C19 UPDATE: CDC Updates Coronavirus Guidance for Businesses

C19 UPDATE: CDC Updates Coronavirus Guidance for Businesses

As we learn more about the coronavirus the Centers for Disease Control (CDC) is updating the guidance they give to business owners and employers. They issued updates on Friday, March 21st to include

  • Updated cleaning and disinfection guidance
  • Updated best practices for conducting social distancing
  • Updated strategies and recommendations to be implement now to respond to COVID-19

If you are a business owner, you may want to bookmark this page and check back regularly for updates: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

Resource: Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19), updated March 21, 2020, https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

Coronavirus News Should Make You Think about Estate Planning

The global Coronavirus (COVID-19) outbreak has many of us thinking about what could happen, if the disease spreads more fully across the general population. We all need to plan for what could possibly happen. To protect yourself and your family, it’s smart to be certain that you have the following these documents prepared and updated, says Motley Fool’s recent article entitled “The Coronavirus Should Have You Thinking About These 4 Things.”

  1. A will or revocable trust. Be sure that your assets will pass to those who you want to receive them after your death. This is critical during crisis times. You don’t want to make things any harder than they need to be. Create an estate plan to avoid potentially expensive and time-consuming processes like probate, which will have greater importance, if your family is confined to their homes in a quarantine situation.

A simple will can cover what happens to your assets at death. This typically works well, especially for modest estates. State laws differ on how complicated a probate process would be with a basic will. Some people opt to use a fully funded revocable trust that doesn’t require probate. For either a will or a revocable trust, make sure that it’s up to date and reflects your current preferences and family circumstances.

  1. Updated beneficiary designations. If you have an IRA, 401(k) account, or life insurance policy, those you name as beneficiaries of that account will receive the proceeds, despite a totally different from arrangement in your will or trust. Many of us also don’t designate any beneficiary for these accounts, which means added complications in the event of death.
  2. Healthcare power of attorney. When we’re in the midst of this Coronavirus, it’s even more urgent that you’ll be able to get the healthcare you need, if you’re hit with this illness. A durable power of attorney for healthcare will give the individuals you choose the ability to make whatever medical decisions you specify on your behalf. An estate planning attorney can help you draft documents that match your specific wishes.
  3. Financial power of attorney. You can designate an agent to help take care of your finances, if you become incapacitated or otherwise unable to handle your financial affairs. A general durable power of attorney for financial matters is another document that lets you delegate responsibility and authority to make financial transactions to the person you name.

Estate planning may not be the highlight of your week, but the Coronavirus outbreak has more people thinking about what they need to do. Make sure your family will have what they need even if something happens to you.

Reference: Motley Fool (March 8, 2020) “The Coronavirus Should Have You Thinking About These 4 Things”

C19 UPDATE: Beware the Rush to Make Your Own Will Online

With COVID-19 affecting more and more Americans, people across the country are scrambling to set up wills and end-of-life directives. Over the last two weeks, online will companies have seen an explosion in users, according to the article, “Coronavirus Pandemic Triggers Rush by Americans to Make Online Wills,” published by CNBC.com.

However, as online wills grow in popularity, estate and elder lawyers increasingly caution against using them, for several reasons.

  • Will the documents be legally valid? Since most of these do-it-yourself wills are created and executed without any oversight from an attorney, a larger number of wills may not be executed in compliance with the proper will formalities, and that could end up invalidating the will.
  • Do you fully understand the questions and consequences of your answers? There are many nuances in estate planning, as well as a good bit of legal jargon. Confusion over the question or the consequences of a decision can result in costly mistakes … and could even mean your will won’t hold up to a challenge in court.
  • What about asset protection? There is more to estate planning than just giving your stuff away after you die. How you transfer ownership of your assets can mean the difference between a protected inheritance and legacy for many generations … or the squandering or loss of a person’s life’s work within a few years … or months … after they pass away.
  • Is there any planning for long-term care? It’s estimated that more than half of people turning age 65 who will need some type of long-term care services in their lifetimes. Proper estate planning should balance the possibility that you will need assistance paying for nursing home care (Medicaid), with other estate planning goals. Mistakes in this area could disqualify you from receiving assistance should you need it.

