Category : News

Take These Three Steps When Your Child Turns 18

If your child has reached the teenage years, you may already feel as though you are losing control of her life. This is legally true once your child reaches the age of 18 because then the state considers your child to be an adult with the legal right to govern his or her own life.

Up until your child reaches 18, you are absolutely entitled to access your child’s medical records and to make decisions regarding the course of his treatment. And, your child’s financial affairs are your financial affairs. This changes once your child reaches the age of 18 because your now-adult child is legally entitled to his privacy and you no longer have the same level of access to or authority over his financial, educational and medical information. As long as all is well, this can be fine. However, it’s important to plan for the unexpected and for your child to set up an estate plan that at least includes the following three crucial components:

1. Health Care Proxy with HIPAA Release

Under the Health Insurance Portability and Accountability Act, or HIPAA, once your child turns 18, the child's health records are now between the child and his or her health care provider. The HIPAA laws prevent you from even getting medical updates in the event your child is unable to communicate his or her wishes to have you involved. Without a HIPAA release, you may have many obstacles before receiving critically needed information, including whether your adult child has even been admitted to a particular medical facility.

Should your child suffer a medical crisis resulting in the child's inability to communicate for him or herself, doctors and other medical professionals may refuse to speak with you and allow you to make medical decisions for your child. You may be forced to hire an attorney to petition to have you appointed as your child’s legal guardian by a court. At this time of crisis, your primary concern is to ensure your child is taken care of and you do not need the additional burden of court proceedings and associated legal costs. A health care proxy with a HIPAA release would enable your child to designate you or another trusted person to make medical decisions in the event your child is unable to convey his or her wishes.

2. Durable Power of Attorney

Like medical information, your 18-year-old child’s finances are also private.  If your child becomes incapacitated, without a durable power of attorney you cannot access the child's bank accounts or credit cards to make sure bills are being paid. If you needed to access financial accounts in order to manage or resolve any problem, you may be forced to seek the court’s appointment as conservator of your child.

Absent a crisis, a power of attorney can also be helpful in issues that may arise when your child is away at college or traveling. For example, if your son is traveling and an issue comes up where he cannot access his accounts, a durable power of attorney would give you or another trusted person the authority to manage the issue. An alternative may be to encourage your child to consider a joint account with you.  However, this is rarely recommended because of the unintended consequences for taxes, financial aid applications, creditor issues, etc.

3. Will

Your child owns any funds given to him or her as a minor or that he or she may have earned. In the catastrophic event that your child predeceases you, these assets may have to be probated and will pass to your child’s heirs at law, which in most states would be the parents. If you have created an estate plan that reduces your estate for estate tax or asset protections purposes, the receipt of those assets could frustrate your estate planning goals. In addition, your child may wish to leave some tangible property and financial assets to other family members or to charity.

While a will may be less important then the health care proxy, HIPAA release or durable power of attorney, ensuring that your child has all three components of an estate plan can prevent you, as a parent, from having to go to court to obtain legal authority to make time-sensitive medical or financial decisions for your child.

If you have a child (or grandchild) who is approaching adulthood, talk to your elder law attorney about having the child execute these three crucial documents. 

How Medicare and Employer Coverage Coordinate

Medicare benefits start at age 65, but many people continue working past that age, either by choice or need. It is important to understand how Medicare and employer coverage work together.

Depending on your circumstances, Medicare is either the primary or secondary insurer. The primary insurer pays any medical bills first up to the limits of its coverage. The secondary payer covers costs the primary insurer doesn't cover (although it may not cover all costs). Knowing whether Medicare is primary or secondary to your current coverage is crucial because it determines whether you need to sign up for Medicare Part B when you first become eligible. If Medicare is the primary insurer and you fail to sign up for Part B, your eventual Medicare Part B premium could start going up 10 percent for each 12-month period that you could have had Medicare Part B, but did not take it.

Here are the rules governing whether Medicare coverage will be primary or secondary:

  • If your employer or your spouse's employer has 20 or more employees, your employer's insurance will be the primary insurer and Medicare is the secondary payer. If your employer or your spouse's employer has fewer than 20 employees, Medicare will be the primary insurer and your employer's insurance will be the secondary insurer.
  • If you are retired and still covered by your employer's group health insurance plan, Medicare pays first and your former employer's plan pays second.
  • If you receive both Social Security Disability Insurance and Medicare and your employer has 100 or more employees, your employer's insurance pays first. Some employers are part of a multi-employer plan and if at least one employer in that plan has 20 employees or more, the employer's insurance pays first. If your employer has fewer than 100 employees, Medicare will pay first.
  • If you have end stage renal disease (ESRD) and are in the first 30 months of Medicare coverage of ESRD, your employer's plan pays first. After the first 30 months, Medicare becomes the primary insurer. It does not matter how many employees your employer has.
  • If you are self-employed and have a group health plan that covers yourself and at least one other person, Medicare pays first. Note that if you are self-employed, you may be able to deduct Medicare premiums from your income taxes by including the premiums in the self-employed health insurance deduction.

