Estate Planning Bits

2009 tax strategy - now is the time to plan

In keeping with prior tradition, it is important to consider year-end tax planning prior to December 31st. So, here are this year’s tax savings opportunities. Maybe you can find something that can help you:

1. Purchase a car. State and local excise taxes that are paid for the purchase of a vehicle are potentially tax deductible. If you itemize your tax return, you may have the ability to include these taxes as additional deductions. In addition, there are significant tax credits available for energy efficient vehicles purchased before year end.


2. Energy credit for energy conservation. Purchasing insulation for your home that may not only save you money on your heating and air conditioning bills, but will also provide you with an energy-related tax credit. Keep in mind these are credits, not deductions. This means that the credit is a direct amount of money that will be returned to you in the form of an increased refund or lower tax bill.


3. Check gains and losses. You may wish to offset your gains with losses to the extent that you have any gains in 2009. If not, you may wish to sell assets before year end and take the tax loss, which may be utilized up to any gains, and if there are no gains, then up to $3,000.00 from other income for the year, with a carry-forward of the balance. Keep in mind that assets included in retirement plans are normally not tax deductible, so gains or losses are going to be taken on non-retirement plan assets.


4. Charitable deductions. Consider donating property, goods, and other assets, such as cash donations, stocks, bonds, etc. before year end. You may also consider making a 2010 donation in 2009, thus taking advantage of the deduction a year early. Payment of pledges for future obligations may also be made before year end, and these may also be charged to your credit card. By charging them in 2009, they become charitable deductions in this year even though you may not pay the charge card in the same year.


5. IRA Withdrawals. In 2009, it is not necessary to take a minimum required distribution from a retirement plan, thus allowing you to delay taxable withdrawals until the following year. The intent of this law was to allow your fund to accumulate more money for retirement, based on the downswing in the market. However, if you need the money, and if you have other obligations you wish to make, such as gifts or bills paying, consider reviewing the amount of taxable income anticipated for the year and take out only as much as necessary to maintain a low bracket for tax payments. Always be sure to consider the possibility that social security benefits will be taxable if the threshold for income is received based on your marital status.


6. Consider the child care credit or one for dependent care. In many cases, children may be supporting their parents, and they may need to sign a multiple support agreement, whereby the credit for the parent is rotated on an annual basis between multiple children. The credit is eligible for child care expenses as well as the expenses of caring for a disabled spouse or disabled adult who is dependent while you work or look for work.

While there are many other opportunities, these are a few that you can consider before the holidays occur, so there is ample time to attend to any payments, expenditures, or tax issues before December 31.

by: Hyman G. Darling, Esq.

529 Plans: computers and Internet in 2009-2010

Named for Section 529 of the Internal Revenue Code, 529 Plans allow taxpayers to both reduce their taxable estates and to earmark funds for the higher education of a family member. Earnings from 529 Plans are tax-free.

Funds contributed to 529 Plans are invested to pay for an individual’s college tuition, room and board, or other related expenses. Additionally, the American Recovery and Reinvestment Act (AARA,) (also known as the Stimulus Bill,) now permits computer technology and equipment, or Internet access and related services to be purchased for eligible students under a 529 Plan for 2009 and 2010. However, software designed for sports, games or hobbies does not qualify unless it is principally educational in nature.

In 2009, individuals can contribute up to $13,000 per year ($26,000 for a married couple) to 529 accounts without the requirement of submitting a gift tax return. Alternatively, up to $65,000 ($130,000 for a married couple) can be contributed in the first year of a five-year period, as long as there are no additional gifts to that same beneficiary over the same five-year period.

529 accounts can be a great way to move a sizable amount of money out of a taxable estate.

By: Todd C. Ratner, Esq.

Equal is not always fair when it comes to your kids & your estate plan

During my initial consultation with clients, we talk about providing for their children upon death. Many clients want to divide their assets equally among their children. In theory, this tends to make a lot of sense. However, in reality, treating your children equally is not always fair.

Oftentimes, issues such as how much the parents contributed to the education of one child, or whether or not a child took on the role of caregiver, thereby sacrificing time and salary, tend to be overlooked. Parents tend to wear rose-colored glasses when it comes to envisioning that their children will be able to work out any issues that may develop. In the event that these sensitive issues rise to legal battles, they can be divisive and devastating and to your family. Because of this, ongoing communication and careful planning can alleviate many of problems before they arise.

One planning solution that can add liquidity and flexibility to an estate is life insurance. This added liquidity can provide parents with the ability to distribute assets both creatively and practically. A “second-to-die” policy that pays off after both you and your spouse die may be a fairly inexpensive and optimal solution. Even better, a properly designed Irrevocable Life Insurance Trust would eliminate the life insurance from being estate taxable.

By: Todd C. Ratner, Esq.

