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Davidow, Davidow, Siegel & Stern, LLP
Long Island's Elder Law, Special Needs & Estate Planning Firm

Friday, October 24, 2014


Our clients often look over the piles of paper (old financial records, mostly) accumulating in their homes, and ask us whether they really need to keep all that stuff. Is it important to hold on to all those documents for legal, tax or other reasons?
Sometimes, by the way, the question comes from clients who are cleaning out their parents’ homes. True story: when my own mother moved from her home of almost fifty years a few years ago, I helped clean out closets of old files and records. I found my parents’ check register from the month I was born (and, of course, months and months before and after). Excited, I figured I could find out how much they paid the doctor. Not having found an entry, I am now mostly worried about being repossessed.
But back to our question. What do you need to keep? Here are a couple things to keep:
  • Tax records for the past seven years. Why seven years? Because the federal statute of limitations for taxes is generally six years (that’s not quite right, incidentally, but assuming you are not committing tax fraud you can rely on that figure), and keeping one extra year makes sure you have documentation if something does come up. But before we move on, let’s make a couple points here: your old bank statements, cancelled checks for non-deductible items like utilities for your home, and an awful lot of the paper people tend to throw into the “tax” file are simply not important for tax purposes. And keeping what you do keep in an electronic format is perfectly fine. So you can probably clean out quite a bit of that “tax” file, too.
  • Original documents with independent significance. What do we mean by that? Wills, trusts, powers of attorney, deeds, auto titles, birth certificates, marriage licenses, death certificates — all of these can be needed to prove the date and circumstances of the underlying events, or to effect your wishes. Keep them. Copies can mostly be discarded (with a couple exceptions — see the next point).
  • Copies of important documents if you don’t have the original. Don’t have an original death certificate for a parent or spouse who died years ago? OK — then keep that photocopy. It won’t be useable as a copy, but it will be helpful in the effort to get a new certified copy. Also keep copies of wills, trusts and powers of attorney if you don’t have the originals — copies of your trust and powers of attorney might be just fine, and even a copy of your will can be used if your heirs can convince the court you lost the original, rather than tearing it up. By the way, if you can’t find the original of your will, that might mean it’s time to make an appointment to update your estate plan. But that’s a different issue.
  • Receipts showing payments for improvements to your home. Not a big deal for most people, but this one can make a difference. If the gain on your home is going to be substantial, or you will sell it more than five years after you move out, then you will want to be able to show how much you spent on improving the house. This won’t make a difference for most people, but it will for a few.
  • Electronic copies of at least some of the things you plan on throwing away. Don’t bother to scan everything, but you might make a pile of documents you think you might regret destroying later, and scan that pile.
That’s not a complete list, but it does include most of the things you actually have to keep. For more detail and some other suggestions, consider the federal government’s suggested list of things to hold on to. We like their description of a process (collect all your papers from around the house and make three piles — “Active File,” “Dead Storage” and “Items to Discard”) but we think following their advice will still leave you awash in unnecessary paper.
So what can you actually throw away? Maybe it will help if you start with the stuff you just don’t need to keep any more. We have some suggestions for the discard pile, but first we want you to think about creating two separate piles of documents you’re not going to keep: one for the trash (or recycling), and the other to be shredded. Anything with an account number (even a closed account) or any personal information should go into the “shred” pile.
Things you could throw away or shred, as appropriate:
  • Old bank records. By “old” we mean not likely to be needed for tax returns, so anything seven years old is safe to shred. Even more recent records can be shredded if you’re a little selective. Bank statements more than three years old are safe to shred, as are most cancelled checks. Does your bank make statements available online? Then shred them all.
  • Unnecessary copies of important documents. Do you have your original will, trust, house deeds at hand? Put them in a safe place and shred all the copies you have lying around. They are more likely to confuse your family and heirs than to be helpful. But keep track of those originals, please — and keep the copies (of current documents ONLY) if you have already misplaced the originals.
  • Appliance manuals. We know — the federal government is very clear about keeping these documents so long as you have the appliance. That is probably because the federal government has not heard about the internet. And when you finally replace your refrigerator, will you remember to pull out the ten-year-old manual and send it with the appliance? Of course not. OK — keep the current ones if you want, but throw out the ones for appliances you have discarded over the years. At the same time you might hunt for that pile of now-useless remote controls and plug adapters, and throw them out, too.
This is a good topic, and we will probably revisit it on another occasion. In the meantime, maybe you have your own suggestions for things you think people hold on to too long. But let us just make one more point about that federal government list of things to hold on to: we think the idea of writing down all your passwords and keeping them in a safe place is a mistake. And that’s another topic for a future entry.

Source:  Written by Robert Fleming, Fleming & Curti PLC, Legal Issues Newsletter, 8/4/14.

