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Why Don’t Border National Guardsmen Receive Veteran Benefits?

They may never meet the requirements of the federal definition of a veteran, but they are doing the work of protecting the country and putting their lives on the line.

Two thousand National Guard troops were ordered to the U.S.-Mexico border in April 2018 to help Homeland Security, and they work alongside U.S. Customs and Border Protection agents every day.

However, Colorado Public Radio’s recent article, “Even After Years In Uniform, Some National Guardsmen Don’t Get Veterans Benefits,” reports that some of those guard troops who worked along the border in uniform may never receive veterans benefits.

To qualify for Veterans Affairs benefits, such as health care or GI Bill education benefits, individuals are required to serve 180 days continuously on active duty. That means being requested by the federal government under specific circumstances.

National Guard troops are usually under the control of a state's governor, who can call them up to help with natural disaster;. However, there are a variety of orders that can be used to mobilize Guard members. Despite the fact that President Trump called guard troops to the border and the federal government paid for the operation, in most cases, the kind of orders they were under do not qualify those troops for benefits.

Representative Mike Levin, a California Democrat, chairs a veterans subcommittee that recently held a hearing on the issue.

"We haven't followed a very basic principle," Levin said, "which is if you're expected to be doing the same sort of thing, putting your life on the line for whatever particular mission, I believe you should be able to get the same pay and benefits."

Representative Levin said Congress has been slow to respond to the changing role of the guard, which has been used more consistently since the terrorist attacks on Sept. 11, 2001.

"The expectations and the demands placed on our national guard and reserves that perhaps weren't there previously, we have to make sure that federal policy reflects that," he said.

In 2016, Congress changed the law, so anyone who retires from the guard or reserves after 20 years has honorary veteran status, no matter the amount of time they spent in active service. However, this legislation didn’t allow them to qualify for federal benefits.

The guard troops also are not eligible for long-term mental health care in the VA health system. There were an estimated 919 suicides in 2017 among guard and reserve members. None of them qualified for care from the VA.

Reference: Colorado Public Radio (November 29, 2019) “Even After Years In Uniform, Some National Guardsmen Don’t Get Veterans Benefits”

What Happens to Digital Assets After Death in Pennsylvania?

Many states have adopted a set of rules for access to digital assets belonging to the deceased, like social media photos and email accounts. However, Pennsylvania has yet to do so. A state senator is trying to bring the state’s laws up to date.

Pennsylvania State Senator Tom Killion has sponsored legislation that would change the state’s rules for post-mortem digital asset management, reports ABC27.com in a recent article “Legislators setting rules on who gets digital photos, emails after death.” “Currently, if you pass away, you can leave your house, your car, your valuables, your savings to your children or whoever you want to decide to leave it to via will or trust, but you can’t do that in Pennsylvania with your digital assets,” he said.

“Think about all of those apps that you have on your phone all of those assets contain your personal information,” said Sen. Kristin Phillips-Hill, who supports the legislation.

Killion’s legislation proposes the transfer of all digital assets to beneficiaries, in the same way physical assets are; by will, trust, or power-of-attorney.

“We all have lots of stuff in the cloud right now — family photos, maybe I’ve started writing a book that I haven’t finished yet, you can go on and on and on,” Killion said. “This is basically our laws catching up to what’s going on in our world.”

The state senator commented that the National Conference of State Legislatures reports 46 states have similar legislation. He says without these laws, family members are frequently in battle against large media companies to fight for ownership of that data.

Killion also remarked that the state bar association was working for some time to move this law forward.

It was unanimously passed by the state Senate and referred to the House Judiciary Committee in October.

Killion would like to see the bill become law before the end of this session.

Planning for digital assets to be properly managed after the owner dies, is an important missing part of many estate plans.

Reference: ABC27.com (November 28, 2019) “Legislators setting rules on who gets digital photos, emails after death”

How Can I Be Sure My Loved Ones Will Receive My Estate?

The best and only way to control what happens to your assets, is to have an estate plan, and that includes managing your beneficiary designations.

