Our reader is asking about a popular, now-expired tax-law provision known as a “qualified charitable distribution,” or sometimes as an individual retirement account “charitable rollover.” Charities have long supported it enthusiastically because they view it as a powerful charitable-giving incentive for older taxpayers. But the law expired at the end of 2013, and nobody knows what action, if any, Congress will take this year.

We are well into 2014. Consequently, that also means we are well into the 2013 tax season and planning for the upcoming year. As many retirees and their advisors review changes in the tax laws and begin their planning, they have one important question in common: “Will Congress revive the IRA charity rollover?”

Coincidentally, these taxpayers and advisors will be interested in a recent article in The Wall Street Journal titled “Will Congress Revive the IRA Charity Rollover?”

Why all the buzz? The IRA charity rollover is a well-loved tool that creates a win-win for retired taxpayers and the charities they support. Unfortunately, it has never been a permanent part of the tax code and was just one those many provisions of the tax code that bit the dust at the end of last year.

What is an IRA charity rollover? It allows a taxpayer who is already required to take “Required Minimum Distributions” to direct their required distribution directly into the hands of charity. As a result, the taxpayer pays no income taxes on the distribution and the charity enjoys 100% of the distribution tax-free. What is not to like about that?

With the IRA charity rollover gone, retirees and their advisors now have to shift their priorities and tools to minimize the tax bite and still accomplish all of their financial goals.

Alternatively, you take the author’s lead and try waiting to see if Congress reinstates this beloved option. But in this political environment, alternate planning is also very important.

Will Congress revive the IRA charity rollover or will it not? That is the question.

Reference: The Wall Street Journal (January 25, 2014) “Will Congress Revive the IRA Charity Rollover?

“There is a strong possibility that the gap is going to be closed over a few years,” said Jamie C. Yesnowitz, a principal at Grant Thornton and chairman of the American Institute of Certified Public Accountant’s state and local tax technical resource panel. “Once some of these other states see New York and D.C. are doing this, I would find it unsurprising if some of these other states join the bandwagon.”

Until — or if — that happens, people who have more money than their state’s exemption but less than the federal exemption generally have three options: set up trusts to reduce or defer the tax, start making gifts to reduce the estate or move. All have complications and pitfalls.

The estate planning world has been in a bit of shock for the past few years. While the federal estate tax exemption has climbed to ever more generous levels, many states are creating new or increasing old wealth transfer taxes. Taxpayers who are in the clear when it comes to federal death taxes may be socked with state death taxes.

Will the states follow suit and drop draconian estate laws?

A recent article in The New York Times, titled “Some States Are Moving to Loosen Their Estate Taxes,” suggests there may be hope.

Not all states have their own form of estate or inheritance tax, one separate from the federal tax that hits with a 1-2 punch. Because of changes in the Federal Estate Tax Law, Utah no longer collects estate tax.  In fact, most states do not. Still, more than a dozen states, mostly northern and Pacific ones, do have such a tax. Interestingly, these state estate or inheritance taxes can be troublesome for more than just the residents of the taxing state. Since the United States population is a mobile one, many people have properties in more than one state.

Unfortunately, the spaces between the federal tax and the state-level taxes can be sometimes tricky to navigate. Trickier still can be the space between two states. After all, “living” across state lines is not at all out of the ordinary, but having to think about entirely different tax schemes (sales tax aside) is generally less so.  Moreover, as the original article elaborates, the states find themselves at odds and fighting jurisdictional battles.

Note: An important pattern may be developing, as more states loosen the rules and either eliminate the death taxes or make them as forgiving as the federal rate. New York and D.C. have recently begun reassessing their taxes, with many more either open to debate or actually winding them down because their populations seem to be migrating to states that no longer have estate and inheritance taxes.  We will keep you posted as these things develop.

Reference: The New York Times (January 24, 2014) “Some States Are Moving to Loosen Their Estate Taxes”

Nobody really knows exactly how many Americans are walking around with pacemakers and defibrillators. But with surgeons implanting at least 225,000 pacemakers and 133,000 defibrillators each year, “there probably are a couple of million” out there now, said Dr. Paul S. Mueller, a Mayo Clinic general internist and bioethicist.

The devices prolong lives, but “all those people will face decisions down the road,” Dr. Mueller said. “’Do I keep it going? Do I turn it off?’” Physicians have similar questions, including what kinds of patients confront these choices and who usually winds up making these decisions.

Do you or a loved one live with a pacemaker or implanted defibrillator? How do you plan for end-of-life matters when one of these miraculous medical devices can keep you going and going and going long after your other essential bodily functions are otherwise shutting down? This scenario is all too common and is presenting challenges in geriatric medicine and palliative care.

Recently, The New Old Age Blog took a look at this perplexing issue in an article titled “A Decision Deferred: Turning Off the Pacemaker.”

