July 2014

CURRENT ISSUES IN THE AREAS OF ESTATE, TAX

AND PERSONAL AND BUSINESS PLANNING

The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.

Designating The Estate As An IRA Beneficiary. It is almost never a good idea to designate the estate as the beneficiary of an IRA. Previous newsletters contain articles which emphasize the importance of coordinating your beneficiary arrangements for life insurance, IRAs, 401(k)s, etc., to be consistent with the terms of your will or your trust. Since your will controls your estate assets, some people think that it is appropriate to name the estate as a beneficiary of the IRA so that the last will and testament controls the disposition. It is almost never a good idea to do so. It is also rarely a good idea to designate a trust as a beneficiary of an IRA, unless very specific provisions are included in the trust. When the estate (or a trust in many instances) is designated as the beneficiary of an IRA or 401(k), the benefits payable to the estate must be distributed within five years, thus accelerating the income taxability of the IRA proceeds. A longer deferral can usually be obtained by naming individual beneficiaries, or a trust with certain specific provisions. If an improper form of designation is made, the income tax consequences can be significant. Because the IRA proceeds must be paid out within a limited period of time, a significant amount of taxable income may be received by a trust. Unless the income is distributed out, in which event it will be taxed to the individuals who receive it, the trust will pay a very high rate of tax at a relatively low level of income. The proper designation of an IRA beneficiary is a very important planning decision.

Managing Your Health Care Advance Directives. The American Bar Association (ABA) Commission on Law and Aging has developed a smart phone application that gives individuals and their family members the ability to store their own and each other’s health care advance directives. To learn more about the application and to download it, go to www.MyHealthCareWishes.org. The goal is to ensure that vital information affecting health care decision making is accessible when it is needed. I advise my clients to provide a copy of their health care advance directives to their primary physician so that it can be made a part of their medical record, and to make copies and place them in their vehicles and suitcases. When I refer to health care advance directives, I am referring to a power of attorney for health care which includes the appointment of a health care representative, a living will, and a HIPAA (Health Insurance Portability and Accountability Act) Authorization form. You can learn more about health care advance directives by consulting my web site, which includes numerous previous newsletters addressing various aspects of health care decision making, as well as the frequently asked questions section of my website.

In Defense Of The Practice Of Law. I recently had a commentary published in the May issue of Res Gestae, a legal publication of the Indiana State Bar Association, addressing certain issues relating to the practice of law. Readers who are interested may access that article on my website.

Indiana Responsible Property Transfer Law Repealed. Virtually unknown to everyone is a repeal provision contained in House Enrolled Act 1005 which repealed the Indiana Responsible Property Transfer Law (IRPTL). The law required a disclosure document under certain circumstances when real property involved possible environmental contamination. It appears that the legislature felt that the requirements of federal law were adequate in regard to the disclosure of chemical storage and underground storage tanks and similar matters. Many legal documents routinely refer to the IRPTL, which will no longer be applicable. Readers who frequently engage in real property transactions may wish to look into the repeal of the IRPTL and determine whether changes in their transaction practices would be appropriate.

Issues Relating To Nursing Home Placement. Although most people prefer not to transition to nursing home care, in many instances nursing home placement is unavoidable. Selecting a nursing facility when one is needed can be a daunting process, particularly since the circumstances are frequently critical and time is of the essence. The facility that you want may not have an available bed, or if Medicaid eligibility is contemplated, the facility may not have a Medicaid bed available. In making the choice, families should visit the facility and should also seek references from others. There are internet resources available that will provide ratings and reviews of nursing facilities, and families should certainly interview the nursing home staff. Guidance should be sought from the local Area Agency on Aging, which for the six-county area which includes Gibson, Perry, Posey, Spencer, Vanderburgh and Warrick counties is Southwestern Indiana Regional Council on Aging, Inc. (SWIRCA & More). The contact information for SWIRCA & More is 16 West Virginia Street, Evansville, Indiana 47710, telephone 812/464-7800. Residents in nursing homes have statutory rights under the federal Nursing Home Reform Law that was enacted in 1987. Those rights include, among others, the right to be free of unnecessary restraints (both physical and chemical), the right to have access to records, a right to privacy, choices of meals, etc. In this area, as in many others, knowledge is power. People should also be aware that Indiana law makes it a crime to physically abuse, neglect or exploit an endangered adult or a dependant. Failure to report suspected battery, neglect or exploitation of an endangered adult or dependant is a crime. A dependant includes an adult who is mentally or physically disabled. An endangered adult includes a person at least 18 years old who cannot manage property or take care of himself or herself, which may result from mental illness, mental retardation, dementia, etc. Anyone who suspects such neglect or exploitation should report their suspicion to local law enforcement, an adult protective services unit, or to the Indiana Division of Disability, Aging & Rehabilitative Services.