Reporting Requirements for Charitable Gifts

by Administrator 26. January 2017 13:45

 The federal government encourages your generosity by allowing you to deduct your gifts to charities on your income tax return if you itemize. However, you must follow the IRS’s reporting and substantiation rules to assure your charitable deduction. I hope that this letter highlighting the IRS’s requirements will be helpful to you when preparing your federal income tax return for the year 2016 (due by April 18, 2017).

The rules are numerous—and overlapping. This letter tells about: (1) reporting requirements for non-cash charitable contributions, (2) rules for hard-to-value property and (3) receipts you need to substantiate cash and non-cash contributions.

For some non-cash charitable gifts, Form 8283 (Non-cash Charitable Contributions) must be filed

That form and its instructions are enclosed. The form is the latest available today. Before filing your income tax return, I suggest that you check the IRS website, irs.gov, for the latest forms and instructions for any last-minute changes.

If your non-cash gifts for the year total more than $500, you’ll have to include Form 8283 with your income tax return. Section A—the simpler part of the form—is used to report gifts valued at $5,000 or under. Section A can be completed by you or your tax return preparer.

When the property’s value is more than $5,000 ($10,000 for closely held stock), you’ll generally need to have it appraised 

The appraiser’s findings are reported in Section B of Form 8283. Those rules also apply if you give “similar items of property” with a total value above $5,000—even if you gave the items to different charities. The IRS says that “similar items of property” are items of the same generic type, including stamps, coins, lithographs, paintings, books, non-publicly traded stock, land and buildings. So, for example, if you have six paintings worth $1,000 each and contribute each one to six different charities, the appraisal rules would apply.

Special rule for publicly traded securities

You don’t need an appraisal or Section B of Form 8283 for gifts of publicly traded securities, even if their total value exceeds $5,000. But you must report those gifts (when the value is more than $500) by completing Section A of Form 8283 and attaching it to your return.

Closely held stock

For gifts of non-publicly traded stock, an appraisal is not required as long as the value is not over $10,000, but part of Section B of Form 8283 must be completed if the value is over $5,000. And if the gift is valued at over $10,000, then both an appraisal and Section B of Form 8283 are required.

If you need an appraisal, the gift must be made within 60 days after the date of the appraisal. The property can be appraised after the date of the gift (the appraisal to state the property’s value on the date of the gift). You must receive the appraisal by the due date (including extensions) of the return on which the deduction is first claimed.

Section B of Form 8283. It must be signed by the appraiser and by the charity that received your gift. It’s essential to complete Section B of Form 8283 and to attach that form to your tax return.

Qualified appraisal.

A qualified appraisal is an appraisal document that is prepared by a qualified appraiser in accordance with generally accepted appraisal standards and otherwise complies with the qualified appraisal requirements.

Qualified appraiser

The requirements to be a “qualified appraiser” are stringent. The definition is critically important: no qualified appraiser, no deduction for property gifts valued over $5,000 (over $10,000 for closely held stock).

Under the current definition, a qualified appraiser is an individual who (1) has earned an appraisal designation from a recognized professional appraiser organization or has otherwise met minimum education and experience requirements (established by the IRS in regulations); (2) regularly performs appraisals for which he or she receives compensation; and (3) can demonstrate verifiable education and experience in valuing the type of property for which the appraisal is being performed. An individual has education and experience in valuing the relevant type of property, as of the date the individual signs the appraisal, if the individual has: successfully completed (for example, received a passing grade on a final examination) professional or college-level coursework in valuing the relevant type of property, and has two or more years of experience in valuing the relevant type of property; or earned a recognized appraisal designation for the relevant type of property.

Ifs, ands, buts. A qualified appraiser may not be related to—or regularly employed by—you or the charitable donee and may not be a party to the transaction by which you acquired the property being appraised, unless the property being appraised is donated within two months of the date of acquisition and its appraised value does not exceed the purchase price.

Appraisal fee.

Generally, no part of the appraisal fee can be based on a percentage of the property’s appraised value. An appraisal fee isn’t a charitable gift. If you itemize, the appraisal fee is deductible on your income tax return as a miscellaneous deduction. But it’s only deductible if it—together with other miscellaneous deductions—exceeds a 2 percent of adjusted gross income floor.

