Changes to Social Security in 2020

social security 2.jpg

The year 2020 will bring important changes to the Social Security program, including a 1.6 percent Social Security benefit increase and an increased annual earnings cap for the Old Age, Survivors and Disability Insurance (OASDI) tax, which is a component of the Federal Insurance Contributions Act (FICA) tax.  Beginning in 2020, the maximum annual amount of earnings subject to the OASDI will increase to $137,700 from the current limit of $132,900 applicable in 2019.

Also beginning in 2020, the maximum retirement earnings test exempt amounts will be $18,240 annually (or approximately $1,520 monthly) for individuals under full retirement age.  That means that for every two dollars earned in excess of that limit, one dollar in Social Security benefits will be withheld.

In addition, starting in 2020, the SSI federal payment standard will increase to $783 monthly for an individual and to $1,175 per couple. Here is a helpful fact sheet summarizing these and other important 2020 Social Security numbers.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Minimizing Elder Financial Abuse

Sad senior woman after quarrel

It seems like every month, there is a news broadcast of a new form of elder financial abuse.  Statistically, it is very prevalent, especially among individuals with dementia who are residing alone in the community.

Unfortunately, elder financial abuse comes in many forms. One version is where a trusted advisor, family member or caregiver with whom the senior has a relationship takes the senior to an attorney to execute a new Last Will and Testament, changing the existing estate plan in favor of the trusted individual.  These are difficult cases to enforce because by the time the fraud is discovered the victim is deceased.

Another variety of elder financial fraud is tech support fraud, where there is a pop up on the senior’s computer screen that routes the victim to a bogus website to input information. Someone calls the senior and asks the person to send in money for software that doesn’t exist. The perpetrator remotes into the computer and tells the senior to log into the bank account. Then the perpetrator minimizes the window and withdraws funds without permission from the senior’s account. Some con artists may pose as representatives of well-known industry giants such as Microsoft and Google.

There are romance scams where someone pretends to be in a relationship and convinces the senior to send money. There are lottery scams and prize scams where a senior is asked to pay money to get the winnings.  But the majority of elder financial abuse the SEC sees is theft.  These cases are hard to put together due to the challenges of gathering the evidence.

In many cases, the victims may not even realize they have been victimized, or they may have had a long term relationship with their trusted advisor or family member and just convincing the senior to speak with an investigator or another attorney is problematic.  It may be easier for seniors to talk about financial abuse by emphasizing that this also happens to younger people and to focus on protecting yourself. Reassure them that their fear of compromising their appearance of competency and independence if they complain will likely not materialize.  Do not hesitate to report the incidents to the authorities. This is an area of enforcement which the Securities Exchange Commission and other federal agencies are currently focusing on and there are a lot of resources at both the state and local levels.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Estate Administration in the Digital Era: Digital Assets, Cryptocurrency and More

Digital Assets and Cryptocurrency

The probate proceedings for the estate of the late musical artist, Prince Rogers Nelson, have been repeatedly profiled in the national news for a variety of reasons. Here are some digital age strategies for dealing with cutting-edge estate administration issues, including identifying heirs, working with digital assets and block chain technology, and administering estate assets in specialized industries.

  1. Genetic testing can determine the rightful heirs. If parentage may become an issue, obtain an order authorizing DNA testing of the decedent’s blood sample as soon as possible after death. Obtain a court order for genetic testing of purported heirs early on in the proceedings.
  1. Identify, catalogue, disclose and value digital assets. Digital assets include a wide variety of electronic files and works. Some examples are digital accounts (i.e., social media, e-mail and online commercial accounts such as Etsy and Amazon), video and audio files and electronically stored media (such as photographs, art, music, and original works and blogs), knowledge stored in electronic databases or formats (i.e., software and architectural plans). Cryptocurrencies (Bitcoin) and block-chain technologies are also digital assets. Some forms of digital assets are more easily monetized than others. Digital assets are regarded as personal property by the taxing authorities and as such, must be clearly identified and properly valued on death tax returns. See I.R.S. Notice 2014-21. In some cases, discounts for lack of marketability may be appropriate. Initial coin offerings (ICO’s) may be subject to registration requirements under the Securities Exchange Act of 1933.
  1. Hire experts for specialized industries. Prince’s estate held a wide range of intellectual property. The personal representative faced unique business challenges, such as operating multiple entertainment businesses, overseeing a real estate portfolio and a museum, archiving a vast quantity of audio and video assets, and safeguarding personal property. The use of entertainment and other industry experts was needed to help monetize the estate’s assets.
  2. File any confidential information disclosed to the court under seal. Consider whether to file sensitive information under seal. Sensitive matters could range from business and licensing negotiations and confidential litigation settlements to details relating to parentage.

