Are the New Proposed Tax Cuts Something You Should Be Concerned About?
The Trump Administration recently announced proposed tax cuts, which received many headlines for reducing corporate tax rates and generally being unclear on how the cuts would be absorbed in the national budget. What do the proposed income tax changes mean for estate planning and elder law? For the wealthy, the plan appears to offer significant benefits, but the proposed cuts would likely have harsh effects on low and middle income individuals with significant health care expenses.
Given the basic nature of the administration’s proposals, there is a lack of clarity with regard to what changes will be made to available income tax deductions and credits. A major piece of the proposal is simplifying the tax brackets to three rates of 10%, 25%, and 35%; unfortunately, it is unclear where those rates would fall. The proposal only specifically saves the charitable and mortgage interest deductions, which are two of the most widely claimed. Losing other deductions would not concern most low and middle income taxpayers, because the standard deduction would be more than doubled.
As an elder attorney, I am seriously concerned for the potential loss of the medical expense deduction. Loss of the medical expense deduction would increase the significant financial burden for those in long-term care or chronic illness, which impacts people of all income levels. Such expenses are only increasing, and the tax credit offers much-needed relief to taxpayers in the middle and lower income categories. When over half of U.S. bankruptcies arise from medical bills, eliminating this deduction would seem unwarranted.
The proposal seeks to eliminate the so-called “Death Taxes” which only impacts those passing with wealth exceeding $5.5 Million (single individuals) or $11 Million if a married couple maximizes their credit. If the implemented measures add elimination of gift taxes to the proposal, it would truly be a rare opportunity for wealth transfers with minimal taxes. This is primarily because an estate tax has been around for over a century now and, while it may go away temporarily, there is a decent chance it would return. Accordingly, only those who pass while the estate tax is gone would reap a benefit. On the other hand, individuals can easily plan to take advantage of changes in the gift tax during their life.
All told, the U.S. tax system is notoriously complex and riddled with deductions, credits, and other various measures that both add to the complexity of the system and offer advantages to certain individuals and businesses. The proposal put forth by the administration illustrates a desire to significantly reduce the complexity of the tax code, but risks oversimplification. The proposed points are certainly not set in stone and would need much refining in order to become coherent policy. However, the prospect of a losing deductions for health-related expenses creates legitimate concern. When combined with rising health care costs and the potential for increased uncertainty if the Affordable Care Act is repealed, the economic outlook for the low or middle-income elderly could become dire. If you have not planned ahead for significant medical costs or unexpected incapacity, these proposed changes offer yet another reason to consult an estate planning attorney specializing in elder law.
Ask Kit Kat – Komodo Dragon Babies
Hook Law Center: Kit Kat, what can you tell us about two Komodo dragon babies at the Virginia Aquarium & Marine Science Center in Virginia Beach?
Kit Kat: Well, this story has several interesting twists and turns. The babies were hatched from eggs this past August (2016); however, their gender was revealed only recently. They have to be old enough to undergo a blood test for that to happen, and the blood test only occurred on April 13, 2017. The test revealed they are both males, and the museum went about announcing this in a fun way. They had the dad dragon, Teman, kick over some giant, blue plastic eggs in his exhibit using some incentives. The mother, Jude, unfortunately, did not live to see her babies hatch. She underwent surgery last summer to correct a condition known as egg-yolk coelomitis. There were complications, and she had to be euthanized last July. She was almost 9 years old at the time.
Now for the interesting part—staff at the museum were not even aware she had left behind some eggs until they were cleaning the exhibit area, and they discovered 18 eggs buried about two feet beneath the surface. Two of the eggs hatched, and now 8 months later, they are about 3 feet long! Eventually, they will end up being 7-8 feet long. The parents, Teman and Jude, were on loan from zoos in Denver and San Antonio. One of the babies will stay in Virginia Beach, and one will eventually go to San Antonio.
The as-of-yet unnamed babies live separately at this point in an area kept to a toasty 90 degrees, but a new exhibit area is being prepared for them which should be ready by late this summer. The museum is welcoming input to pick their names, so if you’d like to make a suggestion, go to their Facebook page. They are unique. In North America, there are only 123 Komodo dragons spread across 60 facilities. Virginia Beach is fortunate to have 4—Teman, the 2 babies, and another male named Sanchez! (Robyn Sidersky, “Two Komodo Dragon Babies,” The Virginian-Pilot, April 14, 2017, p. 3)
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