Credit shelter trusts
A new resource is now available to veterans and their families for health and healthcare-related information. This online library provides reliable information on topics ranging from diseases to rehabilitation and medication. The library is geared to give veterans access to information that will allow them to take charge of their own health and well-being.
The library was developed by Veterans Health Administration clinical experts in an effort to provide information that is specific to the unique needs of veterans. It contains over 1,500 information sheets and 150 videos to help veterans to learn about topics such as PTSD, Agent Orange exposure, combat-related injury, and traumatic brain injury. Also, information about staying healthy mentally, emotionally, and physically, is available through the program. Topics that are not readily available on other websites are made easily accessible here.
The VHL plans to focus its content and design to a veteran-specific audience. The Veterans Health Administration intends to address health issues that are most pressing to veterans and their families right now. The VA hopes that this new resource will allow veterans to feel informed when making a health care plan with their providers. Also, the library will be available to VHA providers directly so that medical staff can work in collaboration with patients in developing a comprehensive plan.
As we discussed in a past blog, many families are affected by state estate and inheritance taxes even if they are exempt from federal taxes. Fortunately, the federal limit was substantially raised and now only affects those who die with an estate valued over $5.2 million. For the vast majority of individuals, this means no federal “death” tax. However, there is still something to worry about in 21 states where taxes exist for estates below the federal limit.
Four hints to help to avoid these tricky state taxes:
Move. Moving to avoid state death taxes can work. However, it only works if you truly move and give up most ties to your old state. This usually means changing your driver’s license and registration, where you vote, and recording the time you spend in the new state. It is also important to consider where the majority of your assets are, as this can be used by the state to determine where you are officially domiciled.
Credit Shelter/Bypass Trust. This type of trust can be set up upon the death of the first spouse in order to “shelter” the amount of the estate equal to the state tax exemption. The remainder exceeding the exemption can then be put into a marital Q-TIP trust that will allow no estate taxes to be paid at the time of the first spouses death. To shelter the rest of the federal exemption, you rely on a provision of the new federal law called “portability,” allowing surviving spouses to carry over the estate tax exemption of the spouse who died first and add it to their own.
Spousal Lifetime Access Trust. This type of trust works much like putting life insurance in an irrevocable life trust for your beneficiaries. Because federal law allows a $5 million dollar lifetime gift, putting property into a trust for the benefit of your spouse or children will take it out of your estate and keep it free from state and federal estate taxes.
Outright Gifts. In addition to the $5 million dollar lifetime gift allowance, each taxpayer can give any number of individuals $14,000 per year without being taxed. This $14,000 must be an “outright” gift that is available immediately. Connecticut is the only state that currently has a gift tax on these types of transfers.
Technological developments seem to constantly make our world more convenient and information more accessible. This is definitely the case in the realm of long-term care after the release of new software that should significantly improve communication between long-term care facilities and the families of patients.
This software has an app for smartphones, called Mobile Family Updates. The app is free to family members and can be downloaded on any Apple or Android phone. It costs 49.95 per month for care facilities to offer and many places are already recognizing its advantages.
Essentially, the software allows employees of assisted living or nursing homes to post updates about the condition of residents. The information can be spoken orally or typed via computer. Some information can be made available to all residents and families while other information can be confidentially shared with only one individual. Once updates are posted, an alert is instantly sent to family members who have the app.
The creator of Mobile Family Updates developed the software after he became frustrated with the difficulty of communicating with his mother-in-law’s care facility. He found that it was difficult to always stay on top of the status of his loved one and to have clear communication with facility employees. He also realized that his struggle is one faced by many family members so he decided to create a system that would make information more readily accessible. If this service is something you think would benefit your family, ask whether or not it is offered by a long-term care facility you are considering. Or if a loved one is already living in a facility, speak with the director about setting up the software there.
In addition to the annual exclusion we discussed in the last blog, there is also an unlimited gift tax exclusion for direct payments of some educational and medical expenses. This exception applies regardless of your relationship to the educational or medical services recipient, however, the payments must be made directly to the provider. IRS regulations define which types of payments qualify for this unlimited tax exclusion.
Educational expenses for tuition at an institution that maintains a regular facility and includes grade school, high school, and higher education qualify. However, payments for books, dormitory fees, and other similar expenses do not qualify.
Medical expenses qualify for the tax exclusion if they are incurred for diagnosis, cure, mitigation, treatment, or prevention of disease. Expenses for transportation essential to medical care and payments for medical insurance are also eligible. However, medical care reimbursed by insurance is not eligible for the exclusion.
The annual exclusion and unlimited health and education exclusion provide a simple yet effective tax savings technique. Also, remember that the earlier you begin to gift, the more that benefits from tax savings can build up!
- Investment Expenses – Income gained from interest, dividends, or capital gain on investments is taxed at a much lower rate than other forms of income. Furthermore, this type of income is not subject to taxes for Social Security or Medicare. Also, any expenses related to your investments that exceed 2% of your AGI can be included with your itemized deductions. These expenses might include accounting fees, attorney fees, online broking fees, and fees to financial planners.
- Business Expenses – If you own a business you may be able to claim business expenses as a senior tax break. These expenses might include business travel expenses, equipment, and office costs. Most any business expenses can qualify so long as they are necessary and reasonable.
- Contributions to Charity – Contributions to charitable organizations are deductible as an itemized deduction. Donations of money exceeding 50% of your AGI are deductible as is the fair market value of any property you have donated.
- Standard Deduction – The standard deduction is the tax deduction you take at the end of the year if you do not itemize your deductions. If you are 65 or older, your standard deduction can increase. Furthermore, if you are legally blind you may be eligible for a larger standard deduction.