Estate Tax Change??

[Snaggletooth]

Not exactly tax season stuff, but occasionally we are called upon to guide people into estate planning. I don't consider myself good enough to claim expertise, but in our profession, most of us have a modicum of knowledge.

I have read on a couple occasions that if you are going to set up a trust to avoid the medical industry (especially nursing homes) from taking your life savings, this should be done quickly. Also I heard on the radio just this week that the Senate voted on some provision to make this more difficult for people to do.

Is anyone aware of the specifics?

With respect to this practice, I'm not sure people with money should use lawyer-like devices to get a free ride for medical costs. However, I have also seen too many times where a man can break his leg and lose his life savings on one night's visit to the hospital, and it can be seen that doctors, hospital administrators, and drug companies live on Millionaire Ridge and if the broken leg guy doesn't pay, then HE is the crook and thief.
Also, there is a growing army of people, most uninsured, who won't pay ANYTHING, and the whole mess really calls for a different system entirely. There's many sides to the health care crisis, and I didn't mean to leave taxes and get on a discussion of social problems.

One more time, the question posed above:
"Is anyone aware of the specifics?"

[Armando Beaujolais]

From my experience, trusts are more often a huge mess than a benefit for the beneficiary. Be really careful about discussing trusts with your clients if you're not an expert. People go to seminars and listen to talk radio and listen to their auto mechanic and hear all about how trusts will do this and do that and they'll be safe if they have trusts to protect their assets. Most (not all) of the trusts I've seen have been nothing more than full employment programs for attorneys.

Be careful. Setting up a trust is like forming a corporation that you can never dissolve, and the corporation has all your money.

My most recent episode with a trust was an elderly woman who had trusts set up with her husband for years. They moved a couple of times to different states, and had to get the trusts updated each time they moved. They thought the trusts were set up to save the surviving spouse taxes on transfer at death. This is what they'd been told by the attorneys, and they spent a huge pile of cash over the years feeding the lawyers to keep these trusts alive and "updated." In talking with the lawyer trying to straighten out the titanic mess, the moment I mentioned "marital exclusion" he got ugly because he realized the B.S. he'd been giving me hadn't fooled anybody.

The woman's husband died. Not only did she lose her husband at a scary time in her life, the moment he died all of her assets got locked up in this god-forsaken trust scheme (it was no long a single trust, it was a passel of them). Unfortunately the attorney was not nearly as anxious to sort things out as he was to create the mess in the first place. The day her husband died this woman lost access to her life savings and got to live off social security for the next six months until things could get straightened out. Bottom line: Trust administration cost a fortune, did the client absolutely no good, and left an elderly lady destitute the moment her husband died.

Just be very careful.

[Snaggletooth]

Does Anyone Know?

Thanks Armando. Good advice, as always. But didn't answer the question. (I'm bad about that, too)

Does anyone know details about recently voted-on legislation, or why folks (including a couple on this board) are recommending setting up this instruments NOW if they're going to be set up at all?

[JON]

Armando

Obviously his is a bad example. There are attorneys and accountants who do make mistakes. Trusts are common and we have to know a little about them and the more we know the better off we are. There is no more brutal tax than the estate tax. Probate is a task no one wants to go through. Trusts have been around forever, but FLAs attorneys took them to all new highs starting in the 80s. Probate in FLA was said to cost 20% of the estate or minimum of $5,000, and guess what their cure was trusts. Now maybe the costs of setting up and administrating are more than probate, but in a lot of situations they are necessary.... Medicare has a 5 year look back for trusts vs three for other transfers.

Know who the good attorneys are to review the clients who NEED them.. Until they simplify the tax rules trusts will become more active in planning. In my case I have learned who to refer them to.

JON

[Snaggletooth]

Senate vote

4 posts so far, and not an answer among them. Let me at least tell what little I know.

I think it may have something to do with the budget reduction bill where the all members of the Senate voted 50-50, and Cheney had to break the tie with his affirmative vote. According to the news, the bill "makes it more difficult for families to keep their assets from medical agencies in event of catastrophic or elongated illnesses." No specifics were given on the "news" -- they never are if the details will bore most listeners.

I also believe the house has not agreed to the specific provisions because they passed a separate version, but usually all that is required is for a joint committee to work out the differences, and this one is clearly in the books, or so I'm told.

[Bees Knees]

Sorry Snag,

Don’t know any details on this one. We have enough trouble trying to keep up with the laws they do pass. You might try poking around Thomas at

http://thomas.loc.gov/home/thomas2.html

which lists all proposed bills from the past year and gives you a status report.

I also know that this issue has been raised in Congress for many years now, but has yet to make it into law.

[Snaggletooth]

Thanks

Thanks to Bees Knees for this. Still didn't find anything I could sink my teeth into, but am very happy to be aware of the "Thomas" site for researching legislation.

Thanks, Ron J.