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

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.