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Using Accountable Plans to Replace Lost Miscellaneous Itemized Deductions

By Jennifer Rossettini, CFP®

Did you used to itemize your deductions before 2018?  Do you miss being able to deduct unreimbursed work-related expenses like mileage, professional dues, and education from your income?  Did your tax bill increase as a result of no longer being able to deduct these expenses? If so, there may be a solution, if your employer is willing to go along with it.

Consider a taxpayer who is in the 30% tax bracket.  In 2017, she was able to deduct $12,000 in unreimbursed employment expenses for a total tax savings of $3,000.  She couldn’t claim these deductions at all in 2018.  If the taxpayer’s employer is on board, she can reduce her taxable compensation by the amount of the unreimbursed expenses by treating them as a working condition fringe benefit.

“A ‘working condition fringe benefit’ is any property or service provided to an employee to the extent that, if the employee paid for the property or service, the amount paid would be allowable as a trade or business expense.”[1]  Working condition fringe benefits would be excluded from the employee’s gross income for income tax purposes, not subject to employment taxes, and deductible by the employer.[2]

For a cash reimbursement of work-related expenses to qualify for a working condition fringe benefit, the arrangement must be structured as an “accountable plan,” which is a plan that follows certain IRS regulations.  To comply with these regulations the plan must require: (1) a business connection; (2) adequate substantiation; and (3) the return of excess advances.

To satisfy the business connection requirement, the amounts paid or incurred by the employee must be in connection with performing services for the employer.  The employer must make sure that the reimbursements or allowances are clearly identified as such, either in a separate check from the employee’s pay check or by delineating the reimbursement or allowance on the employee’s pay stub.

To satisfy the adequate substantiation requirement, the employee must be required to submit documentation, such as an expense report, diary, log or detailed receipt, within a reasonable time period, that shows the amount and business purpose of the expense, the time and place of any travel, the date and description of any business gifts, and the business relationship to the employer of each person receiving a gift.  For travel expenses, an accountable plan is permitted to use federal per diem rates for the basis of determining reimbursement amounts.

The plan must also require employees to return any advance that exceeds substantiated business expenses.  Any unreturned excess amount is treated as additional income subject to income taxes and federal employment taxes.  However, if the employer pays a per diem travel allowance that doesn’t exceed the federal per diem rate, employees can retain the excess of the per diem over actual expenses.  This will not disqualify the accountable plan or require the excess to be treated as taxable income.

If you are an employee who regularly incurs unreimbursed business expenses and you are hoping to minimize income taxes to the greatest extent possible, talk to your employer about whether they offer working condition fringe benefits.  If you are an employer looking to improve your cash flow and/or boost morale among your employees, consider establishing an accountable plan for this purpose.


[1] Gardner, Randy, J.D., LL.M, CPA, RLP®, CFP®, and Welch, Julie A., CPA, PFS, CFP®. “Use Accountable Plans to Retain Benefits of Lost Miscellaneous Itemized Deductions.” Journal of Financial Planning. July 2019: 30. Print.

[2] Gardner & Welch at 31.

Ask Kit Kat: ASPCA/NYPD Partnership

Hook Law Center: Kit Kat, what can you tell us about the ASPCA/NYPD partnership which is now in its 5th year?

Kit Kat: Well, this is a huge success story, if there ever was one! ASPCA and the NYPD (New York Police Department) have been working together since 2013, actually. Back then, it was experimental and only involved one of NYC’s boroughs—the Bronx. When the cooperation proved to be a success, it became a city-wide effort in January 2014. This would mean a lot to abused animals since NYC with its 5 boroughs covers a lot of territory, millions of people, and 77 police precincts. That would mean a lot more attention would be given by people with the power to intervene when abuse/neglect was spotted.

ASPCA and NYPD worked hand-in-hand to make the lives of neglected animals better. Some of the things they did were: 1) establish a special center called the Animal Recovery Center (ARC) to care for the abused animals which were seized. 2) set-up a hotline on the NYPD Crime Stoppers Program to receive anonymous tips concerning animals abuse, and 3) passing laws which require the owners of abused animals with pending court cases to pay the cost of care for the animal while the case is being settled. This encourages a faster resolution of cases, and animals can be placed for adoption much more quickly than in the past.

Some of the cruelty where intervention occurred is unbelievable. One of the earliest cases involved a pit bull named Fraggle. He was found zipped inside a suitcase,  severely malnourished, and abandoned. After rehabilitation by the ASPCA, he was able to be adopted. Another of the  positive outcomes of the collaboration between the 2 departments is that people are also helped. NYPD Police Commissioner James P. O’Neill, says, “Animal cruelty is often linked to other serious crimes against people, including domestic violence. And so, by assisting animals in our neighborhoods, together we’re making our nation’s safest large city even safer.” (“A New Day for Animal Victims of Cruelty,” ASPCA Action, Issue 1, 2019, p.11-15)

Posted on Monday, July 22nd, 2019. Filed under Senior Law News.

Parents May Now Delegate Care Authority of a Child

By Shannon Laymon-Pecoraro, CELA

Many parents travel for work or otherwise send children to stay with a relative for temporary points in time, entrusting others with the care of their children. The concern has always been whether there is any authority to delegate parental decisions to such persons temporarily caring for the child. Until recently, there was no statutory authority that would permit another to step into the shoes of a parent for important care decisions.

Last week, a law permitting parents, or legal custodians, of a child to temporarily delegate care authority to another person became effective. Such delegation must be made in the form of a properly executed power of attorney, signed by both parents if they exercise joint custody, and may not exceed a period of 180 days. Service members on active duty have been exempted from the 180 day limit, but shall not be permitted to extend such time in excess of 30 days beyond the term of active duty service. The agent shall exercise parental or legal authority on a continuous basis for no less than 24 hours and without compensation for the intended duration of the power of attorney. The delegation may be revoked by any person who signed the power of attorney at any time.