If your employer's insurance is the primary insurer, the employer must offer you and your spouse the same coverage that it offers to younger employees. It also cannot deny you coverage, cancel your coverage once you become eligible for Medicare, or charge you more for premiums, deductibles, and copays.

Relief From Medicare's Part B Late-Enrollment Penalty Offered to Some

Medicare is offering relief from penalties for certain Medicare beneficiaries who enrolled in Medicare Part A and had coverage through the individual marketplace. For a short time, these individuals will be able to enroll in Medicare Part B without paying a penalty for late enrollment.

Individuals who do not enroll in Medicare Part B when they first become eligible pay a stiff penalty. For each year that they put off enrolling, their monthly premium increases by 10 percent — permanently. Some people with marketplace plans – that is, plans purchased by individuals or families, not through employers — did not enroll in Medicare Part B when they were first eligible. Purchasing a marketplace plan with financial assistance from the Affordable Care Act (aka Obamacare) can be cheaper than enrolling in Medicare Part B. However, Medicare recipients are not eligible for marketplace financial assistance plans. And because marketplace plans are not considered equivalent coverage to Medicare Part B, signing up late for Part B will result in a late enrollment penalty.

Although the Centers for Medicare and Medicaid Services (CMS) sent notice to individuals who had both marketplace plans and Medicare, it may have been too late. Therefore, CMS is allowing individuals who enrolled in Medicare Part A and had coverage through a marketplace plan to enroll in Medicare Part B without a penalty. It is also allowing individuals who dropped marketplace coverage and are paying a late enrollment penalty for Medicare Part B to reduce their penalty. To be eligible for the relief, the individual must:

  • Have an initial Medicare enrollment period that began April 1, 2013 or later; or
  • Have been notified of a retroactive premium-free Medicare Part A award on October 1, 2013 or later.

This offer is available for only a short time. To be eligible for the relief, individuals must request it by September 30, 2017. Individuals who are eligible should contact Social Security at 1-800-772-1213 or visit their local Social Security office and request to take advantage of the “equitable relief.”

For more information, go here: https://www.cms.gov/Medicare/Eligibility-and-Enrollment/Medicare-and-the-Marketplace/Downloads/Limited-Equitable-Relief-Fact-Sheet.pdf.

Are Trusts Still Useful If the Estate Tax Is Repealed?

With Republicans in control of Congress and the presidency, there is talk of eliminating the federal estate tax.  In 2017 the tax affects only estates over $5.49 million, meaning that for more than 99 percent of Americans, it's already been repealed.  With no estate tax, do you still need a trust? While trusts can be used to shelter assets from the estate tax, trusts have many other valuable estate planning uses.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” The following are some of the benefits of trusts.

  • Avoiding Probate. One of the biggest benefits of a trust is avoiding the probate process. Probate is the process of administering and settling an estate after someone dies. It can be a costly and time-consuming process. Even with small estates, beneficiaries may not have access to estate funds until a will is filed and an executor appointed. A trust gives beneficiaries immediate access to trust funds. If you have property in multiple jurisdictions, a trust can be especially beneficial in avoiding more than one probate proceeding. Also, probate is a public process—anyone can access court records–while assets distributed in a trust are private.
  • Protection for Disability. Another benefit of a trust is to provide protection if you become disabled. If you become incapacitated, the trustee can manage your finances without the need to go to court and get a conservatorship or guardianship.
  • Control. A trust allows you to specifically detail how you want to distribute your assets. For example, you can choose to dole out benefits in small amounts if you don't want your beneficiaries to receive all your assets at one time. You can also direct how funds in the trust can be spent on a beneficiary. If you have property, the trust can specify who has the right to use the property, whether it can be sold, and how proceeds should be distributed.
  • Protection from Creditors. Certain types of trusts can be set up to protect beneficiaries from creditors. A properly structured trust can ensure that creditors cannot reach trust funds. This can be helpful if, for example, your intended beneficiary divorces or is the target of a lawsuit.
  • Providing for a Child with Special Needs. If you have a child with special needs, a trust is particularly important. A special needs trust allows a beneficiary with special needs to receive inheritances, gifts, lawsuit settlements, or other funds without losing his or eligibility for government programs.

Trusts are just one possible part of an estate plan. To know if a trust is right for you, consult with your attorney. 

 

 

 

Owe Back Taxes? The IRS May Grant You Uncollectible Status

Sometimes seniors find themselves owing past-due federal taxes they cannot afford to pay.  Although notices from the IRS can be especially frightening, there are solutions. 

If the sum owed is less than $50,000, the IRS will accept monthly payments over five years. For example, if $6,000 is owed to the IRS, monthly payments of around $100 can be made. There are also laws in place that provide that persons unable to pay their taxes can be placed on Currently Not Collectible (CNC) status with the IRS and not have to pay their past-due income taxes. The IRS is generally very understanding and helpful towards seniors with lower incomes applying for currently not collectible status.

