Friday, January 19, 2007

FAQ: General Durable Power of Attorney

Category: Estate Planning, Financial Planning

Following numerous recent questions about what a General Durable Power of Attorney is and can do, a primer from

FAQ: Durable Powers of Attorney for Finances
Learn about the simple way to arrange for someone to make your financial decisions should you become unable to do so yourself.

How does a durable power of attorney work?
When does a durable power of attorney take effect?
What does an attorney-in-fact do?
How do I create a durable power of attorney for finances?
What happens if I don't have a durable power of attorney for finances?
I have a living trust. Do I still need a durable power of attorney for finances?
Can my attorney-in-fact make medical decisions on my behalf?
When does a durable power of attorney end?

An important caveat - in New Jersey and many other states, your attorney-in-fact cannot make gifts unless the power to make gifts is specifically authorized. This is very important from many perspectives: a failure to include a gifting provisions can stunt the ability to Medicaid planning, while, on the other hand, a gifting provision can be abused if the attorney-in-fact uses the gifting provision to transfer assets to himself or herself.

Thursday, January 18, 2007

Played the market this year? Can you report it right on your Tax Return?

Category: Tax Law and Planning, Financial Planning

Did you buy, sell, or trade stocks in 2006? Planning on doing it in 2007? Did you remembers that you need to record each and every sale on your income tax return? Many investors expect that their end of year statement from their broker will give them everything they need to file their taxes - this is not necessarily true. Your year end statement will give you the sales price, but will not necessarily provide you with all the other key information necessary to file your return. As an investor, it is your responsibility to know the following for each and every security sold to properly reflect the transaction on your tax return:
  • Name of the security
  • Your cost basis (ie: what you paid for it, adjusted by splits, etc.)
  • What you sold it for
  • Date of sale
  • Gain or Loss (sales price - adjusted cost basis)
If you were a successful investor in 2006, but didn't track this information well, April 15th may present a headache this year. But luckily, this headache is avoidable in future years if you track your purchases and sales as you make them - then all you need to do is print out the spreadsheet, and voila, taxes done.

Tuesday, July 11, 2006

Financial Tools Targeted at Women

Category: Financial Planning

In much of my practice I am dealing with women as decision makers - women live longer than men so are more highly represented in my elder law practice; women are often the catalyst for estate planning as they want to deal with their concerns about their and their children's financial security in the event of death or disability; women are both business owners and key employees.

Apparently others are stepping up to the address the fact that women have different and unique needs in their financial planning and security, as MassMutual has launched a new section of its website focused on the financial needs of women

From the press release: "While women share the same goal as men of achieving financial security, they typically have unique wants, needs and concerns that impact the way they build their financial strategy," says Susan Sweetser, second vice president, Specialized Markets, Massachusetts Mutual Life Insurance Company (MassMutual). "This new section has been designed with content, tools and online seminars that can help women prepare for life's events."

Friday, June 30, 2006

10 Financial Urban Legends

Category: Financial Planning

Every once in a while, I get a call from someone saying they had heard "income tax is illegal" or "revocable trusts avoid taxes" or other such things that are just untrue. Here is a list of "10 Financial Urban Legends" from - things that just aren't true. A basic rule of tax law is that "fat pigs get don't be a pig", which is another way of saying the old adage that if something looks to good to be true, it probably is. So if you get an email about one of these, hit "delete" please, not "forward".

Myth No. 1: You can float a check longer if you write in red ink.
Myth No. 2: You don't have to pay income tax -- it's illegal.
Myth No. 3: I'm under 18, so I can't be held accountable for a debt.
Myth No. 4: My hotel key card has my credit-card information.
Myth No. 5: Boycotting a few gasoline brands brings gas prices down.
Myth No. 6: It's better if you don't sign the back of your credit card.
Myth No. 7: You can make a pile of dough by helping a foreigner solve his money problems
Myth No. 8: You can now opt out of having credit bureaus give your information to anyone who asks.
Myth No. 9: You can buy your way out of points on a speeding ticket.
Myth No. 10: Hotel Bibles often have $100 bills tucked into them.