The law specifically allows for the delegation of powers regarding the custody, care, and property of the child, but excludes the power to consent to marriage or adoption of the child, the performance or inducement of an abortion on or for the child, or the termination of parental rights to the child. Further, such delegation of does not modify the legal rights, obligations, or authority of a parent or legal custodian.

Another important exception to the law was implemented to prevent parents from delegating authority for the primary purpose of enrolling a child in a school outside of the child’s jurisdiction. The law specifically states that a power of attorney shall be invalid “if executed for the primary purpose of enrolling the child in a school for the sole purpose of participating in the academic or interscholastic athletics programs provided by that school or for any other unlawful purpose.” A violation of this section is punishable under the law.

As Kit Kat: Arctic Fox’s Journey

Hook Law Center: Kit Kat, was there really an Arctic fox who journeyed from Norway to Canada?

Kit Kat: Yes, amazingly, it did. The female fox was a coastal or blue fox. She had a tracking collar on, and that is how the journey was recorded. This represents a trip of more than 2,175 miles in only 76 days. She began on the Svalbard Archipelago of Norway in 2018, and was tracked to a remote island in northern Nunavut, Canada. This event was reported in Polar Research, and published by the Norwegian Polar Institute during the last week of June 2019.

How was such a trip possible? Well, this particular breed of fox is very hearty, but it is still an amazing story. It was only possible during winter, when the Arctic ice freezes over and the 2 continents are connected. At first, researchers were skeptical. How could this be? Eva Fuglei, of the Norwegian Polar Institute, said, “We didn’t think it was true. Could the fox have been found dead, the collar taken off and now aboard a boat?” That possibility was ruled out when they realized it would not be possible for a boat to travel through the ice that far north at that time of year. When tracking data was downloaded from the collar, it appears the fox left the Svalbard Archipelago on March 26, 2018 and reached Ellesmere Island in Nunavut, Canada 2.5 months later. In one day, she logged in about 96 miles! Ms. Fuglei  commented, “This is, to our knowledge, the fastest movement rate ever recorded for this species.”

Why would the fox have set out on such a journey? Researchers suspect it was motivated by lack of food in her original habitat or some threat that existed there. The fox’s migration also points to the importance of sea ice for some species. With global warming, the way of life for some species may be significantly altered. (Megan Specia, “An Arctic Fox’s Epic Journey: Norway to Canada in 76 days,” The New York Times, July 2, 2019)

Posted on Monday, July 15th, 2019. Filed under Senior Law News.

How To Be An Advocate For a Loved One In a Nursing Home

By Emily Martin, Esq.

If you have a family member or loved one who is unable to live at home any longer, you may feel anxious about leaving them alone with strangers caring for them. Not only can it be confusing and difficult for someone to move into a nursing home, but you may be worried that your loved one will not be able to speak for himself if they become a victim of abuse or neglect.

While most facilities are safe and provide a protective environment for those who cannot care for themselves, unfortunately sometimes that is not the case. For example, in January 2019, the news broke that a 29-year-old woman in a vegetative state who was living in a nursing home gave birth at the facility. At the time, staff at the facility was shocked – no one knew she was pregnant. Later, it came to light that a worker at the facility had been sexually abusing the patient for quite some time.

Although abuse to this extent is rare, the fact remains that assault, sexual or otherwise, is a crime that often goes unreported in nursing homes. Because of a cognitive impairment, those who suffer from dementia are the most likely victims of this type of assault – whether it comes from other residents, staff, and even complete strangers visiting the facility. So how can you protect your loved one from becoming a victim?

Evaluate the facility

When you begin to research nursing homes, visit them in person. Look around and ask questions. How personable is the staff? Are there enough staff members so that each resident receives adequate supervision? What is the quality of the management of the facility? Ask questions about training for the staff and whether all staff members, including volunteers and vendors, are required to have criminal background checks. If you have misgivings after receiving the answers to these questions or if you are unable to obtain answers at all, there is a good chance that it is not the right place for your loved one.

Check for signs of abuse

If a loved one has been physically abused, you may notice unexplained bruising or blood. They may withdraw from social activities and interactions and could possible react differently toward their abuser. They may begin suffering from nightmares or night terrors. Any of these are red flags that could indicate that your loved one is a victim of abuse.

Know your loved one’s rights

If a nursing home receives funds from Medicaid (which nearly all do), then it is subject to federal regulations with regard to the management of nursing homes. Under federal law, when two or more relatives of nursing homer residents meet, the facility is required to give them a place to meet. They also must respond to their recommendations or concerns within a certain time period. These “family councils” can be powerful tools. If a facility knows that family members are active advocates, they will have more incentive to provide proper care or their residents.

Reach out to your long-term care ombudsman

Each geographical area has a long-term care ombudsman whose role it is to serve as an advocate who can investigate complains for residents in long-term care facilities. If you feel that your loved one is being abused or neglected, a long-term care ombudsman can be a powerful tool in helping you get answers about your loved one’s care. They have the ability to investigate the conditions at the facility and make sure that the residents are receiving the care they need. An ombudsman can be a powerful ally for family members who live out of the area or who are unable to be physically present to advocate for their loved ones.

Call Adult Protective Services

Another possible resource for victims of abuse or neglect is Adult Protective Services (APS). APS has the ability to investigate claims of abuse and can offer a wide range of protective services, including legal intervention to protect adults who are being abused. In Virginia, APS is managed by the local Department of Social Services.

The most important thing you can do for a loved one in a nursing home is to make sure they have an advocate – someone who can recognize signs of abuse or neglect and act appropriately to remedy the situation if it does occur. While the majority of residents in nursing homes are not being abused or neglected, it is crucial to know what the signs are – and how to act if it happens to your loved one.

