Williamsburg Trusts & Estates

Location, Location, Location - Health Care Costs in Virginia

It's no secret that the tab for health care in America is soaring. But did you know that what you pay for health care depends--heavily--on where you live?

A cup of coffee will cost you just a bit more or a bit less depending on where you get it. Interestingly, however, the cost isn’t necessarily dependent on how good the coffee tastes. No, when it comes to geography and what you pay for something, remember the three things that determine real estate prices:  location, location and location. And the effect of location on medical care and old-age expenses can be significant.

Planning for your old-age, or for the needs of an elderly loved one, is partly a test of geography in the health care economy. In fact, it’s more important to understand this fact of life now more than ever.

For some fresh analysis of this familiar topic, you might want to take a look at a recent Morningstar article titled “Health-Care Costs: Why Your Location Really Matters.” The article speaks to the “numbers” and to international comparisons. Regardless, the key for you to note is not the economics or even the politics behind this issue, but rather the very real circumstances you and your loved ones may be facing now or in the future. So, how will you plan for the geography of medical expenses?

You can learn more about this topic as well as other strategies on our website under the tab entitled:  elder law planning in Virginia . Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning

Reference: Morningstar (January 11, 2013) “Health-Care Costs: Why Your Location Really Matters”

Is Your (Business) Succession Secure in Virginia?

Do you have the ego to deal with succession planning? The reality is that when you start down this path, it is the first step towards accepting that the business is not all about you anymore. You have to be ready to let go of your vision, your convictions, and anything else that was firm while you were in charge. The next generation has to have the room to experiment, develop convictions and make rules. It takes an enormous amount of strength to step back and stay back.

“Succession” seems to be such an old concept – one that invokes kings, not necessarily entrepreneurs. When it comes to business, however, succession is perhaps the most fundamental concept and object of planning. “In every end is the beginning.” No truer words could be written when it comes to planning the successful succession of a small business.

If business succession is on your mind then you will want to read a recent Forbes article titled “How to Succeed At Succession.” Before you read the original article, remember this – the questions are as important (if not more so) than the answers.

So, what kinds of questions should you be asking yourself? Here are a few to ponder:  Do you want the business to live on past you? Who ought to lead it? What is the business in the context of your own estate or the estates of your partners? Do you have an exit strategy in the event of retirement, disability or death?

In the end, make sure you consult appropriate legal counsel. This area of planning is not a do-it-yourself project.

You can learn more about this topic as well as other strategies on our website under the tab entitled:  business planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning

Reference: Forbes (January 15, 2013) “How to Succeed At Succession”

New Tax Laws May Adversely Impact Charitable Giving in Virginia

There is much confusion and misinformation about The impact of the “fiscal cliff” tax law on charitable giving. Witness this tweet from Ari Fleischer, former press secretary for President George W. Bush, quoted in an article he wrote that was published in The Wall Street Journal on Friday, January 4:

“I increased donations to charities in 2012. This deal limits my deductions so I, & many others, will likely donate less in 2013.”

It’s quite fortunate that there were relatively few casualties in the fiscal cliff deal. In fact, some areas of the tax law became better, or at least safer, because the laws are now more predictable.

Nonetheless, there were certain casualties and, according to a great many writers, charitable giving and donors themselves were cut a raw deal.

The fiscal cliff deal reintroduces the Pease Amendment, so named after former Congressman Donald Pease. Forbes recently wrote about this in an article titled “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks.” Indeed, as you can tell by the title of the article, the Pease Amendment is just one more of those “stealth taxes” working to decrease deductions rather than increase taxation. In this case, for example, this stealth tax chips away at the charitable deductions for high-earners.

For taxpayers with adjusted gross incomes (AGI) above $250,000 (or above $300,000 for joint filers), they will see an itemized deduction limitation kick in that is the lesser of (a) 3% of the adjusted gross income above the applicable amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year.

Among other itemized deductions, this hits the charitable deduction, deductions for mortgage interest, deductions for various lower level taxes, and so on with some specific exclusions. That can start to really add up in a year when you happen to have an increase in your AGI.

So, the tax game has gotten a bit more complex, and charitable giving has fewer tax deduction rewards for some individuals these days.

You can learn more about this topic as well as other strategies on our website under the tab entitled:  charitable planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. 

