Checklist for Selecting a Nursing Home

You are looking for an excellent nursing home placement for yourself or your loved one. These 10 points will help you determine which placement will provide the best care and the most dignity.

1. Ask About Care Plans

Care plans outline the care provided to the resident and should be updated at least every three months and immediately on any change in a resident’s condition. Care plans should be specific and individualized, listing what staff will be involved and what each staff member will do, and should include the resident, family members, and staff. Care conferences to discuss the medical care, activities, and therapies the resident receives should be held regularly and should involve the staff, the resident, and the family. Ask these questions of the residents and their families too. Find out how nonemergency medical concerns are handled. Ideally, a medical director will respond to questions and concerns within 24 hours.

2. Check Last Three Inspections

Nursing homes must be inspected at least every 15 months. Inspection reports are available from Medicare at medicare.gov.  Read the most recent inspections. If there are deficiencies, ask about those deficiencies and find out what is being done to correct the problems. Pay attention to the size and scope of the deficiencies; some deficiencies are more serious than others. If the facility has had any major penalties, find out why the penalties were imposed and if the underlying problems have been resolved. The following penalties should raise a red flag:  government sanctions, decertification from Medicare or Medicaid, partial or total bans on admissions, state appointed monitors, or temporary managers fines.

3. Ensure Minimal Use of Restraints

Restraints are anything used to keep a resident from moving freely, including, but not limited to, cloth ties, bed rails, chair trays, and hand mitts. Restraints can contribute to agitation and depression, development of bed sores, increased likelihood of injury in case of a fall, broken bones, and strangulation. Safer alternatives include pillows to help a person sit straight, reclining chairs, chair alarms, bed alarms, lowered beds, and floor padding. Ask staff and residents or residents’ families about restraints. Look around.  Do you see evidence that restraints are commonly used?

4. Take a Tour

Tour the facility.  Pay attention to what you see, hear, and smell. Do not be limited to public areas, but ask to tour the residential areas too. Check out the food being served. Look at the activities chart. Pay attention to how the staff treats the residents. Try to tour on a weekday and on a weekend and look for any differences.

5. Talk to the Residents

Find out what the current residents or their families think about their care. Talk to them, their family members, and caregivers. Talk to the staff. Get a feel for what they think about their jobs and how they feel about the residents. Ask about coworkers and try to find out if staff turnover is a problem. Lower turnover could mean higher job satisfaction, which results in better care for the residents. Lower turnover also means that the residents can develop relationships with the staff and receive more consistent care.

6. Inquire About Staffing

Facilities are requires to post the number of licensed and unlicensed direct care staff for each shift. Check it out on weekdays and weekends. Homes with more licensed staff tend to provide better care. Do they use temporary agencies? Are staff members permanently assigned to residents?  The better the staff know the resident and the more comfortable they are, the better the care should be.

7. Check the Resident or Family Council

Resident and family councils, made up of residents and their families and friends, help protect against abuse and neglect, tell a facility when culture change is necessary, assist the activity director in increasing resident participation, and provide ongoing appreciation for staff. Resident and family councils benefit residents by providing education about residents’ rights and a means to express concerns and solve problems. They also provide orientation, support, and information for new residents and families.

8. Request Information About Changes in Source of Payment

Federal law prohibits Medicaid certified homes from seeking written promises to pay privately. Most nursing home applications still require financial information and many have written policies stating that someone is more likely to be admitted if that person has a certain level of assets, which ensures his or her ability to pay privately. State law requires that if a nursing home is certified for Medicare, it must be certified for Medicaid.  Medicare beds are, however, more profitable to the nursing home and the Michigan Department of Community Health (MDCH) does not actively enforce this law. In 2004, the MDCH issued a policy stating that any newly certified Medicaid beds (after August 1, 2004) must also be Medicaid certified. Dual certification benefits residents when their source of payment changes.

