Comprehensive Planning. Lifelong Solutions.

Should I Transfer My House to My Kids?

By Hook Law Center

One of the most common questions we get from clients is whether they should transfer their house to their children. The answer to this question is almost always absolutely not! Many people think that transferring their house to someone else will allow them to protect their home from having to be sold in the event that they need to go on Medicaid or receive VA benefits. They believe that getting the house out of their own name will help them qualify for these benefits more easily, and that such a tactic is easier and less expensive than executing and funding estate planning documents. However, there are several reasons why this is never a good idea.

Your Children May Have to Pay Crippling Amounts of Capital Gains Tax.

If you are elderly, it is very likely that you purchased your home thirty, forty, or even fifty years ago. The price you paid for your house at that time was probably much less than its current value. For example, say that you paid $35,000 for your house, and it is now worth $250,000. If you transfer the house to your daughter and she later wants to sell the house, she would have to pay capital gains tax on the difference between the price you paid for the house and the value it had at the time she received it – $215,000. You can see how much this can add up!

In the alternative, if you transfer the house through a will or a trust, your beneficiaries will receive what is called a step-up in basis equal to the value of the house at the time they inherited it rather than the value of the house at the time you purchased it.

 You Could Be Prevented or Disqualified From Receiving Medicaid Benefits.

As you may know, there is a five-year “look-back” period for Medicaid eligibility purposes. This means that, when your Medicaid application is being reviewed, any gifts or “uncompensated transfers” that you have made in the past five years will result in a “penalty period.” In 2018, every $6,422.00 worth of uncompensated transfers that you made in the past five years will result in your Medicaid benefits being withheld for one month. Medicaid will not penalize applicants for transfers that occurred more than five years ago.

If you transfer your home to your children and then require long-term care within five years of the transfer, Medicaid will consider this to be an uncompensated transfer. This type of transfer has the potential to delay your Medicaid benefits and possibly even prevent you from ever qualify for Medicaid.

Debt, Disability, Divorce, or Death

There are a few other reasons why the idea of transferring ownership of a parent’s house to their children is never a good idea. If you transfer your home to your child and they have significant debts, then creditors could inquire as to the assets in their name. If your house is in their name, then creditors could make claims against that property in order to recover the debt owed to them. This could result in your child having to sell your house to satisfy his or her creditors.

Additionally, if your child becomes disabled and requires Medicaid or government benefits of her own, owning your house could prevent her from qualifying for these benefits in the same way that it might prevent you from qualifying for benefits if you need long-term care.

Another potential issue is divorce. If you transfer your home to your child and then they go through a divorce, your house could be considered an asset to be divided or dealt with as part of the property agreement with their former spouse.

Finally, if your child passes away before you do and you have transferred your home to him, then your house could be considered part of his estate and distributed to his heirs instead of yours.

Obviously, none of these outcomes are ideal. If you own a home and you are looking to qualify for Medicaid, VA benefits, or other long-term care benefits, an experienced elder law attorney can work with you to implement strategies that will preserve your assets while allowing you to accomplish your goals and receive the benefits you need.

Kit KatAsk Kit Kat – Light Bulbs & Wildlife

Hook Law Center: Kit Kat, what is the connection between the type of light bulbs one uses and the impact on wildlife?

Kit Kat: Well, I must admit when I saw the title of this article I was intrigued. I just never had thought about any connection between the two things, but apparently there is one. The increase in the use of outdoor lighting is having, in some cases, a negative effect on wildlife. Worldwide, there has been a 2.2% increase annually of outdoor areas that are artificially lit. Inexpensive LED lighting is partially responsible. According to Paul Bogard, author of The End of Night, “Every creature on this planet has evolved in bright days and dark nights. None has had the evolutionary time to adapt to the blitzkrieg of artificial light.” Some of the harmful side effects of artificial light are: 1) baby turtles heading toward lit-up hotels instead of seeking the sea guided by moonlight, 2) migrating birds disoriented by spotlights, 3) salamanders sleeping later, 4) moths stopping mating, 5) delayed maturation of soybean plants near sodium lighting, and  many more  according to experts.

What can be done to reduce this stress on ecosystems? Well, awareness is the first step. If one didn’t know there was a problem, then there could never be a solution. So, this is what the experts tells us: 1) turn off outdoor lighting when it is not being used, 2) install motion-detector lighting which only comes on when an object is approaching, 3) generally, LED lights are better than other types, but not in all cases. It depends on what creatures are native to an area, and how they interact with the particular type of lighting, and 4) close your curtains or blinds at night to eliminate glare which may be affecting the animal world. There are a surprising amount of them who are nocturnal—30% of vertebrates and 60% of invertebrates. They thrive in the dark, so let’s help keep it that way for them as much as we can. (Nancy Lawson, “Going to the dark side,” All Animals, May/June 2018, p. 38-39)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, August 13th, 2018. Filed under Senior Law News.

Will You Outlive Your Nest Egg?

By Hook Law Center

As Generation X approaches its retirement years and the Baby Boomer generation is in the midst of theirs, this question should be on the minds of millions of Americans. The answer to the question is not quite as simple as some of the “rules of thumb” out there.  For instance, the “10% Rule” which suggests saving 10% of your income annually may not work for someone who waits until age 40 to start saving. Similarly the “4% rule” which theorizes that you can withdraw up to 4% of your investment portfolio safely, is an old rule based on assumptions that no longer hold true, such as bonds paying higher rates.  Finally, the myth that seniors should not invest in stocks could prove fallible if the return they do have in the portfolio does not keep pace with the rate of inflation.