Thursday, June 15, 2006

Medicare Rejects your Claim? Appeal, and Chances are You Win!

Category: Elder Law, Financial Planning

What do you do when Medicare rejects your claim for benefits? Why appeal of course.

According to the Medicare Rights Center, a national nonprofit organization "Appealing is easy and most people win so it is worth your while to challenge a Medicare denial,". The denial of coverage may be due, for example, to a simple coding error in your doctor's office.

People have a strong chance of winning their Medicare appeal. According to Center, 80 percent of Medicare Part A appeals and 92 percent of Part B appeals turn out in favor of the person appealing.

The Medicare Rights Center offers the following tips to maximize your success when appealing your denial:
  • Write "Please Review" on the bottom of your Medicare Summary Notice (MSN), sign the back and send the original to the address listed on your MSN by certified mail or with delivery confirmation.
  • Include a letter explaining why the claim should be covered.
  • When possible, get a letter of support from your doctor or other health care provider explaining why the service was "medically necessary."
  • Save photocopies and records of all communications, whether written or oral, with Medicare concerning your denial.
  • Keep in mind that you only have up to 60 to 120 days from the date on the MSN (depending if you are in a private Medicare plan, like an HMO or a PPO) to submit an appeal.
Click here for more information from the official Medicare website, including appeals forms.

Thursday, April 06, 2006

Special Needs Children - 10 Questions to Ask About Their Financial Future

Category: Estate Planning, Financial Planning

Press Release courtesy of Yahoo Finance:

MassMutual, Easter Seals help families create a more secure future for their child with special needs
If you're a parent raising a child with a disability, your child's health and comfort typically come first and foremost. But it's just as important to prepare for your child's financial future to help ensure a safe, secure and independent life ahead.

With more than 3.6 million U.S. children between the ages of 5 to 15 with a disability(1), financial experts say it is crucial for many parents to recognize they can take a few simple steps now to help ensure security for their child in later years. Massachusetts Mutual Life Insurance Company (MassMutual) and Easter Seals today issued a set of guidelines -- 10 questions and answers people should consider to help lay the groundwork for a secure financial future for their child with special needs.

MassMutual and Easter Seals urge parents of children with special needs to ask themselves the following questions:

1. Am I getting the right advice? Since laws affecting people with disabilities change frequently and require specific expertise, it's helpful to seek the expertise of a financial representative and an attorney who specialize in estate planning for families with special needs children. Consider asking other parents for references or check with local advocacy groups, such as the local chapter of Easter Seals, before embarking on your selection.

2. How should I develop an estate plan? Developing a detailed estateplan that best its your family's situation is essential to ensureyour child's long-term needs are met after you have passed away. Your estate plan -- which can include wills, trusts, durable powers of attorney, health care proxies, and other documents -- will outline how you would like your financial affairs handled and identify a guardian or guardians who will care for your child after you die. Consult an attorney and financial services professional who have a thorough understanding of your state's disability laws to develop a comprehensive plan for the future.

3. What kind of government benefits is my family eligible for? Be sure you're aware of any federal programs that may assist your family. Your child may be eligible for benefits under Medicaid, Medicare, the State Children's Health Insurance Program
(SCHIP), or the Children with Special Health Care Needs (CSHCN) provision of the Social Security Act. Visit the Web sites for these entities to check eligibility requirements.

4. Am I making the right choices with my health plan? Raising a child with a disability means you may incur high health care costs, so it's important to understand and maximize benefits under your health insurance coverage. Know which services and procedures are covered, which are not covered and how to appeal if a claim is denied. If you and your spouse both work, compare health plans and select the one that's best for your child.

