Comprehensive Planning. Lifelong Solutions.

Help may be needed in deciding on senior housing

By Hook Law Center

Elderly people who value their independence and are accustomed to living alone are increasingly becoming incapable of doing so. The need for medical attention may prompt some older individuals to consider their options, including moving to a nursing home or another kind of assisted living facility. Another possibility is to have in-home care along with various support services.

Frequently, elders and their family members make decisions about what steps to take after the occurrence of a health emergency, such as when an elderly parent falls, when there are unpaid bills, there is a lapse in housekeeping, or the elderly person’s memory has failed. However, experts admonish against waiting until such an event takes place.

Millions of people, particularly baby boomers and their parents, are wrestling with this problem. In order to make the right decision, some elderly people and their families are seeking the advice of elder care specialists, including financial planners, who can assist them with financial decisions and offer advice regarding the issues of health and aging.

Hook Law Center provides life care planning, including the support, guidance and direction that you need to focus on long-term care. The attorneys at Hook Law Center anticipate the myriad health, safety and quality of life issues that many elders and their families will face. Our seasoned attorneys can work alongside advisors, public benefits specialists and care coordinators to establish a plan for the future.

At Hook Law Center, each life care plan is intended to accomplish three goals, including:

  • The provision of care at home or in a facility that will preserve quality of life;
  • The identification of public and private sources of financing for long-term care while focusing on issues relevant to cost; and
  • Offering peace of mind that you made the right decisions

Life care planning incorporates each aspect of care, including estate planning, qualification for public benefits, and advocacy to make certain that seniors and their families find the appropriate types of services.

Posted on Wednesday, June 22nd, 2016. Filed under Long-Term Care, Senior Law News.

Net gifts can be used to reduce gift tax rate

By Hook Law Center

One strategy to lower your taxable estate is lifetime giving. However, there is a gift tax rate of 40 percent. If you have exhausted your $5.43 million gift and estate tax exemption, and you wish to lower your gift taxes, consider the possibility of making net gifts. This method obligates the recipient to pay the gift tax as a condition of accepting the gift, thereby lowering the value of the gift for gift tax purposes.

An example that reveals the ability of the net gift to save taxes is as follows. A grantor intends to make a $2 million gift to his son. Having used up his gift and estate tax exemption, he would like to reduce the tax. Applying a gift tax rate of 40 percent, if he were to make an outright gift, he would have to pay $400,000 in tax.

However, if his son agreed to pay the tax, there would be a reduction in the value of the gift, and thus, the gift tax liability. The formula that is used to calculate the tax on a net gift is: gift tax = tentative tax / (tax rate + 1). The tentative tax is the amount that would have been owed if the gift had not been arranged as a net gift. In this scenario, the tentative tax is $800,000. An application of the formula to this example results in a gift tax of ($800,000 / 1.4), or $571,429, which represents an effective rate of approximately 28.6 percent.

In order to make certain that his son receives the entire $2 million gift, the father can use a financed net gift. He lends his son $571,429 to pay the tax bill, which bears interest at the applicable federal rate (AFR), and is evidenced by a promissory note in writing.

What if, in this example, the father gave the son real estate with a fair market value of $2 million and a cost basis of $500,000? If the son pays $571,429 in gift tax, the excess of that amount over the father’s basis ($71,429) is a taxable capital gain to the father. You can avoid paying capital gains tax by engaging in a financed net gift transaction with a grantor trust instead of the beneficiary.

When participating in a net gift transaction, the recipient is required to sign an agreement expressing a promise to pay gift and estate taxes upon receipt of the gift. Prior to signing the contract, the recipient is advised to consult an estate planning attorney.

Posted on Wednesday, June 8th, 2016. Filed under Estate Planning, Investments.

Andrew Hook talks to Stretcher about revocable living trusts

By Hook Law Center

In an interview for Stretcher.com, Attorney Andrew Hook explains the meaning of a revocable living trust by dividing the term into its main parts: “revocable,” “living” and “trust.” He describes a revocable living trust as a legal agreement in which a person, who is referred to as the “settlor” or “grantor,” transfers property to a trustee, who manages the property for the benefit of specific beneficiaries. You can consider the trust agreement to be a list of directions from the settlor to the trustee regarding the way in which the trustee will manage the property.

The “living” part of the term, “revocable living trust” signifies that the trust was drafted while the settlor was alive. This concept can also be described by the term “inter vivos.” The “living” element of the trust is that it is not “testamentary,” which means that a trust was created under a will, or arose upon the death of the settlor. The advantage of a living trust over a testamentary trust is that a living trust is established during the settlor’s lifetime, and the terms of the trust may dictate that the trustee manage the administration of the trust property in case the settlor becomes incapacitated or dies. However, a testamentary trust only applies upon the settlor’s death, and thus, it will not become effective in the event of the settlor’s incapacity.

The “revocable” part of the term “revocable living trust” means that the trust can end or be modified if the settlor has capacity, and wishes to terminate or make changes to the trust. If a trust is terminated or revoked, the trust property will be placed back into the name of the grantor. The trustee has a legal duty to manage the trust property for the best interests of the trust beneficiaries. If a trustee cannot serve, another person assumes the role of trustee, and manages the property. Therefore, if the grantor is able, the grantor resumes control of the trust property. If the grantor loses capacity or dies, the trustee will take over management of the property, thereby avoiding court intervention.

Click here to read the full interview on Stretcher.com

Posted on Tuesday, June 7th, 2016. Filed under Estate Planning.
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