Michigan Estate Planning Blog

ESTATE PLANNING / POWER OF ATTORNEY

Some people who thought they had covered all their bases and acted responsibly to care for loved ones in the event of a debilitating illness or incapacity are finding their plans un-done by strict banking policies. Bank of America recently updated their online security procedures, and no longer accepts a power of attorney for online banking. As Bernard Krooks wrote last week for Forbes, this strict policy came to light when Chicago resident Eva Kripke was blocked from accessing her husband’s Bank of America account. According to Krooks, Mrs. Kripke had been handling her husband Sidney’s bank accounts as agent under a power of attorney ever since he was diagnosed with Lew body dementia four years ago. Suddenly now, however, she is denied access under the bank’s updated security procedures. The bank suggested she to go to her local branch and get a printout of her husband’s account information. Unfortunately, Mrs. Kripke felt this was unacceptable because her husband’s health status requires close financial oversight. Perhaps more unfortunate, her options are limited because her husband’s illness has rendered him incompetent. Rules such as these are becoming increasingly prevalent and significant as more people are called upon to care for an aging population and their attendant disabilities. An experienced elder law attorney can provide guidance in situations where powers of attorney are limited. You can learn more about powers of attorney in the Fundamental Estate Planning Practice Center on our website. Reference: Forbes – Bernard A. Krooks (July 7, 2011) “Power of Attorney Does Not Grant Access to Online Banking, Says Bank of America”

ESTATE PLANNING / ESTATE TAXES

With the new estate tax laws in place, including the $5 million exemption ($10 million for a married couple), many people are enjoying a false sense of security about any potential estate tax liability. First, as Forbes recently pointed out, keep in mind this new generous law expires at the end of 2012 … and it’s anyone’s guess what will happen next. In the meantime, also remember that if your state imposes a state estate or inheritance tax, the likely outcome is that combined federal and state taxes could pack a surprising punch for those above the $5 million exemption amount. The federal estate tax rate runs 35 percent, but depending on where you live, combined federal and state tax rates could run as high as 48 percent. Forbes has a handy chart here for you to review the impact of combined state and federal estate taxes by state. You can learn more about estate taxes on the Estate Tax Practice Center on our website. Also, stay informed about changes in the law that could affect you and your estate planning by subscribing to our free monthly estate planning e-newsletter. Reference: Forbes – Robert W. Wood (July 7, 2011) “Will Ohio Estate Tax Repeal Trigger More?”

ESTATE PLANNING / SOCIAL SECURITY

When should you start taking your Social Security benefits? The current common advice is to wait as long as possible, in order to maximize your eventual monthly benefit. In fact, AARP recently launched a new online calculator to help you decide when to start taking benefits … and it clearly illustrates the benefits to claiming later. The calculator is a useful tool, and worth checking out, but as Reuters Wealth points out, the calculator is not totally neutral, and lacks advanced features that could allow you to estimate more complex situations. For example, the AARP calculator does not allow you to figure out when you should start benefits if you are no longer working and have to weigh savings withdrawals against starting benefits. It also won’t allow you to figure the tax impact of your decisions, which can be sizable. Further, it really does not allow you to compare the outcome of various scenarios in which you and your spouse choose different start dates to coordinate benefits. For those types of complex calculations, you probably will still want to consult with a professional who can help identify issues pertinent to your unique situation. Other websites with helpful calculators include: • Should you Start Social Security Early • Break-Even Calculator • Social Security Administration. Reference: Reuters Wealth – (July 12, 2011) “Now or Later? AARP’s new Social Security Calculator?”

ESTATE PLANNING / ESTATE ORGANIZATION

The financial consequences of failing to keep your legal and financial documents in order can be significant. As pointed out in a recent Wall Street Journal article, state treasurers currently hold $32.9 billion in unclaimed bank accounts and other assets. Additionally, some of the country’s largest life insurers are under investigation for failing to pay out unclaimed life policies to beneficiaries. Insurers say they are behaving lawfully and under their policy contracts are required to pay a claim only when beneficiaries come forward. Will your family members reap the full benefit of your estate planning efforts, or will they miss out simply because they cannot locate all of your important legal and financial documents in a timely manner? Of course, you don’t have to keep every single scrap of paper, but the WSJ offers a pretty comprehensive list of the 25 most important legal and financial documents you should compile, and make sure your heirs can quickly access, to include: 1. Will 2. Letter of instruction 3. Trust documents 4. Housing, land, and cemetery deeds 5. Escrow mortgage accounts 6. Proof of loans made and debts owed 7. Vehicle titles 8. Stock certificates, savings bonds, and brokerage accounts 9. Partnership and corporate operating agreements 10. Tax returns 11. List of bank accounts 12. List of all user names and passwords 13. List of safe-deposit boxes 14. Durable health-care power of attorney 15. Authorization to release health care information 16. Living will 17. Do-not-resuscitate order 18. Personal and family medical history 19. Life insurance policies 20. Individual retirement accounts 21. 401(k) accounts 22. Pension documents 23. Annuity contracts 24. Marriage license 25. Divorce papers The original article goes into much more detail with each, and whether you have or need each of these documents will depend on your individual situation and the various legal facets of your life, but it is a list that commands a certain attention. By putting this all together you help your loved ones to more quickly and easily pick up the pieces and put your plan into operation. Reference: The Wall Street Journal - Saabira Chaudhuri (July 2, 2011) “The 25 Documents You Need Before You Die

ELDER LAW / MEDICAID ELIGIBILITY

Here’s another important reminder on how much of a stickler Medicare and Medicaid can be when it comes to denying benefits: the Matter of Komanoff Ctr. for Geriatric & Rehabilitative Medicine v Daines (N.Y. Sup. Ct., App. Div., 2nd Dept., No. 2010-05776, June 28, 2011) (here summarized on ElderLawAnswers.com.) It’s the case of Bernadette Jordan and how she entered a nursing home and filed for Medicaid only to find that the State ruled her ineligible for a period of 14.31 months. Apparently, Mrs. Jordan had transferred funds from a revocable trust to her daughter, to repay expenses that her daughter had shouldered in getting her to the nursing home. States are skeptical of such transfers, and often examine them carefully. In this case they found that the transfers were made at less than fair market value for purposes of Medicaid eligibility, and so denied Mrs. Jordan Medicaid benefits. On Mrs. Jordan’s behalf, her nursing home called a hearing and later appealed. After all, the expenses the daughter paid were documented and done with the assumption that they would be repaid with assets from the trust. The State still denied benefits. The problem was that there was no written document at the time of the expenditure that specified the agreement to repay the daughter’s expenditures. The moral of the story is documentation. By documenting your interactions and intentions you can provide hard proof and avoid getting caught on a technicality. In Mrs. Jordan’s case, 14.31 months is a long time to wait for nursing home benefits. Reference: Elderlawanswers (July 5, 2011) “Transfer to Daughter Without Written Agreement Triggers Medicaid Penalty”

