"One sees great things from the valley, only small things from the peak."
--G.K. Chesterton
AMERICA and the world are in the midst of an economic down turn. No one is denying that - and this won't be the last down turn we face. Reassurance in our future, however, can be gleaned from our past. History, after all, not only serves to preserve the past, but is a window into the future. Recessions and bubbles in the housing market and financial arena have been here before. They have a life of their own with a beginning and an end; and even though they are painful, they do pass. So with a positive outlook, we look forward to the recovery in all markets and the spirit of renewal that comes with Spring.
Spring Seminar
Tuesday, May 19th - 7:00 p.m.
Life Care Planning - What you know now can empower you for decisions later
As strides are being made in the field of medicine to prolong our lives, long term care will be a necessity for most of us. Have you thought about it? Are you prepared for it? Whether you are concerned for yourself, your family, or a friend, please join us for our Annual Spring Seminar - Life Care Planning. Presented in two parts, the discussion will cover the various types of long-term care and will be followed up with options for paying for this care. It is important to understand that YOU will be responsible for your long-term care and should begin planning now. We hope you will take advantage of this seminar and benefit from its information.
Good news!
The American Spirit is strong and intact. Research shows that some important and positive things are happening in the midst of today's challenges. The upside of the down turn is that we are redefining our priorities, re-examining what is important, and remembering that the best things in life aren't things. What may have started out as a necessity to save money has turned into a strengthening of both the immediate and extended family unit. Families are spending more time at home, eating and playing together, planting gardens, saving money, and are paying attention to any excess usage of water, natural gas, electricity, and automobile fuel - all positive outcomes. Life may be giving us lemons, but we are making lemonade!
IRS UPDATE - Annual Gift Tax Exclusion
THE IRS allows you to make gifts up to the amount of the annual gift tax exclusion to any number of people every year, without you or the recipient of the gift ever owing gift taxes on the gift. Last year the annual gift tax exclusion amount was $12,000. THE GIFT TAX EXCLUSION FOR 2009 INCREASED TO $13,000. If you are married, however, you are each allowed to make a tax-free gift up to $13,000 to the same person, doubling the amount which can be gifted free of the gift tax. Other gifts qualify for gift tax exclusions as well, including those made to charities, your spouse, or direct payment of college tuition or medical bills you make for someone.
Any gifts valued over the annual gift exclusion amount are taxable, and require the filing of the IRS gift tax return form 709. However, there is a lifetime gift tax exclusion of $1 million dollars. Only gifts that exceed the lifetime exemption will trigger a gift tax. Any gifts in excess of the annual gift tax exclusion amount of $13,000 will require the filing of a gift tax return.
Should you have questions about implementing a gifting plan as part of your estate plan, please feel free to contact us. Annual gifting is a great way to reduce your estate tax exposure while keeping your assets within your family. Although gifting may be appropriate for some individuals, it may not be a good choice for everyone.
FEDERAL LAW CHANGES
Required Minimum Distribution (RMD)
In December 2008, President Bush signed into law The Worker, Retiree and Employer Recovery Act of 2008. The new Act suspends the requirement for minimum distributions (RMDs) from a qualified retirement account by retirees for the 2009 calendar year. Previous to this Act, retirees who reached the age of 70½ in a given year were required to begin by taking a distribution from their qualified retirement account (401(k), 403(b), some 457(b) and IRA plans) no later than April 1 of the following year. Failure to take the RMD subjected a retiree to a special 50% tax of the amount that they should have withdrawn.
The new Act works like this: If you became 70½ in 2008, you have until April 1, 2009, to take your first withdrawal. However, if you become 70½ in 2009 or have already been taking RMDs on an annual basis, you will not be required to take your RMD for that year; however, you will be required to take the normal RMD withdrawal in 2010.
You might wonder why Congress would suspend the RMD and the penalty tax. In a time when our retirement plans are suffering from the market down turn, retirees might be forced to sell some of their portfolio when stocks are at their lowest point in years in order to satisfy the RMD. Congress opted to let retirees leave their investments alone if they so desire for this year and possibly recover some losses.
