S Corporations and Shorter Built-in Gains Periods

S corporations are most popular as a tax vehicle because it allows for only one layer of tax instead of the double layer of tax usually imposed on a typical corporation. Rather than the S corporation paying tax, the S corporation’s taxable income passes through to the shareholders and is reported on those shareholders’ personal tax returns.shutterstock_304978883

The corporation generally is able to distribute a company in profits to the shareholders free of federal taxes. To avoid corporations attempting to convert over to an S corporation and then sell their assets off, the internal revenue code mandates a 10 year built-in gains tax on S corporations. If the S corporation sells assets within this period, the corporate level tax normal rate is paid.

In early January, legislation was introduced to officially reduce this 10-year period down to 5 years, retroactive to tax year starting on January 1, 2015. For S corporations, this is great news and highlights an important time to return to your planning attorney to discuss your options.             

Is a Revocable Living Trust the Best Way to Provide Asset Protection?

Although a revocable living trust is one of the most commonly recommended by an attorney when you are crafting your will or taking other estate planning steps, you need to carefully consider the own circumstances of your estate to determine whether it’s truly the best fit for you. The primary purpose of a revocable living trust is to avoid the frustration and expense of probate after you pass away. While this is a worthy goal for your beneficiaries, you need to consider whether a revocable living trust goes far enough if one of your goals is to protect assets. Don’t let your loved ones find out too late that creditors can relatively easily access assets inside a revocable living trust. Even though the trust is a legal entity, for legal purposes you are established as the owner of the trust assets allowing creditors’ potential access to these assets. If you set up a typical revocable living trust, you will name yourself as the trustee. This gives you complete control over the assets transferred into the trust so that you can take property in the trust, take it out, sell it or give it away without any restrictions.shutterstock_264000620

For legal and practical purposes, the property is still yours. Bear in mind though that having control over these assets also means that a creditor might be able to tap into it in the event of a lawsuit. You may need to speak specifically with your asset protection planning attorney to shield assets from creditors. Planning for asset protection has become of increasing importance in recent years and finding a law firm that can help you do this is easier than ever.

Make sure to ask questions about their experience in asset protection so that you feel confident about the role they are playing for you.

3 Questions About Safe Deposit Boxes

As I speak with clients about their wills and trusts, I find that many people are confused about what a safe deposit box should be used for.

I’ve created a video that will answer the three most common questions regarding safe deposit boxes:

  1. Do I need a safe deposit box?
  2. What should I keep in a safe deposit box?
  3. Who has access to my safe deposit box in the event of my death or incapacity?

First, Watch This

Then, Call Me

For more information or for help with your will or trust, visit my website or call us today at: 866-925-9797

~ Ronald Morton


Estate Planning Parent Fears: Passing On Assets Without Spoiling Children

This is an issue that many of our clients express during their first meetings with us. Parents with wealth are concerned about leaving just enough to their children to allow the children to succeed without leaving too much so that the heirs would become “spoiled”.  shutterstock_113853856

When it comes to setting children up for success without making them too spoiled, parents can do a lot to install traits and virtues that promote behavior the opposite of spoiled. These virtues include generosity, thriftiness, patience, curiosity, perspective, and perseverance. How can parents promote this from birth? According to financial columnist Ron Lieber, who developed this list, parents can select balanced vacation options, reduce materialism on a daily basis, provide allowances that are not based on chores, and have clear conversations about money with children from an early age.

It’s not just about selecting the right estate planning tools, but determining what tools will work in combination with the example set forth for children. The first stage of doing this involves putting in the time and the effort to think about this fear of having spoiled children and what can be done to avoid it. The second stage is in developing clear statements about goals and values for the children. Once you have accomplished this, it’s time to put together an action plan that lays out how these goals can be achieved.

Working together with establishing goals and confronting fears, estate planning can be an empowering process that puts parents in the right perspective to think about their legacy. We can help you accomplish this process- call us today at (601) 925-9797.