Second parent adoptions in Massachusetts - allowing gay and lesbian couples to adopt the non-biological children of their relationship.

Second parent adoptions or “co-parent” adoptions have been allowed in the Commonwealth of Massachusetts since 1993. A second parent adoption, or often referred to as a “co-parent” adoption, allows the non-biological parent of a couple’s children to now enjoy the same legal rights and responsibilities of the biological parent. The second parent adoption gives the ability of unmarried couples to jointly petition for the adoption of children of the relationship, and is most common among gay and lesbian couples, this allows the biological and non-biological parent to be granted equal legal status, as it relates to the child or children.

In a traditional adoption, the biological parents must agree to terminate their parental rights in order for the adoption to go forward. That is not the case in a second parent adoption where the parties petition jointly for the adoption of the children.
In 1993, the Supreme Judicial Court of Massachusetts ruled that there is nothing in the Massachusetts Adoption Law that would prevent a non-biological parent from co-adopting his or her partner’s child. That the ruling was made by the highest court in the Commonwealth, and the decision is binding in all counties. Although you may notice some difference in the process from county-to-county or Judge-to-Judge, in general, couples can expect to follow the same substantive procedure.

The adoption process begins with the filing of an adoption petition and supporting paperwork. It is strongly advised that the couple use an attorney to assist them with this adoption process in these cases, as once the adoption petition and the supporting paperwork are filed, a criminal background check on all the adults in the household is required and completed. Additionally, the Court may require an in-home study, wherein the home is evaluated by a social worker to determine the suitability of your family for “the proper rearing of children.” This is conducted by the Department of Children and Families (DCF) formally known as the Department of Social Services (DSS.)

This may seem intrusive, but it is usually required to complete the process. ,Although, there are private agencies that are authorized by the Department of Children and Families to conduct the home studies and may be able to be retained by private payment to complete the home study, it still requires opening your home to inspection. It should be noted that as you may guess, there is often a substantial waiting time before DCF can get into the home.

The parties may seek a waiver of the home study, however, a waiver of the home study is not taken lightly by the Court. You and your partner can obtain information, letters of support, and affidavits attesting to the fact that you and your partner function as a family and will make good parents, but this alone may not be enough to waive the home study. It may seem counterintuitive that a biological parent who joins in the adoption process with the non-biological parent would have to go through a home study. However, the Courts normally follow the adoption process in a traditional fashion.

Your attorney can advise you as to whether or not the procedures or requirements instituted by the Court in the county where you and your family reside could be or should be waived. However, the Courts will grant the waivers within their own discretion and some may not follow the same rationale as others.

Once the petition is filed, the home study is satisfactorily completed, the CORI is returned and all background checks are also satisfactorily completed, the adoption unit in the Court will likely schedule a private hearing before the Court either in the Judge’s chambers or in a closed Court room in order to finalize the adoption.

The finalization of the adoption is generally a happy event where family and friends are invited to take pictures and celebrate the adoption of the child.

A second parent adoption is important because it grants the non-biological parent full legal rights regarding his or her child or children in a same sex relationship. It puts them at the same legal status as the biological parent. The adoption in and of itself does not change the legal relationship between the two parents, but it does give recognition and protection to both parents in the relationship to the children, especially in the event of a dissolution of the relationship, as the child would now be considered the legal child of both the biological and non-biological parent. Additionally, the child is now entitled to the benefits of the non-biological parent, such as health insurance, life insurance, and other lifetime benefits. The child, by law, may inherit upon the death of the non-biological parent as a result of the adoption, and in the absence of proper estate planning on the part of the parent, would inherit under the laws of intestate succession.

In regard to the parental rights of the parties, in the event of dissolution of the relationship, both parties would be entitled to custody and/or visitation with a minor child on its face. Each would be able to seek legal and physical custody as well as an appropriate parenting plan to allow time with the child or children.

If the child that is adopted is not biologically related to either party to the relationship, once the child is adopted by one of you, you still may petition for a second parent adoption. The process is essentially the same. Be wary, however, that many international adoptions do not allow married same-sex couples to adopt a child or for unmarried couples to jointly adopt a child abroad. If the goal is for the parties to complete an international adoption, it may be that one of you would have to adopt the child in the foreign county and then jointly adopt through a second parent adoption here in the United States.

by: Julie A. Dialessi-Lafley, Esq

Why do I need to file a gift tax return?

A federal gift tax return (Form 709) needs to be filed when you make a taxable gift. A taxable gift is one in which excess of the annual exclusion which in 2009 is $13,000 per donee per year is made. Therefore, until you gift $13,000 in total cash or other assets in any calendar year, a gift tax return is not required to be filed in most situations.

