Redkey Gordon P.C.

Health Care Considerations and Retirement

Consulting financial and tax advisers as part of planning the retirement process is essential to get the health-care piece covered. Enjoying truly golden retirement years means a lot of different things to different people, but it should include planning for long-term health care now so we obtain the end-of-life care we desire without becoming a burden on our children or the state.

According to a recent article in cincinnati.com, titled “Consider health care when retirement planning,” long-term health care may be a considerable expense during our retirement years, with most of this spent during the last three years of life.

 Health care spending has outpaced inflation over the past decade—from a 6% increase to just 2.5% for core inflation.

 So what do we do about rising long-term care costs?

 You should examine your cash flow in retirement: monthly income versus expenditures and line that up with the cost of Medicare Parts A, B and D, which is about $1,700 for an individual. With a supplemental "Medigap" C plan, you add $2,200 per year in premiums. That’s close to $4,000 per person or $7,900 per couple.

 Generally speaking, your total premiums and health care costs under Medicare can be estimated based on two factors. A study by the Employee Benefits Research Institute in 2013 predicts that a 65-year-old retired couple will need to fund $255,000 to $360,000 in Medicare premiums alone (including Medigap), as Medicare will cover only 62% of medical costs. Also, remember that Medicare doesn’t cover long-term health care. When you run out of funds, Medicaid fills the gap, which means costs for in-home health care and nursing homes must be covered by other sources, such as long-term care insurance.

 Here are some things to consider when planning for a retirement with long-term health care:

•  Will you have savings and assets at retirement to cover your projected health care costs?
• Are you and/or your spouse in reasonably good health now and does your family have a track record of living into their 80s or 90s?
• Will you work during any stage of retirement and earn money?
• Do you know when you want to start taking Social Security, and why?
• What do you project will be your annual income and expenses during retirement, and have you looked at possibly needing to increase your annual income beyond inflation to address potentially higher health care costs?
• If you need long-term care, have you factored in those needs and costs?
• Do you have an understanding of various types of long-term care insurance policies?

Discussing your plans with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning and elder law attorney, when planning for retirement is critical to enjoying your retirement years without becoming a burden on children or the state.

 Reference: cincinnati.com (January 19, 2015) “Consider health care when retirement planning”

3 Tax Advantaged Tools to Help Save for College

There are three basic tax advantaged vehicles to help save for college: 529 plans, Coverdall Education Savings Accounts and Roth IRAs.

 Saving for college? Consider three tax advantaged tools to help fund your child’s or grandchild’s education: 529 plans, Coverdall Education Savings Accounts and Roth IRAs.

 A recent Forbes article, titled “How to Save for College,”reports that each of these plans allows the funds to be used for college tuition and fees, and some also permit the funds to go towards books and room and board expenses. In addition, the Coverdall accounts allow you to use the funds to pay for K-12 schooling. 529 plans have the fewest restrictions and so the broadest appeal.

Each state and DC have their own plans, and the plans may differ in terms of how your contributions are managed, the types of investments they offer, and the fees charged. Your contributions to 529 plans are with after-tax dollars, and 34 states and DC also offer a state income tax deduction for contributions to the plan.

Regardless of the state, the 529 plans come in two basic types—savings plans and prepaid tuition. With a savings plan, you deposit funds, make investment decisions, and watch the funds (hopefully) grow. Later they can be withdrawn for qualified educational expenses when your student begins college.

Prepaid tuition plans are offered by 12 states. These are similar to defined benefit plans, except it is for college rather than retirement. You pay in an amount today or over a certain period of time, and the plan guarantees payment for a certain number of years of college tuition.

One prepaid plan not offered by a state is the Independent 529. This plan is offered by a group of 270 independent colleges and can be used to attend one of those schools. These prepaid plans lessen investment risk by giving you a tuition guarantee: regardless of investment performance or increases in tuition, the agreed-upon part of your student’s tuition will be there when your student’s ready.

The article admits that it can be very complicated, but a college education is the best investment you can make in your student’s financial future. Speak to Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney to find out more.

Reference: Forbes (January 20, 2015) “How to Save for College”

Is It Possible to Take the IRS to Tax Court?

Actually, the answer is yes. The Tax Court is an actual federal court and not, as some people think, affiliated with the IRS. At Tax Court, the IRS is a party to the matter just like the taxpayer. 

If you’ve got beef with the IRS, maybe you should head to court. Didn’t think that was possible, did you?

 Contrary to popular belief, the Tax Court is a real federal court and not a tribunal run by the IRS. The IRS is a party in the case just like any taxpayer in the Tax Court, says a recent Forbes article titled “Taxpayer Advocate Reports On Top 10 Most Litigated Tax Issues.”

 A case typically finds its way to the Tax Court when a taxpayer is assessed a deficiency and decides to challenge the amount in court rather than pay. Other reasons why a matter might end up in Tax Court include a request for interest abatement, worker classification disagreements, and a request for relief from joint and several liability on a joint return. If a specific federal tax-related issue is not within the jurisdiction of the U.S Tax Court, the matter may be decided in other courts, like the Bankruptcy Court and the U.S. Court of Federal Claims.

