Transferring Wealth To The Next Generation

If you're like millions of Americans, you already know that an IRA can be a powerful way to save for retirement. What many people don't know is that an IRA can also be an effective estate-planning tool, allowing you to transfer wealth to future generations while reducing, deferring or even eliminating income taxes on your retirement savings. Thanks to changes in the distribution rules for qualified employer-sponsored retirement plans and IRAs, a strategy of stretching your IRA, sometimes called a "stretch IRA," can help you extend the account's tax-free compounding to your beneficiaries. While this won't be a practical solution for everyone, it may be a useful option to consider as you create or update your estate plan.

Thanks to changes in the distribution rules for qualified employer-sponsored retirement plans and IRAs, a strategy of stretching—extending the life of the account beyond the original account holder’s ownership—your IRA (sometimes called a "stretch IRA") can help you extend the account's tax-free compounding to your beneficiaries. While this won't be a practical solution for everyone, it may be a useful option to consider as you create or update your estate plan.  

Who can benefit from stretching an IRA?

The goal of stretching an IRA is to strategically transfer as much of your retirement savings as possible to your heirs, while helping to minimize the impact of income taxes on their inheritance. Anyone who has younger beneficiaries or beneficiaries whom they expect to outlive them—such as a younger spouse—can benefit from a stretch IRA. Keep in mind that stretching your IRA works best when you (the account owner) don't need the money in your IRA either before or after retirement to pay for living expenses or other retirement costs.

Making it work for you

You can typically implement a stretch IRA strategy with a new or existing IRA by simply naming one or more beneficiaries who are younger than you. You take only the required minimum distributions (RMDs) during your lifetime, leaving the remainder to continue growing tax-deferred while you're still alive.

If you're married, you may want to consider naming your spouse as your primary beneficiary and your children or grandchildren as secondary beneficiaries. Whether you're married, single or divorced, you can name anyone you choose as beneficiary, including family members, friends, a charitable organization or a family trust. Keep in mind that if your ultimate goal is preserving wealth for future generations, a stretch IRA strategy will generally allow you to transfer more money to younger beneficiaries when your primary account beneficiary dies before he or she can deplete the account, allowing other beneficiaries to inherit what remains.

Stretching out account distributions

Upon your death, your beneficiaries will generally have at least two or more distribution options, depending on whether they are spousal or non-spousal beneficiaries and whether or not you had begun taking RMDs from your account.

Your beneficiaries' distribution options (which will each have different tax consequences, depending on your particular situation) may include:

·         Taking a lump sum

·         Transferring the account balance to an inherited IRA with a five-year time limit for starting distributions

·         Transferring the account balance to an inherited IRA that distributes assets according to the beneficiary's life expectancy.

Spousal beneficiaries have the additional option of requesting a spousal transfer, allowing them to roll over the account balance into an IRA in his or her own name. To learn more about distribution options, read our Inherited Retirement Account Guide.

Roth vs. traditional IRAs

Stretching an IRA can be even more effective if you contribute to a Roth IRA. (To determine your eligibility, use Schwab's IRA Analyzer). While Roth IRA contributions are not tax-deductible, your investments grow tax-free, earnings can be withdrawn income-tax-free if you're at least 59½ and have had the Roth at least five years, and there are no RMDs at age 70½. Because of these benefits, using a Roth IRA for your stretch IRA strategy may be a smart choice if you have significant IRA balances that you don't plan to tap during your lifetime.

Although the value of a Roth IRA will be included in your estate, the account could grow larger than it otherwise might under traditional IRA distribution rules, potentially leaving more money for your heirs. Also, your beneficiaries can make income-tax-free withdrawals during their lifetimes (an added bonus for them if you prepaid the income tax on their behalf from your taxable estate by converting unneeded traditional IRAs to Roth IRAs during your lifetime).

The flexibility to change your mind

As with any estate-planning technique, your plans—and the tax laws—may evolve over time. If you're unsure whether or not you'll need your IRA assets to fund your own retirement, you can still implement a stretch IRA strategy and adjust your plans later as needed. All IRAs give you the flexibility to begin taking penalty-free distributions as early as age 59½. In addition, you can change the beneficiary at any time should your beneficiary's needs change or if you decide to use a different wealth-planning strategy. If you have questions about which IRA and estate-planning techniques are right for you, you may want to discuss your options with your tax advisor, as well as with your attorney.

Source: www.Schwab.com

The Problem With Do it Yourself Estate Planning

Do it yourself estate planning has become very popular. In theory it sounds great, but in practice it can lead to some wacky results. A web cast conducted by Northwestern Mutual, indicated that 30% of people in attendance have used or know someone who has used estate planning documents from an on-line service or have written them out.