Ask Kit Kat: Helping Pelicans

Hook Law Center: Kit Kat, what can you tell us about how pelicans are treated when they get fishing line injuries?

Kit Kat: Well, there is such good news on this subject! There are 4 centers across the country that treat seabirds. One is in Murchsion, Texas, another in Oakland, Oregon, another in Ramona, California, and finally one in Ft.Lauderdale, Florida. The latter is the focus of today’s article. The Florida location is called the South Florida Wildlife Center. Headed by Dr. Renata Schneider, director, there have been great results in treating pelicans which have been caught up either in fishing hooks or fishing line. Since January, the center has treated 6 pelicans successfully which had serious injuries. Another 300 with minor injuries have also been treated. Pelicans have large mouths, so it is easy for them to swallow hooks or get line tangled in their beaks.  When an injury is serious enough to warrant surgery, it requires fluid therapy and pain medication for a period of time after surgery before they can be released back to nature.

Dr. Schneider recommends that to keep seabirds safe, there are some things which can be done by those who fish or who happen to come by a bird in distress. First, never leave fishing line out on a pier or dock. Dispose of it in a trash can that has a covering such as a monofilament recycling canister or bin. These now are available on many piers. Second, keep cutting tables where fish are gutted free of any debris or fish remains. This attracts pelicans/birds which can swallow the remains which may also happen to have a hook left in it. Finally, if a bird is found with a line in its mouth, don’t cut the line. Carefully reel in the bird, and contact a veterinarian or wildlife center for help. Also, never hold a pelican’s beak completely shut. They breathe through their mouths, and if it is kept shut, they won’t be able to breathe. The good thing about pelicans, says Dr. Schneider, is that “they don’t get stressed out around people.” (Kelly L. Williams, “Pelican patients get patched up,” All Animals, June/July/August 2019, p. 14)

Posted on Monday, July 8th, 2019. Filed under Senior Law News.

Family Gifts and Loans: Are They a Good Idea?

By Letha Sgritta McDowell, CELA

Often clients will ask about giving or loaning money to family members. Questions range from “Will I pay tax?” to “Is this a good idea?” While money and family decisions are extremely  personal, there are some considerations or “ground rules” which remain universal.

The question that arises most frequently is whether there are tax consequences to the gift.  Many have heard of an exemption but don’t understand what that means. The recipient of a gift never pays tax on the gift so there should never be a concerns that well-intentioned gifts come with a tax consequence to the recipient. However, in some rare instances, the donor of the gift pays tax. Current tax regulations allow an individual to give $15,000 per recipient ($30,000 if a married couple is making the gift and each spouse joins in the gift) without reporting the gift to the Internal Revenue Service. The $15,000 “limit” isn’t actually a limit; instead the $15,000 is a reporting threshold. Current tax regulations allow an individual to transfer $11.4 million without paying tax. Technically the $11.4 million is a unified credit, meaning that amount can be transferred either during lifetime or at death or in some combination. Therefore, if an individual gives their child $1 million as a Christmas gift (above the $15,000) they would report the gift using a Form 709. This gift would result in no tax due, however, at their death, they would only be allowed to transfer $10,415,000 without paying any tax ($11,400,000- ($1,000,000-$15,000)).

Therefore, the $15,000 annual exclusion only makes an impact for individuals with assets exceeding $11,400,000. And, since the vast majority of Americans do not have assets exceeding that amount, the exclusion is fairly irrelevant. There is the potential for this amount to “sunset” in the year 2026, however, even if that were to occur, the exemption is still at $5.49 million.

Since taxes are not an issue for most, then the conversation can focus on whether a gift is a good idea. First, the donor should examine whether he or she has the resources to make the gift. Often I’ve encountered an older adult (parent/grandparent) with very little in savings, who no longer works, who is also trying to give money to a child or grandchild. If that individual doesn’t have sufficient resources to pay their own expenses for the remainder of their lifetime, including potentially catastrophic long term care costs, then I do not recommend gifting. Especially in cases where the recipient has the ability to work, earn a living wage, and still save for their retirement.

Next, assuming the donor has the financial means to make the gift, I recommend considering the motive behind the gift. Is the gift being made to assist the recipient with something worthwhile, such as start-up capital for a business or a down payment on a house? A gift from a willing donor may be just what is needed to make the recipient successful. If a donor is concerned that making such a gift will spoil a child’s drive to succeed or result in a lack of appreciation, then I encourage them to consider the recipient’s personality. The donor will already know if the child has the mindset that they will use the gift to leverage to something better. The donor is aware of the ambition, drive, and personality of the recipient and an individual who has already shown a lack of appreciation or a lack of drive will not change simply because of a gift. Similarly, someone driven to succeed will not change simply as a result of a substantial gift.

Closely related to family gifting is loaning money to family. No interest loans carry no tax consequences and the considerations should be the same for gifting as for loaning. Is the loan just what the borrower needs to leverage into success? If so, then the loan can be a welcome way to aide in someone’s future. When individuals make loans, they do so with the expectation of being repaid. However, when advising clients regarding a loan to family, I encourage them to treat the loan as if they will not be paid back. Unfortunately, often family loans are never repaid leaving hurt feelings and frustration. If the lender approaches the situation with no expectation, then he or she is pleasantly surprised when one is repaid. In addition, the ability of the lender to make the loan should be reviewed with the expectation of not being re-paid. Thus the lender should have sufficient income and savings to reasonably cover life expenses.

Finally is the issue of how gifts or loans work for purposes of an inheritance. A person’s estate plan is extremely personal and their decision about who should benefit after their passing should be their reflection of wishes and not based on obligation or other societal norm. That being said, many wish to treat their children or other family equally and, if they have made gifts or lent funds not yet re-paid, then provisions can be made within an estate plan to ensure equality. It is critical to make the drafting attorney aware of such gifts or loans as well as the desire to equalize and then to review account titling and beneficiary designations to ensure they are consistent with the plan.

