Month: November, 2018

Please Pass the Turkey, and Sign that HIPAA Authorization Form

Many families with college students are eagerly anticipating their return for Thanksgiving break.  In the flurry of making all of the necessary preparations for college, it is easy to lose track of the fact that most college students either are 18, or will turn 18 during their freshman year.  Once a child turns 18, parental authority ends.

In order to ensure that parents will be provided with medical information and are able to act on behalf of an adult child in the event of a medical emergency or illness, parents should consider getting three documents in place before your adult child goes off to college, or when they are home for the next break:

  1. HIPAA Authorization Form

HIPAA stands for the Health Insurance Portability and Accountability Act, which was passed by Congress in 1996.  HIPAA privacy regulations require health care providers to develop and follow procedures that ensure the confidentiality and security of health information. In short, without this form, medical providers are prohibited from sharing medical information with anyone other than their patient.  A signed HIPAA authorization form allows health care providers to disclose health information to anyone designated on the form, including parents.   Your child can limit the information that will be disclosed pursuant to the form, so that sensitive information regarding mental health treatment and drugs remains private.

  1. Health Care Power of Attorney

By signing this document, your adult child designates one or both parents as her/his proxy or health care representative.  The health care proxy/parent is granted legal authority to make medical decisions for the adult child in the event the child becomes incapacitated and is unable to make decisions on her/his own behalf.

  1. General Durable Power of Attorney

Having this document naming one or both parents as agent will allow a parent to make financial decisions and handle legal affairs for their adult child in the event that the child becomes incapacitated.  A general durable power of attorney will allow a parent to, among other things, manage bank accounts, pay bills, sign tax returns, and apply for government benefits.

Important considerations:

  • Once the documents are properly signed, scan them so that they are easily available on your cell phone and computer
  • Provide copies of the HIPAA authorization form and Health Care Power of Attorney to the health services office at your child’s college
  • If your child is attending an out-of-state college, sign separate documents in both your home state, and the state where your child’s college is located
  • Remember that your adult child can revoke the documents either orally or in writing
  • Make sure that your child shares passwords for any online services that you may need to access in the event of a child’s illness or incapacity, including online banking accounts, and credit card accounts

2018 Year End Estate and Gift Tax Planning Update

In the beginning of the year we alerted our clients to changes in the federal and state estate and gift tax laws.  As we approach the end of the year we want to remind you of year-end gifting opportunities as well as some state estate tax revisions enacted during the year.

We recommend that clients review their estate plan at least every five years, or sooner if there are changes in your financial or personal life, changes in your relationship with your fiduciaries or beneficiaries, or changes in the state or federal estate tax law.

Federal Estate and Gift Taxes.  On January 1, 2018, the federal estate tax exemption doubled to $11.2M per person ($22.4M for married couples).  The exemptions are set to expire and revert back to $5M per person, adjusted for inflation, after 2025.  Your beneficiaries will continue to receive the benefit of a “step up in basis” to the date of death value on assets included in your estate.  If a new administration is elected after the 2020 federal elections it is possible the exemptions may be reduced back to current levels.  Thus, consideration should be given to utilizing the large estate and gift tax exemptions while they are available.  However, clients must also weigh the potential estate tax savings against the loss of a “step up in basis” at death.  The Act provides for regulations to be implemented to prevent the gifts which utilized the additional exemptions from being “clawed back” at death in the event the exemption sunsets (as it is scheduled to do in 2025).

Federal Gift Tax Annual Exclusion.  The federal gift tax annual exclusion is $15,000 per recipient for 2018 (increased from $14,000 due to an adjustment for inflation).  There is an unlimited gift tax marital deduction for U.S. citizen spouses.  The annual exclusion for gifts to non-citizen spouses is $152,000 for 2018.

State Estate and Gift Taxes.  States that impose their own estate tax will not be affected by the Act.  Clients in Connecticut must consider the impact of the state gift tax (the only state with a gift tax).

  • Connecticut Estate and Gift Tax: The Connecticut estate and gift tax exemption rose to $2.6M in 2018.  The exemption is scheduled to rise to $3.6M in 2019, $5.1M in 2020, $7.1M in 2021, $9.1M in 2022 and match the federal exemption in 2023 (currently $11.8M but indexed for inflation).  The federal exemption will revert back to $5.1M in 2026. In addition, beginning January 1, 2019, the cap on the maximum estate tax imposed on the estates of decedents dying on or after January 1, 2019, and the maximum gift tax imposed on taxable gifts made on or after January 1, 2019, will lower from $20M to $15M.
  • Massachusetts Estate Tax: The Massachusetts estate tax exemption remains at $1M per person.
  • New Jersey Estate and Inheritance Tax: Effective January 1, 2018, New Jersey eliminated its estate tax, but the inheritance tax remains in effect.  Transfers to spouses, children and grandchildren will remain inheritance tax-free, however, any transfers to a sibling, aunt/uncle, niece/nephew, friend, etc., would be subject to the inheritance tax.  Many professionals believe the estate tax may be re-introduced by a new legislature.
  • New York Estate Tax: The New York Estate Tax exemption is S5.25M for 2018.  In 2019 the New York estate tax exemption will be about $5.5M adjusted for inflation.  If your estate exceeds the exemption, then the entire estate is subject to the estate tax.

Update Your Estate Planning Documents:  Many estate plans provide for the creation of a Family Trust (or Credit Shelter Trust) upon the first spouse to die.  In older estate plans, the formula for funding that trust may continue to reference funding it with the maximum amount that can pass free of federal estate tax.  The doubling of the federal estate tax exemption could result in significant state estate tax.  In newer plans, the funding formula may have been based upon the maximum state estate tax exemption.  With the larger state estate tax exemptions this may no longer be necessary or a desired result.  Estates below the state and federal exemption may be suitable for a simplified estate plan.  Clients should contact the Firm to review and update their estate plans.