Save Your Estate

Why should the government or anyone else direct what happens with your estate assets? Why should a court, a stranger, or someone other than your choice make the medical and financial decisions for you if you become sick and incapacitated? Why should anyone other than your spouse, life partner, or the one you choose make the decisions about your illness, hospital visits, your funeral and what happens to your estate?

My Photo
Name:

Ronald J. Cappuccio, J.D., LL.M.(Tax) is a tax and business attorney practicing since 1976. Ron is a Graduate of Georgetown University, the University of Kansas and the Georgetown University Law Center. He also studied at Exeter University, UK.


Ron protects business and individual taxpayers from IRS Audits, Tax Collections (including bank levies, wage executions) and IRS Appeals. Employee vs. Independent Contractor Issues, Manufacturer, Pharmaceutical and Restaurant audits are a special area of emphasis.

Monday, April 01, 2013

Getting a Court Appointment as Guardian



Here are the basics of what happens when an individual wants to be appointed a guardian.

Before petitioning the court for guardianship, family members (or in some cases, concerned third parties) need to:

  •  compile some documentation that shows the individual "lacks capacity" to care for him or herself. 
  • evaluations from one or more physicians and other medical professionals
  • sworn statements from witnesses and other written documentation. This evidence will be used in an attempt to prove to the court that the person is incapacitated.

Next, a petition is filed with the court. The individual (sometimes called a potential "ward") and other interested parties will be served with a summons or given notice of the proceeding.

An incapacity hearing will be held to present the evidence. The potential ward has the right to an attorney and he or she (as well as other interested parties) can dispute the evidence.
Ultimately, the court will decide:
  • If the individual is incapacitated;
  • Who will serve as guardian; and 
  • What the responsibilities of the guardian will be.
The process can take many months. (The family may be able to get an emergency guardian appointed on a temporary basis.) The court costs and legal fees can be expensive.


The court will examine the guardian's ability to be trusted to make either financial or health care decisions -- or both.

What if more than one person wants to serve as a guardian? In these cases, the court decides who is best suited for the position.
After an appointment is made, the guardian is monitored by the court and generally must file periodic reports. The guardian or guardians must make decisions about where the ward will live, what kind of medical care should be administered, and how finances should be handled.

This is a basic overview of the process. There are different types of guardianship and the exact procedures depend on state law.

Petitioning for guardianship is usually a difficult and painful decision. The elderly loved one may be angry about the decision and the loss of independence. In those cases, the proceedings can become adversarial.

Wednesday, March 27, 2013

Power of Attorney Prevents Court Battles for Guardianship


Too Late....


Here's a scenario that some family members sadly face: They contact their estate planning attorney to explain that an elderly relative is no longer able to care for himself or herself. Perhaps the family members just went to visit the loved one and found filthy living conditions, bills piled up, and little food in the home.
"We want to be able to help," they tell the attorney. "What can we do?"

The attorney asks: "Do you have a power of attorney so you can handle financial matters or a power of attorney or health care proxy so you can make medical decisions?"

Unfortunately, the elderly relative never got around to executing those documents.

Because no one has a power of attorney or health care proxy, the family can turn to a court to have someone appointed as a guardian. (In some states, guardians are called "guardians of the person" and handle personal issues or "conservators" to handle financial issues.) If desired, there can be more than one person appointed -- one to handle financial matters and another to handle health care issues.
But the guardianship process can be time consuming, contentious, and expensive. It should be seen as a last resort.

If the elderly relative only had a durable power of attorney.....


Call Ronald J. Cappuccio, J.D., LL.M.(Tax) at 856 665-2121

Sunday, March 24, 2013

Durable Power of Attorney and Living Will


Documents to Plan Ahead

A durable power of attorney is legal document that enables one individual to designate another person to act on his or her behalf in the event the individual becomes disabled or incapacitated.

A financial power of attorney allows an individual to make decisions such as paying bills, handling investments and filing tax returns.
A power of attorney for health care, or a health care proxy, designates someone to make medical decisions for you if you are unable to do so.
A living will specifies which life-prolonging measures an individual does, and does not, want to be taken if he or she becomes terminally ill or incapacitated. These written instructions are made while an individual is still competent.

Please call Ronald J. Cappuccio, J.D., LL.M.(Tax) at 856 665-2121 to review this.

