Pioneers and nationally recognized leaders in estate planning.

650.493.8070 local

800.244.9424 toll-free

Michael Gilfix, National Experts Form Trump Policy Analysis Group

THE TRUMP POLICY ANALYSIS GROUP (TPAG) – FOCUSING ON OLDER AMERICANS AND THOSE WITH SPECIAL NEEDS

The Trump Policy Analysis Group (TPAG)1 has convened to consider probable changes in law that will affect older Americans and those with special needs. Initial TPAG focus is on entitlements, public benefits, tax, special needs planning, and veterans’ benefits.

DOWNLOAD THIS ARTICLE AS A PDF

We used a three-fold analysis:

  • Stated policy (declared Trump policies and those of the Republican Congressional Leadership);
  • “Realpolitik” (circumstances and factors rather than explicit ideology, often considered “pragmatism”); and
  • Educated speculation (based largely on experience and knowledge of TPAG members who have been leaders in these fields for decades).

STATEMENT OF PURPOSE

On January 20, 2017 both the White House and both houses of Congress will be in Republican hands, not seen since 2006. As president Obama said shortly after being elected in 2008, elections have consequences. We acknowledge this reality.

During the long and divisive campaign, differences in priorities and agendas between the major parties, particularly in social and health policy, were greater than in any recent election. In our opinion, the uncertainty and challenges now facing seniors, disabled, and medically needy Americans are unequaled and unsettling.

Our goals are twofold. First, to objectively analyze real and probable changes in government policies that directly impact older Americans and Americans with disabilities. Second, to identify planning and other steps these populations should take to preserve or, ideally, to increase quality of health care and quality of life.

SOCIAL SECURITY AND MEDICARE

President-elect Trump has consistently stated that the Social Security and Medicare programs are to remain intact and (presumably) solvent. How solvency would be achieved in light of impending bankruptcy of both programs (Medicare long before Social Security) remains to be seen.  Government and non-government economists only disagree about when insolvency will occur, not if it will occur. As one of their proposals to counter insolvency, Trump and Congressman Ryan (Speaker of the House) are promoting Social Security and Medicare privatization.

The Affordable Care Act took some steps designed to extend the solvency of Medicare. Trump, as President-elect, announced that he would keep parts of the Affordable Care Act but did not explain how he would pay for it. With so many members of younger generations convinced that Social Security will not be there for them, preservation of the fiscal health of both Social Security and Medicare is one of the main challenges facing this Administration.

MEDICAID

1. Rising Fears of Significant Restrictions

A significant majority of Americans are seriously worried about the cost of health care and long term care, in particular. Restrictions on benefits and legislative changes that restrict or limit access to government programs such as Medicaid can only heighten such fears.

2. The Trump and Ryan Block Grant Proposal

Currently, Medicaid is administered at the federal level by the Center for Medicare and Medicaid Services (CMS). While each state has its own state Medicaid Plan, there are mandates and there are constraints.

Block grants, which were first proposed by then Speaker of the House Newt Gingrich in 1995, presumably mean that each state would receive a certain number of Medicaid dollars. Each state would then decide how to utilize and spend those dollars.  In some states, little would change. In other states, changes could be profound. For individuals who may rely on Medicaid, this is a time of uncertainty and concern.  This means, in turn, that planning needs will vary from state to state.

TPAG is aware of some details and elements of proposed plans. Some are designed to restrict protective planning – to make it much more difficult for older Americans to protect their homes and other assets while qualifying for Medicaid, particularly in a long-term care setting. Planning challenges could therefore become dramatically more difficult. Increasingly, older Americans and their families will need up-to-date information and advice to understand and qualify for needed services. This will be particularly true for the majority of older Americans who will need home care services and who need to reside in skilled nursing facilities.

Americans with special needs and their families face as many worries, including concerns about possible reductions in protections and services.

TPAG believes that planning will increasingly involve multiple generations to enhance quality of life, quality of care, and asset protection.

3. Protection of Family Assets: Focus on Protecting the Family Residence

The vast majority of older homeowners will view protection of the residence as a core value, a legacy for future generations. Appropriate legislation must be preserved. Appropriate planning steps must be taken, particularly in light of possible changes in Medicaid, the only federal program that can subsidize or pay for the cost of skilled nursing care. No specific proposals to threaten existing tax and Medicaid protections for the residents have yet emerged.

