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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.

Deciding When to Take Social Security Benefits

By Jennifer Rossettini, CFP®

In a previous newsletter article, I mentioned that choosing the right Social Security claiming strategy could increase your retirement income by as much as 9%.  This article will discuss the simpler concept of just choosing when to start taking Social Security benefits.  The more complicated claiming strategies will be saved for a future article.

Most Americans know that they can begin taking Social Security benefits as early as age 62, however, nearly 40% of Social Security beneficiaries do not realize that if they claim benefits before their full retirement age, they will receive a permanent reduction in benefits.  Some beneficiaries believe that, if they take their benefit early at 62, the benefit will increase at full retirement age. This is not the case.

The first thing to know when making your decision is what your full retirement age is.  If you were born after 1960, your full retirement age is 67.  If you were born before 1960, you can find your full retirement age below:

The next thing you need to know is how much you lose by claiming benefits early and how much you gain by waiting until sometime after your full retirement age.  The reduction in benefit amount is equal to five-ninths of 1% for each of the 36 months immediately preceding your full retirement age, plus an additional five-twelfths of 1% for each month before that. The increase in benefit amount if you wait to claim benefits until after your full retirement age is two-thirds of 1% for each month you delay, up until age 70 when the benefit amount reaches its maximum.

While waiting to take benefits may seem like a no-brainer, you will also have to consider the fact that you will be missing years’ worth of benefits and calculate your “break-even point” – the age at which the sum of your higher benefits adds up to the amount you missed out on by claiming late.  If you expect to live after your break-even age, then you will be wise to delay taking benefits until your full retirement age as long as it is financially feasible for you to wait.

The following chart shows the reduction or increase in benefits compared with a full retirement age of 67, based on the age at which you claim benefits. It also shows the number of years you would need to receive benefits to break even, compared with claiming at age 62. It is based on the average monthly benefit of $1,404 at full retirement age.[1]

You can visit www.ssa.gov/myaccount/ to find out what your projected retirement benefits will be at your full retirement age, age 62 and age 70.  Based on your expected benefit at full retirement age, you can use the formulas described above to determine what your benefits will look like in the year you choose to claim benefits, and you can also calculate your break-even point.

Of course, determining when to begin taking Social Security benefits is just one piece of a very large and complex puzzle.  Every person has a unique situation affecting their retirement decisions, so general guidelines are meant to be just that – general.  We recommend that you consult with an advisor who can take a holistic look at your goals and resources to determine a retirement strategy and the Social Security claiming strategy that is right for you.


[1] https://www.fool.com/investing/2018/01/16/the-1-chart-you-need-to-decide-when-to-take-social.aspx

Ask Kit Kat: Pet Allergies

Hook Law Center: Kit Kat, what is the best way to handle pet allergies?

Kat Kat: Well, I suppose the simplest way is to not adopt a pet in the first place, if you know you have pet allergies. However, many people are not satisfied with that response, so they go ahead and deal with the allergy, rather than denying themselves the pleasure of a pet. Fortunately, there are degrees of being allergic to pets, so some with mild allergies can, with some precautions and medications, make it work. However, those with severe allergies should not probably not take the risk. If pet fur sends you into an asthma attack and to the emergency room, then perhaps you can satisfy your desire to interact with pets through volunteering in fundraisers for pets or by becoming a member of groups such as the US Humane Society or the ASPCA.

If you have decided to have a pet despite an allergy, Kenneth Mendez, chief executive of the nonprofit Asthma and Allergy Foundation of America (AAFA), recommends keeping “pets out of the bedroom, avoid carpets in the home, and use products certified as asthma and allergy friendly.” Olivia Lanes of Pittsburgh, PA is one such person who plunged ahead with pet ownership despite her allergy. She has 2 cats—Cupcake and Sophie, as well as a dog named Nova. She sneezes a lot and often has congestion, but she wouldn’t give up her pets for anything. Tracy Spiering has a 20-year old cat named Oatmeal Cookie, and 2 other cats. She requires bi-monthly shots to keep her allergies in check, but to her, giving her cats away is not an option. “It would be like giving away your kid.”

Even though some pets cause fewer allergic reactions than others, Mr. Mendez of the AAFA says there’s no such thing as a 100 % hypoallergenic animal. Another suggestion by an American Kennel Club spokesperson is to try out a pet by interacting with the specific pet for a few times to see if they cause an allergic reaction. Ashok Wahi of Basking Ridge, NJ has developed a non-prescription gel called NasalGuard which sells for $14.85. It can be applied to the nasal passages, and helps reduce allergic reactions. He should know. He developed it for his daughter, so she could keep her cat Ebony.