9. Find Out How Much Control the Residents Have

Find out how much choice the resident has in his or her daily schedule and the care received. For example, can the resident participate in social, recreational, religious, or cultural activities that are important to him or her? Can he or she decide when to participate? Does he or she get to choose what time to get up, go to sleep, or bathe? Can he or she get food and drinks at any time? What if he or she doesn’t like the food that is served? Is transportation provided to community activities? Does he or she get a separate television? Can he or she decorate the living space the way he or she wants?

10. Ask About Visitation

Ideally, the nursing home should be located conveniently for family and friends and should provide a welcoming atmosphere for visitors. Find out what the restrictions are for visiting. Visitors are beneficial to the resident in that they can alert staff to changes in the resident’s behavior or mood, raise concerns with staff members, and ensure that a resident is receiving appropriate and adequate care. Not only do visitors brighten the resident’s day, but residents who have lots of visitors generally receive better care.

Managing Digital Assets Under Michigan's New Law

What’s new?  Michigan recently enacted the “Fiduciary Access to Digital Access Act” (the (“Act”).  The new law specifies rules for disclosure of “digital assets” and “electronic communications”.

What is the purpose of the Act?  The term “digital assets” refers to any electronic record in which a user has a right or interest, which includes most online financial accounts.  The Act also covers “electronic communications”, which refers to any writing, data, sounds or images that are transmitted electronically (text, email, Facebook, Twitter, etc.).  The purpose of the Act is to prescribe who may have access to digital assets and electronic communications after a person dies or becomes incapacitated.  

Why does it matter?  Privacy and access are the main concerns.  Most people maintain online accounts for their financial accounts and communications.  Account owners may now designate a person to manage those assets on their behalf.  With respect to digital assets, that person will be an agent under a power of attorney, executor, or trustee.  However, access to the content of electronic communications is restricted unless a person is expressly authorized to receive those records.

What should you do?  If you have not already so, designate an agent, executor, or trustee to handle your affairs upon death or incapacity, and provide them with the location of your digital assets.  If you also want to designate a person to manage the content of your electronic communications, then your documents must contain specific authority for that purpose.

Tax Implications of Same-Sex Marriages

The Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) in the case of U.S. v. Windsor.  The decision has broad tax implications for same-sex couples.

Joint federal income tax returns.  Same-sex couples may now file joint federal income tax returns. It should be noted, however, that joint returns aren't always beneficial.  If both partners in a same-sex marriage have high taxable incomes, filing a joint return could result in more taxes being paid.  

Exclusion of benefits from income. Another result of the Supreme Court decision is that tax-free employer provided benefits to married same-sex partners that were previously included in income under federal law are now excluded from income, so refunds can be claimed on this basis as well. 

Estate tax marital deduction.  The estate of a partner in a same-sex marriage is entitled to the marital deduction, which means the partner's estate passes tax-free to his or her spouse. 

Federal benefits.  The Court's decision also means that partners of federal employees are eligible to receive federal benefits, as well as social security survivor benefits upon the death of a partner.

The IRS has clarified that, for federal tax purposes, if a same-sex couple is married in a state where it is legal to perform same-sex marriages, the marriage is recognized for federal tax purposes regardless of where the married couple lives (i.e., whether or not they live in a state that recognizes same-sex marriages). However, individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law, but not denominated as a marriage under the laws of that state, are not treated as being married for federal tax purposes.

What is the CAN-SPAM Act and How Does it Affect Your Business?

The CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing Act) establishes requirements for sending commercial e-mail.  The Act spells out penalties for any person or business that violates the law, and gives consumers the right to opt-out of any email solicitation. 

The penalties for violating the CAN-SPAM Act can be severe, ranging up to $16,000 or more per person per violation. Therefore, it is important to understand the requirements of the Act if your business uses e-mail for marketing and advertising purposes.  

Click here to view The CAN-SPAM Act: Compliance Guide for Business. 

