Massachusetts Estate Planning & Asset Protection Blog

Avoiding Massachusetts Estate Taxes, NOT Just for the Rich

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Fri, Aug 19, 2011

When you pass away, who do you want as the primary beneficary of your estate, your loved ones or the government?

Estate Tax Facts

Many people, as you may guess, do not want their life savings and legacy to be swallowed by estate taxes.  What most people are not aware of however, is the fact that if they passed away today their heirs would be forced to pay state and federal estate taxes, even if the deceased is far from what most would consider "wealthy".  They also do not realize that an experienced estate planning attorney can help them AVOID taxes ENTIRELY.  

Massacusetts Estate Tax

Massachusetts taxes every dollar in an estate above the $2 million threshold, recently increased from $1 million.  What Estate Tax this means is in an estate worth $2.5 million dollars, $500,000 will be subject to a Massachusetts estate tax.  Many are concerned with budget cuts and sweeping reform that state legislators will consider dropping the tax exempt amount, thus subjecting more estate to a tax.  within the last 10 years, the federal estate tax exemption, which now stands at $5 million, has been as low as $675,000.  

If your current estate exceeds the state and federal tax exempt amount, without proper planning you can expect to lose 50 cents of every dollar to the government. 

You may be reading this, thinking that your estate is not in jeopardy of being destroyed by taxes because you are well under the exemption amount.  You may think your estate is well under, but there are several catagories of non-obvious wealth you need to include in your estate valuation.  The most common of these are life insurance death benefits and retirement accounts such as 401(k)'s and IRA's.

An Example on the Impact of Estate Taxes

Person A is married, has 2 college age children and belives his estate to be worth $700,000.  Person A failed to take into consideration his IRAs and life insurance policies.  Believing their net worth to be well below the $2 million Person A and his wife executed simple wills with no consideration paid to tax planning. 

Tragedy stirkes and Person A dies.  After his death his wife collects a $2 million life insurance benefit and his $500,000 IRA.  In another tragic turn, Person A's wife dies shortly after him.  Their estate, which they believed to be under the Massachusetts exempt amount, is now worth $3.2 million, leaving $1.2 million subject to estate tax, even if the state and federal thresholds are not lowered.

Avoid Massachusetts Estate Tax

Luckily, many people like Person A and his family can completely avoid paying any estate taxes.  To take steps to protect your life savings from the reach of state and federal estate taxes, register online to attend a free educational workshop hosted by Dennis B. Sullivan, Esq, CPA, LLM or by calling 800-964-4295 (24 hours a day).  You can also check out Free Elder Law Guides developed by the team of professional at Dennis Sullivan & Associates.  By planning now you can save you and your family the stress of having to worry about the future. 

Tags: Estate Planning, Estate Planning, Baby Boomers, 2011, elder care, budget cuts, Debt Ceiling, estate tax, Massacusetts Estate Tax, taxes, trusts, tax liability, Massachusetts estate tax, tax exemption, will, Tax Savings, legacy, tax deductions, tax reform, estate reduction, estate

Massachusetts Seniors Need to Know About Free Medicare Check-Ups

Posted by Wellesley Estate Planning Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, Aug 17, 2011

The official handbook, "Medicare & You 2011," says that "Medicare covers two types of physical exams — one when you're new to Medicare and one each year after that." It describes these as the initial "Welcome to Medicare" physical exam and the yearly "wellness" exam.  Then why are some patients going to the doctors for the physical and leaving with a bill in excess of $400?

Until Jan. 1 this year, Medicare did not cover any routine exams except for the "Welcome to Medicare" exam for new beneficiaries. The Affordable Care Act created the once-a-year wellness visit as a new benefit.

Theese new check ups are not what people think however.  The check up considered by Medicare an "annual wellness visit" can be performed in just a few minutes, without the patient having to undress at all.  Typically, the doctor will measure the patient's height, weight, body mass and blood pressure — and perhaps listens to his heart through his clothes. The rest is a discussion of the patient's medical and family history. 

