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2021 TAX PLANNING WITHOUT A CRYSTAL BALL

Now that Joe Biden has been sworn in as President and a 50/50 split in the Senate with the Democrats holding the tying vote, many of my clients are concerned about future adverse tax legislation.  The most mentioned tax legislation proposed by President Biden includes the reduction of the current estate tax exemption of $11,580.00 to $5,000,000, an increase of the capital gain rate which will tax long-term capital gains at higher rates than ordinary income rates for high income tax filers, and the elimination of the stepped-up tax basis rules that apply to certain property received from a decedent[1].  Many high income and high net worth individuals will be adversely impacted if any of these tax proposals are enacted into law.

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124 Hits

Behavioral Health-Related Advance Directives

Also known as Psychiatric Advance Directive or PAD

Families have historically struggled to provide assistance to a family member with severe mental health behavioral problems such as paranoid schizophrenia , bi polar disorder or any other mental health issue typically requiring medication to manage .Most family members with these diagnoses can be effectively treated with proper medication.  Unfortunately, many individuals stop taking their medications for a variety of reasons and can become suicidal, homeless, violent or incarcerated.  Families are left with few legal options to provide assistance to obtain medical treatment for their loved one.

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154 Hits

Be Alert to Covid-19 Scams

The following article is authored by Rebeca Kueny and published by Special Needs Alliance. Please follow the link below for information about spotting and avoiding COVID-19 scams. 

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334 Hits

Bradley J Frigon Quoted in True Link Financial Blog - Why the New SECURE Act Is Good News For Children with Disabilities

Bradley J. Frigon was recently quoted in a blog about the new SECURE act and it's effect on Children with Disabilities. The blog covers the SECURE act and how it improves upon the old "Kiddie" tax that hurt children with disabilities. The blog also includes information about the IRA stretch provision and how to take advantage of it. Please visit the link below the read the full text:

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952 Hits

End of Life Options Act - How It Works and How We Can Help

From first hand experience I can attest to the merits of the End of Life Options Act aka Medical Aid in Dying (MAID). It is a workable process to exercise your end of life right should you choose to.  You don’t have to agree with it, you don’t have to ever consider exercising it but for those that do the Act has processes and procedures that guard against misuse and abuse.

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1925 Hits

Trust Protector

A trust created by a family may go on for several generations. What makes sense now or how the trust is structured may not make sense for the next generation. There can be many events that require a trust to be modified after the original creators pass away. Changes in the law, change in circumstances, change in family structure, technology changes, etc., all of these events can make a trust less effective than originally contemplated.  This is especially true for a family with a special needs member.

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1858 Hits

Sandstead-Corona v. Sandstead

Every once in a while, I make a point to report on an important court decision that has a significant impact on estate and trust planning.  In the spring of 2018, the Colorado Supreme Court made such a decision in a case by the name of Sandstead-Corona v. Sandstead (“Sandstead”). The ruling by the Court greatly expanded a probate court’s jurisdiction or control over property that would normally pass outside of probate such as joint tenancy accounts, payable on death accounts and other property or accounts with a specific beneficiary designation.  Prior to Sandstead, it was very clear that a joint account, payable on death account, or a beneficiary designation passed outside of probate and the terms of the Will and went directly to the surviving joint tenant or designated beneficiary.

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2351 Hits

The Special Needs Trust Fairness Act Passes!

What does it mean?
Until the passage of this Act, a special needs trust could not be established by the disabled beneficiary themselves. Someone other than the disabled person had to establish the trust: the assumption being that a disabled individual lacked the mental ability to establish a trust for their own benefit. Obviously, a glaringly incorrect assumption about individuals with disabilities. During my NAELA (National Academy of Elder Law Attorneys) presidency, and right up to the passage of the Act – NAELA has been instrumental in keeping this legislation in the forefront of necessary and important special needs change. We celebrate the Special Needs Trust Fairness Act today.
Click here to see a brief description of the Act.

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3521 Hits

Beneficiary forms v. Wills

Tim Turner worked with his financial advisors and attorneys to make sure his children received the balance of his retirement funds when he died. Tim died of old age in 2008.

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4532 Hits

Brad is quoted in the Wall Street Journal

Click here to read the Wall Street Journal article "When the Power of Attorney Lacks Power" dated June 13, 2016.

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3514 Hits

How Does the Medicaid Look-Back Period Work?

One area that causes a lot of confusion with regard to Medicaid is the look-back period.

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4045 Hits

Nursing Home Admission Contracts

Moving a family member to a nursing home is never a simple process. Finding the right facility, coordinating the move, managing a very sick family member and dealing with all of your emotions will easily overwhelm most of us. To make matters more difficult, the nursing home is asking you to sign a very complicated admissions agreement. Here is what you need to know before you sign.

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6049 Hits

The Colorado Guardianship Process

Why do I need a Guardianship?

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2810 Hits

A Case Study

A few months ago, I met with a family with the following set of circumstances; Sue, the mother, has cancer; Jim, the father, is employed; one son, Steve, is 17 with autism in addition to other special needs who does not receive public benefits; the other son, Bruce, is a college graduate and works in a neighboring town. Sue’s father recently died and left Steve $45,000 worth of bank stock. There are a variety of issues that must be addressed with this family.

