The Connecticut Elder Law Blog

A Different Set of Tax Rules for Non-U.S. Citizen Spouses

If you or your spouse is not a U.S. citizen then you need to be aware of the fact that you have a completely different set of estate tax rules to contend with.  And if you don't then you may end up sending a lot of your hard-earned dollars to the government unnecessarily.

When you have two spouses who are both U.S. citizens, then upon the death of the first spouse there is never any tax regardless of how large your estate is.  It's upon the death of the second spouse when estate tax can become an issue if the surviving spouse dies with an estate that exceeds the federal exemption amount (currently $2 million).

But...if one spouse is a U.S. citizen and one is not, and the U.S. citizen spouse dies first, then estate tax could become due at that point and the government is not going to wait until the death of the second spouse before collecting a tax.  Why not?  Because the government is worried about that foreign spouse high-tailing it back to his or her home country and dying there, in which case the U.S. government can't collect a single penny of estate tax.  So the government has decided to tax while the taxing is good...while that non U.S. citizen spouse is still here in the country.

So...if one of the spouses is not a U.S. citizen, then there is a unique estate planning issue that must be addressed.  In the next post I will go over the most common approach to this situation; a QDOT trust (yes, another one of those Q-acronyms that come up a lot in estate planning).

Lawyer Joke!

So here we are at the end of another long week (well, technically it was short, but it still felt long for some reason) and I would like to leave you with another nasty lawyer joke...

What's the difference between a catfish and a lawyer? 

One's a slimy, scum-sucking, bottom-dwelling scavenger.  The other is just a fish.

Beware of "Living Trust Mills"

I try my best to keep an ear to the estate planning blogosphere, and one of the more recent issues in the world of estate planning is the surfacing of "living trust mills".  The loose definition is an organization that markets revocable living trusts (usually by way of a lunch or dinner seminar at a nice restaurant) and tries to convince the public that living trusts are documents that virtually everyone needs and purposely misrepresents how estate tax and the probate courts operate in order to make living trusts more appealing.  The result is people (usually seniors) spending four-figure amounts on estate planning documents that they don't actually need.

The growth of these mills are evident in recent class action lawsuits initiated by clients who claim that they were misled when they purchased living trusts.  And Kudo's to Florida estate planning attorney, David M. Goldman for listing recent articles on these scams.   

I have posted on the danger that financial predators pose for our elderly population, but it's deeply saddening to learn how prevalent such predators have become in my own industry. 

I will throw my two cents into the blogosphere discussion by saying that there certainly are a lot of people who could benefit greatly from living trusts, specifically if the focus is avoiding the probate process.  But I would argue that they are not documents that everyone needs.  Perhaps these living trust marketers genuinely believe that living trusts should be as widespread as living wills. But I don't agree, particularly since trusts are much more expensive than wills and require much more leg-work in regards to re-titling assets into the name of the trust.  And I don't believe in counseling my clients to take on the added expense and hassle if they truly don't need to do so.

So...if you do attend one of those living trust seminars, I strongly recommend that you look into the background and experience of the presenters and be very wary of anyone claiming that there is a universal need for living trusts.

Seniors are More Able Than You Think, Chuck!

Chuck Norris' latest message to the U.S. electorate: John McCain is too old to be president.  He even offered up some hare-brained math formula as scientific evidence to prove that Senator McCain would, in fact, die while in office.

Suffice it to say that I found Mr. Norris' message to be...how shall I say...underwhelming.  And disappointing.  Such ignorant and benighted comments are the reason that American society considers the word "old" to be pejorative.  Personally (and perhaps this is because I have more daily exposure to seniors than the average person because of the concentration of my law practice), I find the experience and reflective thought that seniors bring to our everyday life to be highly beneficial to America and it's hard to imagine where our country would be without the counsel of the over-65 crowd.  In other words, I do not think words like "old", "senior" and "elderly" are bad words.  In fact, I honestly look forward to the day when I can draw on such an enormous wealth of wisdom and experience to apply to my personal and professional life. 

No, seniors may not have the physical stamina and endurance that they once had (although I have many clients who are inspiring exceptions to that general rule). But I would argue that the wisdom and insight that seniors bring to leadership positions, whether in government, the private sector or charitable and community organizations, more than makes up for any physiological shortcomings.

In any case, Mr. Norris will be happy to know that I don't plan to vote for Senator McCain if he ends up being the Republican nominee in November, but it most assuredly will not be because I think he is too old for the job.

The "Autonomy vs. Protection" Dilemma for the Elderly and their Caregivers

If you have an elderly parent or parents, I highly recommend taking 20 minutes or so to read this New York Times article which came out on Christmas Eve (I finally found some time to read it!).  It is an interesting yet disheartening depiction of a growing dilemma for the elderly in our society.

