Tuesday, September 10, 2019

Your Digital Legacy e-book

The redoubtable Take Control series of e-books includes Take Control of Your Digital Legacy, released in January 2017. Many of the recommendations echo those that we have made here for years.
A will takes care of your physical possessions, but what about your digital life—photos, email, files, and the like? If you want to pass your electronic ephemera on as part of your digital legacy, turn to tech expert Joe Kissell for advice on dealing with large quantities of data, file formats, media types, the need for a “digital executor,” and more.
Available at this link for $15.

Monday, August 26, 2019

Tips for returning college students

We are undergoing our annual incursion of new and returning students to our three universities, Northern Michigan University, Michigan Technological University, and Lake Superior State University. Among all of the other things that students and parents will be thinking about, these two should be included: 

A medical authorization form. A student who is 18 years old is an adult. If he or she encounters any illness or injury and as a result is unable to provide consent directly, a treating hospital or physician is not permitted to give medical information to a parent. Having a signed medical authorization form in hand will remove this obstacle - treating doctors will be able and willing to talk with the parent and provide the needed information. We have developed a HIPAA-compliant medical authorization form that can be used for that purpose. It is carefully written so that providers are authorized to speak to the parent about illness or injury, but not about routine matters such as sexual health, contraception, and the like. 

Auto-related injuries. If an out-of-state student is involved in a Michigan accident involving a motor vehicle but is not the owner of the vehicle, he or she may be entitled to Michigan no-fault benefits, either from the insurer of one of the motor vehicles involved in the accident or, in certain circumstances, from the Michigan Assigned Claims Facility. Those no-fault benefits may well be more advantageous than the benefits offered under other auto insurance available to the student. 

Saturday, May 11, 2019

DHHS policy on sole benefit trusts is overturned

On May 9, 2019, the Michigan Supreme Court issued its decision in the case of Hegadorn v Dept. of Human Services Director, overruling the policy adopted by the Department of Health and Human Services in August 2014, and holding that a sole benefit trust (SBO trust) intended for the benefit of a community spouse can shelter a couple’s assets and make them non-countable for the purpose of qualifying the institutionalized spouse for Medicaid benefits for long-term care.

James Steward and Angela Hentkowski of Steward & Sheridan, Ishpeming, were the lead attorneys for the plaintiffs challenging the policy and should be congratulated for an excellent win.

Prior to August 2014, an SBO trust was a common tool that was available to use to avoid spousal impoverishment under the statutes and regulations requiring that a person seeking Medicaid coverage for long-term care must spend down all countable assets to a maximum of $2,000.

The requirements were:
  • The transfer to the SBO trust must be irrevocable.
  • The distributions or payments from the trust must be made solely for the benefit of the community spouse; 
  • The distributions to the community spouse must be made on an actuarially sound basis over his or her the projected lifetime; 
  • There may not be any conditions or circumstances under which either principal or income could be distributed to or used for the benefit of the institutionalized spouse. 
The Hegadorn ruling involved three consolidated cases, each following the same fact pattern. The essential ruling by the Court was that the DHHS had improperly interpreted the provisions of the Federal Medicaid law with respect to a trust whose assets may be made available under any circumstances. The Federal law provides that such a trust would be countable if its assets may be used “for the individual” under any circumstances. The DHHS interpretation was that the word “individual” would apply to both the institutionalized spouse and the community spouse. The Supreme Court disagreed. The statutory language, it ruled, applies only to the institutionalized spouse, the person for whom Medicaid benefits are sought.

Under the Medicaid statute, the definitions that apply are found at 42 USC 1396d. There is no definition of the word “individual” in that section, but it is important to note that that word appears in section 1396d a total of 72 times, and each time it is used it is clear that it refers to the institutionalized person, the person receiving Medicaid benefits, and not to his or her spouse.

Chief Justice Bridget McCormack, concurring in the decision, wrote separately to say that, in her opinion, the transfer of assets by the community spouse into the trust would be regarded as a “divestment” which would trigger a period of disqualification for Medicaid benefits under the divestment rules. She observed that that was not an issue involved in the case before the Court and thus did not require consideration.