Special rule for art gifts

If you donate artworks with a total value of $20,000 or more, your return has to include a copy of the signed appraisal itself, not just Section B of Form 8283. If any single artwork is worth $20,000 or more, IRS may ask you for an 8×10 color photo (or a 4×5 color slide) of the donated property. You don’t have to send the photo with your tax return; just have one ready, if it is requested.

Special rule for very large gifts

For gifts valued at over $500,000, the donor must attach the qualified appraisal—as well as Section B of Form 8283—to their tax return. For purposes of the dollar thresholds, property and all similar items of property donated to one or more charitable donees are treated as one property. An appraisal need not be attached for contributions of cash, inventory, publicly traded stock, or intellectual property. As noted above, a copy of the appraisal must be attached to the tax return when an artwork is worth $20,000 or more.

Gifts of clothing or household items

No deduction is allowed for a contribution of clothing or a household item unless the item is in good condition or better at the time of the contribution and the donor meets the substantiation requirements. A contribution of a single item of clothing or a household item that is not in good condition or better, for which a deduction of more than $500 is claimed, requires that the donor submit with the return on which the deduction is claimed a qualified appraisal prepared by a qualified appraiser and a completed Form 8283 (Section B).

The term “household items” includes furniture, furnishings, electronics, appliances, linens and other similar items. Food, paintings, antiques and other objects of art, jewelry, gems and collections are not household items.

Used car donations

The deduction for charitable contributions of autos, other motor vehicles, boats and airplanes exceeding $500 depends on the use of the vehicle by the charity. A deduction is not allowed unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment by the charity.

If the charity sells the vehicle without any significant intervening use or material improvement of the vehicle, the deduction is the smaller of the gross proceeds from the sale or the vehicle’s fair market value on the date of the contribution. The acknowledgment, which is on IRS Form 1098-C (or a statement containing the same information), must contain the name and taxpayer identification number of the donor and the vehicle identification (or similar) number. The acknowledgment must provide a certification that the vehicle was sold in an arm’s length transaction between unrelated parties and state the gross proceeds from the sale.

If the charity makes a significant intervening use or makes a material improvement to the vehicle, the deduction is the fair market value at the time of the contribution. The acknowledgment must contain a certification of the use or material improvement of the vehicle and the duration of that use, and a certification that the vehicle will not be transferred in exchange for money, other property or services before completion of that use or improvement.

If the charity gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of a charity’s charitable purpose of relieving the poor and distressed or the underprivileged in need of a means of transportation, the deduction is the fair market value at the time of the contribution. You must obtain an acknowledgment from the charity and substantiate the fair market value.

Contemporaneous written acknowledgment

The charity must provide a written acknowledgment within 30 days of sale of a vehicle that is not significantly improved or materially used by the donee, or, in all other cases, within 30 days of the contribution.

Penalties: A charity will be penalized for knowingly furnishing a false or fraudulent acknowledgment, or knowingly failing to furnish a timely acknowledgment showing the required information.

You might want an appraisal (even if your gift doesn’t require one) in case you have to convince the IRS of the property’s worth. And Form 8283 asks how you valued your gift.

Generally, if a charity receives a gift that is subject to the appraisal rules (and it signed Form 8283), the charity must report on Form 8282 to both the IRS and the donor if it disposes of the gift within three years. However, the charity needn’t report its disposal of an item that you certify is worth $500 or less. Form 8283 has a section for that purpose (Section B, Part II).

Bank record or written communication required. No income tax charitable deduction is allowed for a gift in the form of cash, check or other monetary gift unless the donor substantiates the deduction with a bank record or a written communication from the donee showing the donee’s name, the contribution date and the gift amount.

Monetary gift 

Includes a transfer of a gift card redeemable for cash and a payment made by credit card, electronic fund transfer, an online payment service, text message or payroll deduction.

Bank record includes a statement from a financial institution, an electronic fund transfer receipt, a canceled check, a scanned image of both sides of a canceled check obtained from a bank website, or a credit card statement.

Written communication includes electronic mail correspondence.

