Pay Attention to Year-End Estate Planning, Says New Jersey Estate Planning Firm

by: Begley Admin

The year 2012 is quickly coming to a close and the estate planning attorneys at Begley Law Group, PC, have some suggestions for items that should be considered before the year’s end.

Medicare Advantage.  There is an open enrollment period permitting Medicare recipients to disenroll from traditional Medicare and enroll in a Medicare Advantage Plan (Medicare Part C) from October 15, 2012 until December 7, 2012.  During the open enrollment period, Medicare beneficiaries may choose original Medicare or they may choose from among many Medicare Advantage programs. Many beneficiaries choose to enroll in Medicare Advantage, because they do not need a Medicare Supplement. Individuals with pre-existing conditions who have been enrolled in Medicare Part D for more than six months are no longer eligible to obtain a Medicare Supplement. They can enroll in Medicare Advantage and get the same or similar coverage during the open enrollment period.  However, the traditional Medicare program continues to be the choice for most beneficiaries.  Many beneficiaries have experienced difficulties with Medicare Advantage plans and appeals and many plans have pulled out of the Medicare market entirely.  In addition, Medicare Advantage plan are constantly changing their benefit packages and increasing payments.

The Center for Medicare Advocacy recommends the following guidelines before enrolling in a Medicare Advantage plan:

  • Review coverage carefully.
  • Determine what the plan pays for.
  • Does the plan include Part D prescription coverage?
  • Determine what plan services are provided at additional cost.
  • Try to assess the plan’s stability.
  • Ask about plan physicians and determine if your physicians are in the plan.
  • Determine how to use the plan’s complaint system and how appeals and grievances are handled.


Under traditional Medicare, a beneficiary can go to any provider who accepts Medicare.  Under Medicare Advantage, the provider must be included in the plan. Traditional Medicare has deductibles and coinsurance costs.  These can be covered by a supplemental policy.  Medicare Advantage covers many of the gaps that Medicare Supplement policies cover.


Gifting. Individuals with large estates have an opportunity through December 31, 2012, to make a gift of up to $5,120,000 without payment of federal gift tax. This would then remove those assets from the individual’s estate for federal estate tax purposes. Unless Congress acts, this exemption is scheduled to be reduced to $1,000,000 for both federal gift and estate tax on January 1, 2013.  Most commentators believe that Congress will eventually act, but this is uncertain at this time.


Capital Gains.  Currently, the capital gains tax for long-term capital gains is very advantageous.  The long-term capital gain is the gain on an asset that has been held for more than one year.  Currently, there is a 0% rate on capital gains, if total income (including capital gains income) places someone in the 10% or 15% tax bracket.  There is a 15% federal capital gains tax rate, if someone’s total income (including capital gain income) places them in the 25% tax bracket or higher. Most states do not have separate capital gains tax rates; they tax capital gains as ordinary income.


Beginning January 1, 2013, the federal tax rate on long-term capital gains will be 20% (or 10% if a taxpayer is in the 15% tax bracket).  Also beginning on January 1, 2013, capital gain income will be subject to an additional 3.8% Medicare tax.  In determining whether to realize capital gains in 2012 or 2013, this change should be considered.


Medicare Tax.  Currently, there is a federal tax rate of 2.9% of wages received by an employee and on business or farming income earned by self-employed individuals.  Beginning January 1, 2013, the Medicare tax will be increased to 3.8% and expanded to cover both wage income and investment income for higher income individuals.  The Medicare tax is expanded in 2013 for higher income individuals, and the income subject to a Medicare tax will include investment income.  An individual might want to consider gifting income-producing assets to children or other family members who aren’t subject to the additional Medicare tax.  The tax only affects single taxpayers with modified adjusted gross income (MAGI) of $200,000 or more, or married taxpayers with an MAGI of $250,000 or more, or married taxpayers filing separately with MAGI in excess of $125,000, and trusts and estates that file their own returns and have MAGI in excess of $11,650.

To learn more or to contact a New Jersey special needs planning attorney, New Jersey estate planning lawyer, or New Jersey Medicaid planning lawyer, call 1.800.533.7227 or visit