Wednesday, February 06, 2013

New Tax Law Impact on Estate Planning


The American Taxpayer Relief Act of 2012. the "Fiscal Cliff"   law has important tax issues in Estate Planning:
  • The anticipated large increases in federal estate, gift and generation skipping transfer taxes were averted.  The estate and gift tax exemption amount  is $5 million (indexed for inflation)  For 2013, the exemption amount is $5.25 million. 
  • The top estate, gift and GST tax rates increase from 35 percent to 40 percent for transfers in 2013 and later. Many States have much smaller exemptions. For example, the exemption amount in New Jersey is $675,000. This means many estates will have NJ Estate Tax while being exempt from US Estate Tax.
  •  “Portability” for estate tax exemptions is continued. That allows the estate of the first spouse to die to elect to transfer his or her unused estate tax exemption to a surviving spouse. Portability does not apply to New Jersey Estate Tax
Gift Tax Exclusion. The annual gift tax exclusion amount (which is indexed for inflation) increased to $14,000 per recipient on January 1, 2013.A husband and wife can joint give $28,000 per recipient.
Because there is relative certainty in Estate and Gift Tax law for the first time in more than a decade, now is a good time to review your estate plan. Even if your assets are below the federal exemption amount, planning may be appropriate to maximize your New Jersey estate tax exemption. Also, the high tax exemption allows greater flexibility in dealing with non-tax protections for your estate plan.

Ronald J. Cappuccio, J.D., LL.M.(Tax)
February 6, 2013

Thursday, January 17, 2013

401(k) Roth IRA Rollovers


Roth IRA Rollovers

For the past few years, plans with designated Roth accounts could allow an individual to roll over an amount from a non-Roth account into the individual’s designated Roth account in the same plan, but only amounts the individual could have had distributed from the plan, usually because the individual had attained age 59½ or had severed from employment, according to the IRS.
Beginning in 2013, The American Taxpayer Relief Act of 2012, or ATRA, allows a 401(k) plan can permit this type of rollover for an amount that is not eligible for distribution at the time of the rollover, such as an amount in an individual’s regular (pre-tax) elective deferral account when the individual is not eligible for a distribution from that account.
A similar expansion applies to 403(b) plans and governmental 457(b) plans. The amendment to the in-plan Roth rollover rules was made by ATRA. The IRS said it anticipates issuing guidance later this year about the expanded in-plan Roth rollovers.

Labels: ,

Sunday, December 30, 2012

What happens if a Beneficiary of a Will is deceased?


Question: 
Category: Probate, Trusts, Wills & Estates
Location: New Jersey
Question: My wife is the executrix of her deceased mother's estate. The will states that her house is to be sold, and the proceeds of the sale divided equally between her 5 children, or their heirs. If one of the male children is deceased, does his share go to his wife or his children?
Your Reply: The exact language of the Will controls. If the Will states "to my children, x,y,and z PER STIRPES" then your deceased brother-in-law's children would receive his share. You should have the estate lawyer review the Will to give your wife the appropriate guidance. I hope this helps! Ron Cappuccio www.SaveYourEstate.com 856 665-2121

Labels: , , ,

Saturday, September 08, 2012

Roth IRA Conversions - 2012 is the year to Convert your IRA!


What is a Roth IRA Conversion?

Pay Tax Now for Future Tax Savings

The big concern with a Roth conversion is that it is a taxable distribution from your traditional IRA. You do not pay the 10% early distribution penalty if you are under age 59 1/2. Nevertheless, the transfer is a a taxable payout from your traditional account with the money then going into your new Roth account. 

The conversion will increase your Federal and State income tax bill for this year. 

The downside is you will pay tax this year on the amount converted.

Advantages of a Roth IRA Conversion


The following advantages probably outweigh the extra tax paid in 2012:
  • Income tax rates will increase in 2013. The "Bush tax cuts" will expire after December 31, 2012 unless Congress enacts tax law changes. If you convert in 2012, you will pay the current rates not the probably higher rates of 2013.
  • Roth withdrawals are Tax-Free. If you are over 59 1/2 and have a Roth for more than 5 years, you can take withdrawals free of Federal Income Tax. Most states also do not tax the withdrawals. Therefore, even if income tax rates skyrocket, you will have only paid tax at the lower 2012 rates. Further, you will pay no tax on the future earnings in the Roth IRA.
  • Converting in 2012 avoids Obamacare 3.8% tax. The new 3.8% Medicare surtax on investment income, is based upon total income. Even though the conversion in 2013 will not be surtaxed, it will increase total income and may cause the 3.8% surtax on your other investment income. Nobody who converts a Roth IRA this year will be exposed to the Obamacare surtax.    
  • No Required Minimum Distributions. At age 70 1/2, the government forces you to take distributions from a regular IRA even if you do not want them. Roth IRAs are exempt from the required minimum distribution rules. Money can be kept in a Roth IRA and continue earning free of Federal and mot State Income Tax for your lifetime. Note: Roth IRAs are still subject to Federal and State Estate Tax.