While family gifts and loans should be carefully considered before the transaction is made, they can be extraordinary ways to assist in a loved one’s success with the added benefit of the donor seeing the benefit during their lifetime.

Ask Kit Kat: Outer Banks Star

Hook Law Center: Kit Kat, what can you tell us about a mule named Raymond who lives on the Outer Banks, NC and thinks he’s part of the herd of wild horses?

Kit Kat: Well, Raymond is indeed a mule. His daddy was a donkey that was once owned by a petting zoo in Virginia Beach. Somehow, his daddy made his way to the Outer Banks of North Carolina, and mated with one of the mares in the wild herd there. Hence, Raymond. He’s now 20 years old, and could live as long as 30-50 years. Visitors to the Outer Banks sometimes question what they have seen when they visit. Is there really a mule that is part of the herd? Meg Puckett or Jo Langone of the Corolla Wild Horse Fund answer them in the affirmative.

What draws people to Raymond are his antics. He doesn’t let his smaller stature prevent him from tousling with stallions. Sometimes he gets the better of the stallions and sometimes he doesn’t. When they get too close to the mares he likes to spend time with, he will nip at the stallions’ legs or turn around and kick them with his hind legs. If a foal is produced by a successful mating between a stallion and a mare, Raymond, who as a mule is infertile, is very protective of it, and treats it as if it were his. Raymond also tends to be more vocal than the wild horses. He brays and makes other noises which can be quite loud at times. The visitors to the Outer Banks are mesmerized by his behavior.

Meg Puckett of the Corolla Wild Horse Fund, which manages the herd, says, “I can’t express how good he looks for his age and the rough life he’s led. He is tough.” He’s had a little bit of help from a local veterinarian. When it was noticed that his hooves were not wearing down naturally by walking on the sand dunes as happens with most of the horses, a veterinarian intervened. Raymond was sedated, and his hooves were ground down a bit. It was kind of a risky enterprise, but it was successful. With Raymond’s pain relieved, he’s back to his old self—frolicking and standing up to the stallions.

So next time you’re on the Outer Banks of NC, you may want to see if you can catch a glimpse of this wonderful creature! (Jeff Hampton, “Everybody loves Raymond,” The Virginian-Pilot, June 17, 2019, p.1 & 9)

Posted on Friday, June 28th, 2019. Filed under Senior Law News.

What You Need to Know About an Offer in Compromise

By Amanda L. Richter, CPA

If you are like most taxpayers, you do not enjoy opening mail from the IRS, especially if the IRS is after you to collect a tax liability.  Fortunately, there may be solution for you to settle your tax debt for less than the full amount owed; this is called an offer-in-compromise.

To start the settlement process, the taxpayer makes an offer to the IRS in writing using IRS Form 656. An offer is an official agreement between you and the IRS to settle the debt for less than you owe. To be considered, the offer must be based on what the IRS considers your true ability to pay. It is important to remember that submitting an application does not guarantee the offer will be accepted. The offer essentially begins the process of evaluating and reviewing your circumstances to determine your ability to pay. During this process, the IRS will review your application and determine if 1) you are unable to pay the full amount, 2) whether there is doubt as to how much the tax liability is, 3) collection of the tax liability would create economic hardship for you (for example, due to your loss of employment, health issues, etc.), or 4) compelling public policy and equity considerations.      

Generally, the IRS will not accept an offer, if they believe you are able to pay the debt in full or through an installment agreement. However, if after reviewing your offer and determining that you are unable to pay the entire debt, the IRS will accept partial payments to no payment at all.  

Before submitting an offer, you must first determine your eligibility which includes: 1) filing all individual tax returns, 2) up-to-date on all required estimated tax payments for the current year, and 4) if you own a business, make all required federal tax deposits for the current quarter.         A streamlined offer-in-compromise program is available for taxpayers with annual incomes up to $100,000. In addition, the taxpayer must have tax liability of less than $50,000. Taxpayers should be aware that there is a $5,000 penalty applies to any person who submits a frivolous or fraudulent application for an offer in compromise. However, the penalty is clearly aimed at those who abuse the process and should not deter taxpayers with legitimate offers from using the compromise process.

Please call if you would like to discuss whether submitting an offer-in compromise would be beneficial to you.

Ask Kit Kat: Seals & Antarctic Mystery

Hook Law Center: Kit Kat, how did seals help solve an Antarctic mystery?

Kit Kat: Well, the seals had a little help from scientists, but they worked together to shed light on a mystery which was puzzling to scientists. In 2016 and in 2017, scientists noticed that there was a large hole of open water in the middle of the Weddell Sea which is part of the southern Ocean and is located east of the Antarctic Peninsula. Normally, the Weddell Sea is frozen much of the year, so it was extremely rare that open water about twice the size of the state of Vermont would occur. This phenomenon is known as a polynya. According to Ethan Campbell, one of the scientists on the project, “We thought this large hole in the sea ice—known as a polynya—was something rare, maybe a process that had gone extinct. But the events of 2016 and 2017 forced us to reevaluate that.”

Now here’s where the elephant seals enter the picture. The scientists outfitted some of these local seals with antennae to their heads. The seals didn’t seem bothered by the attachments, and they went about their normal business of cavorting and diving as usual. The antennae then transmitted information to the scientists. With this data, the scientists were able to reach some conclusions. Apparently, polynya are formed when certain unusual conditions occur simultaneously. When strong storms occur near an underwater mountain (the case here), it causes the sea water to churn and swirl. This brings water from the deeper parts of the ocean to the surface. Water from ocean depths tends to be saltier. The saltier water leads to melting ice, which doesn’t refreeze after the storms subside, even though some of it sinks back to deeper depths eventually. Apparently, this is what occurred in 2016 and 2017.

We will have to wait and see if the phenomenon of polynya occurs in the future. However, we can thank the elephant seals in Antarctica for their help in understanding the phenomenon.

