Michigan Estate Planning Blog

IRS Relaxes “Innocent Spouse” Relief Rules

Spouses filing taxes jointly make a very special commitment. Aside from being already committed to marriage, joint filing makes them jointly and severally liable for those taxes, or any problems. This can create a significant problem when one spouse runs afoul of the tax laws. Why? It can drag the other spouse into the matter, unless you can convince the IRS to grant “innocent spouse relief.” Luckily, what was once very tricky might now be much easier to achieve. An article from Forbes last month is worth a look, as it details how the IRS may have lowered the bar for innocent spouse relief. Essentially, a new memorandum from the IRS has issued a set of eight factors to weigh for the determination of the need for spousal relief. With these new criteria (such as “economic hardship” and “nonrequesting spouses legal obligation”) the playing field is that much more level for spouses dragged into a sticky situation. If you (or someone you know) want to know more, check out the original article which provides more details on what relief is available and how to obtain it.

Reference: Forbes (January 29, 2012) “IRS Lowers Bar for Innocent Spouse Relief”

Old Age Costs Rising

Are you planning for your old age or perhaps the old age of a loved one? If yes, then you know that such planning is all about getting a handle on healthcare. Unfortunately, the most recent study from MetLife indicates that the costs for long-term care and assisted living are rising at an even faster rate than in previous years despite the weak economy. According to the MetLife study: • The national average daily rate for a private room in a nursing home rose 4.4% from $229 in 2010 to $239 in 2011. • The national average monthly base rate in an assisted living community rose 5.6% from $3,293 in 2010 to $3,477 in 2011. • The national average daily rate for adult day services rose 4.5% from $67 in 2010 to $70 in 2011. • The national average hourly rates for home health aides ($21) and homemakers ($19) were unchanged from 2010. Businessweek offers some coverage of the development, along with the words of the director of the MetLife Mature Market Institute, Sandra Timmermann. According to Timmermann, “The state of the economy, combined with rising health-care and energy costs, are having a significant impact on long-term care rates.” Indeed, even though MetLife is the largest life insurer in the U.S., it also has discontinued its long-term care insurance policies for these very reasons. Likewise, the CLASS Act (the first public-option long-term care insurance) recently shut down. In the end, this is rather grim news for those planning for their old age or an elder loved one.

Reference:  Businessweek (October 26, 2011) “Long-Term Care Costs Rise at Faster Pace, Metlife Says”

Charitable Giving – A Family Affair

Financial skill is far from an inherited ability: it is learned. So, too, with charity. The drive to give (and the know-how to do so well) is often taught rather than genetic. A novel idea, then, is to begin the family charity tradition. During the recent holiday season, an article in Reuters addressed this matter. When it comes to charity, to include beginning a family charity tradition, there should be no “seasonal” limitation. In other words, there is no time like the present. Giving to charity, whether in modest gifts or in larger ones, can be a family activity and a lesson to your children with just a bit of foresight. For example, let your children choose where to give and, perhaps, teach them why you give as you do. Just as important as why you give, consider teaching your children “how” to give. How do you give efficiently or to effect the greatest gain? How do you understand the financial decisions that go into process in the first place? Of course, it’s bound to be a learning experience for you, too, and you might find that it’s a difficult one. For a bit of advice, check out the original article.

Reference: Reuters (December 23, 2011) “How to create a family charity tradition”

ELDER LAW

On the topic of disclosures, a reader inquired about what to do about her family of eight siblings and one elderly father. Long ago the siblings got together and put two of the sisters in charge of their father, largely because his will and other directives advised as much. As a result, they were granted power-of-attorney and access to his accounts. Now, the reader has discovered that they aren’t forthcoming with information about their father, his care, and his finances. The reader is worried that she won’t hear anything until there’s a demand for money to care for their elderly father, and, perhaps, that the original funds weren’t adequately used. The response of Craig Reaves is tailored to the reader’s unique situation, but his advice is applicable for many in this same or similar position. As a preliminary caveat, there are specific state laws (i.e., like those regarding “powers of attorney”) that govern the authority, responsibility and liability of agents and fiduciaries. Read Craig Reaves’ enlightening response in his original post.