Facebook Announces New Policy for Estate Planning

Facebook announced Thursday that it will allow members to designate a friend or family member to be a "Legacy Contact" to make one last post, and manage their account, upon death.

Until now, Facebook verified the death and "memorialized" the account for deceased members. Their account could then be viewed, but not edited or managed.

Use this procedure to designate a Facebook 'Legacy Contact':

1. On the right side of your Facebook page, click on the downward-facing arrow to show the drop-down menu. Click on "Settings."
2. Choose "Security," then "Legacy Contact" at the bottom of the page.
3. Choose your Legacy Contact. 
4. Choose the options you want your Legacy Contact to have.

The system will offer an option to send a message to the designated person.

Asset Protection Tip -- Titling Your Personal Vehicles

Did you know that the Michigan No-Fault Act imposes tort liability for bodily injury on both operators AND owners of motor vehicles? This means that the owner of a motor vehicle is fully liable for an accident -- even if they were not driving.

Married couples can reduce their exposure to liability simply by titling each of their motor vehicles in the name of the spouse who drives it most often. If an accident happens, then only the spouse who owned and drove the vehicle can be named in a lawsuit. Michigan law prevents judgment creditors from seizing a married couple's jointly-owned assets when only ONE of the spouses is subject to a judgment. This law protects the "innocent" spouse from judgments of the other spouse. Therefore, having only spouse on a vehicle title will reduce a married couple's exposure to liability for an accident.

The same idea applies to any vehicle that you own which is frequently driven by another person (a child for example) -- removing your name from the title immediately reduces your exposure to liability for their actions.

So, managing your vehicle titles can be an effective way to protect your assets at almost no cost.

5 Reasons That Wills and Trusts Don't Always Work

5 Reasons That Wills and Trusts Don't Always Work --

1. Documents Not Clearly Drafted -- confusing or incorrect instructions may lead to family disputes, additional costs, and unintended results
2. Outdated Documents -- documents must be updated to reflect changes in your life (marriage, divorce, children, etc.)
3. Assets Not Covered by Will or Trust - you must coordinate assets with your will or trust; otherwise the documents will not direct your assets in the manner that you intend
4. Estate Tax Law Changes -- recent tax law changes have made many documents obsolete
5. Choice of Documents -- choosing the wrong documents can lead to unintended results and additional costs

We have seen numerous documents that do not work for the reasons set forth above.  Take a few minutes to consider whether any of these issues might affect your estate plan.

What is "Estate Planning" Anyway?

Lawyers like to talk about "estate planning", but almost no one else uses that term in the same way.  I have asked many groups "What does estate planning mean to you?", and the responses have varied widely.  Most people just say a "will" or "trust".  That's certainly true, but there is a lot more to it than that.  For me, estate planning is more about objectives than documents.  So, here is my definition --
Estate planning is a combination of documents and strategies that are designed to achieve one or more of the following objectives --

• Transfer assets to beneficiaries

• Disinherit specific heirs

• Manage assets for the benefit of another person

• Minimize administrative costs

• Minimize administrative complexity and litigation

• Nominate persons to handle fiduciary responsibilities

• Protect assets from creditors

• Pay expenses & debts

• Minimize estate and income taxes

• Prepare for incapacity

An exact definition is not as important as achieving a positive outcome for the persons who care. Only one thing is certain -- it must be in writing!

New Dollar Limits for Small Claims -- File a Lawsuit Without a Lawyer

The Michigan Legislature recently increased the dollars limits for small claims lawsuits.  As you may know, the parties in a small claims case cannot be represented by attorneys in court.  The new jurisdictional limits of small claims court are --

• September 1, 2012 to December 31, 2014 -- $5,000
• January 1, 2015 to December 31, 2017 -- $5,500
• January 1, 2018 to December 31, 2020 -- $6,000
• January 1, 2021 to December 31, 2023 -- $7,000
• Beginning January 1, 2024 -- $7,000

I have a complete guide to file a small claims lawsuit on my web site.  Feel free to use the forms and instructions posted there. 

