FAQ: My dad passed with $5,000 in a checking account. Can I get these funds to pay for the funeral?

Answer:  Yes.  Pennsylvania has a statute that allows a bank, credit union, and other savings institutions to pay the amount on deposit to the spouse, any child, the father or mother or any sister or brother of the decedent (in that order of preference) if the total amount on deposit does not exceed $10,000.

You must provide a funeral bill receipt or an affidavit of a licensed funeral director that states that satisfactory arrangements for payment of funeral services have been made.

Bank personnel generally do not know about this law, so it might take a little extra effort to make this happen.  Here is what you could do: 1) have an original death certificate to give to the bank; 2) have the funeral bill receipt or the affidavit of the funeral director as mentioned above to give to the bank; 3) have a photo ID ready and if there is no surviving spouse, have a death certificate for the other deceased spouse; 4) call the bank where the funds are held and discuss your intentions and set a time to visit the branch; 5) be prepared to present the bank with all the information listed above and take this citation to the PA law 20 P.a.C.S. § 3101 with you because an inexperienced customer service rep at a bank might need to send it to their legal counsel for approval.

The process above is a pretty straightforward one.  For many people, this is the first question they have when calling or emailing our office.  If this is the only issue in an estate that you are handling, then hopefully this is all the answer you will need.  But, it’s important to remember that probate and estate administration is a legal process and the representative of the estate can run into liability if he or she mishandles the administration to the detriment of the beneficiaries.  And, the estate administration process can be emotional, complex, and time consuming.  We help families sort out all the legal issues involved in estate administration and protect the representative from liability.  We handle all types of estate administrations from simple to quite complex.  If you are handling the estate of a loved one and are questioning how best to get it done, contact Baroni Estate Planning & Elder Law.  We can help.

Prince’s Public Estate Drama – it all goes to his sister and five half-sisters

It is a pretty sad time for fans of music with the recent deaths of Chris Cornell, David Bowie, and Prince, among others.  These are, in my opinion, some of the greatest creative minds and musical masters the world will ever see.

Prince (Prince Rogers Nelson) was 57 years old when he died last year of an accidental drug overdose.  It appears that Prince had done no estate planning whatsoever.

The Inventory filed by the Personal Representative of Prince’s estate shows $25 Million in Real Estate alone.  Click here to see the actual inventory filed in the Probate Court.  It is likely that his combined real estate holdings will not be his most valuable assets compared to the value of his intellectual property, business interests, and catalog of 50 albums. These things will continue to generate significant revenue for many years. Much of his estate has not yet been valued, but it looks like it could be hundreds of millions of dollars.  The transfer of wealth for estates of this size is usually controlled through trusts and other legal directives.  From Court records to date, which are all available to the public, it appears that Prince did not have any such planning strategies in place.

With no trust in place, Prince’s estate will go through the probate process in the Minnesota court system.  The appointed representatives of the estate will be left to figure out what Prince owned, value each piece of property, pay the income and estate taxes, and distribute the remaining assets to the beneficiaries of the estate.

Prince has one sister and five half-sisters. A Minnesota Court has declared that his estate will be distributed to these six individuals.  While we can’t speculate about how Prince would have wanted his estate distributed, stories of Prince’s charitable nature during his lifetime suggest that he would have probably wanted to leave money to support charities. Stories of his private personal nature also suggest that he would have wanted to avoid such a public display and invasion of privacy.

In any event, if no will or trust turns up, Prince’s estate will be a media drama that unfolds in public.

What if Prince had not died from that drug overdose, but was instead incapacitated and unable to manage his health and financial affairs?  Who would have made decisions for him about his medical care, businesses, and finances? A court, in a public guardianship proceeding, would have had to appoint a guardian or conservator.  This person could have been a complete stranger to Prince.

Estate planning is not just for music icons worth hundreds of millions of dollars.  It is for everyone.  No matter the size of a person’s estate, a comprehensive estate plan will establish control, address incapacity, and direct the transfer assets how, to whom, and when you want.

