Kenneth Vercammen, Esq is Chair of the ABA Elder Law Committee and presents seminars to attorneys and the public on Wills, Probate and other legal topics related to Estate Planning and Elder law. Kenneth Vercammen is a Middlesex County trial attorney who has published 130 articles in national and New Jersey publications. He was awarded the NJ State State Bar Municipal Court Practitioner of the Year and is a lecturer for American Bar Association on Estate Planning for Same Sex Couples. He was a speaker at the 2012 ABA Annual Meeting attended by 10,000 attorneys and professionals.
To schedule a confidential consultation, email us at VercammenAppointments@NJlaws.com, call or

visit Website www.njlaws.com

Kenneth Vercammen & Associates, P.C.

2053 Woodbridge Avenue - Edison, NJ 08817

(732) 572-0500

Saturday, April 5, 2014

Nuts & Bolts of Elder Law & Estate Administration Seminar

Nuts &  Bolts of Elder Law & Estate Administration Seminar  
        Wed, May 7  5:00 PM - 9:00 PM New Jersey Law Center One Constitution Square New Brunswick, NJ 08901  08901  Includes a 260-page book, plus CD with 500 pages of sample forms, documents & checklists! and dinner                                            
           Elder law continues to offer the legal profession a booming opportunity for growth. As your current clients continue to grow older, you need to position yourself to be able to offer them and their families the legal services required by the elderly in today’s society. Or, you may be looking for lucrative areas in which to expand your current practice, including administering their estates.
This practical program is designed to provide the nuts and bolts of elder law practice & estate administration practice to general practitioners and young lawyers, as well as to more experienced lawyers seeking to expand into this field. A highly authoritative and experienced panel of elder law attorneys & estate planners will share proven techniques and experience it would take you years to gather on your own. You’ll also gain insight on how Federal Medicaid Reform will impact your practice.
Everything you need to know about elder law & estate administration including:

• Why Have a Will? - Gathering information; standard provisions; designation of fiduciaries; protective clauses; sample forms; Ethics - who is the client?

• Powers of Attorney - Types of POAs; what should be included; why clients need them; POAs and Living Wills; sample forms

• Living Trusts (Revocable/Irrevocable) as an Estate Planning Tool - Why it should be used; Ethics - who is the client?; disadvantages; revocable vs. irrevocable; Insurance Trusts; sample forms

• Basic Tax Considerations - Jointly-held property; “I love you” Will; no Will at all; insurance owned by client; unlimited marital deduction; estate planning in the testamentary document; sample forms/letters

• Estate Administration - New Probate Law in New Jersey - Probate process; duties of executor/fiduciary; gathering of assets; tax returns; tax waivers; access to property; sample forms/checklists

• Medicaid Planning in Light of Federal Medicaid Reform - Countable assets of Medicaid applicant; income cap/Medical needy standard; look-back period; transfers of property; personal residence; Medicaid estate recovery rules; probate; undue influence; competency
…and more
         Speakers:
-KENNETH A. VERCAMMEN, ESQ. Chair, ABA Elder Law Committee Past GP Solo Section Attorney of the Year Past NJSBA Municipal Court Practitioner of the Year  Edison, NJ
-WILLIAM P. ISELE, ESQ. Past NJ Ombudsman for the Elderly
-MARTIN A. SPIGNER, ESQ. Law Office of Martin A. Spigner, Cranbury
-ADAM DUBECK, Esq.
$160.00 General   Tuition, reduced fee for NJSBA Elder & Disability Law Section and NJSBA Young Lawyers Division
[Free for Superior Court Judges] Seminar #S57800S4
NJSBA Member Price is reduced – To qualify for this reduced price, you must provide your NJSBA Member# at the time you place your order. If you place your order without providing your NJSBA Member#, you will be charged the regular price.
          More details contact New Jersey Institute for Continuing Legal Education 
The non-profit continuing education service of 
The New Jersey State Bar Association  Constitution Square, New Brunswick, New Jersey 08901-1520 
Phone: (732) 214-8500 • Fax: (732)249-0383 • CustomerService@njicle.com
         NJ CLE INFORMATION: This program has been approved by the Board on Continuing Legal Education of the Supreme Court of New Jersey for 4.6 hours of total CLE credit. Of these, 1.2 qualify as hours of credit for ethics/professionalism.