Keep in mind that if a gift of $13,000 is made to one person from another, there is no requirement to file the return. However, if in addition to this $13,000 gift, there is also a birthday present, anniversary present, or other gift, such as paying off a child’s credit card, then this is construed to be a gift, and therefore a gift tax return is required. However, until you give more than $1,000,000 in total gifts, above and beyond the annual exclusion gifts of $13,000, there is no gift tax due, although the return is required to be filed.

The IRS maintains the information in their files, and this is collated with your estate tax return when you die to determine the amount of gifts given during your lifetime, which may utilize some of your total estate tax credit, which is currently $3,500,000. A husband and wife may gift $26,000 to their child on an annual basis, and they are required to file a gift tax return, but they may split the gift as opposed to filing separate gift tax returns, thus requiring only one such form to be filed.

Again, the purpose of the requirement to file the return is to allow the IRS to have the information as to the amounts gifted during one’s lifetime, as these are offset at death. In the event that the total gift during your lifetime is a maximum of $1,000,000, and you die in 2009 with no more than $2,500,000, there will not be any federal estate tax due, as the total exemption of $3,500,000 captures your total assets.

It is also helpful to file a gift tax return in some cases, even when the threshold of $13,000 is not met. This is so that in the event that you need to file for Medicaid assistance, there is a paper trail of the amount of gifts made and the dates those gifts were made within the five year look-back period for Medicaid eligibility. Often times, the state department maintaining control over the Medicaid application process will consider a transfer from a parent to a child as a gift, but in other cases, the authorities may consider the transfer to be a trust or other similar type of technique. Therefore, if the transfer is not considered a gift, then the asset transferred will be construed to be property of the incapacitated parent, and thus, the asset will not be protected for Medicaid eligibility, regardless of the time-frame. When a gift tax return is filed, it is prima facie evidence that the transfer was made as a completed irrevocable gift, and therefore, the Medicaid authority may not reclassify the transfer as a non-gift.

Medication and the elderly - preventing dangerous mistakes

Medication errors are widespread among the elderly community. Many elders take on average of six (6) to eight (8) different prescriptions as well as over the counter medication. Oftentimes the elderly will not return to their primary doctor to have their dosage evaluated and modified when things change, opting instead to take the advice of loved ones. This is very dangerous.

The following procedures may facilitate the elderly in monitoring their medication:

• Make a list of all prescription medication and all supplements being taken.
• Provide this list to the doctor and pharmacist and have one on hand for emergencies. 
• Utilize the same Pharmacy to fill all prescriptions. Pharmacies keep a record of your prescribed drugs, and they will verify your doctor's instructions. Pharmacies will also inform you if certain foods or over the counter supplements will negatively interact with a prescription. 
• Dispense pills in a daily pill organizer box. 
• Have a family member or other adult be responsible to call or physically monitor the taking of medication

By: Todd C. Ratner, Esq.

Steve “Air” McNair truly erred – how proper estate planning would have saved his family both money and grief now

As a quarterback in the National Football League, Steve McNair reportedly earned in excess of $75 million dollars over his career. Notwithstanding McNair’s vast wealth and blended family, (as it has been reported that he had two children born out of wedlock,) McNair did not even have a basic will. Without a will in place, McNair died “intestate,” an therefore, state laws will determine who inherits his estate upon his death. As such, the following preventable issues will now have to be addressed:

Laws of Intestacy: According to Tennessee intestacy laws, McNair’s wife is only entitled to only one-third of the estate, and his children will be entitled to the remaining two-thirds. McNair may have intended that a greater percentage be provided to his spouse. As an aside, under the Commonwealth of Massachusetts intestacy laws, both McNair’s spouse and the children would be entitled to fifty percent of the estate.

Estate Taxes: McNair did not plan to shelter any portion of his estate from federal or state estate taxes. Consequently, the assets of his estate will ultimately be subject to both state and federal estate taxes, which will reduce the eventual distribution to his family. McNair failed to use the unlimited marital exemption and to yield the benefits of a Credit Shelter Trust.

Conservatorship: Since all of McNair’s children are under the age of 18, each mother will have to petition the court to be appointed legal conservator of their child’s inheritance.

No staggered distribution: When each child reaches the age of 18, their entire inheritance will be provided to them outright. It is often preferable to stagger the children’s distribution ages to a later point in time to ensure that they have the requisite financial wherewithal to handle such a large sum of money.

Probate: It appears that McNair owned property in Mississippi. If so, McNair’s family may have to probate his estate in both Tennessee and Mississippi, resulting in additional legal fees, costs and publicity.

In the event that Steve McNair had created an estate plan, he may have left more to his spouse, protected his children’s inheritance well beyond the age of 18, avoided the public scrutiny of his affairs, and saved his loved ones momentous money in legal fees, estate taxes and other costs.

By: Todd C. Ratner, Esq.