(https://www.cnn.com/2019/06/11/us/elephant-seal-antarctic-ice-hole-polynya-trnd/index.html)

Posted on Monday, June 24th, 2019. Filed under Senior Law News.

Can I Really Use My IRA to Pay For Long-Term Care Insurance?

By Jennifer Rossettini, CFP®

Many of our readers have two things in common: (1) they are not fans of “traditional” long-term care insurance, and (2) they are not fans of being required to take distributions from their IRA’s when they reach a certain age.  If you find yourself nodding your head and saying, “Me too!,” I have some good news for you.  With the right approach, you can take those Required Minimum Distributions (RMD’s) that you do not need and repurpose them to pay for “non-traditional” or “hybrid” long-term care insurance benefits.

When thinking about long-term care insurance, most people think of what is now considered a “traditional” long-term care policy.  These are the policies that you pay a premium for and if you need coverage it is there, but if you don’t need coverage, you lose the premiums paid.  Traditional policies are much like auto or home-owners’ policies – you pay for them with the hope that nothing terrible happens to your home or car, and you pay for them regardless of the “use it or lose it” nature of them.  Unfortunately, even though the chances of needing long-term care are greater than, knock-on-wood, getting into an accident, very few people choose to insure against this risk.

Why is this the case? Well, for one thing, it is thought to be expensive.  For another, it has the reputation for hefty premium increases.  And, as it turns out, rightfully so.  It was recently reported in The Virginian-Pilot that an estimated tens of thousands of Virginians will soon be hit with a double- or triple-digit percentage increase in premiums.[1]  Insurers have asked the State Corporation Commission to approve these rate hikes, because they have spent over a quarter of a century incorrectly estimating how long people stay in nursing homes and how many people would drop their policies.[2]  “Insurers kept initial premiums low and aggressively marketed policies, expecting many buyers to drop coverage when prices went up.”[3]  However, more people kept the policies than the insurance companies counted on, thereby causing the payout on claims to be much higher than expected.

Alternatives to traditional long-term care insurance come in the form of “hybrid” policies.  These hybrid policies give the policy owner access to the death benefit, or a multiple of the death benefit, if long-term care services are needed.  If long-term care services are not needed, or if not all of the death benefit is used up to pay for long-term care expenditures, the remaining death benefit is paid out to the designated beneficiaries upon the death of the policy owner.[4]

An example of such a hybrid policy is a product offered by State Life/OneAmerica.  It is a Whole Life life insurance policy with a Continuation of Benefits (COB) Rider.  You make a one-time deposit into a life insurance contract with the COB rider and receive a death benefit for your heirs as well as a lifetime long-term care benefit. 

To use an example, let’s assume that a male, aged 70, and a female, aged 71, are looking for a way to leverage a portion of their savings to fund long-term care expenses.  They also do not need their RMD’s to support their lifestyle.  Her IRA, which is valued at $119,000, has an RMD of $7,800.  His IRA will have an expected RMD in the first year of $3,300.  They could roll over her $119,000 IRA into the base policy and use the annual RMD’s from his IRA, net of taxes, to pay for the COB Rider. In exchange, they will receive lifetime long-term care benefits equal to $62,300 per year for each of them or $124,600 for both of them.  They are able to repurpose the $11,000 annual RMD’s that they didn’t need into something that they could very well need in the future.  But, even if they do not use the long-term care insurance, their heirs will receive a death benefit.

If you are interested in exploring this and other types of hybrid long-term care policies, the professionals of the Hook Law Center, P.C. can help you analyze your situation and introduce you to the right partner to meet your needs.


[1] https://pilotonline.com/news/local/health/article_7dc2abde-6832-11e9-b47a-a700b077671c.html

[2] Id.

[3] Id.

[4] Jamie P. Hopkins, Rewirement: Rewiring the Way you Think About Retirement,” p. 69 (2018).

Ask Kit Kat: Elephant Sense of Smell

Hook Law Center: Kit Kat, what can you tell us about elephants and their capacity for smell?

Kit Kat: Well, as you might suspect, elephants have large, long noses in their trunk. So, it’s not much of a stretch to imagine that their capacity for smell would be greater than some smaller creatures in the animal kingdom, including humans. Why this is important to know is that it may have implications for keeping elephants safe from predators when they wander beyond protected areas, tempted by smells that we may not even be aware of.

To test ideas about whether or not elephants possess greater olfactory capabilities than most animals, Dr. Joshua Plotnik of Hunter College in New York City devised some experiments. Six Asian elephants, which were blindfolded, were presented with plastic buckets with varying amounts of sunflower seeds. The buckets had lids, but also had holes, so the waft of odor of the contents could escape. “Remarkably, when we put two different quantities in the buckets, the elephants consistently chose the quantity that had more over less,” according to Dr. Plotnik.  For example, when there were large differences between the amount of seeds in a particular container, say 30 v. 180 seeds, the elephants were very accurate in picking the larger bucket. When the quantity varied slightly, say 150 v. 180, their accuracy slipped to about 50%. This proved Dr. Plotnik’s hypothesis that elephants have a powerful sense of smell which is not dependent on sight.

Why is this experiment important? Elephants in Thailand and Africa have spilled over from their protected areas into humans’ farmlands. Inhabitants love the elephants, but they don’t want their crops destroyed. It’s becoming quite a problem. Perhaps if there is more understanding what is attracting the elephants, better solutions can be devised to keep them in the areas which have been designated for them. It’s all about co-existing without expense to any group. (Veronique Greenwood, “Elephants May Sniff Out Quantities With Their Noses,” The New York Times (Trilobites), June 4, 2019)

Posted on Monday, June 17th, 2019. Filed under Senior Law News.