ESTATE PLANNING / STATE ESTATE TAXES

As of July 1, it’s official: Ohio has repealed its state estate tax, as reported through Forbes. Of course, it’s not quite dead yet as the estate tax provision of the new law doesn’t go into effect until Jan 1, 2013. Once it kicks in, though, the Ohio estate tax repeal is meant to be permanent. This will leave New Jersey with the distinction of being the state with the lowest estate exemption of $675,000. Other states are in the news as well, with both Maine and Oregon tweaking their state estate taxes. The Maine budget makes a prospective change in their exemption, doubling it from $1 million to $2 million as of Jan. 1, 2013 and thereby exempting some 400 estates. Oregon, on the other hand, has introduced new graduated rates from 10% to 16% applied to the estate above $1 million. The tax applies to the entire estate but jumps up to a flat 16% on portions in excess of $1 million, thus going in the opposite direction of Maine and Ohio and introducing a new calculus for Oregon estate planning. For a map showing state estate taxes and rates for 2011, click here. You also can learn more about estate tax planning on the Estate Tax Practice Center on our website, where we have a handy estate tax calculator to help estimate your federal estate tax liability. Reference: Forbes – Ashlea Ebeling (Jun 30/ Jul 1, 2011) “Ohio Repeals its Estate Tax; Maine and Oregon Tweak Theirs”

ESTATE PLANNING

Life insurance can be a powerful estate planning tool, but paying for it doesn’t necessarily guarantee your heirs will receive the benefit – not if the policy gets lost in the shuffle of life. Remember, your heirs may have to specifically approach the insurance company with their claim in order to receive any benefits. In fact, New York’s Attorney General’s office is investigating nine leading life insurers to see whether they have done enough to identify beneficiaries of life insurance policies. Do your heirs know the particulars of your life insurance, or where to find the paperwork? As recently explained in Reuters Wealth online, life insurance companies have an inherent business interest in not paying out death benefits – it’s just simple economics. You should have an inventory of your assets, and make that inventory available to your family. If you are paying on a life insurance policy, or you’ve ever bought one, track it down and give your heirs complete information about it, to include where the paperwork is now, the policy number, the insurance company, and the name and contact information of the agent who sold it to you. Learn more about getting your legal and financial affairs in order in the November 2010 issue of our monthly estate planning newsletter, Are You Ready? Reference: Reuters (July 5, 2011) “Life Insurance: Will Your Hairs Get What You’ve Paid For?”

ESTATE PLANNING / ASSET PROTECTION

Sometimes when people get into financial trouble, they look for an easy way out. Whether out of sheer desperation or an attempt at trickery, some resort to making what the law considers a fraudulent transfer. Fraudulent transfers have a tendency of coming back to bite you and several recent cases serve to demonstrate that fact, as in one of Lewis Saret’s recent posts on Forbes (and the much longer list in the Wealth Strategies Journal.)

One case is that of re Quaid, (2011 WL 285645, Bkrtcy.M.D.Fla., Jan. 26, 2011,) where a Florida man sought to use a self-settled trust to shield his assets from his creditors. According to his account, even though the trust was self-settled (he, the beneficiary of the trust, set it up) the assets were still exempt because of a spendthrift provision. Unfortunately the Orlando Division of the US Bankruptcy court ruled that a spendthrift provision does not apply to a self-settled trust when the beneficiary contributed assets, and that wrecked the plan. The assets amounted to $400,000 and were added to his estate, well within reach of his creditors.

Also consider the case of Struyk v. Meltzer (2011 WL 1019916, Cal.App. 4 Dist, Unpublished, Mar. 23, 2011), and the far more common case of inter-spousal transfers deemed to be fraudulent. A California man, with $500,000 debt, tried to shield assets by transferring them to his spouse, who was debt-free. He tried to quit-claim his interest in their residence and allow her to claim it as sole property, effectively transferring the asset. Instead of shielding the residence, the jury found that the husband intentionally transferred the property to the wife in order to defraud his creditor, which ultimately led to a jury verdict well in excess of the value of the assets transferred.

The bottom-line is that fraudulent transfers can prove counter-productive at best, and disastrous at worst. These cases remind us of the importance of using knowledgeable professionals in the estate planning and bankruptcy process to avoid the disastrous results that potentially accompany fraudulent transfers.

You can learn more about how to legally protect your assets in the Asset Protection Practice Center on our website. While you’re there, be sure to sign up for our free monthly estate planning e-newsletter as well.

Reference: Forbes - Lewis Saret. (June 7, 2011) “Fraudulent Transfers and Estate Planning: Recent Cases, Important Caveats”

ESTATE PLANNING / ESTATE TAX

SmartMoney recently ran a reminder to all possible victims of the estate tax. The fact is that you could have a taxable estate, and not even realize it. Most people assume that since they don’t “feel” wealthy, they don’t have to worry about estate taxes -- but they don’t actually do the math. Your “taxable estate” includes (minus liabilities): proceeds from life insurance policies; your primary residence and any vacation and/or rental properties; retirement accounts, investment accounts; cars, furniture, collectibles, and the rest of your “stuff.” Plus any private business ownership interests (such as shares in a family business or partnership). Smart Money offers a hypothetical example: Stephanie is a divorced single parent. Since she earns a healthy salary, she has a $4 million term life policy to provide for her three teenagers. She also has $800,000 of equity in her home, $1 million in retirement plan accounts, and $500,000 worth of assorted personal assets (cars, clothes, furniture, jewelry, and so forth). Stephanie has no significant debts beyond her home mortgage. Since she has never considered herself to be anything close to “rich” she has never done any estate-tax-avoidance planning. However, if she died tomorrow, her estate would be worth a whopping $6.3 million for federal estate tax purposes ($4 million + $800,000 + $1 million + $500,000), and her estate would owe the Feds $455,000 ($6.3 million estate – $5 million exemption) x 35% tax rate). Yikes! There may be a state estate tax bill too. The bottom line is that estate planning means planning for contingencies. Consulting an estate planning attorney will not only help you plan for a potential estate tax liability, but also deal with important non-tax issues like probate avoidance, distribution of your hard-earned assets, providing for your own care in the event of long-term illness or disability, and the naming of guardians for any minor children. You can learn more about the estate tax, and even calculate your current (and potential future) estate tax liability with the estate tax calculator on our website. Link: http://blogs.smartmoney.com/tax/2011/02/17/think-youre-estate-tax-exempt-maybe-not/?mod=rss_ From SmartMoney Blog – Bill Bischoff – (Feb 17, 2011) “Think You’re Estate Tax Exempt? Maybe Not”

ELDER LAW / MEDICAID & LONG-TERM CARE

It’s no secret that state (and federal) budgets are severely stressed. While lawmakers look for revenue and cost-cutting measures, Medicaid services are coming under scrutiny. Managed care plans are becoming increasingly popular as one way to cut Medicaid costs. Currently six states require the elderly and disabled who need long-term care to enroll in a managed care plan. At least 10 other states are reportedly considering the same, according to a recent article from The Kaiser Health News. Traditionally, states pay Medicaid providers directly for individual services. Under managed care, states pay health insurers a fixed monthly fee for each Medicaid patient. The lump sum is used for all the patient’s costs, including physician and nursing home care. Managed care companies say they can help states save money by keeping Medicaid patients who need long-term care at home whenever possible. Tennessee pays its Medicaid health plans an average of $4,400 per member per month. AARP and some other advocates caution that managed care plans could make it harder for patients to get the services they need. The nursing home industry, which currently gets about two-thirds of its revenues from Medicaid, is complaining as well. But state officials around the country say they have little choice but to make more aggressive use of managed care, especially for long-term care patients who account for more than two-thirds of all Medicaid spending.

ESTATE PLANNING / IRA ASSETS

If you have substantial assets in an IRA – whether a Roth or a traditional IRA – you’re wise to pay attention to how those assets might pass to your spouse or other heirs in the event of your death. Christine Benz of Morningstar Advisors wrote a small cache of common wisdom on the subject in the forms of “do’s and don’ts.”

What should you do with your IRA?

• Check with your estate planning attorney before naming your beneficiaries. Remember, your beneficiary designation(s) trump whatever might be in your will, so make sure your estate planning documents and your beneficiary designations work together. An estate attorney also can advise you on the most tax-efficient uses of your IRA assets and warn you about ill-conceived designations, such as naming a minor child or your “estate” the beneficiary of an IRA.
• Consider making a charity the beneficiary of your IRA. Depending upon your situation, this could be a tax-savvy way of supporting your favorite cause.
• Consider whether you should convert a traditional IRA to a Roth account. Again, depending on your individual situation, this could make your retirement assets work even harder for your heirs.

 

 Morningstar’s top list of Don’ts:

• Don’t fail to name beneficiaries for your IRA assets. What happens if an IRA has no beneficiary designation at all? It all depends. If that is not a good answer for you, then be sure you name a beneficiary.
• Don’t neglect updating your beneficiary designations after life-changing events. Major life events, such as marriage, divorce, the birth of a child or the death of a loved one may require changes to your beneficiary designations. Plan to review those designations on a regular schedule.
• Don’t name a minor child as the beneficiary of your IRA. Minor children cannot be named beneficiaries of life insurance policies, retirement plans, or annuities. If you’d like to leave IRA assets to a minor, check with an estate attorney about setting up a trust or a uniform transfers / gifts to minors (aka UTMA / UGMA) account.

Link: http://news.morningstar.com/articlenet/article.aspx?id=370811

From Morningstar Advisors News (Feb 17, 2011) “Dos and Don’ts for leaving IRA assets to your loved ones”

ELDER LAW / MEDICARE

The Centers for Medicare and Medicaid Services recently announced they are preliminarily raising the reimbursement rate for Medicare Advantage plans by 1.6 percent in 2012. This could make the popular plans more profitable for the companies offering them, and perhaps help hold the line on premium increases.

Medicare Advantage plans are privately run versions of Medicare. Subsidized by the government, the plans offer basic Medicare coverage, but with extras like vision or dental coverage – and usually at premiums lower than standard Medicare rates.

According to Forbes, the 1.6% increase is about what investors and provider companies had expected. The final rates will come out on April 4, and the reimbursement rates may vary by plan.

There are about 11.8 million beneficiaries, or nearly a quarter of the total Medicare population, enrolled in a Medicare Advantage plan.

ELDER LAW / ELDER ABUSE

Elder financial abuse continues to the “Crime of the 21st Century,” according to a recently published MetLife study on the financial abuse of the elderly, “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders.” The study shows that elder financial abuse falls into three types of crimes: occasion, desperation and predation. Additionally the vulnerabilities of aging increase the risk of elder financial abuse, and there is a continued lack of focus (and prosecution) on the perpetrator. Elder Americans are now estimated to lose $2.9 billion every year, with significant patterns in the nature of these abuses. Most cases of abuse, 51 percent, are perpetrated by strangers, with close family and friends accounting for 34 percent. Crimes classified as “scams” committed by strangers accounted for 28 percent of all financial abuses, business-related exploits made up 12 percent, and Medicare and Medicaid fraud amounted to the most loss per case but only accounted for 4 percent of total cases. The most common perpetrator was likely to be a man between ages 30 and 59. When family or friends were involved, the study found that most cases involved forged checks, stolen credit cards, drained bank accounts, and transferred assets. The most common victims are women, who are twice as likely to be financially abused as men, especially in their 80’s. Most cases found that it was when the victim’s disabilities were outwardly apparent due to the use of a cane, handicap tags, or simple confusion, but those living alone and in need of health care or home maintenance also are at risk. The Elder Justice Act became law on March 23, 2010, and has significantly raised the national focus on elder financial abuse. Provisions of the Act are outlined in the study, which you can download here. Two of the provisions include required immediate reporting to law enforcement of crimes in a long-term care facility and civil monetary penalties for failure to report and a provision for penalties for long-term care facilities that retaliate against an employee for filing a complaint against or reporting a long-term care facility that violates reporting requirements.