 The Tax Court receives tens of thousands of filings each year, but most are settled. Of those cases that do go to trial, a number involve the same kinds of issues over and again. As part of the report that National Taxpayer Advocate (NTA) presented to Congress, it detailed the most litigated issues at court.

 Here’s what were found to be the top litigated issues in the second part of 2014:

1.  Accuracy-related penalty.
2. Trade or business expenses.
3. Summons enforcement.
4. Gross income.
5. Collection due process (CDP) hearings (down about 25% over 2013).
6. Failure to file or pay penalty, and failure to pay estimated tax penalty (down 35%)
7. Civil actions to enforce federal tax liens or to subject property to payment of tax.
8. Frivolous issues penalty.
9. Charitable deductions.
10. Passive activity losses and credits.

 The NTA found that taxpayers are more than twice as likely to prevail on cases if they are represented in court by an attorney and when they had documentation or proved they made a reasonable attempt to comply with the law.

 Obviously having the right advice and doing it right the first time can save you a lot of time and headache. Consult with your local Sacramento estate planning attorney, Robert A. Gordon of Redkey Gordon Law Corp, for assitance.

 Reference: Forbes (January 15, 2015) “Taxpayer Advocate Reports On Top 10 Most Litigated Tax Issues”

President Obama Proposes Tax Relief for Middle Class

What should you have expected to hear during the State of the Union address last week? Key proposals from the President include the following.

 President Obama addressed the country last week in his State of the Union speech about key proposals he has for our government.

 Forbes recently detailed some of the key proposals from the President in its article titled “President's New Tax Proposal Would Hit Wealthy, Benefit Middle Class.”

 The highlights include these provisions:

 Eliminating stepped up basis. The President says that this is “the single largest capital gains tax loophole.” He proposes to eliminate stepped up basis at death, in which heirs are allowed to use the date of death value of capital assets instead of the decedent’s actual basis for capital gains calculations.

 Raising capital gains and dividend rates. In order to spur investment activity, the capital gains and dividends rates have been decreased over the past 30 years. The President’s plan would up those rates to 28% for high-income taxpayers.

 A new tax credit for double-income families. The President proposes providing a tax credit of up to $500 for families with two working spouses equal to 5% of the first $10,000 of earnings for the lower-earning spouse in a married couple. The maximum credit would be available to families with incomes up to $120,000, with a partial credit available up to $210,000.

 Upping child care tax incentives. The President proposes to increase the child care tax credit, or the dependent care tax credit, to $3,000, but only for middle class families with children under five.

 New education tax benefits. Combining some of the existing education tax benefits is part of Obama’s strategy. A move that would conceivably permit more students up to $2,500 in tax breaks each year over five years. The Lifetime Learning Credit and the tuition and fees deduction would be cut and replaced by an expanded American Opportunity Credit (AOC). The refundable part of the AOC would also be increased.

Want more information regarding these topics? Contact Robert A. Gordon of Redkey Gordon Law Corp.

 Reference: Forbes (January 17, 2015) “President's New Tax Proposal Would Hit Wealthy, Benefit Middle Class”

Florida Elder Rights and Guardianship

This year, two legislators who pressed for reform in 2014 are back with new bills they believe have stronger chances of success, as the excesses possible within Florida's guardianship system become more widely known.

A recent article in The Herald Tribune, titled “Legislation aims to curb abuses in guardianship system,” reports that two of Florida’s legislators are addressing the excesses possible within Florida's guardianship system. Florida law has a list of 14 rights that an elder may surrender as a result of the guardianship process. These include the rights to marry, vote, manage finances, determine where to live and accept medical care.

 The Florida bill includes these types of actions:

•  gives clerks of court authority to refer cases of wrong doing for criminal prosecution;
• allows judges to order mediation at any point in the process;
• attempts to curb the practice of legal wrangling over attorneys' and guardians' fees; and
• describes a guardian's duty to honor a ward's desires and file accurate reports to the court.

 The bill also contains language that could help make full guardianship a last resort, rather than a common practice, stating that a judge “may only remove those rights that the court finds the person is incapable of exercising.”

 The bill's most important provisions are those that create court monitors, and that limit the practice of declaring emergency temporary guardianships. Current Florida statute doesn’t call for any emergency guardianships per se—however, in reality this is how most elder wards are stripped of their rights. A petition for emergency guardianship is approved (usually within a few days) and wards are often removed from their homes before a hearing is set on the issue.

 The new Florida bill would mandate that an alleged incapacitated person and his or her lawyer be given 24 hours' notice of any hearing on a petition for emergency temporary guardianship. It also removes any financial incentive for professional guardians to have themselves declared temporary guardians and then automatically become permanent.

 Elder abuse can happen anywhere.  Make sure that your senior loved ones are protected and on guard for abuse. Guardianship is a drastic step, and you should make sure that you’ve discussed this with an experienced elder law attorney. Contact Robert A. Gordon of Redkey Gordon Law Corp for more information.

 Reference: The Herald Tribune(January 17, 2015) “Legislation aims to curb abuses in guardianship system”