While doctors and patients are both thrilled Medicare is now paying for preventative check ups.  As was mentioned earlier in this post, patients are leaving their doctor's office thinking what they got was a free visit, paid for by Medicaid, and then receiving bills in excess of $400.  To be sure this doesn't happen to you, be 100% sure when talking to your doctor to tell them you only want the free Medicare check up and mention the billing code G0438.

Prevent Senior Health Issues

Doctors have said it is difficult to work a 45-minute wellness visit into an already overstretched schedule. They've been covering its elements for years in other ways, by working a discussion of preventive measures into a regular visit when examining a patient.  They also say that by avoiding a sedintary life style and making better choices at the dinner table, seniors can avoid many of the more serious and expensive health risks such as heart disease and diabetes.

To take steps to protect your spouse, home and life savings today register online to attend a free educational workshop hosted by Dennis B. Sullivan, Esq, CPA, LLM or by calling 800-964-4295 (24 hours a day).  You can also check out Free Elder Law Guides developed by the team of professional at Dennis Sullivan & Associates.  By planning now you can save you and your family the stress of having to worry about the future.


Tags: Medicare, Medicaid, Nursing Home Guide, Nursing Homes, Elder Law, Announcements, assisted living, Health Care, 2011, social security

Private Health Care Advocates, Are They The Right Option For You?

Posted by Dennis Sullivan & Associates on Wed, Apr 27, 2011

When a medical issue strikes you or your family, the world starts spinning a bit faster and begins to bear down hard. Even the best of us can’t always keep our heads above the rising tide of bureaucracy, legal snares, and other issues that can arise in the event of a medical-billings problem or an insurance coverage denial. A private health care advocate might be an option worth exploring, according to a recent article in the Wall Street Journal’s MarketWatch.  

An advocate cannot offer medical advice or address legal issues (like malpractice lawsuits) but they can help resolve medical billing problems, fight insurance-coverage denials, aid in complex medical decision-making and find the right specialist or hospital for a particular condition. Some even accompany patients to doctors’ offices and other care settings. Many are or were nurses or social workers – and can help push through a problem when you really need assistance or guidance. Most hospitals employ similar representatives that can help during your stay, but private advocates are often small businesses that can be called upon in far more circumstances.

Advocates typically charge $50 to $200 an hour, says Joanna Smith, president of the National Association of Healthcare Advocacy Consultants (NAHAC), a professional group in Berkeley, CA. If you are looking to hire a health-care advocate, you should expect a written estimate of costs and services, and feel comfortable with the advocate’s style, experience and expertise before signing on. The NAHAC has designed a code of ethics, which you can find on their website. Be sure to ask about those when interviewing an advocate.

Tags: Elder Law, Health Care, 2011

Tax Changes: A Boon for Gift Fund Donations

Posted by Dennis Sullivan & Associates on Tue, Apr 26, 2011

According to some barometers, there has been a recent surge in charitable giving over these, the first few months of 2011. Apparently, a good number of people have figured out that now is a good time to give.

As a recent article on reports, “The Vanguard Charitable Endowment Program, the nation's second-largest, collected about $129 million during the first quarter, a 60% in- crease over the same period a year earlier. Donations out of the $4.8 billion fund totaled $87 million, a 31.2% increase from $66 million.”

Why the sudden increase? The new tax deal reached in December makes 2011 and 2012 particularly attractive years for charitable giving. Conditions are ripe for estate reduction, and charitable giving is one of the best forms of estate reduction.

There is something counter-intuitive to this giving season, though. If estate reduction is the motivation for charitable giving, and if you should be swayed into practicing it yourself, why is it important to do so now, with the estate tax exemption at an historic high ($5 million) and the rates at generous lows?

You just cannot forget the fact that these conditions are temporary, and set to expire at the end of 2012. President Obama, speaking for most liberals, has already voiced his plans on lowering the Gift and Estate tax exemptions far below their current generous rates as well as increasing taxes on the wealthiest Americans. And with the recent (and long-overdue) focus on debt-reduction, wealth transfer taxes are quite likely to experience a resurgence of popularity in Congress.