         Presented in cooperation with the NJSBA Elder & Disability Law Section and NJSBA Young Lawyers Division

Saturday, January 25, 2014

New law Protects minors by prohibiting counseling attempts to change sexual orientation.

New law  Protects minors by prohibiting counseling attempts to change sexual orientation.

CURRENT VERSION OF TEXT
     As reported by the Senate Health, Human Services and Senior Citizens Committee on March 18, 2013, with amendments.
  

AN ACT concerning the protection of minors from counseling attempts to change sexual orientation and supplementing Title 45 of the Revised Statutes.

     BE IT ENACTED by the Senate and General Assembly of the State of New Jersey:

     11.   The Legislature finds and declares that:
     a.    Being lesbian, gay, or bisexual is not a disease, disorder, illness, deficiency, or shortcoming.  The major professional associations of mental health practitioners and researchers in the United States have recognized this fact for nearly 40 years;
     b.    The American Psychological Association convened a Task Force on Appropriate Therapeutic Responses to Sexual Orientation.  The task force conducted a systematic review of peer-reviewed journal literature on sexual orientation change efforts, and issued a report in 2009.  The task force concluded that sexual orientation change efforts can pose critical health risks to lesbian, gay, and bisexual people, including confusion, depression, guilt, helplessness, hopelessness, shame, social withdrawal, suicidality, substance abuse, stress, disappointment, self-blame, decreased self-esteem and authenticity to others, increased self-hatred, hostility and blame toward parents, feelings of anger and betrayal, loss of friends and potential romantic partners, problems in sexual and emotional intimacy, sexual dysfunction, high-risk sexual behaviors, a feeling of being dehumanized and untrue to self, a loss of faith, and a sense of having wasted time and resources;
     c.    The American Psychological Association issued a resolution on Appropriate Affirmative Responses to Sexual Orientation Distress and Change Efforts in 2009, which states: “[T]he [American Psychological Association] advises parents, guardians, young people, and their families to avoid sexual orientation change efforts that portray homosexuality as a mental illness or developmental disorder and to seek psychotherapy, social support, and educational services that provide accurate information on sexual orientation and sexuality, increase family and school support, and reduce rejection of sexual minority youth”;
     d.    (1) The American Psychiatric Association published a position statement in March of 2000 in which it stated:  “Psychotherapeutic modalities to convert or ‘repair’ homosexuality are based on developmental theories whose scientific validity is questionable.  Furthermore, anecdotal reports of ‘cures’ are counterbalanced by anecdotal claims of psychological harm.  In the last four decades, ‘reparative’ therapists have not produced any 
rigorous scientific research to substantiate their claims of cure.  Until there is such research available, [the American Psychiatric Association] recommends that ethical practitioners refrain from attempts to change individuals’ sexual orientation, keeping in mind the medical dictum to first, do no harm;
     (2)   The potential risks of reparative therapy are great, including depression, anxiety and self-destructive behavior, since therapist alignment with societal prejudices against homosexuality may reinforce self-hatred already experienced by the patient.  Many patients who have undergone reparative therapy relate that they were inaccurately told that homosexuals are lonely, unhappy individuals who never achieve acceptance or satisfaction.  The possibility that the person might achieve happiness and satisfying interpersonal relationships as a gay man or lesbian is not presented, nor are alternative approaches to dealing with the effects of societal stigmatization discussed; and
     (3)   Therefore, the American Psychiatric Association opposes any psychiatric treatment such as reparative or conversion therapy which is based upon the assumption that homosexuality per se is a mental disorder or based upon the a priori assumption that a patient should change his or her sexual homosexual orientation”;
     e.    The American School Counselor Association’s position statement on professional school counselors and lesbian, gay, bisexual, transgender, and questioning (LGBTQ) youth states:  “It is not the role of the professional school counselor to attempt to change a student’s sexual orientation/gender identity but instead to provide support to LGBTQ students to promote student achievement and personal well-being.  Recognizing that sexual orientation is not an illness and does not require treatment, professional school counselors may provide individual student planning or responsive services to LGBTQ students to promote self-acceptance, deal with social acceptance, understand issues related to coming out, including issues that families may face when a student goes through this process and identify appropriate community resources”;
     f.     The American Academy of Pediatrics in 1993 published an article in its journal, Pediatrics, stating: “Therapy directed at specifically changing sexual orientation is contraindicated, since it can provoke guilt and anxiety while having little or no potential for achieving changes in orientation”;
     g.    The American Medical Association Council on Scientific Affairs prepared a report in 1994 in which it stated: “Aversion therapy (a behavioral or medical intervention which pairs unwanted behavior, in this case, homosexual behavior, with unpleasant sensations or aversive consequences) is no longer recommended for gay men and lesbians.  Through psychotherapy, gay men and lesbians can become comfortable with their sexual orientation and understand the societal response to it”;
     h.    The National Association of Social Workers prepared a 1997 policy statement in which it stated: “Social stigmatization of lesbian, gay, and bisexual people is widespread and is a primary motivating factor in leading some people to seek sexual orientation changes.  Sexual orientation conversion therapies assume that homosexual orientation is both pathological and freely chosen.  No data demonstrates that reparative or conversion therapies are effective, and, in fact, they may be harmful”;
     i.     The American Counseling Association Governing Council issued a position statement in April of 1999, and in it the council states: “We oppose ‘the promotion of “reparative therapy” as a “cure” for individuals who are homosexual’”;
     j.     (1) The American Psychoanalytic Association issued a position statement in June 2012 on attempts to change sexual orientation, gender, identity, or gender expression, and in it the association states: “As with any societal prejudice, bias against individuals based on actual or perceived sexual orientation, gender identity or gender expression negatively affects mental health, contributing to an enduring sense of stigma and pervasive self-criticism through the internalization of such prejudice; and
     (2)   Psychoanalytic technique does not encompass purposeful attempts to ‘convert,’ ‘repair,’ change or shift an individual’s sexual orientation, gender identity or gender expression.  Such directed efforts are against fundamental principles of psychoanalytic treatment and often result in substantial psychological pain by reinforcing damaging internalized attitudes”;
     k.    The American Academy of Child and Adolescent Psychiatry in 2012 published an article in its journal, Journal of the American Academy of Child and Adolescent Psychiatry, stating: “Clinicians should be aware that there is no evidence that sexual orientation can be altered through therapy, and that attempts to do so may be harmful.  There is no empirical evidence adult homosexuality can be prevented if gender nonconforming children are influenced to be more gender conforming.  Indeed, there is no medically valid basis for attempting to prevent homosexuality, which is not an illness.  On the contrary, such efforts may encourage family rejection and undermine self-esteem, connectedness and caring, important protective factors against suicidal ideation and attempts.  Given that there is no evidence that efforts to alter sexual orientation are effective, beneficial or necessary, and the possibility that they carry the risk of significant harm, such interventions are contraindicated”;
     l.     The Pan American Health Organization, a regional office of the World Health Organization, issued a statement in May of 2012 and in it the organization states: “These supposed conversion therapies constitute a violation of the ethical principles of health care and violate human rights that are protected by international and regional agreements.”  The organization also noted that reparative therapies “lack medical justification and represent a serious threat to the health and well-being of affected people”;
     m.   Minors who experience family rejection based on their sexual orientation face especially serious health risks.  In one study, lesbian, gay, and bisexual young adults who reported higher levels of family rejection during adolescence were 8.4 times more likely to report having attempted suicide, 5.9 times more likely to report high levels of depression, 3.4 times more likely to use illegal drugs, and 3.4 times more likely to report having engaged in unprotected sexual intercourse compared with peers from families that reported no or low levels of family rejection.  This is documented by Caitlin Ryan et al. in their article entitled Family Rejection as a Predictor of Negative Health Outcomes in White and Latino Lesbian, Gay, and Bisexual Young Adults (2009) 123 Pediatrics 346; and
     n.    New Jersey has a compelling interest in protecting the physical and psychological well-being of minors, including lesbian, gay, bisexual, and transgender youth, and in protecting its minors against exposure to serious harms caused by sexual orientation change efforts.1