More important than why the above mentioned rules of thumb may not work, is that every situation is unique. What works for your neighbor may not work for you and vice versa. A good financial planner will not rely on rules of thumb alone, but will take your individual goals, resources and risk tolerance into account.

If you are approaching retirement, chances are that you have a pretty good idea of what your spending needs are, and you may have even accumulated some savings. Your financial planner should take a snapshot of where you are today, compare that snapshot to your goals for the future, determine whether those goals can be accomplished on your current path, and if not, work with you to straighten out the bumps in the path.  If you are in the midst of retirement, it is just as important to evaluate your current path and determine whether the path leads straight to a successful retirement or veers off in an unpleasant direction.

The current snapshot should include an analysis of your income sources, including whether those sources increase with inflation and provide a survivor benefit for your spouse if you are married; your annual spending and savings; the amount and allocation (stocks vs. bonds) of your investment portfolio; and your risk tolerance (how you feel about the prospect of your portfolio’s value dropping). Based on how your investment portfolio is allocated, an average rate of return can be estimated. Taking into consideration that rate of return, how much you need to withdraw from your portfolio to supplement your income, and your life expectancy, your financial advisor can calculate whether you will run out of money before the end of your life.

This “straight-line” approach has its limits, however. It assumes that your portfolio will achieve that same rate of return year after year. It assumes that inflation will remain the same year after year. We all know from experience that the financial markets do not behave that way.  Just as important as how much the value of your portfolio declines or appreciates is the timing of such decline or appreciation.  Many financial planners use a Monte Carlo analysis to more accurately predict the answer to the question: “Will I Outlive My Nest Egg?”

What is Monte Carlo analysis? It is a computer simulation that takes into consideration the allocation of your portfolio and the rate of withdrawal from your portfolio and runs them through a random number of trials (usually 1,000 or more).  The simulation is designed to take all of the possible ups and downs in the market and the timing of the ups and downs to come up with a “probability of success.” The probability of success is based on the number of trials during which your portfolio runs out of money before the end of your life expectancy. For example, if your portfolio ran out of money in 200 of 1000 trials, you have an 80% probability of success.

If your probability of success is below the 70% to 90% range, you and your advisor have some work to do. There are a number of variables that could change the result.  You may achieve your goals with a little less risk in your portfolio (or a little more risk); by spending less or choosing to take Social Security at a later age; by delaying retirement or saving more if you are still in your earning years; and by doing any combination of these things.

The Hook Law Center has two CERTIFIED FINANCIAL PLANNERS™ on hand and the resources available to help you develop a financial plan that is customized to your needs and helps you determine whether you are on the path to success or whether some adjustments need to be made.

Kit KatAsk Kit Kat – Wildlife Land Trusts

Hook Law Center: Kit Kat, what can you tell us about the Humane Society of the United States’ (HSUS) wildlife land trust?

Kit Kat: Well, this is interesting. HSUS is an affiliate of the Humane Society Wildlife Land Trust which has 116 sanctuaries in the United States and Canada. The land mass covered is more than 20,000 acres. The best part is that all that land is safe from hunters. Recently, a wildlife researcher and rehabilitator, Alice Henderson, and Jason Patnode, a photographer and filmmaker, visited seven of the land trusts. The following is what they observed in 3 of the land trusts.

Allranch Wildlife Sanctuary, New Mexico, 1,280 acres – What is unique here are the bats. They spotted a greater bonneted bat, which has a 2-foot wingspan. This particular bat roosts in cliffs and has a call which is audible to humans. Other interesting creatures were horned lizards, and a bird (the loggerhead shrike) which is in decline due to habitat loss.

Demetriades Wildlife Sanctuary, Montana, 240 acres – This is one of the smaller sanctuaries, but it was teeming with life. They observed pronghorns (a deerlike animal with black horns), sandhill cranes, eagles, trumpeter swans, badgers, and moose. They also conducted a Bortle dark-sky test, which is a measure of darkness, or on the flip side, of light pollution. It had a very low score, which is a sign that darkness is being preserved. Darkness is helpful to migratory birds, because it helps them see lots of stars, which they use for navigation.

Meadowcreek Wildlife Sanctuary, Arkansas, 1,219 acres – Once again, bats were observed, but different species than in NM. Here is the home of the gray and Indiana bats, which are endangered. Also seen were the following: deer, coyote, river otters, whip-poor-wills, Eastern screech owls, and barred owls. What a wonderful mix of species!

We are indeed fortunate that HSUS and its affiliate, the HS Wildlife Land Trust, protect these wonderful species for all of us to enjoy! (“Trust in the wild,” All Animals, May/June 2018, p.28-29)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Friday, August 3rd, 2018. Filed under Senior Law News.

Unexpectedly Disinherited?

By Sarah Schmidt

What if your mother or father assured you that you should expect some version of an inheritance after death, but the Will reveals that you have been disinherited?

This scenario is unfortunately common, and it raises a number of questions: Was the will, or portions of it, forged? Was it a product of undue influence or other fraud? Or was it indeed the testamentary intent of the testator and he or she either changed his or her mind after the discussion with you or simply did not want to hurt your feelings by telling you the truth? These questions can be difficult to answer after some one has passed away. If you indeed believe the will was a product of fraud or undue influence you will need evidence to prove those allegations.