Substantiation of charitable contributions of less than $250. An income tax charitable deduction isn’t allowed for non-cash charitable contributions of less than $250 unless the donor maintains for each contribution a receipt from the donee showing: (1) the name and address of the donee; (2) the date of the contribution; (3) a description of the property in sufficient detail under the circumstances (taking into account the value of the property) for a person who is not generally familiar with the type of property to ascertain that the described property is the contributed property; and (4) for securities, the name of the issuer, the type of security and whether the securities are publicly traded securities.

Substantiation requirements for non-cash contributions of $250 or more. To deduct any gift of $250 or more, you must have a written receipt from the charity describing (but not valuing) the gift. If any goods or services were given to you in exchange for your gift, the receipt must describe them and contain a good faith estimate of their value. If the charity provided no goods or services in consideration of your gift, the written receipt must so state. The receipt need not contain your Social Security number. Generally, separate payments are considered separate contributions for purposes of the $250-or-more threshold unless the payments are made on the same day.

Cash gifts. For cash gifts, regardless of the amount, record keeping requirements are satisfied only if the donor maintains as a record of the contribution a bank record or a written communication from the donee showing the name of the donee and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date. The record keeping requirements will not be satisfied by maintaining other written records. Donations of money include those made in cash, by check, electronic funds transfer, credit card, text message and payroll deduction.

Contributions made by payroll deduction. For a charitable contribution made by payroll deduction, a donor is treated as meeting the substantiation requirements if no later than the date for receipt of substantiation the donor obtains: (1) a pay stub, Form W-2, “Wage and Tax Statement,” or other employer-furnished document that sets forth the amount withheld during the taxable year for payment to a donee; and (2) a pledge card or other document prepared by or at the direction of the donee that shows the name of the donee.

Transfers to charitable remainder trusts. The above substantiation requirements don’t apply to a transfer of cash, check, or other monetary gift to a charitable remainder annuity trust or a charitable remainder unitrust. The requirements do apply, however, to a transfer to a pooled income fund. So it is necessary to get a timely receipt meeting the $250-or-more substantiation rules for a gift to a pooled income fund.

Transfers to gift annuities. When the gift portion of a gift annuity or a deferred payment gift annuity is $250 or more, a donor must have an acknowledgment from the charity stating whether any goods or services—in addition to the annuity—were provided to the donor. If no additional goods or services were provided, the acknowledgment must so state. The acknowledgment need not include a good faith estimate of the annuity’s value.

Charitable remainder gifts in personal residences and farms. Regulations don’t specifically deal with these gifts. However, to be safe, get a timely receipt meeting the $250-or-more substantiation rules.

Grantor charitable lead trusts for which an income tax charitable deduction is allowable. The regulations don’t specifically deal with these gifts. Charitable remainder trusts, as stated above, aren’t subject to the substantiation rules. Charitable lead trusts may also be exempt. Nevertheless get a timely receipt meeting the $250-or-more rules.

THE RECEIPT-IN-HAND RULE—THIS IS CRUCIAL: You must have the receipt in your possession before you file your income tax return. If you file your return after the due date (or after an extended due date), the receipt must nevertheless have been in your hand by the due date (plus any extensions).

If you made a gift of $250 or more to a religious organization and received in return solely an intangible religious benefit that generally isn’t “sold in commercial transactions outside the donative context” (e.g., admission to a religious ceremony), the receipt must say so, but need not describe or value the benefit. But this exception doesn’t apply, for example, to tuition for education leading to a recognized degree, travel services or consumer goods.

If a charity receives a gift of over $75 from you for which you received or were entitled to a benefit (other than solely an intangible religious benefit), the charity must, in connection with the solicitation or receipt of the gift, give you a written statement that: (1) informs you that the gift deduction is limited to the excess of any money (and the value of any property other than money) contributed by you over the value of the goods or services provided by the charity; and (2) provides you with a good faith estimate of the value of the goods or services.

However, both you and the charity may generally disregard token benefits you receive for a contribution. The IRS has ruled that a charitable gift is fully deductible if it is made in a fundraising campaign in which the charity informs its donors how much of their payment is a deductible contribution and: (1) the donor receives benefits having a fair market value of $106 or 2 percent of the payment, whichever is less; or (2) the donor gives the charity at least $53 and receives a low-cost or token item (e.g., a bookmark, mug or T-shirt). The item must bear the charity’s name or logo and cost the distributing charity—or the charity on whose behalf the item is distributed—no more than $10.60.

