King & Wood, P.A.

What Can I Do with Unspent Money in a 529 Plan?

“Despite the burgeoning cost of higher education these days, you might still find yourself with unspent money in a 529 plan after your child has graduated from college. As you may know, if you withdraw the money for non-qualified education purposes, you have to pay taxes plus an additional 10% penalty on the earnings withdrawn from the account.”

Los Altos Online’s recent article, “How to use up leftover money in a 529 college savings plan,” says there several ways to use unspent money in a 529 plan, while avoiding the taxes and/or penalties. Here are some options to consider.

Graduate school. If your child is interested in an advanced degree, the money can be used tax free, just as it was for college. Any school that gets financial aid qualifies.

Another child. You can change the beneficiary of the 529 plan to another qualifying family member, without any tax implications. If you have other children, the funds can be used to pay for their qualified expenses—even if you have other 529 plans for them. Money in 529 plans can now also be used for elementary and secondary education.

Another relative. You can change the beneficiary to parents, aunts, uncles, nieces, nephews, stepparents and even first cousins. There’s no deadline for using the funds, so you can keep it as a gift for a future grandchild. However, avoid skipping a generation, because that could trigger a tax penalty.

Your own or your spouse’s career. If you’re interested in changing your career or just want to get a new degree in retirement, using leftover 529 funds will let you avoid using other savings.

Estate planning. You can choose to give a 529 account to an heir. You keep control of the account until you pass away and can continue to make annual tax-free contributions up to the gift-tax exclusion amount, provided the account value doesn’t exceed the state’s maximum limit. After you die, the value isn’t counted as part of your estate for estate taxes.

Offset any scholarships. You can withdraw any amount from the 529 plan, up to the value of all scholarships and the 10% penalty is waived, even if you apply years after the scholarship was earned. The earnings are taxable, but because distributions include both earnings and contributions, only part of this will be taxed.

Give the money to your child or spend it yourself. You could just pay the taxes and the 10% penalty and use the money as you please. The earnings are taxed at your child’s rate.

Reference: Los Altos Online (September 18, 2019) “How to use up leftover money in a 529 college savings plan”

Will the IRS Say It’s a Gift, If I Sell My House to my Son at a Great Price?

“My wife and I have agreed to sell our house to our son. The bank-appraised value of the property is $700,000 and we are selling it to him for $340,000, which is the amount of the mortgage. How will the $360,000 be treated and are there tax consequences?”

If a parent sells his home to his adult child at half the appraised price, this would be considered a gift, says nj.com in the article “I’m selling my home to my son at a discount. Is it considered a gift?”

The amount of the gift would be the excess of the value subtracted from the amount paid. In this example, if the bank-appraised value of the property is $700,000, and the parent is selling it for $340,000, the $360,000 will be treated as the amount of the gift.

The gift must be reported to the IRS on IRS Form 709 by April of the following year. However, there’s probably no gift tax due.

The gift tax is a tax on the transfer of property by one person to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

In this case, because the value is a gift is under the available federal annual gift exclusion, when applied, that relieves the son of taxes on the gift. The federal basic exclusion amount will be applicable.

An individual can gift $15,000, adjusted for cost of living over time, to a person each year without reporting the gift. However, if the gift to a single person is more than $15,000, then IRS Form 709 must be filed to report the gift.

When reporting the gift, the value of the gift is applied against the available federal basic exclusion amount of the donor (the person making the gift). Only if the gift value is more than the available federal basic exclusion amount, is there a tax that’s due.

The current federal basic exclusion amount is $11.4 million per person.

Many states don’t have a gift tax, so there would be no filing if the property is located in a state that doesn’t have a gift tax on the books.

Reference: nj.com (September 17, 2019) “I’m selling my home to my son at a discount. Is it considered a gift?”

How Will New Legislation Update Social Security?

“Lawmakers in the U.S. House of Representatives are looking to significantly increase that ceiling, with a bill introduced this month that would raise SSI’s asset limit to $10,000 for an individual and $20,000 for couples.”

People with disabilities who receive Supplemental Security Income would be allowed to keep a few more assets and wouldn’t be penalized for marrying under a new proposal, according to Disability Scoop’s recent article, “Lawmakers Look To Update SSI Program.”