If your mother repeatedly assured you that you could expect an inheritance, though they may help, the statements your mother made to you during life, standing alone, will likely be insufficient to set aside the will. This is because “such declarations, standing alone, are not admissible as direct evidence to prove or disprove the genuineness of the will.” See Canody v. Hamblin (2018), quoting Samuel v. Hunter, 122 Va. 636, 95 S.E. 399 (1918). Only where testamentary intent is first found on the face of the will is extrinsic evidence, such as the declarations, “admissible as circumstances, either to strengthen or to weaken the assault, according to their inconsistency or their harmony with the existence or terms of the will.” Id. Furthermore, Virginia’s Dead Man’s Statute requires corroboration of such testimony when offered by an interested party. See Va. Code § 8.01-397.

Thus, standing alone, allegations that your mother told you differently will likely be insufficient. Once a proponent of a will proves that the statutory formalities of a valid will have been met, a presumption of testamentary capacity arises and the burden of going forward will be placed on you, the contestant to produce evidence to support your claims.

If you have been unexpectedly disinherited you should seek the advice of an estate litigation attorney as soon as possible. The time frame in which to contest a will is very short and you should act immediately to seek legal advice to see whether you have a case worth bringing.

Note* This article is referring to generally vague promises of a decedent as to how their will disposes of property and is not intended to address gifts causa mortis.

Kit KatAsk Kit Kat – Sunk Costs Apply to Animals

Hook Law Center: Kit Kat, what do you mean by saying, “Sunk costs apply to animals?”

Kit Kat: Well, there is a psychological theory called the “sunk cost fallacy” which applies to humans, and now, apparently to animals. Let me explain. According to this theory, once someone has invested in an idea or paid money for something, for example, they are extremely hesitant to abandon their endorsement or activity. For instance, if you have paid a lot of money for a concert or Broadway show, but 10 minutes into the performance, you realize you hate the show, you still may stick it out until the end, because you have already invested so much time and money at this point.

Now new research suggests that animals operate the same way. In a study published July 12, 2018 in the journal Science, researchers from the University of Minnesota report observing the same phenomenon in rats and mice. The rats and mice were waiting for a reward of flavored pellets and persisted longer than normal, even when the reward was extremely delayed (varied from 1-30 seconds). Once they decided to enter the waiting zone for the pellets (though they had a choice not to enter at all), they did not exit before receiving the reward. Dr. A. David Redish, one of the authors in the study, further observed, “Even more important than the similarity among species was the study’s findings that sunk cost effects appeared only after the subjects had decided to pursue a reward, not while they were still deliberating whether to do so.”

Shelly Flagel, as associate professor of psychiatry at the University of Michigan, who was not involved in the study, said the research had “far-reaching implications across fields including education, economics, psychology, neuroscience, and psychiatry.” She clarified by adding, “Persisting in a behavior even though it has adverse consequences is reminiscent of the conduct exhibited by people with addictions.” This new knowledge may lead to better treatment methods for those who have psychiatric disorders, of which addiction is a prime example. It has much to say about what motivates people and animals and what doesn’t. Further research will elucidate whether this theory is operational in other animal species. (Eric Goode, “Mice Don’t Know When to Let It Go, Either,” The New York Times, July 12, 2018)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, July 30th, 2018. Filed under Senior Law News.

IRS Announces Refunds and Credits for Some Veterans

By Amanda Richter

On July 11, 2018, the IRS announced in IR-2018-148 that certain veterans who received disability severance payments after January 17, 1991, and included that income on their returns, may claim a credit or refund of the overpayment. This announcement is a result of the Combat-Injured Veterans Tax Fairness Act that was signed by President Obama in 2016 to keep the Department of Defense (DOD) from improperly taxing veteran’s disability severance payments.

Most veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the DOD with information on how to claim tax refunds to which they are entitled. The DOD estimates that over 133,000 veterans may be eligible for a refund of Federal taxes under the Combat Injured Veterans Tax Fairness Act.

To claim the credit or refund of the overpayment attributable to the disability severance payment, veterans will need to file Form 1040-X, Amended U.S. Individual Income Tax Return. The IRS is allowing veterans to submit a claim based on the actual amount of their disability severance payment or a simplified method can be used. The simplified method is a standard refund for a set period of years. Veterans who choose to use the standard refund (simplified method) may find this to be the easier way to claim a refund, because you do not need to access the original tax return that was filed from the year of their lump-sum disability severance payment. Below are the standard refund amounts and the years to which it applies:

$1,750 for tax years 1991-2005

$2,400 for tax years 2006-2010

$3,200 for tax years 2011-2016

As with most tax refunds, there is a statute of limitations to claim the credit/refunds. The law provides veterans making these claims have the normal limitations period for claiming a refund or one year from the date of their letter from the DOD, whichever expires later. This is especially important, since some of the claims for refunds are on taxes paid as far back as 1991.

If this applies to you or someone you know, please contact Hook Law Center if you would like assistance with completing Form 1040-X to claim the refund.

Kit KatAsk Kit Kat – Dogo Argentino Rescued

Hook Law Center: Kit Kat, what can you tell us about the Dogo Argentino breed and how one was rescued recently in Alabama?

Kit Kat: Well, this is interesting. I had never heard of the Dogo Argentino breed before reading about how one was rescued in January 2015 from a puppy mill in Alabama. The dog in question, named Ann, was bred repeatedly for puppies, only to have them yanked from her. Along with Ann, there were more than 60 dogs rescued from this living nightmare of malnourishment and mistreatment. At last justice prevailed, and the owner of the farm was convicted in February 2018 of six felony counts of animal cruelty and one misdemeanor.