5. Have I communicated my life care plan to close family members and friends? While the generosity of friends and family members is welcomed, a well-meaning friend or relative may inadvertently disqualify your child for benefits if he or she gives a gift or bequest that exceeds state limits. Once your estate plan is complete,
notify close friends and relatives of your life care plan. If your friends or relatives want to include your child in their wills, your attorney can assist.

6. What are the financial needs of my child's guardians? When you name a guardian for your child, ask yourself: Would the guardian need additional income to care for your child if you died? Would special funding be required for home renovations, specially equipped vehicles or in-home health aides? Should you plan for childcare services if, for example, your guardian worked full-time? If the answer to any of these questions is "yes," discuss these needs with your financial representative or attorney.

7. If I die unexpectedly, how will my child's guardian know what to do? A letter of intent, written by you, would provide detailed information about your child and instructions to assist those who will care for your child upon your death. Information typically includes emergency contacts, medical history, preferred living
arrangements, education or work arrangements, recreational preferences and behavioral challenges.

8. When should I apply for guardianship as my child becomes older? Many parents assume they will retain guardianship of their child, regardless of age. However, once your child reaches age of majority (typically at age 18 or 21, depending in which state you live), you must file for legal guardianship. In many cases, the guardianship process is merely a formality. But it's important to remember that guardianship is a court appointed procedure.

9. Where do I want my child to live in the future? When your child reaches adulthood, he or she will have the option of living in an apartment, house, condo, or an assisted-living environment. Whatever option is chosen, it's important to begin thinking about this when your child is still young, as early as 10 or 11. Waiting times for placements in assisted living facilities can be as long as 10 years for the best facilities. If your child wants to live independently, he or she will need the financial resources and money management skills to do so.

10. What other long-term issues do I need to consider? While housing is a primary long-term issue, there are a number of other matters that must be addressed, including: education, work opportunities, recreational programs, lifestyle, daily transportation, medical costs and custodial care. Projections for each of these factors should be accounted for when determining your child's financial needs in your child's life care plan.

For more information, visit
to order three free financial guides:

* Making Plans, a financial guide for people with Down syndrome and their families.
* 2006 Resource
Guide, the source of information published by MassMutual for people with disabilities and other special needs.
* With Open Arms, a financial guide for families with disabilities.

(1) U.S. Census Bureau, 2003 American Community Survey Summary Tables.

Monday, March 13, 2006

Are you Factoring Medical Costs into your Retirement Needs Goals?

Category: Elder Law, Financial Planning

From, "Retired Couples Will Need $200,000 for Basic Medical Costs"

Couples retiring at age 65 who lack employer-sponsored health coverage will need
an average of $200,000 to cover basic medical costs during retirement, according
to a new annual estimate by Fidelity Investments.

Fidelity has found that most people don't take health care into account when planning for retirement, even though it represents the largest single expense for most people in retirement. The 2006 estimates are a 5.3 percent increase from $190,000 in 2005, according to Fidelity. The brokerage's estimate for health-care costs for retired couples has jumped by $40,000 since it began tracking such expenses in 2002.

The estimate assumes that a couple 65 or older relies heavily on Medicare. The estimate includes expenses associated with Medicare Part B and D premiums $64,000), Medicare co-payments, coinsurance, deductibles and excluded
benefits ($72,000), and prescription drug out-of-pocket costs ($64,000).
Fidelity's estimate does not include other health expenses, such as
over-the-counter medications, most dental services and long-term care.

Meanwhile, Fidelity predicts that the number of companies offering
health benefits to retirees will fall sharply in coming years.

care costs have the potential to significantly erode an individual's retirement
savings," said Brad Kilmer, a vice president at Fidelity who oversaw the study.
"This is the part of retirement people frequently forget."

For a
MarketWatch article on the study that offers tips on how to reduce the cost of
health care in retirement, click here.

For a Los Angeles Times article
on the Fidelity study, click here.

