Monthly Archives: November 2014

Tax Planning with Respect to Disability Insurance

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Author: Charles F. Fuller

No one wants to become disabled, but when a disability arises that prevents you from working, the existence of disability insurance could provide you with an income stream during the period of disability. Often, people are provided short term and long term disability insurance coverage through their employment as part of their employee benefit package. Other times, people purchase individual disability insurance policies. Under either scenario, it is helpful to consider the tax effects of such disability coverage at the time that you obtain it and before you become disabled.

For individual policies where premiums are paid by the policyholder, the premiums are usually paid with after-tax dollars and therefore any disability benefits that you receive under the policy are not taxable for federal or state income tax purposes. This is rather straightforward and does not require much tax planning.

In situations in which an employee is provided disability coverage through employment, the employee should inquire with the employer regarding the tax consequences of this employee benefit should you be required to use it. In other words, you should ask your personnel or human resources department if there is a way to ensure that benefits you may receive as a result of disability under this policy can be received free of any income tax liability. Some employers have thought about this issue prior to implementing their employee benefit plan, while others have not. As a general rule, if the disability insurance premium is paid after being deducted from the employee’s paycheck (after tax dollars), any resulting disability benefits received should be free of tax. If the premium is paid with pre-tax dollars, either from a cafeteria plan[1] or deducted from your pay by your employer before taxes are deducted, any disability benefits received will most likely be taxable. If you have disability coverage, you should investigate now whether there is a way to ensure that your benefits would be free from income tax liability if you become disabled and receive benefits. It is important to investigate and plan for this contingency before you become disabled to determine if you can have greater resources (through tax-free disability benefits) should you become disabled.

[1] A cafeteria plan is an IRS-approved reimbursement plan which allows employees to contribute a certain amount of their gross income to one or more designated accounts before payroll taxes are computed. The account(s) can be used to pay for insurance premiums, medical and/or dependent care expenses not covered by insurance.

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Trying to Write Your Own Will May Result in Undesired Consequences

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Author: Charles F. Fuller

Most of us put off estate planning because it deals with circumstances we do not wish to think about. However, failing to address how you wish your assets to be distributed upon your death could lead to unintended consequences. A recent case in our office provides a good example why you should not delay having a will prepared.

We were recently retained to represent clients who were named as beneficiaries in the will’s residuary clause, or the clause that disposes of the remaining estate property after the satisfaction of any specific bequests. The will was self-authored by the decedent, who was not an attorney. The residuary clause that left the majority of the decedent’s estate to our clients was incomplete and ambiguous. The will arguably left the residuary estate to both the decedent’s grandchildren and to our clients, who were friends of the decedent. Under Maryland law, the decedent’s closest heirs were his daughters, and the next closest heirs were his grandchildren. An earlier provision of the will specifically excluded his daughters from receiving anything under his will but did not reference his grandchildren.  As a result, the personal representative of the estate petitioned the probate court to instruct him how to distribute the proceeds of the residuary estate and litigation ensued. Ultimately, the case settled, with the residuary estate being split among the decedent’s friends and his grandchildren; the wishes of the decedent were not fully accomplished, and his estate had to pay thousands of dollars in attorney’s fees. Had the decedent sought counsel in preparing his will, an appropriate will could have been drafted to carry out his wishes and save the estate the expenses associated with litigation. Further, an experienced estate planning attorney would have advised the decedent how to properly and clearly exclude certain individuals from his will under Maryland law.

A will is an important and essential document for anyone who wishes to pass assets upon their death. It should be prepared by a competent attorney practicing in the field. When done properly, the will can distribute the individual’s assets to the people of his/her choice, in accordance with any terms and conditions that the assets may be subject to, and in an economically reasonable fashion. When wills are self-authored in a legally deficient manner, or not prepared at all, extensive litigation can follow and the likely result is that much of the assets intended to be passed onto the beneficiaries are expended on unnecessary litigation. In order to avoid undesired consequences and to ensure your assets pass only to those you want to receive them, give us a call.

2014 Holiday Food Drive

McChesney & Dale, P.C.

hosts its

3rd Annual Holiday Food Drive

food drive

 

Your donations made a difference last year, now we are asking you to help us fill our boxes once again.

The holiday season is here and McChesney & Dale is sponsoring its third annual food drive from November 12 – December 19, 2014. All donations will be provided to the Bowie Interfaith Food Pantry, which will package and distribute holiday baskets to families in need.

We welcome you to join us in putting a smile on someone’s face this year by making a donation. Donation boxes will be on the first floor of the Omni building, located at 4000 Mitchellville Road, Bowie, MD 20716. The following non-perishable items will be accepted:

(Donations are not limited to those listed but please be sure that donation items are not expired.)

 

  • Canned food items

-soups                          -vegetables/fruits

-sauces                         -fish/chicken

 

  • Boxed food items

-mashed potatoes        -cake/pie mix

-stuffing                      -hot cocoa/cider mix

 

  • Packaged food items

-marshmallows            -hot cereal packets

-pasta/rice                    -snacks

 

The Bowie Interfaith Food Pantry is located at 2614 Kenhill Drive, Suite 134, Bowie, MD 20715.

 

Thank you in advance for your participation. Happy Holidays!