PLANNING FOR WEALTH & SECURITY
By attorneys Jennifer & Jeff Hawkins
 
2009 Wealth Planning Preview

2009 promises many changes that affect Hoosiers’ wealth. President-Elect Obama takes office in January, a new Congress will convene, a new Indiana General Assembly will begin work, and various federal and state agencies will reorganize. Congress must decide how to repair our economy and overhaul an estate and gift tax system that threatens to melt down on January 1, 2010. Governor Daniels’ administration and the Indiana General Assembly must decide how to implement radical federal Medicaid legislation almost 3 years after President Bush signed the federal act into law.

The American economic crisis weighs heavily on congressional minds this year. Last year, Congress decided to give hundreds of billions of dollars to American businesses. However, the United States government owes unfathomable debt that it must pay sooner or later. Republicans and Democrats can continue arguing whether to raise taxes or decrease spending, but the government must raise more revenue than it spends to pay off its debt. Therefore, we can expect Congress to raise taxes this year for many households.

Congress set up a ticking time bomb in 2001 when it increased the effective exemption for the federal "death tax." The federal death tax, more properly known as the federal estate tax, affects the estates of decedents who leave more than the exempt amount of wealth to their heirs and other beneficiaries. The exemption amount increased on New Year's Day 2009 from $2 million to $3.5 million. This means that an individual can pass up to $3.5 million to his family and a well organized married couple can pass up to $7 million to their family free of the federal estate tax. The time bomb problem arises next New Year's Day when the current law wipes out the federal estate tax entirely and then restores the exemption to $1 million in 2011. You can bet that this crazy estate tax situation will weigh heavily in 2009 federal budget negotiations.

Indiana's Medicaid circus will continue to wreak havoc on Hoosier seniors in 2009. Indiana's newly privatized Medicaid system still loses files and mixes up information to the grief and humiliation of nursing home residents and their families. The Indiana Medicaid system proposed new regulations in the fall of 2008, but backed off amid sharp criticism from Elder Law attorneys and nursing home industry professionals. We expect the Indiana General Assembly to take up the issue of implementing the federal Medicaid provisions of the Deficit Reduction Act of 2005 (the "DRA") in 2009. Anyone can guess what the Medicaid system will look like by the end of this year, but everyone can expect more turmoil and frustrating disorganization throughout the year.

We wish this preview would offer more optimism and encouragement. Our best suggestion is for people to keep careful records of receipts for purchases and other expenditures and preserve banking, investment, and tax records for at least seven years at a time. If you think about giving large amounts of money to your children, grandchildren, or anyone else, speak with a qualified elder law attorney first to make sure that your gifts do not trigger regrettable consequences. We may spend more time than normal in this column this year helping you track these transitions. Meanwhile, we wish you a joyful and peaceful 2009.

THIS ARTICLE IS NOT LEGAL ADVICE. ALWAYS CONSULT AN ATTORNEY DIRECTLY BEFORE RELYING UPON THIS ARTICLE OR CHANGING AN ESTATE PLAN.