Maintaining Internal Systems and Strengthening Integrated Networks (MISSION) Act Goes into Effect

By Shannon Laymon-Pecoraro, CELA

Signed into law on June 6, 2018, the MISSION Act is designed to strengthen the ability of the Department of Veteran’s Affairs (VA) to deliver easily accessible high quality care at VA facilities, virtually, and in the community. The MISSION Act went into effect on June 6, 2019.

The MISSION Act came after a study in 2014 that revealed hundreds of thousands of veterans were waiting weeks, sometimes months, for medical appointments at VA health facilities, with some veterans dying while they waited for an appointment.

The law requires the VA to establish new quality and access standards for care received outside VA facilities. While the MISSION Act will better integrate the VA with community health care providers and tackle issues associated with the VA’s outside care program, ultimately expanding health care options, the MISSION Act is also designed to maintain the VA’s infrastructure for those who receive care at VA facilities. To do so, the MISSION Act requires the VA to review its medical centers and clinics to determine whether they are properly structured to serve the veteran population, and put assets and resources into locations that will benefit veterans most.

A key component of the MISSION Act was to provide urgent care benefits to Veterans while promoting choice and access to timely, high-quality care. Rather than being required to go to a VA facility emergency room for urgent care issues, the MISSION Act allows veterans to go to civilian urgent care facilities. To receive care, and have the VA cover the cost, the following conditions exist:

  • The care provider must be part of the VA’s contracted network of community healthcare providers
  • Must be for urgent care –  preventative care or dental services will not be covered
  • You must be enrolled in VA healthcare and have received care through the VA within 24 months
  • You may be charged a copayment, of  up to $30,  for your urgent care visit which will be billed by the VA, not the care provider
  • A prescription for more than a 14-day supply must be filled by the VA and there may be copays for prescriptions filled outside of the VA

There are additional benefits under the MISSION Act, such as access to the caregiver program for veterans who have incurred or aggravated serious injuries while serving in the activity duty military. Additionally, the VA must provide access to community care if the VA does not offer the services required by the veteran, there is not a full-service medical facility in the state in which the veteran resides, or the veteran was eligible for care in the community under the 40-mile rule in the Veterans Choice Program. There is also a responsibility for the VA to ensure its care providers are using “evidence-based guidelines” for prescribing opioid-based painkillers.

Ask Kit Kat: Feeding Hummingbirds

Hook Law Center: Kit Kat, what is appropriate to feed hummingbirds?

Kit Kat: Well, first of all, there are many types of hummingbirds. Bee hummingbirds are extremely tiny. They are the tiniest of hummingbirds. Rufous hummingbirds make very long migrations relative to other migratory birds. Anna’s hummingbirds fly faster than some space shuttles. So all in all, this is a very varied species.

With that said, if you happen to live in an area with hummingbirds, how can you encourage them to stay, and what should you offer to feed them? Experts say the best thing to provide hummingbirds is an environment rich with insects and flowers. Salvias, penstemons, monkeyflowers are excellent examples. In the past, it was thought that feeders containing sugar water was the way to go. However, scientists now realize that is probably the worst thing that can be done. One has said, “Feeders in landscapes with fewer insects are akin to fast-food drive-thrus doling out 32-ounce sodas and nothing else—a quick hit of energy but little substance.” Moreover, sugar water can go flat, especially in hot weather. If used, it should be changed often. Lisa Tell, of the UC Davis Hummingbird Health and Conservation Program, comments, “If you wouldn’t drink it, then it’s not great to offer them.” Also, feeders should not be placed too close to a window to prevent the birds from injuring themselves.

Hummingbirds are an important part of our ecosystem. They help to pollinate about 7,000 species from Alaska to Argentina. In turn, the plants they help to thrive, provide nourishment for mammals that we humans consume. It’s the circle of life—and we owe these tiny avians a great deal! (Nancy Lawson, “To feed or not to feed,” All Animals, March/April/May 2019, p. 30)

Posted on Thursday, June 6th, 2019. Filed under Senior Law News.

How to Provide for Your Pets After You’re Gone

By Emily Martin, Esq.

For many Americans, owning a pet – whether it’s a dog, cat, bird, or other type of animal – is a major part of a fulfilled and happy life. In fact, sixty-eight percent of U.S. households, or about 85 million families, own a pet, according to the 2017-2018 National Pet Owners Survey conducted by the American Pet Products Association (APPA). Pets can provide companionship and often protection for someone who is elderly or living alone. Unfortunately, however, pets can’t take care of themselves after you are gone. So what can be done to provide for your pets if you pass away before they do?

There are a variety of ways in which people make arrangements for their pets after they pass away. Some people may have a discussion with friends or family members who have agreed to take on their pets upon their passing. Still others may have made arrangements for a shelter or other organization to care for their pets when they are no longer able to. Additionally, some people take the step of providing for their pets through their estate plan.

A controversial story was recently reported out of Chesterfield, Virginia, where an owner specified in her estate plan that she wished for her dog to be euthanized and laid to rest with her upon her passing. Although the dog was perfectly healthy and had been in the care of an animal shelter, it was euthanized and taken to a pet cremation center upon the death of its owner (source: https://www.cnn.com/2019/05/22/us/dog-buried-with-owner-trnd/index.html). The animal shelter was unable to keep the dog despite the fact that they felt confident that they would be able to find a new owner for it.

Disturbing stories like this are rare, but it may be that the owner of the dog in Chesterfield did not feel that anyone would be able to care for her dog after she passed away. Perhaps she felt that euthanizing the dog immediately was more humane than having it sent to a shelter where it may be euthanized anyway. Regardless of the reasoning for this plan, there are many ways to avoid uncertainty as to what will happen to your pets after you pass away.

While you can’t leave property directly to a pet, Virginia Code Section 64.2 726 allows you to provide for your pets in your will or trust by creating a “pet trust.” Pet trusts allow you to leave a certain amount of money to someone who will care for your pets until the pets pass away.