When you think of handing down assets, you probably think of a last will and testament. Most people do. However, if you have a life insurance policy, retirement funds, investment accounts or any financial assets that have an option to name a beneficiary, the person who you named (probably when you first opened the account) will receive the asset when the account owner dies. Whatever is in your will won’t matter.

The News-Enterprise recent article, “Don’t accidentally leave your estate to the wrong person,” tells the story of the widower who remarried after the death of his first wife. Because he didn’t change his IRA beneficiary form, at his death, his second wife was left out. She received no money from the IRA, and the retirement money went to his first wife, the named beneficiary.

Many types of accounts have beneficiary forms, like U.S. savings bonds, bank accounts, certificates of deposit that can be made payable on death, investment accounts that are set-up as transfer on death, life insurance, annuities and retirement accounts.

Remember that beneficiary designations don’t carry over when you roll your 401(k) to a new plan or IRA.

You can name as your beneficiaries, individuals, trusts, charities, organizations, your estate, or no one at all. You can name groups, like “all my living grandchildren who survive me.” However, be certain that the beneficiary form lets you to pass assets “per stirpes,” meaning, equally among the branches of your family. For example, say you’re leaving your life insurance to your four children. One predeceases you. Without the “per stirpes” clause the remaining three remaining children would divide the death proceeds. With the “per stirpes” clause, the deceased child’s share would pass to his children (your grandchildren).

Don’t leave assets to minors outright because it creates the process of having a court appointed guardian care for the assets, until the age of 18 in most states. Instead, you might create trusts for the minor heirs, have the trust as the beneficiary of the assets, and then have the trust pay the money to the heir’s over time, after they have reached legal age or another milestone.

If your family includes any disabled individuals, you will put them in jeopardy of losing government benefits, if they are named a beneficiary. There are strict financial restrictions regarding their government benefits. Your estate planning attorney will help you to create a special needs or supplemental needs trust if you wish to leave them something, without harming their ability to receive these benefits.

Reference: The News-Enterprise (November 30, 2019) “Don’t accidentally leave your estate to the wrong person”

The Downside of Moving Retirement Money to a Roth

It sounds like a great deal—no taxes when you withdraw money during retirement. However, there’s no such thing as a free lunch, and that also goes for Roth IRAs.

The question to ask yourself about retirement savings and taxes is simply this: when do you want to pay taxes? You can pay taxes during retirement with a traditional IRA. Or, you can roll your IRA money into a Roth IRA and pay taxes now. However, is there a reason not to put all of your money into a Roth IRA, besides the immediate taxes?

CNBC’s recent article, “Moving all your IRA money to a Roth means losing some tax benefits,” says that those lost tax benefits generally relate to medical expenses, charitable contributions and business losses. By contrast, if you leave too much in the IRA, the result may not be good. You may have higher required minimum distributions and taxes.

Roth IRAs grow tax free and withdrawals generally are also untaxed. They also have no lifetime required minimum distributions, or RMDs. However, traditional IRAs have some potential tax benefits that are gone for good, once the money is moved.

The primary concept in managing taxes in retirement is that you want to get as much money out of your accounts at the lowest possible cost. When you roll over money from a traditional IRA to a Roth, the amount moved is taxed as ordinary income. As a result, you should complete the rollover when you’re in as low a tax bracket as possible. This means tax-free income available down the road, but it also means you’ll have already paid taxes on the rollover. Thus, there’s no opportunity to reduce your rate further. However, if you leave too much in the IRA, the result may not be good. If you think that you might have these future expenses, then it might make sense to keep money in the traditional IRA.

Medical expenses. These is usually a major expense for older Americans and doesn’t include the cost of long-term care. However, a tax break for medical expenses is one of the few remaining deductions available to individuals, since the new tax law in 2018. It’s limited to the amount that exceeds 10% of your adjusted gross income and you must itemize your deductions to take advantage of it. However, those with high medical bills can potentially reduce their taxes by applying it. To take the deduction, you must have taxable income to weigh it against. So, if much of your income is coming from a Roth IRA tax-free, you could be restricted in whether you can take advantage of the break. If you took money from an IRA (whose withdrawals are taxed as ordinary income) to cover those health costs, you could use the medical deduction against that withdrawal. This could result in paying less in taxes than what you had paid by rolling that money to a Roth.