Note: The Act waives the RMD from qualified retirement plans only for the year 2009. For the years 2008 and 2010, the RMD rule is applicable. This Act does not prohibit a retiree from withdrawing funds if they wish to - it only suspends the special 50% penalty for failure to withdraw the RMD at age 70½ or older. Specific procedures for the RMD waiver of 2009 can be found in U.S. Treasury Notice 2009-9 IRB ( 9 Jan 2009).
PENDING CALIFORNIA LEGISLATION
AB No. 292 - Alzheimer's Disease Research
Current law allows California taxpayers to voluntarily check a box on their California income tax return to contribute funds for Alzheimer's Disease (AD) research. This law will end on 1/1/2010, unless AB No. 292 is passed which would extend that date until 1/1/2015.
The Alzheimer's Association recently released a report on AD and its current and future effect on families and the State of California. The statistics are staggering and present a powerful case for action now on behalf of Alzheimer's research. Data projects nearly 1.1 million Californians will develop Alzheimer's or some sort of dementia (double the current number) in the next 20 years - that translates to 1 in 8 people. The effects are far reaching both privately and publicly. The Report's findings support a plan to intensify research, asserting that by delaying the onset of the debilitating symptoms of AD/dementia by 5 years, prevalence rates could be cut in half. If onset can be delayed, this could lessen the burden on families, businesses, communities, and the State. You can help by contacting your legislators and urging them to support this legislation. The entire Report can be viewed at alz.org/CAdata.
ARE ONLINE PHARMACIES SAFE?
Anyone who has a computer has been harassed with unsolicited e-mails and pop-ups advertising drugs for sale at rock bottom prices. The idea of ordering drugs on line is quite appealing. But, beware...you need to know the risks. The FBI is concerned enough about the risks to post on their website a notice about the risks of using Internet pharmacies and pharmaceutical companies online, and they have made Internet health care fraud one of their top priorities.
The task of investigating these frauds is immense. The volume is staggering - there are over 80,000 portal web sites on the Internet that link to over 1,400 potentially illegal companies and they operate worldwide. In 2007, a California Grand Jury indicted an online pharmacy ring that had netted more than $126 million over a two year period. The ring included doctors, druggists, and credit card processors, and demonstrates how intricate and sophisticated these illegal operations can be.
Abusive practices by illegal companies can run the gamut from inadequate review of your health records to not requiring a prescription. If a health care history is required, it is inadequately reviewed and it could result in medication incompatibility and medication contra-indicators as a result of existing health issues. Even riskier, products used to fill your order may be expired, altered, mislabeled, or made from suspect materials.
If ordering your prescription drugs online is a desired convenience, don't be discouraged. There are plenty of online pharmacies and pharmaceutical companies in the U.S. that are legitimate and put your safety first. The FBI guideline of what to look for when ordering drugs online includes the following: the company will require a prescription from a licensed doctor (usually by mail or by fax which will be verified by phone with your doctor); it will require you to submit a detailed medical history; it will clearly state their payment and privacy policies and shipping fees on their site; and it uses a secure website connection for payment. Many online pharmacies are certified by the National Association of Boards of Pharmacy. You can check their website www.nabp.net to see if your pharmacy is listed. "Bottom line: Do your homework and stay clear of illegal Internet pharmacies even if the price is tempting." - FBI
CARING FOR PETS AFTER DEATH
As a pet owner, you take care of your pet. You feed it, shelter it, care for it, and love it. If your pet outlives you, what happens to your pet when you are no longer around? More than 70% of all Americans have not planned ahead for the care of their pet after their death. In the confusion of a pet owner's unexpected death, pets are often overlooked and they may be sent to a shelter or even euthanized.
To ensure that your pet will be taken care of should something happen to you, there are several steps you can take. You can make arrangements to take care of your pets long-term through your estate plan or through a specially drafted pet trust. As your attorneys, we can guide you in preparing legal documents that can protect your interests and those of your pet by making specific plans for what you want to happen to your pet.
