Tax Analysis: Reporting the Death of an Annuitant – Do I Keep the Payment this Month?

January 2, 2013
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Tax Analysis of Sequester Compromise
The House has finalized the details of its plan to avoid the “fiscal cliff.” The bill basically follows the outline of the compromise between Vice President Biden and Senator McConnell that passed the house a day ago, with a few small changes. The team at the Hook Law Center has reviewed the new bill; it will have the following impacts on clients.
Income Tax Rates:
Income tax rates will dramatically rise to Clinton-era levels for couples filing jointly with income above $450,000 and individuals above $400,000. This will require more advanced tax planning techniques for these families. Above those thresholds, the income tax rate will increase from 35 percent to 39.6 percent.
Income Tax Exemptions and Itemized Deductions:
There will also be new limits on personal exemptions and some itemized deductions for high earning families. Two limits on tax exemptions and deductions for higher-income Americans will be re-instated: the Personal Exemption Phaseout (“PEP”) will be in effect at incomes greater than $250,000 and the itemized deduction limitation takes effect at $300,000. All income below the threshold of $400,000 will permanently be taxed at rates from the Bush Era. Thus, the Bush tax cuts are now permanent for the vast majority of Americans.
Tax Credits:
The Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit will be extended for five years.
The Payroll Tax:
The payroll tax holiday is over; the tax will revert back to 6.2%. Many people will feel this change instantly, as weekly paychecks will effectively decrease by 2%.
Capital Gains:
The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 barrier described above. It will remain at 15% for all other families. (Clinton-era rates were 20% for capital gains and taxed dividends as “ordinary” income, with a maximum rate of 39.6%.)
The Estate Tax:
The estate and gift tax will remain unified. The estate tax will be set at 40 percent with a $5 million exemption. That threshold will be indexed to inflation. The gift tax and the estate tax will remain unified together.
Other Issues:
The “sequester” will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense activity. The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they are transitioned over.
Sources: Reuters News and Tax Analysis.
Reporting the Death of an Annuitant- Do I Keep the Payment this Month?
Most retirement annuities are entitlements – “earned” and are paid ‘retrospectively’- in other words, the check you receive ‘this month’ is based on qualifying conditions in the previous month. A check received in December is based on November information. Some programs are based on need and are paid based on financial status in the current month.
For Railroad Retirement Benefits (RRB), Social Security (SSA, SSDI, OASDI), Retired Military Annuitants (DFAS), Civil Service Annuitants (CSA) and Virginia Retirement Systems recipients (VRS), benefits are paid retrospectively and contribute to the budget for the prior month: Payment received in December is for November etc.. Recipients of Supplemental Security Income (SSI) are paid prospectively, and are paid in the month they are to contribute to: Payment received in December is for December etc.
Most of these programs have a required number of days the recipient must be alive during the budget month to qualify for payment. This requirement varies from program to program. Reporting the death of a recipient (annuitant, beneficiary) should be done as soon as possible. Information and documents that will be required for all benefits are:

  • Name
  • Date of death
  • Benefit claim number
  • Copy of death certificate

Depending on the issuing agency, the check received in the month of death may or may not be recovered. Reporting the event immediately will help to ensure timely recovery if appropriate, and prevent overpayment and recovery fees, penalties and expenses.
Benefits delivered via direct deposit are usually recovered directly from the bank account. It is imperative that you take this possibility into account and make sure there is enough money in the account to cover any withdrawals/payments that may be charged to that account.
Managing this in conjunction with taking care of all the other routine caregiver tasks can be overwhelming. You can find specific reporting information on the following websites:
Social Security and SSI:
CSA/CSRS (Civil Service):
Information for this article was obtained from the above websites. Contact Hook Law Center for assistance with negotiating the inevitable maze.

How Cats Show Affection

Hook Law Center: Kit Kat, how do cats show affection?
Kit Kat: Most people think cats are not very affectionate. But that couldn’t be further from the truth. In fact, cats are extremely affectionate, they just show it differently than dogs. So how do cats show affection? Everybody knows cats purr when they’re content, but do they know that when a cats rubs against you, head-bumps your face, or pushes against you (called bunting) that they are actually showing you love. When the cats do one of the above behaviors, they are leaving their scent on you–a sign of true love.
Another way cats show their love is by rolling. When a cat throws himself/herself at your feet and rolls on his/her side, it’s a sign they are inviting you to pet, touch, or hold them. Being on their stomach, is a vulnerable position, so if they present themselves in this way, they are putting total trust in you. They’re saying, “I’m really into you, and you can pet as much as you want.”
Cats also show affection by bringing you gifts. One of my sister cats, Misty, loves to deliver voles to our side door. She loves staying outside late in the summer, and that is when she catches them. Then she deposits them at our side door or near our garage doors.
Finally, cats show their love by the places they choose to sleep. We cats need a lot of sleep–about 16 hours per day. So where we choose to sleep, another vulnerable condition, is another indication of our feelings. If we sleep on your bed or on you, we are saying we love you. We could pick a thousand places to sleep, but if we choose you or where you have left your scent, our actions are speaking for us. (Information taken from Amy Shojai, CABC, “How Cats Love,” cats.about.com, 12/7/12.)
Life situations change. Be sure your Estate Plan reflects your life-today. Our Estate Planning attorneys will be happy to review your current plan and make any changes needed. Give us a call today to schedule your appointment.
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Upcoming Seminars

Hook Law Center is presenting a seminar on Long-Term Care, Estate and Life Care Planning and Veteran’s Benefits at Centerville Baptist Church on January 17, 2013 at 11:30 a.m.
Hook Law Center is presenting a seminar on Long-Term Care and Estate Planning at Lake Prince Woods, 100 Anna Goode Way, Suffolk, VA 23435 on January 25, 2013 at 2 p.m. To r.s.v.p., please call 757- 923-5500 or 757-399-7506.
Hook Law Center will be speaking on the subject of Making an Elder Law Practice More Efficient at the VAELA Conference on February 23, 2013 in Charlottesville, VA.
Hook Law Center is hosting a reception to benefit the Chesapeake Humane Society at Hook Law Center’s Suffolk location, 5806 Harbour View Blvd., Suite 203, Suffolk, VA 23435 onMarch 14, 2013.
Distribution of This Newsletter
Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to theHook Law Center News, then please telephone us at 757-399-7506, e-mail us atmail@hooklawcenter.com or fax us at 757-397-1267.
This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter.