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                On August 17, 2006, President George W. Bush signed into law the Pension Protection Act of 2006.  The average American probably never heard of the law but some provisions in that law, which became effective in 2010, can be a real boon to Americans struggling to find ways to pay for long term care.                 Many seniors own annuity contracts.  Individuals who own annuities can now add long term care riders with special tax advantages.   The Pension Protection Act allows the cash value of annuity contracts to be used to pay premiums on long term care contracts.  Money coming out of the annuity in this way is treated as a reduction of the cost basis of the annuity and thus is non-taxable.  The cost basis is generally going to be the amount of money originally deposited with the insurance company when the annuity was purchased.                 In addition, the Act allows annuity contracts without long term care riders to be exchanged for contracts with such a rider in a tax free transfer under Section 1035 of the Internal Revenue tax code.   This may be helpful to individuals who own annuities that have a low cost basis and are not in the

“I want to leave more to one child than another”, the client will tell me.  In some cases one child is more financially established than another.   Or maybe one child has special needs, whether diagnosed or not. When I ask whether this has been disclosed to either child the answer often is no and I can certainly understand why.  It can be an uncomfortable subject and we never know how the other person will take it.   But, the alternative – finding out after the parent has passed – can be far worse. What may be obvious to the parent may not be so obvious to the child.   And finding out after the parent dies leaves the child with no opportunity to get answers.  It can leave longstanding emotional scars.  There is a tendency to equate love with money.  If my parents leave less to me than to my sibling does it mean they love me less?  There may be very logical reasons why an uneven distribution was chosen.  But then why didn’t they just tell me? A will leaving 2/3 to Child A and 1/3 to Child B typically does not include an explanation why.  Perhaps worse than that is making Child B

                Last week I was talking about the difficulties in funding long term care through long term care insurance or Medicaid.  Insurance companies are getting out of the long term care market entirely or drastically raising premiums.  Medicaid, the primary government program that covers long term care, is still a fall back for many.  But, there are gaps in terms of what it will and will not cover, and it is increasingly difficult for many to navigate the Medicaid system.                 This is especially so given the 2 objectives most of our clients want to achieve – making sure they have enough money to meet their own needs but also passing on a legacy to their children and grandchildren.  Without proper planning for long term care, however, the first objective may overwhelm the second, making it unachievable.                 That’s where long term care insurance has sometimes helped.  It’s also where, what I call the legal solution that we often employ – 5 year planning using trusts  - has also helped.  But, sometimes there is no long term care insurance, it’s too late to get it and the legal solution can only go so far.                 Self funding with asset based long term care

                As I always explain to people, there are 3 ways to pay for long term care.  One way is to use your own money.  A second source is long term care insurance and the third is government benefits – primarily Medicaid and the VA Aid and Attendance program.                 I have written much in this blog about government benefits, especially Medicaid.  Because long term care is so expensive and so many people run out of money, Medicaid, as a last resort, must always be considered.                 But, the economy is still struggling and tax revenues, which provide the funding for Medicaid, are down.  State and Federal governments are looking for ways to cut costs and Medicaid is likely to continue to be a target.  The VA Aid and Attendance benefit, which has been a help but not a total solution by itself, is also likely to be more restrictive.  And, of course, it has never been an option for the non-Veteran senior population.   As we see fewer World War II veterans, there are fewer Korean veterans behind them, and still fewer Vietnam veterans coming behind them.                 Long term care insurance is an important piece as well but, unfortunately, we find that

                Last week I raised the legal issues faced by digital assets – specifically property rights.  Who owns my Facebook account after I die?  Who can access that account when I am alive but incapacitated?                 Courts are often wrestling with these issues for the first time.  State legislatures have not, in many cases, modified the laws to keep up with technological changes.  There have been a number of cases around the country in which family members of a deceased online account holder have fought to gain access to that account, some successful and others not.                 Many online companies have established rules regarding access.  For example, Facebook allows already confirmed friends to continue to access a deceased person’s account.  Yahoo’s policy is that the account expires when the accountholder dies.  Google provides that accounts can be deleted if they have not been accessed for a period of time.                 But, is that the last word?  Do the companies get to lay down the rules with regard to access and ownership?  Not necessarily.  One Michigan judge directed Yahoo to hand over a deceased Marine’s emails to his parents, who argued that he would have wanted them to see the emails.                 Some people have

                Technology has allowed us as a society to go places and do things never before imagined.  But, it has created issues and problems that, likewise, we could never have imagined.  Much has been written about the problem of texting while driving or “sexting” by minors.  Our laws have been struggling to keep up, because they were never written with computers, cellphones and the internet in mind.                 Criminal laws are often the first to be modified.  But, because technology allows us to create and preserve information in many different formats, property rights must be addressed as well.  The term often used to refer to what technology allows us to create is “digital assets”.                 What exactly are digital assets?  They include emails, email accounts, digital music, books, photographs and video, social network accounts, domain registrations, Domain Name System (DNS) service accounts, file-sharing accounts, blogs, listservs, financial accounts, banking accounts, web-hosting accounts and online accounts.  As technology continues to advance, new digital assets are created.                 And unlike paper, these assets can’t simply be thrown in the trash bin.  The volume of digital assets can dwarf that which is put to pen and paper.  This leads to legal issues in the realm of