     1[1.] 2.1     a.  A person who is licensed to provide professional counseling under Title 45 of the Revised Statutes, including, but not limited to, a psychiatrist, licensed practicing psychologist, certified social worker, licensed clinical social worker, licensed social worker, licensed marriage and family therapist, certified psychoanalyst, or a person who performs counseling as part of the person’s professional training for any of these professions, shall not engage in sexual orientation change efforts with a person under 18 years of age.
     b.    As used in this section, “sexual orientation change efforts” means the practice of seeking to change a person’s sexual 1[persuasion]orientation1, including, but not limited to, efforts to change behaviors 1, gender identity,1 or gender expressions, or to reduce or eliminate sexual or romantic attractions or feelings toward a person of the same gender; except that sexual orientation change efforts shall not include1counseling for a person seeking to transition from one gender to another, or1 counseling that:
     (1) provides acceptance, support, and understanding of a person or facilitates a person’s coping, social support, and identity exploration and development, including sexual 1[persuasion-neutral] orientation-neutral1 interventions to prevent or address unlawful conduct or unsafe sexual practices; and
     (2) does not seek to change sexual 1[persuasion] orientation1.

     1[2.] 3.1     This act shall take effect immediately.

Saturday, January 11, 2014

Gay Lesbian partners- Problems if No estate planning

Gay Lesbian partners- Problems if No estate planning

In the absence of a marriage, Will or other legal arrangement to distribute property at death, your partner does not receive your assets and cannot administer your estate. The result can be lengthy delays and other problems. Individuals in gay or lesbian relationships need properly drafted Wills and estate planning documents more than straight persons. The probate laws generally provide if a person dies without a Will, their property goes to family, rather than a partner they had a relationship with for years or decades.

IF YOU HAVE NO WILL:
        
       If you leave no Will or your Will is declared invalid because it was improperly prepared or is not admissible to probate:
* State law determines who gets assets, not you
* Additional expenses will be incurred and extra work will be required to qualify an administrator
* Possible additional State inheritance taxes and Federal estate taxes
*  If you have no marriage,  Civil Union , spouse, or close relatives the State may take your property
 * The procedure to distribute assets becomes more complicated-and   the law makes no exceptions for persons in unusual need or for your own wishes.
*  It may also cause fights and lawsuits between your partner and your family

Have a Power of Attorney prepared. In the absence of a Power of Attorney or other legal arrangement to distribute property if you become disabled, your partner cannot pay your bills or access your assets. 

Have a Living Will prepared. In the absence of a Living Will, marriage or other legal arrangement if you become disabled, your partner generally has no say regarding medical care or life support. Your partner cannot  access your assets. Your partner cannot receive information on your medical status or medical care. Advance directives are very personal documents and you should feel free to develop one, which best suits, your own needs.


Wednesday, January 8, 2014

2014 update Wills and Estate Planning Seminar materials

2014 update Wills and Estate Planning Seminar materials
By Kenneth Vercammen, plus the Greenbaum Rowe Law Office Alert - An Overview of Key Provisions of the American Taxpayer Relief Act of 2012. We thank the Greenbaum Rowe office for permitting us to share their valuable information.

1. Federal Estate Tax exemption now permanently increased so no tax for Estates under $5,250,000, and will be adjusted annually for inflation. However, New Jersey taxes estates over $675,000.

2. Gifts permitted without Federal Estate & Gift tax was increased to $14,000 per person. 

3. Non-formal writings could be Wills under the New Probate Law

4. We recommend Self- Proving Wills since witnesses often move or pass away

5. Revised statute requires Palimony agreements to be in writing.

6. Recent case can void Will signed under suspicious circumstances
7. NJ Inheritance tax
8. Power of Attorney
9. Federal Health Privacy Law (HIPAA)
10. Competency required to sign a Will or Power of Attorney

     1.  Federal Estate Tax exemption is now permanently increased so no tax for Estates under $5,250,000, and will be adjusted annually for inflation. However, New Jersey taxes estates over $675,000.
      New Jersey has an Estate Tax on amounts over $675,000.  So, even if no Federal Estate Tax due, the estate must still file a Federal Estate Tax Return, plus NJ Estate Tax Return.
So, for an unmarried or widowed person with assets of $1,000,000, there is No Federal Estate Taxes, but
the Estimated State Estate Tax:  $33,200.00