Conclusion:

Unless you have exceptionally large gains or income in 2012, the time to convert to a Roth IRA is now!

Wednesday, August 08, 2012

IRS amending 501(c)(4) regs in response to political pressure


IRS getting Political!

RIA, a well tax publisher reports:

After a brief hiatus from the public eye, the controversy surrounding Code Sec. 501(c)(4) social welfare organizations has returned as the November elections near. In a strongly worded letter to Commissioner Shulman, a group of Senate Republicans questioned whether IRS had already begun amending the Code Sec. 501(c)(4) regs and cautioned IRS against short-circuiting its deliberative process with regard to this highly political issue.
Statutory background. Under Code Sec. 501(c)(4), civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare are exempt from income taxation if no part of their earnings inures to the benefit of any private shareholder or individual and no substantial part of the organization's activities consists of providing commercial-type insurance. These organizations may engage in political campaign activities on behalf of or in opposition to candidates for public office. However, in order to retain its tax-exempt status, an organization must ensure that political campaign activities do not constitute its “primary” activity. (Reg. § 1.501(c)(4)-1(a)(2)(i);Rev Rul 81-95, 1981-1 CB 332 ) Many practitioners have interpreted this as allowing a Code Sec. 501(c)(4) organization to spend up to 49% of its total expenditures on campaign activities without jeopardizing its exempt status.
Gift tax is generally imposed on the transfer of money or other property by gift. (Code Sec. 2501(a)) However, there's no gift tax on a transfer to a political organization within the meaning of Code Sec. 527(e)(1). (Code Sec. 2501(a)(4)) Gifts to social welfare organizations do not qualify for the exclusion for political organizations under Code Sec. 2501(a)(4) or the deduction for charitable gifts under Code Sec. 2522, and are thus arguably subject to gift tax. However, IRS's enforcement in this area has been described by practitioners as lax, if not nonexistent.
Earlier controversies. In 2011, it was reported that IRS was examining five donors who made transfers to Code Sec. 501(c)(4) social welfare organizations without reporting them as taxable gifts. Such transfers have proliferated in the wake of the 2010 Supreme Court decision in Citizens United v. Federal Election Commission (FEC), (2010) 130 S Ct 876.
Following questions regarding whether IRS's inquiry was politically motivated, and Commissioner Shulman's assurances that it was not, IRS formally ended its probe and stated that further guidance was required. (See Weekly Alert ¶ 2 07/14/2011)

What this Means to Charities.  The IRS is being used as a tool by the Executive Branch under President Obama to prevent charities from taking political position advertisements. Even though donations are not deductible to the giver, the IRS approach is to attack the donors by making their gifts taxable. This will discourage donations to independent groups -  particularly those supporting Tea Party and Conservative/libertarian causes.


Saturday, June 30, 2012

Living Trusts, Durable Power of Attorney Avoid tough Guardianship Court


A Last Resort
Here's a scenario that some family members sadly face: They contact their estate planning attorney to explain that an elderly relative is no longer able to care for himself or herself. Perhaps the family members just went to visit the loved one and found filthy living conditions, bills piled up, and little food in the home.
"We want to be able to help," they tell the attorney. "What can we do?"

The attorney asks: "Do you have a power of attorney so you can handle financial matters or a power of attorney or health care proxy so you can make medical decisions?"

Documents to Plan Ahead
A durable power of attorney is legal document that enables one individual todesignate another person to act on his or her behalf in the event the individual becomes disabled or incapacitated.
  • A financial power of attorney allows an individual to make decisions such as paying bills, handling investments and filing tax returns.
  • A power of attorney for health care, or a health care proxy, designates someone to make medical decisions for you if you are unable to do so.
A living will specifies which life-prolonging measures an individual does, and does not, want to be taken if he or she becomes terminally ill or incapacitated. These written instructions are made while an individual is still competent.
The requirements for these documents vary from state to state. If you move to another state or own homes in more than one state, check with your attorney to ensure your documents are valid