IRS Adopts Stricter Interpretation of One-Year Waiting Period for IRA Rollovers

An individual can make only one tax-free rollover from one traditional IRA to another in any one-year period.  For at least as far back as 1981, the IRS has interpreted that rule as applying to IRAs on an-IRA-by-IRA basis. However, in the wake of a recent Tax Court case, the IRS announced that it would apply the one-year waiting period on an aggregate basis to all of an individual's IRAs. In Announcement 2014-15, the IRS also stated that it will not apply this more restrictive interpretation to IRA distributions occurring before 2015.

One-Year Waiting Period for IRA Rollovers

Under Code Sec. 408(d)(3)(A), a taxpayer can roll over, tax free, a distribution from a traditional IRA into the same or another traditional IRA. Generally, the individual must make the rollover contribution by the 60th day after the day the individual receives the distribution from the IRA. Code Sec. 408(d)(3)(B) provides that an individual can make only one such rollover in any one-year period. The one-year waiting period begins on the date the individual receives the IRA distribution.

Prop. Reg. Sec. 1.408-4(b)(4)(ii) and IRS Publication 590, Individual Retirement Arrangements (IRAs), provide that the one-year waiting period is applied on an IRA-by-IRA basis. Under this interpretation, an individual who makes a tax-free rollover of any part of a distribution from a traditional IRA cannot, within a one-year period, make a tax-free rollover of any later distribution from that same IRA. The individual also cannot make a tax-free rollover of any amount distributed within the same one-year period from the IRA into which he or she made the tax-free rollover.

For example, applying the one-year waiting period on an IRA-by-IRA basis also means that if an individual maintains more than one IRA say, IRA-1, IRA-2, and IRA-3 - and rolls over the assets of IRA-1 into IRA-3, he or she would not be precluded from making a tax-free rollover from IRA-2 to IRA-3 or any other IRA within one year after the rollover from IRA-1 to IRA-3. However, a recent Tax Court opinion, Bobrow v. Comm'r, T.C. Memo. 2014-21, held that the one-year waiting period applies on an aggregate basis, rather than on an IRA-by-IRA basis. That means an individual cannot make an IRA-to-IRA rollover if he or she has made such a rollover involving any of the individual's IRAs in the preceding one-year period.

IRS Will Follow Bobrow

In Announcement 2014-15, the IRS stated that it anticipates that it will follow the interpretation of Code Sec. 408(d)(3)(B) in Bobrow and, accordingly, intends to withdraw the proposed regulation and revise Publication 590 to the extent needed to follow that interpretation.

The IRS noted that these actions will not affect an IRA owner's ability to transfer funds from one IRA trustee directly to another, because, under Rev. Rul. 78-406, such a "trustee-to-trustee transfer" is not a rollover and, therefore, is not subject to the one-waiting period under Code Sec. 408(d)(3)(B).

Practice Tip: A trustee-to-trustee transfer may be accomplished by any reasonable means of direct payment to the receiving IRA. If the payment is made by wire transfer, the wire transfer must be directed only to the trustee or custodian of the receiving IRA. If payment is made by check, the check must be negotiable only by the trustee or custodian of the receiving IRA.

Estate and Gift Tax Under The 2012 Tax Relief Act

New Permanent Indexed Estate & Gift Tax Exemption. The 2012 Tax Relief Act permanently establishes the estate exemption amount (technically, the basic exclusion amount) at $5 million per person (as increased for inflation after 2011). Inflation indexing increased the exemption to $5,120,000 for 2012.  Based on inflation data, the exemption should approximately $5,250,000 for gifts made and decedents dying in 2013. The exemption is allowed in the form of a unified credit. (Code Sec. 2010)