TAX PROPOSALS – GIFT, ESTATE, INCOME, AND CAPITAL GAINS

1. Gift and Estate Tax

President-elect Trump calls for the elimination of gift and estate tax, perhaps replaced by a “mark to market” tax of capital gains at death. Perhaps a compromise package will not eliminate the tax but will significantly increase the level of estate and gift tax protection. Note that the current level of federal protection is historically high at $5,450,000 per person. If any estate tax remains, it would likely be reduced from the current 40% tax rate.

2. Capital Gains Tax

Different proposals have been proffered by President-Elect Trump, Speaker Ryan and others regarding limitations on “stepped up basis” upon an individual’s passing. For some families, this could result in net tax increases.

For high-end practitioners, those who focus on avoiding estate tax, the challenges are obvious. The number of individuals requiring such sophisticated planning will, at best, dramatically diminish. For most older Americans, the avoidance of estate taxes will have little or no impact from a tax planning perspective and the focus will shift to income taxation. Further, the impacts on entitlements and family financial security could be profound.

3. Corporate and Individual Income Tax

Corporate and individual tax rates for higher earners, in particular, would be substantially reduced. The long-term impact – beyond the obvious increase in after tax income, is impossible to predict. As with most modeling and forecasting, projected outcomes depend on presumptions.

AMERICANS WITH SPECIAL NEEDS

No proposals have yet been made that would directly affect services for special needs children and adults.  Medicaid block grants could adversely affect special needs residents of states that decide – at the state level – to reallocate or otherwise restrict funding for both governmental and non-governmental providers. The reach of Medicaid block grants could significantly reduce or even eliminate the benefit of special needs trusts which maximize assets for the person with a disability.

Additionally, it is possible that support for expanded charter schools and school choice could expand options. This has become more probable than just possible what with Trump’s appointment of Betsy DeVos, as Secretary of Education, an outspoken advocate for charter schools and the dismantling of publicly funded schools. Many special education advocates fear these expanded options could come at a price of diminishing procedural and substantive protections of the Individual with Disabilities Education Act (IDEA), and even reduce or remove the funding formula that follows eligible individual students with special needs under IDEA).

VETERANS’ BENEFITS

President-elect Trump is presumably supportive of maintaining and perhaps expanding services for veterans. At the same time, proposals that predate the election have been introduced that could restrict access to needed programs, such as Aid and Attendance, which provides financial assistance for veterans and spouses of veterans who need higher levels of home care assistance. While new legislative and perhaps regulatory restrictions could make it more difficult for veterans and their spouses to obtain benefits, proactive planning will be an inevitable need across the nation.

LGBTQ PROTECTIONS

President-elect Trump has said that he accepts the United States Supreme Court decision effectively legalizing gay marriage. (His Vice President, Mike Pence, may have a different viewpoint.) The Supreme Court ruled that the U.S. Constitution guarantees the right for same-sex couples to marry in all 50 states creating uniformity across the nation in recognition of the rights of same-sex couples.

IN TIMES OF UNCERTAINTY, FAMILIES WILL PROTECT THEMSELVES

A core conclusion of TPAG is that families will become more insular, more protective of themselves, their assets, and future generations. They will be more focused on what they can control and truly value – their families – and less on public policies that are difficult to influence. This has myriad implications for attorneys, financial planners, and other professionals who work directly with America’s elders, those with special needs and their families. A premium will be placed on advance planning. Inevitably, this will increase involvement of younger generations.  The demand for multi-generational planning – planning that involves and relies on involvement of children and grandchildren – will expand dramatically.

WHAT SHOULD YOU DO?

TPAG thoroughly understands that most Americans, and older Americans in particular, are fearful at this point in time. Above all, do not panic. The stock market panicked at the end of Election Day but soon resolved and moved higher than ever. TPAG believes that the stock market’s response to the election is a lesson for everyone: Learn, watch, be advised, and protect yourself and your family. The changes in store will take time.

TPAG’s goal and its purpose is to turn fear into hope. This is what good planning does.

TPAG will continue to be a source of balanced, objective information about developments at the national level. TPAG is working hard to track initiatives by President-elect Trump, Republicans and responsive proposals of Democrats.

