e- NEWSLETTER

August/September 2006

Jessica M. Kirsch
Editor-in-Chief

Family Law

NEW RULES GOVERNING CHILD CUSTODY CASES

By Julie M. Dombrosky

    On February 10, 2006, the Illinois Supreme Court adopted a series of new rules to help ensure that child custody proceedings be handled expeditiously, competently and with great emphasis on the best interests of the child. Under the new rules, in cases involving the custody of a child or visitation issues, no one is excused from participating in mediation unless the court determines an impediment to mediation. The rules impose strict scheduling duties on the trial court and attorneys, including a new time limit of 18 months from the date of service of a petition to entry of the final order. If a child custody proceeding cannot be resolved within 18 months, the trial court must make a written finding explaining why. Also, the court must consider whether to appoint a guardian ad litem or counsel for the minor child early in the proceedings. These new rules should work to prod procrastinators – lawyers will have to be well-organized, diligent in discovery, and prepared to proceed on the trial date.

    If you have any questions about this article or any other issue related to divorce or family law matters, please feel free to contact jdombrosky@lavellelaw.com.

Estate Planning

THE IRA CHARITABLE ROLL OVER EXEMPTION! WILL IT EVER HAPPEN?
By Kerry M. Lavelle
 

    As of the writing of this article, four bills are pending in the Senate and two bills are pending in the House of Representatives that include a provision to allow taxpayers to make charitable contributions directly from their IRA's, income tax free, rather than withdrawing funds, including the withdrawn funds in gross income, and then transferring the funds to charity, which may still result in additional income tax for the donor despite the possible charitable deduction.

    Support for an IRA charitable rollover provision has again gained momentum, and, as noted above, the current Congress is considering six bills that include a charitable rollover provision. In addition, at the White House Leadership Conference on Faith-Based and Community Initiatives on March 1, 2005, President Bush stated that the IRA charitable rollover is one of his top four charitable initiatives and that his priorities include ridding the federal tax code of provisions that can discourage charitable giving. Indeed, the President has included the IRA charitable rollover in each of his latest budgets. Thus, even if the current Congress does not enact an IRA charitable rollover provision, it is likely that some such provision will be enacted in the coming years.

    Under current law, if a client would like to make a charitable donation during life, a gift of IRA assets is generally a bad choice. If a donor withdraws funds from an IRA to make a donation to charity, the donor must report that withdrawal as ordinary income to be taxed at ordinary income tax rates. Once the contribution has been made, the donor may be entitled to a charitable deduction that will reduce the tax cost. For many contributors however, the income tax charitable deduction is not available to offset the entire amount of taxable income generated by the IRA withdraw in the year of the gift. For example, a donor making a very large gift of IRA assets will likely be unable to claim a full charitable deduction to offset the tax cost of the withdraw. This is primarily because of two features of the tax code: (1) in any given year, a donor may deduct no more than 50% of his or her adjusted gross income for cash donations to public charities (30% for cash donations to private foundations) and (2) total itemized deductions for taxpayers in upper income brackets can be reduced by 3% of adjusted gross income in excess of an inflation-adjusted threshold. The current income tax system discourages donors from making charitable gifts of IRA assets during life.

    The IRA charitable rollover currently enjoys widespread bipartisan support. If the IRA charitable rollover is enacted as part of any of the bills currently being considered, estate planners and their clients will gain a new mechanism for tax-advantaged charitable giving. Donors will be able to make lifetime gifts to charity of IRA assets, removing these potentially problematic assets from their gross estates. For further questions as to how IRA planning could benefit, your estate contact Kerry Lavelle at klavelle@lavellelaw.com with further questions.

REAL ESTATE

RESIDENTIAL REAL ESTATE SALES – WHAT YOUR ATTORNEY SHOULD BE DISCLOSING TO YOU

By Lauren E. Schaaf

    Is your attorney disclosing their title company agency relationship to you? The rules of professional conduct for attorneys put forth by the Attorney Registration and Disciplinary Commission (ARDC) has set guidelines regarding attorney disclosures to clients with respect to residential real estate closings. This is because clients have the right to know why their attorney has chosen a certain title company over another.

    Most sellers’ attorneys have an agency relationship with at least one title company. Attorneys assist the title company in the formation of the title commitment for the sale of real estate. In return, the title company pays to the attorney a portion of the fees the title company collects from the buyers and sellers at the closing. Per the ARDC rules, attorneys are required to disclose that relationship and can be sanctioned if they do not. If the client does not want to use the title company chosen by their attorney, the client has the right to request a different title company be utilized.

    Usually, if your attorney requests all parties to the transaction sign a disclosure statement disclosing the agency relationship, and with which title company the relationship is formed, the attorney has complied with the ARDC rules. It is not a difficult rule for attorneys to follow, but it can often be overlooked. Clients have a right to be made aware of why attorneys make the choices they do and your residential real estate attorney should be able to explain to you why she has chosen a certain title company over another.

    Are you planning on buying or selling real estate in the near future? Do you need an attorney who you know you can trust and who will disclose all the important aspects of your closing to you? Does the possibility of reviewing a real estate contract and understanding the nuances of that contract make you nervous? If so, call or email Lauren E. Schaaf for answers to all your real estate questions at (847) 705-9563 or lschaaf@lavellelaw.com.