Questions? Contact Jane.

Jane Fearn ZimmerJane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA. You can contact Jane by phone at 856.661.2283 or by emailing jane.zimmer@flastergreenberg.com.

Choupette’s Legacy – Why Estate Planning Matters

Choupette royalIt is speculated that Choupette Lagerfeld, the pampered Parisian pet of the iconic late German fashion designer, Karl Lagerfeld, may have a stake in Lagerfeld’s vast fortune.

Choupette Lagerfeld moves in the circles of the rich and famous. Ironically, her most universal legacy could be to demonstrate why estate planning matters for everyone, wealthy or not.

Choupette’s situation makes clear that a clever estate plan can transform the impossible into the possible.  With an estate plan opting into German law (which, on information and belief, may allow the use of pet trusts), even a cat living in France (the law of which apparently prohibits an animal from inheriting) can become an heir.

If Karl Lagerfeld died without any estate plan, and if Choupette had not already amassed a fortune of her own through social media and advertising, she could descend rapidly into a downward spiral from riches to rags by taking nothing from her master’s estate.

An estate plan enables anyone with property (whether a fortune or a modest estate), to literally reach back from the grave, provide for loved ones (including pets) and retain some residual control over those left behind.

An estate plan can protect an unmarried, unrelated cohabitant by allowing her to remain in your home after your death, with any inheritance tax liability paid from life insurance or liquid funds in your residuary estate.

An estate plan can protect an inheritance for a special needs child without disqualifying the child from Medicaid or Supplemental Security Income.

An estate plan can ensure that the life savings you worked hard to accumulate (and your personal affairs) will be kept private by avoiding probate with a revocable trust.

An estate plan incorporating an irrevocable trust or lifetime gifting can help reduce inheritance taxes legally.

An estate plan (using a trust) can protect your life savings or your life insurance proceeds from being blown by little Johnny on a Maserati, upon reaching age 18. An estate plan can even bring hope to beleaguered parents and grandparents everywhere.  Suppose your heart’s sole desire is for little Susie or Johnny to take medication/ finish college/ remove the tattoos/get a haircut and get a real job. Having all your post-mortem dreams ultimately come true could be as simple as leaving a conditional bequest in your last will and testament or trust. However, conditional gifts are very rarely written into wills or trusts due to the heartache and hard feelings caused.

Choupette’s legacy teaches us that even if your estate is limited, the possibilities are not.  For best results, consult an experienced and knowledgeable tax and estate planning attorney, who can help you effectuate your testamentary intentions.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Medicaid Planning In Incapacity: Brennan and Dale’s Excellent Adventures

Medicaid Planning In Incapacity

Medicaid is a joint federal and state program that provides funding for medical and long-term care to individuals with very low income and assets. Generally, a single individual cannot qualify for Medicaid unless her assets are less than $2,000 and she has gross monthly income below the sum of $2,313 (or if she does not, she uses a Miller Trust or a Qualified Income Trust correctly).  Where only one member of a married couple is applying for Medicaid, the healthy spouse may be able to retain up to the sum of $126,420 in 2019. Greater savings may be feasible with Medicaid planning.

Certain strategies can help you legally avoid unnecessary tax liability, avoid Medicaid liens and protect your assets, while facilitating eligibility for Medicaid and other means-tested public benefits.  Asset protection planning can preserve funds to pay for the “extras” that Medicaid cannot pay for, ensuring your loved one a measure of dignity and comfort. It can also protect the family home and even preserve a legacy for the children.

Planning strategies can include deeds, outright gifts, gifts in trust, and the purchase of Medicaid compliant annuities.  If the individual is able to enter into a legal and binding contract, execute a legal document and make decisions, public benefits planning can be done by the individual.  If this is no longer possible, the next option would be to plan through an existing general durable power of attorney.

But what if there is no power of attorney, or the existing power of attorney cannot be used?  Suppose step-brothers Brennan and Dale cannot get along but their parents, Nancy and Robert, named them as their decision-makers on their respective general durable powers of attorney, and the documents require Brennan and Dale to act jointly?  If Nancy and Robert are now incapacitated, using the power of attorney is not a viable option.  Nor will it be, if both Brennan and Dale refuse to serve and there is no other agent.  In this situation, Nancy and Robert could still benefit from Medicaid and tax planning through a guardianship.

