What is the Senior Freeze?

Many states have a Senior Freeze Program that reimburses eligible senior citizens and disabled persons for property tax or mobile home park site fee increases on their principal residence.

nj.com’s recent article addressed this question: “I inherited this home. Can I get the Senior Freeze?” The answer? The Senior Freeze apparently has several eligibility requirements, including age or disability, residency, homeownership and income limits. You must also be paying the property taxes on the property during the ownership period.

To be eligible, an individual or his spouse/civil union partner generally must be age 65 or older; or actually receiving federal Social Security disability benefit payments (instead of benefit payments received on behalf of someone else). Among other requirements, you’re typically not eligible for a reimbursement on:

  • A vacation home or second home;
  • Property that you rent to another;
  • Property that is over four units; or
  • Property with four units or fewer that has than one commercial unit.

The issue of how you determine the date of ownership, may depend on how an individual inherited the home at the parent’s death. If the home was specifically bequeathed to the child in the parent’s will, and assuming he or she was paying the real estate taxes and other carrying charges of the home upon his death, the argument could be made that as of the date of death, the child became the owner of the home and the execution of the deed by the executor of the estate only evidenced this ownership.

However, if the parent died intestate–without a will—or if his will didn’t specifically bequeath the real estate, and if he or she wasn’t paying the real estate taxes and other expenses for the property since the date of death, then it’s pretty cut and dried that the estate held ownership, until title was transferred to the child by deed.

For capital gains purposes, when a home is included in a decedent’s estate, it’s the date of death value of the home that’s considered a beneficiary’s initial basis, rather than the assessed value. While the date of death value may be the same as the assessed value, the two values are not necessarily the same, especially in towns where the true to assessed value ratio is not 100%.

Reference: nj.com (September 2, 2019) “I inherited this home. Can I get the Senior Freeze?”

Suggested Key Terms: Senior Freeze, Estate Planning, Capital Gains, Asset Protection, Inheritance, Tax Planning, Financial Planning, Probate Attorney, Intestacy, Estate Tax

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Does My Business Need a Succession Plan?

Succession plans are typically created to prepare for the owner’s retirement or untimely disability or death. Research shows that 78% of small business owners responded that they plan to use the sale of their business to fund their retirement. However, just 25% of private business owners say they have a succession plan in place.

The Houston Business Journal’s recent article, Three tips to employing establishing a strong succession plan, takes up this matter for discussion.

Applying a proactive succession plan may help your business successfully move to new leadership and keep operations running smoothly. Here are a few tips for establishing your succession plan.

Regardless of whether you’re going with a family member to succeed you or bringing in someone from the outside to take over, it’s important that the plan is communicated beforehand. You don’t want workers speculating or feeling blindsided by the decision.

Be sure that you have legal documents in place and clear expectations, guidelines, and rules, so there aren’t any gray areas when the time of transition comes.

If you are appointing a family member, set out details on how other family members will contribute to the company if they are interested. You could have more than one family member run the company, but it may be best to have one clear decision maker.

If you want to have an outside party come in to run the company or have a longtime employee assume leadership, be open to ideas. Don’t overlook someone who may be a good leader and a good fit for the position. As business climates shift, technologies advance and workplace skills change, make a selection of a leader who can adapt to those changes.

As you create your succession plan, leverage a team of experts, such as an estate planning lawyer and an accountant. You should also work with a business broker who can provide a realistic valuation of your company.

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So, You Have to Manage Someone Else’s Money – Now What?

This sounds like a disaster in the making. A durable power of attorney document must follow the statutory requirements, must delegate proper authority, must consider the timing of when the agent may act and a host of other issues that must be addressed, warns My San Antonio in the article “Guide to managing someone else’s money.” A durable power of attorney document can be so far reaching that a form downloaded from the Internet is asking for major trouble.

Start by speaking with an experienced estate planning attorney to provide proper advice and draft a legally valid document that is appropriate for your situation.

Once a proper durable power of attorney has been drafted, talk with the agent you have selected and with the successor agents you want to name, about their roles and responsibilities. For instance:

When will the agent’s power commence? Depending on the document, it may start immediately, or it may not become active, until the person becomes incapacitated.

If the power is postponed, how will the agent prove that the person has become incapacitated? Will he or she need to go to court?

What is the extent of the agent’s authority? This is very important. Do you want the agent to be able to talk with the IRS about your taxes? With your investment advisor? Will the agent have the power to make gifts on your behalf, and to what extent? May the agent set up a trust for your benefit? Can the agent change beneficiary designations? What about caring for your pets? Can they talk with your lawyer or accountant?

When does the agent’s authority end? Unless the document sets an earlier date, it ends when you revoke it, when you die, when a court appoints a guardian for you, or, if your agent is your spouse, when you divorce.

What does the agent need to report to you? What are your expectations for the agent’s role? Do you want immediate assistance from the agent, or will you continue to sign documents for yourself?

Does the agent know how to avoid personal exposure? If the agent signs a contract for you by signing his or her own name, that contract may be performed by the agent. Legally, that means that the cost of the services provided could be taken out of the agent’s wallet. Does the agent understand how to sign a contract to avoid liability?

All of these questions need to be addressed long before any power of attorney papers are signed. Both you and the agent need to understand the role of a power of attorney. An experienced estate planning attorney will be able to explore all the issues inherent in a durable power of attorney, and make sure that it is the correct document.

Reference: My San Antonio Life (Aug. 26, 2019) “Guide to managing someone else’s money”

Suggested Key Terms: Durable Power of Attorney, Estate Planning Attorney, Agent, Personal Exposure, IRS, Beneficiaries, Incapacitated

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