Reference: Forbes (January 9, 2013) “Pease Limitation Puts A Lid On Itemized Deductions For Wealthy Folks”

The Variables of Valuing Your Business in Virginia

What he did not know when he first tried to buy his own repair shop several years ago was how difficult it would be to pin down shop owners on the actual value of their businesses. Few owners seemed even to know how to make a good guess. “One guy I talked to about selling said the business had to be worth $1 million, because that’s what he needed to retire on,” Mr. Ritz said. “Another was like, ‘Well, let me see, my alimony is $4,500 a month. ... ’ It was ridiculous.”

What is your business worth to you? What is your business worth to a potential buyer? These are two entirely different questions. As a business owner, you should be able to answer both questions fully and truthfully. In other words, you should know the value of your greatest asset and boldest venture, both personally and on the open market, because there may come a day when you need to sell or pass down the business. Knowing the numbers today can also help make you a better manager. 

Valuations are difficult for business owners because there are so many variables to the process. That said, the ability of a business owner to fully understand their business from the outside – as the owner of an asset or as a prospector on the market – rather than from within the immediacy of running the business, is fundamentally important to managing the business well today and in the future. According to The New York Times, business owners are increasingly coming to terms with these issues. Their recent article, “Do You Know What Your Business Is Worth? You Should,” suggests that while most business owners put off getting a valuation until a sale is imminent, many are starting to treat the act of valuing their business as an integral part of running it. For example, valuations -- whether performed by your accountant on an annual basis or with the assistance of sophisticated software tools -- can help business owners pinpoint management practices that may be undermining business value.

Isolating those variables, and acting on them, can drive your valuation higher.

Tax time is a great opportunity for you as a business owner to crunch numbers with your tax adviser and start getting a handle on the true value of your business ... and some ideas for improvement.

You can learn more about this topic as well as other strategies on our website under the tab entitled:  business planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: The New York Times (January 30, 2013) “Do You Know What Your Business Is Worth? You Should”

How to Wisely Gift the Family Home in Virginia

Before the days of long term care planning and the necessity for other complex tax strategies, children simply moved into the family home and took over the master bedroom after their parents died. Unfortunately, it's not that easy anymore. There are nearly half a dozen ways to give a home to your child. And a couple are tax-free. Only a very few avoid penalties for Medicaid.  In order for the transaction to work properly, you've got to plan ahead.

For many families, the family home is the single most important estate asset, imbued with all the memories, hopes and dreams that make it irreplaceable. Family homes also may be the most valuable estate assets, and estate taxes may complicate plans for passing them along to the next generation. If this is your goal, however, don't give up. There are tax-savvy strategies to make it happen, but they require you to plan ahead.

For a good overview of this topic, turn to a recent article in SmartMoney, “Passing Your Home to Heirs.” The article is pretty easy reading on a fairly complex subject, and includes a run-down on some effective strategies: from the simple bequest in your will, to variously structured sales, to more sophisticated trust-based strategies.

Which planning strategy will work best for you depends upon your unique circumstances. The article completely overlooks the problems one needs to address when planning for long term care needs but that likely to be related to the individuality this type of planning requires.  Just know that this definitely is not a do-it-yourself undertaking. There are many factors to be considered and legal land mines to avoid. If passing a family home to your heirs is one of your goals, be sure to discuss this with your estate planning attorney, who can guide you to implement a strategy that will work for you.

You can learn more about this topic as well as other strategies on our website under the tab entitled:  elder law planning in Virginia . Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

 Reference: SmartMoney (February 5, 2013) “Passing Your Home to Heirs”

The Painful Legal Path to Disinheritance in Virginia

Disinheriting someone can be a way to haunt a family member from beyond the grave, but there may be pragmatic reasons involved.

When it comes to estate planning, most people focus on the distribution of their assets to heirs ... but some are more concerned with not distributing assets to certain heirs. If you are among them, be forewarned that disinheritance, for whatever reasons, can lead to hurt feelings and even contentious legal battles.

A recent article from Reuters, “Disinheriting someone is not easy,” illustrates some of the many reasons people choose not to leave assets to certain heirs. The reasons are as varied as the assets involved, and may include anything from hard feelings within a family to a desire to "equalize" wealth among adult children with differing degrees of financial success. 