Qualified charitable distributions. If you give money to charity each year, keeping money in your traditional IRA to make those donations could be wise, because contributions made through qualified charitable distributions — funds sent directly to the charity from a traditional IRA — are excluded from your taxable income. However, the tax break for charitable contributions can only be used if you itemize your deductions, and generally, a deduction isn’t as valuable as an income exclusion. Note that this strategy is only available to IRA owners and beneficiaries who are age 70½ or older. Since that is the age when RMDs kick in, the move could reduce your tax liability on the RMD to zero. If your RMD is $5,000, but you give $5,000 to charity anyway, do the qualified charitable distribution, and you don’t have to pick up any of the income.

Business losses. These can only be claimed on your tax return, if you have income to claim them against.

General tax considerations. No matter your overall income, any amount that falls into each of seven defined brackets is taxed at a specific rate. Therefore, the more income you can get taxed at those lower rates, the better. If you could leave some money in the IRA to soak up some of those lower tax rates in the future, you may pay less in taxes on the money than if you converted it.

Tax rates may be low now, but they are going to revert back to pre-2018 levels at the end of 2025, when the current tax law sunsets. So chances are good that after 2025, they’ll be higher.

The way to get the most from your money, is to minimize your taxes, especially in retirement.

Reference: CNBC (November 27, 2019) “Moving all your IRA money to a Roth means losing some tax benefits”

Buying Property With Someone Other Than Your Spouse?

Buying a vacation home with a family member or trusted friend sounds like a great idea. So does investing in rental properties with another buyer. However, there are challenges you need to know about.

Owning a home or other real estate property with a spouse is fairly straightforward. Most married couples own property with the title as “joint with right of survivorship.” In other words, they own it together and when one dies, the surviving spouse owns the property. However, that’s not the way it works for other kinds of property ownership.

Inside Indiana Business’ recent article, “Risky: Property Owned with a Non-Spouse,” advises giving careful consideration to issues like loss of control, taxes and unknown creditor issues, before going in on an investment or vacation property with someone who is not your spouse.

Loss of Control. When you choose to co-own an asset with another person, you can enter into a legal ownership agreement known as “joint tenants with rights of survivorship” or “JTWROS.” When one of the owners dies, the surviving owner automatically becomes sole owner of the property. However, you give up some control of ownership when you own property in this way. For example, you can’t direct your portion to go to a spouse or a child after your death in your will or other estate planning documents. OK, you can, but your co-owner’s ownership title takes precedence over your estate documents. As a result, she will become the sole owner. You can also lose some control over the property, if the non-spouse co-owner transfers her interest in the property to another individual without your consent. It’s also tough to remove a co-owner from the property title without his or her full cooperation.

Creditors. Another issue with jointly held property is that it’s subject to creditors’ claims against both owners. If your brother, as a co-owner of your cabin, has financial troubles and files for bankruptcy, his ownership in the cabin could possibly be claimed by a creditor. He could also be forced to sell it to pay off his debts. So, unless you can buy out his ownership in the cabin, you may now own the property with a stranger.

Potentially Higher Taxes. Adding a non-spouse as co-owner of an asset, allows for a simple property transfer at your passing. However, it could also mean both a gift tax to you and an increased capital gain tax for your heir. By adding a non-spouse to the property title, you’re making a gift to the new joint owner. Therefore, based on the current value of the property being gifted, you could be liable for gift tax. In addition, the heir of the property may have to pay increased capital gain taxes. Property transferred at death receives a step-up in basis. This means the heir’s cost basis is equal to the fair market value of the property at your death, instead of your cost basis (the amount you paid for the property). Receiving a step-up in basis reduces the heir’s capital gain on the appreciation of the property when it’s sold. However, if you add a co-owner, only your interest in the asset has the benefit of stepped-up basis at your death, not the entire property. When the property is sold, this may mean a higher capital gain tax.