Tuesday, February 07, 2006

Sounds too Good to be True? Financial Scams Targeting Seniors on the Rise

Category: Elder Law, Estate Planning, Financial Planning

An article on an unfortunate trend from - Financial scams expected to boom as boomers age addressing the issue of aggressive marketing of estate and financial planning seminar to seniors, where the products offered through the seminars don't meet, or are inappropriate for the senior's needs.

"While people 60 and older make up 15% of the U.S. population, they account for about 30% of fraud victims, estimates Consumer Action, a consumer-advocacy group.

As this gargantuan generation of boomers starts to retire, 'You're going to see more of these seminars and more of these sales pitches,' says James Nelson, assistant secretary of state in Mississippi. 'Wherever retirees are congregated, you're going to have these people preying on them.'"

There is real money controlled by baby-boomers, which unfortunately can make them targets for unscrupulous marketers of products. The article states that "[b]oomers have more than $8.5 trillion in investable assets. Over the next 40 years, they stand to inherit at least $7 trillion from their parents, research firm Cerulli Associates estimates."

This does not mean that all seminars geared to estate planning and financial planning are scams - just the opposite is more likely true. Seminars are a wonderful opportunity for attorneys and financial planners to educate the public about complex areas of the law that may effect them, as well as investment opportunities to reduce those risks. But, you should exercise some caution and common sense in following up from these seminars. Some things to keep in mind.

  • Only a licensed attorney in your state can prepare a Will, or should prepare any estate planning document, including a trust. You can contact your state or local bar association to see if the attorney is in good standing and if any complaints have been successfully filed against him or her.
  • You and your goals and needs should be an attorneys first concern - not the goals of your children, the financial planner, or the attorney. If you don't feel that your goals and needs are the first priority, see some-one else.
  • There are no magical solutions to estate and tax planning - there are tried and true techniques that an experienced estate planner can apply to your situation. If someone claims to have the secrets of a good estate plan, you need to know that there are no secrets.
  • There is no one magic financial product that solves all woes - as with estate planning, the right product for you must be tailored to your specific asset mix, income, needs and goals. An experienced financial planner will not recommend a product until he or she has analyzed your needs. And be sure to ask for (1) the charges for the product, (2) the agent's commission, and (3) any penalties that might exist in liquidating the product.

If you do think you have been a victim of fraud, there is a sidebar in the article talking about your options.

Wednesday, December 28, 2005

Tis the Time For New Year's Resolutions

Category: Elder Law, Estate Planning, Business Law and Planning, Tax Law and Planning, Financial Planning

Ah, the presents have been opened, you have been eating cookies and leftovers for days, and the commute is remarkably smooth this week - it must be the week before New Years. With each New Year comes New Year's Resolutions - those things you are absolutely and positively going to do in 2006 (or meant to do in 2005 or 2004 - lets be honest). Some thoughts to consider for 2006's list:

  • Don't have a Will, Power of Attorney or Living Will? Get one. Search through prior posts here for some consequences of failing to plan. See the article Make a will: Your #1 family New Year's resolution for more reasons to plan.
  • Have a Will? Haven't looked at it in 5 years or more? Get it out, dust it off, and read it. Does it say what want? Do you understand it? If not, call an attorney and have it reviewed.
  • Own a business? Get a business succession plan in place. Without a business succession plan, your family is likely to receive pennies on the dollar for the value of your business at your death.
  • Got insurance? Review your insurance - health, disability, life, long-term care, property. Are you really covered for your needs? Do you understand your coverage? Have you had your insurance reviewed by a professional in the past 3 years or so? Insurance can be a large annual outlay - you should be sure you are getting the best return for your investment. Most professional insurance agents will give you a free review.
  • Planning to retire? How are you financing your plan? A meeting with a financial planner may give you ideas as to how good of a job you are doing getting to where you want to be. Again, the meeting is likely to be free.
  • Kids going to college? Do you have a plan beyond hoping that there will be enough equity in your house in interest rates stay low? Look into a 529 Plan (try for more information) . See what a financial planner has to say.
  • Have an accountant? Can him or her and make a meeting to discuss your tax profile and ideas to reduce taxes - note that dropping a bag off at the office on April 8 is not a meeting. Your accountant is an expert,particularly with income taxes, those most likely to effect you. Why not take the time to reduce the governments share of your earnings? Call TODAY for last minute year end planning items (see Happy new year! Now, call your accountant )
  • Don't have an accountant? Consider whether a tax professional could help you pay less. You still have time before December 31 to change your tax profile for 2005. (See 5 Year-End Tax Tips and Year-End Tax Tips from ABC News)
  • Have seniors in your family? Consider how they are doing and ways you can help. Would Medicare D save them any money? Go the AARP website for tools to find out the answers. Could they use help with driving, cooking, housekeeping? Consider a service (and speak to your accountant about the tax deductions). Are they safe and secure in their homes? If not, consider alternates within the family and in the community.