Experts are recommending that wealthy individuals and families make the most of the existing philanthropy-friendly tax provisions before they disappear. You can learn more about gifting strategies in the Estate Planning Strategies section of our website. To learn more about gifting, and other estate planning options, attend a free Trust, Estate and Asset Preservation workshop. 

Tags: 2011, gift tax, New estate tax law, gifts

The Future of Medicare, Will it Be There When We Need it?

Posted by Dennis Sullivan & Associates on Thu, Apr 21, 2011

If you (like most of us) were counting on Medicare to provide for your health care needs in retirement, it seems you may be standing on shaky ground. Medicare’s sustainability has been questioned for some time, and as the country turns toward the business of debt reduction Medicare cuts seem inevitable. The future of Medicare and Medicaid, as well as the source, quality, and type of care that seniors receive is in the hands of politicians now, so you may want to keep a weather eye on Capitol Hill.

I’ve previously directed your attention to the House Republican plan for debt reduction as championed by House Budget Committee Chairman Paul Ryan and how it could mean increased costs and fewer benefits for Medicare seniors.

Now President Obama has entered the fray with what may become the benchmark centrist or Democratic position. President Obama issued his position last week in a speech that can be read here in its entirety, but The Kaiser Health News has also done their part to pare down the position just to where it is relevant to healthcare and Medicare.

The President’s plan also calls for heavy savings and spending cuts, saving $480 billion by 2023 and at least an additional $1 trillion over the subsequent decade. While calling for these cuts, the President’s plan retains the ultimate goal of supporting Medicare and Medicaid. The substance of the proposal is to add onto the Affordable Care Act of 2010 with further reform designed to reduce waste, increase accountability, promote efficiency and improve quality of care, “without shifting the cost of care to our seniors or people with disabilities.”

The biggest reform and substantive change is strengthening of the Independent Payment Advisory Board (IPAB) created by the Affordable Care Act. The purpose of the IPAB is to analyze, track, and cut down on excessive costs by informing Congress and recommending action best suited to serve beneficiaries.

In this, the difference between the likely Democrat Position and the likely Republican position (neither party has allied itself to Obama or Ryan just yet) couldn’t be greater. Ryan’s plan relies on vouchers and privatization, whereas President Obama’s relies on cost control and third-party oversight.

Current estimates seem to indicate that Medicare beneficiaries will fare better under President Obama’s plan, but nothing is set in stone yet and there are more issues afoot (like ideology and debt-economics.) Politics is a tricky storm to weather, but if you still have to plan for your retirement, you are well-advised to pay attention to the goings-on on Capitol Hill … and perhaps renew that gym membership. Perhaps the best plan is try to stay healthy for as long as possible!

To learn more about how you can plan for health and long-term care coverage, attend a free Trust, Estate and Asset Protection workshop in Wellesley.

Tags: Medicare, Baby Boomers, 2011

Social Security: Online Statements to Replace Statements via Mail

Posted by Dennis Sullivan & Associates on Mon, Apr 18, 2011

 If you’re not already familiar with the Social Security Administration’s website, it may be time to start. You may already know that you can go online to get an application to replace your Social Security card, apply for Medicare, retirement or disability benefits. While all those online services may be helpful, a new addition to the website may become essential. The government is working to provide your yearly earnings statement exclusively online by the end of 2011.

The statements, mailed to 150 million people each year, show a projection of your future benefits and include a history of taxable earnings for each year – so people can check for mistakes – as well as the total amount of Social Security and Medicare taxes paid over your lifetime. While certainly a useful retirement planning tool for workers, the mailed statements cost the SSA more than $70 million a year.

In a recent article from the Associated Press, Social Security Commissioner Michael Astrue says the website offers the same estimates, while also allowing the individual to run scenarios to test their preparation and various outcomes. Nevertheless, critics point out that it does not, as yet, offer the detailed history of taxable incomes, which means you’ll have no way of catching possible mistakes. Plus, if you’re not really computer-savvy, or don’t have access to high-speed internet, the website could be quite difficult to use. 