Many web sites offer estate-planning documents at a much cheaper rate than securing an attorney. Despite the fact that on-line estate documents cost significantly less than an attorney, people have to realize that those documents contain verbage that is specific to certain laws that may or may not do what the person purchasing the document is intending. Estate Planners have explained “Estate planning documents are filled with legalese; terms that mean very specific things under the law. ” As a result, cut and paste do it yourself estate planning can lead to unintended consequences that can leave your family with few options once you pass. 

Source: www.lawprofessors.typepad.com

Trust: An Effective Vehicle for Succession and Estate Planning

The growth in personal wealth fueled by the overall growth in business in economy, especially mushrooming of affluent businesses governed by families, has created the need for structures that provide effective and hassle-free wealth management, asset protection and tax efficiency. In this respect, trusts are increasingly being recognized as a vehicle for effective succession and estate planning.

The law relating to private trusts is governed by the Indian Trusts Act ("Trust law"). A trust is basically a vehicle under which property is transferred from the original owner and held by the person to whom it is transferred for the benefit of another. The "author of the trust", the "trustee", the "beneficiary", the "trust-property", the "beneficial interest" and the "instrument of trust" are the integral elements of a trust. A trust can be created for any lawful purpose.

A trust, in relation to an immovable property, must be in writing and registered. A trust is created when the author of the trust indicates an intention to create a trust along with its purpose, beneficiary and the trust-property, and transfers the property to the trustee. A trust is different from a gift.

A trust structure comes with certain inherent advantages. A trust provides the flexibility to be set up in more than one form or in hybrid forms as per the requirement. A trust can be either private or public. As opposed to a public trust, a private trust is a trust generally for the convenience and support of individuals of families. Trust can be structured as revocable or irrevocable.

A revocable trust can enable the settler to exercise control over the property but can be prone to clubbing provisions under the tax laws. An irrevocable trust can provide safeguard against future creditor claims on the assets in case of bankruptcy, since the settler ceases to have the title to the trust property, yet at the same time enable indirect control over the property through terms of the trust deed.

This is one the prime benefits of a trust structure which allows ring fencing of wealth, the downside, however, being the settler losing ownership.

Further, while settling equity stake of a loss making company in a trust to ensure asset protection, one may need to be careful of tax provisions due to which losses could lapse in case of a substantial change in stake. A trust can be further set up either as discretionary, where trustees can have the discretion as regards distribution of benefits to one or more beneficiaries and extent thereof which may be especially useful if the settlor is the trustee, or as determinate, where entitlement of beneficiaries is fixed by the settlor through the trust deed.

Trusts can be set up inter vivos or by will. Both have their own characteristic advantages and purposes to serve. Multiple trusts can be set up to suit multiple purposes or even hybrid trusts combining various forms, thus, obviating the need to have multiple trusts.

Except for necessary governing provisions, the trust law provides enough flexibility in creating and managing a trust. Any person competent to contract can create a trust and any person capable of holding property can be a beneficiary including a minor. Any person capable of holding property can be a trustee. A trust can be an efficient tool for succession planning without the need for probate process through Court, thereby protecting privacy by preventing public disclosure.

 Source: www.economictimes.com

Feds Target Ambulette Fraud

After U.S. Attorney's office officials raided an ambulette company last month, the New York Post dug into Medicaid data on the services, and uncovered several ongoing state investigations and multimillion-dollar costs.

At the top of the Post's list: Abraham Demoz, a physician who runs Sunshine Medical Center in Canarsie, N.Y. The data revealed that Demoz authorized nearly 111,000 one-way trips in 2009--the latest year available--costing Medicaid $3.4 million.

These ambulette services are non-medical transport companies that charge $25 to $35 per trip to ferry Medicaid patients to and from doctor's appointments, pharmacies and the like. However, investigators suspect some of the trips authorized by Demoz and other physicians are to non-medical destinations.

But regulators aren't sitting on their hands on this one. New York health department officials told the Post that they've handed Demoz's name to the Medicaid Inspector General for further inquiry. And the MIG just last month demanded repayment of more than $430,000 from ambulette user Interline Employee Assistance Program in Jamaica, a substance-abuse clinic whose patients used $1.8 million worth of the transport services.

Source:  www.fiercehealthcare.com

Problems Faced by Ambulette Companies Now

What are some of the issues or problems these ambulance and ambulette companies face?