None of these thoughts are sexy or exciting, but they do fall under the heading of things a responsible adult should be doing, and items high on this years New Years Resolutions (otherwise known as The Great To Do List).

Wednesday, November 02, 2005

Use and Abuse of Annuities for Elderly Clients

Category: Elder Law, Financial Planning

From, a thoughtful article on possible abuses of the sale of annuities to uninformed elderly clients. While and annuity can be an excellent investment option, like all investment options, there are pros and cons to be considered. Some of the inherent limitations in liquidating an annuity make them a bad investment for seniors. Alternatively, these same limitations can make annuities a central part of Medicaid planning, as an annuity may under certain circumstances be deemed an "unavailable asset".

An excerpt:

"The advantages of an annuity are supposed to be that

1. You will get payments for life so you don't outlive your money,
2. Your beneficiaries will get at least the principle invested when you pass on,
3. That they are tax-deferred, meaning taxes are paid only on the money you withdraw.

The problem with annuities and selling them to elderly, are that they are a long-term
investments when it comes to profits, and the charges can be outrageous. If an elderly person decides he or she needs the money they invested in an annuity they can face many complicated charges. Those charges are calculated using different types of rules and include,

1. Surrender charges,
2. 10% federal tax penalty (if the person is not 59 1/2),
3. Underlying mutual fund expenses (of the funds in the annuity),
4. Mortality and expense risk charges, and
5. Fees and charges for other features."

Tuesday, October 25, 2005

Medicaid Reform - Contact your Congressman

From the National Academy of Elder Law Attorneys (

"October 24, 2005

Dear NAELA Member:

The Chairman's 'mark' that will be considered by the Senate Finance Committee on Tuesday does not include the two punitive Medicaid proposals currently being considered by Congress: changing the Medicaid penalty period start date to the date of application and increasing the lookback period from three to five years.

Your efforts are still needed!!
� Thank your Senators on the Finance Committee for their support of the elderly and individuals with disabilities across the nation.

� Contact the Members of the House Energy and Commerce Committee and ask them to oppose these two punitive proposals. Key states with more than one member on this committee include: California, Florida, Illinois Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas.

To call Members of Congress dial the Senior Flash Hotline at 1-800-998-0180 to communicate our concern and to urge them to oppose cuts to the Medicaid budget and to oppose changes to the nursing home transfer of assets rules.

To write your Representative or Senator, click here

Since Congress is in session, fax or e-mail your letters to their Capitol Hill offices as soon as possible. Encourage your clients to call too!

Thank you for helping NAELA with this critical issue.


Lawrence E. Davidow, CELA
NAELA President"

Tuesday, October 04, 2005

Qualified Retirement Plans for Solo Business Owners - The Solo Defined-Benefit Plan

Category: Business Law and Planning, Financial Planning

From Tax Matters: The Solo Defined-Benefit Plan: "If you're the sole proprietor of a small business, you probably know that you've got some terrific options to choose from when it comes to setting up a tax-advantaged retirement account. But here's one you might not have thought of: a solo defined-benefit plan. These traditional pension plans have been around for years, but get relatively little attention compared with other retirement-savings plans. This shouldn't be the case, however, since solo DB plans allow people to contribute perhaps $100,000 a year.