   For an unmarried or widowed person with assets of $1,500,000, estimated NJ Estate Tax is over $60,000.
The Federal Tax rate on estates over $5,250,000 has been increased from 35% to 40%.
How to avoid NJ Estate Tax- hire an attorney to set up a personal residence trust or irrevocable trust and have the assets taken out of your name and put into a trust or given to children and grandchildren in the trust. Minimum fees for trust are $3,000. This is probably not something a non-attorney can do on their own. It is illegal for a non-attorney to provide legal advice or prepare most legal documents.

2. Gifts permitted without Federal Estate & Gift tax was increased to $14,000 per person. 

        However, the amount permitted for Medicaid transfers is zero.

3. NJ SENATE Law No. 708 made a number of substantial changes to the NJ Probate Law.

   Non-formal writings could be Wills under the Revised provisions governing the administration of estates and trusts in New Jersey.  So make sure you have a Formal Will drafted by an estate attorney.

  The law expanded situations where writings that are intended as Wills would be allowed, but requires that the burden of proof on the proponent would be by clear and convincing evidence. Possibly a Christmas card with handwritten notes could be presented as a Will or Codicil.
     To present a non-formal Will or writing requires an expensive Complaint and Order to Show Cause to be filed in the Superior Court, and a hearing in front of a Superior Court Judge.
     Be careful; have a Will done properly by an experienced attorney.

   Beware of the “Elective share” rights of a new spouse. Have a Prenuptial Agreement if entering into a 2nd marriage
     The elective share provisions of the present Code has still not been changed yet.  Currently, the new spouse who is not given money in a Will can challenge the terms of the Will. This is called "electing against the Will by a spouse". A spouse could receive up to 1/3 of the estate, even if only married for 2 weeks. The spouse must file a Caveat or lawsuit in Superior Court.  We suggest a formal prenuptial agreement in 2nd marriage situations.
        A Testator now means both male and female individuals, removing the term “Testatrix”. Will forms that say executrix should not be used.
        The law provides a statute of limitations with respect to creditor claims against a decedent's estate. There is no longer a need to publish a Notice Limiting Creditors.


4. We recommend Self- Proving Wills since witnesses often move or pass away
     An old New Jersey Probate law required one of the two witnesses to a Will to travel and appear in the Surrogate’s office and sign an affidavit to certify they were a witness. This often created problems when the witness was deceased, moved away, or simply could not be located.  Some witnesses would require a $500 fee to simply sign a surrogate paper. My Grandmother’s Will was not self- proving, and the witness to Will extorted a $500 fee.
     The New Jersey Legislature later passed a law to create a type of Will called a “Self-Proving Will.”  In such a Will, the person for whom the Will is made must sign.  Then two witnesses sign.  Then the attorney or notary must sign; with certain statutory language to indicate the Will is self-proving. 
         When done properly, the executor does not have to locate any witnesses.  This usually saves time and money.  If your Will is not “self-proving” or if you are unsure, schedule an appointment with an elder law attorney. Some law offices ignore the revised law, and fail to prepare self proving Wills. Do not use a law office that follows old methods and does not do a self-proving Will.

4. Revised statute requires Palimony agreements to be in writing.
This law is intended to overturn recent "palimony" decisions by New Jersey courts. An agreement to provide support or any such contract must be in writing and signed by the person making the promise. More specifically, the law provides that a promise by one party to a non-marital personal relationship to provide support or other consideration for the other party, either during the course of such relationship or after its termination, is not binding unless it is in writing and signed.  The law provides that no such written promise is binding unless it was made with the independent advice of counsel for both parties.
     This law eliminates the holdings of two cases New Jersey Supreme Courts that unwisely upheld palimony agreements between two unmarried cohabitants.  
      The new palimony law almost totally eliminates palimony in NJ.