Friday, August 1, 2014

Avoid Problems of Do-It-Yourself Estate Planning

Many people only find out when it's too late that their estate plans contain costly errors. Mistakes aren't necessarily limited to lay people using do-it-yourself kits; inexperienced estate planners make mistakes too. Here are some overlooked issues that may occur without the advice of a practiced estate planning attorney.

Non-probate asset titling has increased in popularity over the years. The benefits of joint titling of assets and beneficiary designations are often overlooked when planning one's estate without professional help. For example, assets allowed to pass to designated beneficiaries upon the death of a principal include life insurance, trusts, joint tenancy with right of survivorship (JTROS) accounts, pay on death (POD) accounts, annuities and 401K/IRA accounts. These are all non-probate assets. However, virtually any asset, including a homestead, can be set up as a non-probate asset.

Though the documents are completely different, confusing a Will for a power of attorney and a Living Will is a common mistake. A Will expresses who will inherit your assets, and it goes into effect after you die. A power of attorney appoints an agent of your choosing to handle your financial affairs during your lifetime, and upon your death it becomes invalid. While modern medicine has increased longevity, diseases like Alzheimer's, Parkinson's and Dementia are creating financial hardships for many families. Having a properly drafted and executed POA, before mental capacity is lost, is essential for a family to be able to access and restructure assets when seeking eligibility for long-term care benefits. A Living Will, also known as a Directive to Physicians, is a document that controls decision making involving the use of life support.

Low cost estate planning kits offered on television commercials or Internet websites present a host of problems potentially costing a family thousands to hundreds of thousands of dollars. These kits contain one-size-fits-all forms into which you fill in the blanks. Using these documents jeopardizes the choices you thought you had carefully made. Here are a few issues that could arise.

Even if enforceable by the court, because of the document's form or phrasing, what you intended is open to challenge;
What you intended may not be enforceable by the court;
You did not intend what may otherwise be enforceable by the court;
Though the document is correctly drafted and enforceable at the time of signing, the document may not account for changes in circumstances that would alter your intentions, making it potentially unenforceable;
Though the document is correctly drafted and enforceable at the time of signing, you may be unaware of options, such as certain types of trusts, that would better protect your assets or reduce taxes;
When you die, your Will could be challenged by an unhappy relative, forcing your heirs to hire an attorney in a costly probate battle.

Estate plans should be reviewed annually for updates and changes in the law, or, upon major life events, including birth, death, marriage and divorce, disability and large asset gains.

Don't put your life and your hard-earned assets into a cookie-cutter plan. Seek advice from an experienced estate planning attorney before you make some of the most important decisions of a lifetime.

Source:  By Wesley E. Wright and Molly Dear Abshire, as published in the Houston Chronicle on June 18th, 2014

Friday, June 27, 2014

Casey Kasem's End-of-Life Drama: A Lesson for the Rest of Us

NEW YORK (Reuters Health) - The dysfunction and drama of the final months of Casey Kasem, a radio personality who died recently from complications of dementia, captured the interest of generations who listened over the years as he counted down the nation’s top pop.

But what Kasem did for four decades on the radio, says end-of-life planning expert Nancy Berlinger, is what he failed to do with his own family before dementia rendered him unable to communicate.

Kasem’s advance directive, stating he did “not desire any form of life-sustaining procedures, including nutrition and hydration,” assigned his daughter as surrogate healthcare decision-maker.
His daughter’s authority, however, was contested by her stepmother, Kasem’s wife. Allegations of kidnapping and starvation played out in courtrooms. Kasem’s wife performed a dramatic interpretation of a Biblical scene for news cameras, throwing raw meat in the street in exchange for her husband “to the wild rabid dogs”- her stepchildren.

Kasem’s situation was “a doozy of a case,” added Berlinger, lead author of The Hastings Center Guidelines, a framework for end-of-life decisions.

Kasem did take “two steps most people don’t,” Berlinger told Reuters Health. “He authorized a proxy decision-maker, and he gave specific information about treatment preferences.”

But, she pointed out, broadly-stated medical options in advance directives often require further considerations about real-life issues. “There may have been the assumption the document would have magically taken care of everything,” Berlinger said.

Kasem’s directive stated his wish for no life-sustaining treatment if it would “result in a mere biological existence, devoid of cognitive function.”

Berlinger said preferences should prompt patients and families to discuss points at which life loses individual meaning; examples include an inability to communicate or address hygiene. Those changes in condition can signal times when life-sustaining measures may be suspended. Without conversation, preferences may be unclear. “What does it mean to have ‘no cognitive function’?” Berlinger asks.

The way to answer that is to ask the patient directly, said Daniel Johnson, a Kaiser Permanente Care Management Institute palliative care specialist. “It’s not uncommon for people making decisions to do it alone,” Johnson told Reuters Health. “The problem is the best-laid plans depend not only on medical infrastructure, but infrastructure of the family.”