Think Before You Purchase – Not all Funeral Plans are Exempt

When Elizabeth received the call from her brother telling her that he had just placed their mother, Gertrude, into a Mississippi nursing home, she took the first available flight to Jackson. Elizabeth was her mother’s durable power of attorney for financial decisions and knew there were a number of things she needed to do to make sure her mother’s financial affairs were in order.

Elizabeth knew quite a bit about Medicaid coverage for nursing home costs, as her aunt had entered a Mississippi nursing home just a few months ago. Elizabeth remembered the exempt assets her aunt was able to keep, as well as those things her aunt purchased with her non-exempt assets, as part of her “spend down” in order to qualify for Medicaid.

Elizabeth knew that her mother would be able to purchase a funeral plan as part of her spend down. Her aunt had an irrevocable funeral plan she purchased when she lived in Florida, which included flying her to Florida to be buried next to her husband. The cost was over $12,000. The entire plan was exempt. So, Elizabeth purchased a funeral plan for Gertrude in Kansas, in the amount of $10,000 (an amount much greater than she thought she would use, because the funeral home explained that they would refund to Elizabeth any unused funds).

Gertrude remained private pay until she spent down to $4,000 and then applied for Medicaid. However, Gertrude was denied Medicaid coverage due to excess resources. Elizabeth called our office, certain that the application was wrongfully denied. When we asked Elizabeth what assets her mother had, she said, “Nothing. My mother has a checking account with only $1,800, a funeral plan of $10,000, and a life insurance policy with a face value of $10,000.” When we explained the state was correct in denying her mother for benefits, Elizabeth said her aunt had $1,900 in her checking account and a funeral plan worth $12,000 when she qualified for benefits only three months ago!

I told her there were two distinguishing circumstances: 1) her aunt had an out of state funeral policy that was irrevocable, and 2) her aunt did not have a life insurance policy. I then went on to explain how Mississippi Medicaid treats funeral plans and insurance policies.

With regard to the funeral plans, I explained to her that her aunt’s funeral plan was exempt because there is no limit on irrevocable funeral agreements from other states. Gertrude’s plan, however, is subject to certain restrictions because it was purchased in Mississippi. One of the problems with the plan Elizabeth purchased for Gertrude was that it was not irrevocable. Secondly, in Mississippi there is a limit of $6,000 for funds set aside for prepaid funerals, but no limit on funds irrevocably set aside for funerals. We advised Elizabeth to ensure that the funeral contract was irrevocable and therefore unavailable during Gertrude’s lifetime.

I also informed Elizabeth that if the funeral home did have excess funds after rendering her mother’s funeral services, the excess would be claimed by Medicaid Estate Recovery. So, there was no benefit to her buying excess services in hopes that she would shelter some of her mother’s resources.

Next, I explained to Elizabeth that in Mississippi, although life insurance policies are exempt only as long as the total face value of all the policies is less than $10,000. However, the exemption for life insurance policies allowed is reduced by funeral funds set aside, but not for funds irrevocably paid for funerals.

Here the face value of her policy is $10,000, and the funeral plan will not reduce the permitted amount because it is irrevocable. So the cash value of the policies is not counted.

Individuals entering the nursing home are often told to meet their “spend down” for Medicaid by purchasing a funeral plan. That’s not always as easy as it sounds. When purchasing funeral plans, it is important to know the state specific allowances for services and merchandise so that you or your loved one is not disqualified from receiving Medicaid. For more information, click here.

Commonly Asked Medicaid Questions

Q:Once I qualify for Medicaid, will the quality of care I receive be sub-standard?

A:No. It is illegal for a facility to discriminate against someone receiving Medicaid benefits. By law, Medicaid patients are to receive the same level of care as private-pay residents.

Q:Is a married couple always required to spend down all of their assets before qualifying for Medicaid?

A:No. In fact, where there is a spouse who remains outside of the nursing home, that spouse is entitled to retain $113,600. Additionally that spouse may also keep the monthly income up to a maximum of $2,841, for their additional support. Also, in some cases it is possible for the at-home spouse to retain additional assets if it can be shown that they need it for their support. Although there are income and asset criteria a couple must meet before one of them qualifies for benefits, federal and state laws were written to protect individuals from becoming impoverished if their spouse needs nursing home care.