After Ann was seized from her delinquent owner, she and others from the Alabama property soon were placed by the Humane Society of the United States (HSUS) in a shelter belonging to HSUS in Ann Arbor, Michigan. There they were rehabilitated and received therapy from canine behaviorists. One of Ann’s favorite canine friends named Ivan was adopted quickly after his arrival. Ann, however, lingered for almost a year and a half. Her adoption day did arrive eventually. She was adopted by Jane Harlow, who was visiting the shelter for a special event. It has been a happy arrangement for both. Ann is getting up to her ideal weight, and she has the run of large, fenced yard. To top it off, she even has play dates with Ivan, who lives nearby.

The Dogo Argentino is a relatively new breed. According to Wikipedia, “The Dogo Argentino, is a large, white, muscular dog that was developed in Argentina primarily for the purpose of big-game hunting, including wild boar; the breeder, Antonio Nores Martínez, also wanted a dog that would exhibit steadfast bravery and willingly protect its human companion.” The breed was first introduced in 1928 from the Córdoba Fighting Dog and other breeds such as the Great Dane. Although the Dogo Argentino is banned or has ownership restrictions in some countries, Ann is a wonderful example of the breed. She displays no aggressive tendencies, and has been living uneventfully with Ms. Harlow for over a year at this point. Thanks to HSUS for their timely intervention! (Kelly L. Williams, “To the rescue—case history: Ann,” All Animals, May/June 2018, p. 6-7 / Wikipedia)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, July 23rd, 2018. Filed under Senior Law News.

Anxiety and Dementia

By Letha Sgritta McDowell, CELA

A recent study has found that anxiety during middle age may be linked to higher rates of dementia late in life.  The study followed almost 30,000 for more than a decade and there was a clear link between anxiety mid-life and dementia later in life.  The study wasn’t a controlled study with the intent to calculate the magnitude of increased risk.  Instead the study simply indicated an increased risk without eliminating other factors.

When experiencing anxiety or stress, the body produces the hormone cortisol and prolonged heightened cortisol levels have been linked to weight gain, lower immune function, lower bone density, higher rates of mental illness and depression, higher rates of heart disease and more.  It is possible that dementia is another possible side effect of prolonged increased cortisol levels.  On the other hand, anxiety is often a symptom of dementia, making the corollary between the two difficult to connect.

Therapy exists to assist individuals with the reduction of anxiety and cortisol levels.  For individuals who live with high stress and anxiety, pursuing therapy to reduce these levels is critical due to the host of other health problems which may result.  The possibility of reducing the chances of developing dementia later in life is simply an added bonus to reducing stress.

While there is no way of eliminating the chances of developing dementia, there are some things one can do to aid in prevention.  Reducing stress is one and maintaining heart health through diet and exercise is another.  The Alzheimer’s Association also recommends education and regularly getting the right amount of sleep as another.

How do you recognize dementia?  The Alzheimer’s Association has provided 10 signs of dementia which, if you notice any one of them in yourself or a loved one, warrants a visit to a physician for further testing.  They are:

  • Memory loss that disrupts daily life – This includes forgetting recently learned information, important dates or events, or repeatedly asking for the same information. This does not include occasionally forgetting a name or an appointment, then remembering later.
  • Challenges in planning or problem solving – This includes difficulty with following a familiar recipe or keeping track of bills but would not encompass the occasional math error or learning a new task.
  • Difficulty completing familiar tasks at home or work.
  • Confusion with time or place – While it is common for many to occasionally forget what day it is but then remember later, it is not common to forget and not remember at all.
  • Trouble understanding visual images or spatial relationships. This includes trouble judging distances or determining color contrasts.
  • New problems with words in speaking or writing – Examples of this are trouble in following a conversation or having trouble finding the right word for something and calling it by the incorrect name.
  • Misplacing things – While everyone misplaces their keys on occasion, a person with dementia may place their keys in an inappropriate location (such as the freezer) then later be unable to find them and not have the ability to retrace their steps.
  • Decreased or poor judgement – This is difficult to ascertain, but is unfortunate and an often missed early sign. Decreased judgment is often what leads individuals to take action such as gifting sums of money when they otherwise would not do so.
  • Withdrawal from social activities – This is often as result of having difficulty in following a certain activity or being able to engage in conversation.
  • Changes in mood or personality – Different from simply becoming irritable when a routine is changed, a person with dementia may become easily upset, afraid, depressed or fearful, even when in a familiar setting.

Studies now show a link between anxiety and developing dementia.  While the strength and nature of this connection remains unknown, it is certainly cause to take steps to reduce stress and anxiety now.  To the extent any preventative measure can be taken, it is critical to implement.  For those who have prolonged exposure to stress and anxiety; be sure to know the early warning signs of dementia and pursue treatment in order to improve overall quality of life.

Kit KatAsk Kit Kat – Virginia Honeybees

Hook Law Center: Kit Kat, is it true the Virginia honeybee population was reduced by half after this past winter?

Kit Kat: Yes, unfortunately, it was closer to 60% that was lost. This was the highest reduction of managed colonies of honeybees since the Commonwealth of Virginia started tracking them in 2000. Normally, only 30% are lost over the winter period. It could be devastating for the state’s agriculture, because honeybees are critical to pollinating crops, and wild bees perform the same function in wild areas such as wetlands and forests. Honeybees are responsible for about 90% of the pollination of apples, cranberries, broccoli, and blueberries. They are also essential for pollinating almonds, to name just a few of the crops which they pollinate. According to Keith Tignor, apiarist for the Virginia Department of Agriculture and Consumer Services. Virginia was 4th in the nation for loss of bees, with only Arizona, Tennessee, and Louisiana losing more. The phenomenon is known as “colony collapse.” Scientists have not yet figured out why this is happening. They have some ideas, however.

