Why Should I Prepay My Funeral by Setting up a Funeral Trust?

January 30, 2013 by


There are four reasons why you may want to prepay your funeral:

  1. Avoid inflation by locking in today’s prices.
  2. Guarantee your burial preferences.
  3. Eliminate the financial burden and tough decisions on your loved ones.
  4. Provide peace of mind that everything has been taken care of.

One way to prepay for a funeral is to set up a funeral trust. Funeral trusts allow you to set aside money for your future funeral costs. You can establish a funeral trust by depositing money into an interest bearing trust account at your bank. When you die, the trust funds will be disbursed to the funeral home or other service provider that you have designated as the primary beneficiary in the trust agreement. If you enter into the funeral trust directly with the funeral home it may agree to lock in costs for your future services at an agreed upon price. Generally, after the funeral costs have been paid, any amount remaining in the trust will be distributed to your estate.

The trust can be revocable or irrevocable. If the trust is revocable you can change or revoke the trust at any time. However, it will still be part of your taxable estate and counted as a resource for Medicaid purposes. If the trust is irrevocable, it cannot be revoked and the trust proceeds must be used for your funeral. However, it is not counted as a resource for Medicaid purposes. The five year Medicaid look-back period does not apply to Irrevocable Funeral Trusts so it can be funded right before you enter a nursing home.

Another option is to join a funeral society, which will help you find local mortuaries that will deal honestly with your survivors and charge reasonable prices. If you join a society, you will receive a form that allows you to plan for the goods and services you want to get them for a predetermined cost. To find a funeral society near you, you can search the internet at www.funerals.org.

If you have any questions about setting up a Funeral Trust contact Gregory Spadea of Spadea & Associates, LLC at 610-521-0604.

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Why Is My Inherited IRA Subject To Both Pennsylvania Inheritance Tax And Federal Income Tax?

January 29, 2013 by

Pennsylvania levies inheritance tax on the following classes of beneficiaries:

1. Class A – This class includes grandparents, parents, children including natural children, adopted children and step-children, and an un-remarried spouse of a child. This is the only class that receives a $3,500 family exemption from the Pennsylvania inheritance tax which is 4.5% for Class A Beneficiaries.

2. Class A1 – This class includes brothers, half-brothers, sisters, half-sisters, and persons having at least one parent in common with the decedent, either by blood or by adoption. Pennsylvania inheritance tax is 12% for Class A1 Beneficiaries.

3. Class B – This class includes all other beneficiaries. Pennsylvania inheritance tax is 15% for Class B Beneficiaries.

Generally inheritances are not subject to income tax under Section 102 of the Internal Revenue Code. One exception to that rule is traditional Individual Retirement Accounts (IRA’s) because IRA’s contain tax deferred assets that have never been subject to income tax. Therefore, in addition to paying Pennsylvania inheritance tax a beneficiary also has to pay income tax when they inherit a traditional IRA in the year they withdraw money from the IRA. The good news is that the Traditional IRA is not subject to Pennsylvania income tax.

If you inherit an IRA you should consider all the options the Plan Administrator offers you.

One option would be taking a lump-sum distribution. Another option would be taking distributions over five years to lessen the tax bite. A third option may be rolling the inherited IRA over into your existing traditional IRA if the Plan Administrator allows it.

Keep in mind that no matter which option you select you will not have to pay the 10% premature distribution penalty since inherited IRA’s are always exempt from the penalty regardless of the age you decide to take the distribution.

If you have any questions about inherited IRA’s feel free to call Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

Filed Under: Estate Planning Tagged With: , , , , ,

What is the Family Exemption on the Pennsylvania REV-1500?

January 21, 2013 by

The Commonwealth of Pennsylvania created the Family Exemption to help the children or surviving spouse who lived with the deceased and relied on that person’s assets or income to take up to $3,500 from the decedent’s bank account until the estate account is opened. At death a person’s assets are frozen until the Executor goes to the Register of Wills with the will and death certificate to open an estate. During this time the surviving spouse or child might find himself or herself without a way to pay for household expenses. In the alternative, if the estate is small, an executor might hesitate to distribute any assets to a dependent child until the Pennsylvania Inheritance Tax was paid in full making the child wait months for a distribution. To guard against this possibility the Pennsylvania legislature created the Family Exemption, which is a right of a person living in the same household with the decedent to retain or to claim real or personal property of a decedent up to $3,500.00 under the theory that this is enough to allow the person to survive until the estate account is opened. Executors can feel comfortable distributing this amount to a dependent child knowing that it will not be subject to the Pennsylvania Inheritance Tax.