As COVID-19 keeps people home, meeting with a lawyer to create a will could not be easier. In most states, a lawyer’s services have been deemed “essential,” even during stay-at-home orders. We are doing everything we can to make our services as easy and convenient for you as possible, including meeting over telephone, online video services and other innovative ways to ensure you get the planning you need while complying with all safety measures.

Resource: Coronavirus Pandemic Triggers Rush by Americans to Make Online Wills, https://www.cnbc.com/2020/03/25/coronavirus-pandemic-triggers-rush-by-americans-to-make-online-wills.html

The Second Most Powerful Estate Planning Document: Power of Attorney

All too often, people wait until it’s too late to execute a power of attorney. It’s uncomfortable to think about giving someone full access to our finances, while we are still competent. However, a power of attorney can be created that is fully exercisable only when needed, according to a useful article “Power of attorney can be tailored to circumstances” from The News-Enterprise. Some estate planning attorneys believe that the power of attorney, or POA, is actually the second most important estate planning document after a will. Here’s what a POA can do for you.

The term POA is a reference to the document, but it also is used to refer to the person named as the agent in the document.

Generally speaking, any POA creates a fiduciary relationship, for either legal or financial purposes. A Medical or Healthcare POA creates a relationship for healthcare decisions. Sometimes these are for a specific purpose or for a specific period of time. However, a Durable POA is created to last until death or until it is revoked. It can be created to cover a wide array of needs.

Here’s the critical fact: a POA of any kind needs to be executed, that is, agreed to and signed by a person who is competent to make legal decisions. The problem occurs when family members or spouse do not realize they need a POA, until their loved one is not legally competent and does not understand what they are signing.

Incompetent or incapacitated individuals may not sign legal documents. Further, the law protects people from improperly signing, by requiring two witnesses to observe the individual signing.

The law does allow those with limited competency to sign estate planning documents, so long as they are in a moment of lucidity at the time of the signing. However, this is tricky and can be dangerous, as legal issues may be raised for all involved, if capacity is challenged later on.

If someone has become incompetent and has not executed a valid power of attorney, a loved one will need to apply for guardianship. This is a court process that is expensive, takes several months and leads to the court being involved in many aspects of the person’s life. The basics of this process: three professionals are needed to personally assess the “respondent,” the person who is said to be incompetent. The respondent loses all rights to make decisions of any kind for themselves. They also lose the right to vote.

A power of attorney can be executed quickly and does not require the person to lose any rights.

The biggest concern to executing a power of attorney, is that the person is giving an agent the control of their money and property. This is true, but the POA can be created so that it does not hand over this control immediately.

This is where the “springing” power of attorney comes in. Springing POA means that the document, while executed immediately, does not become effective for use by the agent, until a certain condition is met. The document can be written that the POA becomes in effect, if the person is deemed mentally incompetent by a doctor. The springing clause gives the agent the power to act if and when it is necessary for someone else to take over the individual’s affairs.

Having an estate planning attorney create the power of attorney that is best suited for each individual’s situation is the most sensible way to provide the protection of a POA, without worrying about giving up control while one is competent.

Reference: The News-Enterprise (Feb. 24, 2020) “Power of attorney can be tailored to circumstances”

How to Plan for Nursing Home Care for Parents

The median annual cost of care in a skilled nursing facility in South Carolina is $42,000, according to a cost of care survey by long-term care insurance company Genworth. You can’t expect Medicare to cover it. Medicaid coverage doesn’t start in, until the value of your assets is reduced to $2,000, says The Columbia Regional Business Report’s recent article entitled “Nursing home care requires advance planning.”

Many people don’t know that to qualify for Medicaid, your assets have to be spent down to almost nothing. Planning for long-term care includes both insurance and financial planning. However, the long-term care insurance options are limited. There are only a few providers remaining in the industry, but it’s worth the effort to see what they have.

Long-term care insurance is a plan that lets you pay a premium in exchange for coverage for a stay in an assisted care facility, full-scale care facility, or even at home. Without a policy, those financial costs can be catastrophic.

Because the cost of long-term care is so high, begin planning for your later years as soon as possible. It’s likely that in the next few decades, when the baby boomer generation starts requiring long-term or assisted living care, paying for it could become a crisis.