Unfortunately, the elderly relative never got around to executing those documents.
Because no one has a power of attorney or health care proxy, the family can turn to a court to have someone appointed as a guardian. (In some states, guardians are called "guardians of the person" and handle personal issues or "conservators" to handle financial issues.) If desired, there can be more than one person appointed -- one to handle financial matters and another to handle health care issues.
But the guardianship process can be time consuming, contentious, and expensive. It should be seen as a last resort after less drastic measures are examined.
Here are the basics of what happens when an individual wants to be appointed a guardian.
Before petitioning the court for guardianship, family members (or in some cases, concerned third parties) need to compile some documentation that shows the individual "lacks capacity" to care for him or herself. The process generally involves an evaluation from one or more physicians and other medical professionals, as well as sworn statements from witnesses and other written documentation. This evidence will be used in an attempt to prove to the court that the person is incapacitated.
Next, a petition is filed with the court. The individual (sometimes called a potential "ward") and other interested parties will be served with a summons or given notice of the proceeding. An incapacity hearing will be held to present the evidence. The potential ward has the right to an attorney and he or she (as well as other interested parties) can dispute the evidence.
Ultimately, the court will decide:
  • If the individual is incapacitated;
  • Who will serve as guardian; and 
  • What the responsibilities of the guardian will be.
The process can take weeks or months. (The family may be able to get an emergency guardian appointed on a temporary basis.) The court costs and legal fees can be expensive.
The court will examine the guardian's ability to be trusted to make either financial or health care decisions -- or both.
In some states, there are requirements to become a guardian. For example, a criminal background check may be required and a guardian may have to take a class after appointment to learn about the responsibilities. The guardian may need to be a state resident or a lineal descendant.
What if more than one person wants to serve as a guardian? In these cases, the court decides who is best suited for the position.
After an appointment is made, the guardian is monitored by the court and generally must file periodic reports. The guardian or guardians must make decisions about where the ward will live, what kind of medical care should be administered, and how finances should be handled.
This is a basic overview of the process. There are different types of guardianship and the exact procedures depend on state law.
Petitioning for guardianship is usually a difficult and painful decision. The elderly loved one may be angry about the decision and the loss of independence. In those cases, the proceedings can become adversarial.
How Can You Avoid this in Your Family?
In order to avoid court intervention, you should have certain legal documents drafted as soon as possible (see right-hand box). Choose the person(s) you want to make financial and health care decisions on your behalf. Having these documents in place is an inexpensive alternative to going to court for guardianship. Once a person is incapacitated and unable to make responsible day-to-day decisions, it is too late to get these routine documents drafted.
A guardian or conservator appointment can cost 10 times as much (or more) as getting the alternative documents executed. This is truly an example of why it is better to plan in advance, rather than waiting until a situation is out of control.
 

Friday, June 15, 2012

Wills- Giving Family Possessions and Treasures


Planning for Possessions
Accumulated over a Lifetime
In the days after a person dies, some family members may decide to take matters into their own hands. These individuals may have a key to the home and decide they are going to take items they want. Before the will is even read, furniture, jewelry, artwork and other items may disappear. Cash around the home may be grabbed. In some cases, trash bags of stuff are hauled away.
"Textbook Example of Headaches, Heartaches and Expense"
   Without specific estate instructions concerning asset distribution, family members can be left guessing what a deceased person would want -- or decide what to do themselves.
    
In one case, a Michigan probate court had to step in and resolve bitter disputes by distributing numerous items. The court called it "a textbook example of the headaches, heartaches, and expense that can result from inadequate estate planning."
    
Facts of the case:According to court documents, Barbara Waters was divorced and living with Kevin Goethe when she died. She had three children from a previous marriage and he had one son.
    
Goethe built and furnished the house. When the couple moved in together, they combined household furnishings. Then, they purchased items together and individually.
    
Goethe proposed and purchased an engagement ring but the couple never married. "Ms. Waters was diagnosed with cancer and told Mr. Goethe it would be unfair of her to marry him because of her illness," according to court documents.
    
Waters made out a handwritten (holographic) will and signed it "Mom." Upon review, the court stated the document did not meet the state's legal requirements and was therefore invalid.
    
