Sunday, March 30, 2014

Using Custodial Accounts to Provide for Younger Beneficiaries

Do you want to leave part of your estate to your grandchild or another young family member? If so, you should plan carefully.
Every state has a law that allows a parent or grandparent to make gifts to young beneficiaries. These laws are usually called Gift or Transfer to "Minors" Acts. They allow you to make a gift to a young person, while allowing the money to be managed by an older and more experienced "custodian."
Custodial accounts can be set up with virtually any bank, broker or mutual fund and are easy to maintain. You can create them either during your lifetime, or in a Will or Trust document or beneficiary designation.  
Many people put provisions in their Wills that state that any assets going to someone who is under age 21 will be held and invested by a custodian until the beneficiary reaches age 21. Without this provision, the minors would receive their inheritance at age 18. 
Until 2003 in Pennsylvania, a "minor" (for purposes of custodial accounts) was a person under age 21. This meant that a custodian would have to turn over the funds to the minor when the minor reached age 21.
The problem is, many people are still financially immature on their 21st birthday. They may still be in school and have limited experience dealing with money. As a result, many parents and grandparents would prefer to protect the funds beyond age 21. Until the new law in 2003, they were forced to create more complicated and expensive trust arrangements.   
Since the enactment of Act 50 of 2003, custodial accounts in Pennsylvania can be designed to continue to age 25. The individual who makes the transfer[i] specifies the age, up to 25, at which time the money is to be turned over to the young person. If no age is specified, then the funds must be given to the minor at age 21. See, 20 Pa.C.S.A. §5321.
What Should You Do?
- If you have already created a Will or Trust that specifies that gifts to "minors" will be managed by a custodian, you might want to update that provision. If you want the custodian to be permitted to continue to manage the account to age 25, your lawyer can make a simple change in your document to accomplish this.
- Recognize that your grandchildren or other “minors” may someday inherit from you as contingent beneficiaries. An inheritance you have designated to pass to one of your adult children may instead pass to young grandchildren in the event the primary beneficiary predeceases you.
- Inheritances can pass to younger persons because they are beneficiaries or contingent beneficiaries on IRAs, life insurance policies, annuities, and other assets that may pass outside of terms of your Will or Trust. You may need to specifically update the beneficiary designations on these assets.  
- If your current Will or Trust documents create a trust to hold funds for minors until they reach age 25, you might want to consider changing them to use the less complicated custodial account arrangement.
 - If you intend to leave money to a minor and your planning documents do not allow for a custodial arrangement, be aware that the minor will receive his or her funds at age 18.  If you think that is too young to come into an inheritance, talk to your lawyer about updating your plan.      

[i] The Pennsylvania Act does not permit the custodianship to continue until later than the time the minor attains the age of 21 years where the custodial property is transferred by a lifetime gift because of federal gift tax issues. The age 21 limit is consistent with the Internal Revenue Code which permits “minority trusts” under section 2503(c) of the Internal Revenue Code to continue in effect until age 21; use of any older age would render the gift ineligible for the federal gift tax annual exclusion. See, Pennsylvania Joint State Government Commission, Report of the Advisory Committee on Decedents’ Estates Laws, PROPOSED PENNSYLVANIA UNIFORM PRINCIPAL AND INCOME ACT AND OTHER PROPOSED AMENDMENTS, June 2001,  

Friday, March 28, 2014

Medallion Signature Guarantee: What Is It and Why Do I Need It To Transfer Stock

Josephine Reviello is a Case Manager and the Director of Office Operations at my law firm, Marshall,Parker & Weber. As a Case Manager she frequently helps clients deal with requirements for a Medallion Signature Guarantee. I thought her explanation of these signature guarantees might be of interest to some readers of this Blog.

Medallion Signature Guarantee: What Is It and Why Do I Need It?

Written By: Josephine Reviello, Case Manager

If you have stock certificates in your safe deposit box and you want to transfer or sell them, you will have to sign the certificates or a document called a security power, more commonly known as a stock power form. But, did you know, that for your protection, you would also need to have your signature "guaranteed" before the stock can be transferred to another owner?

A Medallion Signature Guarantee is a special signature guarantee used when transferring securities (a tradable asset of any kind, such as stock, bonds, etc.). The medallion stamp or imprint can be provided by many financial institutions (banks, broker dealers, credit unions, and savings associations) and indicates that the financial institution guarantees the signature is genuine and accepts liability for any forgery. The financial institution providing the medallion signature guarantee must be a participant or member of one or more of the three Medallion Signature Guarantee programs: Securities Transfer Agents Medallion Program (STAMP); Stock Exchanges Medallion Program (SEMP); and New York Stock Exchange Medallion Signature Program (MSP). Participating financial institutions can guarantee the authenticity of their customers’ signatures.