Compounding the problem is the fact that standard medical directives are designed with feeding tubes and breathing support in mind. Rarely do such legal instruments address the question of a pacemaker, implanted defibrillator or other surgically implanted electronic heart monitor. Part I Section (F) of the Utah Advance Healthcare Directive does allow you to specify additional instructions to your agent about your end of life options.  If you have one of these devices please consider providing instructions to your agent in this section.  These devices may extend life, and maybe not for the better, but without the directive who is empowered to direct when or even whether they should be turned off?

Simply put: no one.

So how many patients with these devices have built their wishes (whether on or off) into their plans and medical directives? In one survey of 150 elderly and dying Mayo clinic patients, more than half had a medical directive (and only that — a bad statistic in itself). However, only one medical directive addressed the issue of the patient’s defibrillator. Please discuss this in Part I Section F of your Utah Advance Healthcare Directive.

Reference: The New York Times – The New Old Age Blog (January 29, 2014) “A Decision Deferred: Turning Off the Pacemaker”

In the meantime, cases like this demonstrate anew how vigilant families need to be. If your older relative has a long-term care policy, photocopy the page listing the company, policy number and claims contact information. Keep the insurance company updated on new addresses, yours (if you are the third-party designee) and your relative’s. It wouldn’t hurt, if the policyholder is becoming forgetful, to check bank statements or call the company to be sure premiums are paid.

Are your elderly loved ones lucky enough to have a long-term care insurance policy or something similar? If yes, then they likely are relying on it to cover the potentially catastrophic financial risk that is long-term care. If yes, then what happens if they forget to pay the premiums?

Do I have your attention now? If yes, then you will want to read a recent horror story in The New York Times – The New Old Age Blog titled “The Policy Lapsed, but No One Knew.”

Generally speaking, any form of “insurance” exists to help minimize various financial risk exposures to the insured. In essence, you pay a premium you can afford (and the insurance company will accept) to cover a risk you cannot afford. Once insured, you really only need to think about the much easier task of remaining insured, which usually means making timely premium payments.

Unfortunately for some families, remaining insured can sometimes present a few challenges uniquely associated with old age itself. What happens when the loved one begins to develop dementia and simply stops making the premium payments on the policy? Dementia is rather subtle before it becomes fairly dramatic. Accordingly, you may need to implement some financial safety precautions.

The terrible lesson coming out of the original article is how the caregiver/son was diligent, but a mistake by his father at the bank snowballed into missed payments and a lapsed policy. The worst part of the horror story is that the cancellation notice from the insurer was never received – and the family was unaware of the policy lapse until they went to claim its benefits.

Ultimately, the burden of proof was not on the insurer regarding whether the premium notice had been sent and received.

Will there be a legislative reaction to stories like these? It seems this case will not go anywhere soon, but there may be more like it across the country.

Reference: The New York Times – The New Old Age (January 31, 2014) “The Policy Lapsed, but No One Knew”

If your parents live in one of 29 states or Puerto Rico that has filial responsibility laws on the books, you could potentially be held legally responsible for their care under certain circumstances, such as when your parents are ailing and without sufficient financial resources to take care of themselves. Until recently, these statutes have been largely ignored. However, several recent court decisions indicate that there might be renewed interest in enforcing them.

Filial support is not just a moral virtue. In many parts of the country and branches of the legal system filial support is a legal imperative. Filial support laws exist in 29 states as well as Puerto Rico, and have quietly existed on the books for some time. Now, however, in some states these laws are a very real and present concern for the adult children of elderly loved ones.

Fortunately, Forbes has provided a crash course regarding filial laws and their potential challenges in an article titled “Who Will Pay For Mom’s Or Dad’s Nursing Home Bill? Filial Support Laws And Long-Term Care.”

Essentially, filial support is the legally-imposed financial responsibility whereby children are responsible for their aging parents. The origins of filial support are found in some pretty old laws and lines of legal reasoning. History aside, consider filial support the flip-side of the legally-imposed financial responsibility parents owe to young children.

Yes, Utah has the remainder of a filial support law in Section 17-14-2.  However, the statute that imposed liability of relatives for their “poor” relatives was repealed in 1975.   The remaining section (Section 17-14-2 cited in the Article) merely establishes the order for liability between relatives. I would suggest that this Section would not be enforceable.  Support for this is shown in the fact that there have been no reportable cases in Utah since 1975.

Nevertheless, in a modern context with the massive escalation of healthcare costs, in states with such a statute still on the books there may be a dangerous pattern emerging. This is most dramatically evident when it comes to the costs of long-term care. So are you at risk?

These are state laws. However, you might be liable if an elderly loved one resides in one of these states and you do not. Does this have your attention?

Be sure to read the original article and, perhaps, do a little online research yourself. If nothing else, find out which states have filial support laws. Better yet, consult with an experienced elder law attorney.

Reference: Forbes (February 3, 2014) “Who Will Pay For Mom’s Or Dad’s Nursing Home Bill? Filial Support Laws And Long-Term Care