2010 Update

With consumer prices down over the past year, Social Security and Supplemental Security Income (SSI) benefits will not increase in 2010. With no increase to the SSI benefit levels, the medically needy income and resource levels will not increase effective January 1, 2010, and will remain the same as in 2009. As a result, the Mass Rebudgeting that is normally performed in November for January 1, 2010 budget changes will not occur. There will also be no increase in the spousal impoverishment standards for 2010.

The Medicaid Eligibility Resource Allowance level remains the same at $13,800 for a single person and $20,100 for a couple. The maximum Federal Community Spouse Resource Allowance remains $109,560 and the minimum State Community Spouse Resource Allowance remains $74,820. Medicare Part A co-insurance is now $137.50 per day for days 21 - 100.

In order to calculate the Medicaid Transfer Penalty for Suffolk County, we take the value of the transfer and divide it by the new figure of $11,227 to calculate the number of months of the penalty.


Help us make a difference!
Make a difference in the lives of critically ill children by joining the Walk/Run for Friends of Karen at the Long Island Marathon taking place with a 5K Run/Walk on Saturday, May 1 and 10K, Half and Full Marathons on Sunday, May 2 at Eisenhower Park, East Meadow. New runners and walkers welcome to join the Friends of Karen team, volunteers are needed at the event. For a brochure and donor and sponsor opportunities, please contact Patricia Conway at Friends of Karen at 631-473-1768, ext. 303 or email her at patriciaconway@friendsofkaren.org

ESTATE TAX UPDATE

WASHINGTON, Dec 16 (Reuters) - An effort by Democrats to stop the repeal of a tax on wealthy estates in the United States has failed in the Senate, as Republicans blocked a renewal of the tax that expires in 15 days.

Senate Finance Committee Chairman Max Baucus failed on Wednesday in a procedural move to introduce a measure that would have extended the tax for two months, to give lawmakers more time to work out a deal.

Without action, the 45 percent tax on estates after a $3.5 million exemption disappears for a year and then jumps to 55 percent, with an exemption of $1 million, in 2011.

The tax has divided Democrats, with conservatives from the party teaming with Republicans to propose a lower tax with a greater exemption level.

"Americans, even after informed that the estate tax may not apply to them, object to it on principle," argued Senate Minority leader Mitch McConnell as he blocked Baucus's effort.

Democratic leaders had hoped to permanently extend the tax, and the House of Representatives passed a bill to do that earlier this month.

But the Senate is mired in its health-care debate, so floor time is scarce.

"We're a little concerned that if it's allowed to disappear (for a year), some lawmakers will be more tempted to make that permanent," said Steve Wamhoff, legislative director for Citizens for Tax Justice, a group that calls for a more progressive tax system.

Once the tax expires, those inheriting estates after Dec. 31 will have to pay capital gains taxes on any asset sold. The cost will be based on the original price of the property, which could mean record-keeping headaches and bigger tax bills for some people.

"If we do not extend our estate tax law, all taxpayers, all heirs will be subject to massive, massive confusion in trying to determine the value of their underlying asset," Baucus argued on the Senate floor.

The estates of about a quarter of 1 percent of Americans would be subject to the tax under the House bill, according to the the Brookings Institution-Urban Institute Tax Policy Center.

UPDATE

UPDATE to our last newsletter entitled:
“House Reportedly Set to Vote on Estate Tax Bill Permanently Setting 2009 Levels”

By a vote of 225-200 the House has just passed H.R. 4154, which would make “permanent” the current $3.5 million exemption and 45% maximum estate tax rate.

HOUSE REPORTEDLY SET TO VOTE ON ESTATE TAX BILL PERMANENTLY SETTING 2009 LEVELS

The U.S. House of Representatives will vote during the week of November 30th on a bill recently introduced by Rep. Earl Pomeroy (D-N.D.) That would make permanent the 2009 estate tax rules.

The House vote will come Wednesday, December 2nd, “at the earliest,” according to Dow Jones Newswires. It is assumed that by “The House” the news service is referring to the House Ways and Means Committee, to which the bill was referred when it was introduced November 19.

