AARP’s TaxAide – A Great Cause and a Great Help

AARP TaxAide Volunteer

AARP volunteers help millions across the U.S. file their taxes each year.

Tax season is coming into full swing shortly, and this will be my third tax season volunteering with AARP’s TaxAide program.  For me, it’s an opportunity to do some good and keep abreast of how all the different tax tweaks congress makes each year find their way into the IRS forms and filing requirements we actually deal with back here on Earth.  For you – or for an elderly friend or loved one – it’s can be an opportunity to get your taxes done for free with friendly, convenient service.  For the benefit of those who might be interested, I’ve reposted this FAQ article with a summary of the services we provide.
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A Few Words on Disinheritance

Fight Over MoneyAn article last week in the local lawyer’s trade paper, The Connnecticut Law Tribune, discussed the increasing prevalence of wills being delayed in the probate process through complaints, objections, and full-out challenging of wills admitted to probate.

It’s not surprising, given that the economy is at the lowest point most of us have ever and will ever see.  There will always be maligned siblings looking for their fair share and suspicious later-in-life will changes, but in these tight times staying silent to keep the peace may not be the option it normally would be for some left-out relatives.  At the same time, there’s likely a surge in opportunists who suspect (accurately, as it happens) that most legit beneficiaries would rather pay a small, quick settlement than see their own inheritances delayed and diminished by a protracted lawsuit.

It’s an unfortunate situation for those looking to plan for when they are no longer around.  It’s also a good example of why it’s so important to have your will done by an attorney, in particular one who handles a great deal of wills and probate work.

If you’re looking to cut someone off because you question their responsibility or they have significant debts, several different types of trusts can be employed to address those concerns without completely disinheriting the person.  If you just want someone out, the wording must be carefully chosen to meet legal standards.  Depending on the situation, it may be better to employ a “carrot and stick” tactic, where the ousted person is actually given a small legacy under the will, but which is forfeited if he or she challenges the will in court.

Later-in-life will changes are particularly susceptible to challenge in court, as relatives may claim the author was not competent to make the will, or had been subjected to the manipulation and pressure of an overbearing child or confidante.  An experienced estate planning or elder law attorney can take steps to help ensure the will will be upheld in court, such as careful selection of the location and people present at the execution ceremony (will signing), choice of witnesses, and videotaping the ceremony as future evidence.

For more information, feel free to call me at (203) 871-3830 or email scott@scottrosenberglaw.com for a free consultation.

The Mess on Wall Street (or, Five Simple Rules for Finding a Fair Broker)

When it's time for a new broker...

With the House and Senate banging out the final version of the financial reform bill, it seems a fair guess that many people are wondering how the new law will affect their own investments, and that trustees are likewise concerned about what major consequences such sweeping legislation might have on the assets they are obligated to carefully manage. While a significant part of the bill is still up in the air, all possibilities seems to point to one answer:

None. Nada. Zilch.
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Debunking Wolf Blitzer: The Reality of 2010-2011 Estate Tax Changes

Wolf and Allan Chernoff discuss the changing estate tax landscape.

Wolf and Allan discuss the changing federal estate tax landscape.

In a December 17th segment on CNN’s The Situation Room, Wolf Blitzer and colleague Allan Chernoff began discussing the upcoming changes changes in the federal estate tax landscape.  They point out that in just a few short days the calendar will turn and the reign of EGTRRA (the Bush tax cuts) over the estate tax comes to a close.  No estate taxes will be owed on deaths occurring in the year 2010, but in 2011 the tax comes back at an even lower threshold, resetting to it’s pre-Bush rate of 41%-50% on assets over $1 Million.  While all of this is perfectly accurate and well worth knowing, much of the commentary surrounding it was murky at best, if not just plain wrong.  After the jump, some of the points that could use some tweaking:

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New Research on Comas, and What It Means for Living Trusts

An article in Time Magazine this week tells the story of a man who was presumed brain-dead for nearly a quarter century, but as it turned out, had been alert and listening the whole time.

Rom Houben, a Belgian engineering student before his accident, was suffering from total locked-in syndrome, a condition which paralyzes all intentional body movement. His body could breathe, pump blood, and digest; he could watch, listen, and think just fine, but he did not have the ability to respond. It wasn’t until a neurologist on a quest to find misdiagnoses with an experimental new type of brain scan saw Rom that they discovered his mind was intact.

This might seem like a far-fetched aberration, but recent studies in the British Journal of Medicine and elsewhere show that incorrect diagnoses of a persistent vegetative state (or PVS) occur at an alarming rate – about 40-45 percent of the time. The reasons are several. Brain-scanning technology has not reached a level where it can clearly diagnose conscious from unconscious; the methods for diagnosis by observation all have serious flaws, and doctors can’t agree on which is best or how to make a better one; and reviews after an initial diagnoses are often too cursory to notice signs of improvement after the brain has had time to heal.

This reality creates a serious problem for the typical living will. The lion’s share of clients have them drafted to ensure they have a quick and peaceful passing instead of getting “Terry Schiavo’d,” and living wills often mention a PVS diagnosis by name as one of the triggers for the removal of life support. The result is that a person who could live a fulfilling life with quadriplegia (body paralysis) as so many others do may inadvertently be euthanized. Almost all misdiagnosed patients are completely paralyzed, and many suffer some loss of cognitive ability, so it is understandable that these new revelations may not prompt older clients to change their plans. For everyone else, though, it should be an important consideration in laying out your advanced healthcare directives.

Going forward, estate planning attorneys should keeping abreast of new developments in PVS diagnostics, to know the what/how often/for how long combination that best ensures a PVS diagnosis is accurate, and clients should strongly consider having those standards incorporated into the document itself.

CT Revamps Estate Tax Model; Saves Headaches

Since 2005, one of the more annoying idiosyncracies of CT estate planning law has been the 2 million dollar cliff threshold for CT estate taxes. At the time it matched the federal estate tax exclusion, but that rate was set to rise to $3.5 million at the start of 2009, and was widely expected to stay in that vicinity.*  The end result was that individuals could easily get wallopped over manners of poor planning** (as a “cliff tax”, you’re assessed on the full first $2MM if you’re over by even a dollar), and couples with a net worth over $4 million required multiple, layered trusts to maximize the tax credits offered, such as they were.

However, last month Gov. Rell announced she would allow the proposed 2010-2011 budget to pass into law, which modifies the estate tax to a flat tax of 25% on the value of estates over $3.5MM, similar to the federal taxes. Under this new system, modest individuals estates may no longer be blindsided, and couples with a net worth underneath $7 million can avoid estate taxes altogether with a common arrangement often referred to as an “AB Trust.”  An AB trust simply takes the property from the decedent spouse(let’s say husband’s) estate and splits it into two piles: a “bypass pile” which could be taxed, but is valued to max-out his $3.5 million credit, and a “marital deduction pile,” which gives the property to his widow tax-free, and will fall within her $3.5 million credit when she passes.  The trust allows the piles to be split up in whatever way will save the most taxes, and is now a very effective tool in CT.

*This is still in a state of legislative flux, however. Presently there is no estate tax at all for 2010 and a low $1MM exemption starting in 2011, but these are likely to change and should not be planned around.
**Because of the low threshold, holding a large life insurance policy on yourself, vacation properties, or even part of a small business could make an estate subject to tax. The change in the estate tax does not affect the assessment of probate fees on these assets, so it remains prudent to place substantial investments in trust, outside of your estate.