Financial Planning

SPECIAL NEEDS, THIRD PARTY AND SELF SETTLED TRUSTS – WHATS WITH ALL THE NAMES?

Published on: February 17, 2016 | by Ettinger Law Firm

LEGAL DISTINCTIONS THAT MATTER

When a person applies for Medicaid eligibility there are many pitfalls that an unsuspecting or unsophisticated applicant can run afoul of. To help them retain the benefit of certain monies that they would normally have access to third parties or the applicant themselves can create a special needs trust to help keep the public benefits and still benefit from the money in the trust. The various different trusts have different legal requirements that must be met to qualify as that type of trusts.

Moreover, different trusts accomplish different goals and yet other types of trusts exist that have nothing to do with Medicaid or other public entitlement program eligibility but help to reduce tax liability. Some trusts accomplish two tasks, such as a third party special needs trusts, which allow seniors to live a relatively modest and respectable life and qualify for Medicaid at the same time. While other types of trusts only satisfy just one legal goal, such as a grantor retained annuity trust, which allows a person to make a gift of an asset that will likely appreciate rather quickly, but incur no gift tax liability. Finally, there are other types of trusts that outlive their utility, such as pooled trusts.

PROTECTING YOUR FUTURE VIA POOLED TRUST ASSET ALLOCATION

Published on: December 26, 2015 | by Ettinger Law Firm

COMMON LEGAL WAY TO PROTECT EXCESS INCOME

Unfortunately many means based programs, such as Medicaid, are strict in their qualifying criteria. Depending on the specific facts you may not qualify for Medicaid and even as little as twenty dollars a month can make a difference. There is no sliding scale of benefits based on your income. Each state has its own financial thresholds for income qualification, given the drastic difference in cost of living throughout the country. New York only allows for up to $845 in income, anything above that will disqualify the potential recipient. So what of the millions of men and women throughout New York that live on modest means and yet still receive more than $845 in monthly income? For example, a person in Manhattan or even Long Island who earns approximately $2,000 per month does not live luxuriantly, yet he/she may need certain services and does not want or even need to go into a nursing home facility for those services.

Pooled trusts allow for seniors to setup their own trusts so that they can still live a respectable and modest life and not be required to turn over all of their income to the state for Medicaid eligibility. In the case of the senior above, he/she would $1,155 ($2,000 – $845) to a pooled trust that they joined so that he/she could still qualify for Medicaid and have money left to pay bills and perhaps enjoy their normal lifestyle with family and friends without much financial impact.

BANKRUPTCY IN THE AGE OF RETIREMENT

Published on: December 5, 2015 | by Ettinger Law Firm

RISING RATE OF SENIOR FILERS

In 2011 a noted bankruptcy legal scholar at the University of Michigan Law School published a working paper where he documented the rise in the rate of bankruptcy filing rates for elderly Americans. While the overall rate was only seven percent of the bankruptcy filing population, the rate has increased 177 percent for the 65-74 age group and a staggering 566 percent for the 75 and older age group. In May, 2015 the New York Times noted this new reality. There are certainly many factors at play in this dynamic, including a witch’s brew of fixed income, rising medical costs and high credit card debt for a majority of the bankruptcy filers. No doubt the recession of 2008, with its hard impact on housing and retirement was an additional major factor. Bankruptcy also has a favorable treatment of social security and retirement income savings.

BANKRUPTCY OVERVIEW

“TONTINES” ARE BACK IN VOGUE

Published on: November 27, 2015 | by Ettinger Law Firm

To be sure, tontines are illegal in America and have been since the early 1900s. There have been many articles of late, however, arguing for their return and putting the product back onto the menu of options that retirees may want to purchase. The idea of the tontine is rather simple. You get a group of people who all buy into the tontine, with their money going into the collective pool of cash. At certain intervals, you get paid money back. When people in the pool pass away, the money they invested does not go back to the investor’s family or estate. Instead it stays in the pool, allowing the payment to the remaining members to increase. The offensive part comes from the financial gain garnered by another’s death. Some people may view it as gambling on the lives of another.

REGULATORY SCHEME OUTLAWING TONTINES

In 1905 the New York based Equitable Life insurance company internal fight went public with accusations of self serving deals and political payoffs. In response New York launched a far reaching investigation that helped to shape insurance law for the next century. The Armstrong Committee started the career of future United States Chief Justice Charles Evans Hughes, who was a rabid opponent of gambling and helped to create the picture in the public that tontines are gambling. He further helped to draft the 400 plus pages of recommendations and reforms. At the time, New York had jurisdiction over 95 percent of the insurance industry in America. Moreover, within ten years most states enacted similar legislation. As such, the impact was national in scope. Among the reforms enacted was a prohibition on rebates by insurance companies and a ban on deferred dividend insurance.

ADVANCES ON PENSIONS: IS IT PREDATORY LENDING?