Pomeroy’s Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009 (H.R. 4154), which is backed by the Obama administration, would set the exclusion amount at $3.5 million and freeze the estate and gift taxes rate at 45 percent. H.R. 4154 is Rep. Pomeroy’s second legislative initiative aimed at fixing the federal estate tax. H.R. 436, which he introduced in January 2009, would also extend the 2009 rules indefinitely but in addition would have a “far reaching effect on gift and estate tax valuation,” according to a paper by Jonathan Blattmachr and Scott Nammacher. Emory law school professor Jeffrey N. Pennell has reportedly said that “H.R. 436 is ‘garbage.’ It has been introduced in the last two Congressional sessions, has no other sponsors, and has gone absolutely nowhere.”

The new Pomeroy bill would cost $233 billion more than current law over the next 10 years. Dow Jones reports that “In addition, there are enough opponents of the Pomeroy bill to block action in the Senate.”

Source: www.elderlawanswers.com

Representative Berkley Introduces H.R. 3905 to

Under current law, the estate tax is slated for one year of repeal in 2010 (approximately two months from now), with a return in 2011 at the rates and exemption level that were in effect in 2001 ($1 million exemption). Recently introduced H.R. 3905 would eliminate 2010's one-year repeal, and would gradually increase - over a 10-year period - the Federal estate and generation-skipping transfer tax exemptions to $5 million. The bill also would reduce - again over a 10-year period - the maximum rate of tax (now 45%) to 35%. The deduction for state death taxes would be phased out over the same period. In a bipartisan effort, H.R. 3905 was introduced by Rep. Berkley (D-NV) who was joined by co-sponsors Brady (R-TX), Davis (D-AL) and Nunes (R-CA).

The increase in the amount of the Federal estate tax exemption would be phased in at the rate of $150,000 per year as follows:
2009 $3,500,000
2010 $3,650,000
2011 $3,800,000
2012 $3,950,000
2013 $4,100,000
2014 $4,250,000
2015 $4,400,000
2016 $4,550,000
2017 $4,700,000
2018 $4,850,000
2019 and thereafter $5,000,000

In the case of any decedent dying after 2019, the $5,000,000 exemption amount would be indexed for inflation. The amendment would apply to estates of decedents dying and gifts made after December 31, 2008.

The maximum estate and gift tax rates would be reduced at the rate of 1 percent per year over 10 years as follows:
2009 45%
2010 44%
2011 43%
2012 42%
2013 41%
2014 40%
2015 39%
2016 38%
2017 37%
2018 36%
2019 and thereafter 35%

The deduction for state death taxes would be phased out over 10 years by reducing the allowable percentage of the current deduction over that period as follows:
2009 100%
2010 90%
2011 80%
2012 70%
2013 60%
2014 50%
2015 40%
2016 30%
2017 20%
2018 10%
2019 and thereafter 0%

It remains to be seen if this will pass. We’ll keep you posted!

ESTATE TAX UPDATE

There has been much discussion about the temporary repeal and reinstatement of the federal estate tax. Here is a brief summary of some of the current proposals.

Right now, there are three major bills in Congress:

Senate Bill 722
• Makes permanent the 2009 $3.5 million exemption and top 45% tax rate
• Reunifies the estate and gift tax exemption (the gift tax exemption is $1 million in 2009)
• Indexes the exemption for inflation
• Allows for exemption portability (i.e., allows the transfer of a decedent’s unused exemption to his or her surviving spouse)


House Bill 2031
• Makes permanent the exemption level at $2 million
• Establishes top tax rates of 45% for estates valued between $2 million and $5 million to $10 million, and 55% for estates valued over $10 million
• Reunifies the estate and gift tax exemption
• Indexes the exemption for inflation
• Allows for exemption portability
• Restores the state death tax credit


House Bill 436
• Makes permanent the 2009 $3.5 million exemption and top 45% tax rate
• Reunifies the estate and gift tax exemption
• Limits the valuation discount for family limited partnerships (FLPs)
• Provides strict valuation rules for the transfer of non-business assets

And, the Congressional Budget Office has modeled these four options for Congress:

Option 1
• Makes permanent the exemption level at $5 million
• Establishes the tax rate to equal the top rate on capital gains (currently 15% in 2010 and 20% thereafter)
• Indexes the exemption for inflation
• Disallows the deduction for state death taxes

Option 2
• Makes the same changes as Option 1, but a two-tiered rate would be used – the first $25 million of taxable assets would be subject to the top capital gains rate, then taxable transfers above $25 million would be taxed at 30% (and the $25 million threshold would be indexed for inflation)

Option 3
• Makes permanent the 2009 $3.5 million exemption and top 45% tax rate

Option 4
• Repeals the estate tax in 2010
• Retain the $1 million gift tax exemption
• Institutes a carryover basis regime state

We’ll continue to pass along timely, relevant information as it materializes.


Source: Forefield, 10/15/09.

INSURANCE INDUSTRY FIGHTING TO REMOVE KENNEDY'S LONG TERM CARE PLAN FROM HEALTH REFORM

A proposal to establish a new national long-term care insurance program that would offer basic help to the elderly and disabled is under attack by the insurance industry. Although the proposed program is still included in major health reform bills in both the House and Senate, it is unclear whether it will make it to the final legislation.

“It’s got a long way to go to survive,” says Brian W. Lindberg, Policy Advisor to the National Academy of Elder Law Attorneys; an organization that Lawrence Davidow has been involved with since its inception and recently held its highest position of President.

Proposed by the late Sen. Edward M. Kennedy, the Community Living Assistance Services and Supports (CLASS) Act would set up a voluntary, federal long-term care insurance program. Those who wish to participate would pay a premium of roughly $65 per month, far less than the typical cost of private long-term care insurance. After they had contributed for at least five years, participants would be eligible for benefits of either $50 or $100 per day, depending on degree of impairment. While the benefit would be modest compared to the average cost of nursing home care, it could be used instead to pay for a range of services that would help people stay in their homes. The CLASS Act was first introduced in 2007 by Sen. Kennedy, then-Sen. Barack Obama and current Senate Finance Committee Chairman Max Baucus (D-MT).

The CLASS Act is part of the Senate Health, Education, Labor and Pensions (HELP) Committee’s health care reform bill. This measure will eventually be merged with legislation coming out of Baucus’s Finance Committee that is being finalized and does not contain the CLASS Act. On the House side, the House Energy and Commerce Committee approved an amendment by Rep. Frank Pallone (D-JN) to add a bare-bones version of the CLASS Act to the House health reform legislation, HR 3200, which has not yet been passed by the full House.

As reported earlier, the Obama administration has thrown its support behind the CLASS Act, but that support may not be enough. As The Disability Policy Collaboration reports in its latest Action Alert, the insurance industry has recently launched what the Collaboration calls “a full-scale attack” on the CLASS plan. The American Council of Life Insurers (ACLI), the major trade group representing life insurers (including the leading providers of long-term care insurance), has gone on the offensive against the CLASS Act, which could cut into the sales of its members’ private long-term care products. ACLI argues that the CLASS Act’s; modest benefit will not adequately protect Americans who need nursing home care or 24-hour home health care services.

ACLI is missing the point, counters The Disability Policy Collaboration, which is a partnership of The Arc and United Cerebral Palsy. “By focusing on these extreme ends of long-term care, the industry is mischaracterizing the typical needs of most people with disabilities and older Americans,” the Collaboration states in its Alert. “What they most need is some assistance with things like getting up the stairs or getting dressed so that they can stay at home and not enter nursing homes or obtain full-time care before they truly need it. The CLASS plan’s cash benefit of about $27,000 per year can go a long way to meeting this need by paying for things like ramps and railings or a few hours a day of a home health worker.”

ACLI is also concerned that the CLASS Act will give consumers a false sense of security and further discourage sales of long-term care insurance. (Many consumers already mistakenly believe that Medicare will cover their long-term care needs.) “Simply put, the federal government should not get into the business of providing long-term care insurance. It sets the stage for doing more harm than good to consumers,” said ACLI President and CEO Frank Keating.

The Disability Policy Collaboration, is urging individuals to “take on the insurance industry” by calling or faxing their Senators and Representatives.

Source: www.elderlawanswers.com,9/28/09.