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3008 Hits

Income taxation of First Party Special Needs Trust. Why I do not believe Section 674(c) applies to First party Special Needs Trust.

A reversion is a power to reclaim possession or enjoyment of the trust property. If at the creation of the trust, the value of the reversion exceeds 5% of the value of the trust portion to which the reversion relates, the grantor is treated as the owner of that portion of the trust. To determine whether the value of the reversion exceeds the 5% threshold, the value of the reversion is compared to the value of the transferred property, including those interests not dependent upon surviving the grantor. The reversion test is met whether the grantor retained a reversion that is expressly stated in the document or occurs by operation of law.

Section 673 provides as follows:

“The grantor will be treated as the owner of a trust or any portion of the trust in which the grantor has a reversionary interest in either the corpus or the income there from, if, as of the creation of the trust (or such portion), the value of such interest exceeds 5% of the value of the trust (or such portion).”

For § 673 to apply there must be a reversionary interest to the grantor. Actuarial rules under § 2031 are used to value the reversion. For example: T creates a trust for 50 years for A. After 50 years, the trust then terminates and reverts to the grantor T. If the applicable § 7520 interest rate is 1.4% at the time the trust is created, the value of the reversion is 49.9%. Since the value of the reversionary interest exceeds 5%, T would be treated as the grantor under § 673.

Section 673(c) is a valuation subsection to the general rule stated in 673(a). In other words, 673(c) does not create an additional category of rules to make a trust a grantor trust, it is an instruction on how the reversionary interest must be valued.

673(c) Special Rule For Determining Value Of Reversionary Interest
“For purposes of subsection (a), the value of the grantor's reversionary interest shall be determined by assuming the maximum exercise of discretion in favor of the grantor”

For example, a grantor funds a discretionary trust for the benefit of his children to last for 20 years. At the expiration of the 20 year period, the trust fund is to revert to the grantor. In determining whether the trust is a grantor trust under 673(a), the value of the grantors reversionary interest at the inception of the trust needs to be determined by assuming the maximum exercise of discretion in favor of the grantor. This means that in determining the value of the grantor’s reversionary interest, 673 (c) requires an assumption that no distributions are made to the grantor’s children during the trust’s 20 year term

A well drafted first party snt trust will require the trustee to exercise maximum discretion in favor of the beneficiary. The trust document must also provide that the grantor (beneficiary) cannot compel the trustee to make any distributions to or for the benefit of the grantor (beneficiary). If the document provided otherwise, it would not be a valid first party snt. The exercise of maximum discretion for the benefit of the grantor (beneficiary) is not a reversionary interest as contemplated under § 673(a). If there is no reversionary interest as defined in § 673(a), § 673(c) does not apply. Section 673(c) does not impose grantor tax status to a discretionary trust where no reversionary interest exists in the first place.

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2641 Hits

NAELA Commends House Passage of Older Americans Act Reauthorization Act

Click here to read the NAELA article entitled "NAELA Commends House Passage of Older Americans Act Reauthorization Act." 

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Protecting Assets from Long Term Care Costs

Douglas had to place his mother in a nursing home. Douglas consulted a social worker who told him that he should spend his mother’s assets down to below $2,000 and then, for a small fee, the social worker would prepare the Medicaid application for his mother and everything would be taken care of.

Douglas spent his mother’s assets below $2,000, paid the social worker $2,500 to prepare the Medicaid application and was told everything was good to go with his mother.

After about four months, Douglas had not heard anything on the status of the Medicaid application and the business office at the nursing home told him that his mother’s account was $35,000 past due. After a few frantic calls to the social worker, Douglas found out that his mother’s Medicaid application was rejected by the Medicaid office because of some prior gifts his mother had made to set up college funds for Douglas’ three children.

Because the Medicaid application was rejected, the nursing home is demanding that Douglas immediately pay the $35,000 past due account or the nursing home will evict his mother. Additionally, the nursing home is telling Douglas that he is personally liable for the payment of the bill because he signed as the “responsible party” at the time his mother was admitted to the nursing home.

Fortunately, we were able to reverse the decision by the Medicaid office on appeal and qualify Douglas’ mother for Medicaid. Douglas would have saved himself a lot of money and stress if he would have consulted with an elder law attorney with expertise in protecting assets from long term care costs this office first and retained them to complete the Medicaid application correctly. I explained that it is almost never in the best interest of the Medicaid applicant to spend down all of their money. There are legal ways to protect a person’s savings if it is done correctly.

The filing of a Medicaid application is a complicated process. There is no room for mistakes.

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3224 Hits

You've Been Appointed Trustee of a Trust - Here are Eight Do's and Don'ts to Get You Started

It can be an honor and a burden to be appointed trustee of a trust. What responsibilities have been thrust upon you? How do you successfully carry them out?

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3166 Hits

Brad is quoted in MarketWatch

Brad is quoted in a MarketWatch article entitled, "Caring for Older People's Finances can Boost Independence," dated May 21, 2015.  To read this article, click here.

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3367 Hits

Brad quoted in NerdWallet

Brad is quoted in an article entitled "Long Term Care Insurance: It's Not for Everyone."  Please click here to read this article.

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6799 Hits

Memberships

NAELA NAELA Alliance Bradley J. Frigon SuperLawyers NELF CELA ACTEC

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