We believe that the Chief Justice is probably wrong on this point. At page 9 of the Bridges Eligibility Manual, section 405 (divestment), the DHHS says that:
It is not divestment to transfer resources from the client to:
The client’s spouse.
Another [person] SOLELY FOR THE BENEFIT OF the client’s spouse. Transfers from the client’s spouse to another SOLELY FOR THE BENEFIT OF the client’s spouse are not divestment.
And this DHHS policy statement is based on the Federal Medicaid statute, 42 USC 1396p-c-2-B-i:
(2) An individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that—
* * *
(B) the assets—
(i) were transferred to the individual’s spouse or to another for the sole benefit of the individual’s spouse,
(ii) were transferred from the individual’s spouse to another for the sole benefit of the individual’s spouse,
(iii) were transferred to, or to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of, the individual’s child described in subparagraph (A)(ii)(II), or
(iv) were transferred to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of an individual under 65 years of age who is disabled (as defined in section 1382c(a)(3) of this title)

Friday, February 1, 2019

Updated probate limits

The Michigan Treasurer has certified the following as the amounts for spousal share, statutory allowances, etc. for persons dying in 2019:

Tuesday, October 30, 2018

IRS prevails in a tax collection case

On October 3, 2018, the Sixth Circuit released its opinion in United States v Estate of Albert Chicorel, in which it held that the United States, seeking to enforce a claim for unpaid taxes, may perfect its claim after timely submitting a notice of claim to the personal representative of the Estate by filing a collection proceeding in Federal Court, even though the Federal court proceeding was filed more than ten years after the assessment of the tax.

The tax was first assessed by the IRS in September 2005. Chicorel did not pay before he died in the fall of 2006. An estate was opened and the four-month notice to creditors was published in May 2007. The IRS was not notified, despite the fact that it was a known creditor. The United States filed a proof of claim in the probate court in January 2009. It later filed its collection action in March 2016.

26 USC 6502-a requires that any tax assessment may be collected "by levy or by a proceeding in court" if the proceeding is begun within ten years of assessment. The issue presented, given the fact that the lawsuit was filed more than ten years after the assessment, was whether the filing of the notice of claim was a "proceeding in court."

The court found that it was. The filing of a notice of claim requires action by the personal representative, and has significant legal consequences for the creditor and for the estate.

What the court did not tell us is what the personal representative did with the notice - it must be disallowed if the PR does not believe it is properly payable - or why the United States took another seven years to file the lawsuit against the estate. Under the Sixth Circuit's analysis, once the notice of claim was submitted to the personal representative within the ten-year period, the United States could wait as long as it wished to file the collection action.

United States v Estate of Albert Chicorel (PDF)

Saturday, October 20, 2018

The effects of this year's tax cut

Newsweek has published an article entitled "Trump's tax cuts benefit rich Americans, not middle-class families, voters say by two-to-one margin in new poll."

If that that is what most people believe, it is because they have accepted claims made by politicians, because the assertion is simply untrue. Doing a direct financial analysis of the effects of the Tax Cuts and Jobs Act of 2017 tells another story entirely.

We have done the calculations for two hypothetical taxpayers, a single person with one child earning $70,000 per year and another single person with one child making $135,000 per year. The result of our calculation, comparing the 2017 tax year to the 2018 tax year, the first year the cuts go into effect, shows:

The 70K worker will have a 22.3% lower tax bill for 2018
The 135K worker will have a 15% lower tax bill for 2018

We show our work. We have posted the calculation at https://is.gd/OAFWiW

So you can believe the fictions disseminated by politicians, or you can believe the result of an actual calculation and comparison.

You can argue about whether the country can "afford" a cut in personal income taxes. You can argue about whether the taxes paid by those taxpayers who earn more than you do should be higher than they are. But you cannot deny that most middle-income Americans will have a lower tax bill next spring as a result of the TCJA.

Saturday, October 6, 2018

Unexpected information from SSA

When you apply for Social Security benefits, the Social Security Administration will review the reports that it has received from former employers. If it finds information about a pension plan that you participated in during a period of employment, SSA will notify you of that plan and the fact that you might be entitled to benefits. One client of ours learned that she was entitled to $235 per month that she did not know about, in addition to her Social Security benefit.

Your Digital Legacy e-book

The redoubtable Take Control series of e-books includes Take Control of Your Digital Legacy, released in January 2017. Many of the recommend...