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.

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.

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.

CHANGE IN FEDERAL TAXES (Page 36)
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:

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.

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.

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."

LOST POLICIES (Page 40)
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