Johnson gathers key loved ones involved in patient care, so designated surrogates and those not selected understand reasons and values behind preferences. “When people take time to have discussions with family to ask the right questions with all important parties, you almost never see this,” he said.

Such dialogues are particularly vital in families like Kasem’s - involving second marriages and stepchildren, says elder law and estate planning attorney Michael Amoruso. “It’s not just blending family that is important, but ensuring relationships maintain themselves during stressful times,” he says. “If you don’t discuss, you are deferring the problem to a later day.”

That later day came for the Kasem clan, and it arrives even for the most “functional” of families, said Robert Fleming, an attorney and author of The Elder Law Answer Book. “I can drudge up one similarly emotionally fraught case for every year in 38 years of practice,” he told Reuters Health.

Conflict often arises between adult daughters- common choices, he says, for surrogate decision-makers. “The oldest blows into town and says ‘I can’t believe Mom ever meant that, and if I had talked to her she wouldn’t have done that,’” Fleming offers as a common scenario. “She thinks Mom assigned the youngest daughter because she stuck a form in front of her when she was over having coffee.”

These conversations should be initiated periodically by every responsible adult, Fleming said. He suggests a time-frame of every five years, as well as a dialogue to accompany every life change- whether it be in health status or a new spouse.

“There are some levels of family dysfunction that cannot be taken care of, but it certainly would have helped if Kasem had clearly expressed his preferences in a document shared in advance,” Fleming said.

Source:  Reuters, by Randi Belisomo, June 16, 2014.s

Friday, June 6, 2014

IRA Rollover Ruling

Uncle Sam's Tax Court just ruled that the one-rollover-per-yea​r rule applies to all of a taxpayer's IRAs rather than to each IRA separately. And that ruling, experts say, is in direct conflict with IRS Publication 590, the bible for IRAs.

"Industry leaders, financial advisers, and everyone else who handles IRAs are stunned," said Denise Appleby, the editor and publisher of The IRA Authority.

Close-up of a Banking Services Pamphlet © Keith Brofsky, Photodisc, Getty ImagesAccording to Appleby, there are two ways to move money between IRAs:
  1. Transfers, which are not reported to the IRS and not reported on a tax return. The IRA owner never touches the money. You can do this as often as you like, whenever you like, Appleby said.
  2. And rollovers. With this method, the IRA owner takes the money as a distribution and they have 60-days to rollover (put back) the amount in an IRA. And this, you can do only once per 12-month period, said Appleby.
According to Appleby, the IRS, through their publications and regulations, has said for at least 20 years that the rollover method applies on a "per-IRA" basis. In other words, if you have 10 IRAs, you can do 10 rollovers for the year (12-month period), as long as an IRA does it only once (or the year). 

Here's the guidance found in Publication 590, which everyone viewed as gospel: 
Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a one-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same one-year period, from the IRA into which you made the tax-free rollover.  The one-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA.
The IRS gives this example: You have two traditional IRAs, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA.

However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. This is because you have not, within the past year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2.

Enter Alvan and Elisa Bobrow, who had a few IRAs.

In 2008, Alvan rolled over two distributions from his IRAs and took the position that the rollovers were valid because they were done in a timely manner, and involved different IRAs, Appleby wrote in her analysis of the court case. His position was that he had not broken any rules, as explained by the IRS in their publication for the past 20 years.

The IRS disagreed and determined that only one of the two rollovers was valid. So, Uncle Sam and the Bobrows went off to court. And the Tax Court — much to the surprise of all IRA experts — agreed with the IRS.

The mistake cost the Bobrows an additional $51,298 in income tax and a penalty of $10,260. Maybe they should be thankful; it could have cost them $31,000 more, according to Appleby. You can read the gory details in Bobrow v. Comm’r, T.C. Memo. 2014-21.

So what was the bottom line? In essence, only one of the Bobrow's distributions was eligible for rollover during the 12-month period. In fact, that Tax Court concluded that the Internal Revenue Code Section 408(d)(3)(B) limitation — the relevant section of the federal tax code — applies to all of a taxpayer's retirement accounts and that regardless of how many IRAs he or she maintains, a taxpayer may make only one nontaxable rollover contribution within each one-year period.

In other words, we've all been operating under the impression that what was written in Publication 590 — you know, the IRS’ very own publication — was correct. But it's not.

In fact, the Bobrow case highlights, according to Appleby, an important rule that we sometimes overlook: "If conflicting information is provided in multiple sources, one must consider the hierarchy and reliability of such sources. In this case, Publication 590 is not authoritative and is not considered official guidance. The Tax Code is the more authoritative, and supersedes any other guidance in the event of conflict."

So what now?
Well, according to Appleby, the IRS will be changing its publications, changing what they have been saying for 20-plus years. The IRS will implement this change for everyone -- everyone except the Bobrows who have to pay those penalties, starting Jan. 1, 2015.

