Caring for an elderly parent can be stressful for families. Siblings may disagree over how to provide care or where a parent will live, and if these squabbles escalate into a guardianship battle, it can cost the family thousands of dollars. To avoid this, lawyers have begun drafting sibling agreements (also called family care agreements).
If a parent becomes incapacitated and can no longer take care of him- or herself, questions can come up between siblings over where a parent should live, who should manage the parent’s money, or who will assume primary caregiving duties. A sibling agreement can address these issues and provide consequences if the agreement is not followed. Continue reading
While most of the new tax law – the Tax Cuts and Jobs Act – has to do with reducing the corporate tax rate from 35 percent to 21 percent, some provisions relate to individual taxpayers. Before we get into the details, be aware that almost everything listed below sunsets after 2025, with the tax structure reverting to its current form in 2026 unless Congress acts between now and then. The corporate tax rate cut, however, does not sunset. Here are the highlights for our readership:
- Estate Taxes.If you weren’t worried about federal estate taxes before, you really don’t need to worry now. With the federal exemption already scheduled to increase in 2018 to $5.6 million for individuals and $11.2 million for couples, the Republicans in Congress and President Trump have now nearly doubled this to $11.18 million (estimate) and $22.36 million (estimate), respectively, indexed for inflation. The tax rate for those few estates subject to taxation remains at 40 percent.
- Tax Rates. These are slightly reduced and the brackets adjusted, with the top bracket dropping from 39.6 percent to 37 percent.
- Standard Deduction and Personal Exemption. The standard deduction increases to $12,000 for individuals, $18,000 for heads of household and $24,000 for joint filers, all adjusted for inflation. Personal exemptions largely disappear.
- State and Local Tax Deduction. Now referred to as “SALT,” this is now subject to a cap of $10,000,
- Home Mortgage Interest Deduction. The limit on deducting interest on up to $1 million of mortgage interest stays in effect for existing mortgages. New mortgages taken on after December 15, 2017, are subject to a $750,000 limit. The deduction for interest on home equity loans disappears.
- Medical Expense Deduction. After much outcry in response to the House version of the tax bill, which would have eliminated the medical expense deduction, it survived. And, in fact, it was enhanced by permitting medical expenses in excess of 7.5 percent of adjusted gross income to be deducted in 2017 and 2018, after which it reverts to the 10 percent under existing law.
- 529 Plans. These accounts permitting tax-free accumulation of capital gains and dividends to pay college expenses can now be used for private school tuition of up to $10,000 a year.
Should You Enroll While You Can?
If you will soon turn 65 and be applying for Medicare, you should carefully consider which Medigap policy to enroll in because two of the most popular plans will be ending soon. In 2020, Medicare beneficiaries will no longer be able to enroll in Plans F and C.
Between copayments, deductibles, and coverage exclusions, Medicare does not cover all medical expenses. Offered by private insurers, Medigap (or “supplemental”) plans are designed to supplement and fill in the “gaps” in Medicare coverage. There are 10 Medigap plans currently being sold, identified by letters. Each plan package offers a different combination of benefits, allowing purchasers to choose the combination that is right for them.
Plans F and C are popular Medigap plans in part because they both offer coverage of the Medicare Part B deductible. Enrollees in Plans F and C do not have to pay the deductible. Plan F, the most comprehensive Medigap plan currently available, also pays for all doctor, test, and hospital fees. Plan C is similar, but it does not cover the excess fees that doctors charge over Medicare’s limits. According to the Kaiser Family Foundation, 53 percent of Medigap enrollees have either plan F or plan C. Continue reading
Medicaid has strict asset rules that compel many applicants to “spend down” their assets before they can qualify for coverage. It is important to know what you can spend your money on without endangering Medicaid eligibility.