Published on: November 25, 2015 | by Ettinger Law Firm

GOVERNMENT ACCOUNTING OFFICE INVESTIGATION

On September 30, 2015 the Government Accounting Office (GAO) issued a report following a 15 month investigation regarding advances to pensioners, secured by monies that the pensioner would receive in their pension. The same day the Senate Committee on Aging held hearings on this exact issue to determine if indeed this practice is predatory as well as how the federal government will respond. The GAO conducted an undercover operation and received substantive offers from six different pension advance companies. The GAO report also indicated that there was a lack of disclosure on some fees, interest rates and various options, in addition to undisclosed affliations between 21 of the 38 companies that were investigated. The majority of the offers had interest rates of a stiffling 27 to 46 percent. While there is no set federal definition for usury, New York law defines usury as any loan which requires a payment of 25 percent or more; more about this below. Not surpringly the some of the companies focused their efforts on financially vulnerable pensioners with poor or bad cre dit. One of the recommendations from the GAO report was that the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) educate consumers about these practices.

WHY THE GAO INVESTIGATED

The Most Valuable Assets for Your Heirs

Published on: July 7, 2014 | by Ettinger Law Firm

Planning for retirement can be difficult; however, if you also plan on leaving money to heirs in your estate plan the process can be even more complex. Deciding which financial accounts should be tapped first for retirement funds and which should be left for inheritance purposes is a tricky question. The answer is often determined by your own financial needs for retirement as well as the needs of your heirs, but you can expect the following to occur with your heirs with each of these retirement accounts.

Roth IRA

As a general rule, a Roth IRA account is a great asset to leave for inheritance. When inherited, Roth distributions are tax-free for your heirs. If planned properly, your heirs can take distributions from the account over the course of their lifetimes and simultaneously leave the bulk of the principal from the account to continue to grow in interest. Additionally, the federal estate tax exemption is now at $10.6 million for a married couple. That means that most Roth IRA accounts that are inherited will be both income and estate tax free.

New 2014 Cost of Long-Term Care Study Released

Published on: April 28, 2014 | by Ettinger Law Firm

Residents throughout New York continue to experience “sticker shock” when exploring their long-term care options. Whether you are planning for possible needs in the future or working quickly to secure support for an ailing loved one, there is a good chance you may be surprised by the overall costs of this care. Naturally, there is a spectrum of care–from occasional, at-home aides to a move into a skilled nursing home. And there are wide variances in quality among specific caregivers. In most cases, however, the overall cost is quite significant, particularly in a relatively expensive state like New York.

The Cost Data – 2014

A helpful starting point to understand the financial toll of long-term care is to examine the newly released 2014 Cost of Care Survey from Genworth. This particular survey has been conducted for over a decade, allowing an understanding of year over year trends on top of providing information on current costs.

April is Financial Literacy Month – Plan for Your Future

Published on: April 8, 2014 | by Ettinger Law Firm

In the spirit of raising awareness of sound money management, April is officially deemed “National Financial Literacy Month.” The U.S. Senate even passed a resolution on the matter a few years ago. The National Foundation for Credit Counseling usually leads the yearly effort, and many others in the financial world also use the occasion to discuss important money matters.

For example, Money Management International, a non-profit credit counseling agency, created a robust website sharing a variety of resources for consumers: www.FinancialLiteracyMonth.com. The website provides helpful tools on basic financial information, income worksheets, debt load calculators, financial goal tracking, and more.

While much of the information is focused on very general money management skills, if recent poll data is accurate, a majority of Americans remain far behind in prudent planning. Consider that a recent National Foundations for Credit Counseling (NFCC) survey found that over 60% of Americans do have any sort of budget. In addition, the survey found that nearly one in three Americans do not put anything from their annual income toward retirement savings. It is perhaps no wonder then that “retiring without having enough money set aside” is the most commonly cited financial issue that worries Americans according to the NFCC survey.

U.S. Tax Court: New IRA Rollover Decision Strongly Criticized

Published on: April 3, 2014 | by Ettinger Law Firm

Intricate financial and estate planning details are understandably hard for many residents to wrap their head around. There are hundreds of thousands of page written in federal statutes, case opinions, and regulations dictating what can be done and what cannot. Making matters even more complex is that fact that even professionals can disagree on how certain rules should be applied.

For example, many financial planners are up in arms following a recent opinion by a U.S. Tax Court related to IRA rollovers.

The Case

NFL Players & Estate Planning Errors – It Can Happen to Anyone

Published on: January 31, 2014 | by Ettinger Law Firm

For sports fans, all eyes this weekend are planted squarely on New York City with the Super Bowl set to kick off early Sunday evening. Beyond the usual chatter about who will win and lose, many commentators are discussing how this single game will impact the long-term legacy of many players in it.

Of course, at the end of the day, this game represents just a single game in a career. And for many players, that career is relatively short-lived. Football is a demanding sport, and it is not uncommon for players to retire in their late twenties or early thirties. It is only a rare few who play successfully into their late thirties.

This presents an unique dilemma for players who must then find other careers and/or properly manage their affairs early in life ensure financial stability for what is hopefully a many-decades long retirement. As you might imagine, many players are clumsy in this regard, making a plethora of estate planning mistakes that cause harm to themselves and their families down the road.