Medicaid planning is like tax planning in that legislation has provided legal exceptions to the general rules that, with good advice from a knowledgeable professional, can save Medicaid applicants and their families thousands of dollars.

Q:Is it true that under current Medicaid laws, a parent cannot make financial gifts to their children once they have entered the nursing home?

A: No. In fact, a proper gifting program is a great Medicaid planning technique. At the time an applicant applies for Medicaid, the state will “look back” 5 years to see if any gifts have been made. Any financial gifts or transfers for less than fair market value during the five year look back may cause a delay in an applicant’s eligibility. A proper gifting program requires calculating the penalties prior to making gifts and designing a way to privately pay during the penalty period.

Q:Is $13,000 per year the maximum an individual can give away if they are going to apply for Medicaid?

A: No. The $13,000 per year gift people ask about when discussing Medicaid Planning is a tax law figure and not relevant with respect to Medicaid’s specific asset transfer rules. The maximum monetary figure Medicaid applicants need to concern themselves with is the “penalty divisor.” The penalty divisor is the state

assessed average cost for nursing home care by which the state assesses Medicaid penalties. The penalty divisor is $5,700 in Mississippi.

Q:A Medicaid applicant’s house is considered “exempt” under Medicaid laws. Can an applicant give their house away without incurring penalties?

A:Sometimes. Any assets which are given away (personal property or real property) are considered gifts. Usually, if an applicant gives their house away, the state will assess a penalty based on the fair market value of the house at the time it was transferred. However, there are some exceptions to this rule that a qualified elder law attorney can explain.

Q:Once my spouse is approved for Medicaid, can I gift my assets away?

A:No. In Mississippi, however, any gifts made by the community spouse would incur penalty which may result in the termination of Medicaid benefits for their spouse.There are a number of steps a Medicaid applicant can take to preserve their assets, ranging from gifting strategies, personal care contracts, private annuities, raising the Community Spouse Resource Allowance, etc… What you need to remember is that the laws are constantly changing and the planning your neighbor did for their mother six months ago may not be proper for your mother tomorrow. Consult a knowledgeable elder law attorney for advice.

For more information on Medicaid Planning, click here.

Is Every Married Couple Required to Spend Down All of Their Assets Before Qualifying for Medicaid?

The simple answer: No. In fact, there are couples who together have over $117,000 in assets (not including their home) and qualify for Medicaid without any spend down. How can this be? What about the “division of assets” and “spend down” people are always talking about? Medicaid law is quite complex and everyone’s situation is different.

The following example is just one of the many ways in which some of our clients are able to qualify their spouse for Medicaid without spending a penny: Carol’s husband, Bob, entered a Mississippi nursing home in October of 2012. At that time, their assets totaled approximately $200,000 (not including their home and one car, both of which are “exempt” for Medicaid purposes). Carol and her daughter immediately went to the Division of Medicaid to apply for benefits. The caseworker explained to Carol that, upon application for Medicaid benefits, the state will only allow Bob to retain $4,000 of assets in his name, and will require the transfer of their joint assets into Carol’s name up to a maximum of $113,600. Bob will qualify for Medicaid once their joint assets are spent down to $117,600. When Carol came to our office in January of 2009, it was because the social worker at Bob’s nursing home had told her she should contact an elder law attorney to see if there were ways she and Bob could preserve more than $113,560 their assets. We explained to Carol that she may be able to keep additional assets, but it would depend on her income and the interest their assets were earning.

