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Updates to:
When Someone Dies in California
(Copyright 2000)
NOTE: UPDATES ARE CURRENT UP TO 2004, ONLY
IN 2005, GUIDING
THOSE LEFT BEHIND IN CALIFORNIA
REPLACED When
Someone Dies In California
CHAPTER
1: VA Pamphlet 051-000-00228-8
FEDERAL
BENEFITS FOR VETERANS AND DEPENDENTS
now costs $7, however you can download it without charge: http://www.va.gov.
CHAPTER 1:
The telephone number for the Arlington National Cemetery is
(703) 607-8585.
Chapter
2: The number for information about COBRA has been changed to
(866) 444-3272
CHAPTER 3: The Web site for the FAA is
http://www.faa.gov.
The telephone number to call is (866) 835-5322.
CHANGE IN FEDERAL TAXES (Page 34)
Both the federal and state government have the right
to impose an Estate Tax
on property transferred to a beneficiary as a result of the death. All
the property owned as of the date of death becomes the decedent’s Taxable
Estate. This includes real
property (homestead, vacant lots, etc.) and personal property (cars,
life insurance policies, business interests, securities, IRA accounts,
etc.). It includes property held in the decedent’s name alone, as well
as property that he held jointly or in Trust. It also includes gifts
given by the decedent during his lifetime that exceeded $10,000 per
person, per year. That value (the Annual
Gift Tax Exclusion) is now
based on the cost of living index and for 2002 is increased to $11,000.
For most of us, this is not a concern because no federal Estate Tax need
be paid unless the decedent’s Taxable Estate exceeds the Estate
Tax Exclusion amount. That
value is currently one million dollars and is scheduled to go even
higher:
|
YEAR |
|
EXCLUSION
AMOUNT |
| 2004-2005 |
|
$1,500,000 |
| 2006-2008 |
|
$2,000,000 |
| 2009 |
|
$3,500,000 |
There is an unlimited
marital tax deduction for property transferred to the surviving spouse;
so in most cases, no Estate tax need be paid if the decedent was
married. Regardless of whether taxes are due, federal and state Estate
tax returns must be filed whenever the decedent’s Estate exceeds the
Exclusion Amount in effect as of his date of death. The law as passed in
May, 2001 phases out Estate taxes for the year 2010, but the law is
effective only until December 31, 2010. If lawmakers do nothing, then in
2011, the Federal Estate Tax goes back into effect; and estates that
exceed one million dollars will once again be subject to Estate taxes.
And that is not the only uncertainty. Each state has its own Estate Tax
structure. It remains to be seen how each state will react to the
Federal change. Some states may follow the lead of the Federal
government and increase the Exclusion amount in the same manner. Other
states may see this as an opportunity to "pick up the slack"
i.e., to have a lesser Exclusion value, so that Estate taxes will now be
paid to the state instead of the Federal government.
THE UN-UNIFIED GIFT TAX
Up until the year 2002, if you gave someone more than
$10,000 in any given year you had to report that gift to the IRS. The
Annual Gift Tax Exclusion is now adjusted for the cost of living and is
$11,000 for the year 2002. The IRS keeps a running count of amounts that
you give over the Annual Gift Tax Exclusion. Although you are required
to report the gift, no tax need be paid unless that running total is
more than the federal Estate Tax Exclusion amount. If your running total
does not exceed that amount during your lifetime, once you die, the
cumulative value of gifts reported to the IRS will be added to your
Taxable Estate. Up until the change in the tax law in 2001, the Gift and
Estate tax were unified. No Gift Tax needed to be paid unless the total
value of the taxable gifts exceeded the federal Estate Tax Exclusion
amount. That changes in 2004. In 2004, the Estate Tax Exclusion amount
goes up to $1,500,000, but the amount for the Gift Tax Exclusion remains
at $1,000,000, so they are no longer unified.
To summarize: If you make a gift to anyone that is
greater than the Annual Gift Tax Exclusion for that year, you must
report that gift the IRS. The IRS will keep count of values that you
gave in excess of the Annual Gift Tax Exclusion. In 2004, if that sum
exceeds $1,000,000, you will pay a Gift Tax on any amount that you give
that is over the Annual Gift Tax Exclusion.
The Estate Tax is scheduled to be repealed in 2010,
but not the Gift Tax.
GIVING WITH ONE
HAND — TAKING WITH THE OTHER
The current federal Estate Tax is scheduled to be
phased out in the year 2010, but a new Capital Gains Tax is scheduled to
be phased in that may prove to be even more costly than the Estate Tax.
The new Capital Gains Tax is related to the how inherited property is
evaluated by the federal government. Real and personal property
inherited by a beneficiary is inherited at a "stepped up" in
basis. This means that if the decedent purchased some item now worth
more than when he purchased it, the beneficiary will inherit the
property at its fair market value as of the decedent’s date of death.
For example, suppose the decedent bought stock for $20,000 and it is now
worth $50,000, the beneficiary takes a step-up in basis of $30,000;
i.e., he inherits the stock at the $50,000 value. If the beneficiary
sells the stock for $50,000, he pays no Capital Gains tax. If the
beneficiary holds onto the stock and later sells it for $60,000, the
beneficiary will pay a Capital Gains tax only on the $10,000 increase in
value since the decedent’s death.
Up to 2009, there is no limit to amount you can take as a step-up in
basis. But in 2010 caps are set in place. The surviving spouse is
allowed to take a step-up in basis of up to 4.3 million dollars.
