank accounts and to make decisions for you. Having the right power of attorney, right now, is more important than ever.

AARP’s article from last October entitled, “Powers of Attorney: Crucial Documents for Caregiving,” describes the different types of powers of attorney.

Just like it sounds, a specific power of attorney restricts your agent to taking care of only certain tasks, such as paying bills or selling a house. This power is typically only on a temporary basis.

A general power of attorney provides your agent with sweeping authority. The agent has the authority to step into your shoes and handle all of your legal and financial affairs.

The authority of these powers of attorney can stop at the time you become incapacitated. Durable powers of attorney may be specific or general. However, the “durable” part means your agent retains the authority, even if you become physically or mentally incapacitated. In effect, your family probably won’t need to petition a court to intervene, if you have a medical crisis or have severe cognitive decline like late stage dementia.

In some instances, medical decision-making is part of a durable power of attorney for health care. This can also be addressed in a separate document that is just for health care, like a health care surrogate designation.

Virginia is among the states that recognize “springing” durable powers of attorney. With these, the agent can begin using her authority, only after you become incapacitated. Other states don’t have these, which means your agent can use the document the day you sign the durable power of attorney.

A well-drafted power of attorney helps your agent help you, because she can keep the details of your life addressed, if you cannot. That can be things like applying for financial assistance or a public benefit, such as Medicaid, or verifying that your utilities stay on and your taxes get paid. Attempting to take care of any of these things without the proper document can be almost impossible.

A poorly drafted power of attorney, or one not tailored to your needs now, could make it difficult or impossible for a loved on to apply for important government health care benefits you could need down the road. (Or sooner!)

In the absence of proper incapacity legal planning, your loved ones will need to initiate a court procedure known as a guardianship or conservatorship. However, these hearings can be expensive, time-consuming and contested by family members who don’t agree with moving forward.

Don’t wait to do this. Every person who’s at least age 18 should have a power of attorney in place. If you do have a power of attorney, be sure that it’s up to date. Ask an experienced elder law or estate planning attorney to help you create these documents. And we have no-contact consultations available right now via phone or Zoom Meeting.  Call us now.

Reference: AARP (October 31, 2019) “Powers of Attorney: Crucial Documents for Caregiving”

C19 UPDATE: Bookmark this Page from the IRS for Ongoing Coronavirus Updates

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus. This page will be updated as new information is available. https://www.irs.gov/coronavirus

For health information about the COVID-19 virus, visit the Centers for Disease Control and Prevention (CDC) https://www.coronavirus.gov

Other information about actions being taken by the U.S. government visit https://www.usa.gov/coronavirus and in Spanish at https://gobierno.usa.gov/coronavirus.

The Department of Treasury also has information available at Coronavirus: Resources, Updates, and What You Should Know https://home.treasury.gov/coronavirus

C19 UPDATE: Emergency Estate Planning Decisions to Make Right Now

Though it is hard not to panic when our grocery store shelves are empty, the number of confirmed cases of COVID-19 keeps rising — a friend of mine just posted his positive diagnosis yesterday — and we see sobering statistics here and across the globe It is clear we will not overcome this challenge with a panicked response. Or by failing to act.

Clearly, there are things we all need to be doing right now – and Virginia public health officials are the best resource on how to stay personally safe and help prevent the virus from spreading.

When it comes to the seriousness of this outbreak, however, there also are some critical estate planning decisions you should make – or review – right now.  You nay be sitting at home mire this week.  It is a good time to ask yourself these questions:

  1. Who will make medical decisions for me should I become severely ill and unable to make these decisions myself?
  2. Who will make my financial decisions in that same situation — for example, who will be authorized to sign my income tax return, write checks or pay my bills online?
  3. Who is authorized to take care of my minor children in the event of my severe illness? What decisions are they authorized to make? How will they absorb the financial burden?
  4. If the unthinkable happens – what arrangements have I made for the care of my minor children, any family members with special needs, my pets or other vulnerable loved ones?
  5. How will my business continue if I were to become seriously ill and unable to work, even remotely … or in the event of my death?

These are the most personal decisions to make right now to protect yourself and your loved ones during this emergency. Now is also a good time to ask yourself if you have plans in place for the smooth transfer of your assets and preservation of your legacy.

We are ready to help walk you through these decisions, understand the ramifications of your choices, and memorialize your plans in binding legal documents. The Nance Law Firm is currently offering no-contact initial conferences remotely, including consultations via Zoom Meetings. In other words, you may be able to use some of your down time to take care of decisions you may have put off.  Book a call now and let us help you make the right choices for yourself and your loved ones.

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