TPAG will work hard to be “one step ahead.”

**Members of the TPAG group include Michael Gilfix of Palo Alto, California, Vincent J. Russo of Garden City, New York, Harry S. Margolis of Boston, Massachusetts, Frank Johns of Greensboro, North Carolina, and Tim Nay of Portland, Oregon.

mike gilfix vincent russo harry margolis
frank johns timnay

Gilfix & La Poll attorneys speak at NAELA Summit

Attorneys Michael Gilfix and Mark R. Gilfix of Gilfix & La Poll Associates appeared as featured speakers at two sessions during the 2016 National Academy of Elder Law Attorneys Summit in Newport Beach, California, on January 28 and 29. Michael Gilfix is one of NAELA’s original founding members.

They addressed audiences of more than 100 elder law attorneys from around the country. Each three-hour Immersion Session demonstrated their leadership in the field of elder law. The subject of their presentations was “Advanced Elder Law, Tax and Estate Planning from Start to Finish.”

The session was designed to train and educate participants to more effectively advise their client communities. It taught them to develop sophisticated estate plans to coordinate tax and long-term care objectives along with retirement and financial planning. In addition, building on the Gilfix attorneys’ skills in identifying personality types, attendees learned how to utilize a variety of tools such as spreadsheets, flowcharts, software and written proposals to effectively communicate the plan to the client.

Michael Gilfix and Mark Gilfix engaged summit participants through the use of peer instruction in their sessions. In contrast to traditional lectures, peer instruction is an interactive, student-centric approach to teaching that focuses on the application of learning.

Top reasons women need to consider estate planning

Whether single, married, divorced or widowed, every woman should know how to maintain her financial independence and plan for issues she might face as she gets older, such as the need for long-term care.

Women in the United States statistically have longer life expectancies than men, and therefore a higher likelihood of outliving their husbands. In such circumstances, planning for the financial future becomes critical.

Estate planning is one way in which women can take control of their finances in order to ensure long-term economic security. It is also a useful tool for preserving wealth and creating a plan for handling assets upon one’s death.

Many women tend to put off estate planning, not realizing its importance or understanding how to go about it. Taking simple steps such as writing a will or setting up a trust can reduce confusion and expenses for your family when you are no longer around.

Drafting a will forces you to review you financial situation and formally plan how you want to pass on your wealth. Without a will, you die intestate and a court decides how your assets will be divided, based upon certain assumptions.

Trusts can be helpful in protecting your assets and ensuring they go where you intended. They can protect money from children until they are older and keep ex-spouses from gaining access to your funds against your wishes. Talking to a lawyer will help you choose from the many types of trusts available, depending on your needs.

With a well-drafted estate plan in place, some of the financial impact of unexpected life events such as a divorce or the death of a spouse can be reduced. By planning ahead, you can also capitalize on federal estate tax exemptions, ensuring your beneficiaries receive the maximum amount of your assets.

A Party to Thank our “Peace of Mind” Program Members

Gilfix & La Poll associates recently hosted a thank-you party in Palo Alto for members of our very popular trust maintenance program that we call "Peace of Mind." Several hundred of our clients are members of the program, which makes it easy for them to stay in touch with us, to attend free seminars (and parties!), and to keep their estate plans up-to-date in a cost-effective way.

As the program has grown, we wanted to thank our members with a celebration. Shanna Gilfix, a professional musician (see one of her original songs, with over 500,000 views, here) and administrator of the Peace of Mind program, and Myra Gerson Gilfix performed live music. Wine and cheese were also served at a wonderful event. Many of our clients sang along to classic tunes, and we are hopeful that all attendees had a fantastic time. We certainly did!

The "Peace of Mind" program has been extraordinarily popular, and it is exclusively available to our trust clients. A 2 year membership includes annual 1 hour free consultations with our attorneys, exclusive free seminars on topics related to estate, long term care, and tax planning, and discounted legal services. If you would like to learn more, please visit https://www.gilfix.com/peace-of-mind/.

photo 1 photo 2

Wealthy American Parents Face Inheritance Dilemma

Can a large inheritance do more harm than good? According to a new article from the American Association of Retired People (AARP), many wealthy parents still struggle with decisions about how much money should be left to their children, and how that inheritance should be structured.