Seniors with especially low incomes can often obtain CNC status by simply phoning the IRS at the number on an IRS collection notice. You can ask the collector to file “53” on your case, which means filing IRS form 53 (only a collector or IRS official can do this). You will not need to file detailed financial paperwork. For example, a senior with a monthly income of $1,200 and rent of $600 obviously will have no extra income to pay any past-due taxes. 

However, you may be asked to complete a financial form that shows you do not have any surplus income after paying necessary monthly living expenses. This form, IRS 433-A, can be found here

Although it is rarely done, the IRS can garnish 15 percent of a senior’s Social Security for past-due income taxes. However, this garnishment will never happen without the senior being first notified.  The IRS will almost never garnish pensions and other retirement income. 

Tips on Applying for Uncollectible Status

Here are some guidelines and requirements for applying for CNC status:

  • The financial information supplied must prove to the IRS that the individual does not have any surplus income after paying their necessary monthly living expenses and that they have no significant additional assets.
  • Individuals may need to submit their bank statements along with this IRS financial statement and any other relevant financial documentation for review.
  • Look carefully at this web page http://www.taxdebthelp.com/hardship/requirements-uncollectible. At the bottom of the page are links to budget standards the IRS uses in determining whether a person qualifies for uncollectible status.
  • If you are going to apply by phone, carefully prepare a budget ahead of time that shows expenses within those budget standards that consume all your money so it is clear there is no extra money with which to pay taxes.
  • If applying by phone, the IRS collector might try to get you to say that you can pay something when you can’t.  Review on the IRS website the suggested budget numbers and national standards for where you live. Do not underestimate your expenses, which many people do.  If you fit within the criteria, you qualify for CNC status.

Once taxpayers are placed on CNC status, they will maintain this status for at least a year.  In the case of retirees, the status will likely be indefinite since retirement income and Social Security are constant and most retirees will not be working in the future. If an individual’s account keeps its CNC status until after the statute of limitations on the debt runs out, usually around ten years, the IRS will be permanently prevented from collecting the debt.

If you are unable to work something out with the IRS over the phone, you can contact the Taxpayer Advocate Service (TAS). This free government service ensures that every taxpayer is treated fairly and understands his or her rights. The TAS is an independent organization within the IRS, headed by the National Taxpayer Advocate. Each state has at least one Local Taxpayer Advocate who is independent of the local IRS office and reports directly to the National Taxpayer Advocate. 

To contact TAS, call (877) 777-4778 or see its website for a list of local TAS offices.

What About State Income Taxes?

 Not all states have procedures in place to put persons on uncollectible status for past-due state taxes owed. Federal law protects Social Security, pension, disability and VA benefits from garnishment by states for taxes owed. Unfortunately, not all state taxing agencies will tell seniors that their income is protected from garnishment; instead, they continue collection efforts. (Click here for information on a law Oregon enacted in 2015 to put an end to this practice.) 

If a senior’s bank account is garnished by a state tax collector, twice the amount of monthly Social Security deposited into the bank account is automatically protected from garnishment, no matter the source of funds in the account at that time. Federal banking regulations require a bank to determine an account into which Social Security is deposited and disregard any garnishment, including for past-due state taxes owed. If there are excess funds from exempt sources in the account, a claim of exemption would need to be filed with the state before the money could be released.

For more information, visit HELPS, a non-profit law firm formed to educate seniors and persons working with them about seniors' financial rights and to resolve tax, student loan and housing issues.  

 

Protecting Your Construction Business from Common Lawsuits

On June 13, 2017, Amy E. Stratton presented “Protecting Your Construction Business from Common Lawsuits” to members of the Center for Women & Enterprise.  She was able to share tips about ways to avoid some of the most common law suits in the residential and commercial construction field through comprehensive contract drafting and alternative dispute resolution.

Center for Women & Enterprise

Lecture at Rhode Island Center for Women & Enterprise

On May 10, 2017, Amy Stratton lectured to the budding entrepreneurs of the Rhode Island Center for Women & Enterprise about legal considerations for business owners. It was a great chance for Rhode Island business owners from diverse industries to learn about some common pitfalls relating to legal structure, contracts and business financing.

NAELA Conference

National Academy of Elder Law Attorneys

On April 27-28, 2017, Kristen Moonan and Amy Stratton attended the annual NAELA (National Academy of Elder Law Attorneys) conference in Boston, Massachusetts. They learned cutting edge planning techniques and shared planning strategies with elder law attorneys from around the country.

DVDs4Vets

DVDs4Vets

During the first three weeks of December 2016, Moonan, Stratton & Waldman, LLP assisted a local project called DVDs4Vets, which is collecting new and used DVD’s for distribution to local veterans’ homes and rehab facilities helping soldiers.

Estate Planning Basics

Estate Planning Basics

On Thursday, October 27, 2016, Kristen Moonan and Amy Stratton presented Estate Planning Basics to the residents of Capitol Ridge at Providence Assisted Living facility. The presentation gave residents a unique opportunity to ask questions about estate planning and probate without having to leave their home.