The Costs of Dementia: For the Patient and the Family

A recent report from the Alzheimer’s Association states that one in nine Americans age 65 or older currently have Alzheimer’s. With the baby boomer generation aging and people living longer, that number may nearly triple by 2050. Alzheimer’s, of course, is just one cause of dementia—mini-strokes (TIAs) are also to blame—so the number of those with dementia may actually be higher.

Caring for someone with dementia is more expensive—and care is often needed longer—than for someone who does not have dementia. Because the cost of care in a facility is out of reach for many families, caregivers are often family members who risk their own financial security and health to care for a loved one.

In this post, we will explore these issues and steps families can take to alleviate some of these burdens.

Cost of Care for the Patient with Dementia—And How to Pay for It

As the disease progresses, so does the level of care the person requires—and so do the costs of that care. Options range from in-home care (starting at $46,332 per year) to adult daycare (starting at $17,676 per year) to assisted living facilities ($43,536 per year) to nursing homes ($82,128 per year for a semi-private room). These are the national average costs in 2016 as provided by Genworth in its most recent study. Costs have risen steadily over the past 13 years since Genworth began tracking them.

Care for a person with dementia can last years, and there are few outside resources to help pay for this kind of care. Health insurance does not cover assisted living or nursing home facilities, or help with activities of daily living (ADL), which include eating, bathing and dressing. Medicare covers some in-home health care and a limited number of days of skilled nursing home care, but not long-term care. Medicaid, which does cover long-term care, was designed for the indigent; the person’s assets must be spent down to almost nothing to qualify. VA benefits for Aid & Attendance will help pay for some care, including assisted living and nursing home facilities, for veterans and their spouses who qualify.

Those who have significant assets can pay as they go. Home equity and retirement savings can also be a source of funds. Long-term care insurance may also be an option, but many people wait until they are not eligible or the cost is prohibitive.

However, for the most part, families are not prepared to pay these extraordinary costs, especially if they go on for years. As a result, family members are often required to provide the care for as long as possible.

Financial Costs for the Family

Women routinely serve as caregivers for spouses, parents, in-laws and friends. While some men do serve as caregivers, women spend approximately 50% more time caregiving than men.

The financial impact on women caregivers is substantial. In another Genworth study, Beyond Dollars 2015, more than 60% of the women surveyed reported they pay for care with their own savings and retirement funds. These expenses include household expenses, personal items, transportation services, informal caregivers and long-term care facilities. Almost half report having to reduce their own quality of living in order to pay for the care.

In addition, absences, reduced hours and chronic tardiness can mean a significant reduction in a caregiver’s pay. 77% of those surveyed missed time from work in order to provide care for a loved one, with an average of seven hours missed per week. About one-third of caregivers provide 30 or more hours of care per week, and half of those estimate they lost around one-third of their income. More than half had to work fewer hours, felt their career was negatively affected and had to leave their job as the result of a long-term care situation.

Caregivers who lose income also lose retirement benefits and social security benefits. They may be sacrificing their children’s college funds and their own retirement. Other family members who contribute to the costs of care may also see their standard of living and savings reduced.

Emotional and Physical Costs to Caregivers

In addition to the financial costs, caregivers report increased stress, anxiety and depression. The Genworth study found that while a high percentage of caregivers have some positive feelings about providing care for their loved one, almost half also experienced depression, mood swings and resentment, and admitted the event negatively affected their personal health and well-being. About a third reported an extremely high level of stress and said their relationships with their family and spouse were affected. More than half did not feel qualified to provide physical care and worried about the lack of time for themselves and their families.

Providing care to someone with dementia increases the levels of distress and depression higher than caring for someone without dementia. People with dementia may wander, become aggressive and often no longer recognize family members, even those caring for them. Caregivers can become exhausted physically and emotionally, and the patient may simply become too much for them to handle, especially when the caregiver is an older person providing care for his/her ill spouse. This can lead to feelings of failure and guilt. In addition, these caregivers often have high blood pressure, an increased risk of developing hypertension, spend less time on preventative care and have a higher risk of developing coronary heart disease.

What can be done?

