RobRoy's blog

This One Simple Tip Can Save You Thousands

Last week I had a client contact us in a panic because her daughters had told her "Mom, if you die, the government is going to tax you 50% of everything that is in your bank account!" They further explained that she should probably start giving away her money to children and grandchildren now while she was still alive in order to avoid this tax.

Now I know this family well enough to feel comfortable that these daughters were not trying to exploit their aged mother. However, this experience highlighted to me a problem that I see very often in my practice. The federal and state laws that govern taxation are extremely complex and are in a constant state of evolution. Just when we start to get a handle on how our families or our businesses are going to be taxed, we find out that the rules have changed.

The Future of Medicaid and Medicare

In May, we reported about the federal government’s efforts to decrease spending in 2011 by making sweeping cuts to numerous federally funded programs to avoid a government shutdown. Four months later, the focus on cutting Medicaid and Medicare benefits has gained momentum, despite documented evidence of the many benefits of Medicaid, as well as the huge detrimental impact cutting either program can have on individual states.

Proposed Cuts

As has been widely reported, the Obama Administration is offering to cut tens of billions of dollars from Medicare and Medicaid as part of the negotiations to reduce the federal budget deficit. The depth of the cuts depends on whether Republicans will accept any increases in tax revenues.

It appears that hospitals and nursing homes will be the unwilling recipients of some of the cuts, as Administration officials and those involved in the negotiations say that the cuts can come from health care providers like hospitals and nursing homes without directly imposing new costs on needy beneficiaries or overhauling either program. Some of the proposals being considered are:

• Gradually eliminating Medicare payments to hospitals for uncollectible patient debt. Medicare currently reimburses hospitals for 70% of debt resulting in patients failing to pay deductibles and co-payments and the hospitals have made reasonable efforts to collect.

• Reducing Medicare payments to teaching hospitals for the cost of training doctors, caring for sicker patients and providing specialized services such as trauma care and organ transplants.

• Reducing the federal share of payments to health care providers treating low-income people under Medicaid and the Children's Health Insurance Program.

Lawmakers opposed to the cuts say it would impair access to care for the poor and shift costs to the states that are already facing a huge expansion in Medicaid eligibility and enrollment beginning in 2014 under the terms of the health care reform legislation passed last year. Hospital executives say that additional cuts (besides the reduction in Medicare payments already part of the health care reform legislation) will result in hospitals discontinuing services and increasing charges to patients with private insurance.

But I Thought I Owned That!

You know something I see fairly regularly in my practice is confusion about how people think they own assets versus how the assets are actually owned, i.e., whose name is on the title--whether that be manifested as a property deed, stock certificate, bank statement, etc. This confusion usually occurs when someone owns property (or thinks they own property) with someone else.

For example, husband and wife purchase a home together, and they think that they both own it. But if you look at the deed for the home, it only has husband's name on it. Or three business partners purchase a vehicle for company business, but instead of the company's name on the title, it has the partner's name on it who will be driving the vehicle.

What difference does it make? In normal day-to-day activities, it probably makes little noticeable difference. However, when certain events occur (such as death, disability, divorce, lawsuit, dissolution of business, sale or gifting of an asset) whose name was on the title can make a big difference in terms of time and money.

Dad's Driving is Scaring Me!

We've all seen it before, a huge Lincoln Town car weaving down the road, with little more than a tuft of purple hair or a shiny, hairless head just barely peeking over the steering wheel. As parents and grandparents age, driving can become much more difficult for them as vision worsens, reaction times slow down, and the potential for heart attacks, strokes or other sudden physically debilitating illnesses become more likely.

Often, I have children with elderly parents come into my office and tell me "We need to take away dad's/mom's license. Can we?"

Aging and Big Brother: Orwellian Nightmare or Godsend?

The LA Times recently ran an article about new technology being developed by major health care companies (General Electric and Intel) to help the elderly population age in place.