Right now, in order to retain benefits, SSI recipients generally can have no more than $2,000 to their name at any given time. However, Congress is looking to significantly increase that ceiling, with a bill introduced this month that would increase SSI’s asset limit to $10,000 for an individual and $20,000 for couples.

The Supplemental Security Income Restoration Act would also increase the amount of disregarded income that beneficiaries can collect monthly.

The bill would also repeal penalties for marrying or receiving financial, food, and housing assistance from family members.

Supporters of the Act say it’s time to update Social Security’s SSI program, which has remained largely static since 1972.

“This issue is one I have heard about directly from autism advocates and families in our district, particularly parents preparing for children with disabilities to transition into adulthood,” said Rep. Elissa Slotkin, D-Mich., who introduced the measure along with Rep. Raúl Grijalva, D-Ariz.

“This bill brings the Supplemental Security Income (SSI) program’s outdated limits up to speed with inflation—a common-sense adjustment that will make a huge difference for individuals and families caring for someone with disabilities.”

Reference: Disability Scoop (September 23, 2019) “Lawmakers Look To Update SSI Program”

What is Florida Doing to Protect Seniors from Exploitative or Neglectful Guardians?

“Changes could be coming to Florida’s system for overseeing the guardians of elderly who are no longer able to care for themselves, including beefing up monitoring and increasing penalties for those with valid complaints against them.”

Orlando Sentinel’s recent article, “DeSantis, Florida lawmakers consider changes in troubled guardianship program,” reports that legislative leaders and officials of Governor Ron DeSantis’ administration met with judges, guardianship trade groups, state attorneys and people from the Elder Law section of the Florida Bar to talk about ways to protect seniors from exploitative or neglectful guardians.

“More must be done to enhance the structure of accountability for guardians to monitor compliance with established standards of practice and ensure that guardians are acting in the best interests of their wards,” Department of Elder Affairs Secretary Richard Prudom said. “The matter is complex, and the solution extends beyond the Department of Elder Affairs; families, local communities, and public officials must also work together to prevent all forms of exploitation to provide safety and security for all.”

The recent news concerning guardian Rebecca Fierle, who investigators say was responsible for more than 400 wards and regularly signed “Do Not Resuscitate” orders for clients against their wishes, has rekindled interest among lawmakers for more control over Florida’s 550 registered guardians.

Senator Kathleen Passidomo and Representative Colleen Burton participated in the meeting and said some of the ideas being discussed include limiting the number of cases each guardian has and requiring a judge to approve a DNR order. Other ideas include increased standards for guardians and more thorough monitoring.

The lawmakers say there’s no need to increase the requirements to become a guardian. All that is required now is a 40-hour course and passing an exam. Passidomo said the issue isn’t a lack of competence, but the risk for abuse.

As a result, standards and monitoring of guardians must be increased. However, these ideas are merely being discussed, as lawmakers have yet to present a concrete plan.

Governor DeSantis will publish a budget request for the Department of Elder Affairs, which includes the Office of Public and Professional Guardians, which could include more funds for investigators to review complaints. The OPPG has only four employees. Prudom has taken control of the department since July, when he asked Carol Berkowitz, the agency’s executive director, to resign because of the Fierle case.

Reference: Orlando Sentinel (September 16, 2019) “DeSantis, Florida lawmakers consider changes in troubled guardianship program”

Am I Too Young to Think About Estate Planning?

“Many people equate estate planning with older people who have more assets and more to protect. However, that doesn’t mean younger people should ignore the benefits of estate planning. According to Caring.com, only 34% of adults ages 35 to 44 have a will and 18% of adults ages 18 to 34 have one.”

It’s wise for younger generations to consider estate planning, advises The Cleveland Jewish News in the recent article “Younger generations should focus on estate planning, too.”

Don’t be fooled into thinking that an estate plan is only for older people or the ultra-wealthy. Many younger adults have been financially successful and also have experienced changes with marriage and families.

A young married couple should talk about their vision and goals for their legal affairs, in case something happens to one of them or within their family.

Estate plans provide some certainty into an otherwise uncertain life. There are many reasons to start early. One reason is that you never know what’s going to happen. You want to make certain that all of your assets are in place.

