John Lane Law

New Texas Law to Thwart Elder Financial Exploitation - John M. Lane Law, PLLC

“A new Texas law gives financial institutions greater authority to stop transactions that they suspect are aimed at defrauding elderly or disabled clients.”

An elderly woman in Dallas County recently sold her home and wired the $200,000 proceeds to a mysterious bank account, a victims’ advocate said. The “alleged Nigerian” promised to marry her. But it was a scam, and now the woman is homeless.

The Texas Tribune explains in its article, “New law aims to help elderly Texans fooled by scammers,” that cases like this happen all the time.

To thwart these types of scams, a new law signed by Governor Greg Abbott gives financial institutions greater power to stop transactions like the one described above. Under previous Texas law, some banks, credit unions, and securities firms would routinely stop transactions on behalf of elderly or disabled clients, who they suspected were the victims of fraud. But this new law provides financial firms even more freedom to do so. In fact, it gives them immunity from litigation when halted transactions turn out to be legitimate or when fraudulent transactions get by undetected.

The bill passed both the Texas House and Senate easily.  However, the immunity provision was not pleasing to one conservative lawmaker.

“I do not believe that banks should be held harmless when they unreasonably, or without a sound basis, deny access to a person's money,” said state Rep. Matt Rinaldi, R-Irving, who was one of ten “nay” votes in the Texas House.

But the Texas Bankers Association said it was important for workers in the financial industry to have protection, so they could report perceived fraud to the correct authorities.

The new law also directs financial institutions to set policies that spell out reporting procedures for employees, when they suspect an elderly customer may be the victim of fraud.

Despite the new law, advocates say challenges remain. They note that the law doesn’t address the greatest issue concerning the state's role in combating such scammers. The Texas Department of Family and Protective Services only has the authority to investigate financial predation, if a relative of the victim attempts to commit the fraud. When strangers try to con the elderly, the cases are usually referred to the Texas Attorney General’s office or local law enforcement. Victims are less apt to get help there, because law enforcement is under no obligation to investigate these crimes.

The new law also says that banks can notify a “third party” who is “reasonably associated with the vulnerable adult” to provide assistance when flagging a potentially fraudulent transaction.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Texas Tribune (September 19, 2017) “New law aims to help elderly Texans fooled by scammers”

Don’t Make These 401(k) Mistakes! - John M. Lane Law, PLLC

“Many Baby Boomers might not be ready for retirement, but younger workers have a chance to do better–if they make the most of their 401(k)s.”

Kiplinger’s recent article, “The 7 Most Common 401(k) Mistakes to Avoid,” provides three good news/bad news retirement plan statistics. First, the Investment Company Institute reports that the 401(k) plan retirement system held $4.8 trillion in assets as of March 2016. That represents 52 million active participants, former employees, and retirees. Vanguard also recently reported that the average 401(k) balance reached a record high of $101,650.  However, 38 million working-age households (45%) don’t own any retirement account assets, either an employer-sponsored 401(k)-type plan or an IRA.

The employer-sponsored 401(k) plan started in 1978.  Therefore, it’s been available to millions of workers who are now 65-years-old and who could’ve been using it to save for retirement and save on their taxes. However,  only half of Baby Boomers have more than $100,000 in a 401(k) or other retirement plan.

The good news is that younger workers have much of their working lifetime to accumulate a retirement fund. They also have the advantage of participating in 401(k) plans that have become far more sophisticated. This means that it’s a little bit more complicated for participants to understand all of the plan choices. As a result, some will make mistakes. A good goal is to save $1 million over your career to allow you to withdraw $5,000/month for 30 years with a 6% annual investment return.

Here are some common mistakes that retirement plan participants make and what they should be doing to avoid them.

Not Saving Enough. Simple math, right? To accumulate $1 million in monthly increments, you need to defer about $1,000 per month, every month, for 30 years with a 6% annual return.

Starting Too Late. Time and the power of compound interest must be worked to your advantage. The more time you have to accumulate savings, the more time the returns will have to work in your favor. Start to save right out of college, even if it’s a small amount to make saving easier on you down the road.