According to Margaret Couvillon, assistant professor of pollinator biology and ecology at Virginia Tech, the four stressors for bees are known as “the four P’s—pesticides, pathogens, pests, and poor nutrition.” Contributing factors this year were an unusually long winter and a brief warm-up in February which tricked them into thinking spring had come. Also, the bees battled parasitic Varroa mites and infections from nosema fungi. Furthermore, they have had to deal with a loss of habitat, as more and more woodlands are converted to farming nationwide. Finally, it is becoming harder to make a living as a full-time beekeeper. Therefore, fewer people undertake the task, thus reducing the number of bees, because there are fewer active agents revitalizing their numbers each year after a cold winter.

What can you do to help the situation? 1) Become a beekeeper, or expand the number of hives you have, if you already keep bees, 2) plant flowers; even if you live in an apartment, you can plant in pots, 3) monitor your bees if you are a beekeeper for mites, especially in July and August, and 4) seek advice from state extension agents before applying any pesticides. (Katherine Hafner, “Over half of Virginia’s honeybees died last winter. Here’s what that means.” The Virginian-Pilot, pg. 1 and 7, July 9, 2018)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Friday, July 13th, 2018. Filed under Senior Law News.

Think Before You Liquidate That IRA

By Shannon Laymon-Pecoraro

One of the biggest problems faced in estate and trust administration is the liquidation of qualified assets, such as a 401k or IRA. Often, clients forget that the funds in the qualified account have not yet been taxed, and as a result, when withdrawn from the account, the full withdrawal will be taxed as ordinary income.

Estates and trusts have a condensed tax structure, and as a result, it only takes $12,500 worth of income for an estate or trust to be taxed at the maximum marginal tax bracket (37% in 2018). To put things into perspective, an individual would need to earn over $500,000 to hit the same tax bracket. As a result, planning the timing of distributions from qualified accounts becomes an important.

The rules for inherited account vary greatly from those of a traditional account holder. With the exception of spousal rollovers, distributions from qualified accounts, which will become an inherited IRA, must begin immediately and must generally be taken over the lifetime expectancy of the beneficiary (in the event of multiple beneficiaries, it would be the life expectance of the oldest beneficiary) or within five (5) years after the decedent’s death. These rules will vary based on circumstances set by the Internal Revenue Service.

Beneficiaries are often anxious to collect their inheritance, and as a result, the fiduciary often liquidates a majority of the assets with the goal of closing an estate as quick as possible.  This is often a costly mistake. Working with a professional, the fiduciary of the estate or trust can develop a distribution schedule that complies with the rules set by the Internal Revenue Service and will push the income out to the beneficiary(ies) so as to minimize the overall tax effect.

The attorneys at the Hook Law Center are well versed in estate and trust taxation, but the addition of a CPA has added comprehensive tax service to the firm. Not only do we prepare decedent and estate returns, but we can address tax issues associated with qualified accounts as we develop an estate plan, and work with fiduciaries to plan distributions from Inherited IRAs.

Kit KatAsk Kit Kat – Don’t Feed the Horses

Hook Law Center: Kit Kat, what can you tell us about 1) the St. Paul raccoon who was climbing the UBS building and 2) the habits of mammals that are becoming increasingly nocturnal?

Kit Kat: Yes, it’s very true, and there can be life and death consequences for the wild horses if this is not taken seriously. Signs in the area say “Apples and carrots ‘kill’ wild horses.” It’s not an exaggeration. While most horses can tolerate these delicious treats, the wild horses that were left by the Spanish in 16th-17th centuries cannot. Jo Langone, chief operating officer of the Corolla Wild Horse Fund, says their normal food is the grasses in the area. If they eat other things, it can cause colic or even death. Also, it is advisable to keep one’s distance from the wild horses. Ms. Langone said to think of them as wild—like a bear. Stallions can suddenly begin to fight one another, or sometimes the herd gets spooked and begins to stampede, quite unaware of their surroundings.

If you live in that area and want to help, you can put a sign in your yard saying “Don’t feed the horses!” They are available at the Corolla Wild Horse Fund museum and gift shop in Corolla. Other great citizens have helped by financing a billboard on their own property on US 158. Karen and Mac Quidley gave the space. R.O Givens Signs paid for installation, and Terry Douglas, a graphic artist from Richmond, did the design for free. What a wonderful community effort to protect the beautiful wild horses of the Outer Banks! (Jeff Hampton, “In NC, billboard pulls no punches on safety of horses,” The Virginian-Pilot, June 29, 2018, pg.3)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, July 9th, 2018. Filed under Senior Law News.

New Changes to 529 Plans

By Amanda Richter

The Tax Cuts and Jobs Act (TCJA) has made some significant changes to qualified tuition programs also commonly known as “529 plans”. These plans are a tax-advantaged savings plan designed to encourage savings for future education costs. 529 plans are authorized by Section 529 of the Internal Revenue Code “IRC” and are sponsored by states, state agencies, or educational institutions.

Distributions from 529 plans are tax-free if it is used to pay “qualified higher education expenses” of the beneficiary (student). Under old law, tuition for elementary or secondary schools was not considered a “qualified higher education expense”. So students (529 beneficiaries) who had to pay tuition for elementary or secondary schools could not receive tax-free distributions from their 529 plans.