When creating an estate plan, there are a few things that younger people should consider, such as making sure all their accounts have named a beneficiary. This includes life insurance, retirement, and checking and savings accounts. These beneficiaries need to be updated for life and family changes.

Many youngers adults will be fine with a will and a health care power of attorney. However, marriage is a time when people have more complexity in their professional lives. This can include starting a business, becoming leaders at companies and needing more complex and protective plans.

While younger generations are known to be independent and to try to meet all their needs online, estate plans should be treated differently. There are numerous online tools or ‘do-it-yourself’ strategies, but professional legal assistance can make it an easier and a more thorough process.

Start as early as you can and set the foundation for more complex planning that will come in the future. This preparation will mean less stress for those left behind, after you pass away.

Reference: Cleveland Jewish News (September 19, 2019) “Younger generations should focus on estate planning, too”

Arizona Passes Financial Exploitation Legislation

“The Arizona Corporation Commission will be enforcing Arizona’s newest law to protect vulnerable adults and senior investors from financial exploitation.”

The Queen Creek Independent reports in the article “New Arizona law helps protect vulnerable adults, seniors from financial exploitation” that Senate Bill 1483 went into effect at the end of August.

The new law lets securities dealers and investment advisory firms report suspected or attempted financial exploitation of a vulnerable adult and delay a questionable disbursement or transaction.

The new law lets these financial firms impose an initial delay of disbursements from an eligible adult’s account for up to fifteen business days, if financial exploitation is suspected.

The firms must report the delay within two business days to the Commission or the Department of Economic Security—Adult Protective Services. The government can then extend the delay for an additional ten days or longer.

If additional delay is required, a judge can extend the time even further.

It’s important to note that the law provides immunity from administrative or civil liability to qualified individuals for taking preventative actions that are permitted under the law.

The 2010 Investor Protection Trust Elder Fraud Survey reports that one out of every five citizens over the age of 65 has been a victim of financial fraud.

Arizona’s new law aims to help protect individuals who are over 65 years old or who are unable to protect themselves from abuse, neglect, or exploitation by others, due to a physical or mental impairment.

“Protecting senior investors has long been a top priority for the Corporation Commission,” Arizona Corporation Commission Chairman Bob Burns said in a news release.

“Early detection and reporting of financial exploitation are critical to help prevent elder financial abuse and the devastating financial and emotional impacts that ensue.”

Reference: Queen Creek Independent (September 16, 2019) “New Arizona law helps protect vulnerable adults, seniors from financial exploitation”

How Do I Find a Great Estate Planning Attorney?

“Estate planning is a critical part of financial planning, but something many Americans procrastinate about. Drafting a will and a health care proxy or power of attorney, maybe creating a trust, and maximizing your loved ones’ inheritances by minimizing taxes are all important matters you don’t want to leave to chance.”

Taking care of these important planning tasks will limit the potential for family fighting and possible legal battles, in the event you become incapacitated, as well as after your death. An estate planning attorney can help you avoid mistakes and missteps and assist you in adjusting your plans as your individual situation and the laws change.

Next Avenue’s recent article “How to Find a Good Estate Planner” offers a few tips for finding one:

Go with a Specialist. Not every lawyer specializes in estate planning, so look for one whose primary focus is estate and trust law in your area. After you’ve found a few possibilities, ask him or her for references. Speak to those clients to get a feel for what it will be like to work with this attorney, as well as the quality of his or her work.

Ask About Experience.  Ask about the attorney’s trusts-and-estates experience. Be sure your attorney can handle your situation, whether it is a complex business estate or a small businesses and family situation. If you have an aging parent, work with an elder law attorney.

Be Clear on Prices. The cost of your estate plan will depend on the complexity of your needs, your location and your attorney’s experience level. When interviewing potential candidates, ask them what they’d charge you and how you’d be charged. Some estate planning attorneys charge a flat fee. If you meet with a flat-fee attorney, ask exactly what the cost includes and ask if it’s based on a set number of visits or just a certain time period. You should also see which documents are covered by the fee and whether the fee includes the cost of any future updates. There are some estate-planning attorneys who charge by the hour.