Taxation

Court Sides With Taxpayer And Against IRS Collection
By Timothy Hughes

    A district court has held that IRS abused its discretion in not considering an individual's proposal that IRS attempt to collect jointly owed tax from former spouse who had agreed to pay the tax in the couple's divorce decree.

    In 2004, the IRS assessed, in a joint and several capacity, a tax liability of $54,263 against the Crawfords for failing to collect and pay trust fund and payroll taxes relating to their Company. Colleen did not challenge the assessment. The Crawford's divorce was finalized on May 25, 2004. In the divorce decree, Donald agreed to assume the entire debt owed to IRS and to indemnify Colleen should IRC collect the tax obligations from her. He also agreed to grant the state court continuing jurisdiction to modify the divorce decree should Colleen be forced to pay the tax liability. As a result, he was awarded sole ownership of the Company, as well as certain real property, which he agreed to sell and apply the proceeds to the IRS debt. However, he didn't satisfy it and in September 2004, IRS issued a Notice of Intent to Levy and a Notice of Federal Tax lien to Colleen regarding the Company debt.

    She filed a request for a Collection Due Process Hearing with the IRS. As part of that request, she suggested an alternative proposal for collection of the outstanding debt. She proposed that IRS first attempt to recover the debt from Donald and, in addition, she would attempt to work out an installment agreement to pay off any of the debt that could not be collected. After holding a due process hearing regarding the collection process, IRS upheld its determination that it should collect the taxes from Colleen. IRS determined that her proposal was not viable because it was not authorized by law in that it did not attempt to satisfy the outstanding debt from her assets but instead required IRS to seek the assets of another party.

    She then went to district court arguing that IRS was incorrect in determining that her alternative collection plan was not viable. Colleen recognized that the divorce decree was not binding on IRS and did not seek to compel collection through that document. Rather, she argued that the statutory list of options for collection alternatives under Code Sec. 6330(c)(2)(A)(iii) is not exclusive and that any relevant collection alternative must be considered. Code Sec. 6330(c)(2)(A)(iii) provides that “The person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including—...offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise...”

    The federal court noted that neither party cited authority concerning whether the term “collection alternatives” as used in Code Sec. 6330(c)(2)(A)(iii) includes alternatives in which the tax liability is not paid by the person from whom collection is sought. The court could not find any such authority itself. Thus, it was faced with an issue of first impression involving whether “collection alternatives” as used in the cited sections include alternatives which do not involve the party against whom a levy has been assessed paying the assessed liability directly.

    The court noted that although the IRS was not bound by Colleen and Donald's divorce decree, they had split their assets in a manner that would facilitate payment of the tax liability by Donald through the sale of property he received in the divorce. The court stated that Colleen's collection alternative was a proposal to withhold collection from her until it was determined whether it would facilitate the tax collection and provide a less intrusive means of collection to go after the assets earmarked for payment of the tax liability as defined in the divorce decree. It concluded that her request fell within the alternative contemplated by Reg. § 301.6630-1(e)(3) and should have been considered.

    The court stressed that it was not saying that her proposed collection alternative had to be accepted by IRS. The error was not that it was rejected, but that it was rejected without the proper consideration required by the statute. Thus, should the appeals officer, upon proper consideration, determine that the alternative is not viable as a collection alternative, there would be no statutory bar precluding IRS from rejecting that option.

    The taxpayer won temporary relief from IRS collections. Is the IRS attempting to collect against you, if yes please contact me at thughes@lavellelaw.com to discuss.

Home Health Law

PROCEDURES ON TRANSFERS OF PATIENTS OF HOME HEALTH CARE AGENCIES
By Theodore M. McGinn
 

    Under Federal Law, a patient by right may transfer form one home health agency to another home health agency during any treatment prescription. Any home heath care agency receiving a transferred patient must follow the appropriate steps in order to assure prompt Medicare reimbursement.

    To comply with the regulations, a home heath care agency must submit a request for anticipated payment with a transfer even when an episode may already be opened with another home heath care agency. A home heath care agency receiving the transfer must document that they have informed the beneficiary that the previously home heath agency will no longer receive Medicare payment on their behalf and the prior agency will no longer be providing Medicare covered services after the date of the patients elect to transfer. The new home heath agency must also insure that the patient that is being transferred is under an established plan of care and to contact the initial home health agency on the effective date of transfer. Each step must be documented in the event there is a dispute over payment. Payments made under Medicare are then prorated based upon the date of transfer between the agencies.

    If a dispute arises between agencies, the agency should attempt to settle the dispute themselves. If they are unable to do so however, it may contact Polmetto and inform them of the dates and disputes and request proof that all documentary evidence has been meet. Polmetto will then inform the new home health agency of all transfer requirements, and the failure to provide timely documentation can result cancellation of the episode. Documentation must be dated on the date of admission and must be received by Polmetto within five (5) business days. Polmetto will ultimately settle the dispute based upon the documentation that it submitted.

    Obtaining new patients under home health agency is critical to growing the business. Often new patients under Medicare may have been treated previously by another home health agency. If such patient was making payment by Medicare, it is essential that the transfer is handled and documented properly to insure payment in the future. The failure to follow such requirements could lead to the loss of reimbursement in the future.

    If you have any questions regarding these procedures please contact me at tmcginn@lavellelaw.com.

For past e-newsletter articles of interest, please visit the Lavelle Legal Services, Ltd. website at:  http://www.lavellelaw.com/newsletters/newsletter.htm.