Driving and the elderly - how to take away the keys without damaging your relationship

Operating a motor vehicle requires quick reaction time and good judgment. Many elderly individuals will eventually become unable to drive as they lose the requisite ability to operate an automobile safely. With the support of family and professional caregivers, many people voluntarily stop driving. Others continue to drive, fearing that giving up their car means losing the independence that having a car provides.

If an elderly person who exhibits poor driving skills insists on driving, caregivers, friends and family members may need to take additional steps, including:

• Controling access to automobile keys
• Keeping the automobile out of sight
• Requesting a “do not drive” prescription from a doctor
• Disabling the car by removing the distributor cap or the battery
• Getting a driving evaluation from a certified professional. There are hospitals and driving schools in the Commonwealth of Massachusetts that perform driving evaluations. Locally, the Weldon Center for Rehabilitation, Driving Advisement Program, located at 233 Carew Street, Springfield, Massachusetts 01104, 413.748.6800 can be of assistance.

Driving an automobile can be a significant part of our self-image, and losing our freedom to drive can be one of the most difficult decisions to accept. Caregivers, friends and family members should avoid arguments about driving and not allow themselves to become the focus of the elderly person’s anger and frustration. It may be beneficial to blame the doctor or the police.

If the above strategies do not produce the intended results, and the elderly person continues to drive in an unsafe manner, anyone caring for or interacting with him/her, including the police, can notify the state department of motor vehicles (DMV) and the DMV can require a competency examination and corresponding road test.


by: Todd C. Ratner, Esq.

10 common estate planning pitfalls

1. Not having a Will: Personal wishes, whether written or oral, will most likely not be followed in the absence of a will. Without a plan, your assets will pass to your heirs according to your state’s laws of intestacy.


2. Not funding your revocable living trust: A property drafted trust will prevent putting your loved ones through the expensive, lengthy and emotionally draining court probate process. 


3. Failing to understand the impact of life insurance proceeds: Many people do not realize that life insurance proceeds are normally included in the estate of the deceased, which can result in approximately 50% of the proceeds going to the IRS instead of your intended beneficiaries. Depending upon the situation, an Irrevocable Life Insurance Trust may be appropriate.


4. Failing to adequately plan for children with special needs: A child with special needs risks being disqualified from receiving SSI benefits and may have to use their inheritance to pay for their care. Depending upon the situation, a Special Needs Trust may be appropriate.


5. Not properly planning for incapacity: People are living longer, and therefore the risk of lacking capacity during your lifetime is increasing. Only with proper estate planning can you be sure that your health and financial affairs will be taken care of in the event of your inability to take care of them yourself.


6. Business planning: With a properly executed plan, you can choose who will own and control your business upon your death, which increases the likelihood of the business continuing as a viable operation.


7. Not preparing for minor children: If you have minor children, you should have a will nominating personal guardians for the children, in the event that both you and your spouse should die prior the children reaching the age of 18. Without a plan, the court will decide without your input where the kids will live and who will make important decisions about their money, education and life.


8. Improper beneficiary designations: Not updating the beneficiary designations on bank accounts, life insurance, IRAs and other assets can lead to unintended beneficiaries.


9. Not periodically updating an estate plan: Generally, people do not like to discuss dying, and therefore people often want to simply execute their estate plan documents and be done with it. However, economic, family, and health changes require revisions to your estate plan.


10. Doing it yourself: Even if a self-prepared will or trust is legally enforceable, estate planning is a complex legal process requiring knowledge in several areas of the law, including estate law, tax law and property law as starters.

by: Todd C. Ratner, Esq.

Pet trusts coming to Connecticut

When estate planning for pets was first introduced, there were no statutes or other legal standards in place to rely on when crafting a plan to provide ongoing care for pets after the death of the owner. Fortunately, pet trusts have become more widely recognized and desired, and many states are finally recognizing the validity of them. As of October 1, 2009, pet trusts will be valid in Connecticut.

The new Connecticut law allows pet owners to set up enforceable trusts to provide ongoing care for their animals. Such a trust would continue until the last surviving animal passes away. Under the statute, a pet owner must name a “trust protector,” who will act on behalf of the animals and ensure they receive proper care.

When planning for a pet, there are many concerns to be addressed. For example, it is important to determine who will serve as the pet’s caretaker, and if establishing a trust, who will act as the trust protector. It is also important to remember that a pet will pass through the owner’s estate as personal property; therefore, the owner’s Last Will and Testament may need to be updated. In addition, the plan should address the final disposition of the pet, including guidelines for when euthanasia would be appropriate.

If you’re interested in learning how to ensure that your pets are properly cared for upon your death or incapacity, it is important to consult a pet estate planning attorney who understands how to set up these complex trusts.

by: Gina M. Barry, Esq.