For example:
• robotic cameras that move around grandma's house in California that can be controlled by a joystick from a family member in Montana;
• pill boxes with sensors that record when and how often medications are being taken;
• monitors in the hallway that measure the speed and gait of the resident as they walk through the house;
• devices that monitor facial expressions to look for signs of depression or anxiety
• robotic "pets" that have lifelike interactions with their owners
• and monitors on the bed that measure the rate of breathing of the occupant and can send warnings to a computer when the breathing becomes irregular or stops.
Many of these technologies are being developed in what one corporation's representative describes as a "race to see who's going to invent 21st century care services for boomers." There's a major market that is developing to serve the millions of baby boomers who are entering into the retirement stage of their lives.

Honey, Did You Unplug the Iron?

Have you ever taken a family trip somewhere and at the last moment, as you're driving away from the house or sitting on the airplane waiting for it to take off have that momentary panicky thought "What if something bad happens on this trip? Are all of our affairs in order?"

My family went to Lake Powell last week for a summer vacation. We look forward to this trip all year, but each time we pack up the car, that same thought pushes its way into the front of my mind. Would everything be okay if I never came home? Yes, even estate planning attorneys have to worry about making sure their estate planning is up to date.

So last week, as we prepared for our trip, Melissa and I reviewed our documents to make sure that those we've named in positions of trust in our documents were still the people who we would want to serve in those roles. We reviewed our insurance policies and the beneficiary designations on those policies. We made sure our documents were located somewhere that our family members could find them easily if they needed to. And we made sure that our business succession plan was up to date to ensure that our clients wouldn't suffer if we could no longer continue as their attorneys.

The Best Way to Avoid Dirty Business Practices

Just yesterday I was looking online for the phone number of an insurance company ("Company A") to get a quote on car insurance. I typed in the name of the company into Google and sure enough, a link appeared that had the name of the company all over it. So I dialed the phone number displayed along with the link. But the company who answered was NOT the company I was trying to call. In fact, it was one of the Company A's biggest competitors ("Company B"). When I asked them to explain what that was all about, they tried to brush it off as though I had simply mis-dialed the number or made some mistake. However, because it was also a car insurance company, I went ahead and had them prepare a quote for me anyway. When they returned with a terrible quote, I hung up and started thinking about it. At that stage I realized that this company had used a rather dirty trick to get me in touch with them and allow them to try to gain my business. Unfortunately for them, it backfired and I'll likely think twice before I ever call them again.

It's Not If. It's When.

A couple of weeks ago I was invited to sit on a panel of Elder Law attorneys up at the Utah Law and Justice Center in Salt Lake to speak to the public about the legal issues that most commonly face aging individuals. One of the audience members asked the question, "How much does it cost to work with an attorney to get this kind of planning in place?"

One of my colleagues responded to the question by explaining that it can vary widely depending upon your specific circumstances (amount of wealth, types of assets, family dynamics, and how it is you would like to see your estate inherited by the beneficiaries). But the portion of his response that struck me the most was this:

Just Roll With It, Man!

The band I'm in made a pretty big mistake last weekend at one of our shows. We had recently upgraded some of our PA equipment and were all excited to get it hooked up and try it out. We were so focused on the new equipment and how we were going to integrate it into our setup that about 45 minutes before we were supposed to begin our set, we suddenly realized that we had left a whole pile of our speaker cabling back at home and it would take us at least 1 ½ hours to go retrieve it. Because it was a paid gig, we were all sweating it pretty bad.

But then our drummer spoke up and brought us back down off the edge. He reminded us that these kinds of things happen all of the time and that we just needed to improvise and roll with it. So that's what we did. We sent our keyboardist out to solo some nice jazz numbers to buy us some time while one of our bandmate's daughters raced the equipment up to our gig.

Put the Fun in Funding

The other day, my wife went over to her grandparents' home to help them make sure their trust was properly "funded." After her visit, she shared with me her grandparents' confusion about the funding process because they thought "everything was all taken care of" when they signed their trust document. This is such a common misunderstanding that I thought the topic of funding was worth revisiting today.

What Does It Mean to Fund a Trust?

Funding is the process of transferring ownership of assets from your individual name into the name of your trust (or making your trust a beneficiary of beneficiary-designated assets). The terms of your trust agreement will only control property that is actually owned by your trust. This is why funding a trust is just as important as setting it up.

I like to use the bucket analogy. Think of your trust as a bucket. Your trust document contains instructions on what to do with the things in the bucket. Funding is simply the process of putting things into the bucket.

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