Beneficiaries that are members of the decedent’s household are eligible for the Family Exemption. They include grandparents, parents, children including adopted children and step-children, and an un-remarried spouse of a child of the decedent.

Since its inception, the family exemption was legally payable only from the probate estate of the decedent. Furthermore, this exemption can be taken as a deduction on line 3 of Schedule H of the Pennsylvania Inheritance Tax Return Form REV-1500.

If you have any questions about the REV- 1500 or the family exemption you should contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

Filed Under: Estate Planning Tagged With: , , , ,

2013 American Taxpayer Relief Act

January 11, 2013 by

Tax return paper
We finally have clarity on income, payroll, and transfer taxes for the foreseeable future.  The new law, referred to as the American Taxpayer Relief Act, contains both good and bad news for affluent and high-net worth taxpayers.

Income Tax Rates –This was one of the most controversial issues in the negotiations leading up to the new law’s enactment. When the dust settled, income tax rates for 2013 will remain the same as last year for most individuals. However, affluent and HNW taxpayers will see their top rate increases from 35 percent to 39.6 percent. This change affects singles with taxable income above $400,000, marrieds filing jointly with taxable income above $450,000, heads of households with taxable income above $425,000, and married individuals who file separate returns with taxable income above $225,000.

The following table contains the new rates and brackets with projected inflation adjustments. As of this date, the IRS has not announced the official inflation-adjusted numbers.

FEDERAL INDIVIDUAL INCOME TAX RATES FOR 2013

Tax Rate Single Individuals Married / Joint Married / Separate Head of Household
10% on taxable income to: $8,925 $17,850 $8,925 $12,750
15% on next taxable income to: 36,250 72,500 36,250 48,600
25% on next taxable income to: 87,850 146,400 73,200 125,450
28% on next taxable income to: 183,250 233,050 111,525 203,150
33% on next taxable income to: 398,350 398,350 199,175 398,350
35% on next taxable income to: 400,000 450,000 225,000 425,000
39.6% on next taxable income above: 400,000 450,000 225,000 425,000

Rates on Long-Term Gains and Dividends—While the tax rates on long-term capital gains and dividends will also remain the same as last year for most individuals, the maximum rate for affluent clients increases from an historic low of 15 percent to 20. This change affects singles with taxable income above $400,000, married joint-filing couples with taxable income above $450,000, heads of households with taxable income above $425,000, and married individuals who file separate returns with taxable income above $225,000.

Note also, that beginning in 2013 taxpayers with modified adjusted gross incomes (MAGIs) above a designated threshold ($200,000 for single filers, $250,000 for married couples filing jointly) will pay a surtax of 3.8 percent on net investment income. Net investment income is gross income from annuities, interest, rents, royalties, dividends, and net gain from the sale of property, reduced by deductions attributable to the production of such income.  This provision is part of what has become known as Obamacare and is unrelated to the American Taxpayer Relief Act.

Personal and Dependent Exemption Deduction Phase-Out – The phase-out of personal and dependent exemptions has not been seen since 2009. However, under the new law, the phase-out returns for affluent clients. Phase-out starts at the following adjusted gross income (AGI) thresholds:

  • $250,000 for single filers;
  • $300,000 for marrieds filing jointly;
  • $275,000 for heads of households; and
  • $150,000 for married individuals who file separate returns.

Itemized Deduction Phase-Out—Similarly, the new law revives the limitation on total itemized deductions for taxpayers whose (AGI) exceeds the applicable amount. The applicable amount is $300,000 for marrieds filing jointly, $275,000 for heads of household, $250,000 for individuals, and $150,000 for married individuals filing separately.

These applicable amounts for both phase-outs are indexed for inflation for tax years beginning after 2013.

Beginning January 1, 2013, the standard mileage rates for the business use of a car, van or truck is:

  • 56.5 cents per mile for business miles driven
  • 24 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Alternative Minimum Tax—With negotiations leading up to the new law’s passage appearing to ignore the alternative minimum tax (AMT), many tax professionals were worried that a “glitch” in the law could cause the AMT to affect even more taxpayers.