Essentially, your pet is considered property. When you die, it will have a new owner. Choosing a new owner is the most important thing you can do to make sure your pet is taken care of after your death. If you do not name a new owner for your pet in your estate plan, generally your pet will go to the beneficiary who inherits everything not taken care of by the rest of your estate plan or next of kin who may not be prepared or want to take care of your pet. There are other options for the care of your pet after your death besides naming a person as caretaker such as a pet retirement home or a shelter that does not euthanize pets. You can contact the Humane Society of the United States for information on these options (1-202-452-1100).
It is important to keep in mind the importance of personal arrangements for immediate care of your pet upon your death as the formalities of a trust can take some time. Prepare for the unexpected by making arrangements with at least two people to be emergency caregivers. Make sure friends and neighbors know who your pet caregivers are. To alert emergency response personnel, post an easily visible notice on your door or window regarding how many pets you have and the name and contact number of individuals who have agreed to serve as emergency caregivers.
If you have concerns about your pet and wish to discuss options for providing for your pet in your estate plan, please contact our offices.
CARE FOR THE CAREGIVER
Taking care of yourself is THE most important thing you can do as a caregiver. It is not a selfish act despite the feelings of most caregivers. When your needs as a caregiver are taken care of, the person you are caring for will benefit. For example, when you are a passenger on a plane, what is the first rule you are instructed to follow when faced with an emergency? Get your own oxygen mask on first because when you help yourself first you can effectively help others.
Family Caregiver Facts: 70% of all people who pass away have had family caregivers. Families, not social service agencies, nursing homes, or government programs are the mainstay of long term care for older people in the U.S. In California alone, caregivers comprise 11% of the population (1 out of every 8 people) and most often both the caregiver and recipient are aging adults. This figure is projected to double by 2030. With statistics like these, your chance of facing this challenge is high.
Effect on the Caregiver: Faced with the emotional, exhausting, and frustrating task of caring for a loved one, it is not uncommon for caregivers themselves to end up in the hospital. The fact is, for a caregiver spouse between the ages of 66 & 95 who is experiencing mental or emotional strain, their risk of dying is 37% higher than others their age who are not caregivers. The combination of prolonged stress, the physical demands of providing care, and the vulnerabilities that come with age, put a caregiver at significant risk for health problems. Despite the risks, caregivers of any age are less likely to practice preventative healthcare than non-caregivers. On the whole, caregivers report they can't sleep, eat poorly, lack exercise, don't rest when ill, and fail to keep, or even make, medical appointments. Studies show that caregivers have an increased risk of alcoholism, depression, and tobacco and drug use - symptoms so prevalent they have their own name - "Caretaker Syndrome". It is not only seniors who find themselves at risk. More and more people in their 40's and 50's are finding themselves juggling the demands of stressful jobs along with caring for adolescent children and their aging parents. All of this puts them at an increased risk for depression, chronic illness, and a general decline in the quality of life.
Self-Help for the Caregiver: Given the sobering data on caregivers, you can see why taking care of yourself is not a selfish act. As a caregiver, you have to ask yourself "What good will I be to the person I am caring for if I become ill? If I die?" and make yourself a priority. You can't stop the impact of a debilitating illness or injury on someone for whom you care about, but there is a great deal you can do to take care of YOU. Experts in the field of self-care offer the following list of "musts" for a caregiver: take responsibility for your own care, take time to rest and eat properly, exercise (even if only 20 minutes a day of walking), get enough sleep (take naps if you are up during the night), take time alone (read a book, take a bubble bath), seek and accept help, take time off (without feeling guilty), stay connected with friends (don't isolate yourself), communicate (talk to a trusted friend, counselor or a doctor), and don't wait until you are overwhelmed, exhausted, or your own health fails before seeking help. There are life rafts out there - acknowledge your need for assistance and explore support systems, search the internet, contact your local and state senior services office, or talk to your doctor and ask for referrals. Medicare, recognizing the importance of knowing that you are not alone, recently established a one-stop resource for caregivers (www.medicare.gov/caregivers) which includes information on navigating the Medicare system, health care services, and links to partner organizations that assist caregivers. Remember, it is not selfish to focus on your own needs and desires when a caregiver - IT IS AN IMPORTANT PART OF THE JOB.