Property inherited by anyone else is allowed a 1.3 million dollar
step-up in basis. Significant Capital Gains taxes could result. For
example, suppose in 2010 you inherit a business from your father that he
purchased for $100,000 and it is now worth 2 million dollars. There is a
capital gains of 1.9 million dollars, but you are allowed a step-up in
basis of only 1.3 million. $600,000 of your inheritance is subject to a
Capital Gains tax. No one knows how the new law will be applied in 2010,
but it could well be that the Capital Gains tax turns out to be the same
as, if not more than, what you would have paid in Estate Taxes, before
they were "phased out."
CHAPTER
4 2004 MEDICARE UP-DATE
There are many new changes in the Medicare system.
MEDICAL BILLS COVERED BY INSURANCE
If the decedent had health
insurance you may receive an invoice stamped "THIS
IS NOT A BILL." This means
the health care provider has submitted the bill to the
decedent’s health insurance company and expects to be paid by
them. If the decedent was receiving Medicare, you will receive a
Medicare Summary Notice
listing all of the services or supplies that were billed to
Medicare for the prior 30 days. In some areas of the country,
you can get a copy of the decedent’s Medicare Summary Notice
from the Internet: http://www.medicare.gov
HOW TO CHECK MEDICARE BILLING
The structure of Medicare has
been changed giving people in some parts of the country, the
option of staying with the Original
Medicare Plan or
choosing one of the Medicare +
Choice Plans. Coverage
differs depending on which plan is chosen. If the decedent was
covered by Medicare, you need to determine whether he was
covered under the Original Medicare Plan, or whether he chose a
Medicare + Choice Plan. The publication Medicare
and You explains coverage
under the different options. See Chapter 2 to obtain a copy of
the booklet.
An important billing question is whether the health care
provider agreed to accept Medicare assignment,
meaning that they agreed to accept the Medicare-approved amount.
If so, the patient is responsible for the coinsurance (usually
20% of the approved amount) and any deductible amount. Doctors
and health care providers who do not accept assignment, are
limited in the amount they can charge for a Medicare covered
service. The highest they can charge is 15% over the
Medicare-approved amount. This Limiting
Charge applies only to
certain services and does not apply to supplies and equipment.
If all of this appears confusing, it is.
To check the decedent’s Medicare billing,
you first need to determine whether he was in the Original
Medicare Plan or in one of the Medicare + Choice Plans. The
Medicare and You booklet explains what is covered
under the Original Medicare Plan. You will need a copy of the
contract for the Medicare + Choice Plans to determine what is
covered under that plan. If
the decedent was in the Original Medicare Plan, you need to
determine whether the health care provider accepted assignment;
and if not whether the Limiting Charge applies to the services
provided. Finally if assignment is accepted or the Limiting
Charge applies, you need to determine the Medicare-approved
amount.
NOTE: A doctor or supplier can give the
patient an Advance Beneficiary Notice
that says Medicare probably will not pay for a service.
If the decedent received such notice and signed an agreement
saying he wants the service and agrees to pay for it, then if he
received the service, his estate is now liable to pay that debt.
COST OF NURSING CARE IN ORIGINAL MEDICARE
PLAN
Medicare pays for the first 20 days of nursing care.
For days 21 to 100, the patient pays up to $109.50/day.
Medicare does not pay for nursing care beyond 100 days.
Page
xv change
LEGAL AID SOCIETY OF BURBANK COUNTY to
LEGAL AID SOCIETY OF BURBANK (there is no Burbank County)
Page
34 The California Estate Tax Return is form ET-1.
Form 541 if the form used to file the Estate
Income Tax Return
You can get information about these returns at http://www.sco.ca.gov/
Page
39 The
American Council of Life Insurers does not assist in locating lost insurance
policies, but they do offers suggestions about how to find a
policy at the Missing Policy Inquiry page of their Web site
http://www.acli.com
Page 43 MEDICARE AND YOU (Publication No. CMS-11007) is now published by the
Centers for Medicare and Medicaid Services. You can get the publication from the
Medicare Web site or by
writing to: U.S. Dept. of Health and Human Services
Centers for Medicare and
Medicaid Services
7500 Security Blvd.
Baltimore, MD 21244-1850
Page
63 2nd line down from the top should be "....then
the Will be
deposited in...."
Page 82: 2004 VALUES FOR EXEMPT PROPERTY
- Up to $17,425 of value in the homestead
- Up to $2,775 of value in one motor vehicle
- Up to $1,150 in jewelry
- Up to $1,750 in tools or books used for work
- Any award granted to you under the crime victim's reparation law
- Up to $17,425 of monies due to you because of personal bodily injury
- Household furnishings, appliances, books, musical instruments, etc. provided any particular item is not greater than $450 in value (Civil Procedure 703.140, Probate 6510).
Page 158 The correct Probate Code to appoint a Health
Care Agent is 4701 (not 4771).
LONG TERM
CARE INSURANCE FOR FEDERAL EMPLOYEES
The Long
Term Care Security Act (Public Law 106-265) was passed by Congress to
take effect in October 2002. The law is designed to make long-term
care insurance available to Federal employees, members of the uniformed
services, and civilian and military retirees. You can download a copy of the law from
their Web
site:
OFFICE OF PERSONNEL MANAGEMENT
http://www.opm.gov/insure/ltc
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