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Suffolk County, NY Estate Planning and Elder Law Blog

Monday, February 08, 2016

Using an Irrevocable Trust to Protect Your Home

Question:  I would like to protect my home by transferring it to my children but am concerned about losing my tax exemption, is there a way that I can protect my home while still maintaining my exemptions?

Answer: Yes there is.  For many of our clients, without the property tax exemptions that they receive, staying in their homes would be a hardship.  When faced with the decision of either protecting that home or potentially losing the exemption, the decision is not an easy one.  The good news is that you can get the asset protection you desire while still maintaining your tax exemptions.  One way to achieve this is with an Irrevocable Trust, oftentimes referred to as a Medicaid Protection Trust.  These trusts enable our clients to maintain a certain level of control and beneficial ownership over their home while garnering the same potential asset protection that they would achieve through an outright transfer.   The way this works is that you as the owner of the property would create a trust, you are the grantor, sometimes referred to as the settlor.  You would name a third party (anyone other than you spouse) to act as trustee and the trust would also provide for distribution at the time of your death to your named beneficiaries.   Oftentimes, the trustee and the beneficiaries are one in the same.  Once you transfer the home (or any other non-retirement assets) into the trust, the “clock” begins to run for the purpose of asset protection in the context of Medicaid planning.  


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Monday, February 08, 2016

2016 New York State Estate Tax Update

Q: I read somewhere that the New York State Estate Tax Exemption was increasing again this year, could you explain this to me?        

A: The New York State Estate Tax exclusion amount will be increasing again as of April 1, 2016 to $4,187,500.00. This is an increase from the $3,125,000.00 exclusion amount which has been in effect since April 1, 2015.  As of January 1, 2016, the federal estate tax exclusion is $5,450,000.00. The New York State estate tax exclusion will increase again on April 1, 2017 to $5,250,000.00. This exclusion amount will remain in effect until December 31, 2018.  On January 1, 2019, the basic exclusion amount will be indexed for inflation annually and will be equal to the federal exclusion amount. The New York State and federal exclusion amount is estimated to be $5,900,000.00 in 2019.

     An item still of particular concern to many is the “cliff" language contained in the law.  If the estate is valued between 100% and 105% of the exclusion amount, the amount over the exclusion will be taxed.  As of April 1, 2016, the 105% amount is $4,396,875.00.  However, once an estate exceeds the exclusion amount by more than 5%, not just the amount in excess of the exclusion amount is taxed, but, rather, the entire estate is subject to estate tax. Practically, this means that taxable estates greater than 105% of the exclusion amount receive no benefit from the exclusion amounts shown above and will pay the same tax that would have been paid under the prior estate tax law.


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Monday, February 01, 2016

Supplemental Need Trusts and Supplemental Security Income

Q: My son has developmental disabilities and, as a result, is unable to make enough money to support himself.  He only has a savings account with $25,000 in it; is there any government assistance available for him to receive some income?

A:  With the proper planning, your son will be able to qualify for Supplemental Security Income (“SSI”).  Monthly SSI payments can be available to provide income to aged, blind and disabled persons who have little or no other income.  It is intended to pay for the beneficiary’s food and shelter.  Furthermore, in New York State, an individual who is eligible for SSI benefits is automatically eligible for Medicaid benefits. 

If the recipient receives too much income or has assets that are too great, he or she is likely to lose SSI eligibility -- and the automatic Medicaid coverage that comes along with it.  In many instances, the loss of Medicaid coverage can be a more serious problem than the loss of SSI benefits, particularly if alternative medical insurance is not readily available. 


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Monday, January 25, 2016

Bonding of an Estate Fiduciary

Q: I was recently appointed Administrator of my father’s estate, but the Decree from the Surrogate’s Court said that I must post a bond. What does that mean?

A:  It is fairly common that the fiduciary of an estate may receive notice that the he or she must be bonded in order to complete the appointment by the Surrogate's Court. The bonding requirement of an Executor (when a Will is probated) or an Administrator (when there is no Will) is not as strange or as intimidating as it may sound.

A bond is essentially an insurance policy issued by a bonding or surety company that provides security for the estate’s assets. If the fiduciary misappropriates or improperly takes estate assets, the surety company may be required to reimburse the estate and its beneficiaries for the loss.  


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Wednesday, January 20, 2016

Credit Card Debts of Decedent

Q: My mother passed away with $20,000 in credit card debt.  As the Executor of her estate, am I liable for these bills?

A: As Executor, you have the responsibility of paying his debts from estate assets. Assets that are includible in the estate are ones that are in your father’s sole name without a joint holder or named beneficiary. You can only be held personally liable if you do not follow the rules.

In New York, creditors have a seven month creditor period to make claims against the estate.  The seven month period runs from the date of your appointment as Executor, not from the date of death. The purpose this period is to protect you as Executor.  Any claims that are filed in that period must be paid.  If the Executor distributes the assets to beneficiaries and cannot pay the bills of the estate then he is personally liable if the claim was filed within the seven month period.  The Executor is not personally liable if the claim is made after 7 months and the executor has no personal knowledge of the existence of a claim against the estate.  However, even if the claim was not presented within the seven month period, if the Executor had notice of the claim, he can still be held personally liable for the claim.  Of course, if the estate has more expenses than assets, you can try to negotiate the bills with creditors.  You could also ask the Court to declare the estate insolvent.  You have no obligation to use your own funds to pay the decedents bills as long as you follow the rules. 


