Massachusetts Estate Planning & Asset Protection Blog

Understanding Long Term Care Planning

Posted by Dennis Sullivan & Associates on Fri, Jan 19, 2018

Facing the enormity of long term care, whether it is the financial, healthcare, emotional or psychological issues, it is so overwhelming. 

It's needs a team effort!  With the help of family, friends and our team here at Dennis Sullivan and Associates you can make the enormity of long term care manageable 

 

What exactly is "Long Term Care Planning" ? 

Here's one way to look at long term care planning: 

In today’s world, the question is no longer only, “What happens when I die?, but now we need to plan for “What happens if I live?” An estate plan covers the scenario of, What happens when I die.  But long term care covers a large variety of other factors and scenarios that sometime families forget to consider such as what happens if I live but am not healthy and have increased health-care costs and need to rely on others for assistance, either temporarily or on a permanent basis. The estate plan does not address this need. An estate plan can help you answer the first question, but a long-term care plan can help you answer both the first and second questions. Let’s put it another way. An estate plan insures that if you have assets when you die they will be passed in the manner you wish. The key word is “if.” The plan will not, however, guarantee that there will be anything left at that time to pass. Your assets could be mostly or entirely wiped out by a lengthy illness, hospital, and/or nursing home stay, leaving your spouse and other heirs with nothing.

 long Term Care and Medicaid:

I had a conversation last week with a married couple for whom we are preparing a Medicaid application. John is in a nursing home, and Mary is healthy and living at home. I explained to them that Mary can keep half of their countable assets, in their case $75,000, but that they must spend down to below that dollar amount by the last day of the month directly preceding the month we want to qualify John for Medicaid. I have had this conversation numerous times with clients in John and Mary’s situation, and know all too well that this simple instruction is not always followed. The largest part of most spend downs typically goes to the nursing home. But, as most people do, myself included, we wait until we get a bill before we pay it. If I owe you money, I’m not going to chase after you for a bill. Whenever you get around to it and invoice me, then I’ll pay it. The longer the money stays in my bank account, the happier I am. However, this can get you into big trouble and cost you tens of thousands of dollars if you wait for the nursing home bill. If we want John to be eligible for Medicaid next month and we know that he owes the nursing home $20,000 for the past two months of care, but the nursing home hasn’t yet presented Mary with a bill, it does not matter that Mary and John legitimately owe the facility the money. If that $20,000 is still sitting in their bank account next month, causing their account balance to exceed $75,000, John cannot qualify for Medicaid. Even worse than that, he can’t even qualify for next month. He has to wait until the following month, which means they will owe the facility another $10,000, leaving Mary with $65,000 to live on.


So Much to Discuss

For more information on Long Term Care Planning we encourage you attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy. January sessions are filling up fast call or register on line to reserve your seat today.  

At the Estate Planning & Asset Protection Law Center, we help people and their families protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future. 


Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Dennis Sullivan, Elder Law, Estate Planning, Estate Planning Recommendations, Estate Planning Tip, Financial Planning, Retirement, coverage, senior, Attorney, Baby Boomers, Capital Gains Tax, GST tax, Massachusetts, New estate tax law, IRS, Massacusetts Estate Tax, Tax Savings, federal, new regulations, tax, tax reform, tax deductions, taxes, tax liability, tax exemption, New Tax Bill, Tax Bill, 2018 Tax Bill

New Tax Bill: What you need to know

Posted by Dennis Sullivan & Associates on Fri, Jan 05, 2018

How does the new tax bill affect you and your family now and in the future?

The new tax bill has officially been passed by Congress and signed by President Trump, what does this mean for us?  The answer to this depends on many variables discussed here. 

 

First of all, these changes don’t apply until you file your 2018 taxes, meaning that you won’t have to worry about the new law when filing your 2017 income tax returns this spring.  That being said, still we will be experiencing the greatest overhaul of the tax laws in more than 30 years.  The last major changes having been made under President Reagan in 1986. 

One change you can expect to see is that both corporate tax rates and personal income tax rates will drop.  There are also other changes which limit or eliminate personal deductions.   The changes that affect corporate tax rates are permanent, and the changes that affect individual tax rates and deductions are not.