Basically, every community spouse is entitled to a minimum monthly maintenance needs allowance of $2,841 per month. If Carol’s income, including the interest from her assets is less than $2,841, she can keep enough of Bob’s income to bring her income up to this level. Carol informed us she has $900 in income and all of her and Bob’s assets are in CD’s and bank accounts earning no more than 5%. We told Carol that her $100,000 earning 5% will be considered by the state as an asset, and the income of $416.33 per month will be counted as income, giving her a total income of $1,315.33 ($900 + 416.33). Her income, because it is less than the minimum monthly maintenance needs allowance of $2,841.00, entitles Carol to retain some of Bob’s income up to the monthly needs allowance. In this case, she can retain some of Bob’s income. Because her assets exceed the asset limits, Carol may be able to purchase a special type of annuity, or make a loan, of any excess money, in order to qualify Bob for Medicaid. However, the income from this special annuity or promissory note will reduce the amount of Bob’s monthly income that she will be permitted to keep. Bob’s monthly income is only $1,000, so the monthly income from the annuity or note will not likely decrease the amount that she is entitled to keep of his income, and all of their assets will be saved.

In order to accomplish this, special planning will be required, and it is likely that, due to the complexity of the Medicaid rules, that a fair hearing will be necessary to get the plan approved. Again, this scenario is fact-specific to Carol and Bob. It is unlikely to be accomplished at the case worker level as the state is not able to give legal advice on this type of planning. The bottom line: before you start spending down, seek advice from someone who knows Medicaid laws.  For more information, click here or email contact@mortonlaw.com.

Should Facebook Play Into Estate Planning For Mississippi Residents?

Estate planning lawyers in Mississippi have always had to keep up with the times, and this is just as true in Mississippi as it is anywhere else.  Oftentimes these changes include things like new legislation, but there are other factors that need to be considered, such as differing lifestyles and advancing technologies.  Have you ever stopped to wonder what happens to your Facebook when you die?

It’s a question that even the legal world is starting to address.  Of course, Facebook is only one of the social networks out there, and it’s likely that more will emerge, with some taking over the spotlight.  For now, Facebook is certainly one of the most talked about, as Facebook has reached a billion users.  As of November of 2012, Twitter had 500 million, Google+ had 400 million, Skype had 280, and LinkedIn had 175 million.  And this represents only a fraction of the social networks that are out there.

New York, Oklahoma, and Nebraska were some of the first states to start taking a look at how estate planning attorneys might assist clients in designating personal representatives to take over their social media accounts should the original owner become deceased or incapacitated.  Some people are referring to this as an “online executor,” and it’s even being suggested to officially name this person in the will or trust.

What About Facebook?

While it still remains to be seen how things will play out, especially as newer technologies become part of the Mississippi estate planning landscape, Facebook (as well as many other social media networks) already does have a system in place for dealing with the death of a user.

When someone passes away, Facebook allows another person to notify them.  They will need to be able to supply the individual’s full name (used on the account), email address used to create the account, and the URL of the deceased’s profile.  This is done through a form.  In addition, the person must report their relationship with the deceased.

At this point, Facebook will ask what should be done with the profile.  Some families prefer to take the entire thing down.  Others choose the option of “memorializing” the page.  When this happens, Facebook allows only those who were already confirmed as friends to see and post on the page.  Many friends do this as a way to leave memories or express condolences to those left behind.  If the account has been memorialized, it is removed from the general search function.

Another common option is for people to create their own pages in memory of a friend or family member.  This can even be done in conjunction with the memorializing of the original page.  The benefit is that this allows those who were not confirmed friends on the original account to leave messages, post photos, etc.

So, do you need to get a Mississippi will lawyer involved when it comes to your Facebook account?  The answer to that is “maybe.”  If your account is part of your business strategy, for example, you might find it to be even more imperative.  Even for those who just use Facebook and other social media for personal communication, naming an online executor is something to consider.

Our Mississippi wills, trusts and probate law firm can help you get started in creating a digital asset protection plan that best meets your personal or business needs.  We have offices in Clinton, Flowood, Hattiesburg, and Southaven Mississippi, and also serve the cities of Madison, Ridgeland, Pearl, Brandon, and Jackson, Mississippi.  For more information or to schedule a complimentary consultation, please give our office a call at (601) 925-9797.