Planning is important. Challenges that caregivers face include finding relief from the emotional stress associated with providing care for a loved one, planning to cover the responsibilities that could jeopardize the caregiver’s job or career, and easing financial pressures that strain a family’s budget. Having options—additional caregivers, alternate sources of funds, respite care for the caregiver—can help relieve many of these stresses. In addition, there are a number of legal options to help families protect hard-earned assets from the rising costs of long term care, and to access funds to help pay for that care.

The best way to have those options when they are needed is to plan ahead, but most people don’t. According to the Genworth survey, the top reasons people fail to plan are they didn’t want to admit care was needed; the timing of the long-term care need was unforeseen or unexpected; they didn’t want to talk about it; they thought they had more time; and they hoped the issue would resolve itself.

Waiting too late to plan for the need for long-term care, especially for dementia, can throw a family into confusion about what Mom or Dad would want, what options are available, what resources can help pay for care and who is best-suited to help provide hands-on care, if needed. Having the courage to discuss the possibility of incapacity and/or dementia before it happens can go a long way toward being prepared should that time come.

Watch for early signs of dementia. The Alzheimer’s Association (www.alz.org) has prepared a list of signs and symptoms that can help individuals and family members recognize the beginnings of dementia. Early diagnosis provides the best opportunities for treatment, support and planning for the future. Some medications can slow the progress of the disease, and new discoveries are being made every year.

Take good care of the caregiver. Caregivers need support and time off to take care of themselves. Arrange for relief from outside caregivers or other family members. All will benefit from joining a caregiver support group to share questions and frustrations, and learn how other caregivers are coping. Caregivers need to determine what they need to maintain their stamina, energy and positive outlook. That may include regular exercise (a yoga class, golf, walk or run), a weekly Bible study, an outing with friends, or time to read or simply watch TV.

If the main caregiver currently works outside the home, they can inquire about resources that might be available. Depending on how long they expect to be caring for the person, they may be able to work on a flex time schedule or from home. Consider whether other family members can provide compensation to the one who will be the main caregiver.

Seek assistance. Find out what resources might be available. A local Elder Law attorney can prepare necessary legal documents, help maximize income, retirement savings and long-time care insurance, and apply for VA or Medicaid benefits. He or she will also be familiar with various living communities in the area and in-home care agencies.

Conclusion

Caring for a loved one with dementia is more demanding and more expensive for a longer time than caring for a loved one without dementia. It requires the entire family to come together to discuss and explore all options so that the burden of providing care is shared by all.

We help families who may need long term care by creating an asset protection plan that will provide peace of mind to all. If we can be of assistance, please don’t hesitate to call us toll free at 866-227-3994 click on the contact link on our website.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

Did Whitney Houston Leave Too Much Money To Bobbi Kristina?

Whitney Houston’s estate was worth approximately $20 million when she died – plenty to meet the needs of her only daughter – Bobbi Kristina. Sadly, only a few years after Houston’s death, Bobbi Kristina died as well.

Although Bobbi Kristina’s previous boyfriend, Nick Gordon, is still a suspect in her murder, many say that having access to so much money at a young age was a contributing factor. Sadly, Houston’s estate planning mistakes are all too common.

Aunt & Grandmother Say Will Did Not Depict Houston’s Intentions

Houston’s aunt and grandmother filed a lawsuit to re-write the will as they say it didn’t accurately depict what Whitney really wanted for Bobbi-Kristina. They claimed that she was too young to handle so much money.

Although they likely had the best of intentions, probate courts must follow the terms of the actual will or trust documents, not what the person who died might have otherwise intended.

Whitney Houston’s will was created in 1993, specifying that a trust would be created after she died for any children she may have (so before Bobbi-Kristina was even born). Unfortunately, she never updated her will before she died.

Inheriting Money at a Young Age is Never a Good Idea

Whether this tragedy could have been adverted if Bobbi Kristina’s distributions were delayed until she was older is anyone’s guess. The bottom line is that inheriting large sums of money at a young age is generally never a good idea. Although the young beneficiary might be responsible, young people can be easily manipulated by others.

While it’s clear that Houston could have better protected that money with a stronger estate plan, she’s certainly not the only one guilty of not following through. In fact, many of us have the best intentions, but simply don’t make the time to create – and update – proper estate planning documents that can help beneficiaries.