Not Maxing Out. You need to “max out” your employer match. For example, if you make $75,000 per year and put away 3% ($2,250), and the employer matches, your total annual contribution is $4,500. That won’t even get you halfway to that $1 million. But on that same salary, if you defer 13% into the retirement plan ($9,750 or $812.50 per month), and your employer matches the first 3% of your contribution, that’s an additional $2,250, for a total of $12,000. The employer match is like getting a 23% return on your contribution!

Priorities. Many people don’t pay themselves first. Most 401(k) plans have an option to set an increase in your contribution rate annually, until you’re making maximum contributions. If you’re a single taxpayer, a $9,750 contribution will save you at least $2,437 in federal income tax.

Taxes. There are tax savings that are possible. How about $200 per month? Your paycheck won’t go down quite as much as the entire contribution to the plan, because there are fewer withholding taxes. In our example, we assume a conservative 6% annual return. Two factors affect returns in a retirement plan. They are fund selection and asset allocation.

Doing Nothing. This means not taking advantage of the plan’s available tools to develop an allocation plan. Spread your contributions over a variety of funds that represent a broad selection of asset classes. A high percentage of plan participants don’t even take the time to change their fund selections from the default fund the plan offers.

Monitoring. You should rebalance your plan to keep the risk profile of your retirement plan portfolio consistent, over time.

Now’s the best time to review your retirement plan options.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Kiplinger (July 2017) “The 7 Most Common 401(k) Mistakes to Avoid”

Changes in Medicare Surcharges Next Year - John M. Lane Law, PLLC

“More beneficiaries who are considered high earners will be hit with steeper fees.”

Bad news for high-income retirees who were hit with premium surcharges for Medicare Part B and Part D: they may need to pay a bit more in 2018. The income thresholds for the highest surcharge tiers are going to drop next year, affecting more beneficiaries with higher premiums, says Kiplinger in its recent article, “Medicare Surcharge Thresholds to Drop.”

This recalibration of the trigger points was a part of the Medicare Access and CHIP Reauthorization Act of 2015, also called the "Doc Fix" law, which ended the annual battles over fee schedules for doctors' Medicare payments. To help pay for the permanent fix, lawmakers have asked high-income beneficiaries to foot the bill.

There’ll still be four surcharge tiers for 2018, and there’s no surcharge for beneficiaries whose modified adjusted gross income (MAGI: AGI plus tax-exempt interest) is less than $85,000 for single filers or $170,000 for married taxpayers filing jointly.

However, the tops of the other tiers are going to be compressed. As a result, some income levels that were in tier two will move to tier three, and some beneficiaries previously in tier three will jump up to the most expensive tier four. The highest surcharges were previously triggered when MAGI passed $214,000 for singles and $428,000 for married couples. Now the trigger points will drop 25% in 2018, to $160,000 and $320,000 respectively.

Your 2016 tax returns are used to determine your 2018 Medicare premiums. Those returns have already been filed. Therefore, you could be stuck with higher premiums, unless you qualify for a waiver because of a life-changing event like retirement or the death of a spouse.

But if you think your income will be at similar levels in 2017, you still have some time to try to lower your MAGI for this tax year to reduce your 2019 Medicare premiums.

If you might be on the border of a tier threshold, consider tapping into sources of income that are exempt from MAGI, such as Roth account distributions, health savings account distributions, loans from cash-value life insurance, a portion of nonqualified immediate annuity payouts and reverse mortgage proceeds.

If you are subject to required minimum distributions (RMDs) from retirement accounts, consider making a direct charitable contribution from your IRA,  since this qualified charitable distribution won't count toward your MAGI.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Kiplinger (June 2017) “Medicare Surcharge Thresholds to Drop”

Simple Estate Planning Tools - John M. Lane Law, PLLC

“The longevity of successful retirement cannot be overstated, thus the importance of building, preserving and protecting one’s assets during retirement.”

When we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.

As Marco Eagle’s article, “Money Talks: Estate planning tools” explains, the next phase is the retirement stage, when the focus shifts from accumulation to preservation and maintenance of the nest egg.

Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.

The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred by the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.

Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.

There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.

Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”

What… My Taxes are Going Down? What Gives? - John M. Lane Law, PLLC

“Do you want proof that taxes can actually go down? In the last three years, nine states have eliminated or lowered their estate taxes, mostly by raising exemptions.”

