Michigan Gas Choice – Bad Actors

Now that the weather has gone from half-hearted winter to enthusiastic spring, the utility-rate scammers are crawling out from under the rocks where they pupate over the winter. There were two at our door yesterday, trying to talk us into signing a natural gas supply contract under the so-called Gas Choice Program. They were pushy, insistent, obnoxious, and ignorant. Unfortunately we were not able to get the name of the company.

They started out with, “We are from DTE [the local energy supplier] and we are here to save you money.” Come on! Nobody knocks on your door to “save” you money. From Holy Rollers to city council candidates, they do not knock on your door to save you money.

They asked to see our DTE bill so they could show us how much they could save us. If they were from DTE, why would they not have that information? They were clearly lying about who they worked for. When we told them that we did not intend to show them our utility bill, or anything else, and we wanted them off our porch, they started arguing with us.

I saw the sleazy way these utility re-sellers operate in Ann Arbor, when my daughter was moving into a room in the student ghetto. If you have never been there, moving day is one of those bizarre rituals that take place in college towns. It may be different in other cities, but in Ann Arbor moving day is like a dilapidated furniture carnival. There are recycling sites with dozens of huge dumpsters where volunteers accept all manner of refuse. Meanwhile, whole neighborhoods are swarming with vans and cars with trailers while students and their families empty out an academic year’s accumulation of couches, chairs, futons, beds, tables, electronic and electric appliances, shelving and entertainment units, stolen speed-limit, no-parking, and stop signs, traffic cones and barrels, cooking utensils, rugs, beer pong tables, and exercise and drinking equipment. Butt-sprung couches and wobbly tables are discarded and snapped up at a stunning pace.

In the midst of this chaos, agents from utility re-sellers go around signing up students who have no clue what they are signing and could not care less until the rates inflate. Furthermore, the person who signs the agreement probably is not the person with responsibility for the bill – they just buttonhole anyone they can get to stand still and request a signature. The utility re-seller does not care who signs for a particular house, as long as the signature is under the statement that “the signer is responsible for the utility bill at 1292 Black Street.” That way, they get the house as a customer and the person who actually is responsible for the bill has a miserable time getting out from under the re-seller, if he or she recognizes the switch.

Two of these companies are Volunteer Energy Service Inc. and Santanna Energy Services. Their telemarketers call and say, “May I talk to the person with responsibility for the DTE bill?” They claim to be from DTE, or give that impression. The seldom take that first “no” and insist that they be allowed to show how VolunteerEnergy can save us money. Their websites are replete with “testimonials” and self-serving claims, but lack substance. Volunteer has a page for “Community Support,” but it just says, “coming soon.”

We signed up with one of these companies several years ago and ended up paying more than $100 per month above what we would have paid DTE. When these creeps call, hang up or play games with them, if you have the time. Ask them to wait while you get your mother to the phone. Tell them she is in a wheelchair, so it will take a few minutes. Then ask them to wait while you change the batteries in your mother’s hearing aid. Then keep them waiting as you search for the utility bill.

Keep a hose by the front door for when these pinheads come around. A can of shaving cream would also be good. If they give you a hard time, a pocket full of shaving cream or a nice whipped cream collar on the solicitor’s jacket would help to reinforce the fact that you would rather not be bothered. Good luck with getting rid of them permanently. I have not succeeded so far.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2012 John B. Payne, Attorney
 
 

Gift Tax? Hakuna Matata

In government benefits planning, relatively large amounts are often transferred between between generations.  A common response is, “But if I make a gift of more than $10,000 I have to pay gift tax.”  I have this conversation so often I could do it in my sleep, but the lesson in a nutshell is, don’t worry about it.

First off, the exemption is $13,000 in 2012, not $10,000.  The exemption has been adjusted for inflation over the last decade.  If a financial planner or adviser talks about “the $10,000 exemption,” that is a clue that he or she is lost in time or financially illiterate.

Secondly, the exemption is per person, per person, per year, and can be split between spouses.  The redundancy in the last sentence was intentional.  One person can give one person $13,000 per year, without any obligation to file a gift tax return.  One person can give two people $13,000, each, or $26,000, per year.  Usually the gifts are to family members, but not necessarily.  Sylvia Gotrocks can give her hairdresser, her psychic, her daughter, her uncle, her incarcerated penpal, her masseur, and her best worst frenemy an annual $13,000 gift, each.  If Sylvia is married, she can give each of the above seven donees $26,000.  That would be $182,000 in gifts, with no gift tax return needed.  If all of the above donees are married, the gifts can be doubled again, to $364,000.

Furthermore, none of the above donees needs to report the gift to the IRS.  Gifts are not income to the recipient.  The only tax consequences to the recipient are when the property generates income or is sold for more than the donor’s tax basis.

For example, if Sylvia and her husband give Stymie Grimes, her feng sui consultant, and his wife $52,000 worth of Trojan Corporation stock, there is no gift tax consequence.  However, dividends would be taxable to Stymie and he would pay capital gains tax based on Sylvia’s tax basis when the stock is sold.