Set Your Beneficiaries Up For Success!

You do have the power to set your young beneficiaries up for success. In most cases, that means creating a trust that allows them access to money over time and can be managed by someone you trust and has their best interests at heart.

We can provide you with the tools you need to protect your loved ones – whatever your situation may be. As Houston’s case shows, ignoring estate planning issues can have tragic consequences.  Contact us today and let’s get started protecting you and those you love.

Who Is Your Beneficiary? Marilyn Monroe Ultimately Had No Idea

When creating a last will and testament, it’s important to know your beneficiary. Sadly, that’s not always the case. Marilyn Monroe, one of the world’s most famous icons, didn’t seem to have any idea to whom she left her money.

Acting Coach & Psychiatrist Got Everything

Marilyn Monroe died at the age of 36 from a drug overdose. The year was 1962 and there have always been questions as to whom she named as beneficiaries. In fact, her business manager, Inez Melson, was allegedly suspicious about Marilyn Monroe’s will when it was first drafted.

Monroe’s will left some money to care for her mentally ill mother and bequeathed some of her personal belongings to Inez Melson. The remainder went to her acting coach and psychiatrist:

  • 25% to her psychiatrist to help those who couldn’t afford psychiatric counselling

 

  • 75% of the residue (the majority of her estate) was left to Lee Strasberg, her acting coach

A bit strange, but there it is, and Monroe could never predicted what happened next…

Strasberg’s 2nd Wife Takes Control of Monroe’s Fortune

Lee Strasberg controlled Monroe’s estate for a short while. Then, his second wife, Anna, took over. Although she only met Monroe one time, she created utter chaos for years. Here’s a brief rundown of what happened:

  • Multi-million lawsuit over publicity rights. Strasberg filed a multi-million lawsuit over publicity rights of Monroe’s image and likeness – and won. Ironically, she has since earned more money thanks to Monroe than Monroe earned in her lifetime.

 

  • Licensing deal on products. Strasberg made millions of dollars through a licensing deal with CMG Worldwide who sold products with Monroe’s picture on it such as cigarette lighters, pet clothing, and other “iconic” memorabilia.

 

  • Multi-million lawsuit over personal belongings. Strasberg also filed a lawsuit against the heirs of Monroe’s former agent, Inez Melson, for personal belongings in their possession. She won and auctioned them off at Christie’s for over $13 million.

Strasberg eventually sold her interest in Monroe’s estate for a reported $20 – $30 million.  Interestingly, Monroe has consistently been one of the top highest earning deceased celebrities since her death. Her estate earned $17 million in 2015 alone.

Consider Everything – Carefully

When creating an estate plan, it’s important to consider everything very carefully. While you may want a specific person to benefit from your estate (as Monroe wanted for Lee Strasberg), the probability that someone else will get control of your assets is likely unless you provide otherwise.

Monroe obviously had very good intentions for providing for help to those who are mentally ill.  Had she considered those intentions more carefully, many more people could have been helped.  Instead, someone she met once bilked her estate for their own purposes.

We can all learn from Monroe’s mistakes. We can help you come up with a good estate planning tool which provides for your family, friends, and charitable organizations. Call us today.

Celebrity Estates – Michael Jackson’s Estate Liable For $200M in Taxes Due to Unfunded Trust

Michael Jackson, the “King of Pop,” had always been a controversial superstar. Over the years, he became the father of three children, Prince Michael Jackson II, Paris-Michael Katherine Jackson, and Michael Joseph Jackson, Jr.

While Jackson created a trust to care for his children and other family and friends, he never actually funded it. The result? $200 million in estate taxes and years of court battles.

4 Essential Purposes of a Trust

A trust is a fiduciary arrangement which allows a third party (known as a trustee) to hold assets on behalf of beneficiaries. There are basically four essential purposes of a trust:

  • Avoiding probate. Unlike wills, funded trusts are not subject to probate as ownership is transferred outside of the grantor’s will. However, unfunded, or underfunded, trusts will go through probate.

 

  • Maintaining privacy. Probate is a matter of public record. However, since trusts aren’t subject to probate, privacy is maintained.