There could be more reductions in the offing, as lawmakers in Minnesota recently raised the state's estate tax exemption to $2.1 million retroactive to January. That exemption will rise to $2.4 million next year. Similarly, Maryland is going to increase its $3 million exemption to $4 million in 2018. New Jersey's exemption of $675,000 per person increased to $2 million per person this past January.

In addition, Fox Business’s article, “Why More States Are Killing Death Taxes” reports that the Garden State will also totally eliminate its estate tax, making New Jersey one of about six others that have ended their estate taxes in the last ten years.

The tax-cutting trend stems from an intense competition between the states for affluent and wealthy taxpayers. Residents owe income taxes every year. However, there are those who are willing to move out-of-state to avoid death taxes. In addition, with the federal estate and gift tax exemption increasing to more than $5 million, states with death taxes really stick out.

There are two holdouts, Massachusetts and Oregon. These two are the only states with estate tax exemptions of $1 million or lower, compared to nine in 2009. The tax in both states will increase annually because neither adjusts for inflation. Some Massachusetts lawmakers are concerned about losing residents to other states because of its estate tax, a $400 million revenue generator last year. Massachusetts is looking at upping the exemption to half the federal level and maybe excluding the value of a residence.

It’s a different story in Oregon where efforts to raise the exemption have met with resistance in the legislature. The estate tax revenue of $200 million for the two-year cycle ending June 30 is 50% higher than forecast, which has been helped by strong housing and financial markets. Nevertheless, few people are expected to leave Oregon to avoid its estate tax.

In another six states, it’s the inheritance tax that is creating pressure on the government. An inheritance tax is payable by the person who inherits assets, not the estate of the person who died. Inheritance tax rates and exemptions often vary, according to the heir's relation to the decedent. For instance, in Nebraska, there’s no tax on assets left to a spouse, a top rate of 1% on assets passed to lineal relatives or siblings and a top rate of 18% on assets left to non-relatives.

There are two states, New Jersey and Maryland that have both an estate and an inheritance tax. They’ve both trimmed their estate tax, but neither state has modified its inheritance tax. On the bright side, Maryland has large exemptions to its inheritance tax.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Fox Business (June 16, 2017) “Why More States Are Killing Death Taxes”

Widows and Widowers Get Break with New Tax Ruling - John M. Lane Law, PLLC

“Revenue Ruling 2017-34 eases the process for an executor to get relief from having failed to make a timely ‘portability election’ to allow a surviving spouse to take advantage of a deceased spousal unused exclusion amount (DSUE).”

Forbes’ recent article, “IRS Offers Estate Tax Relief To Widows And Widowers,” advises that some quick action may be needed to take advantage of the relief from the deceased spousal unused exclusion amount (DSUE).

DSUE comes from a simplification of the estate tax in 2010 and the two most important provisions of the estate tax for many “moderate” millionaires: (i) the unified credit, which protects $5.49 million from estate tax in 2017; and (ii) the unlimited marital deduction. The unlimited marital deduction allows any amount left to the surviving spouse to be free of estate tax, if chosen.

A big concern of basic estate planning in the past was to make sure that a couple did not waste one of their unified credits. The DSUE saves people from creating trusts to work around losing the unified credits.

The relief offered by Revenue Procedure 2017-34 is available for the estates of decedents who died after December 31, 2010, in instances where no estate tax return was required and none was filed.

The executor can take advantage of the relief by filing an estate tax return with the election and making a reference to the revenue procedure at the top of the first page of the return. It’s available until January 2, 2018. After that, the procedure is available up to two years after the date of death.

This issue should be considered by moderate millionaires (those with a few million dollars), if they’re surviving spouses of people who died after 2010, where no estate tax return was filed. Look at the administrative headache of accomplishing the filing versus the chance that you might die with a net worth over the exclusion amount.  It is important to remember: it’s not your current net worth, but rather what your date of death net worth might be.

Speak with an estate planning attorney, if you believe that this is something you should do. Avoid the estate tax preparation rush in December.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Forbes (June 12, 2017) “IRS Offers Estate Tax Relief To Widows And Widowers”

IRS to Use Private Debt Collectors to Collect Some Debts - John M. Lane Law, PLLC

“Consumer watchdogs are fearful that some of the nation’s most vulnerable taxpayers will be harassed and that criminals will take advantage of the system by phoning people and impersonating I.R.S. collectors.”

Starting in April, the IRS began using private debt collection agencies to collect past-due taxes. The new program could be confusing to seniors, who are vulnerable to scams.