One of the biggest issues in regards to caring for the elderly, specifially those who are still competent and not suffering from dementia or some other debilitating disease, is protecting them from financial predators who attempt to take advantage of their generosity.  Another big issue is helping the elderly maintain their independence and autonomy in making their decisions if they are still mentally competent.   But trying to address both issues simultaneously can be extremely challenging.

This article chronicles the sad story of 81 year-old Robert J. Pyle of California who was financially comfortable before he was befriended by a single mother who was struggling to get by.  Mr. Pyle then voluntarily loaned enormous amounts of money to her until nearly all of his money was gone, and now the matter is in court.  The troubling aspect of the case is that Mr. Pyle is perfectly competent with no signs of dementia. 

So...does his case get thrown out because he simply made some bad financial decisions?  Or does his characterization as "elderly" mean that he is entitled to some type of legal protection, even if he is perfectly competent?  The article compares the situation to a teenager being able to get out of a legal contract because she is underage, despite the fact that she was fully aware of the consequences of entering the contract.

This is a relatively new and fascinating legal question that will surface more often in the courts as the population continues to age.  But if you're a caregiver on the homefront it's an enormously difficult balance for you and your family to strike between the competing issues of "automony" and "protection".

After a Full Year of Medicare D, the Results Are In...

Believe it or not, a full year has gone by since the establishment of Medicare Part D (Medicare drug benefit), and after a highly confusing start to the sweeping program, the Chicago Tribune reports in this article that out-of-pocket expenses for patients dropped by 13.1% and prescription use increased by nearly 6%.

The savings was good news for patients in 2006, but it also contributed greatly to a $63.3 billion increase in Medicare spending for the federal government compared to 2005.

Medicaid Planning: An Important Non-Financial Consideration When Gifting Assets

Although the Deficit Reduction Act has certainly made it more difficult to transfer assets out of one's name in order to protect those assets from the nursing home, such transfers can still be a viable planning option for Medicaid planning purposes if the circumstances are appropriate (unfortunately, an adequate discussion of such circumstances are better covered in a full-blown seminar, not a blog post).  And although transferring assets can make perfect sense from a financial perspective, it's important to consider the entirely non-financial issue of taking such steps.

The non-financial concern is that if you're moving money from mom to one or more of the children, you are also removing that money from mom's control.  And although mom may love the kids dearly and trust them implicitly to give some or all of the money back to her if she needs it, there is probably still a sense of unease over not having direct access to that money anymore.  When you're talking about losing control you're also talking about losing independence, and maintaining a sense of independence is something that becomes more and more important to most people as they enter their "elderly" years. 

The other concern that mom may have is that the money may disappear while its in the hands of the children.  If someone gets sued in a big way or if a divorce issue comes up then some or all of the money may suddenly be at risk.  This could be an enormous source of stress for mom if she is not especially risk-tolerant.

So if the family and its elder law advisor determine that there is a financial benefit to mom gifting assets to the children, then it's time to have a very non-legal, non-financial discussion with mom regarding how she feels about that.  If mom is going to lose sleep over the loss of independence and/or the risks associated with the transfer, then the financial reasons for such planning may not be worth it.

A Social Security Debit Card?

The U.S. Treasury Department is ready to order a pre-paid debit card for Social Security and Supplemental Security Income (SSI) recipients. Residents of all states will have this option by the end of the summer.

The purpose is to accomodate recipients who do not have a bank account, and switching from paper checks will be less costly, more secure and make monthly benefit payments available to recipients faster.

The full story is in this Wall Street Journal online article.

Lawyer Joke!

A man dies and goes directly to Hell.  While he is milling around, he spots another man who he recognizes as a lawyer, and the lawyer is snuggling up to a beautiful woman.

"That's totally unfair!" he protests to the Devil.  "I have to burin in Hell for all eternity, and that lawyer gets to spend it with a beautiful woman!"

"Silence!" barks the Devil, jabbing with his pitchform.  "Who are you to question that woman's punishment?!"

The Fear of Moving to a Nursing Home

I recently ran across this article in Spectrum Online, which is an online news publication, and it confirms what I continuously hear from my elderly clients; they fear moving into a nursing home, on a permanent basis, more than anything...literally.  Including death.

A study commissioned by Clarity and the EAR Foundation has determined that 89% of American seniors prefer to live in their own homes for the rest of their lives, even if they have to go to great lengths in adapting their houses to accomplish this.  These results were echoed by surveys of the adult children of such seniors, 94% of which feel that it's important for their senior parents to age in place.

And although seem seniors generally reluctant to adopt many of the latest lifestlye technologies into their day-to-day lives, this rule-of-thumb certainly does not apply to technologies which would make it easier for seniors to live indepently at home.  The study concluded that most seniors would welcome such technological developments in their homes.

My general advice to clients and their families is to start early in regards to planning on how to keep mom and/or dad at home on a permanent basis.  This may not always be practical, but it is a worthwhile goal to shhot for.  And this Spectrum Online article (a quick read) should prompt you to include researching the latest technologies and services (Lifeline, for example) when mapping out such a plan.