December 2000
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(The following article was taken from the Friday, November 17, 2000 edition of Newsday).

Millions of Americans may have to dig out their marriage certificates after getting letters from the Internal Revenue Service warning them of discrepancies between their names and their Social Security numbers.

Most of the cases involve women who took their husbands' names after getting married.  For various reasons, the new names and numbers were entered incorrectly into the system, or weren't entered at all.

The IRS said that unless taxpayers supply documentation of the Social Security Administration to clear up discrepancies, when they file tax returns in the spring they could be denied the earned income tax credit or the personal exemption a spouse gets when a couple files jointly.

"You may have your refund delayed", added John M. Dalrymple, an Internal Revenue Service commissioner, "or you may have to have a lengthy conversation with us".

In some cases, couples who have been married for decades are returning to Social Security offices with their marriage certificates and other documentation.  

The Social Security Administration said documentation can be mailed in, but only originals, not copies.

Fred Borsello, an engineer at a Long Island manufacturing company who received a letter dated October 30, said he and others fear originals might be lost by the same bureaucrats he holds responsible for the mess.

"The only way to clear this up is for my wife to take a day off from work, go down the Social Security office for the second time and get this taken care of", he said.  

The letters went out to 2.4 million taxpayers filing joint tax returns.

"We send out an information notice to people, saying that based on the records, your name and Social Security number do not match", Dalrymple said.

The problem for many is that when wives change their surnames to their husbands' following their marriages, the information apparently never made it into Social Security Administration computers.

"They have to match, by law", Dalrymple said.  "You've got this time window to get this straightened out with Social Security Administration".  He said the move is part of an effort to reduce fraud.

Both Social Security and IRS officials said there were various reasons for the discrepancies - including failure by taxpayers to inform the Social Security Administration of name changes, as well as failure by government bureaucrats to enter the correct information into their computers when it was originally provided.

Social Security spokesman John Clark said the cause could be as simple as a typographical error on a form or transposed number entered into a database. 

"Look, 20 years ago, you didn't change your name or our clerk didn't record it correctly when you did change it, and now here we are 20 years later, and I have a public relations problem on my hands.  What can I say??  Clark told Newsday.  "I can apologize.  I can make what suggestions I can think of to make it easier for you".


(The following article was taken from the Sunday, June 18, 2000 Edition of the Wall Street Journal.)

Beware the living trust - it can kill you financially.  

A number of lawyers, independent securities brokers and small financial firms are pitching these estate-planning vehicles as a way for average folks to better prepare for the inevitable and help their families avoid estate taxes and probate.  A number of people are biting. 

But in many cases, it's the wrong people.  A study released last week by the American Association of Retired Persons shows that some of the most eager buyers of the trusts are age 50 and older with annual incomes of $25,000 or less.  For that group, the trust "is close to being a worthless document", says Sally Hurme, an attorney and program consultant for consumer issues with the AARP in Washington, D.C.  "The only thing they've done is waste money and likely created more problems than they solved."

The reason is that most of the trusts being sold are simple, boilerplate documents that aren't tailored to the specific needs of families - which is the whole reason for setting up a living trusts can actually hurt your eligibility for Medicaid - the federal-state health program for low-income families and elderly people.  And then, there's the cost:  anywhere from $750 to $2,500 to set up the trust.  

Purveyors of living trusts - known as "trust mills" - routinely target old Americans in mass mailings, newspaper ads and door-to-door campaigns.  The ads often claim - erroneously - that the trusts will let your heirs avoid estate taxes.  Many even use the AARP name to lend and air of legitimacy, although "AARP is not behind these products, "Ms. Hume says.

Many states are cracking down on the practice.  Michigan recently launched investigations into several firms that use nonlawyers to pitch these legal products, while both California and Florida have won judgments against firms for using scare tactics to sell trusts to elderly consumers.

How They Work

For some people, a living trust is a good estate-planning tool.  But to know whether it's right for you, you have to understand how it works.

Basically, a living trust is a legal mechanism that allows you to transfer ownership of your assets - such as a home, cars and investments - before you did.  The assets are put under the control of a trustee (who can be anyone of your choosing), who manages them for your benefit while you're alive and then disburses them to beneficiaries upon your death.

Handled properly, a living trust allows wealthy people to reduce the amount of taxes owned by their heirs.  Living trusts also are a good way to make sure certain wishes are carried out - such as the care of a special-needs childs if an elderly parent dies.

But for moderate and low-income people, living trusts probably aren't a good idea.  The main reason is they can damage your eligibility to receive Medicaid.  Although eligibility laws vary among states, assets such as homes and cars often aren't included in determining whether you qualify.

In some states, however, if you transfer those assets to a living trust, "they are included in the calculations", says Clifton Kruse, a lawyer specializing in estate planning and elder law at Kruse & Lynch, a Colorado Springs, Colo., could make you ineligible for the federal health-care program.