Further, donors needn’t reduce their deductions when they receive unsolicited free items that cost the charity—or the charity on whose behalf the item is distributed—no more than $10.60.

Those token benefit amounts are for 2016 charitable gifts. The dollar figures are adjusted annually for inflation.

Please call ((513) 731-6612) if you have any questions—and the earlier the better so that last-minute problems can be avoided.

 


As a reminder, this is not intended as legal or tax advice. So, check with your advisor on how the rules apply to you.

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Top 10 Reasons to Use a Trust in Your Estate Plan

by Administrator 28. March 2016 09:11

While trusts may seem necessary only for the wealthy, there are actually many benefits for creating them, even if you’re a member of the middle class.  Here are the top 10 reasons why you might consider using a trust in your estate plan:

1.       Wasteful spending.  Some experts estimate that heirs spend 80% of their inherited money in the first 18 months of receiving their inheritance.  Without a trust in place, your heirs will receive their inheritance outright.  A trust can protect your heirs from quickly depleting their inheritance by spacing out distributions over a certain number of years or for their lifetimes.

2.       Wrong heirs.  A trust can keep your estate assets in your blood line and not to your heir’s in-laws or your surviving spouse’s new partner. A trust can delay distributions so that your grandchildren inherit your estate after the death of your children instead of your children’s spouses.

3.       Worthless investments.  A trust can protect your loved ones from investing their inheritance in worthless investments that will quickly deplete their inheritance or provide little to no return.

4.       A trust can ensure that assets and IRA/pension plans are used to provide for the surviving spouse for life, rather than being liquidated and spent on a new partner.

5.       A trust can control how assets are allocated among children and step-children upon the death of the surviving spouse.  If you have a blended family and have children from a prior marriage, a trust can ensure that all of your children will be taken care of after your surviving spouse passes away.

6.       A trust can maximize federal estate tax savings, if necessary.

7.       A trust can control/hold assets in trust and limit distributions if heirs have alcohol/drug issues.  Failure to leave your estate in trust to these individuals means they might stop working or going to school and use their inheritance to fund their lifestyle of drugs and alcohol.

8.       A trust can create asset protection for heirs from their creditors.  Failure to leave your estate to your heirs in a trust means that family members own the assets outright and if they are subject to a lawsuit or the claims of their creditors, their inheritance may be lost to their creditors. Inherited IRAs also can get asset protection with a trust.

9.       A trust can avoid probate delays, costs, and burdens for your loved ones.  Probate is costly, stressful, and time-consuming.  The only people who benefit from probate are the attorneys.

10.   Lastly, a trust can keep your estate private from the public.  Simply implementing a Last Will and Testament will not keep your estate private. 

The purpose of establishing a trust is to ultimately help you determine and implement who gets what and when.  When you meet with your estate planning attorney, make your intentions known so that your trust can be tailored to your specific needs.  It becomes extremely important that your trust be properly drafted and funded, so that you can maximize all the benefits a trust has to offer.

Bill Hesch is an attorney, CPA, and PFS (Personal Financial Specialist) licensed in Ohio and Kentucky who helps clients with their financial and estate planning.  He also practices elder law, corporate law, Medicaid planning, tax law, and probate in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.

 

(Legal Disclaimer:  Bill Hesch submits this blog to provide general information about the firm and its services.  Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel.  While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog.  Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

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Tax Return Filing Due Date Changes-Effective 2017

by Administrator 18. January 2016 10:13

Clients and Friends:


Re: IRS changes in tax return filing due dates-To be effective in 2017

Effective for returns for tax years beginning after December 31, 2015, the due date of partnership tax returns is changed to March 15th for calendar-year partnerships and to the fifteenth day of the third month after the end of the tax year for partnerships with a fiscal tax year.

To avoid bunching the workload for filing and processing tax returns, the due date for C corporation tax returns is moved to April 15th for calendar-year C corporations and to the fifteenth day of the fourth month for fiscal-year C corporations.

Because tax returns for tax years beginning after December 31, 2015, will be filed in 2017 and thereafter, the new due dates will affect returns filed beginning in 2017.

The Due dates are not changed for tax returns for tax years ending 12/31/15 to be filed in 2016.