Now under the TCJA, the law provides greater flexibility for families by expanding qualified higher education expenses to also include expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. And as a result, tax-free distributions from 529 plans can now be received by beneficiaries who pay these expenses, effective for distributions from 529 plans after 2017. Also, 529 plans can be transferred between relatives, allowing significant amount of flexibility for families with overfunded 529 plans.

Under subsection (b)(1)(A)(ii), there is a limit to how much of a distribution can be taken from a 529 plan for these expenses. The amount of cash distributions from all 529 plans per single beneficiary during any tax year can’t, when combined, include more than $10,000 for elementary school and secondary school tuition incurred during the tax year. Any excess distributions received by the beneficiary would be treated as a distribution subject to tax under the general rules of section 529 of the IRC.

Kit KatAsk Kit Kat – Koko Passes

Hook Law Center: Kit Kat, who was KoKo, and has she now died?

Kit Kat: Koko was a beloved gorilla who was a pioneer in communicating with humans using sign language. She was age 46, and she lived her last years at The Gorilla Foundation’s preserve in Northern California. She died in her sleep the week of June 18, but it was first reported in The Washington Post on June 21, 2018.

Koko was a very social creature, and her two loves were baby dolls and kittens. During her lifetime, she had several cats—All Ball, Lips Lipstick, Smoky, Ms. Gray, and Ms. Black. She tended to them and stroked them, like any human owner would. They were pure delight for her! She appeared on the cover of  National Geographic twice. In one of the articles, Koko was featured with her kitten, All Ball. That led to a book called Koko’s Kitten, which is still a part of many elementary school curriculums today.  Koko also had relationships with several celebrities including Mister Rogers, Betty White, and Robin Williams.

Koko was born in captivity at the San Francisco Zoo on July 4, 1971. She was a western lowland gorilla. Her official name was Hanabi-ko, which means “fireworks child” in Japanese. It soon was shortened to Koko. At the zoo, she started working with Francine “Penny” Patterson, who was a young animal psychologist. It was she who introduced Koko to an adapted version of American Sign Language, which she soon dubbed “Gorilla Sign Language,” or GSL. There is some debate about whether or not Koko was really internalizing language or merely mimicking Dr. Patterson’s movements, with whom Koko had developed a close relationship. Nevertheless, the foundation issued a statement after Koko’s death about the importance of her life—“Her impact has been profound and what she has taught us about the emotional capacity of gorillas and their cognitive abilities will continue to shape the world.” (Lindsey Bever, “Koko, the beloved gorilla that learned to communicate using sign language, has died,” The Washington Post (Animalia section), June 21, 2018)

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Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, July 2nd, 2018. Filed under Senior Law News.

When it’s Time to Hang up the Keys – and How to Have That Difficult Discussion

By Hook Law Center

As your parents age, you may be realizing that they need more and more help with their daily activities. Perhaps your mother may be forgetting to take her medication, or your father may be having a hard time getting in and out of the bath. All of these changes are upsetting, but perhaps the most disturbing change can be your parent’s sudden inability to drive safely.

Obviously, many seniors are unwilling to give up their independence in any way, and having a car and being able to drive is a major part of that. Your parent may not realize how unsafe it is for them to be behind the wheel, and they may resent you if you tell them they can no longer drive or if you take their driver’s license away.

However, the dangers of continuing to drive when it is unsafe to do so are all too real. In 2014, a 79-year-old woman killed three people and injured four others at a church when she accidentally put the car in reverse instead of drive. Unfortunately, these situations are becoming more frequent. According to the U.S. Census, the number of Americans over the age of 70 is set to increase greatly in upcoming years, from 28.5 million in 2011 to 52.7 million in 2030. Statistics show that drivers over the age of 75 have higher crash rates, including higher rates of fatality behind the wheel, than the average driver.

There are many signs that it may be time to reevaluate whether a loved one should drive. Signs of impaired driving include unexplained dents and scrapes on a vehicle, frequent “close calls” when driving, drifting in and out of traffic lanes, difficulty working gas versus brake pedals, and a delayed response to sudden changes in a traffic pattern.

Before you put away the keys for good, it may be worthwhile to make it easier for your loved one to continue driving. For example, many types of medications can cause delayed response times and drowsiness – see if any of those medicines can be reduced or eliminated altogether. Also, you may want to make sure that older drivers avoid driving in high-traffic areas, especially during rush hour. Mom may be able to drive to church or the grocery store, but driving on the highway could be a whole different story.

So how can you approach this difficult topic with a loved one who possibly should not continue to drive? One way to avoid being the “bad guy” in this situation is to ask your parent to take a driver’s test at your local DMV or driving school. If they cannot pass a simple driving test, this might help them to accept that it is not safe for them to be behind the wheel. Your loved one may be more willing to hear the opinion of a neutral third party than the opinions of family members.

No matter what you do, it is important to make sure that your parent will not be able to hurt themselves or anyone else by driving unsafely. Giving up independence is never easy, but sometimes the hardest thing to do is often the best thing for yourself and your family.

Kit KatAsk Kit Kat – Raccoon Update & Nocturnal Animals

Hook Law Center: Kit Kat, what can you tell us about 1) the St. Paul raccoon who was climbing the UBS building and 2) the habits of mammals that are becoming increasingly nocturnal?