Stopping the mailed statements is part of a trend in government to conduct more of its business electronically. The SSA already mails out few paper checks. About 88 percent of beneficiaries have their payments deposited directly into bank accounts, and approximately 41 percent of applications for retirement benefits come in online.

Visit the SSA website to find out more about what you can now do online. You may also benefit from downloading our recent article on "The 7 Biggest Concerns for Your Retirement Planning" as well as our Free Massachusetts Elder Guide to Medicare, Nursing Home & Asset Protection Planning.

For a more complete picture on planning for the future, please attend one of our free Trust, Estate & Asset Protection workshops

Tags: Medicare, Retirement, 2011, social security

Roth IRA Conversions as a Planning Tool

Posted by Dennis Sullivan & Associates on Wed, Apr 13, 2011

Roth IRAs have gained popularity over the past few years, and for good. However, one thing most media commentators fail to address is that sometimes the people who could benefit most from a Roth conversion are the ones for whom such a conversion could carry the highest tax liability. Peter McDougall takes stock of the issue in a recent Wall Street Journal posting, and offers the potentially powerful cocnept of a one-two punch with defined benefit plans and Roth conversions that can help take the sting out of such conversions.

If you are wealthy and planning your estate, a traditional IRA can become cumbersome because of the required minimum distributions (RMDs). RMDs are taxable income, and thereby become a tax liability, and they deplete the assets you may prefer to pass on to your family. A Roth IRA has the advantage of allowing you to escape RMDs by paying the tax upfront. But, if you’re wealthy enough to be saving your IRA for your family then you are also likely to be in a higher tax bracket and in the line for e a hefty tax hit if you don’t play your cards right. The one-two-punch wisdom comes into play if you also have a defined benefit plan to which you make regular contributions. Those contributions are also tax deductible and can be used to offset the tax-cost of the Roth conversion.

Indeed, there are a number of tricks in the article’s specific anecdote, but the essential wisdom lies in the one-two punch of recognizing a means of finding enough tax deductions to off-set the tax-hit of the Roth conversion.

You can read more about Roth Conversions in our past blogs.  Learn more about tax planning with retirement accounts on our website. To learn more about protecting your home, family and life savings, attend a free workshop on Trust, Estate & Asset Preservation.

Tags: 2011, roth conversions, roth conversions, Roth IRA, Tax on IRAs, Tax Savings

IRS Audits of the Wealthy

Posted by Dennis Sullivan & Associates on Mon, Apr 11, 2011

If you’re a high-earning taxpayer, with an adjusted gross income of more than $500,000 – well, first, congratulations! and second – beware. It appears that the IRS may be gunning for you. As the Wall Street Journal recently reported in their MarketWatch section, the IRS is stepping up audits of wealthier taxpayers as part of their offensive to crack down on tax avoidance.

According to the IRS’s most recent statistical report, audits are increasing on most high income groups and increase as the tax brackets get greater.

The percentage of taxpayers who were audited increased in every category of adjusted gross income above $500,000, compared with a year earlier. The biggest jumps came at the top of the income ladder. About 18% of Americans earning at least $10 million were audited in fiscal 2010, up from 11% in fiscal 2009, according to the IRS. For those earning $500,000 to $1 million, the audit rate rose to 3.4% from 2.8%.

The audits are often “correspondence” exams in which a series of letters is exchanged. Such exams account for more than 70 percent of IRS audits of individuals. The lesson here is “documentation.” Be sure you and your tax advisor(s) retain records and can document every item on your tax return.

At Dennis Sullivan & Associates, we are a dedicated team with tax as well as legal expertise. If you are concerned about Massachusetts Estate Tax, or the transfer of your assets after you die, attend a free Trust, Estate & Asset Protection workshop.