Estate Planning for Single Parents in Clinton

Single parents tend to work hard for their children, so it’s no wonder that those in Clinton want to protect the children they would leave behind should the adult be killed or become incapacitated.  Every day it falls to the single parent to provide just about everything for his or her children, and with 13 million single parent households in the US, there are a whole lot of folks doing their best to provide everything their children need today.  Working with a Mississippi guardianship lawyer is the right step to make sure they are also provided for in the future.

As a single parent, your estate plan may look different from that of a married parent.  In those cases, there are laws in place to ensure that both property and custody have a means of passing to the surviving spouse.  In your case, however, the courts would determine your next of kin and disperse your property, as well as appoint a guardian, based on Mississippi state laws.  While it’s great that there are laws like this to rely on when a single parent dies with no will in place, it’s not necessarily such a wonderful thing if the person/people named are not those you would have chosen yourself.

For example, it’s quite common for grandparents to be given custody of a child upon the parent’s death.  In many families, that would be the perfect choice.  In others, however, a better choice could be made.  Perhaps there has been a falling out between family members, or it’s possible that the grandparents are either too old or just otherwise not in the right place in their lives to be starting over raising children.

Clearly, appointing a guardian for your child or children is one of the most pressing issues for which to see an estate planning attorney in Clinton.  It’s not the only one, though.  This lawyer can also help you to create a financial plan which can help support your child even if you aren’t there.  You might be advised to look into a life insurance policy or to participate in a Mississippi college savings plan.  Likely, an guardianship lawyer in Clinton will also help you to create a trust or trusts which can not only protect some of the money from being heavily taxed, but also give you some say over how the money is to be used and by whom.

An estate planning attorney will also help you to make sure that everything is in order.  He or she will ask you about bank accounts, insurance policies, retirement accounts, and even military service, as all of these can possibly be directed to the care of your child or children.  Every family, no matter what the marital status is, is unique.  With the help of a Clinton estate planning lawyer, you can put together a plan that works for your specific situation.

Who Really Needs a Business Lawyer in Clinton?

To the average person, the term “business lawyer” or “corporate lawyer” may sound like something that only exists on Wall Street.  In reality, though, nearly every business in Clinton can and should use the services of a good business lawyer.  This means large and small businesses alike.

Business lawyers play a very different role than that of trial lawyers.  Rather than fighting one another, “opposing” attorneys are generally working together to bring about legal transactions between businesses.  It’s also very common for a business or corporate lawyer to help a business set up and review its contracts, to advise on tax issues and to help with the legal setup of the company.

A typical Clinton business lawyer may have expertise in one or more of the following areas:

  • Accounting
  • Bankruptcy
  • Contract Law
  • Intellectual Property
  • Licensing
  • Securities Law
  • Tax Law
  • Zoning

Each industry will have its own specific issues and concerns, too, so it’s possible for a business lawyer to focus his or her practice on a particular type of business.  In fact, some larger companies have their own corporate lawyers right on staff.

Business Planning

A business lawyer in Hinds County can have a really important impact on an individual business.  Not only can they protect it by making sure everything is up-to-par when it comes to setting up and running your business, but they can also help you plan for the future.  For example, is there a succession plan in place for when key personnel leave the organization, either expectedly or unexpectedly?  The ability for a business to survive in this circumstance can balance on how prepared it was for this kind of transition.

A related concern is what will become of the business should the owner (or one of the owners) die?  Who has rights to his or her shares, and how should that be handled?  Will the business be taken over by a family member, or will it be sold, shut down, or something else?  The business lawyer helps to lay out all the options and make determinations about the decisions that need to be made.

It’s also worth noting that many business lawyers in Hinds County have a wide skill set.  For example, in addition to business planning services, they may also provide personal estate planning for wills and trusts, assist with real estate transactions, and assist with divorces or prenuptial agreements.

Getting Help

Whether your business is large or small, a business lawyer in Clinton will help ensure you are set up on a proper foundation and that you are well prepared should you face lawsuits, creditors or unexpected transitions in the future.  To schedule an appointment with our business and estate planning attorneys, simply call (601) 925-9797.