Kit Kat: Well, first, let’s talk about the raccoon. It turns out it was a female, and she was quite healthy. On the same day that she was trapped on top of the 25+ story bank building after scaling the entire facade, she was taken to a wooded area and released on private property near the suburb of Shakopee. According to Suzanne MacDonald, a raccoon expert at York University in Toronto, “Raccoons don’t think ahead very much, so raccoons don’t have very good impulse control.” Phil Jenni, director of the Wildlife Rehabilitation Center of Minnesota, hypothesizes, that she just got scared, and so reverted to what raccoons normally do—they climb when stressed. Whatever the reason, the story has a happy outcome.

Now, on to the 2nd topic of how more mammals are becoming nocturnal as a reaction to dealing with the encroachment of humans in their habitat. According to a new study published recently in Science magazine, “Humans’ presence alone can cause animals across continents—including coyotes, elephants and tigers—to alter their sleep schedules.” It turns out, mammals have been regulating their activity for centuries, depending on external threats. For example, after the dinosaur period, they became more active during the day. Now the reverse is happening, according to Kaitlyn Gaynor, an ecologist and graduate student in environmental science at UC-Berkely, who led the study. They used data from 76 studies about 62 species living on 6 continents to come to their conclusions. Therefore, “an animal that typically split its activity evenly between the day and night would increase its proportion of nocturnal activity to 68 percent of total activity near human disturbance.”

Humans may not be actively threatening the mammals, but the mammals feel stressed nonetheless. Coyotes in the Santa Cruz mountains of California, for example, are becoming more active at night merely because of biking and hiking in the area. Tigers in Nepal are behaving likewise. As their favorite trails are used more often by humans, they too, have changed their habits, and shifted to a more nocturnal schedule to be active. Future research will investigate how these changed patterns will affect mammals’ diet and reproductive patterns. (Steve Karnowski, “St.Paul Raccoon Set Free after Scaling 25-story Tower,” The Associated Press as published in The Virginian-Pilot, June 14, 2018/ Julia Jacobs, “Mammals Go Nocturnal in Bid to Avoid Humans,” The New York Times, June 15, 2018)

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Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, June 25th, 2018. Filed under Senior Law News.

Elder Abuse, Neglect, and Exploitation, Part Three: What Can You Do?

By Hook Law Center

This is the third article in a three-part series discussing Elder Abuse, Neglect and Exploitation. In Part One, we discussed the definitions for elder abuse and the prevalence of it in our society. In Part Two, we discussed what to watch for in detecting the signs of elder abuse as well as identifying the situations in which our elderly citizens are most vulnerable to abuse. We also discussed what the Federal Government and the State of Virginia are doing to help combat the problem. In this Part Three, we will discuss what you can do to protect yourself, your loved ones, and/or your clients from elder abuse, neglect and exploitation.

The Virginia Department for Aging and Rehabilitative Services (DARS) oversees two programs that are helpful in the investigation and remediation of elder abuse, neglect and exploitation: the State Long-Term Care Ombudsman Program and Adult Protective Services. The Ombudsman Program is mandated to receive, investigate, and resolve complaints made by persons in nursing homes and assisted living facilities, as well as those receiving community based long-term care services. If you need help resolving a problem of this nature, contact your local Ombudsman by calling 1-800-552-3402. Adult Protective Services investigates reports of abuse, neglect and exploitation and local family services specialists arrange for a wide variety of health, housing, social and legal services to stop the mistreatment. Their 24-hour toll-free hotline is 1-888-832-3858.

There are also civil and criminal remedies available through the Courts. Even though Virginia does not have a specific statute creating a cause of action for financial exploitation, those civil remedies that are available include actions for breach of fiduciary duty, negligence, assault and battery, theft by conversion, fraud, rescission of transactions, restitution, and/or an accounting of the actions of a fiduciary. Criminally, a person can be found guilty of larceny for financially exploiting a vulnerable adult. In addition, there are penalties for failing to make a required report of elder abuse ranging from $500 to $1,000.

Often the best remedy for elder abuse is the prevention of elder abuse, and some prevention can be done with the drafting of legal documents and the selection of the right fiduciary to act on your behalf. Some of the legal documents that we recommend our clients have are a General Durable Power of Attorney for financial matters, an Advanced Medical Directive for health-related matters, and a Trust. The most important decision you will make, however, is not to have these documents drafted, but who will serve as your agent or Trustee. To prevent abuse, it is imperative that your agent be someone you can trust. Sounds simple, right? Your agent should be organized, efficient, able to open mail, balance a checkbook, make calls in the business world; have good credit, no bankruptcies, and a proven track record for fiscal responsibility; and must be of high moral character, honest, trustworthy and free of active addictions.

There are also things that professionals who work with elderly clients can do in their everyday practice to prevent and/or be able to detect abuse. The first thing to do is to clearly identify the elder as your client. Regardless if the elder is accompanied to an appointment by family members, friends or other advisors, the professional should have a private conversation with the elder to identify which other individuals are authorized to receive information. It is also important to meet privately with the elder so you can assess their capacity and whether they are being unduly influenced. By the same token, professionals should also have frequent meetings with clients. As their client’s capacity diminishes, the professional should shorten meetings, discuss few topics during each meeting, and meet more frequently. After each meeting, the professional should send a letter to the elderly client with a written summary of the meeting.

Finally, here is a list of some of the other resources available:

  1. National Center on Elder Abuse: ncea.acl.gov
  2. Virginia Adult Protective Services: State Hotline: 888-832-3858
  3. Virginia Family Violence Hotline: 800-838-8238
  4. VA Coalition for the Prevention of Elder Abuse: vcpea.org
  5. Virginia Department for the Aging in Richmond – provides information for local area agencies – https://www.agingcare.com/local/virginia-department-for-the-aging-richmond-area-agency-on-aging-va
  6. Caregiver Resources: http://www.pbs.org/wgbh/caringforyourparents/handbook/caringcaregiver/supportgroups.html

Kit KatAsk Kit Kat – Raccoon on a Ledge

Hook Law Center: Kit Kat, what can you tell us about a raccoon that was stranded on the ledge of a building in St. Paul, MN?