Wealthy parents from Bill Gates to Sting have publicly declared that their children will have to make their own money. And according to a recent article in CNBC, a number of Bay Area parents are following suit, fearing the implications of handing down too much money.

But increasingly, a number of private individuals and wealth advisors are expressing more nuanced views.

Wealthy parents have a unique opportunity to raise their children to be responsible and principled wealth managers, regardless of the size of their inheritance. Parents with the opportunity to engage in significant charitable giving can and should involve children in the process of examining opportunities and deciding how to give. In addition, many experts recommend that parents engage teens in setting up and managing retirement funds.

On the flip side, some parents must face the reality of a child or family member with personal problems, such as addiction or frequent legal trouble, that cause irresponsible financial decision-making. Wealth experts point out that in these cases, when an inheritance really can do more harm than good, parents now have a host of options for trusts that support their child in meaningful and structured ways.

For most experts, the consensus seems to be that it is not the inheritance that will make or break the child, but rather the understanding of how to use and manage wealth. Regardless of the choices that parents make about the size and distribution of an inheritance, experts agree that clear and open communication with one's children about the what and the why of inheritance decisions is crucial.

Michael Gilfix discusses Medi-Cal asset seizure in Mercury News

A growing number of older Californians are concerned about Medi-Cal asset seizure, according to a new article from the San Jose Mercury News.

The California State Assembly recently passed a new bill designed to limit Medi-Cal’s ability to recover assets from the estates of deceased Medi-Cal beneficiaries. As the law stands currently, Medi-Cal can seize a substantial portion of an estate -- including a residence -- to recover the benefits used to cover medical care through Medi-Cal.

But Governor Jerry Brown’s advisors are encouraging a veto of the bill in order to avoid revenue losses that would hurt the state’s budget, as reported by the Mercury News.  

Even if Governor Brown does sign the bill, the new law would limit but not entirely prohibit Medi-Cal asset recovery.

The Mercury News turned to Michael Gilfix for comment on the growing concerns surrounding Medi-Cal asset seizure.

Gilfix pointed out that whether or not the bill is vetoed, Californians can take steps to protect their estates from Medi-Cal recovery. In the article, he commented that assets, and residences in particular, can be protected through proactive estate planning.

According to the Mercury News, many older Californians who already benefit from Medi-Cal are surprised to learn that their estates, which they hoped to pass down to their heirs, are at risk.

Gilfix & La Poll helps clients plan for Medi-Cal eligibility in a way that legally protects assets to the greatest extent possible and minimizes the impact of taxes on the estate.

Gilfix discusses Medi-Cal planning in the San Francisco Chronicle

Michael Gilfix In the August 24, 2014 issue of the San Francisco Chronicle, reporter Kathleen Pender wrote about Medi-Cal reimbursement or “estate claims” that are imposed on a person’s estate if they receive Medi-Cal and after they pass. The article makes the point that the state could seek “an unlimited amount” from an individual’s estate when “Medi-Cal pays all the person’s health care costs.” This claim applies to all benefits received from age 55.

A major concern is that such claims blindside tens of thousands of older Californians who are receiving “expanded Medi-Cal” under President Obama’s Affordable Care Act. They are shocked to learn that their estate, most typically consisting of their residence, will be essentially attacked upon their passing.

Michael Gilfix points out in the article that assets could be protected from such Medi-Cal recovery claims. “There are certain ways to transfer a home out of an estate, although this can raise tax issues,” Michael Gilfix is quoted in the article.

Clients of Gilfix & La Poll understand that the residence can be protected and that many potential tax traps can be avoided with careful planning.

Learn more by contacting Gilfix & La Poll Associates LLP at https://www.gilfix.com/contact-us/.

Navigating intestacy for surviving spouses in California

When someone dies without a valid will, his or her condition is called "intestacy." Each state has its own laws for determining how the deceased’s estate is divided in cases of intestacy.

When the deceased’s spouse is still living, all community property (meaning property acquired during the marriage) automatically goes to the spouse, while separate property (meaning property acquired before the marriage or gifts and inheritance gifted to only one spouse) is split differently depending on the relationship the deceased shares with other living relatives. 

If the deceased had more than one child with the living spouse, then the spouse will receive one-third of the deceased’s separate property, with the other two-thirds being divided equally among the children.