Reference: Metlife.com (June, 2011) “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders” (study publication)

 

ELDER LAW / ELDER CARE

If you, your parent, or an elderly loved one is reaching the point where living alone is no longer an option – for medical reasons or otherwise – it may be time to consider some time of assisted living, whether nursing home or retirement community Increasingly, many families are looking at the “Continuing Care Retirement Community” or CCRC option. Even though the CCRC may be the pricier option, a little-known tax strategy recently explained in Smart Money could make it more financially attractive.. What is a CCRC? As SmartMoney explains: As opposed to a traditional nursing home where you simply pay a monthly fee, residents enter into a long-term contract with a CCRC. In exchange for a one-time entry fee and ongoing monthly charges, the CCRC provides housing and a range of on-site services. When a resident's health and personal care needs become more acute, the level of service can be increased to include assisted living, long-term care and skilled nursing care. The big advantage is that the resident doesn't have to move as his or her needs change. Interestingly, there is another advantage: a potential tax savings. Because part of the upfront and ongoing fees is to provide medical services – whether the resident uses them or not – a medical tax deduction may be available. This strategy was upheld in the 2004 Tax Court case, Delbert L. Baker v. Commissioner (122 TC 143, 2004). Of course, medical expenses must exceed 7.5% of adjusted gross income in order to claim the deduction. However, if you are considering a CCRC, it’s quite possible that your applicable expenses will exceed this threshold, since their fees, including the upfront buy-in, are usually quite high. Remember, too, that the percentage of costs that qualify as medical is determined by the aggregated spending of the facility itself, rather than the individual and their level of received care. The CCRC management should be able to give you estimates of the percentages, though you may have to ask for them. Also of note, remember that if you will pay some or all of your parent’s CCRC fees, you can claim the applicable percentage of the charges as a medical expense on your return – if you provide more than half of your parent’s support. Also, the IRS says these tax breaks apply only if the person enters into a CCRC-like contractual lifetime care arrangement, not just any retirement facility or nursing home. You can learn more about long-term care planning on our website. Also, be sure to sign up for our free monthly e-newsletter for regular updates

Reference: SmartMoney (June 15, 2011) “A Tax Break for Retirement Community Costs”

ESTATE PLANNING / GIFT TAXES

If you own private business interests or other rapidly appreciating assets, and would like to gift those to the next generation at the lowest possible tax cost, you may want to act sooner rather than later. The Tax Relief Act of 2010 included a 400 percent increase in the lifetime gift tax exemption, from $1 million in 2009 to the current $5 million ($10 million for a married couple). These provisions are due to expire on the last day of 2012. If you are considering a gifting strategy, you are wise to start exploring your options now, while you have time to carefully consider, since giving away assets requires careful thought and planning, There are several strategies we could use to maximize the value of the exemption, to include an advanced strategy known as an installment sale to an Intentionally Defective Grantor Trust (IDGT). Gavin Morrissey of Commonwealth Financial recently wrote in detail about how this strategy works. The bottom line is that this complex strategy, when properly executed in the proper circumstances, can result in quite significant tax savings. As Morrissey points out, the strategy works best when the assets to be transferred are rapidly appreciating – such as private business interests or pre-IPO stock.

Reference: ADVISORONE.COM (June 15, 2011): Estate Planning: Time Running Out on $5M Gift-Tax Exemption.

ESTATE PLANNING / REQUIRED MINIMUM DISTRIBUTIONS

If you’re turning 70½ this year, get ready to start taking those mandatory annual payouts (your “required minimum distributions” or RMD’s) from your IRA accounts. Unfortunately, this is not something you can afford to put off. As SmartMoney points out in a recent article, the IRS wants you to take those distributions, and pay the additional income taxes sooner rather than later, and there are stiff penalties for non-compliance. In fact, if you fail to take at least the required amount each year, the IRS can assess a 50 percent penalty on the shortfall – the difference between what you should have taken and what you actually took. SmartMoney offers a quick run-down on RMD basics, but remember this: the requirements are fairly complex, and penalties for non-compliance are pretty stiff. You are well-advised to seek qualified counsel on this one. The most important lesson here is – do not delay. If you have reached age 70-1/2 and you have IRA accounts, you have some big decisions to make now. As SmartMoney says, “If you sit on your hands, you will be in the RMD double-dip mode next year, which might result in a higher tax rate that could have been easily avoided.” Reference: SmartMoney (June 22, 2011) “Don’t Blow Off Minimum IRA Withdrawals”

ESTATE PLANNING / LETTER OF FINAL INSTRUCTION

If you’re a member of the Baby Boomer generation, there’s a good chance you have not done even the most basic of estate planning. In fact, only 56 percent of you have a will, according to a 2011 survey by Rocket Lawyer. So, if you have covered that base, give yourself a well-deserved pat on the back … but not too heartily. As SmartMoney recently pointed out, most people overlook another crucial element in their estate plan: a letter of final instruction. The letter of final instruction is a non-legal document that guides your family through important tasks after your death. For example, your family might not know where you keep important papers like a deed or a marriage or birth certificate. They may need your passwords to access accounts on your computer. You also may want to list the contact information for people you would want notified, like friends that your family members may not know well. Trusts & Estates magazine recently ran a list of items you might want to include. The idea is not so much to set down demands or to solve possible squabbles, because the document is non-legal, but just to supply the answers to those questions that could otherwise prove troublesome for your family. Of course, this letter is just a small (and non-legal) part of your estate plan. You still need to cover your legal bases with at least a will, living will, health care proxy and durable powers of attorney. Learn more in the Fundamental Estate Planning Practice Center on our website. Also, read the October 2010 of our e-newsletter, Are You Ready? about getting and keeping your legal affairs in order. Reference: SmartMoney (June 9, 2011) “The Missing Link in Your Estate Plan”

ELDER LAW / RETIREMENT CAREERS

In today’s economy, it seems that everything old is new again … albeit with a bit of a twist. Years ago, it was common for older couples – and frequently widows – to rent out rooms for extra income. Taking in boarders was a viable way to supplement income. Well, the idea is back, with a bit of a twist. As Baby Boomers face the cold, hard facts of retirement, they are increasingly changing the definition of the term to include at least some form of work. While you may not be ready to hang out a shingle on the front gate, “Rooms for Rent,” you might consider becoming a landlord. In fact, the venerable Wall Street Journal writes that it may be just the ticket, especially given the uncertain prospects for stocks and bonds and the meager interest rates on savings accounts. Think about it. It’s a buyer’s market now, so purchasing a multi-family home is more financially feasible. And, the trend toward the renter’s lifestyle is picking up steam. All this means you have a low cost of entry into a market that is expected to expand. Starting to make investment sense? Sure, it’s a career of sorts, but you also need to think of it as an investment. Weigh everything in the short term, including start-up and maintenance costs, as well as the marketability of the location you’re considering. But then also keep your long-term goals in mind, including appreciation and eventual sale. Buying in a depressed market, after all, is only a steal if that market bounces back. Finally, don’t overlook the possible danger of having all your eggs in one basket since being a live-in landlord will unite your home, equity, and employment, into one potentially risky asset. Like any retirement move, don’t make this one too quickly. Discuss your plans with a professional who can help you sort out the details, including how an investment rental property could affect your Social Security benefits. Remember, too, that this lifestyle may not suit you. In which case, you would be wise to explore other, more enjoyable options.