For people who are starting to save for future care needs, financial planners earmark 10% to 15% of your income. If you’re older and see that you don’t have enough money saved, put away at least 20% of your income. IRS guidelines include catch-up provisions for people older than 50 for IRAs and 401(k)s.

Some group insurance plans offer long-term care options. There are some additions for life insurance policies that could extend living benefits for elder care. You should plan on paying for three years of long-term care.

How to pay for skilled care is just one of the issues a family may face in later years. You also should have a will, advance directives, medical or health care power of attorney and durable power of attorney in place to help your family with difficult decisions. Remember to make sure the beneficiaries on your insurance plans are up-to-date.

Talk to an attorney about late-life concerns.

It’s never too soon to develop some kind of plan that can ease the financial burden for you and your family.

Reference:  Columbia Regional Business Report (March 10, 2020) “Nursing home care requires advance planning

Fraudulent Social Security Calls Still Targeting Seniors

You’d think everyone would know to ignore these calls. However, these criminals are so convincing, says The New York Times in the article “How Not to Become a Victim of Social Security Fraud Calls,” that many people fall for the schemes and end up losing money. They buy gift cards and often, give up their personal PIN (Personal Identification Number), losing thousands of dollars.

It’s not clear whether the volume of calls is increasing. However, the government is getting thousands of complaints about them, reports the Social Security Administration’s inspector general, Gail Ennis. There have been 250,000 online complaints made, since a new dedicated digital reporting form was released in November 2019.

Other regulators are also reporting a flood of complaints. The Federal Trade Commission has received more than 166,000 complaints about fraudulent Social Security calls last year, and the average individual loss is about $1,500. The Senate’s Special Committee on Aging said that Social Security impersonation schemes were the single most reported fraud on its fraud hotline last year.

In January, the committee heard from a woman who lost $150,000 in a Social Security scheme.

The government is trying to fight the fraud in a few different ways. The Justice Department took legal action in January against two telecommunication companies that it says serve as “gateways” for illegal robocalls, by funneling them to the U.S. from oversees. However, stopping the calls is not easily accomplished. There are many gateway telecommunications companies, so hitting two just means that the criminals will take their business elsewhere.

Congress passed the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRADED), which requires telecommunication companies to adopt technology to identify spoofed calls. Spoofed calls are calls that appear to come from legitimate phone numbers. However, the FCC has yet to set rules for how the law will be carried out, so relief for consumers may be as far as a year away.

Here’s what you need to know about Social Security and other fraudulent calls:

  • Don’t answer calls from unfamiliar numbers. Let the calls go to voicemail, or the answering machine, if you still use one.
  • If you answer the phone and someone demands money immediately, hang up.
  • Report the call to the inspector general’s office on the Social Security Administration’s website. There’s a form that asks you to create a unique identification number, so you can ask for that number if anyone calls to verify their identity.
  • Be aware that even a phone call that appears to be from Social Security mostly likely will not be from the agency. Schemes that involve a suspension of benefits work because they target senior’s biggest fear—losing their benefits.
  • There are other Social Security schemes. Some involve official looking papers, and there has been an increase in the number of scams that start with an official-looking text. The Social Security Administration does not text people, unless they have signed up to have authentication codes sent to your phone when logging into a Social Security account.

There’s not much that can be done by the individual to stop the endless stream of robocalls. You can register your number on the Federal Trade Commission’s Do Not Call list, but that will only reduce calls from legitimate telemarketers. The criminals will still call. The best advice is not to answer the phone, unless it’s from someone you know, and never, ever give in to demands of immediate payment. That’s always a red flag for fraud.

Reference: The New York Times (March 6, 2020) “How Not to Become a Victim of Social Security Fraud Calls”

C19 UPDATE: Tax Filing Deadline Extended to July 15

There has been some confusion about the tax filing / tax payment deadline extensions. On Friday, March 20 we got clarity that both the filing and the payment deadlines have been extended from April 15 to July 15 giving all taxpayers and businesses additional time to file and make payments without interest or penalties.

If you are expecting a refund, however, the Treasury Department encourages you go ahead and file as soon as possible – the sooner you file, the sooner you will get your refund.

Resource: Tax filing deadline moved to July 15, the latest measure to battle coronavirus downturn, The Washington Post, March 30, 2020

How Bad Will Your Estate’s Taxes Be?