If gift taxes are still a concern because a donor wants to give a donee an amount that would exceed the exemption amount, there is a $5.12 million estate and gift tax-free estate in 2012.  The tax-free amount may drop to $1 million in 2013, but that is still a lot of money.  Very few people have to worry about hitting the gift tax threshold.

To explain the tax-free estate a little better, assume that Sylvia gives Fermi Strokes, her dog’s canine chiropractor, $52,000.  Sylvia is married, but Fermi is not.  This is a $26,000 taxable gift.  However, Sylvia can apply the taxable gift against the $5.12 million tax-free estate, reducing it to $5,094,000.  Until Sylvia’s gifts exceed the tax-free estate, she does not need to pay gift tax.  However, her tax-free decedent’s estate will be reduced by her taxable gifts when she dies.

This is a simplified explanation of a complex topic that comes back to the original message:  Do not worry about it unless you are uncommonly wealthy.  A married person, can give a married son or daughter $52,000 per year with no – repeat no — gift tax consequences.  Over the annual per person, per person exclusion, a gift tax return is necessary.  But there would be no negative tax consequences unless the donor is worried about exceeding the $5.12 million limit ($1 million after 2012 if Congress does not act) on the tax-free estate for Federal Estate and Gift Tax.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2012 John B. Payne, Attorney
 
 

HMS – Ignore Them

When a person dies, surviving family members are very vulnerable. They are going through the grieving process; they may feel guilty for not having done more for the decedent, or for an unresolved conflict; and they may be confused about their legal obligations related to the decedent’s debts. Collection agents take advantage of this vulnerability. They try to persuade grieving family members to pay debts they do not have to pay.

The State of Michigan has hired a debt collection company called HMS (Health Management Systems, Inc.) to pursue the families of deceased Medicaid recipients. This is called “estate recovery,” which is a euphemism for “take the widow’s mite when she dies.” Nursing home residents on Medicaid are not left with much — $2,000 in the bank, a pre-paid funeral, and maybe the home. The home, which is usually modest and outdated, is all the inheritance that will be left; so the state wants it. The same folks who think a $5 million tax-free estate puts an unreasonable crimp on rich families begrudge poor families a $50,000 bungalow in Grand Rapids.

As if the law, itself, were not burden enough on grieving families, the state will not be satisfied with what it is entitled to. It appears that HMS will act like other debt collectors – its employees will try to fleece grieving families for whatever they can get. It’s like sharing with a crocodile. The crocodile will be happy to accept its fair share, but then it wants your share, too.

The first contact the family of a deceased Medicaid recipient will receive from HMS is a letter asking that the family fill out a “voluntary” questionnaire. Except in very limited circumstances, do not return the questionnaire unless a probate estate has been opened and a personal representative (i.e., executor, executrix, or administrator) has been appointed by the probate court. The personal representative is the only person obligated to report anything to HMS and is the proper person to fill out the questionnaire.

The questionnaire is signed under oath and demands information HMS has no right to request. Filling out and returning the questionnaire if you are not the court-appointed personal representative makes you liable for the accuracy of the statements you make and gives HMS ammunition to try to browbeat you.

Responding to HMS by explaining that there is no probate and no personal representative, makes their collectors more insistent. As HMS sees things, “voluntary” means you have to fill out the questionnaire and return it. It is better to ignore HMS.

If you decide to return the questionnaire, do not make any false statements, but do not answer questions about non-probate assets or family members other than a surviving spouse. HMS has no right to ask about those things. In particular, do not provide HMS with anyone’s Social Security Number, including the surviving spouse’s. Under the Privacy Act of 1974, 5 U.S.C. § 552a, federal, state and local government agencies may only ask for a person’s Social Security Number if the agency needs it for a specific purpose. HMS is not a government agency and does not need the Social Security Number of the decedent’s family members for any legitimate purpose. Just say no.

If there is no probate estate or if there is a surviving spouse, there is no estate recovery and there is no reason to answer HMS. The only reason to fill out the questionnaire is to request a hardship waiver.

Hardship waivers are described in the estate recovery law, MCLA 400.112g. These include a waiver for the portion of the estate that is the primary income-producing asset of survivors, such as a family farm or business. They also include waivers for a home that is worth less than “50% of the average price of a home in the county,” whatever that means. The Medicaid Agency will not say how the average price of a home in the county is determined for this purpose. HMS gives you two weeks to return the questionnaire to request a hardship, but there is no time limit in the law. Furthermore, HMS makes it difficult to pursue a hardship waiver.

There are also four exemptions. The home of a deceased Medicaid recipient is exempt if it is occupied by: A) a surviving spouse, B) a minor, blind or disabled son or daughter, C) a brother or sister who has an ownership interest and has lived there for a year, or D) a relative who lived with, and provided care for, the recipient, keeping him or her out of a nursing home, for at least two years. Since these are exemptions, not hardship waivers, they do not need to be requested using the questionnaire procedure.

It is generally unwise to respond to HMS unless a probate estate has been opened. It is also unwise to do so without consulting a lawyer. Deciding what may be vulnerable to estate recovery involves serious legal issues and estate recovery places anything the decedent owned in jeopardy.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2012 John B. Payne, Attorney