6. NJ Supreme Court held a Will could be void if signed under suspicious circumstances
        When there is a confidential relationship coupled with suspicious circumstances, undue influence is presumed and the burden of proof shifts to the Will proponent to overcome the presumption. 
      If there is undue influence in making of Will and transfer by Deed of a house by persons in Confidential relationship, this could subject those persons to punitive damages in some instances, plus voiding of the Will. In the Matter of the Estate of Madeleine Stockdale, Deceased 196 NJ 275 (2008)

      Wills should be prepared without undue influence. No one other than the person who is signing the Will should be in the room. We usually request the person who wants the Will to fill out the interview form themselves.

7. NJ Inheritance tax
      The NJ Inheritance Tax Return instructions and NJ Estate Tax Forms were revised in 2011. Throw out old forms.  Even if no inheritance tax due, a Tax Waiver on a house must still be obtained and filed if the house was not co-owned by the spouse.

8. Power of Attorney
        Do not use a form purchased online, unless it contains reference to the NJ statute requiring banks to honor the Power of Attorney. Section 2 of P.L. 1991, c. 95 (c. 46:2B-11).

9. Federal Health Privacy Law (HIPAA)
     A federal regulation known as the Health Insurance Portability and Accountability Act (HIPAA) was adopted regarding disclosure of individually identifiable health information. This necessitated the addition of a special release and consent authority to all healthcare providers before medical information will be released to agents and interested persons of the patients.     
       The effects of HIPAA are far reaching, and can render previously executed estate planning documents useless, without properly executed amendments, specifically addressing these issues.
        Any previously executed Powers of Attorney, Living Wills, Revocable Living Trusts, and certainly all Medical Directives now require HIPAA amendments.   
     Powers of attorneys and Living Wills should be updated to reference this new law. More information on the HIPAA law at http://www.njlaws.com/hipaa.htm
    After you sign the Living Will in your attorney’s office, provide a copy to your doctor and family.

10. Competency required to sign a Will or Power of Attorney
           My law office cannot prepare a Power of Attorney, Will or any other legal document unless a person is mentally competent. If someone is unable to come into our office, we require the client or client’s family to have the treating Doctor sign the “Doctor Certification of Patient Capacity to Sign Legal Documents” It is the client or client’s family’s responsibility to contact the doctor, obtain the signed Certification at the clients’ expense, and then provide the law office with the original signed Certification. The law office cannot accept phone calls stating someone is competent. Therefore, it is wise do have your documents drafted while you can drive and are healthy.


More information on Wills and Probate at

KENNETH VERCAMMEN & ASSOCIATES, PC
ATTORNEY AT LAW
2053 Woodbridge Ave.
Edison, NJ 08817
(Phone) 732-572-0500
  
American Taxpayer Relief Act of 2012
Signed into Law by President Obama on January 2, 2013

January 2013


     By the Greenbaum Rowe Law Office
        On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 ("Act"), which was signed, into law on January 2, 2013. While certain provisions of the Act are considered to be "permanent", an overhaul of the Internal Revenue Code later this year or in a subsequent year could impact certain of the "permanent" changes. An overview of some of the Act's provisions, which are likely to be applicable to our clients, is provided below.

Important Provisions Included in the Act

Estate Tax

The $5,000,000 gift and estate lifetime exemption has been made permanent and will be adjusted annually for inflation (it is expected that the IRS will set it at $5,250,000 for 2013). The $5,000,000 indexed exemption for the generation skipping transfer tax has also been made permanent. Portability (i.e., the provision in the estate tax law that allows a surviving spouse the benefit of the unused lifetime exemption of his or her predeceased spouse) has also been made permanent. The one downside of the new law is that the maximum estate tax rate has increased from 35% to 40%.

Individual Income Tax Rates

  Ordinary Income.   The new law increased the highest marginal federal income tax rate to 39.6% for married couples filing jointly with $450,000 of taxable income, heads of household filers with $425,000 taxable income, and single filers with $400,000 of taxable income. The existing tax brackets for lower income thresholds were not changed.
   Long Term Capital Gains.   Although the long term capital gains rate remains at 15% for most filers, those in the 39.6% tax bracket will be faced with a 20% capital gains rate and a 3.8% additional investment surtax (which will be used to fund healthcare).
  Temporary Payroll Tax Cut Expires.   For each of the past two years, FICA withholding on wages had been reduced from 6.2% to 4.2% on the first $100,000 of wages. The new law does not extend this payroll tax holiday. As a result, wage earners will see a direct adverse effect on their paychecks (of up to $2,000 per year).