Also in the new tax bill you will find a “sunset” provision, meaning that the new law – as it applies to individuals – will expire on December 31, 2025.   That is, unless Congress agrees to extend the law.  That, of course, will depend on the political and economic climate 8 years from now, including whether the economy responds the way Republicans say it will

       Now let’s take a look at the changes that are likely to affect the average senior.  Good news, the tax rates have been lowered a bit.  There are still 7 tax brackets but the rates have changed with the top rate lowered from 39.6% to 37% and the threshold at which each rate is reached has been altered. (The corporate rate reduction is much greater, from 37% to 21%).

       Some of the most significant changes relate to deductions.  The standard deduction has been doubled to $12,000 for a single person and $24,000 for married couples but personal exemptions have been eliminated.  The deduction for state and local taxes will be capped at $10,000, something that could hurt many Massachusetts residents and especially homeowners because we have high real estate and state income taxes.  


So Much to Discuss:

For the first time in decades major overhauls to the tax system are happening! This is an enormous change that can affect your estate planning and asset protection as well. Be sure to stay tuned as we will discuss more about this new tax bill in our next blog post!    

For more information we encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy. January sessions are filling up fast call or register on line to reserve your seat today.  

At the Estate Planning & Asset Protection Law Center, we help people and their families protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future. 


Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Dennis Sullivan, Elder Law, Estate Planning, Estate Planning Recommendations, Estate Planning Tip, Financial Planning, Retirement, coverage, senior, Attorney, Baby Boomers, Capital Gains Tax, GST tax, Massachusetts, New estate tax law, IRS, Massacusetts Estate Tax, Tax Savings, federal, new regulations, tax, tax reform, tax deductions, taxes, tax liability, tax exemption, New Tax Bill, Tax Bill, 2018 Tax Bill

Step Up Basis Part 1

Posted by Dennis Sullivan & Associates on Mon, Mar 02, 2015

Losing the Step Up Basis Could be a Step Back On Your Estate Planning | Massachusetts Estate Planning Attorney

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A few weeks back, President Obama proposed, in his State of the Union address, that the “step up in basis” provision of the capital gains tax be eliminated.  While Obama claims that he wants to eliminate a loophole for the rich, such a change could have a bigger impact on the average middle-class American.

             Before I explain why, let’s review just what exactly what the step up in basis is.  Certain assets, such as stocks, mutual funds and real estate, appreciate in value over time.  Joe bought stock in Apple for $10.  If it is now worth $1,000 and he sells it, he will have a gain of $900.  That $900 gain is subject to something called capital gains tax.  The gain is calculated by subtracting the sale price minus the basis, which usually is the purchase price. (There are cases where the basis gets adjusted but we’ll keep our example simple.)

            There are certain instances where Joe may not have to pay capital gains tax.  One such instance is if he holds onto that stock and don’t sell it before he dies.  Instead, he transfers it to his heirs as part of his estate.  They now own it and the tax that comes with it.

             If his heirs then sell it for $1,000, must they pay tax on the $900 gain?  The answer is no. This is because of something called the step up in basis.  Upon the date of his death Joe’s stock “steps up” in value to $1,000.  So if the market value is $1,000 on Joe’s date of death, and his heirs sell it for its stepped up value of $1,000, the gain will now be zero and all the unrealized gain tax from Joe’s lifetime disappears. 

             This can be a huge tax break for many families.  For example, if Paul purchased Microsoft or IBM stocks many years ago and held onto them as they multiplied; he would have accumulated significant gains over the years.  If he holds onto his stocks until he dies and then his children inherit it, the tax on all that gain is gone and they will owe nothing in taxes if they sell it.  This could amount to tens of thousands of dollars tax-free for his family.  On the other hand, if Paul was to transfer the stock to the children while he is alive they get his original basis, what is called a “carryover basis”.  They’ll have to pay tax on all the unrealized gains based on the original price that Paul paid for the stocks.

            Now that you know how the step up in basis works, next time we’ll tell you why President Obama’s proposal could miss the mark on targeting the wealthy and instead have a greater impact on middle-class America.

 

 

At the Estate Planning & Asset Protection Law Center, we provide a unique education and counseling process which includes our unique 19 Point Trust, Estate and Asset Protection Review to help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones, click here for more information. We provide clients with a unique approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

 

Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: taxes, Obama, middle class, Inheritance, 2015, Capital Gains Tax, proposed changes, heir

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