The generous contribution limits make these plans worth serious consideration by people who are late to the retirement savings game and who are prepared to set aside serious dollars to make up for lost time. Sound familiar? Here's what you need to know. "

The article goes on to describe various retirement planning options for small business owners.

Monday, September 26, 2005

Annual Credit Report

Category: Financial Planning

Under Federal Law, you are entitled to one free credit report every year. In the age of identity theft, it is critical that you are aware of the extent of your credit and history of use. You can download your free credit report at , the website established by the three national credit agencies (Equifax, Experian, and Trans Union) to satisfy this law.

Thursday, September 15, 2005

5 (Early) Year-End Estate and Financial Planning Tips

Category: Estate Planning, Estate and Inheritance Tax, Financial Planning,
Some tips to think about now to put your estate plan and finances in a better position come 2006:

1. If over 701/2, convert from traditional IRA to Roth IRA
2. Name a charity as beneficiary of an IRA
3. Take more than Required Minimum Distribution from IRA and buy life insurance
4. Give gifts/fund 529 plans
5. Review your assets and domicile

Robert Powell: Top 5 (early) year-end estate-planning tips - General News - Personal Finance describes each of these tips in detail.

Monday, September 12, 2005

Grandma's Got A Boyfriend, Now What?

Category: Estate Planning, Financial Planning

Grandma's Got A Boyfriend, Now What? - takes a look at some financial and estate planning issues facing older adults who are combining households but have grown families. A person in this situation needs to consider the competing desires of providing for their new spouse, or their children or other descendents. These can be incredibly difficult decisions to make, from who is going to get what to who will be the fiduciary to make medical or financial decisions, or to act as Executor or Trustee. Being that these are situations where there are two factions (new spouse and existing children) that have economically opposed interests, these are also situations ripe for litigation. Furthermore, the cost of long term care becomes an issue as each spouse is responsible under the law of most states to provide care for the other spouse, a potentially financially draining issue.

While the issues facing older adults as they combine households are not easy ones, they can be minimized with some honest conversations and pro-active planning. Some questions to consider:

* Who is being named on the Living Will/Health Care Proxy to make medical decisions? Consider the Schiavo case where there were two warring factions over health care decisions.

* Who is being named on the Power of Attorney? You need to consider that you will have ongoing joint expenses with your spouse, but that your children will be concerned if they cannot participate in your finances if you are incapacitated. You may want to consider naming your spouse and child together.

* Who is a joint owner of assets? Joint assets pass to the surviving owner on death, regardless of what the Will says. So, if you have a joint account with a child, that child receives those assets, not your spouse. Similarly, if you own your house jointly with your spouse, it passes to your spouse on death, regardless of who paid for it.

* Who receives your assets at death? You will need to balance the welfare of the surviving spouse versus that of your children. Also, there may be tax considerations in that assets passing to a trust for your spouse may be able to defer the eventual taxation of those assets. Some people get paralyzed by this decisions between two camps of loved ones - you need to remember that if you don't make a will, the state will divide your assets as it sees fit.

* How will long-term health care costs be paid? In most states, a person is responsible for the health care and support costs of a spouse. This can be a considerable issue for seniors, as long-term care costs can bankrupt a person. Also, a wealthier spouse's assets would be at risk due to the health care of a less wealthy spouse. Once answer for this is to purchase and maintain long-term care insurance. Where one spouse is wealthier then the other, it might even make sense for that spouse to foot the bill.

Friday, September 09, 2005

Savings Bonds (Part 2) - What Happens when the Bond Owner Dies?