Weeks after Waters' death, her children moved out of Goethe's home. He packed some belongings and left them on the front porch for the children to pick up. He was not home when they arrived. The children gained entry to the house through another relative. They removed "almost everything they thought was their mother's."
   Goethe testified the house was "ransacked." Family photographs were removed. One photo was ripped in two, with Goethe's image returned to the frame and Waters' image taken.
   The Probate Court called the children's actions "offensive." It then made decisions to divide the items, including:
  • A jewelry chest and small kitchenware had to be returned to the estate by Goethe. However, some items of jewelry were determined to be gifts from Waters so Goethe got to keep them.
  • Photos were ordered returned or duplicated at estate expense.
  • Goethe had to pay the estate $125 for a sewing machine he sold.
  • A family pet was claimed by both sides. Goethe was awarded the Maltese Terrier "in lieu of compensation for items which either disappeared from his house or items to which he might have had a reasonable claim."
    The judge stated the court could not adopt either "extreme position" -- that everything in the house belonged to Goethe or that the children were entitled to anything connected with their mother.
   He added: "there is a difference between saying or writing down what you hope will happen and taking the proper legal steps to assure that a court will enforce your intentions." (Waters, Probate Court for the County of Marquette, No. 10-31879-DE)
Family feuds may erupt when other beneficiaries find out items are missing.
In some families, nothing brings out greed and long-time resentments like divvying up sentimental items that remind adult children of their childhoods. The situation can become even worse if it involves divorce, a blended family, or an unmarried couple.
Splitting up material possessions among family members can be more acrimonious than dividing up financial assets. If there are four heirs and a bank account worth $10,000, it's easy to divide it with each person receiving $2,500. But how do you divide a diamond ring or antique teapot four ways?
Unfortunately, some families wind up incurring large legal expenses over non-titled items that have more sentimental importance than monetary value.

To help avoid this in your family, here are some Q&As about how the executor collects and distributes the assets in an estate.
Q. Exactly how are assets distributed?

A. Here is a brief rundown of the process. After the will is read, the executor must inventory and gather the assets of the estate. Appraisals may be needed for items of value, such as jewelry.
An estate bank account is opened up by the executor, who also obtains a tax ID number. The various accounts of the deceased person are then transferred to the account.

The executor must pay creditors, file tax returns and pay any taxes due. Then, he must collect any money or benefits owed to the decedent. Finally, he or she distributes the remainder in accordance with the will. The executor generally exercises discretion in distributing personal and household items. (Unwanted items must be disposed of or donated to charity.)

Q. How long does it take before assets in a will are given to beneficiaries?

A. Generally, beneficiaries have to wait a certain amount of time, say at least six months. That time is used to allow creditors to come forward and to pay them off with the estate assets. (In some cases, an executor may make partial distributions to the heirs after he or she estimates the debts. However, if the estimates are wrong, the distributions can be called back.)

Q. What happens in the time between when a person dies and the assets are finally distributed?

A. The executor must handle the everyday tasks of the estate to preserve the assets. For example, if there is a home that needs to be sold, the executor must be sure to make mortgage payments, as well as pay insurance premiums and utility bills. (Foreclosure can be started if a few mortgage payments are missed.)


Q. What if a relative has a key to the home and goes in to take items he or she wants?
A. The executor should inventory the assets as soon as possible -- before family members get a chance to remove items. If a valuable or important item is taken, and the person responsible refuses to return it, a court can step in to order the item back into the estate.
If the executor knows there are outstanding keys to the decedent's house, or is concerned about someone coming in without authorization, the locks should be changed.
Q. What happens if the beneficiaries are not satisfied with the way the executor distributes personal items? Or what if the heirs suspect the executor has taken or hidden certain valuable items for himself or herself?
A. The beneficiaries can request an informal accounting of the assets from the executor. If the executor refuses, or the beneficiaries are still not satisfied, they can petition the court for a mandatory accounting. Consult with your attorney about how to proceed.
Q. What can I do to prevent these types of disputes from occurring after I die?
A. There are a number of steps you can take:
  • Give away gifts while you are still alive.If there are specific items you want to loved ones, present them now. In other words, get them out of your estate. It can be rewarding to see your prized possessions go to individuals who appreciate them. Depending on the size of your house, you may have thousands of items. Throw away or donate things you no longer need. (A donation to a qualified charity may result in a tax deduction.)

  • Make specific bequests in your will or in a letter of intent. If you want your car to go to your daughter or your golf clubs to go to your grandson, put it in writing. Without detailed instructions and guidance, the executor may have to devise an equitable system for distributing your possessions. That can place a large burden on the executor and lead to disputes among your heirs.

  • Choose your executor carefully. The executor generally exercises discretion in distributing personal and household items. So it's important to name a trustworthy person with a fair, impartial, reasonable personality -- especially if there are sibling rivalry issues. You want someone who will fulfill your intentions. The right executor can reduce the chance of litigation.
No matter who you name as an executor, the individual will appreciate clear, written instructions.

If you like this, sign-up for my free weekly e-mail newsletter!