Maximum Transfer Rates Raised from 2012 Levels. The maximum estate and gift tax rate was 35% for gifts made and decedents dying in 2012.  The 2012 Taxpayer Relief Act changes the top rate to 40% for gifts made and decedents dying after 2012.  Under the Act, transfers over $500,000 are taxed at 37%, transfers over $750,000 are taxed at 39% and transfers over $1,000,000 are taxed at 40%. More specifically, the tax on a transfer over $1 million is $345,800 plus 40% of the excess over $1,000,000. (Code Sec. 2001(c), Code Sec. 2502(a), and Code Sec. 2641, as amended by Act Sec. 101) Thus, the $5,250,000 exemption for 2013 would offset $2,045,800 in tax ($345,800 + (.40 × $4,250,000)).

Generation-Skipping Transfer Taxes (GST).  The 2010 Tax Relief Act made the GST tax exemption for decedents dying or gifts made after Dec. 31, 2010 and before Jan. 1, 2013 equal to the basic exclusion amount for estate tax purposes (e.g., $5 million, as indexed), set the GST tax rate for transfers made in 2011 and 2012 at 35%.  The 2012 Taxpayer Relief Act makes these changes permanent, except that it increases the GST tax rate to 40%.  In other words, under the 2012 Taxpayer Relief Act, for decedents dying and gifts made after 2012, (1) the GST tax exemption is equal to the basic exclusion amount of $5 million as indexed, which should be approximately  $5,250,000 for 2013; (2) the GST tax rate is 40%; and (3) the technical modifications to the GST rules made by prior law continue to apply.

Portability of Unused Exemption Between Spouses Made Permanent.  The 2010 Tax Relief Act authorized estates of decedents dying after 2010 and before 2013 to elect to transfer any unused exclusion to the surviving spouse.  The amount received by the surviving spouse is called the deceased spousal unused exclusion, or "DSUE", amount.  If the executor of the decedent's estate elects transfer, or portability, of the DSUE amount, the surviving spouse can apply the DSUE amount received from the estate of his or her last deceased spouse against any tax liability arising from subsequent lifetime gifts and transfers at death.  The 2012 Taxpayer Relief Act has made this provision permanent. (Code Sec. 2010(c)(2)(B), Code Sec. 2010(c)(2)(4), and Code Sec. 2010(c)(5), as amended by Act Sec. 101)

Other Changes Now Permanent.   The 2012 Taxpayer Relief Act also provides that several  temporary changes made under prior law are now permanent:  (1) replacement of the State death tax credit with a deduction, (2) repeal of the qualified family-owned business deduction, (3) modifications to the rules regarding qualified conservation easements, (4) installment payment of estate taxes, and (5) various technical aspects of the GST tax.

Proposed Regs Clarify New 3.8% Investment Income Tax

The IRS has issued proposed regulations that provide guidance on the new 3.8% healthcare surtax on investment income and gains (IRC Sec. 1411). This article explains the general operating rules of the tax, and specific rules applicable to estates and trusts.  

The proposed regulations can be found at this link:  Proposed Net Investment Income Tax Rules.  This article does not contain a complete analysis of the regulations.  Please review the regulations before applying them to your own situation.

Although there are still many unresolved issues surrounding 2013's tax rates and the so-called “fiscal cliff,” with this surtax, higher taxes on investment-type income and gains are a relative certainty for higher-income taxpayers who meet the thresholds explained below.

Background. Beginning in 2013, certain “unearned income” of individuals, trusts, and estates is subject to a surtax (i.e., it's payable on top of any other tax payable on that income). The surtax, also called the “unearned income Medicare contribution tax” or the “net investment income tax” (NIIT), is 3.8% of the lesser of:

(1) net investment income (NII); or

(2) the excess of modified adjusted gross income (MAGI) over the threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case). MAGI is adjusted gross income (AGI) plus any amount excluded as foreign earned income under Code Sec. 911(a)(1).