 

  • Mitigating the chance of litigation. Since trusts are not subject to the probate process, they are not a matter of public record. Therefore, fewer people know estate plan details – mitigating the chance of litigation.

 

  • Providing asset protection. Assets passed to loved ones in trust can be drafted to legal protection so assets cannot be seized by predators and creditors.

While these are arguably the most essential purposes, trusts can also affect what you pay in estate taxes as well.

Sadly, Jackson could not take advantage of any of these benefits. Although he created a “pour-over” will, which was intended to put his assets into a trust after his death, the estate still had to be probated.

The probate, along with naming his attorney and a music executive as his executers (instead of family members), fueled a fire that could have been avoided.  With nearly $600 million at stake, it’s no surprise that everyone wanted a piece of the pie.

Don’t Burden Your Family!

Losing a loved one is difficult enough without having to endure legal battles afterward.  In Jackson’s situation, a proper estate plan could have reduced litigation, legal fees, and estate taxes.  His situation, although it deals with hundreds of millions of dollars, applies to anyone who has assets worth protecting.  In other words, it likely applies to everyone!

There are many types of trusts and estate planning vehicles available to ensure that you don’t burden your family after your death.  We’ll show you how to best provide for and protect your loved ones by creating the type of estate plan which is tailored to fit your needs.

Celebrity Estates – James Brown’s “Vague” Estate Plan Forced Family into Years of Litigation

James Brown, the legendary singer, songwriter, record producer, dancer, and bandleader was known to many as the “Godfather of Soul.” Although he intended his estimated $100 million estate to provide for all of his children and grandchildren, his intentions were somewhat vague.  This forced his family into years of litigation which ended up in the South Carolina Supreme Court.

Everything Seemed In Order…

Brown signed his last will and testament in front of Strom Thurmond, Jr. in 2000. Along with the will that bequeathed personal assets such as clothing, cars, and jewelry, Brown created a separate, irrevocable trust which bequeathed music rights, business assets, and his South Carolina home.

At first glance, it seems as though everything in Brown’s estate plan was in order. In fact, he was very specific about most of his intentions, including:

  • Donating the majority of his music empire to an educational charity

 

  • Providing for each of his six adult living children (Terry Brown, Larry Brown, Daryl Brown, Yamma Brown Lumar, Deanna Brown Thomas and Venisha Brown)

 

  • Creating a family education fund for his grandchildren

However, only days after his death in 2006 from congestive heart failure, chaos erupted.

Heirs Not Happy With Charitable Donation

Apparently, Brown’s substantial charitable donations didn’t sit well with his heirs. Both his children and wife contested the estate.

  • His children filed a lawsuit against the personal representatives of Brown’s estate alleging impropriety and alleged mismanagement of Brown’s assets. (This was likely a protest of the charitable donation.)

 

  • Brown’s wife at the time, Tomi Rae Hynie, and the son they had together, received nothing as Brown never updated his will to reflect the marriage or birth. In her lawsuit, Hynie asked the court to recognize her as Brown’s widow and their son as an heir.

In the end, the South Carolina Supreme Court upheld Brown’s plans to benefit charities and recognized Hynie and their son as an heir.

Should You Anticipate Litigation?

Brown’s estate was substantial and somewhat controversial – and he failed to update or communicate his intentions to his family.  His heirs were taken by surprise.  And experienced attorney could have avoided much of the family upset.  Call our office today to protect your goals.

How to Make Your Inheritance Last

A 2012 study by Ohio State researcher Jay Zagorsky found that about one-third of Americans who receive an inheritance have negative savings within two years of getting their money, and of those who receive $100,000 or more, nearly one in five spend, donate or simply lose it all.  If you are about to receive an inheritance, there are several steps you can take to insure your funds will last longer than a few years.

Don’t Make Any Hasty Decisions.  Once you receive your money, don’t make any hasty decisions about what to do with it.  Instead, park the funds in a safe place such as a savings account, money market, or CD until you have had enough time to put together a long term financial plan.  If you don’t already have one, set up an emergency fund that will cover six months of expenses.  If you already have an emergency fund, consider adding to it to cover one year of expenses.  If you are married, you will need to decide early on if you want to keep your inheritance in your separate name or place the funds in joint names with your spouse.  If you are considering giving some of your inheritance to your children, you could invoke a gift tax or negative income tax consequences and should only proceed with gifting once you understand all of the consequences.