JTWROS vs. Tenants in Common. When deciding to co-own an asset with another person, you can also enter into an ownership agreement known as “tenants in common.” Here’s a key difference: holding property JTWROS with another person means that when one owner dies, the other owner receives the property outright and automatically. When owning property as tenants in common with another person, when one owner dies, the owner’s heirs receive his share in the property.  A co-owner can again transfer his interest in the property without approval as the other co-owner. This loss of control may place you in a difficult position.

Due diligence is very important when considering buying real estate property with another person. Examine how the property might be owned and the pros and cons of each. Speak with a qualified estate planning attorney to make sure that your estate is protected, if something should go wrong. They may recommend the use of trusts.

Reference: Inside Indiana Business (December 1, 2019) “Risky: Property Owned with a Non-Spouse”

Can I Really Protect My Aging Parents from Scams?

Scams targeting the elderly are on the rise, and most are convincing, making even savvy seniors vulnerable.

Adult children of elderly parents need to keep their eyes open on their parent’s behalf, because the scammers are increasingly sophisticated and compelling.

The number and types of scams focused on separating the elderly from their money is growing by leaps and bounds. If you’re 65 and older, you’re a target and vulnerable. The FINRA Investor Education Foundation reports that more than 8 in 10 seniors are solicited for likely fraudulent offers.

Kiplinger’s recent article, “Defrauding the Elderly: Watch for These Danger Signs,” explains that advancing age can have some impact on an individual’s emotional and physical health that may lower their defenses against abuse and fraud. Let’s look at some common frauds.

Wire transfer scams: A retired 80-year-old businessman contacted by fraudsters who said they wanted to do business with him. He wired them $400,000, and when he found out he’d been defrauded, he complained to the scammers. They had him contact some new crooks who said they could get his money back if he would wire them $400,000—which he did.

Gift card scams: These can be used to launder money without even having to physically send the cards anywhere. A scammer convinces the elderly victim to get several cards and load them with money. They then have the victim scratch off a protective strip on the back of the card to reveal its code number, take a picture of the number, and then text the picture to a cellphone number.

Computer-hacking scams: A common scam designed to victimize seniors is a contact from someone who says they’re a Microsoft employee. The scammer says the senior’s computer has a virus or some other problem, which they’re happy to fix. The senior just has to click on an email link or download an attachment the rep sends them and pay a fee. The scammer thus gets control of the victim’s computer.

Door-to-door scams: A scammer knocks on a senior’s door and says her trees need to be trimmed or gutters need to be cleaned. There are numerous cases where seniors have paid upwards of $30,000 to trim the hedges at their house. There are no service rendered: the crooks just wait and reappear to help the elderly person write a check for their services.

Family member financial abuse: Financial fraud in a family can be hard to resolve. It’s hard to know if an elderly parent voluntarily gives gifts to a family member, or if fraud is involved.

The best prevention is through education. Make sure that you or your parents are aware of these scams and prepared to say no to thieves. Be non-judgmental, and make sure your parents know that if they think they’ve been scammed, they can come to you for help and support. Get ready for a battle, if your parent thinks that you are trying to stop them from making a lot of money. If things get really dodgy, you may need to think about guardianship and conservatorship. Talk with an elder law attorney about these issues and what steps may be next.

Reference: Kiplinger (October 24, 2019) “Defrauding the Elderly: Watch for These Danger Signs”

What States Will Be Home for Veterans in the Near Future?

A national discussion about allocating resources for veterans’ services prompted the creation of a new graphic to help lawmakers understand where veterans from recent wars will likely reside.

Where will the veterans who survived the Gulf War, Post-Gulf, Post-9/11 and Vietnam wars live until 2045?

Rebecca Burgess, an expert on veterans with the American Enterprise Institute, spoke at a national conference earlier this year about how geography and demographics impact perceptions from the public and politicians about veterans. However, getting data was difficult.

"In fact, the more one tries to piece together a clear picture of veteran demographics, the less coherent the data seem to be," Burgess wrote in her study. "States, counties, and the federal government seem to arrive at different outcomes in terms of veteran numbers, even using the same projection model, VetPop 2016."

Military.com’s recent article, “These States Will Be the Most Popular for Veterans in the Next 25 Years,” explains that VetPop 2016, or "Veterans Population Projection Model 2016," is data from the VA that’s used by the agency and other groups, such as Congress, for policy planning and budgeting.

