As the COVID pandemic reaches the six-month mark, the BPSLawyers Estate Planning and Elder Law Department continues to be busy serving clients, existing and new, through a variety of methods. As an essential business under the Governor’s executive orders we have stayed open during the crisis. We are utilizing phone conferencing, various video conferencing tools, and socially distanced in person conferences to serve the needs of clients in virtually any situation. Using these tools and following the Governor’s guidelines authorizing remote document execution, including remote witnessing, notarization and recording where needed, we have been able to conference with clients, discuss their goals and needs, explain options and recommendations, and proceed to preparation and execution of appropriate documents to prepare clients for whatever situation they may face or be concerned about. Even clients confined as residents of nursing facilities, assisted living, or hospital settings, with strict prohibitions against in person visitations, have been able to effectively conference with our attorneys, and to make and execute plans necessary to carry out their wishes. It has been possible to accomplish clients’ legal objectives without physical meetings or in the privacy of a client’s own home. Often this may involve review of existing plans in need of modification to reflect changes in family situations, asset ownership or client goals as time has passed.
The need to address Medicaid/Title 19 and other Elder Law issues continues, often in heightened ways during this crisis, and the transition to remote work status for state employees in agencies that deal with these needs has increased the obstacles and delays for folks needing assistance. It is best not to wait to address these issues as they may take more time to resolve with current limitations and restrictions.
With heightened awareness of mortality risks increased by the current medical crisis and more time to consider and discuss goals and aspirations with family members, you may realize that a plan should be put in place, or an existing plan be updated. You or family members may need to address Medicaid or Elder Law issues. We caution folks not to procrastinate their estate planning or elder law needs during this difficult time. We have the capability and desire to address and assist in resolving those needs despite the physical barriers that may exist – most of which can be overcome with existing tools.
For those with substantial assets that may be exposed to taxation, it is important to consider the potential for significant changes to tax structures – income, gift, and estate taxes, at both the federal and state level. The possibility of a change in administrations in Washington always increases the likelihood of changes in taxes, but that likelihood is particularly high in the current political environment, in the setting of large financial burdens shouldered by the nation to mitigate the effects of the COVID pandemic with reduced cash receipts resulting from a struggling economy. Although it is impossible to predict what tax changes will occur, economists and tax advisers have identified several possible changes that would affect families with substantial assets, and may be reasons to consider taking steps before the end of this calendar year.
The existing federal estate and gift tax exclusion is just over $11.5 Million Dollars for an individual (scheduled to return to $5 Million in 2026 if no legislation changes it before then). On the federal level, an individual can therefore make a gift of up to $11.5 Million Dollars without incurring a gift tax or triggering a later estate tax. It must be noted, however, that the state exemption is less than half this amount and thus a state gift tax would apply for gifts exceeding $5.1 Million Dollars for an individual. The IRS has issued a regulation providing that if a gift is made while the exclusion remains at $11.5 Million, the gift will remain excluded from gift and estate tax even if the exclusion is reduced by Congress in the future. Many advisors believe a new administration may lead Congress to reduce the exclusion, perhaps retroactive to the beginning of 2021. A large gift before the end of this calendar year would lock in the higher exclusion for your estate even if the exclusion is reduced thereafter. This planning would have to be completed before the effective date of any future change, which some predict could be as early as January 1st of 2021.
Another tax change that has been discussed for a long time and could be adopted, in whole or in part, with a change in Washington, involves changing the basis for income tax purposes of certain assets inherited at death. Under long-existing law basis, for most assets, is stepped up or down at death to equal its then fair market value. This eliminates income tax on all appreciated value for a beneficiary who sells after inheriting an asset. Families have used this concept to transfer wealth to younger family members while minimizing income taxation for generations. If you own an asset that you expect to increase substantially in value in the future, and if the “step up” rules are changed, it may be advisable to make an irrevocable gift, to an individual or to a trust, to effectively transfer future appreciation out of your taxable estate since the income tax benefit of holding the appreciated asset until death would be lost or reduced.
If you wish to explore any of your estate planning or elder law needs, we welcome you to contact your BPSLawyer.