FLORIDA ESTATE PLANNING AND PROBATE LAW BLOG: Sarasota retirement planning

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NEW 401-K RELAXED HARDSHIP RESTRICTIONS

♠ Posted by Marc J. Soss in 2018 Budget Law,401k Hardship Withdrawals,401K retirement plans,Budget Act of 2018,sarasota estate planning lawyer,Sarasota retirement planning

The Budget Act of 2018, signed into law on February 9, 2018, provides individuals with 401K retirement plans relaxed hardship restrictions. The new relaxed restrictions include: (i) Rescission of the IRS rule that prohibits a participant from making an elective 401(k) deferral for six months after taking a hardship withdrawal; (ii) Allowing plan participants to take a hardship withdrawal from funds attributable to qualified non-elective contributions or qualified matching contributions made by employers under a safe harbor plan; and (iii) Allowing a hardship withdrawal to include not only the actual amount of elective 401(k) deferrals made but the earnings on those contributions. The changes are effective for plan years beginning after December 31, 2018.

2017 CHANGES TO THE REVERSE MORTGAGE PROGRAM

♠ Posted by Marc J. Soss in 2017 reverse mortgage changes,elder planning,florida estate planning,home equity,retirement planning 2017,reverse mortgage,Sarasota estate planning,Sarasota retirement planning

Effective October 2, 2017, new rules go into effect for federally backed HECM (Home Equity Conversion Mortgage) reverse mortgages. The good news is that the new rules will only impact new borrowers. A reverse mortgage allows an individual over age 62 to borrow against the equity in their home without being required to pay back the loan until they either move, sell the property or die. For many seniors, a reverse mortgage provides them a means to generate funds in retirement. The new rules will increase the upfront cost of the reverse mortgage to 2.0% (it previously was 0.5% for those receiving less than 60% of their home equity and 2.5% for those borrowing more than 60%). The new rule will also decrease the annual premium from 1.25% to 0.5% of the outstanding mortgage balance. The amount that may be borrowed will remain linked to the age of the borrower and prevailing interest rate. At current interest rates, the average borrower is able to borrow approximately 58% of the value of the home, down from 64%. The new rules are necessitated by the continuing deficits in the federal reverse mortgage program.

FLORIDA HOMESTEAD EXEMPTION INCREASE ON THE BALLOT IN 2018

♠ Posted by Marc J. Soss in 2019 tax exemption,Florida Homestead Exemption,Homestead exemption increase,Sarasota attorney,Sarasota estate planning,Sarasota retirement planning

In 2018, Florida voters will have the opportunity to vote on a constitutional amendment to raise the Florida homestead exemption from $50,000 to $75,000, on homes worth $100,000 or more. If 60% of voters approve, the new rate will take effect January 1, 2019. The Florida homestead exemption reduces the value of a Florida residents home for property tax assessment purposes. The proposed amendment would save Florida state residents about $644 million with the average homeowner receiving an annual savings of $170. Florida municipalities and counties are concerned about the decreased revenues impact on critical services (fire department, library, police, etc...).

NEW FINRA RULE TO PROTECT EXPLOITATION OF THE ELDERLY

♠ Posted by Marc J. Soss in elderly U.S. population,exploitation of elderly,financial exploitation,florida estate planning,Regulatory Notice 17-11,sarasota elder abuse,sarasota elderly,Sarasota retirement planning

In an effort to help protect the elderly U.S. population the Financial Industry Regulatory Authority (FINRA) has announced that the Securities and Exchange Commission (SEC) has approved a new rule and an amendment that are specific to customers who are elders. Regulatory Notice 17-11 explains the new rule and amendment: (1) the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) to permit members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers; and (2) amendments to FINRA Rule 4512 (Customer Account Information) to require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. Both New Rule 2165 and the amendments to Rule 4512 become effective February 5, 2018. The new rule and amendment are designed to enable financial specialists to be able to more quickly and effectively address suspected financial exploitation of seniors and other specified adults.