The AMT is a parallel tax system. Individuals pay the higher of the AMT or their regular income tax. Originally enacted in 1969, the stated purpose of the AMT was to prevent higher-income tax payers from decreasing or eliminating their income taxes through taking advantage of certain deductions and credits including:

  • State and local income taxes and property taxes;
  • Child-tax credits;
  • Home-equity loan interest; and
  • Miscellaneous itemized deductions such as employee business expenses that are not reimbursed by employers.

Although the highest tax rate under the AMT, 28 percent, is lower than the highest regular income tax rate, 35 percent, AMT victims pay more taxes because their taxes are based on a higher taxable base.  Although the exemption was not indexed for inflation, Congress routinely enacted legislation to increase the exemption. Unfortunately, the last “patch” expired on December 31, 2011. Thus, for tax year 2012, the alternative minimum tax exemption amounts reverted to the previous amounts of $45,000 for married couples filing jointly and $33,750 for single filers.  Fortunately, the new law sets the 2012 exemption level at $50,600 for single filers and $78,750 for joint filers and adjusts these amounts for inflation going forward. In 2013, inflation adjustments are projected to result in an exemption level of $51,900 for single filers and $80,800 for joint filers.

Payroll Taxes—Despite the fact that income tax rates stay the same for most taxpayers, wage-earners can expect a decrease in their paychecks beginning in January of 2013. That’s because the 2011 decrease in payroll taxes from 6.2 percent to 4.2 percent was allowed to expire on December 31, 2012.

Estate and Gift Taxes—Prior to the new law, many were concerned that both tax rates and exemption amounts would revert to 2001 levels (55 percent maximum rate, $1 million exemption amount).

First, the new law makes permanent the $5 million gift, estate, and GST tax exemption amount, subject to annual inflation increases. In 2012 the inflation-adjusted exemption amount was $5.12 million. The projected inflation-adjusted amount in 2013 is approximately $5.25 million per person. For married couples in 2013, the aggregate exemption will be twice this amount or approximately $10.5 million.

The new law also caps the top rate at 40 percent tax for decedents dying and transfers occurring in 2013.

In addition, the new law also makes permanent “portability” of an unused deceased spouse’s estate tax exemption amount to a surviving spouse. For example, if the first spouse passes away in 2013 with $5 million of assets, that deceased spouse could leave his or her entire estate to the surviving spouse tax free under the marital deduction, thus preserving the use of his or unused exemption by the survivor. Even if the surviving spouse’s estate was also valued $10 million (including the inheritance from the deceased spouse), he or she could pass the entire estate to non-spousal beneficiaries without tax by combining the deceased spouse’s “unused estate tax exemption amount” and his or her own exemption amount. The “inherited” exemption may be applied against both lifetime gifts and bequests.

If you have any tax questions please call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, PA.

Filed Under: Tax Law Tagged With: , , , , , ,

Tax Information Needed to Prepare Your 2012 Income Tax Returns

January 11, 2013 by

Please click on the link below in order to download and print tax preparation information needed for 2012. This income tax checklist is divided into relevant categories to help you organize your tax information.

Tax Information Needed to Prepare Your 2012 Income Tax Returns

Filed Under: Tax Law Tagged With:

Understanding Criminal Possession and Criminal Conspiracy

January 10, 2013 by

Police Officer Arresting Young Man

Clients sometimes claim that the government has charged them with possession of illegal drugs but the charges are baseless because the police did not find any of the drugs in question on their person at the time of arrest. It is important to understand that if the government is not able to prove that a person actually possessed an illegal item, it may demonstrate constructive possession of such items by showing that you had control or intended to exercise control over the item.

A constructive possession analysis requires that a Court examine the totality of the circumstances surrounding the arrest. A Court may convict you for illegal possession under a constructive possession theory where it appears under the totality of the circumstances you exercised conscious dominion and control over it. In other words, constructive possession is the ability and intention to control an illegal substance without having actual physical possession. For example, if the police find a key to a train station locker when they searched you they can charge you with constructive possession of the contents in the locker even if you were not in the train station at the time of the search.

It is important to understand that even if the prosecutor cannot charge you with constructive possession, they may still successfully prosecute you for criminal conspiracy. A Court can find you guilty of criminal conspiracy if the prosecution can demonstrate that you agreed with one or more persons to commit a crime. You are also guilty of criminal conspiracy if you provide aid to someone in planning or committing a crime. It is also important to understand that if you are found guilty of criminal conspiracy, you may be found guilty for more than you realize. If, for example, the prosecution is able to show that you knew a person was conspiring with others in addition to yourself, you could be found guilty of conspiring with everyone. Criminal conspiracy does not have its own sentencing grading so if you are convicted of conspiracy you face the same grading as the actual crime. The prosecution must establish that you had an agreement with at least one other person and that you took a substantial step toward completing the actual conspiracy.