Reference: The Wall Street Journal Online (June19, 2011) “Want a job? Become a landlord.”

ELDER LAW / ELDER CARE

When the time comes, as does for most of us, that we need assistance in our daily living, the unfortunate fact is that too many of us end up in nursing homes – not because we need constant nursing care, but because there no other good options. A provision of the new Patient Protection and Affordable Care Act may help change that. According to a recent article in the LA times, the most ambitious part of the Act, as it relates to long-term care is the Community Living Assistance Services and Supports Act, or CLASS – a voluntary, consumer-financed insurance plan to cover long-term care expenses. CLASS, scheduled to go into effect in January of 2014, is an insurance plan, similar to those currently available in the private market, with a few notable distinctions. First, the program will be administered by the government. Second, any working adult age 18 or older will be able to enroll, regardless of any pre-existing medical condition, and the benefits will be good for as long as someone needs long-term care. Perhaps even more importantly, the government plan will offer benefits that could be used for a wide variety of expenses, including hiring a home care provider and doing home modifications. Take note that Senators June Thune and Lindsey Graham on April 14 of this year introduced the Repeal the CLASS Entitlement Act. Nonetheless, the CLASS Act highlights a widespread move in the country to shift resources from nursing home-based care to home-based care as a viable and far less expensive option. The cost of nursing home care ranges from about $40,000 to $85,000 a year, according to a recent report by John Hancock Financial Services Inc. The average cost of a home health aide, on the other hand, is about $37,000 a year. The most precious detail, of course, is that the patient can remain at home. You can learn more about long term care options in the Long Term Care Practice Center on our website, or read the May issue of our monthly e-newsletter, Elder Law Elements. Reference: The Los Angeles Times (June 19, 2011) “Helping Seniors Live at Home Longer”

ESTATE PLANNING / EXECUTORS

There are a number of decisions to be reached when planning for your estate and not least among them is the choice of executor. A poor choice of an executor, or a disconnection between executor, estate, and beneficiaries can hobble even the best laid of estate plans. Indeed, Reuters offers one unfortunate beneficiary’s troubles in a recent article on the topic and offers some solid suggestions to consider. The beneficiary was Stephanie Stephens, who, in the end, was surprised to find that the estate she received had shrunk by $129,000, something she angrily blames on the executor. Apparently, the estate had incurred a $104,000 loss when the executor failed to pull the assets from the flames of the 2008 financial meltdown and, insult to injury, that executor was then entitled to a fee of another $25,000. Needless to say, she wasn’t happy. Whether or not the executor was to blame may be debatable (since it was the beginning of the recession, after all) but there are other wrinkles to the story. For example, Stephanie hadn’t met the executor of the estate until after her relative passed away and so only knew him as a somewhat disinterested party. Further, she was surprised by the executor’s fees even and even felt them to be excessive. In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand. Her case offers an example of a kind of disconnect that can all-too-easily arise between executor, estate, and beneficiary. Reuter’s offers three general principles to bear in mind: Know the estate. Choosing the right executor has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones. Know the person. Just because someone is a “good person,” this does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence. Let your family know - communicate. It’s a difficult conversation to have but it’s important to relate your plans directly so that your family knows your decisions. Further, you’ll want to be sure they are aware of the cost of the executor so it isn’t the surprise it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too). You can learn more about Probate and Estate Administration on the Probate Practice Center on our website. While you’re there, be sure to sign up for our free monthly e-newsletter to stay informed about issues affecting you, your family and your estate. Reference: Reuters (June 16, 2011) “Help! Our executor cost us $129,000”

TRUSTS / INCENTIVE V. RESULTS-ORIENTED

There is an old saying, quite true, that wealth is difficult to amass but easy to squander … especially by those who did not earn it. Many parents – and grandparents – come to us asking how they can leave an inheritance to their loved ones, without “spoiling” them. They want the fruit of their labors – the wealth they pass on – to inspire their loved ones to greater causes, and not cause that dread disease known as “affluenza.” Incentive trusts offer an opportunity to try and nudge younger generations to solid values, but as explained in a recent issue of Palisades Financial’s “Sentinel,” they don’t always work as planned. An incentive trust can be a beautiful tool. Using it you can specify certain benchmarks to be accomplished before the trust can be unlocked. For example, you could specify that your child must graduate from college, get a full-time job, and maybe even become a philanthropist before some or all of the trust funds can be paid out. Alternatively, it can be arranged that the trust pays out to match the beneficiary’s annual income, thus offering the incentive to work harder. The problem is that rigid incentives may defeat your purpose. Some beneficiaries may not learn the intended lessons, but instead learn how to “game the system” and work around the benchmarks either by technically meeting the requirements but not the lessons … or even forge diplomas and pay-stubs to sneak their way in. More worrisome, however, is the beneficiary who does become that “good person” you hoped for, but fails to meet the rigid benchmarks of the trust. If the trust is too rigid, it may not instill the values you had hoped, but instead force a predetermined life-plan upon the beneficiary. The key to a successful incentive trust is a keen awareness of this problem. Sometimes, the same spirit can be better utilized within a results-oriented trust. These are a less intrusive arrangement without set benchmarks, but rather with guidelines to be pursued, a mission statement to be upheld, and the solid judgments of a trustee to carry out the spirit of the trust. The down side, of course, is that this is a more lax approach that may be easier to undermine. It is a difficult line to walk, but if you have come to appreciate the power of using your assets to instill good values then you also appreciate the importance of striking the proper balance. Your best course may be to consult competent counsel and share your unique situation and your goals, and then work together to design a plan with the greatest chance of success for you and your family.

