The new law does a few things.  First, it add a spouse, widow, or widower of a child or step-child as a Class A beneficiary.  Second, it increases the exemption for Class A beneficiaries to $250,000.  This change was made retroactive to decedents dying after December 31, 2011.  The third change is the gradual repeal of the inheritance tax.  This was done through a credit to the actual tax owed which credit increases by 10% each year beginning in 2013 through 2021.  Beginning in 2022 the inheritance tax would cease to exist.  As an example, if a parent dies in 2013 with a $1,000,000 estate which is divided equally between two children. Each inherits $500,000. The first $250,000 for each child would be exempt.  The other $250,000 inherited by each child would incur a tax of $7,250.  In 2013 there would be a 10% credit against this tax (which is $725) and thus the actual tax owing for each child would be $6,525.  If the person died in 2014 the law applies a 20% credit against the tax ($1,450) and thus the actual tax on each child would be $5,800.

Unfortunately this new law does not increase the paltry exemptions available to Class B beneficiaries (brothers, sisters, nieces, nephews, etc.) which is only $500 nor does it increase the exemption for Class C beneficiaries (everyone who is not a Class A or Class B beneficiary – such as a friend) which is only $100.

The fact that this legislation got passed is somewhat of a surprise. There have been proposals to repeal our state’s inheritance tax many times in the past and it never got anywhere.  This time was different although the full repeal will take many years to materialize.

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We are also covering a little known VA benefit referred to as "aid and attendance" that is available for war time veterans and their widows.  This VA benefit can help these elderly individuals cover their long-term care costs, whether in-home care, assisted living, or nursing home care. These benefits are not automatic however. But, there are planning techniques that can be implemented to help qualify a person for this valuable benefit.

Dr. Healy also stated that 60% to 80% of nursing home patients have some form of dementia and over five-million people over the age of 65 have some form of dementia.  He believes early diagnosis is very important which can allow the patient to get some treatment that may help him or her, there can be help put in place to protect the safety of the patient and others, and appropriate legal planning can be put in place before the person's mental capacity is severely affected.  He relies a lot on what family members and loved ones notice about the patient and often times the first indication of problems exhibit themselves as a change in behavior.  He encourages those loved ones to provide, in writing, a list of their concerns and the changes in behavior that they have noticed.

Dr. Healy also offered tips on dealing with persons with dementia and issues surrounding caregivers.  Caregivers need to recognize the need for help and he has seen all too often when caregivers may work themselves into the ground by trying to provide all the care without any respite relief or other help.  Obviously this is not good for the caregiver nor their loved one.

The bottom line is that if you suspect a family member or loved one may have some form of dementia you should put your concerns in writing to your loved one's doctor and try to get an assessment performed.  Early diagnosis is key to helping your loved one.  Of course, the apropriate legal planning should be done as well to avoid court guardianship matters and putting in place advanced medical directives as well as other planning steps that may be appropriate.

Another presenter was a doctor who discussed end of life decisions and the role of the patient's doctor.  His presentation was insightful and added credence to the idea of how limited living wills are in practice.  Many of the terms used in the Indiana living will statute are undefined and difficult in practice for the medical profession to handle.  The main take away from his presentation was that there needs to be a conversation between the client and the medical decision maker.

More to come later.

Teaching this course helps me realize how many misconeptions people have about estate planning and financial matters.  Several class attendees have talked to me after the class, or have asked questions during the class, which make it clear there is a lack of education out there about proper estate and financial planning.  Hopefully this course will prompt the attendees to get their affairs in order and to avoid problems should a crisis occur.

I have also tried to emphasize the importance of considering estate planning a lifetime process.  It is not a one-time event which is then put on a shelf and forgotten.  Rather, they must make sure to review their planning every few years with their advisors to make certain it is still up to date with their needs and circumstances.

If you are interested in attending future offerings of this IU Continuing Studies course it appears it will be offered by IU again in the Spring of 2011.  Contact us or Indiana University's Continuing Studies office for more information.

In 2009 the estate tax exemption was $3.5 million.  However, due to a quirk in the law that was passed in 2001 the estate tax expired in 2010.  Thus, anyone dying in 2010, even billionaires, will pay no federal estate tax.  However, like Cinderella’s carriage turning back into a pumpkin, on January 1, 2011 the estate tax is set to be reinstated with only a $1 million exemption.  Despite rumors and other information that Congress would fix this issue they have failed to do so.

Again, stay tuned.  I am sure there will be more to this story later.