However, you will not be found guilty of conspiracy if you can demonstrate a renunciation to the act. Renunciation means that upon becoming aware of the criminal nature of the act you affirmatively disengage from the group.

It is important to remember that the prosecution may charge you criminally for constructive possession despite a lack of actual possession of any illegal item.
Therefore, if you are charged with either criminal conspiracy or constructive possession, it is important that you hire an experienced defense attorney to represent your interests. For more information contact our Ridley Park office and speak with Gregory J. Spadea, Esq. of Spadea & Associates, LLC at 610-521-0604 regarding your options in these cases.

Filed Under: Criminal Law Tagged With: , , ,

What is A Gagnon or Probation Revocation Hearing?

January 8, 2013 by

Courtroom
If you violate one or more of the terms of your probation you have certain rights. If you violate your probation indirectly such as failing to report to your probation officer or failing a drug test a bench warrant will be issued for your arrest. If you violate your probation directly such as being charged with a new crime or being arrested you have a right to a pre revocation hearing within 72 hours. This hearing is called Gagnon I Hearing where a judge will determine whether you should be incarcerated pending your full hearing on the matter which is called a Gagnon II Hearing. If the judge is so inclined, he will release you until your full hearing. If not, you will be held incarcerated for several months until the Gagnon II Hearing, which is known as a “detainer.”

At the Gagnon II Hearing the judge will determine if you violated the terms of probation based on the facts presented by your attorney, the District Attorney, the police as well as your probation officer. The burden of proof is lower for a Gagnon II Hearing than for a criminal trial. In a criminal trial the District Attorney must prove beyond a reasonable doubt that you committed all the offenses you are charged with. However in a Gagnon II hearing the burden of proof is lowered to the preponderance of the evidence which means that more likely than not you violated the terms of your probation.

If the Judge does find you violated your probation, he or she will give you a new sentence on the case for which you were on probation for. In determining how to sentence you the Judge will consider whether you are a threat to society, and if you are not, can you be rehabilitated through probation. Your Attorney will try to show that you can be rehabilitated by presenting favorable evidence such as your employment history, or a strong family support system.

If you have a bench warrant or are facing a Gagnon I or II Hearing please contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604. He can negotiate a time and place to turn yourself in to the Sheriff and help you get the bench warrant rescinded and get you a new court date.

Filed Under: Criminal Law Tagged With: , , , ,

What Should I Do If I Have a Juvenile Detention Hearing?

January 4, 2013 by

Young man in handcuffs

If you are detained in a detention facility, you must have a court hearing within 48 hours. This does not include weekends and holidays. At that hearing, the judge will decide if you should stay in the detention facility until your trial date, or if you can be released (either conditionally or unconditionally) until then. The court should appoint a lawyer called a Public Defender to represent you at the detention hearing if you cannot afford one. The Judge will be deciding if you should remain in a juvenile detention facility until your next adjudication hearing which could be four to eight weeks.

It is very important to have a lawyer at this hearing. You should call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park. You should meet with Gregory and provide him with proof of counseling, community service, good performance at school, etc. This will help Gregory negotiate your release and get favorable bail terms.

If you are released you want to make sure your parents know what time they can pick you up and how much they have to post for your bail if it is not unsecured.

If you have any questions you should contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604 in Ridley Park, PA.

Filed Under: Criminal Law Tagged With: , , ,

How Do I Handle Juvenile Charges In Pennsylvania?

January 4, 2013 by

portrait of handcuffed young man with face hidden by sweatshirt hood

If you are under 18, break the law, and have been charged with a juvenile offense, you will receive a summons/notice to appear, and a juvenile allegation of delinquency and a juvenile petition. You should call Gregory J. Spadea at 610-521-0604 and he can answer your questions.

Police Questioning

Before questioning you, a police officer must try to contact your parents or legal guardian. If they ask, you must tell the police your real name and address. You do not have to tell them anything else and you should not make any statements without an attorney present. Therefore you must ask for an attorney and if you do the police must stop questioning you.

Asking for a lawyer

You have a right to a lawyer, and it is important to ask for one. If you do not ask for one, your parents can ask for you. Asking for a lawyer does not mean that you think you are guilty. A lawyer can advise you on what you should or should not answer. When the police question you, they do not have to tell the truth. They are trained to use interrogation techniques, such as making up facts or evidence that can be used against you. A lawyer can help you so never speak with the police without your lawyer present.