For example, you may leave $10,000 to your granddaughter for the care of your dog Rusty. Additionally, if you have multiple pets, you can leave an amount to be used for all of your pets (or the pets you own upon your passing) until they pass away. It is possible to create multiple pet trusts for different pets – say, if you want your sister to have your cat, but you want your niece to have your dog. It is important to name an alternative caretaker as well who can continue to care for your pets, if the original person you named is unable or unwilling to care for the pets.

Perhaps the most important thing to do when deciding how to provide for your pets is to have a conversation with the person to whom you will be entrusting their care. Make sure the people you are naming in your pet trust are aware that they will be caring for your pets after you pass away and that they are willing and able to do so.

Although it is difficult to imagine that our pets may someday be living in a world without us, one of the best gifts we can give them is to make sure that they are provided for once we are gone.

Ask Kit Kat: Spayathon™

Hook Law Center: Kit Kat, what can you tell us about the Spayathon™ which the HSUS organized for Puerto Rico recently?

Kit Kat: Well, this was quite an effort! The Humane Society of the United States (HSUS) organized a spayathon in Puerto Rico, utilizing help from more than two dozen organizations. So far, nearly 25,000 animals have been sterilized and vaccinated since the project began last summer. By the time the effort finishes this month (May 2019), they hope to have helped 30,000 animals. To make this happen, teams of veterinarians, vet technicians, and volunteers were organized to treat the pets in sports arenas and other large venues on the island. In addition to spaying/neutering, pets were vaccinated and received pet food, leashes, toys, etc.—all at no cost to the owner. The impact will be tremendous. According to the ASPCA, “Sterilizing 30,000 cats and dogs will prevent the births of approximately 200,000 puppies and kittens in the first year alone.”

One might think it would not be possible to maintain a high level of quality in volume procedures such as this, but that is not the case. According to Tara Loller, HSUS senior director of strategic campaigns and the creator of Spayathon, “This is the first time high-quality, high-volume spay/neuter of this magnitude has ever been done anywhere in the world.” By following strict procedures for safety and cleanliness, the Spayathon had a tremendous success rate with a low-level of complications. Quality was never sacrificed for quantity. An added benefit was that local veterinarians received training in the latest veterinary care techniques.

There were many heart-warming stories to emerge from the effort. Mary Ann Lopez rescued 5 community cats and had them spayed/neutered. She was given a free play tower. Luis Rosario’s Milagros, a female dog, had been found on the streets, and had obviously recently birthed a litter of puppies. She was spayed at the event. Now she has a home and plenty of food. Her name “Milagros” means miracles in Spanish, and she indeed receive a miracle. There are so many other stories, but there is not room to share all of them here. However, we can thank the HSUS for organizing this fantastic effort! It has helped so many animals who cannot voice their thanks. (Emily Smith, “All In,” All Animals, March/April/May 2019, p. 19-21)

Posted on Thursday, May 30th, 2019. Filed under Senior Law News.

The End of the Stretch IRA?

By Letha Sgritta McDowell, CELA

Tax deferral has long been one of the most powerful money saving strategies in existence and few options rival the concept of the stretch IRA. To understand the stretch IRA, we must first understand why the IRA (or any other tax-deferred savings vehicle such as a 401(k), 403(b), SIMPLE, etc) is such a powerful money saving tool.  If an individual invests $5,000 each year in an IRA beginning at age 29 and retires and stops contributing to the plan at age 65, then their IRA balance would be approximately $796,687 at retirement age. This assumes an average rate of investment return of 7% (the S&P 500 averaged 10.3% between the years 1970 and 2016). Keep in mind the contributions aren’t taxable and neither are the earnings. Current income tax rules require that minimum distributions be taken from the account beginning at age 70 ½ in order to ensure some income tax is paid on that which has not yet been taxed. If the account owner dies and there are funds left in the account and they have named a beneficiary, then the beneficiary may “roll” the account into her or her own IRA, and then he or she must also take distributions from the account. However, the distributions must be taken over the life expectancy of that beneficiary. In many cases, the named beneficiary is younger than the original account owner thereby requiring a smaller percentage be taken annually. In the interim, the inherited account will continue to grow free of income tax. This phenomenon is commonly called the stretch IRA.

Using the above example, assuming a withdrawal rate of just the minimum required distribution of the original IRA owner beginning at age 70 ½ with the same continued rate of return, that same IRA is worth $1,462,161 if the owner dies at the age of 85; the increase being due to tax deferred growth. Then, assume the named beneficiary of the IRA is 55, and he or she rolls the IRA into his or her own IRA and begins taking only the required minimum distributions. Assuming the same 7% growth rate assumed with the initial IRA, the funds will last until the beneficiary turns 84, at which time the IRA value and required minimum distribution is the same amount. That amount being $236,569.

The above illustrates how a total investment of $180,000, when allowed to grow tax free, results in a large accumulation of wealth. In the above example, the IRA pays out a total of $6,999,418 between the original IRA owner and the beneficiary. For years attorneys, accountants, and financial advisors have stressed the power of this savings to clients and their families. And, for added protection, attorneys have strived to ensure that such accounts left to trusts for the benefit of family members also received the same tax deferred treatment. Much billable time and attention has been paid to preserve this tax-deferred transfer of wealth.

Currently, there are bills pending in both the House of Representatives and the Senate which would severely reduce or eliminate the stretch IRA. House Resolution 1994 (also known as the SECURE Act) proposes to raise the age for requiring minimum distributions to 72 but eliminates the stretch provisions which allow a beneficiary to take required minimum distributions over his or her life expectancy. Instead, the new law proposes to require a beneficiary to withdraw inherited funds over a period of 10 years or less. The bill does include some exceptions such as for a spouse, minor child, a child with a disability, or a beneficiary who is chronically ill. The equivalent bill in the Senate is Senate bill 3471. The Senate version proposes to require distributions from an inherited tax deferred account be made over a period of 5 years (instead of lifetime) but is only applicable if the total of all such tax deferred accounts exceeds $450,000. The Senate bill also provides for exceptions for the spouse, minor child, a child with a disability or person who is chronically ill.