PROTECTING YOUR HEIRS FROM YOUR DEBTS AT DEATH

♠ Posted by Marc J. Soss in estate debts,florida creditor protection,florida estate planning,florida probate,florida probate attorney,PROBATE CREDITORS,Sarasota estate planning,Sarasota retirement planning

With almost 70% of the retiree population solely living on social security it is not surprising that the percentage of families with debt headed by someone age 65 to 74 rose from about 50% in 1989 to about 66% in 2013. Personal debt nearly doubled during the same time period from 21% to about 41%. For most seniors the debt is not being utilized to live a lavished lifestyle but to pay for expensive nursing home, aids and in-home care. As seniors accumulate this debt their families become concerned over what happens to their unpaid bills when they die. It is recommended that families discuss these increasing debts, what amounts, if any, will be the responsibility of their estate, and what they can do to protect an inheritance for their heirs. Families need to recognize that their children are not responsible for their debts at death and only the decedent’s estate assets (subject to probate or Trust administration, but excluding exempt assets) can be utilized to repay the debt. For example, a retirement account (IRA or 401(k)) with a designated beneficiary is creditor protected. A parent’s federal student loan debt will be canceled at death, although taxes may be owed on the forgiven debt. It is important to consult with a legal specialist to learn more about the options that are available in each state.

DOES YOUR FORMER STATE OF RESIDENCE STILL BELIEVE YOU ARE A RESIDENT?

♠ Posted by Marc J. Soss in Power of Attorney,probate attorney,retirement planning,Sarasota attorney,Sarasota estate planning,Sarasota retirement planning,senior citizens,state death taxes

The term “Snowbird” refers to an individual who spends their winters in one of the sunshine states (Florida, Arizona, etc..) and their summers in one of the cooler weather states (Northeast, Northwest, etc..). Most Snowbirds claim one of the sunshine states, without or a limited state income tax, as their permanent residence. Problems can arise for a Snowbird when their former state of residence still deems them to be a resident of that state and subject to its states taxing authority. For example, a New York resident is subject to both state and federal income taxes on all income earned. In contrast, a Florida resident is only subject to New York income taxes on income derived from “New York sources” (rental income, etc.). When challenged, a former New York state resident will be forced to show by “clear and convincing evidence” that they intended to moving to Florida or another one of the sunshine states permanently and not just a rouse to avoid their former state of residences income tax burden. While “intent” can be a very subjective test, states with income taxes and estate taxes use written audit guidelines to help them determine a taxpayer intent (where is your permanent place of abode). They will examine and look at where you spend more than one hundred eighty-three days a year, business involvement, family connections, your driver’s license registration, where you are registered to vote, where you maintain your family heirlooms, works of art, books, antiques, family photo albums and receive your mail. It is important, to avoid this dilemma, that if you intend to make Florida your permanent residence you: (i) obtain the homestead exemption on your Florida residence; (ii) register to vote in Florida (even if you are renting a home or condominium); (iii) register your vehicles in Florida; (iv) update your estate planning documents to reflect Florida as your state of residency; and (v) affiliate with a Florida house of worship (church, temple, mosque, etc..).

FEDERAL ELDER ABUSE AND PREVENTION ACT ON THE HORIZON

♠ Posted by Marc J. Soss in elder abuse act,guardianship abuse,probate attorney,sarasota elder abuse,Sarasota estate planning,Sarasota guardianship abuse,Sarasota retirement planning,senior citizens

The Elder Abuse and Prevention Act has a high chance of becoming law this year. The legislation has received substantial support among elderly advocacy groups because of its promise to make the world a safer place for seniors. Additionally, the Act will increase penalties for marketing fraud schemes targeting seniors and expand data collection of elder abuse to help create more reliable statistics highlighting the prevalence of this problem. The Act is also aiming to enlist the Justice Department to become a greater protector of seniors.

THE 2017 FEDERAL ESTATE AND GIFT TAX LIMITS

♠ Posted by Marc J. Soss in 2017 Federal Estate Tax,2017 federal gift tax exemption,florida estate planning,Sarasota estate planning,Sarasota retirement planning,Sarasota Tax Attorney

The IRS has published Rev. Proc. 2016-55 and the federal estate and gift tax limits for 2017. For 2017, the credit against federal estate tax (federal exclusion amount) is increased to $5,490,000. For an individual who passes away during 2017, no federal estate tax will be imposed if his or her gross estate is less than $5,490,000. For a married couple (including a same-sex couple) the federal exclusion amount is $10,980,000. For 2017, the federal gift tax limit of $14,000 remains in place. This allows an individual to gift up to $14,000 in 2017, to any individual without being required to report the gift to the IRS or utilizing a portion of their lifetime gift tax exemption (also $5,490,000). Spouses can make a joint gift of $28,000 without being required to report the gift to the IRS or utilizing a portion of their lifetime gift tax exemption. The federal gift tax limit does not apply to gifts between spouses. However, if the gift is made to a spouse who is not a United States citizen, the first $149,000 of gifts are not included in the total amount of taxable gifts that must be reported to the IRS. In addition, the federal gift tax limitation does not apply to qualified gifts paid on behalf of another individual directly to a college or university or for medical purposes.