Miscellaneous Taxes

Many temporary tax provisions were extended for 2013, including but not limited to the child tax credit, the earned income credit, the American Opportunity tax credit, qualified tuition deductions, bonus depreciation, various research and energy credits, the temporary exclusion of the gain on the sale of certain small business stock, and the reduction of the recognition period for built-in gains tax in the case of S corporations.

Roth 401(k) Conversions

Effective January 1, 2013, 401(k) plans may be amended to permit participants to convert pre-tax accounts, including amounts accumulated prior to 2013, to designated Roth accounts within the same plan, without regard to the participant's eligibility to take a distribution from the plan. Prior to the enactment of the new law, 401(k) participants could only complete an in-plan Roth conversion with respect to the portion of their account balance that was otherwise distributable under the terms of the plan, such as on account of severance from employment, attainment of a particular age (e.g., 59½) or disability. Pre-tax contributions, and earnings on such amounts, that are converted to a designated Roth account are includable in the participant's gross income in the year of the conversion. Subject to certain timing and other restrictions, however, all Roth 401(k) contributions and earnings may be withdrawn tax-free. The new, more flexible Roth conversion rules also apply to 403(b) and governmental 457(b) plans.

Qualified Charitable Distributions from IRAs

The Act reinstates, through the end of 2013, the ability for individuals aged 70½ or older to make "qualified charitable distributions" from their traditional or Roth IRAs to certain charitable organizations without having to include such amounts in gross income or take a charitable contribution deduction. To constitute a "qualified charitable distribution," the amount(s) donated by an IRA owner must, among other requirements, be transferred directly from the IRA to the recipient charity and cannot exceed the aggregate amount of $100,000 in a single taxable year. Although excludible from gross income, qualified charitable deductions still count toward the annual "required minimum distribution" that generally must be taken by an IRA owner beginning in the calendar year after attaining 70½ years of age. Under special rules applicable for 2012, a taxpayer may make a qualified charitable distribution in January 2013 and elect to treat it as having occurred in 2012. In addition, a taxpayer may retroactively elect to treat an IRA distribution received in December 2012 as a qualified charitable distribution for that year, provided, among other requirements, that cash in the distribution amount is transferred to the charitable organization in January 2013.

Important Provisions Not Included in the Act

Grantor Retained Annuity Trusts ("GRATs"). The President's proposed changes to the taxation of grantor retained annuity trusts that had been considered, were not addressed in the Act. As a result, GRATs continue to be a tax planning technique to be considered in the appropriate circumstances.

Provisions Regarding the Tax Treatment of "Carried Interests". As Congress has done in the past, it again considered changing the favorable tax treatment afforded "carried interests", including profits interests that are granted in a partnership or limited liability company in exchange for services. Such changes were not contained in the Act as signed into law on January 2. As a result, the granting of such interests to a service recipient can still result in compensation for services being taxed at favorable capital gains rates under certain circumstances.

The two provisions discussed above, as well as certain others that were considered by Congress and not included in the Act, could again be considered and included as part of a tax overhaul at a later date.

Planning Opportunities and Next Steps

As a result of the stability provided under the Act in the estate and gift tax areas, it is now an opportune time for individuals to review their personal situations and consider moving forward with certain wealth transfer transactions or changes to their Wills which may have been put on hold. In addition, individuals with significant holdings in a 401(k) plan or an individual retirement account or annuity, may want to revisit the possibility of making a Roth election or contributing retirement holdings to a charity. The 4.6% increase in the highest marginal federal individual income tax rate makes contributions to qualified retirement plans more attractive than they have been in the last few years.

Please contact the attorneys in the Greenbaum Rowe Law Office   Tax, Trusts & Estates Department if you have any questions regarding this Alert, or would like additional information concerning this important new tax legislation.

732-476-2450 | mbacker@greenbaumlaw.com

732-476-2650 | tsenter@greenbaumlaw.com