If you choose to disinherit someone, realize that some classes of heirs have legal rights that cannot be violated, such as spouses and minor children. Reuters explains it well:

Just as you cannot tell a divorce judge that you refuse to split assets or pay alimony, you cannot leave your surviving spouse's house and all of the money to a child or some other family member. Using language to disavow and disinherit your spouse will not help ...  the spouse can waive the will and receive whatever he or she is entitled to under state law. Minor children are also protected by the courts. Whatever financial support the minor is entitled to receive, he or she will get, assuming the money is available.

Regardless of the reason(s) you may have to disinherit someone, be sure to discuss them with your estate planning attorney. Properly drafted legal documents can help ensure your wishes are followed, as well as prevent unintended consequences such as hurt feelings or court battles. Simply put, “disinheritance” is not necessarily an ugly word, but it can turn ugly even when you do it for the right reasons if not done properly.

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: Reuters (January 31, 2013) “Disinheriting someone is not easy”

Diagnostic Clarity to Cognitive Disorders in Virginia

When Dr. Frances refers to the Diagnostic and Statistical Manual of Mental Disorders (DSM5) as “a guide, not a bible,” and urges skepticism about some of its diagnoses, he is advocating an approach that patients and families should probably bring to any medical decision.

Not all of the truly important medical developments come out of the laboratory, and in fact, many of the most noticeable shifts felt by doctors and patients alike spring from committee. Manual of Mental Disorder IV (DSM-IV), the utterly necessary reference book and dust-gatherer of psychologists, doctors, insurance companies, bureaucrats, and lawyers alike. DSM-IV chronicles known and diagnosable psychological disorders.

For seniors, the new disorder making the rounds is “mild cognitive disorder.” This diagnosis is an attempt to bring to psychiatry the same awareness to levels of cognitive senility that medical doctors know all too well and yet still understand too little. If the DSM5 is published as is, and becomes the go-to reference, then we’re likely to see many more elderly diagnosed into categories that have only just now been created.

For families taking care of elderly loved ones, and those getting on in years themselves, it’s useful to understand the basis for any diagnosis made by their doctors. Regardless, the takeaway would be to get your legal ducks-in-a-row before a future diagnosis diminishes the legal capacity to make proper estate planning decisions.

Reference: The New York Times – The New Old Age Blog (January 25, 2013) “Time to Recognize Mild Cognitive Disorder?”

Tax Savings for Supporting Your Elderly Parent in Virginia

If you supported one or both of your parents financially last year, Uncle Sam may be willing to share the cost when you file your 2012 tax return.

It’s officially tax time, and if you have been caring for an elderly parent you may find that Uncle Sam can help with some of those costs through favorable tax treatment. Depending upon your circumstances, you may be able to claim your parent as a dependent, take a dependency care tax credit, deduct a portion of their medical expenses or get some combination of these tax breaks.

Forbes offers guidance on whether you might qualify in a recent article “How To Claim Tax Breaks For Supporting Your Parents." If you think you may qualify, consult an accountant or tax professional to maximize your tax savings.

Sadly, caregiving frequently also means managing end-of-life care ... and the attendant expenses. While it may be difficult to focus on financial matters during these stressful times, tax breaks can help extend available resources. Of course, the first step is to determine which expenses qualify and to what extent. Expenses that frequently apply to people with advanced illness include health insurance premiums not paid through work, deductibles, co-pays, medication, alternative care, medical supplies such as bandages, dental care, Medicare B premiums, lodging while traveling for care, and transportation costs. The IRS has a very detailed list of what is and isn’t deductible in Publication 502. You can refer to this publication for details, as well as to another excellent Forbes article, “Save Money On Taxes At The End Of Life -- How And Why It Matters.”

Again, be sure to consult your accountant or tax professional if you think you may have qualifying expenses. The tax savings could be significant, and could help ease an otherwise difficult burden.

References: Forbes (January 29, 2013) “How To Claim Tax Breaks For Supporting Your Parents”

Forbes (February 4, 2013) “Save Money On Taxes At The End Of Life -- How And Why It Matters”

Wealth Transfer ala Goldilocks – How Much IS “Just Right?