IS A PAY-ON-DEATH OR TRANSFER-ON-DEATH ACCOUNT THE RIGHT CHOICE FOR THE ACCOUNT BENEFICIARY?

♠ Posted by Marc J. Soss in creditor protection,florida estate planning,pay-on-death account,Sarasota estate planning,Sarasota retirement planning,totten trust,transfer-on-death account

The benefits and negatives associated with establishing transfer on death (TOD) and pay on death (POD) accounts has been debated for a long-time. The main benefit of an account of this nature is that the account assets will pass directly to the beneficiary(s) named on the account without probate or being subject to the decedent’s creditor claims. This is a simple way to transfer assets at death to an individual not involved in any dispute or litigation (divorce, bankruptcy, judgment creditor, etc.). In contrast, if the individual is involved in a dispute or litigation the assets passing outright to them could be at risk to the dispute or litigants claims. Consideration must also be taken if the individual named as the account beneficiary is a “special needs” individual, as direct receipt of the account funds could result in them loosing eligibility for the government benefits they are receiving. In addition, a POD or TOD could alter the end result of the decedent's intended estate plan.

SOCIAL SECURITY - NEW AGE FOR FULL RETIREMENT

♠ Posted by Marc J. Soss in 2017 social security rates,Full retirement rate,Sarasota estate planning,Sarasota retirement planning,social security 2017

Understanding social security can result in a happier retirement. January 1, 2017 brought in significant changes and the new age of 66 years and 2 months (it had been 65 years) for full retirement benefits (for those born between 01/02/1955 through 01/01/1956). It is expected to increase to age 67 for individuals born in the 1960’s. Individuals may receive permanently reduced retirement benefits when they turn 62 in 2017. As the full retirement age continues to increase, there are greater reductions in benefits for individuals who claim the benefits before they reach full retirement age. For example, if you apply for benefits in 2017 at age 62, your monthly benefit amount will be reduced nearly twenty-six (26%) percent. Your spouse’s benefits, if any, will also be significantly reduced if you claim benefits before reaching full retirement age. There are both advantages and disadvantages to receiving your social security benefit before full retirement age. An advantage is that you will collect benefits for a longer time period. In contrast, the amount you receive will be reduced based upon how early you elect to begin receiving them.

STATE ESTATES AND INHERITANCE TAXES IN 2017

♠ Posted by Marc J. Soss in 2017 Federal Estate Tax,asset protection planning,estate planning,ESTATE TAX ELIMINATION,inheritance tax,retirement planning,Sarasota retirement planning,state death taxes,state estate tax exemption

For years it has been discussed that for estate tax purposes it was better to die a resident of certain states than others. The following is an updated list, as of January 1, 2017, of the states which impose a "death or inheritance tax" on its residents and those who follow the Federal Estate Tax Exemption amount. Good States in Which to Die a Resident: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming. Bad States in Which to Die a Resident: Connecticut ($2,000,000), Delaware ($5,490,000), District of Columbia ($2,000,000), Hawaii ($5,490,000), Illinois ($4,000,000), Iowa (inheritance tax on transfers to others than lineal ascendants and descendants), Kentucky (separate inheritance tax), Maine (estate tax and no portability), Maryland ($3,000,000), Massachusetts ($1,000,000), Minnesota ($1,800,000), Nebraska (County Inheritance Tax), New Jersey ($2,000,000), New York ($4,187,500 for April 1, 2016 through March 31, 2017 and then $5,250,000 for April 1, 2017 through December 31, 2018), Oregon ($1,000,000), Pennsylvania (Inheritance Tax), Rhode Island ($1,500,000), Vermont ($2,750,000), and Washington ($2,129,000).

2017 - SOCIAL SECURITY BENEFIT RATES

♠ Posted by Marc J. Soss in 2017 social security rates,retirement age,retirement benefits,Sarasota estate planning,Sarasota retirement planning,social security benefits

The Social Security Administration has announced its changes for 2017. Social Security benefit payments will increase by .3% (3/10s of 1%) in 2017. The Social Security Wage Base, the amount of income subject to Social Security taxes, will increase to $127,200 (up from $118,500). In addition, the age for full retirement (which has been 66 for the past 12 years), will increase in 2017. You receive the full amount of your calculated benefits at full retirement age, but a reduced amount if you start receiving benefits earlier. For those born in 1955, full retirement age will be 66 years and 2 months. In essence, Social Security benefits are being decreased since you are required to wait longer to collect "full benefits." The change in the full retirement age dates back to a "deal" enacted in 1983.