Burgess said she examined the VA's data and compared it to other sources, like the Census Bureau's American Community Survey. She found that the actuarial projections didn’t always agree. Burgess said that the VA's core data about veterans is nearly 20 years old and the Census Bureau stopped collecting veteran status data with the 2010 Census. However, she says, visualizing where vets will be over the next three decades will offer at least two benefits: providing the best idea of where VA resources will be most needed in the future and which congressional districts might see veteran policies soon become an electoral issue.

The VA has estimated that the overall veteran population will drop about 40% in 25 years. Burgess's research shows geographic population shifts, grouped by states and counties from 2015 to 2045.

Unlike the general shifts in the veteran population, with most veterans in the South and West, high numbers of Vietnam-era vets remain in the Northeast and Midwest—especially compared to the West. Already with the Gulf War and post–Gulf War veterans, the data shows higher numbers in the Southeast, but a good number (in the 240,000–300,000 range) who reside in Arizona, Colorado, Illinois, New York, Ohio, Pennsylvania, South Carolina, and Tennessee. Post-9/11 vets are moving to Texas, but also going to Georgia, North Carolina, Virginia and Washington State.

Burgess wants to see better data gathering, from the Census Bureau, as well as the VA. She said that Congress should require all future Censuses to include questions about veterans, and the VA should develop an updated veteran population projection model, whether or not the Census starts collecting data.

Reference: Military.com (November 26, 2019) “These States Will Be the Most Popular for Veterans in the Next 25 Years”

Celebrity Estate Planning Success Story: Luke Perry

With so many headlines about celebrities who failed to plan at all, or planned their estates poorly, it’s refreshing to learn that Luke Perry made all the right moves, when it came to his estate plan.

Luke Perry will long be remembered as the romantic figure on the popular show Beverly Hills 90210. However, he may also be remembered as a money-savvy celebrity, who had an excellent estate plan in place.

Forbes’ recent article, “How Luke Perry’s Estate Maximized This Unique California Tax Shelter,” says that media outlets have reported that Perry’s $2 million home in the Los Angeles area had been transferred from his revocable trust to his two children in equal shares. This can be a normal part of the estate administration process, if you are working with an experienced estate planning attorney. However, it also shows some additional sound planning on his family’s part. It looks like the actor’s children took advantage of a unique tax loophole in California, the parent-child property tax exemption. Therefore, they’d have inherited their father’s property tax base, which is an important financial benefit in California, because the home has increased in value significantly since Perry bought it.

The parent-child exclusion gives California property owners some unique benefits, so with proper planning, property can be passed on to the next generation. Note that these rules are complex and must be followed carefully, to avoid accidently triggering reassessment.

In 1978, California voters approved Proposition 13, which rolled back property tax values for existing homeowners to their 1976 value. For new purchases, the property tax rate was set at 1% of the purchase price and increases to the property tax base were limited to 2% per year. In 1986, California passed Proposition 58—a constitutional amendment that excluded from reassessment transfers of real property between parents and children. Therefore, when a child inherits their parent’s home, they can also inherit the parent’s property tax base.

While both propositions independently create property tax relief, when combined, it can have extraordinary benefits. Assume that you bought a home for $100,000 in 1979. The property tax base would have been established at 1% of the purchase price ($1,000). This property tax base 40 years later in 2019 would be $2,208. Now, let’s say the $100,000 home has increased its fair market value to $1,000,000. If the owner dies and the property is transferred to their child, their child would inherit the parent’s property tax base of $2,208, and that rate would continue to grow at the 2% rate.

However, this loophole is complicated because the exclusion allows the transfer up to $1 million of assessed value (and each spouse of a married couple has $1 million to allocate). The assessed value is merely the property tax base, not the fair market value. As a result, provided the assessed value stays within the $1 million of assessed value, parents can transfer property that has increased by millions of dollars. As you can imagine, these rules can have a major effect on beneficiaries. The ability to inherit a parent’s property tax on a home that has increased in value, might result in keeping the family home, instead of having to sell it.

