NAELA Summit

imageI have spent the last three days in Newport Beach at a NAELA (National Academy of Elder Law Attorneys) summit meeting. While the program was set up as classes hosted by a speaker/moderator, the summit has been interactive. Questions have been posed In the sessions and the audience responds with electronic devices to give an immediate poll of the opinions of the attendees, at which point members of the audience can choose to stand up and be heard on their ideas and views.
It has been interesting to see how the laws of the different states vary greatly on the issues and how other attorneys have overcome problems that we are also facing in California. I will be coming home with ideas and tips to improve our documents and help our clients solve practical problems from special needs trust administration, retirement benefits quandaries, and powers of attorney.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Tax Identity Theft Awareness Week

At Sugai & Sudweeks, LLP we get calls and emails daily from clients and potential clients who have fallen victim to scams or have been contacted by potential scammers. We also get a lot of email from scammers (I have personally received 18 fraudulent emails today, including one from the IRS scammers mentioned below). The Federal Trade Commission (FTC) has designated this week as Tax Identity Theft Awareness Week to warn consumers about two of the ways tax scammers might target you.

1. Tax identity theft

This kind of identity theft happens when someone files a fake tax return using your personal information — like your Social Security number — to get a tax refund or a job. You find out about it when you get a letter from the IRS saying:

• more than one tax return was filed in your name, or
• IRS records show wages from an employer you don’t know

If you get a letter like this, contact the IRS Identity Protection Specialized Unit at 800-908-4490. You can find more about tax identity theft at and

2. IRS imposter scams

This time scammers aren’t pretending to be you — they’re posing as the IRS. They call you up saying you owe taxes, and threaten to arrest you if you don’t pay right away. They might know all or part of your Social Security number, and they can rig caller ID to make it look like the call is coming from Washington, DC – when it could be coming from anywhere. Leaving you no time to think, they tell you to put the money on a prepaid debit card and tell them the card number right away.

The real IRS won’t ask you to pay with prepaid debit cards or wire transfers, and won’t ask for a credit card number over the phone. When the IRS contacts people about unpaid taxes, they usually do it by mail.

If you have a question about your taxes, call the IRS at 800-829-1040 or go to You can report IRS imposter scams to the Treasury Inspector General for Tax Administration (TIGTA) online or at 800-366-4484, and to the FTC at

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

Congress Approves Tax-Free Savings Accounts for People with Disabilities

A new law just passed by Congress and signed by President Obama will allow people with disabilities who became disabled before they turned 26 to set aside up to $14,000 a year in tax-free savings accounts without affecting their eligibility for government benefits.  As things stand now, a person diagnosed with a disability generally can’t have assets worth more than $2,000 without forfeiting eligibility for government programs like Medicaid and Supplemental Security Income (SSI).

Under the Achieving a Better Life Experience (ABLE) Act, the tax-free savings accounts can be used to pay for qualifying expenses such as the costs of treating the disability or for education, housing and health care, among other things.  The existence of the accounts will not compromise the individual’s ability to qualify for benefits like SSI or Medicaid as long as the account balance does not exceed $100,000.

States must set up programs for families to invest in the new so-called “529A accounts” and will provide investment options. The act takes effect at the beginning of 2015, meaning that states will have to act soon to regulate these new accounts. Once in place, ABLE accounts will become one more tool for families of people with special needs to use in order to protect their loved ones’ valuable benefits while enhancing their quality of life.

But because the accounts can hold only up to $100,000 without negative repercussions, and especially since they apply only to people who became disabled when they were young, most, if not all, families of people with disabilities will still need to consider setting up traditional special needs trusts if they want to properly care for their relatives with special needs.  Many of these trusts can also be drafted to protect the trust assets from Medicaid estate recovery if they are funded with money from family members and not the trust beneficiaries.

Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members.  Therefore, it is imperative that anyone thinking about establishing an ABLE account speak with her special needs planner first in order to make sure that all of the pieces of a special needs plan will properly align with the ABLE account.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

2015 Estate and Gift Tax Update

The 2015 estate and gift tax limits, as well as retirement plan contribution limits have been released by the IRS. For estate taxes, the top tax rate remains unchanged at 40%. However the federal estate and gift tax exemption amount has increased to $5,430,000 per person. This is an increase of $90,000 based on the annual increases for inflation. Thus, for a married couple, a proper estate plan can protect a total estate of $10,860,000 in 2015.

With estate tax limits so high, many clients no longer need to be concerned about estate taxes and can opt for trusts and estate plans that are no longer as complex. Many want to now revise their plans for simplification purposes and are pleased that estate taxes are no longer such a large concern.

Annual gift tax exclusion amounts remain at $14,000 per person. A donor can gift $14,000 to any number of donees with no tax consequence. Gifts in excess of $14,000 in 2015 would have to be reported on a gift tax return (form 709). In addition, a 529 college savings plan can be funded, and up to five (5) years worth of annual gifts may be made at one time ($70,000) without reducing the lifetime gift tax exemption, although a gift tax return would have to be filed to report the gift. To avoid reporting requirements, gifts can be paid directly to providers for medical, dental or tuition and do not count towards the annual limits.

For 2015 the IRS has increased the annual contribution limits for retirement plans. The annual limit for 401(k), 402(b) and 457 plans is $18,000, an increase of $500. For employees that are over age 50, a catch-up contribution amount has also increased by $500 to a maximum of $6,000 per year. This catch-up contribution can be made in the year you turn 50, no matter your birthdate. For IRA contributions, the annual limit remains at $5,500, and the catch-up contribution limit remains at $1,000.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.