If you want a lawyer before your “initial appearance” in Court, such as when you are being questioned by the police, it is up to you or your parents to find a lawyer. You should call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, PA.

Initial Court Appearance

Unless you had a detention hearing, this is your first appearance in Court. At the initial appearance:

  • you ask for a lawyer to be appointed to you if you do not already have one
  • the charge against you will be read aloud and
  • you admit or deny the charge. Remember: Talk to an attorney before you do this!

There will be a Public Defender at Court who will talk to everyone who is charged with a juvenile offense and who does not have an attorney. The Public Defender will talk to you for free and will advise you of your rights. Anything you tell the Public Defender is confidential. Talk to the Public Defender before you talk to the District Attorney. Anything you tell the District Attorney can be used against you. Talk to the Public Defender before you admit or deny the charge in Court. After talking to you, the Public Defender may help you settle your case. If you deny the charge, and you want a lawyer, you have to ask the Court to appoint a lawyer to you.

If you admit to the charge, you have been “adjudicated,” and the Court will schedule a disposition hearing (see below).

If you deny the charge, make sure that you meet with your lawyer as soon as possible. Do not wait for your lawyer to call you. If you deny the charge, the Court will schedule a “first hearing,” which is basically a negotiation day, before your trial. At a “first hearing” there will not be a trial, so you do not need to bring witnesses. You lawyer does not have to go to the first hearing, but it is a good idea if he does. Ask your lawyer to go to this hearing with you. This is a good time to bring in proof of counseling, community service, good performance at school, etc. This will help your lawyer negotiate a better disposition for you. If your case does not settle at the “first hearing,” a hearing, which is your trial date, will be scheduled.

Adjudication

You are adjudicated if you formally “admit” to the juvenile offense in Court, or after a hearing by the Judge you are found to have committed the offense. Most cases settle and never go to hearing. But if you deny the charge and have a hearing, the State must prove that you committed the offense. You have a right to defend yourself and have a lawyer represent you. There is no jury, just a Judge. If the Judge finds you that you committed the offense, then you are “adjudged” guilty. Your case will then move on to a “dispositional” hearing. The dispositional hearing is usually held on a different day after your adjudication hearing.

Disposition Hearing

Instead of getting sentenced, you receive a “disposition.” The primary purpose of the disposition is to rehabilitate you. The Court can order the terms of the disposition, but most dispositions are agreed to without a hearing. It is very important that you have a lawyer represent you in the negotiations for your disposition.

For a dispositional hearing, your probation officer should prepare a report with recommendations. The District Attorney, will also make recommendations to the Court. You also have a right to argue for a specific disposition, and your lawyer can introduce evidence (school records, counselor statement, family testimony, etc.) to support your position. After the Judge hears all the evidence, he will decide. Even if you have an agreement with the State, the Judge will still review it to make sure that your interests and the public’s interests are protected. The Judge follows the District Attorney’s recommendations in practically all of the cases. Call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park if you are changed with a crime.

Filed Under: Criminal Law Tagged With: , , , ,

What Should I Do If I Receive a Criminal Summons / Notice To Appear?

January 4, 2013 by

Man reacting in shock to a letter
A Criminal Summons or Notice to Appear is a piece of paper that tells you the time and date to come to Court and the Court location. The police will serve a Summons if the State thinks that you have committed an offense. A Summons is not an arrest. You will not be taken into custody. But you must go to Court when the Summons tells you to or else a bench warrant will issue for your arrest. If you cannot make it to Court you must contact the court immediately to notify them and reschedule your reporting time. After going to court you will have to go to the police station to get fingerprinted and photographed. However, do not give any statements to the police without your attorney present.

If you are a juvenile you will also receive a Juvenile Allegation of Delinquency which is an affidavit signed by the police officer stating the facts he observed and the people he interviewed.

A Juvenile Petition contains the offenses you are being charged with and indicates if your fingerprints were taken, if you were arrested and if the criminal laboratory services were requested. If you are arrested, a police officer must contact one of your parents or your legal guardian and tell them where you are.

If you are an adult you will also receive a criminal complaint containing list of charges and the affidavit signed by the police officer stating the facts he observed and the people he interviewed.

If you receive a Criminal Summons you should contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Filed Under: Criminal Law Tagged With: , , ,

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