Wednesday, August 31, 2011

Family fight in a country song

Gerry Beyer of the Law Professors Blog Network posts the lyrics to a song from Hell on Heels, by the Pistol Annies, called Family Feud. The song describes a family fighting over the possessions of their recently deceased mother. A snippet:

I'm watching it all go down in shame
Wish the whole house would go up in flames
Who gives a damn about a cedar chest
When we just laid her soul to rest

Tuesday, August 23, 2011

Limited conservatorship?

Florida has an interesting process for assisting older adults: the voluntary guardianship. Rather than the all-or-nothing that applies to a conservatorship in Michigan, the Florida process permits an individual to go to the probate court and designate a voluntary guardian to handle only certain accounts for him or her. The authority to act can be withdrawn at any time.

In Michigan, a conservator is a person designated by the probate court to handle the protected person's money. A guardian handles personal decisions. It appears that the term "guardian" in Florida covers both concepts.

In Michigan, when the court has designated a substitute decision-maker, the protected person's authority on that subject is at an end. The conservator has all the authority to handle the PP's money; the PP has none.

A principle often heard in Michigan is that the court-imposed limitation on a protected person's autonomy should be limited to that which is necessary. Something like the voluntary guardianship concept would be consistent with that goal.

Sunday, August 21, 2011

Financing Medicare

An article by Richard L. Kaplan called Rethinking the Medicare Payroll Tax, posted at SSRN, starts off with a review of how the Medicare program is currently financed.

Part A - standard Medicare, pays hospital expenses and some home health - financed by a 1.45% tax on earned income (wages and salaries), plus another 1.45% on the employer - total 2.9% tax on earned income.

Part B - optional Medicare, pays doctors visits, ambulance, some durable medical equipment. Financed by a monthly premium charged to the beneficiary and deducted from social security benefits, subsidized by general Federal revenues. Premium $115 to $369 per month, depending on annual income levels. The graduation based on income was first introduced in 2006.

Part D - prescription drugs. Financed generally like Part B, but with various premiums based on a number of factors.

The new tax added under the Affordable Care Act is a combination of two items, to be effective in 2013.

1. An increase in the employee portion of the payroll tax from 1.45% to 2.35% for those earning over $200,000/$250,000. The employer contribution is unchanged.
2. A 2.9% tax on investment income (interest and dividends, rents, capital gains) over $200,000/$250,000.

Kaplan goes on to proposed that the payroll tax approach be abolished and that Congress change the Medicare program so that it is financed by general revenues. Don't hold your breath.

Thursday, August 18, 2011

Michigan's "new" state tax on retirement distributions

The article of faith among Republicans appears to be that new taxes of any kind are unacceptable, regardless of why or how. But that is not the case with Michigan's new Republican governor, Rick Snyder. Among the reforms that were put into place this year, the most prominent of which was the abolition of the Michigan Business Tax and its replacement by a state tax on corporate profits, Michigan modified the tax treatment of distributions from pensions and retirement programs.

Michigan has not adopted a new tax. Pension distributions were subject to tax previously, but there was a fairly high exemption. What Michigan has done is significantly lower the exemption.

One justification that has been made for this step is that the exemption of distributions was inconsistent with the overall structure of retirement plans. IRAs and 401(k) plans are built up with untaxed money. The contributions are not taxed at the time they are made. Rather, the funds grow (if the participant is fortunate) and then are taxed only when they are distributed. That is what happens at the Federal level. All such distributions are taxed as ordinary income. At the state level, where other income is taxed at a flat 4.35% after the application of the personal exemption, the distributions from those accounts were not taxed under previous law until they exceeded $45,120 per person, or $90,240 per couple.

The newly-adopted plan has several exceptions and limitations:

  • It does not apply at all to those who will be 67 or older by the end of 2011. For them, the current exemptions will remain in effect.
  • The exemption is reduced to $20,000 per person, $40,000 per couple. For those earning more than $75,000/$150,000, that exemption is phased out.
  • For those who are 60 to 66 by the end of 2011, those figures apply beginning in 2012.
  • For all others, that exemption will apply only after age 67. Any distributions between ages 60 and 67 will not have any exemption other than the small state personal exemption. (The thinking apparently is that most people will not be living on retirement income until age 67.)
  • After age 67, the taxpayer may elect to have the tax apply to his social security benefits instead of pension distributions.
  • Significantly, social security benefits (unless the election is made) and military pensions will remain entirely exempt.

There have been legislative proposals to add police and firefighter pensions to the exempt list.

More: The state's information site.

Monday, August 15, 2011

Responding to Buffett

At Forbes, two brief articles responding to Warren Buffett's call for higher taxes on the wealthy.

Warren Buffett's Very Strange Tax Argument, in which Tim Worstall notes that Buffett's comments ignore the effect of corporate income taxes, which are paid before dividends are paid to shareholders.

The Real Reason Warren Buffett's Taxes Are Low in which Peter Reilly makes a very simple point: Berkshire Hathaway, Buffett's company, simply does not pay dividends at all. The company's famous investment strategy is to buy and hold - seemingly forever.

No dividends, no income to tax. No sale, no capital gains to tax.

Another factor that I have not seen addressed in any article: Buffett is famous for limiting his own salary to $100,000 per year. That would again seriously limit his tax liability. If he were to pay himself a $1 million salary, things could be much different.

Saturday, August 13, 2011

Medicaid and home care

A pair of related stories on NPR on the question of whether the Americans with Disabilities Act requires that Medicaid pay for care at home for those who do not require care in a nursing home environment. The case of Olmstead v. L.C., decided by the U.S. Supreme Court in 1999, is cited in support of that position.

Care At Home: A New Civil Right (Dec 2010)

At 88, A Chance To Be Independent Again (Aug 2011)

Several law review articles on this topic by Michael Perlin, who has a penchant for titles based on Dylan lyrics:

Their Promises of Paradise: Will Olmstead v. L.C. Resuscitate the Constitutional Least Restrictive Alternative Principle in Mental Disability Law?
37 Hous. L. Rev. 999 (2000)

I Ain't Gonna Work on Maggie's Farm No More: Institutional Segregation, Community Treatment, the ADA, and the Promise of Olmstead v. L.C.
17 T. M. Cooley L. Rev. 53 (2000)

What's Good is Bad, What's Bad is Good, You'll Find Out When You Reach the Top, You're on the Bottom: Are the Americans with Disabilities Act (and Olmstead v. L.C.) Anything More Than 'Idiot Wind'
University of Michigan Journal of Law Reform, Vol. 35, Pp. 235-261, 2001-2002

Friday, August 12, 2011

To roll over or not

Most advisors recommend that an employee who departs from a company roll her 401(k) funds into a self-directed IRA. This article from Smart Money provides a few reasons not to follow that standard advice. The conclusion, probably accurate but not very helpful: "There's no universal right answer."

Saturday, August 6, 2011

Packers succession planning

An item of interest to many in the U.P.
These items have a tremendous value, just not much of a monetary value, if any. They can be inherited but they cannot be sold. Proper planning is essential. Packers season tickets have not been available for sale since 1960, and there are currently 87,000 people on the waiting list.

New amendments to EPIC

Public Act 1 (2024) made a number of changes to the Estates and Protected Individuals Code (EPIC). These changes were given immediate effect...