Tags: 2011, Tax Savings, IRS

Where to Retire: Factors to Consider

Posted by Dennis Sullivan & Associates on Thu, Apr 07, 2011

You've worked hard, and you are ready to retire, congratulations.  Where are you going to go?  For many who dream of retiring, they dream of the beach, or the desert to escape New England winters, but retirement doesn't mean an end to expenses or responsibilities, and there are many things to consider when you are deciding where to retire. 

Today, Yahoo Finance posted an article on Considerations of where to retire. Here are some factors to consider, some from Yahoo, and some from other important considerations. 

1. Taxes

Remember to consider not just income tax, but sales tax, property tax as well.  Also remember, that some states, like Massachusetts, offer retirees tax benefits by excluding tax on social security retirement benefits from state income taxes.

2. Climate

Maybe you love winter, maybe you've had enough.  Climate is certainly something to consider when you think about relocating.

3. Work Opportunities & Recreation

Just because you've retired doesn't mean you don't want to stay active.  Think about what you like to do, visit historical sites, walk in the woods, or fish when you consider where to retire.

4. Cost of Living

This is very important, how far will your retirement funds go?  If you are not as concerned about being close to friends and family, many retirees are considering living abroad, where taxes may be lower and the dollar goes farther. For more information, check out our blog on the retiring abroad.

5. Housing Market

Consider the housing market to decide if you would like to sell your current home, and buy another, or keep what you have.

6. Proximity to Loved Ones

One way to decide where to retire is to decide who it is important to be close to, and narrow your location search from there.

Obviously there are many more factors to consider. Deciding where, when and how to retire is a unique and personal decision that involves a many factors. If you carefully consider the many financial and lifestyle considerations that go into your retirement strategy, you can ensure a smooth, rewarding and happy transition into this new life phase.

For more information on planning for your retirement and beyond, attend a free, Trust, Estate and Asset Protection Workshop in Wellesley.

Tags: Retirement, Baby Boomers, 2011

How to Retire in 2011

Posted by Dennis Sullivan & Associates on Wed, Mar 16, 2011

Much of the American workforce is still just trying to hold on to their current jobs, not transition out of them, but now that the economy is showing increasing signs of growth, and nest eggs are starting to come back, many baby boomers are thinking about retirement. Phased retirement is not new, but given the aging population and the tumultuous economy of the past few years, it is enjoying a comeback.

In a continuation of their previous article about test-driving your retirement plans, SmartMoney recently offered a reminder about the prospect of a transitional retirement – which may be the best way for some to leave the workforce.

Retirement doesn’t have to be a climactic stopping point, where yesterday you were working full speed ahead and today you’re at full stop. From a financial planning standpoint, it’s difficult to transition from a full working income to a retirement income – especially if your retirement accounts took a recessionary hit. From an emotional standpoint, the abrupt lifestyle adjustment may be difficult to manage.

Transitional retirement may be one solution. For some this means retiring from their old job and taking on a new part-time job. For others it may be smarter to stay with your current job and simply cut back a bit on your involvement. With the prospect of a transitional retirement, there are essentially two questions: “How should you transition?” and “How do you sell it to your boss?”

For your own sake, you’ll need to assess your goals and your financial needs. As you work less you’ll probably earn less, which means you can ease into a retirement budget gracefully. Of course, you have to figure out how to work less. One option may be to become an independent consultant for your current employer.

When it comes time to broaching the subject with your employer, think in terms of mutual benefits. Your employer needs to know why you need to begin the transition, and why it’s better (for them) to keep you by any means possible. To your advantage, many companies right now are hurting for talented experts, and cautious of hiring new full-time employees. You may be solving their problems by offering to provide your expertise on an as-needed basis. A transitional retirement also gives the company time to set up succession plans, find the right person for your job, and give that person time to get up to speed on company policy, protocol, and learn the tricks of the trade, so to speak. Don’t hesitate to point out these benefits to your employer during your discussions.

To find out how you can protect your retirement savings and assets from the increasing cost of nursing home care, attend a free Trust Estate and Asset Protection workshop.

Tags: Retirement, Baby Boomers, 2011, retirement plans

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