Category: Estate and Inheritance Tax, Tax Law and Planning, Probate and Estate Administration, Financial Planning

Savings bonds are a ubiquitous asset. However, dealing with savings bonds as part of an estate can in many ways be more complicated then dealing with other investment assets, such as mutual funds, stocks and bonds, where a broker can coordinate transfer and liquidation efforts. In a prior post Saving Bonds (Part 1) - Learning More about those Bonds - I discussed resources to learn more about the value of any bonds. Here, we are looking at what to do with the bonds as part of an estate, or if you inherit bonds as a result of a person's death.

A few general rules, regardless of what series of bonds (E/EE, H/HH or I):

  • Single Ownership: If the savings bonds are owned by one person, and that person dies, the bonds are now owned by the person's estate. The executor, personal representative, or administrator, as the case may be, is the only person authorized to deal with the bonds after a person's death. This means that a probate proceeding will need to be opened so that a person is named by the court to liquidate or transfer title to the bonds.

  • Joint Ownership: If the bonds have co-owners, and one owner dies, the bond now belongs entirely to the co-owner. The co-owner may now liquidate the bond, change title to his or her own name, or change title to the surviving owner and another person of the owner's choosing.

  • Named Beneficiary: If the bond owner named a beneficiary to the bonds on the bonds (not through her will) then upon the bond owner's death, the bond ownership is automatically transferred to the beneficiary. The named beneficiary may now liquidate the bond, change title to his or her own name, or change title to the named beneficiary and another person of the beneficiary's choosing.

  • Estate Tax Consequences: Where the bonds are owned by one person (or by one person who names a beneficiary), 100% of the value of the bonds as of date of death is includible in a person's taxable estate. Where the bonds are owned by more then one person, there is a presumption that 100% of the value of the bonds is includible in the taxable estate of the first person to die. This presumption can be rebutted if the surviving co-owner actually contributed money to buy the bonds. The more likely scenario is that grandma bought a bond naming grandchild as co-owner with grandma's money. In this situation, 100% of the value of the bond on the date of grandma's death is included in her estate, even though she had a co-owner.

  • Income Tax Consequences: Interest income on bonds is generally reported only when the bonds are cashed, disposed of (note: a change of ownership is considered a "disposition" of the bonds and interest accrued to that date must be reported at that time), or reach final maturity. Unlike other types of investments, there is no "step up in basis" for savings bonds, and the accrued, but as yet untaxed income, must be reported as some point by the estate or the beneficiaries.

    If a person owned bonds in their own name with no beneficiary, reporting the interest on those bonds for federal income tax purposes is the responsibility of either (a) the estate if the executor, personal representative, or administrator as the case may be, redeems the bonds; or (b) the beneficiaries of the estate if the bonds are transferred to them as new owners, in the year in which they redeem bonds or the bonds reach final maturity.

    Where there is a co-owner or beneficiary named, the co-owner or beneficiary is the new owner and as such is required to include on his or her return interest earned on the bonds for the year the bonds are redeemed or disposed of (including re-registration by substituting a new owner for the original living owner) or the bonds reach final maturity, whichever occurs first. Alternatively, even when there is a surviving co-owner or beneficiary, the person filing the decedent's final 1040 has the option of reporting on that return all interest earned on the bonds to the date of death. This option might be used where a person on a low income tax bracket has died, leaving the bonds to a person in a higher tax bracket.

The Bureau of Public Debt, on the Treasury Direct website, has detailed articles specifically outlining how savings bonds are to be treated in the event of the death of a bond holder.

Friday, August 26, 2005

Savings Bonds (Part 1) - Learning More about those Bonds

Category: Elder Law, Estate Planning, Tax Law and Planning, Probate and Estate Administration, Financial Planning

Many people have invested in saving bonds at one time or another, or another has done so for them. For the most part, they sit in a safe deposit box until cash is needed (or you remember that you have them). However, there may be a need to find out more about the bonds or liquidate them as part of estate planning, estate administration, or elder law, or just sound financial planning for yourself.

Savings bonds are investment in the US government. There are various types of bonds, that earn interest in different fashions, and have unique tax consequences. Luckily, there are some wonderful resources on the web to cut through all of this information.