Ambulance clients need to understand auto liability claims versus general liability claims. The issue often comes up, when does auto liability stop and general liability start? We suggest getting both coverages from the same carrier. Otherwise, when there is a claim, two separate companies may try to deny coverage saying it is just an “auto claim” or “general claim.” So, if you have coverage for both from one source, there's no gap.

What are the issues related to medical malpractice faced by ambulance and ambulette companies?

Medical malpractice insurance policies have various time constraints. This is especially important if a claim is after a policy is no longer in force. You need to talk to your broker about tail coverage to protect if you are sued for an event that occurred in the past and the policy that was in force then is no longer in effect today.

When clients change carriers, we take into account they need to be covered when they go from one policy to another. This should be done on your primary insurance coverage as well as subsidiary coverage such as umbrella insurance. When you switch carriers, you need to consider which carrier it is better to use for coverage for prior events. In most cases, there is a three-year statute of limitations, so this type of coverage is important. Tail coverage is expensive, but many companies feel it is worth the expense versus paying a cost lawsuit judgement. Some clients say they will self-insure for tail coverage by putting money aside. My experience is that they rarely do.

What other insurance problems can ambulance and ambulette companies avoid?

Ambulance companies sometimes use their lights and sirens to facilitate call response when it is not an emergency. They do that because they want to get there before the competition, but it can cause a “shock loss” – a loss so catastrophic that the insurance company experiences a significant Underwriting Loss. That just makes it harder and more expensive to get insurance. Don’t forget basic operating procedures. Accidents have been caused, including fatalities, from patients who are not properly strapped in.
Source: www.Capcoverage.com

New York State Gets $2.5 Million in Medicaid Fraud Case

In life, Helen Sieger was the embattled owner of a Bronx nursing home.

Her employees at the Kingsbridge Heights Rehabilitation and Care Center went on strike in 2008 after she stopped paying their health insurance premiums, drawing attention from state lawmakers, labor leaders and even Barack Obama, then a senator from Illinois.

Ms. Sieger was arrested a year later on charges of bribing a hospital social worker to steer patients to her nursing home, and of improperly collecting payments from the state’s Medicaid program. She jumped bail, only to be caught in a Miami hotel and returned to New York, where she died in custody in 2011.

But now Ms. Sieger is making amends in death.

The state attorney general, Eric T. Schneiderman, said on Tuesday that his office had reached a settlement with the estate of Ms. Sieger to pay a total of $2.5 million to the state’s Medicaid program, which includes $1.2 million in reimbursements, and $1.3 million for damages.

“There are few programs as sacred and important to our most vulnerable citizens as Medicaid,” Mr. Schneiderman said in a statement. “So, when we have a case involving a criminal scheme that robs Medicaid, our prosecutors will do whatever it takes to restore those stolen funds — whether that criminal is alive or we’re forced to settle with their estate.”

Nicholas Gravante, Jr., a lawyer at Boies, Schiller & Flexner who represented Ms. Sieger’s estate, said that her family was “pleased to have this matter behind it.”

Ms. Sieger, who took over the nursing home in the mid-1990s, was removed in 2009 by the State Health Department because of an issue over the nursing home’s lease. The operation of the 400-bed nursing home, one of the largest in the Bronx, was eventually transferred to a state receiver, which still runs it today.

Also in 2009, Ms. Sieger was indicted, accused of paying Frank Rivera, a former social worker at NewYork-Presbyterian Hospital/Columbia University Medical Center, $300 for every patient that he referred who was subsequently admitted to her nursing home, plus a bonus of $1,000 for every 10 patients, according to the attorney general’s office. Beginning in 2005, he received more than $19,750 from Ms. Sieger.

Mr. Rivera pleaded guilty to felony and misdemeanor violations under a state law, and is awaiting sentencing, according to the attorney general’s office.

The attorney general’s office also said that the investigation had found that Ms. Sieger, who lived in Borough Park, Brooklyn, held several bank accounts, including one in Montana with $2 million.

Michael Benjamin, a former Bronx assemblyman, praised the settlement, calling it an appropriate way for “the state to recoup her ill-gotten gains.”

“It sends a signal that the state will not be cheated,” he said. “And that people who steal from the poor and from the elderly will be pursued whether they’re dead or alive.”

Source: www.NewYorkTimes.com

Golden Parachutes Are Still Very Much in Style

MOST employees who leave a company are typically offered modest severance — in some cases a corporate pension, and perhaps a retirement party hosted by co-workers. For many chief executives of corporations, the rewards are far, far richer.

Executives who choose to retire — or are forced to retire — often receive millions when they leave. And despite years of public outcry against such deals, multimillion-dollar severance packages are still common. 

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