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Estate Tax Exemption at $5 Million in 2011
The federal legislature several years ago passed legislation, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which repealed the federal estate tax in 2010. While most estate planners expected the legislature to amend the Act before the repeal took effect, and institute an estate tax with an exemption of around $3 to $4 million dollars, this did not happen. The estate tax disappeared for one year in 2010, and then was reinstated for 2011 at a $5 million dollar exemption amount (now up to $5.12 Million for 2012). In addition to the exemption, the law added a "portability" feature to the exemption, which allows a spouse to use any of the unused exemption of a previously deceased spouse. Their are specific limitations on this exemption that must be explored with an estate planning attorney; however, this new law makes it more forgiving on couples who do not set up a proper trusts to limit the impact of estate taxes. Unfortunately, this law is scheduled to expire in 2012. It is expected that Congress will set the estate tax exemption around $3-5 million, and leave the portability feature in the new law. Hopefully, this time Congress will act before the current law expires. If it does not act, the exemption will automatically be reduced back to one million dollars, and the portability feature removed, which would have a significant impact on many estate plans. To deal with the uncertainty in the federal estate tax law, the attorneys at our firm are skilled at drafting estate plans that will allow the most flexibility in planning, including even allowing post-death tax planning using disclaimer trusts. To learn more about these valuable estate planning methods, please contact one of our attorneys today.
Recent Medicaid Changes in Ohio
Medicaid in Ohio in the last couple of years has undergone massive changes. Most significantly, the look-back period in determining available resources has been expanded from three years to five years. This means that if property is transferred to certain non-exempt individuals within five years of both applying for medicaid and entering a long-term care facility, the property transferred is used to calculate the period of ineligibility for medicaid. Transfers to spouses and other qualified individuals are not improper, and may generally be made without triggering a penalty period of ineligibility for medicaid benefits (though care should be taken).
The changes in the law also make the penalty period more severe by starting the period of ineligibility at the time the individual would have otherwise qualified for medicaid, not at the time when the improper transfer was made. This means that many individuals could find themselves ineligible for medicaid and without available resources of their own to pay for healthcare costs. These changes in the law make it even more important to prepare in advance for qualifying for medicaid by transferring property more than five years prior to any need to qualify for medicaid. Other methods, such as establishing a special needs trust, or purchasing a single premium life-insurance policy, may be viable alternatives if you must qualify for medicaid in less than five years. As always, you should consult with a qualified estate planning attorney before making any decisions regarding medicaid.
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