Reference: Shomari Hearn, CFP®, EA. Sentinel. Palisade Hudson Financial Group LLC. (June 17, 2011)  “Do Incentive Trusts Encourage Responsibility?”

ELDER LAW / HOSPICE

Hospice care can provide a great benefit to many families and their dying loved ones, and Medicare has been generally praised for its support through reimbursements to providers over the past 28 years. However, according to a recent article by Kaiser Health News and The New York Times, there is growing concern now about misuse of the program by for-profit hospice providers. Hospice care is intended to provide dying patients with palliative care in their own homes, or in a hospice facility or nursing home. But, as hospice has moved into the mainstream, concerns about excessive costs and misuse have mounted. A primary concern is that Medicare’s flat-fee payment system encourages hospices to seek out patients likely to live much longer than the six month time period for which hospice was originally intended. Medicare pays a flat fee ranging from $147 to $856 a day, depending on the level of care, whether a hospice actually provides services or not. For-profit hospices in particular tend to have longer-staying patients. "The financial incentives do in fact dictate behavior," said Eugene Goldenberg, a research analyst for BB&T Capital Markets who follows the hospice industry. "It's a lucrative business, at least under the current reimbursement system." In response, Medicare has adopted a restriction: It won’t pay for hospice beyond six months unless a physician or nurse practitioner visits the patient and attests that his or her condition is still terminal. But this requirement, part of the health care law passed last year, has provoked a backlash from hospice providers who say that sending a doctor or nurse practitioner out to see every patient at the six-month mark is too expensive. But given the financial and political pressures facing Medicare, government officials are concerned that hospice care may be misused. The inspector general of the Department of Health and Human Services looked at one fast-growing segment — hospice patients in nursing homes — and found hospices routinely failed to document that those patients belonged in a hospice or that they were getting the care to which they were entitled. If you or a loved one is considering hospice care, be sure to thoroughly investigate the care provider before making a commitment. Perhaps the most chilling aspect of these findings is not that people are using a hospice benefit for too long – but that they may be enrolling too soon …perhaps before giving other, more aggressive medical procedures a chance to work .

Reference: The Kaiser Health News (June 27, 2011) “Growing Hospice Care Costs Bring Concerns About Misuse”

SMALL BUSINESS / PATENT LAW

Depending on who you follow, Congress has either delivered a great gift to entrepreneurs and inventors, or shackled them with a terrible handicap: the House last week passed legislation to overhaul the U.S. patent system for the first time in 60 years, making the effort one step away from being put before President Obama’s executive pen. As reported by The Wall Street Journal, the House managed a bipartisan maneuver with more than two-thirds of lawmakers from each party supporting the “America Invents Act,” passing it on a 304-117 vote. The overhaul essentially breaks down into two big changes. Firstly, it revises the way that the patent office handles its funding and fees. Under the new law, since the office supports itself on the basis of its fees, it therefore gets to keep all of its fees as budget, rather than have them siphoned off by Congress (note here that as much as $800 million has been diverted to other programs over the past 20 years.) The hope is that the money will help clean up the staggering backlog of some 700,000 applications. The second change, of greater importance to the small business owner and entrepreneur, is the move from a “first-to-invent” system to “first-to-file.” Here is the blessing and the curse. If your patent is challenged, proving that you were the first to invent can involve drawn-out and expensive legal battles. For the up-and-coming inventor whose very business might rely on that patent, the legal squabble is often too much for them, where a conglomerate can absorb the drain with ease in a battle of attrition. Of course, on the other side of things that legal battle is often the only tool the entrepreneur/inventor has; it is his sling to wield against Goliath. What happens when big business can simply move quicker with an entrepreneur’s ideas? The Senate has passed a similar bill and so the final matter at hand is to reconcile the two before passing it up to the Executive branch. President Obama has already pledged his support for overhaul.

Reference:  The Wall Street Journal Online (June 24, 2011) “Patent-Overhaul Bill Clears House”

ESTATE PLANNING / GRATs

July offers a GRAT opportunity to make some strategic estate planning moves. The IRS just published the applicable federal rates (AFR) for July: • Section 7520 Interest Rate: 2.4% • Applicable Federal Mid-term, Annual Rate: 2.0% These rates continue to slide, and are set now at historical lows. These low rates make certain estate planning opportunities much more attractive, to include: • loans to family members • installment sales to grantor trusts • grantor retained annuity trusts (GRATs) and • charitable lead annuity trusts (CLATs). A recent article in Forbes focuses primarily on the GRAT opportunity for savvy planners. As Forbes writes, GRATs are particularly attractive now, with low AFRs, under-valued assets (particularly real estate) and the ability to create a GRAT with a term as short as three years. Here’s why the low rates make GRATs such a good deal. The idea with a GRAT is to transfer an appreciating asset into a trust for a set number of years, say three years. After the three years, any appreciation over the applicable federal rate goes to your heirs, free of estate and gift tax. So, if you own rapidly appreciating assets, particularly if they are currently under-valued, and you anticipate the three-year appreciation to exceed the low AFR, then this strategy could result in some GRAT tax savings.

Reference: Forbes (June 28, 2011) “A GRAT Opportunity: Taking Advantage of Low July 2011 AFRs”

ESTATE PLANNING / REAL ESTATE GIFTING

The economy is starting to show some life in a number of sectors but, unfortunately for many, the housing market is not one of them. The good news for the crafty estate planner is that the poor housing market coupled with the tax laws that went into effect with last December’s compromise offer a rather unique opportunity, one that may very well rate amongst the smartest estate planning moves one will ever make, according to Forbes columnist Rob Clarfeld. Now might be time to give away the house. The poor housing market remains perhaps the largest unhealed wound of the Great Recession. If you are trying to sell a home right now you are likely a bit frustrated. Homes are not moving quickly, and many sellers are forced to take a relative loss just to move their property. But, if you were considering making a gift of your home, the situation is entirely more cheerful. Depressed prices mean that you won’t have to work to reduce your home’s taxable value, and the gift you make of it will take a much smaller chunk of your lifetime gift tax exemption. This is a serious boon to high net-worth individuals looking to give away property of considerable value. But wait, there’s more. The tax compromise signed in with the budget deal last December also extends the lifetime gift allowance from $1 million up to a generous $5 million. So, right now, there is an 18-month window of opportunity for you to make a tax-advantaged gift. Previously, when one wanted to give away real estate the strategy of choice might have been a Qualified Personal Residence Trust (QPRT) because it allowed for considerable discounts given certain risks through a gradual transfer, but with this perfect storm of depressed real estate prices and a generous gift tax exemption – an outright gift in trust may make more sense. Further, if you want to retain post-gift use of the real estate, you may want to consider transferring the home to an Intentionally Defective Grantor Trust (IDGT), with a structured plan that allows you to remove the asset (in this case your home) from your estate for estate and gift tax purposes, but not for income tax purposes. . Of course, carefully crafting the trust provisions, including dispositive and potential generation skipping provisions, is of utmost importance. Again, this window of opportunity could close at any time, so if this is an estate planning strategy you might consider, you are well-advised to discuss your situation with professional counsel sooner rather than later.