These new bills requiring inherited funds be withdrawn and taxed will significantly reduce the amount allowed to accumulate and will reduce the ultimate pay out of the savings. While there are differences in each bill which would need to be rectified before it could pass and be signed into law, these bills have bi-partisan support which is rare and there may be a push to pass the bill in order to show constituents that Congress can accomplish something. Certainly this possible change will likely have a large impact on beneficiaries both from an income tax perspective and from a financial planning standpoint. Should some version of these bills pass, many will need to revisit both their estate and financial plans. Hook Law Center will be sure to monitor this legislation to inform clients of any final change.

Ask Kit Kat: Oyster Castles

Hook Law Center: Kit Kat, what can you tell us about oyster colonies in the Elizabeth River which runs through Norfolk, Virginia?

Kit Kat: Well, this is thoroughly fascinating! Scientists have long planted square concrete blocks with irregular heights and hollow centers in local waters to serve as a base for baby oysters to attach to and grow to form a reef. However, now environmental scientists think they have improved on the concept. Their new concrete blocks still have the same outer dimensions, but they have filled in the square with towers and mounds, so that the new blocks resemble something like a Disneyland castle. Evelyn Tickle, the head of GROW Oyster Reefs, says oysters in these new blocks can grow and “arch over … to establish their own reef. It establishes a natural-looking reef.” Reefs are important because they can serve as a buffer to protect shorelines during storms. GROW Oyster Reefs is based in Charlottesville, VA, but RISE, a Norfolk non-profit, awarded them a $285,000 grant to conduct the trial.

The concept of this new type of block is based on study of actual reefs—how different shapes work to encourage growth. Over the years, various materials have been tried—reg. concrete building blocks and even coal ash. Tickle’s blocks, however, are made of a specialized concrete that imitates the actual composition of an oyster shell. Her hope is that the new baby oysters will actually receive nourishment from the blocks which will, in turn, foster growth. Tickle also says, with her system, blocks will not need to be re-planted every year. Hopefully, her blocks will spur new growth on their own. Tickle hopes to open an office in the Hampton Roads in the near future. She is that confident of her product.

There are  3 locations in the area that have been planted with the new concrete blocks—along the Elizabeth River south of I-264, one in the Lynnhaven River, and one each on the ocean and bay sides of the Eastern Shore. This was done in mid-May of this year. Joe Rieger, deputy director of restoration for the Elizabeth River Project, said these locations will be checked in a couple of months to determine progress. Time will tell how successful this endeavor has been.

(Katherine Hafner, “Unique tile gives oysters a new castle,” The Virginian Pilot, May 20, 2019, p. 1 & 10)

Posted on Thursday, May 23rd, 2019. Filed under Senior Law News.

What You Need to Know About IRS Form 8379 – Injured Spouse Allocation

By Amanda L. Richter, CPA

Internal Revenue Service (“IRS”) Form 8379 Injured Spouse Allocation is a form that can be submitted with the jointly filed individual tax return when it is anticipated that the refund will be used to offset past-due obligations of the other spouse. By filing this form, the injured spouse (non- debtor spouse) is requesting the IRS to not have his/her share of the refund applied to the other spouse’s debt obligation.

When married couples file a joint individual tax return, under the principle law of joint and several liability, both the taxpayer and spouse are held responsible for the tax liability and certain debts. Some examples of debts susceptible to being seized by the IRS are:

  • Federal income taxes
  • State income taxes
  • Unpaid child support
  • Delinquent student loan debt
  • Unpaid spousal support
  • State unemployment compensation

This form can be filed with the tax return or filed separately. If Form 8379 is filed separately, it is important to remember to attach a copy of all Forms W-2 and 1099’s that report Federal withholding. If not attached this can result in delays for the IRS to process the form.

The due date for filing Form 8379 is three years from the due date of the original tax return (April 15th) or two years from the date the tax refund was applied to the debt obligation. This form must also be filed each year the non-debtor spouse is requesting relief.

If you have any questions regarding this information or belief that you may be entitled to an injured spouse allocation, please contact our office at 757-399-7506 to further discuss your situation.

Ask Kit Kat: Forward Food Team

Hook Law Center: Kit Kat, what is the Forward Food Team, and how does it help animals?

Kit Kat: Well, the Forward Food Team is a project of the Humane Society of the United States (HSUS). It fosters training in preparing food which is meatless, yet tasty. A prime example is its partnership with the U.S. Military. A sweet potato and black bean burrito recipe created by the HSUS has been approved by the Department of Defense (DOD) to be served on military bases. This is a huge achievement for HSUS, because DOD has some very strict nutrition regulations. HSUS also has developed recipes for lasagna and tacos using a plant-based meat substitute. Soldiers are apparently enjoying the food. 90% have reacted positively to the menu changes. Stefanie Heath, a HSUS food and nutrition specialist, says, “As long as it tastes good, they’ll eat it.” In addition, military chefs are being trained in plant-based nutrition on several bases and at Fort Lee, an Army base in Virginia, which is an important culinary training center. Gradually, there will be more and more plant-based options on the menu.

HSUS’ Food Forward also partners with universities, K-12 school districts, hospitals, and other groups to include plant-based menu options. In all, 2000 chefs have been trained nationwide. That translates into 10.3 million animal lives saved. Kudos to HSUS to all the institutions who are willing to experiment with their menu options to provide tasty food which is at the same time animal-friendly. (Kelly L. Williams, “Meatless in the mess hall,” All Animals, March/April/May 2019, p. 11)

Posted on Thursday, May 16th, 2019. Filed under Senior Law News.
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