In summary, the decision to proceed with pet ownership despite an allergy is an individual one. Don’t feel guilty if you decide it just won’t work for you. There are other ways to support animal welfare. (Khadeeja Saafdar, “My Cat Allergy Is Killing Me, but Cupcake Stays,” The Wall Street Journal, March 28, 2019)

Posted on Monday, May 13th, 2019. Filed under Senior Law News.

HUD Releases ABLE Account Guidance

By Shannon Laymon-Pecoraro, CELA

In December 2014, the Achieving Better Life Experience Act (ABLE) was signed into law, allowing persons with a disability onset prior to age 26 to establish tax-advantaged savings accounts. ABLE was designed to promote the health, independence, and quality of life of individuals with disabilities by allowing families to fund an account in which such an individual can secure funding for disability-related expenses. Similar to a special needs trust, the individual with the disability will have a beneficial interest, and the purpose is to supplement and not supplant other benefits. A qualified disability expense is defined as “any expenses related to the eligible individual’s blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary .” While the treatment of ABLE accounts for the Social Security and Medicaid programs was established with the promulgation of ABLE, other means-tested benefits programs needed to clarify how they would treat ABLE accounts.

Many people with disabilities rely on assistance received through the U.S. Department of Housing and Urban Development (HUD) for housing. This assistance is most frequently received through public housing or rental assistance programs. As a general rule, eligibility is based on annual gross income, with established income limits based on area and family size. The individual receiving housing assistance will be responsible for rent, which is set at the highest of 30% of the monthly adjusted income, 10% of monthly gross income, welfare rent, or a $25-$50 minimum rent set by HUD. In calculating a household’s income, HUD will impute income to assets at the higher of actual income or calculate income from the asset based on the passbook savings rate, which is currently .06%.

HUD recently released guidance for the treatment of ABLE accounts for HUD assistance programs, clarifying that HUD will disregard amounts held in an ABLE accounts. In doing so, HUD states that under ABLE legislation, the account balance is specifically disregarded when determining an individual’s eligibility for federal means-tested programs, and that ABLE exclusion applies to HUD programs in determining a family’s income. As a result, the balance of an ABLE account will be excluded in the household’s assets, and there will be no actual or imputed income to such an account. Further, distributions from the ABLE account will not be treated as income. This favorable treatment is, however, not without limitations since HUD will continue to treat all wage income received as income, regardless of whether the income is paid into an ABLE account.

Ask Kit Kat: Tail-Tied Squirrels

Hook Law Center: Kit Kat, what can you tell us about the baby squirrels who got their tails tied together when they were in their nest?

Kit Kat: Well, this is almost unbelievable, but it really did happen. The squirrels in question were 5 baby Eastern gray squirrels. Their nest or drey was inside a tree in Milwaukee, Wisconsin. In the confined space of the nest, and with the fine hair of the babies’ tails coupled with the grasses the mother squirrel had used to line the nest, the babies’ tails became a gnarled mess. Someone rescued them and brought them into the Wisconsin Humane Society. Scott Diehl, Wildlife Director, was charged with untangling them. They resembled a star with 5 points that were pulling in all different directions. They were quite agitated, as one might expect. They had to be sedated using a tiny amount of ketamine and xylazine. Once that was done, he placed them on a heating pad. Then he set to the task of untangling them using a tiny, sharp-pointed scissors. In about 20 minutes, he got the job done. He said, “It was like untangling a ball of Christmas lights.” Because the tips of the tails had been deprived of circulation, 3 of the little ones lost a portion of their tails.

In another state (Nebraska), a similar situation played out. This time there were 6 tangled baby squirrels. Laura Stastny, Executive Director of Nebraska Wildlife Rehab, worked by herself. It was night, and she could not locate a veterinarian to do the sedation, so she wrapped them in a towel to keep movement to a minimum. She said, “I had them wrapped like a squirrel burrito.” It took her 90 minutes. 5 of the 6 squirrels ended up losing part of their tails, too. But, that’s not really a problem—tails are not essential.

Somehow, both stories got publicity through the Associated Press, and news of their feats even reached Europe! The important thing is that the tiny babies were relieved of their suffering. As Scott Diehl said, “For us, it all goes back to our mission. The mission of the Wisconsin Humane Society is to build a community that values animals and treats them with respect and kindness.” (John Kelly, “What do you do when five baby squirrels accidentally tie their tails together?” The Washington Post (Local Perspective), April 17, 2019)

Posted on Monday, May 6th, 2019. Filed under Senior Law News.
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