The federal estate tax has been a small but steady source of federal revenue for nearly 100 years. The tax was first imposed on wealthy families in America in 1916. They were paid by families whose assets were previously passed down through multiple generations completely and utterly untaxed, says the article “Will the government tax your estate when you die, seizing home and assets?” from The Orange County Register.

The words “Death Tax” don’t actually appear anywhere in the federal tax code, but was the expression used to create a sympathetic image of the grieving families of farmers and small business owners who were burdened by big tax bills at a time of personal loss, i.e., the death of a parent. The term was made popular in the 1990s by proponents of tax reform, who believed that estate and inheritance taxes were unfair and should be repealed.

Fast forward to today—2020. Will the federal government tax your estate when you die, seize your home and everything you had hoped to hand down to your children? Not likely. Most Americans don’t have to worry about estate or death taxes. With the new federal exemptions at a record high of $11,580,000 for singles and twice that much for married couples, only very big estates are subject to a federal estate tax. Add to that, the 100% marital deduction means that a surviving spouse can inherit from a deceased spouse and is not required to pay any estate tax, no matter how big the estate.

However, what about state estate taxes? To date, thirteen states still impose an estate tax, and many of these have exemptions that are considerably lower than the federal tax levels. Six states add to that with an inheritance tax. That’s a tax that is levied on the beneficiaries of the estate, usually based upon their relationship to the deceased.

Many estates will still be subject to state estate taxes and income taxes.

The personal representative or executor is responsible and legally authorized to file returns on a deceased person’s behalf. They are usually identified in a person’s will as the executor of the estate. If a family trust holds the assets, the trust document will name a trustee. If there was no will or trust, the probate court will appoint an administrator. This person may be a professional administrator and likely someone who never knew the person whose estate they are now in charge of. This can be very difficult for family members.

If the executor fails to file a return or files an inaccurate or incomplete return, the IRS may assess penalties and interest payments.

The final individual income tax return is filed in just the same way as it would be when the deceased was living. All income up to the date of death must be reported, and all credits and deductions that the person is entitled to can be claimed. The final 1040 should only include income earned from the start of the calendar year to the date of their death. The filing for the final 1040 is the same as for living taxpayers: April 15.

Even if taxes are not due on the 1040, a tax return must be filed for the deceased if a refund is due. To do so, use the Form 1310, Statement of a Person Claiming Refund Due to a Deceased Taxpayer. Anyone who files the final tax return on a decedent’s behalf must complete IRS Form 56, Notice Concerning Fiduciary Relationship, and attach it to the final Form 1040.

If the decedent was married, the widow or widower can file a joint return for the year of death, claiming the full standard deduction and using joint-return rates, as long as they did not remarry in that same year.

An estate planning attorney can help with these and the many other details that must be taken care of, before the estate can be finalized.

Reference: The Orange County Register (March 1, 2020) “Will the government tax your estate when you die, seizing home and assets?”

Surprising Ways Beneficiary Designations Can Damage an Estate Plan

Naming a beneficiary on a non-retirement account can result in an unintended consequence—it can even topple an entire estate plan—reports The National Law Review in the article “Overuse of Beneficiary Designations: How They Can Derail a Client’s Estate Plan.” How is that possible?

In most cases, retirement accounts and life insurance policies pass to beneficiaries as a result of the beneficiary designation form that is completed when someone opens a retirement account or purchases a life insurance plan. Most people don’t even think about those designations again, until they embark on the estate planning process, when they are reviewed.

The beneficiary designations are carefully tailored to allow the asset to pass through to the heir, often via trusts that have been created to achieve a variety of benefits. The use of beneficiary designations also allows the asset to remain outside of the estate, avoiding probate after death.

Apart from the beneficiary designations on retirement accounts and life insurance policies, beneficiary designations are also available through checking and savings accounts, CDs, U.S. Savings Bonds or investment accounts. The problem occurs when these assets are not considered during the estate planning process, potentially defeating the tax planning and distribution plans created.