If the couple only has one surviving child or no children, then the spouse receives one-half of all separately owned property. The remaining half is then either given to the child, or, if there is no child, divided among the deceased’s parents, or the deceased’s siblings if the parents are no longer living.

Legally separated partners do not have any claim to property under California intestate succession laws.

Not all assets fall under this realm of intestate succession laws. Property transferred to a living trust, an IRA, a 401(k), payable-on-death bank accounts, life insurance proceeds and property owned jointly with someone who is not a spouse are all assets which will go to the beneficiary named on their legal paperwork.

Intestacy laws can become quite complicated to navigate, so legal and financial advisors strongly encourage all individuals to create a living will with an attorney as soon as they are able. Living wills enable an individual to transfer property to desired beneficiaries regardless of state intestate succession laws.

Crummey trusts can maximize benefit of annual exclusion

The annual exclusion to gift taxes is rather straightforward: tax-free, someone can give away up to $14,000 per year. Spouses, through gift-splitting, can effectively double that annual exclusion to $28,000. As a basic precondition, the gift must consist of present interest (or an asset that the recipient can immediately use), such as cash.

Gifts given to many types of trusts do not satisfy this requirement. However, there is one means of employing the annual exclusion to fund trusts while meeting the “present interest” requirement. It is often called a “Crummey trust.”

First, gifts are made to an irrevocable Crummey trust. Children or other designated beneficiaries are given the right to withdraw the gifts from the trust for perhaps 30 to 60 days. Often, the beneficiaries do not withdraw the gifts, instead leaving them in the trust until reaching a (much older) designated distribution age. Crummey trusts can be a great planning tool when used in conjunction with life insurance policies and life insurance trusts.

Every year, trustees must send a notice to the beneficiaries to remind them of their right to withdraw their share of annual gifts made to the trust. That notice, called a Crummey notice, is named for the plaintiff in a 1968 Ninth Circuit Court of Appeals case that sanctioned the use of the process to circumvent the present interest requirement.

Because these trusts allow tax-avoiding gifts to trusts, the Obama administration has proposed their elimination as a way to increase tax revenue and help meet the government’s budget. But for the time being, Crummey trusts remain viable. Anyone considering a Crummey trust must consult with an experienced estate-planning attorney — like those at Gilfix & La Poll Associates.

Within the context of estate planning, charity can come in many forms

Many people considering estate planning want to incorporate charitable contributions in their estate plan. Many also wish to shield estate assets from taxation. In addition, they may wish to benefit from a tax deduction for charitable contributions and save on capital gains taxes that would be levied on appreciated property.

There are two basic irrevocable trusts that can achieve those goals: Charitable Lead Trusts (CLT) and Charitable Remainder Trusts (CRT). Depending on a person's objectives, either can be highly beneficial to an estate.

With a CLT, assets are placed in the trust, and the designated charity receives an annual distribution for the term of the agreement. As such, CLTs permit a donor to see the charity benefit during his or her lifetime. At the conclusion of the term of agreement, which might be 10 or 15 years, the remaining assets are left to noncharitable beneficiaries that the client has designated (typically his or her children). As a bonus, the beneficiaries receive the post-trust assets free of gift tax and estate tax inclusion.

A CRT's arrangement is basically set up in reverse. In a CLT, the designated charity obtains distributions first. Then, noncharitable beneficiaries get the remaining assets at the end of the trust’s term. During the term of agreement of a CRT, the donor or the donor’s beneficiaries receive income for life or for a fixed period not to exceed 20 years. At the conclusion of that term, the remaining assets are transferred to the designated charity.

CRTs are often utilized when significantly appreciated assets would generate huge capital gains tax exposure if sold. With a CRT, assets are sold after being transferred into the trust. No tax exposure results because the assets will ultimately go to a tax-exempt organization. The full net proceeds are then invested to provide the donor with decades of income.

CRTs offer two variations. One is a Charitable Remainder Unitrust, in which beneficiaries receive a fixed percentage of the trust each year during the trust’s term. The other is a Charitable Remainder Annuity Trust, in which, as the name suggests, a defined amount is distributed every year to beneficiaries during the term of the trust.

Experienced estate planning attorneys like those at Gilfix & La Poll Associates can help determine the best option and create the appropriate charitable trust for a donor.