It’s an Ongoing Relationship. See if you’re comfortable with the person you choose, because you’ll be sharing personal details of your life and concerns with them.

Reference: Next Avenue (September 10, 2019) “How to Find a Good Estate Planner”

What is Michigan Doing to Combat Elder Abuse?

“The state’s Elder Abuse Task Force unveiled a uniform investigative and reporting model for Michigan law enforcement to use, when investigating suspected mistreatment of older residents.”

The Michigan uniform investigative and reporting form will be sent to police departments by state law enforcement associations. They will also receive a list of best practices for elder abuse investigations and videos to assist in training on those best practices, according to The Detroit News’ recent article, “Mich. task force rolls out new elder abuse reporting form.”

“People are not getting caught and this is one of the reasons,” Attorney General Dana Nessel said at a press conference announcing the initiative Tuesday. The model’s development is part of the ongoing work of the Elder Abuse Task Force established this year.

The Attorney General remarked that the form will bring some clarity to what can be, a complicated investigation. Law enforcement must look for signs of physical abuse or neglect, as well as financial evidence from banks, legal documents and purchases.

“People will know now that law enforcement is really paying attention to crimes that earlier, it wasn’t that they didn’t care about, it was that they needed assistance in identifying these crimes,” Nessel said. “Now people know that they’re watching these types of offenses.”

Michigan doesn’t have a specific elder abuse statute, so many elder abuse cases are investigated using a standard police report form that looks to establish whether the suspected crime could fall under the vulnerable adult statute, said Assistant Attorney General Scott Teter, division chief for the department’s Financial Crimes Unit.

“It’s a very complex crime,” Teter said. “There’s not a lot of teaching in the police academy on it.”

The program helps to create best practices across the state for the investigation and prosecution of elder abuse, according to Michigan State Police Director Joe Gasper. He said that it’s similar to a standardized form created in 1994 to help law enforcement investigating domestic violence cases.

“The form aids in identifying not only physical abuse but financial abuse,” Gasper said. “This will be a good foundation for all law enforcement to follow.”

The new form will prompt officers to identify items that may qualify a person as a vulnerable adult, like if they need assistance walking, cooking, bathing, driving, or taking medication. Officers will use a checklist for potential signs of physical risks, like bodily injury, dehydration, soiled conditions, bad odors or malnutrition. The form also requires officers to find out if a senior is at risk of financial harm through a “parasitic” caregiver, poor care, the person controlling the victim’s bank account, or through legal provisions that remove an individual’s decision-making capacity, such as guardianships, conservatorships or power of attorney.

Among the evidence collected in a financial harm investigation are copies of all legal documents, financial statements, vehicle titles and photographs of the senior’s living conditions.

Reference: The Detroit News (September 10, 2019) “Mich. task force rolls out new elder abuse reporting form”

Why is ADR So Popular with Divorcing Couples?

“Where litigation requires multiple court dates and a formalized process to obtain a judge’s determination of disputes, alternative methods, such as mediation and arbitration, offer a more customized path to dissolving a marriage.”

When a couple divorces, there are disputes that must be resolved, such as the division of property, child custody arrangements, child support and alimony. Resolving these issues in a divorce can happen without lengthy and expensive litigation. More couples are now going with alternative dispute resolution (ADR) to end their marriages.

The Philly Voice’s recent article, “Why divorcing couples are choosing alternative dispute resolution over litigation” explains that these approaches both share the benefit of being more flexible, faster and less expensive than litigation. Obviously, prior to any action, talk to an attorney.

Mediation lets the parties work through the issues in a more informal setting. However, this requires open communication, candor and a willingness to compromise. Arbitration is more formal and still allows the parties to streamline the decisionmaker’s role, allowing a faster resolution than a trial.

In mediation, the two parties to the divorce select a mediator who supervises direct negotiation. Parties may appear with or without a lawyer. The mediator guides the parties to reach a resolution. Mediation works best when the parties can talk openly or are willing to be conciliatory. It can even help to establish the basis of the post-dissolution relationship. When an agreement is reached, a written Memorandum of Understanding is prepared by the mediator. You can talk to you own attorney to assist in finalizing a formal written agreement.