Still Working?  Put Away More Towards Your Retirement.  If you are working and are not contributing the maximum to your 401(k), bump up your withholding, particularly if you are not meeting your employer’s match.  If your employer does not offer a 401(k), start funding an IRA.  Note that if you have inherited a traditional IRA, any withdrawals you make will be included in your taxable income.  You can minimize the income tax consequences by only taking required distributions and leaving the balance invested inside of the inherited IRA.

Hire a Team of Professional Advisors.  You will need a team of professionals to help you develop long term plans for your inheritance.  A financial advisor will help analyze your current finances and build a solid financial foundation to include investment advice, insurance (life, long term care, and liability), credit and debt management, college savings, and retirement planning.  Your advisor can also help you look into the future and plan for long term financial goals, such as purchasing a first or second home or starting a charitable foundation.  An accountant will help you determine cash flow and minimize capital gains and other income taxes.  An estate planning attorney will help you create or update your estate plan (everyone needs a will, revocable trust, advance medical directive and durable power of attorney), decrease or eliminate estate taxes (federal and/or state), set up a gifting strategy, meet your charitable goals, create a family legacy, and protect your inheritance from creditors, predators, and lawsuits.

If your inheritance is large enough, it has the potential to last your lifetime.  Don’t go it alone.  We are here to answer any questions you have about receiving, growing, donating, protecting and ultimately passing on your inheritance to your loved ones.

Surprise! You Can’t Easily Disinherit Your Spouse in the U.S.

Believe it or not, in the U.S. it isn’t easy to disinherit your spouse.  But the same is not true for other family members – generally, you can use your estate plan to disinherit your brothers and sisters, your nieces and nephews, or even your very own children and grandchildren.

However, in the majority of states and the District of Columbia, you can’t intentionally disinherit your spouse unless your spouse actually agrees to receive nothing from your estate in a Prenuptial or Postnuptial Agreement.

Beware:  Spousal Disinheritance Laws Vary Widely From State to State

Unfortunately there isn’t one set of rules that govern what a surviving spouse is entitled to inherit.  Instead, the laws governing spousal inheritance rights, referred to as “community property laws” or “elective share laws” depending on the state where you live or own property. These laws vary widely:

  • In some states the surviving spouse’s right to inherit is based on how long the couple was married.
  • In some states the surviving spouse’s right to inherit is based on whether or not children were born of the marriage.
  • In some states the surviving spouse’s right to inherit is based on the value of assets included in the deceased spouse’s probate estate.
  • In some states the surviving spouse’s right to inherit is based on an “augmented estate” which includes the deceased spouse’s probate estate and non-probate assets.

For example, in Florida a surviving spouse has the option to receive a portion of their deceased spouse’s estate called the “elective share.”   This share is equal to 30% of the deceased spouse’s “elective estate,” which includes the value of the deceased spouse’s probate estate and certain non-probate assets such as payable on death and transfer on death accounts, joint accounts, the net cash surrender value of life insurance, property held in a revocable living trust, and annuities and other types of retirement accounts, reduced by the deceased spouse’s debts (this is an example of the last category described above).

Aside from this, state laws also vary widely regarding the time limit a surviving spouse has to seek their inheritance rights, which can range anywhere from a few months to a few years.

Disinherited Spouses Need to Act Quickly!

If your spouse has attempted to disinherit you, you must seek legal advice as soon as possible before state law bars you from enforcing your rights.  Only an experienced estate planning attorney can help you weigh all of your options and protect your interests as a surviving spouse.

 

How Will the 2015 Supreme Court Decisions Affect You and Your Family?

While approximately 10,000 cases are appealed to the U.S. Supreme Court each year, only 75 to 80 make it to oral argument. Of those cases, only a handful grab the media’s attention. Below is a summary of three landmark decisions handed down in 2015 that could affect how you are taxed, pay for healthcare, and plan your estate.