Example:  In 2013, a single taxpayer has net investment income of $100,000 and MAGI of $220,000. He pays the surtax only on $20,000, which is the amount by which his MAGI exceeds the threshold amount of $200,000, and because that is less than his NII of $100,000. Therefore, the surtax is $760 ($20,000 × 3.8%).

For an estate or trust, the surtax is 3.8% of the lesser of undistributed NII, or the excess of AGI (as defined in Code Sec. 67(e)) over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.

Net Investment Income (NII) is defined as investment income less deductions properly allocable to such income.  Investment income is (a) gross income from interest, dividends, annuities, royalties, and rents, unless derived in the ordinary course of a trade or business to which the 3.8% surtax doesn't apply; and (b) other gross income derived from a trade or business to which the Medicare contribution tax does apply; and (c) net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business to which the Medicare contribution tax doesn't apply.

The 3.8% surtax applies to a trade or business only if it is a passive activity of the taxpayer or a trade or business of trading in financial instruments or commodities.

Investment income does not include amounts subject to self-employment tax, distributions from tax-favored retirement plans (e.g., qualified employer plans and IRAs), or tax-exempt income (e.g. earned on state or local obligations).

The surtax doesn't apply to trades or businesses conducted by a sole proprietor, partnership, or S corporation (but income, gain, or loss on working capital isn't treated as derived from a trade or business and thus is subject to the tax).

Gain or loss from a disposition of an interest in a partnership or S corporation is taken into account by the partner or shareholder as net investment income only to the extent of the net gain or loss that the transferor would take into account if the entity had sold all its property for fair market value immediately before the disposition.

The tax does not apply to: nonresident aliens; trusts all the unexpired interests in which are devoted to charitable purposes; trusts exempt from tax under Code Sec. 501; or charitable remainder trusts exempt from tax under Code Sec. 664.

General operating rules. The IRS has provided definitional rules in the proposed regs designed to both promote the fair administration of Code Sec. 1411 and prevent taxpayers from circumventing its purposes (significantly, to impose a tax on the unearned income or investments of certain individuals, estates, and trusts).  The IRS will closely review transactions that manipulate a taxpayer's NII to reduce or eliminate the amount of the surtax and, when appropriate, challenge such transactions based on applicable statutes and judicial doctrines (e.g., substance over form).

Application to Estates and Trusts. The proposed regs provide rules with regard to these specific trust types:

(a)   Grantor trusts. The income of a grantor trust (i.e., a trust any portion of which is treated as owned by the grantor, with items of income, deduction, and credit attributed accordingly) is taxed to the owner. So, these amounts are taken into account in calculating the owner's NII.

(b)   Electing Small Business Trusts (ESBTs). ESBTs, which are treated as two separate trusts when a portion of the ESBT's holdings is S corporation stock, are subject to special computational rules. The proposed regs treat the ESBT as two separate trusts for computational purposes, but consolidate the ESBT into a single trust for determining the AGI threshold.

(c)   Charitable remainder trusts (CRTs). CRTs are also subject to special computational rules. The trust itself isn't subject to Code Sec. 1411, but the annuity and unitrust distributions may constitute NII to the noncharitable recipient.

(d)   Foreign estates and foreign nongrantor trusts. In general, foreign estates and foreign trusts aren't subject to Code Sec. 1411.  However, IRS and Treasury believe that the NII of a foreign trust or estate should be subject to Code Sec. 1411 to the extent that such income is earned or accumulated for the benefit of, or distributed to, U.S. persons.

(e)   Bankruptcy estates. A bankruptcy estate of a debtor who is an individual is treated as an individual for Code Sec. 1411 purposes.  Therefore, the bankruptcy estate computes its tax in the same manner as an individual, and the rate is the same as that imposed on a married taxpayer filing separately.  

Effective date. The proposed regs are to be effective for tax years beginning after December 31, 2013.  However, taxpayers may rely on the proposed regs for purposes of compliance with Code Sec. 1411 until the effective date of the final regs.