Non-Traditional Relationships

Minimizing the Impact

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Social Security regulations are set in stone.  To combat reduced disability payments it is advised that both partners in a non-traditional relationship purchase additional disability insurance, above and beyond what may be offered from your medical office or hospital group plan. 

And, to combat the lack of death benefit from Social Security and some restrictive hospital or medical employer plans, it is recommended that sufficient life insurance be purchased on both parties. 

View this as a business buy-sell arrangement, so that one either partner will be left with sufficient financial means if an untimely death should take place. 

A charitable remainder trust, for estate planning, may be an appropriate document that allows a medical professional with an alternative lifestyle to insure an income stream for the rest of both partner’s lives.  It may result in reduced estate taxes, relief from capital gains, and the opportunity to diversify your investments. In this way, the legacy that is left to a significant other comes without familial meddling. 

In early 2000, the Vermont Supreme Court recognized that committed gay couples deserve the same rights and benefits, in the eyes of the law, as heterosexual couples.

So, going forward from 2008, some experts hope the above machinations may not be required much longer. Nevertheless, on the positive side, there are a few financial benefits to being unmarried.  

For example, although they can’t file joint income tax returns, or use each other’s deductions to shelter income, unmarrieds do avoid the so-called but eviscerated marriage penalty that occured when both parties had high paying jobs, such as medical professionals. 

Assessment

Moreover, if one partner is wealthy, unmarried couples can take advantage of estate freeze techniques, unavailable to married couples since 1990, to reduce gift and estate taxes. 

And so, have you been affected by any of the above?

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Medicare – Simply Unsustainable

Medicare and Medicaid Spending Growth

Staff Writers 

 

Like Michael Palmer’s song, “Irresistible”, it seems that Medicare and Medicaid spending would — if unaddressed — continue to grow faster than the economy over the next 75 years. According to the Congressional Budget Office; it’s also very unsustainable. 

The culprits are physician and hospitals reimbursement methods and new technology and treatments that drive costs.

“The main message of this study is that, without changes in federal law, federal spending on Medicare and Medicaid is on a path that cannot be sustained,” stated the CBO report of November 13th 2007. 

According to the CBO, by 2030, federal Medicare and Medicaid spending will consume about 8% of the gross domestic product, a measure of the total value of goods and services produced.

Of that, 0.8 percentage points would be from the effect of aging.

And, by 2082, federal Medicare and Medicaid spending would eat up 18.5% of the gross domestic product, with the effect of aging representing just 1.7 percentage points. 

What is the answer to this unsustainable [irresistible] dilemma?

Honoraria Controversy – Ties that Bind

Pharmaceutical / Medical Device Industry Bedfellows

By Staff Writers   

The Journal of the American Medical Association recently reported that nearly two-thirds of academic leaders surveyed at 125 US medical schools and the nation’s 15 largest teaching hospitals have financial ties to the medical industry. 

Serving as paid consultants or thought leaders – accepting industry money for free meals, honoraria and drinks were among the most common practices reported by the heads of academic departments.

Moreover, researchers said drug companies and makers of medical devices often use these connections to influence doctors to use products that aren’t necessarily in the patient’s best interest.

Overall, 60 percent of department heads reported some type of personal financial relationship with the industry, while 27 percent said they had recently served as a paid consultant.

The same percentage reported serving on a company scientific advisory board, and 21 percent who headed departments of medical specialties closely related to patient care said they had served on speakers’ bureaus for industry.

And so, is this ethical or acceptable to you; or just standard industry practice?

 

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UGMAs and UTMAs

 

Titling Assets Correctly

Staff Writers 

 

Generally, medical professionals should not save in a child’s name.  Yes, there is a small tax break, but all the assets in their name diminish the amount of financial aid available to them.  

Also, your child can take control of the assets at age 18 or 21, depending on your state’s law. 

Other drawbacks to be aware of include:

· The custodian has the power to invest and draw funds for the benefit of the child; but who defines – what is a benefit?

· Earned income will be taxed at the child’s rate.

· The gift is irrevocable, and may be included in your estate for federal tax purposes, if you die prior to the age of majority. 

The Uniform Gift to Minors Act (UGMA) and the slightly different Uniform Transfers to Minors Act (UTMA) are therefore usually not helpful when it comes to financial aid, and not using them will ensure that you will decide how to spend the funds. 

What is your experience in this area relative to college savings?

Non-Resident Alien Physicians

Dual Citizenship

Staff Writers 

 

There may be a number of reasons why a foreign medical professional, especially a physician, may choose to remain a non-resident alien.

But, few realize that the U.S. income tax applies worldwide, and when a doctor becomes a U.S. dual citizen, the IRS is with them forever. 

Also, there is the $100,000 annual limitation on gifts to a non-citizen spouse. At his death, a doctor can’t leave his possessions to a non-citizen spouse since the U.S. government is concerned that the foreign survivor will take her inheritance to her home country.  

Accordingly, the estate is tax immediately after the first death. Separate savings accounts may mitigate this so that the dual citizen spouse can acquire assets personally, and have something to pass on to children.   

Otherwise, any assets that can’t be proven at least a one half contribution, even if jointly owned, will be taxed as if they solely belong to the American citizen spouse.   

Now, since the number of H-1B visas for healthcare workers can change dramatically by political fiat, is an increase in potential dual – or non-citizen – medical professionals likely in the years ahead?

The Non-Citizen Spouse

IRS Code Differences

Staff Writers  

Currently, the IRS offers an unlimited estate tax deduction (unlimited marital deduction) by which any spouse can receive an estate tax free, regardless of amount.  

However, the IRS Code has a much different view of a non-citizen spouse, limiting the marital deduction for a legal resident alien to only $100,000.  

Fortunately, this spouse is offered a safe harbor in the Qualified Domestic Trust.  The QDOT has the effect of narrowing the gap between a citizen and non-citizen spouse and is a valuable tool when draw up according to the IRS Code.  

Thus, sans a proper QDOT, the non-citizen spouse of a physician is subject to the same treatment as a non-spouse beneficiary.  

Now, is it fair that the rules are somewhat less favorable for a non-citizen spouse who is not a resident alien? 

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