AI Created Estate and Long Term Care Plans – Part 2
In my blog post last week I asked the question whether an AI created and driven estate or long term care plan can work. More specifically, what place do I see it having when it comes to addressing the problems we help our clients solve every day. As I said last week, we have begun to receive AI generated reports from callers asking us to implement the recommendations made in those reports and/or to comment on them. I expect these scenarios to be more frequent in the coming years. I view these requests no differently than when someone calls and asks my opinion about what another attorney told them or asks me to review documents prepared by another lawyer. The advice given or the documents drafted are not done in a vacuum. I need to know what information the caller provided to the attorney. Additionally, I often need information that the previous attorney didn’t have or didn’t ask for. This is especially the case when the previous attorney was someone who doesn’t concentrate their practice in the field of estate and/or long term care planning. When presented with a caller who didn’t consult with an attorney, but instead used AI to arrive at a plan, my approach is
AI Created Estate and Long Term Care Plans – Part 1
Since the early days of the internet, many callers to our office have reached out to us after having done some research on the internet. There is a lot you can find on the internet about any topic, however, that doesn’t mean it is all accurate. When it comes to long term care planning and Medicaid in particular, there is much confusing and inaccurate information found online. I find myself on our initial calls correcting these misunderstandings before then explaining what we can do to help. In the past several months, however, we have seen an increase in the number of people who are using artificial intelligence to guide them in reaching estate planning and long term care planning solutions for themselves and their families. They then call our office, wanting us to review these plans to confirm they are getting the right answers and reaching the right conclusions. In some cases they present AI generated “reports” that are 10+ pages. But, is this really a workable approach to what is a complex and very personal process? The estate and long term care plans we create for clients - and then guide them through - are based on our knowledge of the applicable laws and our experience over
How Death Taxes Get Paid – Part 3
I ended last week’s blog post with a hypothetical estate left by John Doe. John died with an estate totaling $2,500,000. Because he had no spouse or children, he left his estate to nieces, nephews and friend, all Class D heirs. What they receive is subject to New Jersey inheritance tax at a rate of 15% to 16% after allowable deductions. The problem is that some of the estate assets are payable directly to heirs by way of direct beneficiaries, such as retirement accounts and the non-retirement brokerage account. These assets go directly to those heirs and do not pass thru the probate estate. Other assets are passed by way of specific bequest, such as the home that John left to his friend. Of the total $2.5 million, only $300,000 passes under the residuary clause of the will. But, inheritance tax is paid on the entire estate that passes by way of the will and outside of the will. More specifically, the will directs the executor to pay the taxes out of the residuary but the tax is in excess of $375,000. What is the executor supposed to do? The first place to take funds to pay the tax should come from the residuary estate. As stated above, however, that still leaves
How Death Taxes Get Paid – Part 2
In this week’s blog post I continue discussing death taxes and how they get paid. Last week I explained how estate taxes and inheritance taxes are calculated. In each case the assets subject to the tax are not necessarily all within the control of the executor/administrator of the estate. That’s because non-probate assets which go directly to named beneficiaries or surviving co-owners are not part of the probate estate that passes by way of the will. Yet the executor/administrator is the person tasked with the responsibility to file the return and pay the tax. That can be a problem if there are not sufficient assets in the probate estate. Let’s look at an example of how this might play out. John Doe did not have any children and his wife predeceased him. His will left his assets to several nieces, nephews and friends. What he did, however, was designate TOD/POD (transfer on death/payable on death) designations for some of his assets. John had a large non-retirement brokerage account that he made TOD to a niece and nephew. He also left his home to a friend by way of a specific bequest in his will. The brokerage account was valued at $800,000 and the home at $1,000,000. He also had some smaller retirement accounts
How Death Taxes Get Paid – Part 1
In this week’s blog post, I address death taxes - the taxes owed as a result of one’s passing - but more specifically how to pay them. It is not always as straightforward as one might think. First, let’s be clear what we are talking about. In New Jersey, we need to be concerned with estate taxe and inheritance tax. Estate tax is based on the size of the decedent’s (the person who died) estate. A certain amount - referred to as the “exemption amount” is not subject to the tax. There is a federal estate tax and there was a New Jersey estate which was phased out for anyone who has passed away January 1, 2018 or later. The federal estate tax exemption is now $15,000,000, meaning the tax is owed on estates greater than that amount with one exception. Amounts left to a surviving spouse are never subject to federal estate tax even if they exceed $15,000,000. This amount is currently indexed for inflation so will increase each year. While New Jersey no longer has an estate tax, it still has an inheritance tax. This tax is based on the relationship of the heirs to the decedent. Class A beneficiaries are exempt from the tax. These heirs are children, grandchildren, parents,
Medicaid Redeterminations Revisited – Part 3
In my blog post last week about Medicaid redeterminations, I wrote about the reasons why Medicaid conducts annual redeterminations. Recent changes in the written application, however, has caused some confusion. As I explained last week, the application has more than doubled in length. The new “redet” application now looks more like the application filed to get Medicaid approved. It asks for much of the same information. The section about resources (assets) asks for a listing of every account opened or closed in the past 5 years. It also asks for listing of all real estate owned or sold in the past 5 years. 4 or those 5 years have already been answered in previous annual redet applications and/or the original application. The question should be limited to the past year but it is not. Section 6 of the new application asks about transfers made in the last 5 years. Again, this has already been asked and answered in previous redets or during the original application process. The concern is that if we answer the question as asked and include transfers which had previously been disclosed, will a new transfer penalty be mistakenly calculated? That will lead to more wrongful denials or improper penalties. It is not clear why these changes were made but what