The courts of New Jersey and many other states recognize that as incapacitated individuals, people like Nancy and Robert still have the right to restructure their finances through lawful tax and Medicaid planning as if they were able to act independently.  Once certain factors are established, a court is authorized to approve tax and Medicaid planning in the best interests of the incapacitated individual.  In these situations, asset protection planning may be accomplished through a guardianship.

An experienced and knowledgeable elder law attorney can help you determine whether your loved one needs tax or asset protection planning, and if so, when that planning can be authorized and carried out through a guardianship.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Medicaid Estate Recovery and the Home

Jane Fearn-Zimmer explains Medicaid Estate Recovery and the Home

MLTSS Medicaid pays for long term care for individuals with low income (below $2,313 gross monthly in 2019) and low assets.

Post-mortem (after death) Medicaid liens protect the fiscal integrity of the MLTSS Medicaid program by attaching to property held by a Medicaid enrollee at death. In most cases, such Medicaid liens are imposed upon property held by a former Medicaid enrollee to recoup the cost of care and services provided to the enrollee after reaching the age of 55. After the death of the Medicaid beneficiary, the Medicaid estate recovery program collects on the Medicaid liens, with the lien proceeds being paid to the government.

In most cases, Medicaid liens attach only to property in which the Medicaid enrollee held an interest at the moment immediately before death. If the Medicaid enrollee retained no interest just before death, there is nothing subject to a Medicaid lien.

An important planning strategy is to remove the name of the future MLTSS Medicaid recipient from the title to valuable property, such as a home. If the future Medicaid recipient is married, often this property can be transferred to the healthy spouse without any Medicaid penalty period, even during the five year Medicaid look back period.

If the future Medicaid enrollee’s name is not removed from the property at the correct time, a Medicaid lien on real property can cloud title, accelerate a mortgage, and potentially place the property in foreclosure.  Even if the mortgage is not accelerated, the Medicaid lien must be paid before the real property can be sold, given away or refinanced.  Consequently, that is one reason why you should only trust your Medicaid application to an experienced Medicaid attorney, who can determine the best strategy to avoid a Medicaid lien.

Every case is different.  Irrevocable trusts will be suitable for some clients; others may be able to transfer the home without incurring a Medicaid penalty period, where there is a blind or disabled child, a sibling with an equity interest in the home, or, less frequently, to a caregiver child.  There are also some limited exceptions to Medicaid estate recovery.

The good news is that an experienced and knowledgeable elder law attorney can explain how to protect your home and your life savings, even if your loved one is already in long-term care.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Estate Planning Check Up and the New Tax Laws

Estate planning tax reform

The Tax Cuts and Jobs Act of 2017 enacted the most sweeping changes to the federal tax code since 1986. Many people assume that due to the increase in the basic exclusion amount (BEA) to $11,180,000 per individual, only the wealthiest need now estate planning. That is just not true!

Certainly, many fewer federal estate tax returns will be required to be filed. However, it is still important to periodically review your documents and your estate plan.  Most clients should review their existing wills and trusts. Particularly where a formula bequest was incorporated, the estate plan must be reviewed to ensure consistency with the client’s legacy goals.  This is due to the increase of the BEA.  The BEA functions like a sponge to limit or prevent a decedent from any federal estate tax liability at death. The BEA soaks up the decedent’s aggregated lifetime gifts and the assets remaining in the decedent’s estate at the moment of death, allowing the donor’s wealth up to the BEA limit to be transferred free of federal estate and gift taxes. Beyond the BEA, the estate will incur federal estate transfer tax liability. When the BEA was significantly lower, it was very common for estate planners to draft formula bequests, which allocated all of the decedent’s assets up to the decedent’s basic exclusion amount, to a “credit shelter trust” for the benefit of the surviving spouse and/or the descendants of the decedent. The remaining assets would pass outright to or in trust for the surviving spouse. With the doubling of the BEA and with credit shelter trusts which do not name the surviving spouse as a trust beneficiary, those estate plans will now disinherit the surviving spouse, and the surviving spouse will then be entitled to a one-third elective share of the decedent’s augmented estate in New Jersey.  The solution is to update the estate planning now, possibly with a disclaimer formula.  The new law sunsets on December 31, 2025.

At least until the new law sunsets, under the current regime, family limited partnerships remain a viable planning strategy, with the possibility of discounts for lack of marketability and lack of control. Trusts will continue to be useful for non-tax reasons, including privacy by avoiding the probate process, creditor protection, curbing spendthrift children, centralizing asset management, fostering family harmony through controlled asset disposition, and preserving a fund for a special needs beneficiary while protecting the beneficiary’s Medicaid and SSI eligibility.

Questions? Let Jane know.