12/31/2015

-----------------------------------------Due Date

Trusts/Estates---Form 1041-----4/15/2016

C Corporations---Form 1120---3/15/2016

S Corporations---Form 1120S--3/15/2016

Partnerships---Form 1065-------4/15/2016

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Amended Substitute House Bill 5 (HB 5)

by Administrator 6. January 2016 15:29

Dear Client and Friends:

This year Municipal tax reform will take effect under the Amended Substitute House Bill 5. The Amended Substitute House Bill 5(HB 5) was signed into law on December 19, 2015. The new provisions take effect beginning on or after January 1, 2016.  HB 5 provides some relief to the overly burdensome process for businesses in determining what local tax to pay and withhold from their employees when they do business in multiple municipalities.

I have outlined just a few of the key provisions under the Municipal Tax Reform:

(1)   Mandatory 5 year Net Operating Loss carry forward. Requires all municipal corporations to allow businesses to deduct new net operating losses(NOL) and to allow a five-year carry forward of such losses first incurred in taxable years beginning on and after January 1, 2017, and permits pre-existing losses to continue to be carried forward if current ordinances allow. 

(2)   Withholding provisions:

a.     The “occasional entrant rule” will increase the number of days from 12 to 20 days whereby a traveling employee may enter a municipality before their employer is required to withhold on wages earned.

b.     Employers will generally be required to begin withholding on the 21st day the employee conducts business within a municipality. There are limitations to the new law. If an employer expects the employee will work within a municipality more than 20 days, the employer will be required to begin withholding on day 1.

c.     A “small employer” withholding exception will be available for businesses with gross receipts of less than $500,000. These businesses will not be subject to the 20 day rule and will only be required to withhold income tax for their principle work municipality (fixed location). Employee’s not subject to the local tax at the business’s fixed location can apply for a refund, but the employer still needs to withhold tax on their fixed location.

 

Listed above are just a few of the tax changes taking effect on January 1, 2016. If you would like a copy of the summary of the Amended Substitute House Bill 5, please give us call. The new law only gives taxpayers a short time to educate and prepare themselves for numerous changes in the municipal tax law. We will be working with our clients throughout the coming weeks to help them implement these changes. If you have any questions or have concerns about the effect of the changes on your business, please call us at (513) 731-6612.

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Elder Law Importance | Hesch CPA

by Administrator 9. April 2013 16:59

When many people retire, they assume that their finances are in order and that they will live out their retirement comfortably in their homes.  Unfortunately, as retirees age, the chances of suffering long-term illness or a serious injury tends to increase.  Sadly, and much too often, families are not prepared for the changes that can occur when an older family member suffers an injury or illness that may require that person to spend the rest of his or her days in an assisted living facility or nursing home.  An elder law, estate planning, and Medicaid planning attorney can help mitigate some of these problems and give families peace of mind by utilizing different tools and strategies to help families plan ahead for these situations.

Create protections early

Medicaid rules currently allow a five year "look back" period on asset transfers. This means that Medicaid case workers will look back five years from the time an applicant applies for Medicaid to see if any assets were improperly transferred.  Those who were given gifts improperly during that five year period may be forced to liquidate those gifts to pay for the applicant’s assisted living or nursing home care.  However, families who have taken the time to lay out an estate plan can avoid this problem. 

Understanding Medicaid Rules

In nearly all cases, a Medicaid applicant’s assets cannot exceed $2,000 to qualify for Medicaid assistance.  To avoid this requirement, an irrevocable trust can be set-up that will benefit the applicant while he or she is alive and still allow him or her to meet the Medicaid guidelines. Medicaid rules are very strict, so a trust designed to bypass Medicaid requirements must include clauses that will not violate the $2,000 dollar rule.  However, assets transferred to a trust within five years will be counted towards the applicant’s Medicaid eligibility.

There are no universal solutions for establishing an estate plan.  Everyone’s financial situation is different.  However, with the help of an elder law, estate planning, and Medicaid planning attorney who understands the rules, you can protect your assets and make sure that your final wishes are carried out.

Bill Hesch is a CPA, PFS (Personal Financial Specialist), and an attorney licensed in Ohio and Kentucky who helps clients with their financial planning.  He also practices elder law planning, estate planning, and Medicaid planning in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.  Please contact him to establish a plan for you or a loved one to avoid these heartbreaking problems.