You should plan ahead so that — starting in 2015 — you avoid making two or more IRA-to-IRA rollovers during a 12-month period. This 12-month (one-year) period is not determined on a calendar-year basis. Instead, it starts when the IRA owner receives the distribution, Appleby said.

And, check with your IRA custodian. According to Appleby, they need to change their IRA agreements, because those agreements say what the IRS has been saying for years — which means they are wrong.

And finally, Appleby said individuals should start moving money via transfers and not rollovers. "There are too many pitfalls with rollovers and none with transfers," she said.

Source:  www.money.msn.com, 4/4/14.

Thursday, March 27, 2014

Senate Bill Updates SSI and Would Help Elder Poor

WASHINGTON, DC – The Supplemental Security Income Restoration Act of 2014 was introduced in the U.S. Senate by Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA). The bill, championed by the National Senior Citizens Law Center (NSCLC),would fix key elements of the Supplemental Security Income (SSI) program that currently make life difficult for millions of low-income older adults.

“Millions of vulnerable Americans who struggle just to get by depend on Supplemental Security Income to help take care of their families, but inflation has significantly decreased the ability to qualify for SSI benefits, hurting seniors, the disabled and blind, and more than one million children,” said Sen. Brown. 

“SSI is a critical program that helps millions of our poorest and most vulnerable citizens keep their heads above water,” said Senator Warren . “I’m very pleased to join Senator Brown to introduce the SSI Restoration Act, which will help strengthen SSI for families who rely on these essential benefits.”
The legislation would update rules such as one that recognizes the value of past work by disregarding the first $20 of Social Security Retirement or other monthly income when determining SSI eligibility, a rule that hasn’t been updated in more than 40 years.  The SSI Restoration Act will increase the disregard to $110 to account for inflation.  The bill also increases the amount of resources an SSI recipient can retain from $2,000 to $10,000 so that they can respond to emergencies such as a home repair or the replacement of an old car. The bill also eliminates the harsh provision that reduces the monthly benefit whenever someone receives food or housing for less than fair market value from another person, including family members.

“We hear many stories from consumer advocates about elderly SSI recipients who cannot pay for food, or needed medical care because they exceeded the resource limit or received too much support from a family member and lost part or all of their benefits,” said NSCLC Executive Director Kevin Prindiville.  “Sadly, some poor seniors face homelessness when they lose even some of the already meager income SSI provides.”

An identical bill, H.R. 1601, was introduced in the House last April by Rep. Raul Grijalva (D-AR) and has 13 co-sponsors. The House bill has been endorsed by 50 national and local organizations, including NSCLC.

“Recipients, their families and all of us owe Sen. Brown and Sen. Warren many thanks for advancing one of the most important fixes we can make to this program,” Rep. Grijalva said. “This shouldn’t be a political football. Everyone agrees it can be improved, and they agree on how badly it’s needed. The full Senate should take this bill up and pass it as soon as possible, and the House should do the same.”

SSI provides subsistence-level income to two million older adults with very limited financial resources who are either age 65 or over or cannot perform substantial work because of a severe disability. More than two thirds of older adults receiving SSI payments are women and one out of every three applying for the program has a primary language other than English.

“We hope that many others in the Senate will join Sens. Brown and Warren as co-sponsors to help make these needed changes into law this year,” Prindiville said. 

Source:  National Senior Citizens Law Center

Friday, February 28, 2014


Estate Administration

Estate administration is the process of managing and distributing a person’s property (the “estate”) after death.  If the person had a will, the will goes through probate, which is the process by which the deceased person's property is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, usually takes about a year. However, substantial distributions from the estate can be made in the interim.
The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple's finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can't be set aside. Finally, the estate itself may be in disarray or scattered among many accounts, which is not unusual with a generation that saw banks collapse during the Depression.
Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased family member's will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.
First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate.
Second, take your time. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without adverse repercussions. It's more important that you and your family have time to grieve. Financial matters can wait. (One exception: Social Security should be notified within a month of death. If checks are issued following death, you could be in for a battle.
When you're ready, but not a day sooner, meet with an attorney to review the steps necessary to administer the deceased's estate. Bring as much information as possible about finances, taxes and debts. Don't worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements.
The exact rules of estate administration differ from state to state. In general, they include the following steps:
1. Filing the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed "administrator" of the estate.
2. Marshaling, or collecting, the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an "inventory," with the probate court. It's generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures.
3. Paying bills and taxes. If an state or federal estate tax return is needed---generally if the estate exceeds $1 million in value---it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due.
4. Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings.
5. Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which can be as long as a year after the date of death. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.
6. Filing a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.
Some of these steps can be eliminated by avoiding probate through joint ownership or trusts. But whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and reduce the legal bill.