Congress passed legislation in December 2015 that approved the IRS’s contracting with private debt collectors to collect certain debts. These private collection agencies can work on accounts where the taxpayer owes money and the IRS isn’t actively working on the account. That could be because the account is older or the IRS does not have resources to keep pursuing the debt.

The New York Times article, “I.R.S. Enlists Debt Collectors to Recover Overdue Taxes" notes that scammers have historically posed as the IRS to target vulnerable seniors in order to get personal information or money.

The IRS would never harass consumers over the phone. But this new program allows private debt collectors to contact taxpayers by phone. This may make it harder to know if a scammer is targeting the taxpayer.

Both in 1996 and 2006, the IRS tried to use collection agencies. However, both times, the programs failed, with the most recent attempt costing millions more than it took in. In addition, the program created thousands of complaints—one of which was the horror story about an older couple who received more than 150 phone calls in less than a month. Some changes were made.

The IRS will inform taxpayers by mail if it is turning their collection issue over to a private debt collector. The debt collector must also send a written notice, once it receives the taxpayer's information, and collection agencies are required to comply with all debt collection laws. These laws prevent debt collectors from harassing consumers. More information is found on the IRS website.

The IRS has contracted with these four debt collection companies:

• Conserve in Fairport, New York
• Pioneer in Horseheads, New York
• Performant in Livermore, California
• CBE Group in Cedar Falls, Iowa

In order to avoid scams, seniors should know that private collection agencies will only request payments to be made online at IRS.gov or by check. The checks should be made payable to the U.S. Treasury and sent directly to the IRS. They don’t go to the private collection agency. The collection agency won’t ask for payment on a prepaid debit card or gift card.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: The New York Times (April 20, 2017) “I.R.S. Enlists Debt Collectors to Recover Overdue Taxes”

How to Build, Protect and Enhance Your Wealth throughout Your Life - John M. Lane Law, PLLC

“Save early and often. The sooner you start to save, the easier it will be to amass a comfortable nest egg -- thanks to the power of time and the magic of compounding”

For the 70th-anniversary issue of Kiplinger’s Personal Finance, Kiplinger outlined its best advice to show you how to build, protect and enhance your wealth throughout your life in an article entitled “5 Time-Tested Tactics to Save for Retirement.”

Start Now. A 25-year-old who saves $450 a month in a tax-deferred retirement account and earns an average yearly return of 7% will have about $1.1 million at age 65. If he or she waits until age 35 to start saving, they’d have to save $950 a month to reach the same balance by age 65. You should aim to save 15% of your income, including any employer match for your retirement plan.

Take advantage of employer incentives. For your company’s 401(k), you can contribute up to $18,000 ($24,000 for people 50 and older) in 2017 to this pretax account. Your employer may also add another 4% to 6% of your pay, maybe more. Try to save 15% of your income, including the company match, from the beginning of your career until the end. Even if you have to cut back for a few years, contribute at least enough to get the full company match, and boost your contributions later to get back on track.

Take stock. Calculate the future value of your current savings and see how much more you’ll need to save to attain your retirement goal.

Plan a plan. Create your retirement budget, with a column for essential costs (housing and food) and another column for discretionary expenses. Factor inflation at 2.4% over the next 20 years, and consider a separate calculation for health care costs which likely will increase at a much higher rate, perhaps as  much as 5%. Match your expenses to guaranteed income, like pensions and Social Security, plus the annual amount you plan to withdraw from savings. If you see a gap, you’ll need to spend less or work a bit longer. That may not be a bad thing, since staying in the workforce for a few extra years gives you more time to contribute to your retirement accounts—and you have fewer years to finance when you do retire.

Up your contributions. If you’re 50 or older, you can make catch-up contributions to your IRA and 401(k). This year, you can add $6,000 to your 401(k) above the $18,000 annual contribution limit. That’s a total of $24,000 for the year. You can also save an extra $1,000 in a traditional or Roth IRA beyond the $5,500 annual contribution limit (a total of $6,500 for the year). If you invest $24,000 in a 401(k) every year starting at age 50, you’ll boost your retirement savings by more than $580,000 by the time you’re 65, assuming a return of 6% per year. If you invest $6,500 in your IRA during those years, you could accumulate over $157,000 in your IRA in 15 years.