In order to be eligible for Medicaid, applicants must have no more than $2,000 in “countable” assets (the dollar figure may be slightly more, depending on the state). In addition, Medicaid also has strict asset transfer rules. If an applicant transfers assets for less than market value, the applicant will be ineligible for Medicaid for a period of time. Applicants for Medicaid and their spouses may protect savings by spending them on non-countable assets.
A Medicaid applicant can spend down money on anything that would benefit the applicant. Following are examples of what a Medicaid applicant may be able to spend money on: Continue reading
Massachusetts General Laws Chapter 688 (“M.G.L. c. 688”) 688 is the Massachusetts state law that is referred to as the “Turning 22 Law”. It takes effect when a disabled or special needs student turns 22 or graduates from high school, whichever comes first. Chapter 688 creates a process to help special needs individuals transition out of special education services and into adulthood. A special needs child who is entering adulthood will only qualify for Chapter 688 if they have been receiving special education services.
At least two years before the Turning 22 Law takes effect for an individual, the education authority who has been providing special education services will determine whether the special needs individual needs continuing habilitative services, which are health care services that help a person keep, learn, or improve skills and functioning for daily living. If the individual is deemed to need continuing services, the education authority will notify the Bureau of Transitional Planning about the disabled person, and will provide the Bureau with the record of the special education services the person has received, as well as the expected termination date for services currently being received.
The special needs individual will either be determined to be disabled under the Social Security regulations, or he or she will be referred to the Massachusetts Rehabilitation Commission (“Mass Rehab Commission”) for an evaluation to determine if he or she is considered disabled. If determined to be disabled, a transitional plan will be developed by a predetermined state agency, which may be either the Massachusetts Department of Developmental Services (“DSS”), the Massachusetts Rehabilitation Commission, or the Massachusetts Department of Mental Health (“DMH”).
In the very exciting case, U.S. v. Windsor (699 F.3d 169 (2013)), the Supreme Court repealed a portion of the Defense of Marriage Act (DOMA). Now, when a same-sex couple gets married in a state that recognizes same-sex marriage, the Federal government must recognize the couple as married. Those of you who live in Massachusetts are in luck! Unless you have been living under a rock, you are well aware that Massachusetts has recognized same-sex marriage since 2004.
In regards to estate planning, the Supreme Court has now made it very easy for estate planning attorneys in Massachusetts. Estate plan documents for same-sex spouses can now be virtually identical to those of heterosexual spouses. In addition to basic estate plan documents, it is important for same-sex spouses with $1,000,000 or more in combined assets and life insurance to do estate tax planning. This will minimize potential death taxes upon the death of the first spouse. Furthermore, the surviving spouse in a same sex marriage is now afforded the same tax saving opportunities as a heterosexual spouse by both the Federal Government and the State of Massachusetts.
Although these new found civil rights are exciting, one must remember that the gay rights movement still has a long way to go. Due to some cases of ongoing discrimination, it is vitally important for same-sex spouses to have estate planning documents in place. For example, if a same-sex married couple is traveling to a state that does not recognize same-sex marriage, we advise that they bring copies of what we call the “Competence Documents” so they will have legal authority to act for each other in both financial and medical matters. First is the Durable Power of Attorney (DPOA), in which each spouse appoints the other in their respective document to have authority in financial matters. Second is the Health Care Proxy (HCP), where each appoints the other to be able to make medical decisions for them if the treating physician determines the spouse cannot make medical decisions for themselves. Third, and perhaps most importantly, is the HIPAA Authorization and Release document in which each appoints the other to be able sign medical release forms to access medical information and to always be able to visit with each other no matter what medical facility they are in. Our office regularly prepares these documents for our clients.
Of course the main reason for having an estate plan is to make sure that both you and your loved ones are taken care of in a case of illness or at the time of your passing. If the family members of a “non-traditional” couple do not approve of their marital choice, there is a possibility that a spouse’s inheritance rights may be challenged. Having strong estate planning documents in place can make it more difficult for disapproving family members to interfere with your plans for each other.
Authors: John R. Hope, Esq. and Samantha F. Gentel, Esq.