Comptroller v. Wynne – A State Can’t Double Tax Income Earned Outside of the State

Legal Issue: Does Maryland’s state income tax scheme violate the U.S. Constitution by “double taxing” a resident’s income earned from economic activity in another state that also taxes the same income?

Decision, 5 – 4: In a taxpayer-friendly ruling, the Supreme Court ruled that, yes, Maryland’s “double taxation” scheme violates the dormant Commerce Clause.

The Wynne case involved a Maryland couple who owned stock in a Maryland S corporation that did business in 39 states. Since income generated by an S corporation is passed through to its shareholders, the Wynnes paid income taxes in Maryland as well as their pro-rata share of taxes on the income the corporation earned in the other states.

In Maryland, residents are subject to a state income tax as well as a “local tax” based on the city or county in which they live. Prior to the Wynne case, the state allowed residents to take a credit against the Maryland state tax to offset a similar tax paid to another state, but it did not allow a credit to be taken against the local tax. Thus, income of a Maryland resident earned outside of the state was “double-taxed” by being subject to (1) out-of-state taxes, and (2) the local city or county tax. The Court struck down this “double taxation” scheme, holding that because the dormant Commerce Clause gives Congress power over interstate commerce, Maryland could not hinder interstate commerce by offering a credit against state income taxes but not against local income taxes.

Planning Tip: The Wynne decision will potentially affect hundreds of cities, counties and states other than Maryland, including Indiana, New York, and Pennsylvania. If you pay income taxes in your home state and other states, you should seek qualified tax advice regarding filing protective claims (such as amended returns or requests for refunds) for tax years in which the statute of limitations has not run.

King v. Burrell – Obamacare Subsidies Are Available to All

Legal Issue: Can the IRS provide tax-credit subsidies to healthcare coverage purchased through the federal healthcare exchange under the Patient Protection and Affordable Care Act (the “ACA,” commonly referred to as “Obamacare”)?

Decision, 6 – 3: Yes, Obamacare subsidies are available to individuals who obtain their healthcare coverage through a federal exchange.

Buried in the 2,700-page ACA is a provision which states that tax-credit subsidies are available to individuals who sign up for healthcare coverage “through an exchange established by the state.” After the ACA was passed, 34 states did not establish exchanges, leaving their residents to use the federal exchange to obtain their coverage. The King case challenged the validity of federal subsidies given to these residents since the ACA appeared to limit subsidies only to individuals who relied on a state-established exchange. Writing for the majority, Chief Justice John Roberts stated, “We doubt that is what Congress meant to do.” Thus, the validity of subsidies claimed by residents of the 34 states that use the federal healthcare exchange was upheld.

Planning Tip: Despite the King decision, the Obamacare debate will continue to be hashed out in the political arena as the 2016 presidential election fast approaches.

Obergefell v. Hodges – Same Sex Marriage is Legal Everywhere in the United States

Legal Issue: Does the Fourteenth Amendment of the U.S. Constitution require a state to license same sex marriages and recognize same sex marriages that are legally licensed and performed in another state?

Decision, 5 – 4: Yes, same sex marriages are legal and must be recognized everywhere in the United States.

The Obergefell case consolidated four cases that challenged state-banned same sex marriages in Kentucky, Michigan, Ohio and Tennessee. Relying on the Due Process and Equal Protection Clauses of the Fourteenth Amendment, the Court held that marriage is a fundamental liberty and denying the right of same sex couples to wed would deny them equal protection under the law.

Planning Tip: Same sex couples who are considering marriage need to decide if commitments regarding how to handle money, debt, and related matters should be formalized in a prenuptial agreement. Same sex couples who are already married need to determine if their prenuptial agreement should be fine-tuned and if their estate planning documents need to be amended in view of the King decision.

The Bottom Line on the Wynne, King and Obergefell Decisions

There are constant changes in the law from judicial, legislative, or regulatory action. These selections from the recent Supreme Court session are just a small example of the numerous changes that occur every year. How the Wynne, King and Obergefell decisions will affect your planning options has yet to be fully determined. Our firm is available to answer your questions about these landmark cases and how they may affect you and your family.