Wealthy families got a holiday gift on Jan. 1, when Congress agreed on permanent estate-tax rules that are much more generous than many financial planners had expected. Some aren't celebrating, however. Instead, they are grappling with new questions about how best to set up trusts for their heirs—while keeping a measure of control over their wealth.

Sometimes there really can be too much of a good thing. Oftentimes, however, you have to be in the right position to see it. For example, many parents have come to believe that $10.5 million is just way too much of a good thing to leave as inheritance to their children.

None other than the venerable Wall Street Journal explored this subject in an article appropriately titled “Can You Trust Your Kid With $5.25 Million?”

As you likely are well aware by now, the recently enacted American Taxpayer Relief Act of 2012 (ATRA) sets the unified estate and gift tax exemption at $5.25 million per taxpayer (with a nearly “automatic” $10.5 million per married couple). Using certain estate planning “tools” (e.g., to make “discounted” wealth transfers) you can do a great deal better than that, too.

So, what do you think about leaving a large inheritance to your progeny? By default in most jurisdictions, your children would inherit their inheritance outright without any restrictions, guidance or protection at age 18 (or immediately if already older than age 18). If that is not enough motivation to make proper estate plans now, then little may do the trick.

Proper estate planning means providing the legal means to both protect the inheritance “for” and “from” your descendants. Have you ever noticed that some children “grow up” and others just “get older”? Accordingly, your planning should reflect the unique needs of each of your children. While you are at it, perhaps you might want to make provisions directly for your grandchildren. Many grandparents say had they known how much fun grandchildren are, they would have had them first!

Bottom line: only you can decide “how much is enough” when it comes to the financial legacy you leave downstream to your loved ones. Only you can make the

married couple). Using certain estate planning “tools” (e.g., to make “discounted” wealth transfers) you can do a great deal better than that, too.

So, what do you think about leaving a large inheritance to your progeny? By default in most jurisdictions, your children would inherit their inheritance outright without any restrictions, guidance or protection at age 18 (or immediately if already older than age 18). If that is not enough motivation to make proper estate plans now, then little may do the trick.

Proper estate planning means providing the legal means to both protect the inheritance “for” and “from” your descendants. Have you ever noticed that some children “grow up” and others just “get older”? Accordingly, your planning should reflect the unique needs of each of your children. While you are at it, perhaps you might want to make provisions directly for your grandchildren. Many grandparents say had they known how much fun grandchildren are, they would have had them first!

Bottom line: only you can decide “how much is enough” when it comes to the financial legacy you leave downstream to your loved ones. Only you can make the arrangements to help ensure such inheritance is a blessing and not a curse. Also, remember to leave an inheritance to your favorite charity or charities, as well.

You can learn more about this topic as well as other strategies on our website under the tab entitled:  estate tax planning in Williamsburg, Virginia . Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. 

Reference: The Wall Street Journal (January 18, 2013) “Can You Trust Your Kid With $5.25 Million?”

Regretting Your Large 2012 Gifts in Virginia?

After taking advantage of generous transfer taxes in a mad rush last year, and then seeing the benefits go largely unchanged in the U.S. budget deal, many donors may be looking for ways to take back their gifts.

So far, so good? Has 2013 been as scary as you anticipated? For example, if you gave away large portions of your personal fortune before the ball fell in Time’s Square, are you having donor’s remorse?

If you are suffering from donor’s remorse, then you might want to read a recent article on Financial Advisor - Private Wealth titled “After Budget Deal: Donor’s Remorse.”  The article addresses any interest you may have in undoing a large gift. In reality, whether you can undo your gift will hinge on precisely which strategies you employed and the language used. Be sure to consult with your professional advisors on this.

That noted, however, 2012 was still a good year to give and most likely will do wonders for your overall estate plan. Don’t be too hard on yourself. After all, unless you had a working crystal ball, who knew how the fiscal cliff deal would go down? Just think if the transfer tax laws had reverted to their default settings. Your savvy gifting would have been prescient, to say the least.

Whether you currently suffer from donor’s remorse or not, there always is a lesson to be learned from every life experience. Such was the run-up to the fiscal cliff deal. What, then, are your takeaways going forward?

You can learn more about this topic as well as other strategies on our website under the tab entitled:  asset protection in Williamsburg, Virginia . Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: Financial Advisor – Private Wealth (January 11, 2013) “After Budget Deal: Donor’s Remorse”