 

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Small Business Succession Plan | Hesch CPA

by Administrator 9. April 2013 16:58

Over time, business owners spend a lot of blood, sweat, and tears crafting a good business plan, finding an appropriate corporate structure, and seeking the best possible financing options for their businesses. However, the one part of their businesses which is often overlooked is succession planning.  Nobody is going to be able to run a business forever, so all small business owners should have a plan in place for what will happen to their company upon their death, disability, incompetence, bankruptcy, or retirement.

Having a strong and enforceable succession plan is as necessary as any other part of starting or operating a business. In fact, when you hire a corporate attorney to help you with the formation or operation of your business, you should probably develop a succession plan. 

Here are a few things to keep in mind as you work on your succession plan:

  • Keep it flexible: If the plan can't be modified as you learn more about the strengths and weaknesses of potential successors, the plan may fail.
  • Make smart decisions: The decision of who will take over in your absence must make good business sense and should be done as dispassionately as possible to ensure the right person is ultimately in control.
  • Consider tax consequences: Keep in mind that there may be gift tax considerations to be made when writing a succession plan.
Review your will, trust, durable power of attorney, corporate minutes, and shareholder/member operating agreements with your attorney, CPA, and financial adviser.  Identify what your current documents provide and update them if any changes are necessary.  You may need a second opinion to evaluate your current succession plan.  After you meet with your attorney, CPA, and financial planner, contact Bill Hesch to get a second opinion and see what he can do for you.

Bill Hesch is a CPA, PFS (Personal Financial Specialist), and an attorney licensed in Ohio and Kentucky who helps clients with their financial planning.  He also practices succession planning, estate planning, and business tax planning in the Greater Cincinnati and Northern Kentucky areas.  Whether you are just starting your Cincinnati or Northern Kentucky business or you have an existing business and need to develop a succession plan, contact Bill Hesch for help. He will help you develop a plan that minimizes taxes and maximizes the long-term potential of your business.

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Bill Hesch Channel 9 | Hesch CPA

by Administrator 9. April 2013 16:58

Announcement from Bill Hesch

Bill Hesch will be interviewed by Jenell Walton on the WCPO Channel 9 News magazine show “The List”, TONIGHT! The show airs at 7pm and Bill will be on at 7:20pm. Bill will talk about the 3 best ways to spend your Tax Refunds. Make sure you tune in!!! 

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Hesch WCPO The List | Hesch CPA

by Administrator 9. April 2013 16:57

Bill Hesch will be interviewed by Jenell Walton on the WCPO Channel 9 News magazine show “The List”! The show airs weekdays at 7. Bill will talk about the 3 best ways to spend your Tax Refunds and it is scheduled to air one evening next week. “The List” brings viewers the hottest topics of the day in one-of-a-kind list form and features stories from right here in the Tri-State, mixed with national and global trends.  

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Medicaid Planning Introduction | Hesch CPA

by Administrator 9. April 2013 16:57

 

Many people wonder how to protect their assets lawfully, while still remaining eligible for benefits like long-term care. The whole notion of transferring assets, in anticipation of a nursing home or assisted living facility, is so that the cost of long-term care (sometimes running upwards of $80,000 annually) can be covered by Medicaid. 

Medicaid is a social welfare program that provides health care and long-term care for those with limited means.  It can be used to pay for long-term nursing home and assisted living facility costs.  However, just like a creditor can challenge the transfer of assets, the federal government can and will challenge transfers made before qualifying for the benefits of Medicaid.  The laws governing asset transfers vary from state to state, but generally, a Medicaid recipient must have no more than $1,500 to $2,000 in assets (subject to some exemptions) and receive no more than $75 a month in income to be eligible.  

There is a key difference in long-term care support through Medicaid versus Medicare.  Medicare is available for everyone over the age of 65 who has paid into social security.   However, only a minimal portion of Medicare (about 100 days) covers a nursing home or assisted living bill. Afterward the 100 day period, the resident senior must privately pay or must qualify for Medicaid.