The US Government provides a very informative website at that goes through the purchase and redemption of various government investments (T-Bills, T-Notes, T-Bonds, I Bonds, EE Bonds, HH Bonds) and explains the differences between the various investments.

There is a very useful toolbox a the website for determining the current and future value of your investment:

Have Your Treasury Securities Stopped Earning Interest?

Savings Bond Wizard

Savings Bond Calculator

Growth Calculator

Savings Planner

Tax Advantages Calculator

Another excellent site is This is a commercial site oriented to financial planning. It does have excellent step-by-step guides on bond redemption, including the practicalities of redemption and guidelines to the tax consequences.

Thursday, August 18, 2005

So You Want to Be a Landlord - Tax Benefits

Category: Tax Law and Planning, Financial Planning

I have discussed here before some of the risks with owning rental real estate in your own name ("Rental Real Estate - What are the Risks?") - it should be titled to an LLC or some other entity to create a barrier between your personal assets and the property. As a general rule, if rental real estate is owned by an LLC, the LLC is the only entity that is liable in the event of a lawsuit, and only to the extent of its assets.

The article - Tax Matters: So You Want to Be a Landlord discusses the income tax benefits of owning rental real estate (as opposed to purchasing real estate to fix up and flip).

"But the real kicker is that you can depreciate the cost of residential buildings over 27.5 years, even while they are (you hope) increasing in value. Say your rental property (not including the land) cost $100,000. The annual depreciation deduction is $3,636, which means you can have that much in positive cash flow without owing any income taxes. That's a pretty good deal, especially after you own several properties. Commercial buildings must be depreciated over a much longer 39 years, but the write-offs will still shelter some cash flow from taxes. "

Since an LLC is a pass-through entity for tax purposes, if the rental real estate is owned in an LLC, the tax benefits will flow through to your personal return.

Tuesday, August 09, 2005

Midyear Financial and Tax Planning Checkup

Category: Tax Law and Planning, Financial Planning

Portsmouth Herald Financially Speaking by Holly Hunter: Mark calendar for midyear financial checkup - If your spring cleaning resulting in a pile of papers to go through, or you resolved to make some financial housekeeping changes this year, some food for thought.

Also, some views from James Jimenez, CPA, a partber at Fass & Associates, certified public accountants located in Parsippany, New Jersey as to mid-year tax tuneups:


It’s summertime! Probably the last thing on your mind is tax planning. The problem is that if you wait until December to think about your 2005 taxes, there won’t be enough time for any tax strategy to take effect. But if you take the time to plan now, you still have six months for your strategy to work this year. So set aside some time for tax planning right now. Begin by pulling out your 2004 tax return.

* Review your income and deductions for last year. Did you lose any credits or deductions because your income was above a certain threshold amount? If so, find out what you can do to keep this year’s income below the threshold in order to save the tax break.

* Evaluate your investment portfolio. By now you should have an idea whether you’ll be selling any investments this year. Taking losses by pruning your portfolio can be an effective way to manage income.

* Build a retirement fund and cut taxes too. Take advantage of the new higher contributions allowed for IRAs, SIMPLEs, SEPs, and 401(k) plans. If you will be 50 or older by December 31, take advantage of the additional “catch up” contributions you can make to your retirement plan.

* Check out education tax breaks. If you or your children are in college, review the education tax breaks for 2005. These include the deduction for higher education expenses, a deduction for student loan interest, and contributions to Section 529 plans or education savings accounts.

* Don’t overpay your taxes. Finally, if you received a large refund on last year’s taxes, consider reducing your withholding for this year. To adjust your withholding, file a new Form W-4 with your employer."

Monday, August 08, 2005

Get what you want from a Financial Planner

Category: Financial Planning

Marshall Loeb's Daily Money Tip: Getting what you want from a financial planner - General News - Personal Finance A quick guide to what you can expect a financial planner to do for you.