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NOTES and Updates -Spring
2006
"When Spring comes, the grass grows by itself."
The annual gift tax exclusion increased to $12,000 per donee in 2006. For those clients who make annual gifts, please take note of the increase and use it to your advantage. Also, in making annual gifts, if you intend any of the gifts to be an advancement on a donee's share of inheritance, you should contact us to ensure that such gifts will be treated as an advancement by (1) amending your Trust, (2) formally informing the donee in writing at the time the gift is made that the gift is an advance on inheritance, or (3) getting a written acknowledgment from the donee that the gift is/was an advance on inheritance. Naturally, we will be happy to assist you with this process if you contact us. California's Department of Health Services (DHS) has released new proposed regulations for Medi-Cal estate recovery claims. Among other things, the new recovery regulations (if enacted) would allow DHS to recover against the estate of a Medi-Cal recipient who irrevocably transfers a home on or after May 22, 2006 in which the elder/owner transferor retains a life-estate or separate right to occupy the home. The amount of the DHS claim would be the lesser of the value of the life-estate (or retained occupancy right) or the amount received in Medi-Cal benefits. Furthermore, DHS plans to value the retained life-estate (or occupancy right) according to valuation tables as of the moment prior to the decedent's death. Additionally, if a Medi-Cal recipient had only made a revocable transfer of real property , such as to a revocable living trust, the claim from DHS would apply to the entire value of the property. Again, these proposed regulations would only apply to such transfers of a home occurring on or after May 22, 2006, and should not impact any prior transfers. However, any of you who have transferred title to your home with a retained life-estate or occupancy right as part of your Medi-Cal planning should contact us in the event you wish to have your planning reviewed. The Federal Deficit Reduction Act was passed in February, 2006. This very complex legislation includes changes to the Medicaid system, which in California we call "Medi-Cal." These changes will greatly impact eligibility rules with greater emphasis on prior transfers (i.e. gifts), the transfer period, and the valuation of certain "exempt" assets, including the personal residence. The good news for us is that California must pass regulations to enact this legislation before it becomes law here in California. The Department of Health Services in California is notoriously slow at promulgating such regulations and, to date, no drafts of such regulations have been circulated. Thus, while we do expect these changes to become effective in California eventually, we have a bit of time before that occurs. Having said that, those of you who are interested in doing Medi-Cal planning to protect your assets in case of a prolonged need for long-term care in a skilled nursing facility should consult with us as soon as possible, before the stricter eligibility regulations are enacted. California Law Changes In January, 2006, a new filing fee schedule was imposed on all civil matters filed in any Superior Court in California. While the new fees are now uniform between all counties and have been "simplified" to remove various add-on fees which had previously been imposed, the result is that costs for probate fees in Santa Clara County have increased substantially. The base filing fee for probate, trust, conservatorship, guardianship, and all other matters handled by the probate court is now $320.00, with the filing fees increasing for probates and trusts (that are contested or require court supervision) in relation to the size of the estate. For example, a gross estate of just one million dollars now requires a filing fee of $1,135.00. With the rising fees, the importance of having trust documents becomes even more clear. Scam Alerts The Internal Revenue Service has issued a scam alert relating to bogus email messages to taxpayers informing them of a supposed tax refund. The official-looking email, which comes from tax-refunds.irs.gov, claims to be from the IRS and directs the consumer to a link requesting a Social Security number and credit card data for "verification." According to a release warning citizens of the scam, the IRS never will ask for personal identifying or financial information via unsolicited email. Neither do taxpayers have to fill out a special form to obtain a refund. We urge you never to respond to an email asking you to click through a link in the message to enter sensitive information on a web page. If in doubt, call the merchant or agency (but not using any telephone number given in the suspicious message) to determine whether they are trying to contact you. The latest in a series of scams exploiting the confusion over the Medicare Part D drug benefit has elicited a warning from the California Health Advocates' Senior Medical Patrol Project. This particular scam has been named the $299 scam because Medicare beneficiaries are charged this amount as a "one-time fee" to maintain phony coverage. A variation on the scam is to offer advice on making drug plan decisions for an added cost. Potential victims are approached at bus stops, senior centers, shopping venues, parking lots and so forth. Telemarketing is another means used by these high pressure scammers. Their goal is to obtain Medicare numbers and other sensitive data from their intended prey. Consumers should exercise caution in dealing with companies offering Medicare drug coverage, and violation of the following rules of thumb should be considered a red flag:
Quick Guide to Medicare
Prescription Drug Program
Millions of eligible Medicare beneficiaries
have yet to enroll because of the feeling (and
media-driven impression) that choosing a prescription
drug plan is so confusing it isn't even worth
the trouble. Despite its flaws, however, the new
drug plan can indeed save money-even
hundreds or thousands of dollars a year, for
some. Some tips on choosing a plan:
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