The most common way this happens, is when a well-meaning bank employee or financial advisor asks if the person would like to name a beneficiary and explains to the account holder how it will help their heirs avoid probate. However, if the estate planning lawyer, whose goal is to plan for the entire estate, is not informed of these beneficiary designations, there could be repercussions. Some of the unintended consequences include:

Loss of tax saving strategies. If the estate plan uses funding formulas to optimize tax savings by way of a credit shelter trust, marital trust or generation-skipping trust, the assets are not available to fund the trusts and the tax planning strategy may not work as intended.

Unintentional beneficiary exclusion. If all or a large portion of the assets pass directly to the beneficiaries, there may not be enough assets to satisfy bequests to other individuals or trust funds created by the estate plan.

Loss of creditor protection/asset management. Many estate plans are created with trusts intended to protect assets against creditor claims or to provide asset management for a beneficiary. If the assets pass directly to heirs, any protection created by the estate plan is lost.

Estate administration issues. If a large portion of the assets pass to beneficiaries directly, the administration of the estate—that means taxes, debts, and expenses—may be complicated by a lack of funds under the control of the executor and/or the fiduciary. If estate tax is due, the beneficiary of an account may be held liable for paying the proportionate share of any taxes.

Before adding a beneficiary designation to a non-retirement account, or changing a bank account to a POD (Payable on Death), speak with your estate planning attorney to ensure that the plan you put into place will work if you make these changes. When you review your estate plan, review beneficiary designations. The wrong step here could have a major impact for your heirs.

Reference: The National Law Review (Feb. 28, 2020) “Overuse of Beneficiary Designations: How They Can Derail a Client’s Estate Plan”

Estate Planning Is For Everyone

Estate planning is something anyone who is 18 years old or older needs to think about, advises the article “Estate planning for every stage of life from the Independent Record. Estate planning includes much more than a person’s last will and testament. It protects you from incapacity, provides the legal right to allow others to talk to your doctors if you can’t and takes care of your minor children, if an unexpected tragedy occurs. Let’s look at all the ages and stages where estate planning is needed.

Parents of young adults should discuss estate planning with their children. While parents devote decades to helping their children become independent adults, sometimes life doesn’t go the way you expect. A college freshman is more concerned with acing a class, joining a club and the most recent trend on social media. However, a parent needs to think about what happens when the child is over 18 and has a medical emergency. Parents have no legal rights to medical information, medical decision making or finances, once a child becomes a legal adult. Hospitals may not release private information and doctors can’t talk with parents, even in an extreme situation. Young adults need to have a HIPAA release, a durable power of medical attorney and a power of attorney for their finances created.

New parents also need estate planning. While it may be hard to consider while adjusting to having a new baby in the house, what would happen to that baby if something unexpected were to affect both parents? The estate planning attorney will create a last will and testament, which is used to name a guardian for any minor children, in case both parents pass. This also includes decisions that need to be made about the child’s education, medical treatment and even their social life. You’ll need to name someone to be the child’s guardian, and to be sure that they will raise your child the same way that you would.

An estate plan includes naming a conservator, who is a person with control over a minor child’s finances. You’ll want to name a responsible person who is trustworthy and good with handling money. It is possible to name the same person as guardian and conservator. However, it may be wise to separate the responsibilities.

An estate plan also ensures that your children receive their inheritance, when you think they will be responsible enough to handle it. If a minor child’s parents die and there is no estate plan, the parent’s assets will be held by the court for the benefit of the child. Once the child turns 18, he or she will receive the entire amount in one lump sum. Few who are 18-years old are able to manage large sums of money. Estate planning helps you control how the money is distributed. This is also something to consider, when your children are the beneficiaries of any life insurance policies. An estate planning attorney can help you set up trusts, so the monies are distributed at the right time.

When people enter their ‘golden’ years—that is, they are almost retired—it is the time for estate plans to be reviewed. You may wish to name your children as power of attorney and medical power of attorney, rather than a sibling. It’s best to have people who will be younger than you for these roles as you age. This may also be the time to change how your wealth is distributed. Are your children old enough to be responsible with an inheritance? Do you want to create a legacy plan that includes charitable giving?

Lastly, update your estate plan any time there are changes in the family structure. Divorce, death, marriage or individuals with special needs all require a different approach to the basic estate plan. It’s a good idea to revisit an estate plan anytime there have been major changes in your relationships, to the law, or changes to your financial status.

Reference: Independent Record (March 1, 2020) “Estate planning for every stage of life