Self-employed savings. If you’re self-employed, you can contribute up to 20% of your net self-employment income (business income minus half of your self-employment tax) to a SEP-IRA in 2017 with a cap of $54,000. In a solo 401(k) plan, you can save more, because you can contribute as both an employer and an employee. The maximum contribution this year is $54,000, or $60,000 if you’re 50 or older.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Kiplinger (March 2017) “5 Time-Tested Tactics to Save for Retirement”

Taking Care of an Elderly Parent Can be a Full-time Undertaking - John M. Lane Law, PLLC

“Each year over 43 million Americans provide unpaid care to a family member, usually a parent.”

Adult children who care for an elderly parent will typically be asked to oversee and provide medical care and finances. However, sometimes the caregiving goes far beyond this.  As a result, many adult children caregivers fail to think about the financial impact that this can have on their own monthly budgets and retirement funds.

MarketWatch’s article, “Read this before becoming your parents’ caregiver,” reports that, in many instances, the adult child caregiver is still able to maintain a full career and family life. However, in certain situations, the family member who’s assumed the role of a full-time caregiver must reduce his or her work hours or forego a promotion because of the time commitment. In the majority of situations, we see adult children answer the call of caregiving in a crisis when there’s an imminent need. A short-term assignment can be doable for a professional with his or her other family and personal responsibilities, but when the duties last longer, he or she will realize there isn’t enough time or resources to do it all.

A caregiver needs to take the actions necessary to help without putting his or her own family’s financial future at issue. When there are siblings and other family members involved, it is necessary to communicate realistic expectations of what areas of care are needed, responsibilities, time commitments and whether there will be any financial compensation.

A Personal Care Agreement can be a good guideline.  It will help to detail which individuals are responsible for various aspects of care, the amount of time required and any compensation. The biggest question that people have about this agreement, is how to get paid to be a family caregiver.

A Personal Care Agreement can give an adult child caregiver the peace of mind and security that he or she won’t suffer undue financial consequences, as well as provide clear details for other family members as to the expectations when assuming these important caregiving responsibilities.

This agreement can help avoid some of the misunderstandings that can occur when many siblings and loved ones are trying to help (or fail to pitch in). It also can protect a family member who is losing his or her own income and time to provide caregiving. This is because reduced hours or an exit from the workforce to care for a loved one, can have a major personal financial impact. In addition, the time for a personal and immediate family life with one’s own spouse and children can nearly evaporate with caregiving demands.

You can work with an Elder Law attorney to draft a Personal Care Agreement. Having an attorney review your Personal Care Agreement can even help to confirm that care payments were a legitimate and necessary expense, rather than a way to conceal assets from Medicaid.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: MarketWatch (February 22, 2017) “Read this before becoming your parents’ caregiver”

Farm and Ranch Families May Get Help with New Legislation - John M. Lane Law, PLLC

“Current law provides for an estate tax exemption of $5 million indexed for inflation, allows portability between spouses and includes stepped-up basis.”

Proposed estate tax repeal legislation has been introduced in Congress that would assist farm and ranch families with the challenges of passing their family businesses to the next generation.

An article in Farm Bureau, “Estate Tax Repeal Bills Would Help Family Farmers,” says that rather than spending money on life insurance and estate planning, many farmers today will expand their businesses by upgrading buildings, purchasing needed equipment and adding livestock.

More significantly, when a family member dies, the family can keep farming or ranching without having to sell land, livestock or equipment in order to pay the tax. While the current laws help people involved in agriculture, the estate taxes are still a big issue.

Family-owned farm and ranch assets typically are tied to illiquid assets like farm and ranch land, buildings and equipment. When estate taxes on an agricultural business are greater than cash and other liquid assets, surviving family partners have few options but to sell off their assets, which jeopardizes the viability of their business.

The bipartisan Death Tax Repeal Act of 2017 (H.R. 631 and S. 205) was introduced in the House by Representatives Kristi Noem (R-S.D.) and Sanford Bishop (D-Ga.) and in the by Senate John Thune (R-S.D.).

The bill is designed to help protect the family farms, which are vital to feeding our great country and who in many cases, barely generate enough profits to sustain their operations.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Farm Bureau (January 26, 2017) “Estate Tax Repeal Bills Would Help Family Farmers”