As for estate taxes and probate, "the living trusts sold by trust mills can be misleading there, too," says John Rogers, an estate-planning lawyer with Ross, Sacks & Glazier, in Los Angeles.  Living trusts don't help you avoid estate taxes, despite many sales pitches.  With boiler-plate living trusts, Ms. Hurme says, "estate taxes will apply".

Moreover, there is a little reason to fear probate.  It's simply the legal course followed to ensure wills are accurately executed.  It can be a bear in some instances, but many states have adopted uniform probate codes that greatly simplify the costs and time.  For modest estates, probate can be quite painless.

In addition, Mr. Rogers says, trust mills frequently fail to tell buyers that they have to actually transfer the assets into the trust.  Therefore many people simply buy the document and file it away.  As a result, their assets end up in probate court anyway, so you've "blown your reason for having a trust," Mr. Rogers says.

In Louisiana, trying to avoid probate is all but irrelevant.  Because of the state's inheritance-tax laws, a trust will go through something remarkable similar to probate, requiring the same amount of time and lawyers' fees anyway, says Carole Cukell Neff, a certified estate-planning expert at New Orleans law firm Sessions & Fishman.

Case Studies

Many times the way these boiler-plate trusts are written shows just how shady they can be.  Mr. Rogers notes a recent client:  A widower who wanted to leave certain assets to his children and grandchildren bought a living trust that had been written for a married couple.

Worse, the distribution provisions were conflicting.  In one section the grandchildren received the assets at 18 years old; in another section the age was set at 23, Mr. Rogers had to go to court to fix the mangled document.  

"This is not an aberration", he says.

So unless you have a very large estate, or unless you have "very specific needs that you can articulate," you probably don't need a living trust, says Ms. Hurme at the AARP.  According to Mr. Rogers, a properly prepared will "accomplished what a trust does" for those with modest assets.

Even without a will, you don't face much worry with a small estate.  Tax laws allow for a so-called unlimited martial deduction, which means you can leave everything - a billion dollars if you have it - to a surviving spouse without triggering taxes; taxes are imposed after the surviving spouse dies.

There is also what is called a unified credit, which lets you bequeath as much as $675,000 to anyone, - tax-free.  With proper planning, married couples can create exemptions of up to $1.35 million.  (By 2006, these exemptions rise to $1 million per person, $2 million per couple).

Are you still in the market for a living trust?  There are a couple of things you can do to save yourself trouble later on and to ensure you get the product you need.

First off, Mr. Kruse says, if you see an ad for a living-trust seminar at a local hotel "that's a neon-sign warning to stay away".  Also, be wary of mail and phone solicitations, particularly  from nonlawyers.

Different states set different laws regarding trusts, wills, probate and items such as Medicaid eligibility.  So call your state's bar association and ask for a referral for a lawyer certified in the estate law and trust planning.  Or contact the American College of Trust and Estate Counsel, in Los Angeles, and invitation-only group of lawyers who specialize in this area.

In short, Mr. Rogers says, "if you determine you need a living trust, spend the money to take care of the special needs you have".  Otherwise, experts says, just get a will. 


The capital gains tax rules will soon be changing for the better.  Right now, long-term gain from the sale of capital assets is taxed no higher than 10% to the extent that it would otherwise be taxed at 15% if were treated as ordinary income.  Such gain generally is taxed no higher than 20% currently to the extent that it would otherwise be taxed at a 28% or higher rate if the profit were treated as ordinary income instead of capital gain.  After 2000, gain from the sale of capital assets held more than 5 years that would otherwise be taxed at the 10% rate instead will be taxed at an 8% rate.  Additionally, gain that would otherwise be taxed at a 20% rate will be taxed an 18% rate if (1) the asset sold is held for more than 5 years, and (2) the holding period begins after 2000.  Under a demmed sale-and-repurchase election, you can choose 5to be treated for tax purposes as having sold and repurchased stock on Jan 2, 2001.  You can also choose to treat any other capital asset or property used in a trade or business and held by you on Jan 1, 2001, as having been sold on date for its FMV on that date, and repurchased on the date for that FMV.  This deemed-sale-and-repurchase election avoids the transaction costs you would otherwise have to pay if you actually sold stock or another eligible asset and then repurchase it in order to eventually qualify for the 18% rate. 

The lower rates won't apply to certain specialized types of gains, such a collectibles gain, which is taxed at a maximum rate of 28%.


We would like to extend our congratulations to the Lesk Family, who's son Brian married Jennifer on November 11, 2000.

We would also like to announce  the birth of Kaitlyn Daniellle Malone born to Lisa & Danny Malone on September 1, 2000.

We would like to welcome our newest staff accountant, Pam Smith.