Estate Planning and the
New Estate Tax Rules
Effective in 2014
- Page 1
Health Care Reform’s
Individual Mandate
- Page 1
What Every Homeowner
Should Know About
Dog Bite Insurance and
Claims - Page 2
$3.3 Million Judgment
Awarded to Motorcyclist
- Page 4
Health Care
Reform’s Individual
Mandate
What are My Obligations and
Options?
Beginning on January 1, 2014,
most taxpayers will be assessed a
shared responsibility penalty for any
months during which they or their
spouse or dependents lack “minimum
essential coverage.” Since this tax
penalty has the effect of requiring
individuals to have health insurance
coverage, this aspect of health care
reform is sometimes referred to as the
“individual mandate.”
What is Minimum Essential Coverage?
Minimum essential coverage means
coverage under any of the following:
(1) a government-sponsored program
(e.g., Medicare, Medicaid, CHIP,
TRICARE);
(2) an “eligible-employer sponsored
plan;
(3) a health plan offered in the
individual market;
(4) a grandfathered plan; or (5) other
health benefits coverage as recognized
by the United States Department of
January 2014
InsuranceInsights
A NEWSLETTER FOR CLIENTS AND FRIENDS OF BANCORPSOUTH
INSURANCE SERVICES, INC.
Estate Planning and the New Estate Tax
Rules Effective in 2014
Estate planning is often an
undesirable experience but it is one
of the most important aspects of
financial preparedness. Estate plans
ensure a person’s property is left to
the loved ones he or she chooses.
These plans can also help surviving
family members save money on
taxes, attorney fees and court costs.
If a person dies without an estate
plan, surviving family members
must pick up the tab for all financial
matters surrounding the death.
What an Estate Plan Includes
A durable power of attorney
form and a will should be the
bare minimum for an estate plan.
Wills ensure personal property
is distributed to the desired
parties after death. If the person
making an estate plan becomes
incapacitated or mentally unable
to make decisions, a durable power
of attorney forms give a named
person the ability to manage the
creator’s property and other assets.
People who want to leave money
to their children may consider
setting up trusts. There are also
medical power of attorney forms,
which give a certain individual
express permission to make medical
decisions and funeral arrangements
for the creator. If a person is not
named as power of attorney,
the next of kin must make such
decisions.
What is a Trust?
A trust is a legal entity designed
continued on page 3
Welcome to the BancorpSouth Insurance Services, Inc. Newsletter!
to hold and distribute money
for a beneficiary, or group of
beneficiaries. Instead of your
beneficiaries directly inheriting
your assets, they would come under
the ownership of the trust. When
setting up the trust, you can leave
instruction in the language of the
trust and designate an executor
to follow the instructions on your
behalf.
New Estate Tax Rules Effective in
2014
In January 2013, the American
Taxpayer Relief Act was signed
outlining changes regarding gift
taxes, federal estate taxes and
generation-skipping transfer
taxes. Although a tax relief plan
was passed, several complications
ensued in the complex world
of income and estate taxes.
Individuals with estates or trusts
should pay close attention to the
new changes in the recent laws and
how it impacts their beneficiaries.
Some of the changes include less
favorable tax rates, but the gift
tax, estate tax and generationskipping transfer exemptions are
more favorable. The federal estate
continued on page 3
To locate an office near you,
please visit us online at
www.bxsi.com or contact us at
info@bxsi.com.
I hope that you find these articles of interest. If you have a topic for future discussion, please let us know.
Please contact us at info@bxsi.com anytime we can answer questions or be of help with your business or
personal insurance needs.
What Every Homeowner Should Know About Dog Bite
Insurance and Claims
In 2012, more than 33 percent of
homeowners liability insurance
claims paid were related to dog
bites. According to one of the largest
carrier of homeowners insurance in
the United States, the total amount
of claims paid was nearly $490
million. The Insurance Information
Institute found that although the
amount of claims filed fell by more
than one percent in 2012, the amount
of money required to settle each
dog bite case had risen. In 2012,
the average amount paid for a dog
bite claim was more than $29,750.
However, the average cost in 2011
was $350 less than that amount.
A decrease in the amount of dog bite
claims is good news for insurers, but
the rising cost per incident suggests
that judgments and medical costs are
likely to continue in the future. Below
are several steps for homeowners
helping prevent dog bites and avoid
facing a lawsuit.
Being A Responsible Dog Owner
While some dogs may be classified
as dangerous breeds, any dog can
be dangerous if it is not properly
trained, improperly bred or has been
mistreated. This is why it is important
for homeowners to have liability
protection for dog bites; however,
the most important step to take is to
prevent dog bites from happening.
