Articles Posted in Estate tax

At our office we are frequently approached by elderly clients who are considering a second marriage later in life. A new romantic relationship can mean new friends, new experiences, increased happiness and an overall better quality of life. That being said, older couples do have some important issues to consider when deciding whether or not to take the plunge. Adult children, retirement plans, long-term care consideration and government benefits are all topics that should be discussed thoroughly before an elderly couple decides to marry.

A particularly sensitive issue is what happens to the family home. Whether the couple decides to remarry, or decides that they would prefer to just live together, it is important to plan for what will happen to the home they decide to cohabit. Seniors in this situation are faced with the competing goals of wanting to keep the equity of the home in their family, while wanting to provide a place for their significant other to live should the owner predecease. Through the use of proper estate planning such as a life estate or properly drafted land trust, this can be achieved. Care should be taken to ensure that assets are available to maintain the home and that the owner’s family understands their wishes.

Another sticky topic, is how to pay for long-term care and what happens if one spouse requires Medicaid benefits. Long-term care can be very expensive and the Illinois Department of Human Services will require that a spouse’s assets be taken into consideration even in the face of trust and prenuptial agreements when reviewing an application for Medicaid benefits. One spouse’s refusal to make their assets available for the care of another can have a significant negative impact on Medicaid eligibility. We strongly advise against later in life marriages when the need for Medicaid benefits to pay for long-term care is relatively foreseeable.

Gary Cohn, a White House advisor on tax-planning, uttered these words to a group of senate Democrats recently.  To Cohn, his comment underscored the fact that very few of the uber wealthy pay estate taxes anyway so eliminating the tax would do very little to the revenue side of the government’s ledger.

But Mr. Cohn has a point here.  Only 1 out 500 Americans are affected by the tax and those that are usually use a myriad of IRS allowed techniques to eliminate the tax all together. Some of these strategies are the following:

Using the Annual Exclusion(now $14,000 per person) to gift monies and/or assets out of their estates.

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