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 It is a little disheartening, but not surprising, when someone asked me if a tax attorney or tax preparer is worth it. In truth, however, this is a loaded question. If you are asking me if the local store front office of the mega-tax preparer service is worth it, I would say probably no. If you are asking me if an experienced tax attorney is worth it, the answer is yes. And not just a little yes; a resounding yes.
Let me explain by way of illustration. If I decide that I want burnt ends (a Kansas City favorite) for dinner, I can either make them myself or go out. If I decide to make them myself, I would do what everyone faced with this situation would do. I would go to Google and type in “Burnt End Recipes.” I’m sure this would yield me many useful results. After perusing the many links, I would probably find one that sounded good and easy. I would then print it out and head to the store for ingredients. After getting the ingredients, I would come home, fire up the smoker, follow the recipe, and soon after, I would have my burnt ends. Now if I went to any of the fine BBQ restaurants in Kansas City, I could probably get better burnt ends, a variety of side dishes, and not be faced with the messy cleanup. Would they be significantly better? I would hope not! Could I not figure out the side dishes I like and just make those? Yes. Is the extra cost worth avoiding the cleanup? Maybe; my wife would say, “Yes!” So why don’t I cook every meal at home? Because, I like the variety the restaurant offers. I like the fact that the menu contains items I’ve never heard of but want to try. Most importantly, I’m only as good as the recipe. The restaurant, on the other hand, has the ability to explore and create new and unique items for me. I could try and do this, but I’m almost certain nothing I make would be edible. And yes, my wife likes the piece of mind of no cleanup.
The same goes for your tax return and your tax preparer/tax attorney. You can go out and purchase some great products that will help you complete your tax return. [continue reading]
In the ever changing world of estate tax and estate planning, here are three proposed changes that could significantly affect your estate plan: (1) the determination of tax basis; (2) valuation discounts; and (3) grantor retained annuity trusts (GRATs). And even though these are merely proposed changes, they are a signal to all individuals that many of the “once-in-a-generation chances to save money” could be coming to an end. All of these changes are part of the Obama administration’s proposed budget that was recently released (see Yahoo Finance Article).
Determination of Tax Basis
Under current law, a recipient of a gift also receives the giver’s basis in the property (i.e., “carryover basis”). The recipient of property through a will or intestacy, on the other hand, gets a step-up in basis (not in 2010; see my early post on the subject) to the value as of the decedent’s date of death. Basis is used to determine the amount of gain or loss an individual recognizes, and is taxed on, when the property is sold. For instance, if your rich grandma gives you property during her life that is worth $12,000 but she paid $1,000 and you sell it, you would have a $11,000 taxable gain. [continue reading]
I wrote a couple weeks ago on how even without a federal estate tax a current estate plan is a necessity (click here). Additionally, I’m a strong advocate of involving an attorney, in some capacity, in all legal matters. The recent Missouri court of appeals case In the Estate of Shirley Marie Smith illustrates both of these points.
Pursuant to Section 473.398 RSMo, upon the death of a person, who has been a participant of aid, assistance, care, services, or who has had moneys expended on his behalf by a governmental agency, the total amount paid to the decedent or expended upon his behalf shall be a debt due the government from the estate of the decedent. The government may not recover, however, if it is shown, that that the cost of collection will exceed the amount of the claim or that the collection will adversely affect the need of the surviving spouse or dependents of the decedent to reasonable care and support from the estate. Once the government shows that the decedent received benefits, the burden of proof shifts to the person opposing collection.
In In the Estate of Shirley Marie Smith, the decedent had received Medicaid benefits through MO HealthNet for the five months preceding her death. Upon her death, the MO HealthNet Division filed a claim to recover these benefits, $10,003.66. The decedent’s son, who was also the personal representative of the decedent’s estate, responded with a petition asking for a denial of the division’s claim on the basis that the son was unemployed, lacked the skills and capacity to obtain employment and was living in the decedent’s home. The petition stated that if the son had to sell the house to make the reimbursement, he would become homeless. The son did not testify, file a brief, or offer any other evidence in support of this petition. [continue reading]
The 2010 MO HealthNet (formerly Medicaid) figures show no increase from the previous year. The following summarizes these figures.
Minimum Community Spouse Resource Allowance (CSRA): $21,912
Maximum Community Spouse Resource Allowance: $109,560
Maximum Monthly Maintenance Needs Allowance: $2,739
Minimum Monthly Maintenance Needs Allowance: $1,821
Community Spouse Excess Shelter Standard: $547.38 (unitl July 2010)
Annual Gift Tax Exclusion: $13,000
Supplemental Security Income (SSI): $674
Medicare Premiums, Deductibles and Copayments:
| Inpatient Hospital for first stay during a year: |
$1,112 deductible |
| Day 1 through Day 60: |
$0 |
| Day 61 through Day 90: |
$278 per day |
| 60 Day Lifetime Reserve: |
$556 per day |
| Skilled Nursing Day 1-20: |
$0 |
| Skilled Nursing Day 21-100: |
$139 per day |
Long-Term Care Premium Deductibility Limits:
| Attained age before the close of the year |
|
|
| Maximum Deduction: |
|
|
| |
40 or less |
$330 |
| |
More than 40 but not more than 50 |
$620 |
| |
More than 50 but not more than 60 |
$1,230 |
| |
More than 60 but not more than 70 |
$3,290 |
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More than 70 |
$4,110 |
– The State Line Lawyer
The short answer is “YES!” Even though the federal estate tax has been repealed, at least for a year, there are still countless other issues that need to be addressed by a proper estate plan. Naming a guardian for minor children or children with special needs, protecting assets from creditors, providing for the payment of certain expenses, providing for future generations, insuring children from a previous marriage are protected and provided for, are just a few of these reasons. Additionally, while the estate tax is down, it is not out. The estate tax is scheduled to return in 2011 with a lower exemption amount and a higher tax rate.
A recent article published by the New York Times highlights some of the concerns caused by the ever-moving target that is the estate tax regime. Here are some of the highlights as well as my commentary on the issue.
As many are aware, the federal estate tax is taking a one-year hiatus in 2010. While many predicted that the U.S. Congress would act to avoid this, it did not. Thus, for one-year, there is no federal estate tax, at least for now. In 2011, however, the federal estate tax comes back, and this time, the federal estate tax reverts back to the smaller $1 million estate tax exemption amount and the higher 55% marginal tax rate. While there are countless jokes about encouraging rich relatives to take advantage of this, this advice, while in jest, my be completely wrong. [continue reading]
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It is a little disheartening, but not surprising, when someone asked me if a tax attorney or tax preparer is worth it. In truth, however, this is a loaded question. If you are asking me if the local store front office of the mega-tax preparer service is worth it, I would say probably no. If you are asking me if an experienced tax attorney is worth it, the answer is yes. And not just a little yes; a resounding yes.