 Reference: Forbes (June 22, 2011) “Your Smartest Estate Planning Move Ever: Give Away Your House—Now!”

SPECIAL NEEDS TRUSTS

Here is a summary of a great article from Forbes.  http://www.forbes.com/2010/06/10/estate-planning-special-needs-children-personal-finance-bernard-krooks.html?boxes=Homepagechannels

Providing for children in an estate plan is not a simple task. For parents of children with special needs, the concerns and difficulties are magnified since, in many cases, the child will not be able to care for himself after the parents pass away. With recent advances in modern medicine, people with disabilities are living longer; meaning aging parents need to address this issue. However, since estate planning involves facing many difficult issues, many parents put it off--especially when they are already stretched thin navigating the special needs maze, obtaining services for and caring for their child. There is more to estate planning--particularly when special needs children are involved--than signing some documents and putting them in a strong box or filing cabinet, never to be found again. As a general rule, we should keep our estate planning documents in a safe place that is readily accessible in the event they are needed. Parents of children with special needs should also use a binder that contains all the information that future caregivers will need to carry on after the parents are gone. The information in the binder should be updated periodically to reflect changes in family circumstances, changes in the needs or desires of your child, and other issues that may assist your child's future caregivers in carrying out their duties. Here are 10 things to put in that binder:

Article 1. Important legal papers for any children with special needs (for example, birth certificates, Social Security cards and health-insurance cards).

 2. A "Letter of Intent," which parents should update at least once per year. This is a nonbinding document that passes vital information about a person with a disability to future caregivers. It can include such things as your child's sleeping preferences, eating habits and other important aspects of your child's daily routine. While these items may be second nature to you, it is important not to take them for granted. After all, in many cases the future caregivers assume their role in caring for your child without having actually walked a single day in your shoes.

 3. Written instructions spelling out any wishes regarding final arrangements (burial, cremation or religious services or other ceremonies that may be desired).

 4. Your own advance health care and financial directives such as powers of attorney, living wills and health care proxies. By having these documents in a binder that can be accessed when needed, you can save your family the heartache and expense of a guardianship proceeding should you yourself become incapacitated. This is important for any family, but if you have special needs children it is crucial; the last thing you want is confusion over your own wishes to distract from the needs of your child. Related Stories States and Patients Face Cuts in Federal Medicaid Backing and Services

5. Copies of any trusts--special needs trusts, living trusts, or insurance trusts--that may have been prepared. Remember, signed copies or originals may be needed to complete property transfers. Thus, you should also provide Information about where the original documents are kept, whether that's at an attorney's office or in a safety deposit box.

 6. A list of major assets and information about where they are kept (for example, a list of insurance policies, stocks, mutual funds, bank accounts, with policy and account numbers and the names of any brokers, insurance agents and investment advisors).

 7. Guardianship papers for your special needs child, if any, and a list of advocacy organizations that may be helpful. Also, write down any personal reflections or thoughts you may have about these organizations.

TRUSTS / INCENTIVE V. RESULTS-ORIENTED

There is an old saying, quite true, that wealth is difficult to amass but easy to squander … especially by those who did not earn it. Many parents – and grandparents – come to us asking how they can leave an inheritance to their loved ones, without “spoiling” them. They want the fruit of their labors – the wealth they pass on – to inspire their loved ones to greater causes, and not cause that dread disease known as “affluenza.” Incentive trusts offer an opportunity to try and nudge younger generations to solid values, but as explained in a recent issue of Palisades Financial’s “Sentinel,” they don’t always work as planned. An incentive trust can be a beautiful tool. Using it you can specify certain benchmarks to be accomplished before the trust can be unlocked. For example, you could specify that your child must graduate from college, get a full-time job, and maybe even become a philanthropist before some or all of the trust funds can be paid out. Alternatively, it can be arranged that the trust pays out to match the beneficiary’s annual income, thus offering the incentive to work harder. The problem is that rigid incentives may defeat your purpose. Some beneficiaries may not learn the intended lessons, but instead learn how to “game the system” and work around the benchmarks either by technically meeting the requirements but not the lessons … or even forge diplomas and pay-stubs to sneak their way in. More worrisome, however, is the beneficiary who does become that “good person” you hoped for, but fails to meet the rigid benchmarks of the trust. If the trust is too rigid, it may not instill the values you had hoped, but instead force a predetermined life-plan upon the beneficiary. The key to a successful incentive trust is a keen awareness of this problem. Sometimes, the same spirit can be better utilized within a results-oriented trust. These are a less intrusive arrangement without set benchmarks, but rather with guidelines to be pursued, a mission statement to be upheld, and the solid judgments of a trustee to carry out the spirit of the trust. The down side, of course, is that this is a more lax approach that may be easier to undermine. It is a difficult line to walk, but if you have come to appreciate the power of using your assets to instill good values then you also appreciate the importance of striking the proper balance. Your best course may be to consult competent counsel and share your unique situation and your goals, and then work together to design a plan with the greatest chance of success for you and your family. Reference: Shomari Hearn, CFP®, EA. Sentinel. Palisade Hudson Financial Group LLC. (June 17, 2011) “Do Incentive Trusts Encourage Responsibility?”