Research optimal breeds before
buying a dog
For homeowners who have not yet
purchased a dog but plan to do so,
spend time researching which breeds
are better for companionship. It is
also good to know which types of
breeds are suitable for a particular
neighborhood or home. Every
homeowner should keep in mind
some cities forbid owning pit bulls or
other breeds.
Make sure children are not fearful of
dogs
People who plan to have dogs in the
home should make sure their kids do
not show fear around the dogs. This is
especially true with larger breeds. If a
dog senses fear, it is more likely
to bite a person. Young children and
infants should never be left alone with Deal with aggressive behaviors
immediately
a dog.
Get to know the dog
Homeowners who are shopping
for dogs should become familiar
and comfortable with a dog before
bringing it a home. This is especially
true for people who have young
children or infants in the home. Any
dog that has a history of aggressive
behavior should be avoided.
Socialize the dog
After buying or adopting a dog, it
is important to spend time around
other dogs and people so it becomes
comfortable. Socialized dogs are less
likely to bite visitors. When dealing
with a new dog, approach new
situations carefully. Avoid letting the
dog off a leash when unsure what its
response will be to a certain situation
or new surroundings.
Teach children proper behavior
around dogs
Children should learn that dogs must
be left alone when they are eating
or sleeping. They should also be
discouraged from playing aggressive
tugging games with dogs.
Never pet an unfamiliar dog
Every person should learn
how to properly approach a dog.
Any dog that is unfamiliar
should not be petted, and it is
important to avoid eye contact
with a dog that is posing a clear
threat.
If a dog shows any sign of aggression,
it is important to talk to a vet or
professional dog trainer immediately.
The dog may need medical treatment
for an underlying issue that is
contributing to the dangerous
behavior.
To learn more about insurance
coverage for dog bites or certain
breeds and what to expect if a claim
is filed, discuss concerns with your
BancorpSouth Insurance Services
representative.
continued from page 3 ... Health Care
Reform’s Individual Mandate
However, the IRS cannot impose
criminal sanctions.
Does My Employer’s Coverage
Constitute Minimum Essential
Coverage?
Most employer-provided group
health coverage will meet the
very broad definition of minimum
essential coverage. The definition
includes any “eligible employersponsored plan.” This term
includes any plan or coverage
offered in a state’s small or large
group market. It also includes selfinsured and retiree coverage as
well as COBRA.
For more information on your
obligations and options under the
health care reform’s individual
mandate, please contact your
BancorpSouth Insurance Services
representative.
continued from page 1 ... Estate Planning and the New Estate Tax Rules Effective in 2014
tax exemption increased to $5.12
million in 2012 due to being
indexed for inflation. For 2014,
the federal estate tax exemption
increased to $5.34 million. Estate
tax rates for those valued higher
than this increased from 35 percent
in 2012 to 40 percent in 2013. The
lifetime gift tax was the same as the
estate tax exemption and increased
equally. For 2014, $14,000 is the
annual exclusion from gift taxes.
The portability of federal estate tax
exemptions for married couples
was made permanent for 2014.
During and prior to 2009, they had
to pass as much as two times the
federal exemption using AB trusts.
The need for trust planning was
eliminated in 2010 when portability
was added. Since this provision is
now permanent, couples can pass
as much as $10.68 million to heirs
without federal tax penalties and
without planning. However, even if
the deceased’s estate is not taxable,
the surviving spouse will have to
file a Form 706 from the Internal
Revenue Service to take advantage
of this. If this form is not filed, the
unused estate tax exemption is lost.
In 2005, the pick-up tax was
removed by federal law, and it was
not reinstated during the recent
changes. This tax was a state estate
tax, which was equal to a portion
of the federal tax bill. State taxing
authorities were responsible for
collecting it. If state laws returned
to the way they were in 2001, the
pick-up tax would have resurfaced
in 2013, and that would have meant
that several states would again
collect state estate taxes. However,
states without freestanding estate
taxes remain dormant in this area,
and the pick-up tax is not expected
continued from page 1 ... Health Care Reform’s Individual Mandate
Health & Human Services (“HHS”).
How is the Penalty Calculated?
The penalty is the greater of two
amounts – the “flat dollar” amount
and “percentage of income” amount.
The annual flat dollar amount is
assessed for each individual, spouse or
dependent that is without coverage.
The amount is set at $95 for 2014
but will increase to $325 in 2015
and $695 in 2016. The amount for
individuals age 18 or under is half the
otherwise applicable amount. Also,
the total family amount is capped
at three times the annual flat dollar
amount per year, regardless of number
of individuals in the taxpayer’s
household that do not secure
minimum essential coverage during
the year.
The “percentage of income” amount
is determined in two steps. First,
all applicable tax exemptions and
deductions are subtracted from
the taxpayer’s household income.