Experienced estate planning lawyers create a private and tax efficient estate plans for their clients every day, even those who are not romantic Hollywood stars.

Reference: Forbes (November 14, 2019) “How Luke Perry’s Estate Maximized This Unique California Tax Shelter”

Asset Protection is Critical in Real Estate Investing

Whether you are buying rental properties or commercial buildings, asset protection of real property is critical to making money in real estate. It’s a risky business.

Securing the value of real estate assets requires with different strategies to protect the property from several different types of threats. This recent article from Wealth Advisor looks at “8 Reliable Ways to Protect a Real Estate Asset.”

1. Insurance. This is one of the most popular asset protection strategies in real estate. The protection you select for your property depends on the real estate type. You can protect your home with a homeowner’s policy and your commercial property with a business policy. Insurance will protect you against many catastrophic events.
2. Limited Liability. An LLC for rental property can protect your personal assets from potential lawsuits. With limited liability, your home is shielded from litigation concerning your business. One strategy is to buy a house with an LLC and rent it to yourself to minimize financial risks. This will limit the odds of personal real estate asset seizure. However, consult with an attorney to avoid charges on fraudulent practices. You should also place your commercial real estate properties in different LLCs, so if one asset faces a risk, the remainder of your property will be protected.
3. Anonymous Land Trust. You can create an anonymous land trust to avoid legal implications on your real estate property. With a trustee, you don’t need to have your name on records, so putting your house in a trust will protect your investment. This may discourage anyone from attempting to pursue a lawsuit against you.
4. The Titling of Assets. This can also be a great protection strategy. If your spouse is an equal tenant, it provides you with an indivisible interest, so if your spouse is involved in litigation, creditors can’t claim your house because you have an interest. Ask your estate planning attorney about how this works in your state.
5. Protection Through Debt. Debt is an affordable way to protect your real estate property because the available equity is insignificant. The low income may also discourage creditors from going after your property.
6. Eliminating Assets. You can get rid of your real estate asset, if creditors are on your tail. A lawsuit against you can’t affect the property that’s not under your name. Ask your attorney about transferring ownership of the property to irrevocable trusts.
7. Homestead Exemptions. In some states, the homestead laws provide full or partial protection of home equity. If the exemption is high, think about increasing your mortgage payment to promote fund protection.
8. Avoid Risk. You can’t protect against acts of nature. However, you can work with a skilled real estate attorney to review all contracts, do your due diligence in hiring contractors and tenants and maintain your properties to avoid foreseeable risks.

Keep your real estate assets secure to protect your investment.

Reference: Wealth Advisor (November 19, 2019) “8 Reliable Ways to Protect a Real Estate Asset”

Will the New Tax Levels Really End in 2025?

The IRS has said that even if taxpayers don’t die until after the tax overhaul expires in 2026, they may still benefit from the higher thresholds for U.S. estate and gift taxes. How will that work?

The estate and gift tax exemptions skyrocketed in 2017, as the result of changes to the tax law. The increases mean that in 2019, individuals may pass on $11.4 million from their estate and gifts they gave before their death. That level expires in 2026, unless laws change. However, the IRS announced regulations that said individuals who make large gifts while the exemption is higher and die after it goes back down, won’t see the estate tax benefit eroded.

“As a result, individuals planning to make large gifts between 2018 and 2025 can do so, without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025,” the agency said in a press release.

Yahoo Finance’s recent article, “IRS Says Millionaires Can Keep Estate Tax Benefits After 2025,” says that the exemption increase was a big priority for Republicans in the 2017 tax overhaul.

This exemption decreased the number of individuals who’d be subject to the 40% estate tax by about two-thirds.

The exemption was $5.5 million prior to the law change.

However, Democrats are looking to reverse those changes if they sweep the House, Senate and White House in the 2020 national elections.

Nearly every Democratic presidential candidate would like to see the estate tax apply to a greater number of wealthy families.

Candidate and Senator Bernie Sanders wants to see the estate tax start at $3.5 million and would set rates as high as 77% for the wealthy.

Reference: Yahoo Finance (November 22, 2019) “IRS Says Millionaires Can Keep Estate Tax Benefits After 2025”