The uncertainty about the future of the federal estate tax, state estate or inheritance taxes and other estate-settlement costs indicate that estate and financial plans should be flexible for changing needs. The durable power of attorney is an inexpensive device that permits a person to designate a family member or professional adviser to make critical financial and personal decisions and take action to preserve the estate when incapacity occurs.
An estate plan that is never updated works about as well as a car that is never serviced. They're both in great condition when they're new, but the wear and tear of the intervening years can take an enormous toll. Because even the most well-conceived plan cannot predict every contingency, a careful review of an existing estate plan is critical to making sure that it will continue to meet evolving needs.
After a long process of debate, procedure and Congressional politics, we have Health Care reform. The changes are actually in two pieces of legislation. The Patient Protection and Affordable Care Act was passed by the Senate and the House under normal parliamentary procedures, and the Health Care and Education Reconciliation Act of 2010 was passed under the reconciliation process in the Senate by a simple majority vote and approved by the House. President Obama signed both bills into law last month. The legislation contains sweeping changes to the health care system in the United States, with many tax and other revenue-raising provisions designed to offset portions of its cost.
Most people wonder what they should do with their tax records. These items include old returns; substantiating information such as receipts, canceled checks, and diaries; and financial statements regarding stocks, bonds, and real estate. The current law concerning estates has provided a rather unique and troubling situation with a temporary one-year repeal of the federal estate and generation-skipping taxes and a one-year repeal of the so-called basis step-up rules that otherwise establish the income-tax basis for assets passing to heirs. For 2010, the assets would pass to heirs under what is technically referred to as the modified carryover basis rules. We feel that this law may be changed retroactively, but barring that development, it would be imperative to understand the impact of this rule on record keeping and compliance. Here are some guidelines for determining what to keep and for how long.
The Health Care reform has lost momentum and may not come to fruition. It contained surprisingly little about the potentially devastating costs of long-term care needs. There is a bill (The CLASS Act--Community Living Assistance Services and Support) that was introduced by the late Senator Kennedy that would address some the concerns associated with long-term care, but its current prospects are uncertain.
The economy and action/inaction of Congress have created more than the usual upheaval with respect to tax planning moving forward into 2010. The federal estate and generation-skipping transfer (GST) taxes lapsed (for one year) at the end of 2009. This has generated some controversial discussion in the media and Congress will have to address this issue sometime this year.
You may have heard about the opportunity for all taxpayers to make a Roth IRA conversion beginning in 2010. This type of tax-planning opportunity only comes around once or twice a decade and should get serious consideration.