ELDER LAW / HOSPICE

Hospice care can provide a great benefit to many families and their dying loved ones, and Medicare has been generally praised for its support through reimbursements to providers over the past 28 years. However, according to a recent article by Kaiser Health News and The New York Times, there is growing concern now about misuse of the program by for-profit hospice providers. Hospice care is intended to provide dying patients with palliative care in their own homes, or in a hospice facility or nursing home. But, as hospice has moved into the mainstream, concerns about excessive costs and misuse have mounted. A primary concern is that Medicare’s flat-fee payment system encourages hospices to seek out patients likely to live much longer than the six month time period for which hospice was originally intended. Medicare pays a flat fee ranging from $147 to $856 a day, depending on the level of care, whether a hospice actually provides services or not. For-profit hospices in particular tend to have longer-staying patients. "The financial incentives do in fact dictate behavior," said Eugene Goldenberg, a research analyst for BB&T Capital Markets who follows the hospice industry. "It's a lucrative business, at least under the current reimbursement system." In response, Medicare has adopted a restriction: It won’t pay for hospice beyond six months unless a physician or nurse practitioner visits the patient and attests that his or her condition is still terminal. But this requirement, part of the health care law passed last year, has provoked a backlash from hospice providers who say that sending a doctor or nurse practitioner out to see every patient at the six-month mark is too expensive. But given the financial and political pressures facing Medicare, government officials are concerned that hospice care may be misused. The inspector general of the Department of Health and Human Services looked at one fast-growing segment — hospice patients in nursing homes — and found hospices routinely failed to document that those patients belonged in a hospice or that they were getting the care to which they were entitled. If you or a loved one is considering hospice care, be sure to thoroughly investigate the care provider before making a commitment. Perhaps the most chilling aspect of these findings is not that people are using a hospice benefit for too long – but that they may be enrolling too soon …perhaps before giving other, more aggressive medical procedures a chance to work.

 

SMALL BUSINESS / PATENT LAW

Depending on who you follow, Congress has either delivered a great gift to entrepreneurs and inventors, or shackled them with a terrible handicap: the House last week passed legislation to overhaul the U.S. patent system for the first time in 60 years, making the effort one step away from being put before President Obama’s executive pen.

As reported by The Wall Street Journal, the House managed a bipartisan maneuver with more than two-thirds of lawmakers from each party supporting the “America Invents Act,” passing it on a 304-117 vote. The overhaul essentially breaks down into two big changes. Firstly, it revises the way that the patent office handles its funding and fees. Under the new law, since the office supports itself on the basis of its fees, it therefore gets to keep all of its fees as budget, rather than have them siphoned off by Congress (note here that as much as $800 million has been diverted to other programs over the past 20 years.) The hope is that the money will help clean up the staggering backlog of some 700,000 applications.

The second change, of greater importance to the small business owner and entrepreneur, is the move from a “first-to-invent” system to “first-to-file.” Here is the blessing and the curse. If your patent is challenged, proving that you were the first to invent can involve drawn-out and expensive legal battles. For the up-and-coming inventor whose very business might rely on that patent, the legal squabble is often too much for them, where a conglomerate can absorb the drain with ease in a battle of attrition. Of course, on the other side of things that legal battle is often the only tool the entrepreneur/inventor has; it is his sling to wield against Goliath.  What happens when big business can simply move quicker with an entrepreneur’s ideas?

The Senate has passed a similar bill and so the final matter at hand is to reconcile the two before passing it up to the Executive branch. President Obama has already pledged his support for overhaul.

Reference:  The Wall Street Journal Online (June 24, 2011) “Patent-Overhaul Bill Clears House

ESTATE PLANNING / GRATs

July offers a GRAT opportunity to make some strategic estate planning moves. The IRS just published the applicable federal rates (AFR) for July: • Section 7520 Interest Rate: 2.4% • Applicable Federal Mid-term, Annual Rate: 2.0% These rates continue to slide, and are set now at historical lows. These low rates make certain estate planning opportunities much more attractive, to include: • loans to family members • installment sales to grantor trusts • grantor retained annuity trusts (GRATs) and • charitable lead annuity trusts (CLATs). A recent article in Forbes focuses primarily on the GRAT opportunity for savvy planners. As Forbes writes, GRATs are particularly attractive now, with low AFRs, under-valued assets (particularly real estate) and the ability to create a GRAT with a term as short as three years. Here’s why the low rates make GRATs such a good deal. The idea with a GRAT is to transfer an appreciating asset into a trust for a set number of years, say three years. After the three years, any appreciation over the applicable federal rate goes to your heirs, free of estate and gift tax. So, if you own rapidly appreciating assets, particularly if they are currently under-valued, and you anticipate the three-year appreciation to exceed the low AFR, then this strategy could result in some GRAT tax savings.

Reference: Forbes (June 28, 2011) “A GRAT Opportunity: Taking Advantage of Low July 2011 AFRs”

ESTATE PLANNING / REAL ESTATE GIFTING

The economy is starting to show some life in a number of sectors but, unfortunately for many, the housing market is not one of them. The good news for the crafty estate planner is that the poor housing market coupled with the tax laws that went into effect with last December’s compromise offer a rather unique opportunity, one that may very well rate amongst the smartest estate planning moves one will ever make, according to Forbes columnist Rob Clarfeld. Now might be time to give away the house. The poor housing market remains perhaps the largest unhealed wound of the Great Recession. If you are trying to sell a home right now you are likely a bit frustrated. Homes are not moving quickly, and many sellers are forced to take a relative loss just to move their property. But, if you were considering making a gift of your home, the situation is entirely more cheerful. Depressed prices mean that you won’t have to work to reduce your home’s taxable value, and the gift you make of it will take a much smaller chunk of your lifetime gift tax exemption. This is a serious boon to high net-worth individuals looking to give away property of considerable value. But wait, there’s more. The tax compromise signed in with the budget deal last December also extends the lifetime gift allowance from $1 million up to a generous $5 million. So, right now, there is an 18-month window of opportunity for you to make a tax-advantaged gift. Previously, when one wanted to give away real estate the strategy of choice might have been a Qualified Personal Residence Trust (QPRT) because it allowed for considerable discounts given certain risks through a gradual transfer, but with this perfect storm of depressed real estate prices and a generous gift tax exemption – an outright gift in trust may make more sense. Further, if you want to retain post-gift use of the real estate, you may want to consider transferring the home to an Intentionally Defective Grantor Trust (IDGT), with a structured plan that allows you to remove the asset (in this case your home) from your estate for estate and gift tax purposes, but not for income tax purposes. . Of course, carefully crafting the trust provisions, including dispositive and potential generation skipping provisions, is of utmost importance. Again, this window of opportunity could close at any time, so if this is an estate planning strategy you might consider, you are well-advised to discuss your situation with professional counsel sooner rather than later.

Reference: Forbes (June 22, 2011) “Your Smartest Estate Planning Move Ever: Give Away Your House—Now!