The reasoning behind obtaining a Medallion Signature Guarantee stamp is to protect the customer against forgery of his or her signature and limit the liability of institutions which process these forms, i.e., transfer agents. Although it is an inconvenience, the stamp protects the stock owner by making it hard for other people to forge a signature that could result in the owner losing money. And transfer agents require Medallion Signature Guarantees to limit their liabilities and losses if the signature does turn out to be forged. That liability lies on the financial institution that accepted that signature and put the Medallion Signature Guarantee stamp on the paperwork.

Usually, the cost for this type of stamp is minimal and it may even be free of charge if you are already a customer of the participating financial institution. If you are not an existing customer and do not have a relationship with the participating financial institution, they may choose not to provide this service.

A notary stamp or seal is NOT the same as a Medallion Signature Guarantee stamp. Nor is a notary stamp or seal a substitute for a Medallion Signature Guarantee. Notaries are state government officials who verify the identity of signers and witnesses to documents. A notary cannot take financial responsibility like a financial institution does when providing a Medallion Signature Guarantee.

Tuesday, March 25, 2014

Senior Respite Program Legislation passes PA House

The Pennsylvania House of Representatives has unanimously passed legislation (HB 1702) in support of senior respite services. The bill was introduced by Representative Chris Ross (R-158).
HB 1702 was inspired by an assisted senior program that has been operated for over 20 years by the Kennett Area Senior Center. A similar program is in operation at the Downingtown Area Senior Center.  
The legislation authorizes the licensing and oversight of “community adult respite services" programs. These programs are intended for seniors who are living at home and require only minimal assistance. They provide the senior with social interaction, exercise and cognitive stimulation, thereby enhancing the potential for longer-term independence. And they provide family members with a much needed break from caregiving duties.
Program participants must be age 60 and over and be able to actively or passively engage in social and leisure activities with others. Participants may suffer from mild cognitive or physical impairment and need cueing. But the program is not intended for seniors with higher care needs such as individuals needing assistance with medication, personal hygiene care or who present a risk of wandering. Participants would be subject to ongoing assessment. Those who develop more intense care needs would be transitioned to other providers.  
If enacted, the bill and related guidance to be developed, would clarify the role to be provided by senior respite programs like the Kennett Area Senior Center program. In particular, it would demarcate them from the higher level of assistance available in adult day care centers. Adult day centers provide personal care, nursing services, social services, therapeutic activities, nutrition and therapeutic diets and emergency care. [See the Directory of Pennsylvania Adult Day Services Providers here.]
The legislation would provide a safe harbor which would clear the way for additional senior centers and other providers to offer senior respite services. This will hopefully allow for the geographic expansion of respite to other senior centers across the state. It may also encourage other non-profit and for-profit organizations to offer senior respite.   
An ultimate goal of the program is to allow seniors to continue to live in their communities for as long as possible. It can help participants maintain independence by enhancing their abilities and supporting their caregivers. It represents another small cog in the continuum of care.
Licensed long-term care service providers will be able to provide senior respite services without a separate license. But they must notify the Department of Aging of their intent to operate a program. Other providers must obtain a license.
For the purpose of this exemption, licensed long-term care service providers include:
An assisted living residence.
A continuing-care provider.
A Life program.
A long-term care nursing facility.
An older adult daily living center.
A personal care home.
Within a year and a half of enactment, the Department of Aging is charged to develop guidance for the program – via regulations or statements of policy.
Program monitoring will be provided by either the Department of Aging or by local area agencies on aging (AAAs) acting “as agents of the Department.” Programs may be operated by existing AAA senior centers as well as other providers. Employees of senior respite services programs will be prohibited from serving as power of attorney or guardian for a participant.
The legislation includes no provision for funding. This does improve its prospects for ultimate enactment. But the lack of any public financing means that programs will need to come up with creative ways to pay for the services provided. It’s possible that senior centers could offer respite on a sliding-fee schedule based on ability to pay. Other providers could subsidize their respite services as a means of marketing or for charitable reasons.   
HB 1702 now moves on to the Pennsylvania Senate where its prospects appear bright. With broad bi-partisan support and no public funding requirement, the bill may be on the Governor’s desk by this summer.  