Kit Kat: Well, this is another tale of you humans encroaching on the territory of the animal world. No just kidding. But seriously, more and more wild creatures are appearing in urban areas. This story has a happy ending, fortunately.

On June 12, 2018, a raccoon was spotted in downtown St. Paul climbing the UBS building. The windows don’t open, so bystanders and office workers could only watch helplessly. It is thought this same raccoon was seen on another downtown building a few days earlier, perhaps looking for a source of food like baby pigeons. Nevertheless, the building which is more than 25 stories high, has the perfect surface for climbing. It has a rough surface and there were ledges at each window. So the raccoon took all day in its ascent to the top. It never considered going down, only going up. It rested at the 12th floor, the 22nd floor, and the 23rd floor. Then there was a wide lip of rough surface around the top. In the early hours of the following morning (June 13), it made it to the top. Waiting for it (sorry, don’t know the gender) were several live traps with wet cat food which were supplied by animal-control authorities. The plan worked, and it was trapped safely.

Soon the raccoon will be relocated to a more suitable area. While I’m sure the people in downtown St. Paul were mesmerized by this little creature, the pictures showed it scared and tired. It’s wonderful that this one little creature will get another chance to exist, hopefully, in a more appropriate environment. (Karen Brulliard and Keith McMillan, “Raccoon triumphs over skyscraper in a climb that captivated the internet, celebrates with cat food,” The Washington Post, (Animalia section), June 13, 2018)

 

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Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, June 18th, 2018. Filed under Senior Law News.

Executor or Trustee of a Family Member’s Estate or Trust? Be careful.

By Sarah Schmidt

The role of an executor or trustee is often misunderstood by lay people who have never served as an executor or trustee. Beneficiaries of an estate often litigate or argue over who should serve as the executor, administrator or trustee. Lawyers, and those who have served in such a capacity, know all too well that being an executor is a difficult job which comes with a great deal of obligation and responsibility. If not handled properly, it can even subject the executor/trustee to personal liability.

I always tell my clients, colloquially, it is not fun to be an executor. Your mother, father, or close friend most likely named you as an executor, because you are responsible and someone they trust, but they did not do you a favor by naming you. You will be charged with paying final debts and expenses, filing final tax returns, properly distributing any assets according to law, and filing inventories and accountings with the Commissioner of Accounts who, by the way, will oversee all of your work.

Because executors are a fiduciary and held to that standard under the law, it is of the utmost importance that, if you are serving in such a capacity, you seek the advice of legal counsel as to your actions.  The best course of action for a great majority of issues you will face can be easily explained by a trust and estate attorney. And where the law is unclear, a trust and estates attorney can assist you in seeking guidance from the court concerning the best course of action.  The Virginia Supreme Court has explained, “in all cases of doubt as to what the law is, and what their conduct ought to be under it, [trustees] are entitled to direction and instruction from the court.” Gooch v. Old Dominion Trust Co., 121 Va. 29 (1917).

If you’re currently serving as an executor or trustee, I highly recommend you contact an attorney to seek out advice and counsel regarding your duties and obligations. As an executor, administrator, or trustee, it is best to ask for permission, rather than forgiveness.

 

Kit KatAsk Kit Kat – Pet Trusts Update

Hook Law Center: Kit Kat, what can you tell us about pet trusts and some things to include so they are done the correct way?

Kit Kat: Well, yes, it can be difficult to plan for the care of one’s pet after one has died. However, with some planning, your pet can be taken care of as you have instructed. Legal experts recommend a pet trust. It has several advantages to just leaving instructions as part of a will. Probating a will can be a lengthy process, during which time, the pet’s care would be in limbo. With a trust, provisions can be made for care of the pet to begin immediately upon incapacitation or death. According to Judy Mandell, an author on the subject of pet trusts, “A pet trust is a legal way to provide for your pet and is the option that allows you to directly give pets anything, since many states consider them personal property, no different from your fine jewelry, antiques, computers, or cars.” In addition she continues, “With pet trusts, a trustee is appointed to hold property and cash and make payments for the benefit of the pet upon the disability of the grantor. Trusts continue for the life of the pet or 21 years, depending on which comes first, although rules may vary by state.” As a cat, I would say we cats would be in favor of the up-to-21-year-provision, since we tend to live longer than our canine friends. My parents had a cat who lived to age 19, and I myself will be 15 in August.

The only caveat for a pet trust is to make sure you have secured a trustee who is willing to assume this responsibility. Also, include in the trust, direction as to what should be done with any remaining money in the trust, after the pet dies. Many decide to leave any balance in the trust to an organization like the Humane Society or the ASPCA.

Some have gone to extravagant lengths to care for their pets. In one situation, a home in Texas valued at $1 million was left as the residence for the deceased’s 10 cats. The appointed caretaker was given a salary of $50,000 per year to live in the house and take care of them. In another, a New York attorney was asked to ensure that the deceased’s cat would be buried in a custom-made wooden coffin.

So whatever your wishes, incorporate them in a pet trust. Your pet will thank you! (Judy Mandell, “The Pets Are All Right (Even Though You’re Gone), The New York Times, May 24, 2018)

 

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Thursday, June 7th, 2018. Filed under Senior Law News.
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