Mediation allows for very customized solutions, since the negotiation isn’t bound by statute or case law, as it would be in litigation. Select a mediator who is professional, patient, a good communicator and experienced in these matters. The parties must develop trust with the mediator, so they can candidly talk about the needs and concerns in settling their divorce.

Arbitration lets divorcing spouses determine how formal or informal a process to use. It also has the advantage of confidentiality. However, unlike mediation, arbitration is more like litigation. The parties choose an arbitrator and work with their own counsel to prepare for a hearing. Just like a trial, each side presents documents, witnesses and makes arguments. The arbitrator then makes decisions concerning the divorce, applying the law to the specific facts. Note that an arbitrator’s decisions are final and typically not reviewable by a court.

Divorces can take several years to travel through the courts, and trials are public hearings. The parties also have no say regarding which judge is assigned to the case. The litigation process can drag on, and it can be stressful, expensive, and the results can be unfavorable or unexpected. Trials are also long and tedious.

Talk to an attorney about ADR options. For the many American seniors who make up the wave of “gray divorces,” ADR may be a wiser and gentler way to end a marriage of many decades. You should also coordinate your matrimonial break up with your estate planning attorney. There may be financial and legal matters that have a direct impact on your estate plan.

Reference: Philly Voice (September 12, 2019) “Why divorcing couples are choosing alternative dispute resolution over litigation”

How Does a Federal Court Decision on The Department of Veterans Affairs Impact Vets?

“The Department of Veterans Affairs must reimburse veterans for emergency medical care at non-VA facilities, a federal appeals court ruled Monday—a decision that could be worth billions of dollars to veterans.”

The U.S. Court of Appeals for Veterans Claims said the VA has been wrongfully refusing to reimburse veterans, who sought emergency medical care at non-VA facilities, MSN reports in its recent article, “Court rules VA must pay veterans' ER bills, a decision that may be worth billions to vets.” The Court also struck down the VA regulation that blocked those payments.

"All of this is unacceptable," said the ruling, which ordered the VA secretary to "re-adjudicate these reimbursement claims."

Plaintiffs' attorneys say that, based on past estimates by the VA, the department is now responsible for between $1.8 billion and $6.5 billion in reimbursements to hundreds of thousands of veterans who’ve filed or will file claims between 2016 and 2025.

Former Coast Guardsman Amanda Wolfe, who is one of the plaintiffs in the case, told NBC News "I'm just overjoyed. I think it means change, it means that veterans don't have to be afraid of receiving care, emergency care. They can have that sense of security that sense of peace knowing they are covered if they have emergency care."

"I served side by side with some of these veterans who were impacted and to think that this is going to make a difference for them is what is most important to me."

In 2015, the court struck down a previous version of the internal VA rule that denied coverage for an emergency claim when another form of insurance covered, even a small portion of the bill. The court said the regulation violated a 2010 federal law.

The recent ruling held the department violated the same federal law with its revision of the reimbursement regulation. The Court said the new rule, issued last year, actually created another issue for vets, by forbidding the VA from reimbursing medical expenses for emergency services at non-VA facilities.

In 2016, Wolfe went to the ER because her appendix was about to burst. After a quick recovery, she figured she was okay because she had two kinds of insurance, a private plan she paid for and her VA benefits.

Wolfe’s private insurance covered most of the more than $20,000 bill for her hospital stay. However, six months later, the VA denied her claim for the remaining $2,500. This put her in an unexpected financial bind. She paid off the bill in 2017 but has been fighting for reimbursement ever since. This year, her case made it all the way to the Court of Appeals for Veterans Claims.

A VA's Inspector General released a report in August that found that in just one recent six-month period, the VA left roughly 17,400 veterans to pay out-of-pocket for $53 million in emergency medical treatment the government should have covered.

"The Court's decision rights a terrible injustice and its order ensures that veterans who were unjustly denied reimbursement for critical emergency treatment at non-VA facilities will finally be reimbursed," said Bart Stichman, executive director of the National Veterans Legal Services Program, which represented Wolfe in the case. "It is a hard-won victory for hundreds of thousands of veterans."

Reference: MSN (September 11, 2019) “Court rules VA must pay veterans' ER bills, a decision that may be worth billions to vets”