Monday, March 17, 2014

PA Property Tax Rebate Survival Requirement Invalid says Court

A Pennsylvania Appeals Court has invalidated regulations that prevent an estate from claiming a property tax or rent rebate for a decedent who did not survive beyond the year of the claim.
According to the decision, an estate can claim a property tax or rent rebate if the decedent lived at any time during the year of the claim and was otherwise eligible. This means that estates can claim a property tax or rent rebate for tax year 2013 even though the decedent died during 2013.
The case is Muscarella v. Commonwealth of PA (Pa. Commw. Ct., March 14, 2014). The 4-3 decision will likely be appealed to the Pennsylvania Supreme Court. 
Personal representatives of estates should note that propertytax and rent rebate claims for the 2013 tax year must be filed by June 30, 2014.
A majority of the court construed the Pennsylvania Act as allowing a decedent’s estate to pursue a claim for a rebate so long as the decedent met any one of the three eligibility criteria set forth in the definition of “Claimant” under section 1303 of the Act, 53 P.S. §6926.1303.
Section 1303 of the Act defines an eligible “claimant” as:
A person who files a claim for property tax rebate or rent rebate in lieu of property taxes and:
(1)    was at least 65 years of age or whose spouse, if a member of the household, was at least 65 years of  age during a calendar year in which real property taxes or rent were due and payable;
(2)    was a widow or widower and was at least 50 years of age during a calendar year or part thereof in which real property taxes or rent were due and payable; or
(3)    was a permanently disabled person 18 years of age or older during a calendar year or part thereof in which the real property taxes or rent were due and payable.
53 P.S. §6926.1303.5
The invalidated regulation states: “A claim for a property tax rebate or a rent rebate in lieu of property taxes may be filed by the personal representative of a decedent’s estate if, and only if, the decedent lived during some part of the year next succeeding the calendar year for which a rebate is claimed.”  61 Pa. Code §401.1(iv) and the similar Section 401.43(a).

The court rejected a Department of Revenue attempt to re-interpret its regulations to deny a rebate to any estate (regardless of whether the decedent had lived into the succeeding year) as precluded by non-compliance with the Commonwealth Documents law, 45 P.S. §§1102-1602; 45 Pa.C.S. §§501-907.  

Saturday, March 15, 2014

File Now for PA Property Tax/Rent Rebates for 2013 tax year

The Property Tax/Rent Rebate program benefits lower income Pennsylvania residents who are age 65 and older; widows and widowers age 50 and older; and people with disabilities age 18 and older. The income eligibility limit (which excludes half of Social Security income) is $35,000 for homeowners and $15,000 for renters.
The maximum rebate for both homeowners and renters is $650.
The deadline to apply for a rebate on property taxes or rent paid in 2013 is June 30, 2014.
You may request an application form by maildownload a form or obtain a paper form from the PA Department of Revenue district office or legislator's office nearest you until June 30, 2014.
More information is available through the PA Department of Revenue website: or by calling 1-888-222-9190. 
The property tax/rent rebate program began in 1971 and was significantly expanded with the passage of Act 1 of 2006. The program is supported by the Pennsylvania Lottery and slots revenue.

Friday, March 14, 2014

Pennsylvania Healthy Steps Program Reduces Falls in Older Adults

A Pennsylvania Department of Aging program is proving successful in reducing falls suffered by older adults. A two year study being published by researcher Steven Albert of the University of Pittsburgh Graduate School of Public Health reports that the Healthy Steps program reduced falls by over 17%. 
The Department of Aging supported program is available to individuals over age 50 through their local Area Agency on Aging. The average age of study participants was 75.4.  
The Healthy Steps program website says that participants “learn how to stay active, make their home safer, manage medications, talk to their doctor, improve nutrition and learn about other valuable resources to help reduce the risks for falls.” The program consists of two 2 hour workshops and includes a 64 page guide.
According to a March 13, 2014 article in the Pittsburgh Post-Gazette:
One in three adults aged 65 and older falls each year, according to the U.S. Centers for Disease Control and Prevention. That agency and the National Institutes of Health gave Pitt $1.5 million for the falls prevention study.
The cost of fall injuries will reach $67.7 billion by 2020, according to the CDC.
“We recognize we do not have to accept falls,” said Mr. Albert, 58, because falls are not a normal part of aging. Though pleased with the 17 percent reduction in falls, he suggested “we can always build a better mousetrap. We can nudge people a little more.”
Since 2007, 32,000 Pennsylvanians have completed the Healthy Steps program according to the Post-Gazette. There are 4.5 million Pennsylvanians over the age of 50.
The Healthy Steps Program Initiative website makes note of the significance of falls for older adults:  
  • Falls are the most common cause of injury for older adults.
  • One out of 3 people over age 65 falls at least once a year.
  • Half of the people who break a hip do not recover fully.
  • Almost half of those who enter nursing homes do so because of a fall.  After the fall, they cannot stay at home on their own.
  • Most falls occur in people's own homes while they perform their regular daily activities.
Interested individuals age 50 and over can find out more about the Healthy Steps program by contacting their local Area Agency on Aging. See an excerpt of the Healthy Steps class guide.