Second, that amount is multiplied
by the applicable percentage. The
applicable percentage is 1% for 2014
but increases to 2% in 2015 and 2.5%
in 2016.
Percentage of income = (taxpayer’s
household income – tax exemptions
and deduction) x (applicable
percentage)
Are There Any Exceptions to the
Penalty?
to reappear in the near future.
With states where there is a
difference between federal and
state tax
exemptions,
couples must
include
special
planning
to use both
exemptions.
For
generationskipping
trusts,
special
planning is
required. As
stated
before, the estate tax exemption
was made portable for couples.
It is important to remember that
generation-skipping transfer tax
exemptions have not been made
portable. If couples want to take
advantage of both spouses’ transfer
tax exemptions, special planning is
required.
The following individuals may not be
subject to the penalty:
• Individuals for whom a required
contribution for coverage would cost
more than 8% of their household
income;
• Individuals whose household income
does not exceed the threshold for filing
a federal income tax return;
Individuals who are extended a
hardship exemption (as determined by
HHS);
• Members of certain Indian tribes;
• Individuals who are not citizens,
nationals or aliens lawfully present in
the United States;
• Incarcerated individuals;
• Religious conscience objectors; and
• Members of a health care-sharing
ministry
How is the Penalty Reported and
Paid?
The penalty must be reported annually
on the individual’s federal income tax
return. The penalty will be collected
in the same manner as taxes. This
includes the Internal Revenue Service’s
(IRS) ability to offset any refund or
make a demand for the amount owed.
continued on page 2
$3.3 Million Judgment Awarded
pass the defendant, and then the
to Motorcyclist
defendant made a left turn toward
Even the best drivers are still at risk
of being in an auto accident, and this
is especially true for people who drive
smaller vehicles or motorcycles. Smaller
vehicles do not have the same weight or
protections as larger vehicles, and they
are also more difficult for other motorists
to see. It is possible for damages from an
auto accident to cost millions of dollars.
The following is an example of a case
where the driver faced a hefty judgment
despite being found only 50 percent at
fault.
a driveway. In addition to this,
he said the driver tried to speed
up and veer away. However, the
maneuver was not enough to
stop a collision. The defendant
disagreed with the plaintiff’s
statements and said he slowed
and activated his turn signal in
advance. An eyewitness at the scene who
was behind the defendant said she agreed
with the defendant’s statements. Ultimately,
she agreed the accident was due to the
plaintiff’s negligence.
The plaintiff in this case was a
motorcyclist claiming the defendant
caused the collision by trying to pass him
while making a left turn. The road was
approximately 25 feet wide and marked
with double yellow lines. The motorcyclist
sustained spinal cord injuries leaving
him with no feeling in his feet and loss of
bladder control after the accident.
After the accident, the plaintiff became an
incomplete paraplegic. He is only able to
walk on the heels of his feet and cannot
walk further than one block without a cane.
His rehabilitative specialist believes the
condition will result in permanent loss of
bladder and bowel functions as well as a
loss of sensation in the feet. In addition, the
plaintiff sold his home to help cover medical
expenses.
approximately
$90,000, but his
attorney estimated future
care costs and damage awards
were into the millions. Ultimately, the
judge found the defendant 50 percent
liable resulting in a $3.3million award
for the plaintiff. In addition to this,
$20,000 was awarded to the plaintiff’s
wife.
Unfortunately accidents happen
and many times individuals do not
have enough insurance to cover the
damages. People who do not have an
adequate coverage may have to sell
their possessions or have their wages
garnished to pay for the damages. This
case is an example of why everyone
should ensure they have the proper
insurance coverage in the event of
The plaintiff claimed the driver had
At the time of the accident, the plaintiff was an accident. Be sure to discuss your
approached him and slowed, sped up
coverage limits with your BancorpSouth
and then slowed again without activating not covered by personal injury protection
Insurance Services representative.
(PIP).
His
medical
expenses
amounted
to
his turn signal. He claimed he tried to
Information contained in this newsletter about product offerings, services, or benefits is illustrative and general in description, and is not intended to be relied on as complete
information. While every attempt is made to ensure the accuracy of the information provided, we do not warranty the accuracy of the information. Therefore, information should
be relied upon only when coordinated with professional tax and legal advice.
BancorpSouth Insurance Services is powered by BancorpSouth Bank; a whollyowned subsidiary of BancorpSouth Inc., a $13.4 billion-financial holding
company based in Tupelo, Mississippi. BancorpSouth Insurance Services is
annually ranked as one of the nation’s largest brokers by Business Insurance
magazine. Equipped to service clients across the globe through our Worldwide
Broker Network relationship, we have over 30 offices with almost 600 insurance
and risk management professionals ready to serve.
InsuranceInsights