Reference: The New York Times – The New Old Age Blog ( January 18, 2012) “Ask the Elder Law Attorney: Disclosures and Loans”

“Family” Is Key To Family Business Success

Legacy companies – those incredible companies that have lasted for generations within a family, some 100 to 150 years, and continue to grow – occupy a special place in the American imagination and even more so in the hearts of entrepreneurs. In fact, for most thinking people, there is a special appreciation for the care and planning necessary to start a company and keep it going for a short time, never mind for entire generations. Indeed, Legacy companies are a rare breed. Many family companies will simply never get there. Fortunately, there is heartening news in a recent study that suggests that the duration of a family company is not quite so important, for all its branding glory, as the duration of the family itself. As related in Family Business Magazine, the Family Firm Institute – a global association of researchers and advisers – has conducted a three year study: the “FFI/Goodman Longevity Study,” completed in 2010. By surveying some 500 senior family-firm executives they discovered that just 10.6 percent of family enterprises owned just one business. The average is actually closer to 3.4 businesses, with 21.3 percent controlling five or more businesses, and an average of 6.1 companies over a family history. What does all of this mean? Simply put, single companies are not the measure of enterprise, especially not in a family. The family itself is the asset and the drive that moves matters forward across time, generations, and changing markets. As you plan for your business - and for your family - this may be an essential thought to bear in mind, and one to foster in others. As noted in the original article: Families with a trans-generational orientation view the legacy company broadly rather than narrowly. Though they lovingly tell their children tales of the original business model and the town where it first took root, those aspects are just part of the family story. They place their emphasis on the founder’s entrepreneurial spirit, attention to the marketplace, flexibility and sense of stewardship. This perspective raises the odds that the family will prosper as an economic unit over many generations, no matter what form its wealth-creating entities take.

Reference: Family Business (November 2011) “Family Business Longevity Examined in a New Light”

Checking Out Charities

Giving charitably can be a tough thing. You want to make sure your money goes as far as it can. A lot of donors choose smaller charities with less overhead to help ensure their money is used as intended and to the fullest extent. However, if you’re thinking small, it’s worth ‘digging deeper’, and not just into your pockets. No, dig deep into the charity and make sure it is as you want it to be. The good thing about a large charity is that it’s fairly well established. For example, it has the power to complete its goals and likely it has a history that is readily examinable. The reason not to give to a big charity is that your money also will go towards funding all the bureaucracy and red-tape that have made the charity big in the first place. This can mean few dollars actually advance the charitable cause. Conversely, smaller charities can be more efficient, but may lack those same assurances, unless you’ve done your research. Depending on your charity of choice, the local history might indicate the effectiveness of the charity. As to its value, you always can check its progress against its mission statement. What are they trying to accomplish? Do they know? How do they do so? In addition, don’t be too bashful to ask “who’s in charge” and what they do with the donations? To help guide you through the process, try various services like the Charity Navigator ratings system, or GuideStar to determine how charities use their funds. In the end, giving to a smaller charity may be that much more rewarding, and with all your research you might end up giving your time, too. Indeed, work first-hand can be a good way of learning and for giving back as well. Heading into the Holiday season, with Thanksgiving at our doorstep and carolers not far behind, it’s as good a time as any to start your research and your charitable donations.

Reference: The Wall Street Journal (October 30, 2011) “Dig Deeper When Checking Out Smaller Charities”

Old Age Costs Rising

Are you planning for your old age or perhaps the old age of a loved one? If yes, then you know that such planning is all about getting a handle on healthcare. Unfortunately, the most recent study from MetLife indicates that the costs for long-term care and assisted living are rising at an even faster rate than in previous years despite the weak economy. According to the MetLife study: • The national average daily rate for a private room in a nursing home rose 4.4% from $229 in 2010 to $239 in 2011. • The national average monthly base rate in an assisted living community rose 5.6% from $3,293 in 2010 to $3,477 in 2011. • The national average daily rate for adult day services rose 4.5% from $67 in 2010 to $70 in 2011. • The national average hourly rates for home health aides ($21) and homemakers ($19) were unchanged from 2010. Businessweek offers some coverage of the development, along with the words of the director of the MetLife Mature Market Institute, Sandra Timmermann. According to Timmermann, “The state of the economy, combined with rising health-care and energy costs, are having a significant impact on long-term care rates.” Indeed, even though MetLife is the largest life insurer in the U.S., it also has discontinued its long-term care insurance policies for these very reasons. Likewise, the CLASS Act (the first public-option long-term care insurance) recently shut down. In the end, this is rather grim news for those planning for their old age or an elder loved one.

Reference:  Businessweek (October 26, 2011) “Long-Term Care Costs Rise at Faster Pace, Metlife Says”