FEBRUARY 2010

Federal Estate Tax Developments. The failure of Congress to take action has created an anomalous and unexpected result - no federal estate tax or generation-skipping ("GST") tax will apply for decedent's dying in 2010. The general consensus is that the federal estate tax rules will be reinstated retroactively, but this is by no means certain to occur. The general consensus earlier was that the elimination of the federal estate GST tax would not be allowed to occur, but nevertheless it did.

As the situation now stands, there is no federal estate tax, no GST tax, and a $1 million gift tax exemption with a gift tax rate of 35 percent on taxable gifts above the exclusion, deductions, and the $1 million exemption equivalent amount. "Carryover basis" will apply to inherited assets, subject to a number of limitations. For example, a decedent's executor may allocate up to $1.3 million to increase the basis of property up to the fair market value of the property at the decedent's death, and if there is a surviving spouse, the decedent's executor can also allocate up to an additional $3 million to increase the basis of assets that the surviving spouse receives outright or through a QTIP trust. There are a number of possible issues that could arise because of the current legal uncertainty. For example, if a husband has an estate plan which includes a formula bequest, which bequeaths an amount equal to the federal estate tax marital deduction to the spouse and any excess to a credit shelter trust or outright to the children, then the question arises whether the marital bequest will be funded at all since there is no federal estate tax and no need for a marital deduction. The fact that Congress could allow this situation to result as it did, while flailing haplessly in regard to health care reform, and while conservatives are touting their favorite red herring, "tort reform," speaks volumes about the capabilities and seriousness of our current Congress and other political "wannabees." Even if action is taken quickly, with retroactive effect, those retroactive changes will no doubt meet with Constitutional challenges. Here we go again!

FSSA's "Hybrid" System. The Indiana Family and Social Services Administration ("FSSA") has announced a so-called "hybrid" system. Developed as a reaction to its previous "modernization" project that had a disastrous effect on the process of applying for and redetermining public benefits, such as Medicaid, the Vanderburgh County area is to be one of the first to roll out (this area includes Davies, Dubois, Gibson, Knox, Perry, Pike, Posey, Spencer, Vanderburgh and Warrick Counties). Supposedly there will be more face-to-face contact, increased county office staff, a team concept applied to encourage caseworkers to work together, etc. All other counties will remain under the current system, some of which were never subjected to the changes of "modernization." This means that we will have at least three different systems operating within the state for at least a period of time. As one who is on the firing line, I can report that the situation has not improved and in fact appears to be worsening. Let us all hope and pray for an improved system that allows our poorest and neediest citizens to obtain help that many of them desperately need.

Increased Nursing Home Costs. Even though the U.S. economy suffered gravely last year, price rollbacks have not applied to long-term care facilities. The 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Service, and Home Care Costs reports that the average cost of a private room in a nursing home rose 3.3 percent to $79,935 per year or $219 per day, while the cost of an assisted living facility also climbed 3.3 percent on average, to $35,572 per year or $3,131 per month. The cost of a home health care aide increased by five percent to $21 per hour, and adult day care services increased by 5.7 percent to $67 per day. The cost of a semi-private room in a nursing home increased 4 percent to $198 per day or $72,270 per year.

Interestingly, for the first time since spousal impoverishment protections were enacted in 1989, the Centers for Medicare and Medicaid Services has announced that there will be no increase in the community spouse resource allowance (CSRA) or the maximum monthly maintenance needs allowance for 2010 because there was no increase in the Consumer Price Index. The figures for 2009 will remain in effect, which are as follows: the CSRA ceiling is $109,560; the CSRA "floor" or minimum amount is $21,912; the income standard is $1,823; and the maximum community spouse income share is $2,739.

SWIRCA Fantasy Finds Benefit Auction. This will serve as a reminder of the SWIRCA Fantasy Finds benefit auction to be held on Saturday, March 13, 2010. Readers are encouraged to learn more about SWIRCA and its many services for the benefit of the elderly and the disabled by viewing SWIRCA's website: http://www.swirca.org. SWIRCA is involved in virtually every aspect of obtaining services or assistance for the disabled and the elderly in the six-county area which includes Gibson, Perry, Posey, Spencer, Vanderburgh and Warrick counties. Very few people have a full understanding of the extent and scope of SWIRCA's services and its involvement in the lives of the disabled and the elderly. Not only does SWIRCA serve more than 1,200 meals each day at its various meal sites, including home-delivered meals (not to be confused with "Meals on Wheels"), it is also involved in the screening process for the admission of every single person to a long-term care facility in SWIRCA's six-county service area. I have had the honor and privilege of serving on SWIRCA's board of directors for many years and to serve as its president currently and for more than five years. If you are interested in sponsoring the auction or making a financial contribution to support SWIRCA's numerous efforts in behalf of the elderly and disabled in SWIRCA's service area, please contact Judith D. Freson, SWIRCA's Development Director, 16 West Virginia Street, Evansville, Indiana 47710-1742, by telephone at 812/464-7800 or 800/253-2188, or by e-mail at jfreson@swirca.org.

Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.

Previous Newsletter - December 2009