Ideally, an applicant may want to gift or deplete assets 60 months or more before needing to apply for Medicaid to pay for nursing home care. An applicant cannot simply transfer assets right before applying for Medicaid. The 60 month look-back period ensures that no assets were transferred improperly. Medicaid caseworkers challenge improper transfers made within the 60 month look-back period, and are usually successful in denying Medicaid coverage to the extent of such improper transfers. The problem is that most applicants don´t consider applying for Medicaid to cover long-term care until that very brief Medicare window runs out. By that time it is too late to do advance planning for the gifting of assets or implementing their strategies.  The costs of long-term care are high, and in cases where an applicant is denied Medicaid coverage, those costs must come from the senior's personal assets.   

The failure to plan or improper Medicaid planning can result in the complete depletion of assets and leave nothing for the senior's family upon death.  All of the assets the senior has accumulated throughout his/her life will instead be entirely spent on long-term care.  Therefore, one must understand the appropriate timing of asset transfers and other strategies in order to secure eligibility for Medicaid coverage. Bill Hesch is a CPA, PFS (Personal Financial Specialist), and an attorney licensed in Ohio and Kentucky who helps clients with their financial planning.  He also practices elder law planning, estate planning, and Medicaid planning in the Greater Cincinnati and Northern Kentucky areas.  His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky.  Please contact him to establish a plan for you or a loved one to avoid these heartbreaking problems.

 

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Issues Facing Senior Citizens | Hesch CPA

by Administrator 9. April 2013 16:56

Bill Hesch is a Cincinnati and Northern Kentucky elder law attorney who focuses on the complicated legal, tax, and financial planning issues confronting senior citizens. Elder Law, or special needs law, is unique in that it is defined by the needs of the client rather than a particular field of law or other legal distinction.   


An elder law attorney will normally address issues including:

Estate planning

If you own anything of value you would like passed on to a friend or loved one at your death, you have an estate. In order to ensure the assets of your estate are distributed according to your personal wishes, there must be an estate plan. This plan can include legal instruments like a will, a power of attorney, a trust, a living will, and a health care power of attorney. To put it quite simply, an estate plan consists of the accumulation, conservation and distribution of an estate and ensures your financial goals are met after you die.

Estate administration

Estate administration is the process of collecting, managing and distributing assets upon a person's death. All debts and taxes must be paid and the remaining assets must be distributed to any beneficiaries who stand to inherit under an existing will. If there is no will, the laws of the particular state will decide who serves as the personal representative of the estate and who the beneficiaries will be, as well as, what each beneficiary's share of the estate will be. The absence of a will can make estate administration a much longer and sometimes more costly process. A well-executed will, designed by an experienced elder law attorney will make estate administration a much smoother process for everyone involved.

Trust creation and administration

A trust is a legal mechanism used to not only help manage property during a person's lifetime, but also to supplement an existing will after death. Trusts not only allow you to pass on assets to different people, but it also allows you to place certain conditions on how and when estate assets will be distributed upon your death. Trusts can also help to reduce any possible estate taxes and avoid the delay and publicity of probate court. The creation of a trust can be a very important part of your estate plan.

Planning for possible long-term care needs, including nursing home care

Statistics show that approximately 70 percent of people over the age of 65 will require some type of long-term care services. Most people put off any type of long-term care planning simply because they just don't want to think about it. Part of the long-term care planning process may include the preparation of a living will in which you determine the medical care you want in the event you are unable to make these decisions for yourself. A medical power of attorney may be prepared to allow you to name someone as the person who will make health care decisions for you in the event you are unable to do so yourself. Proper financial planning is important because long-term care can be very expensive and Medicare and most other health insurance programs don't cover many long-term care services. Planning ahead gives you the time to determine payment options that will work best for you, and also gives you the time to save for possible long-term care needs.

An experienced elder law attorney understands that your needs extend beyond basic legal services and a variety of legal tools and techniques are used to specifically meet your personal goals and objectives.
  
William E. Hesch Law Firm offers a wide variety of services to help assist you in your elder law planning. Our estate planning attorneys explain how Ohio, Kentucky, and federal estate tax laws may affect the assets that are transferred to your loved ones upon your death. Please contact us to arrange a free 30 minute consultation with one of our experienced Cincinnati and Northern Kentucky elder law attorneys to learn more about how we may identify strategies to protect your life savings in your later years from being depleted by your nursing home care costs, estate taxes, and probate administration costs, as well as seek asset protection from your creditors.

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