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Wednesday, January 20, 2016

Gifting to Minors

Question: I want to designate my grandchildren as the beneficiaries of my retirement accounts and life insurance policies. Currently, they are ages 4 and 6. Is this possible? Can I simply complete a new designated beneficiary form with my financial institutions?

Answer: You can absolutely designate minor children to receive money under retirement accounts and life insurance policies. However, you NEVER want to designate that the child receive those monies outright. In other words, you would not simply fill out the child’s name and information, like you would an adult beneficiary. This is because New York law does not permit transfers of this kind to a minor unless the money is directed to a custodian or to a trust for the benefit of the child.

If you were to leave these accounts directly to the child, upon your demise an adult would have to petition the court to become a property management guardian. This is the case even if the child has living parent(s). Once appointed, the guardian could collect the funds and hold then hold them in a savings account for the child until they reach the age of 18. Once the child turns 18, the funds must be turned over to them.


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Wednesday, January 13, 2016

Community Medicaid: Aging in Place

Question: My Mom is starting to require some assistance with her daily activities and I promised her that we would never send her to a Nursing Home, what are my options for care in the home?

Answer: For most of us, if a time ever came that we needed assistance, the preferred option would be to remain at home and receive whatever care services we needed in our familiar setting surrounded by family.  For many, the Community Based Long Term Care Program, commonly referred to as Community Medicaid makes that an affordable and therefore viable option. 

Oftentimes we meet with families who are under the impression that they will not qualify for these services through the Medicaid program due to their income and assets.  In most cases, that is not the case. Although an applicant for Community Medicaid must meet the necessary income and assets levels, oftentimes with planning we are able to assist in making an individual eligible with little wait.  

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Wednesday, January 13, 2016

New York State Estate Tax Update 2016

The New York State Estate Tax exclusion amount will be increasing again as of April 1, 2016 to $4,187,500.00. This is an increase from the $3,125,000.00 exclusion amount which has been in effect since April 1, 2015.  As of January 1, 2016, the federal estate tax exclusion is $5,450,000.00. The New York State estate tax exclusion will increase again on April 1, 2017 to $5,250,000.00. This exclusion amount will remain in effect until December 31, 2018.  On January 1, 2019, the basic exclusion amount will be indexed for inflation annually and will be equal to the federal exclusion amount. The New York State and federal exclusion amount is estimated to be $5,900,000.00 in 2019.

                An item still of particular concern to many is the “cliff" language contained in the law.  If the estate is valued between 100% and 105% of the exclusion amount, the amount over the exclusion will be taxed.  As of April 1, 2016, the 105% amount is $4,396,875.00.  However, once an estate exceeds the exclusion amount by more than 5%, not just the amount in excess of the exclusion amount is taxed, but, rather, the entire estate is subject to estate tax. Practically, this means that taxable estates greater than 105% of the exclusion amount receive no benefit from the exclusion amounts shown above and will pay the same tax that would have been paid under the prior estate tax law.


Read more . . .


Monday, January 04, 2016

2016 Medicaid Levels

Question:  My husband may require care in a Nursing facility.  I was considering applying for Medicaid but I have heard that we could lose everything if we accept assistance through the Medicaid program.  Is this correct?

Answer: No, however this is a common misconception.  As you are likely aware, Medicaid is a means tested program and accordingly applicants must meet certain income and asset requirements.  Rest assured, despite these requirements, there are protections for spouses who remain in the community.  In 2016, applicants for Chronic Medicaid (this is the program which will assist in paying for Nursing Home Care) may have up to $14,850.00 in resources in order to be eligible.  In addition, the applicant may have qualified (retirement) accounts in any amount assuming distributions are being taken on a monthly basis.  In Suffolk County, the distribution amount will be more than the amount required by the IRS and is based upon the individual’s life expectancy.  Finally, an irrevocable pre-arranged burial account in any amount is an exempt asset.  Federal guidelines permit community spouses to retain up to $119,220.00 in assets plus a primary residence with a maximum value of $828,000.00.  Assuming your husband has assets which exceed the allowance; these assets can be transferred to you to bring him below the Medicaid threshold amount.  However, New York’s spousal refusal provisions provide even more protection in that a community spouse can elect to sign a document which allows them to retain assets in any amount, including assets which were previously in the name of the spouse that requires care in a nursing facility. 


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Monday, December 21, 2015

Article 81 Guardianship

Question:  My father is a widower and was recently diagnosed dementia.  I am worried he is becoming incapable of taking care of himself.  He never executed a health care proxy or a power of attorney. Can he sign them now? If not, what options do I have to get him the care that he needs?   

Answer:  Just because your father has a diagnosis of dementia, does not necessary mean he is unable to execute the advance directives he needs to designate you to take care of his personal and financial needs.

The capacity that your father would need to sign these documents differs depending on what document he is signing. For instance, the level of capacity your father needs to sign a health care proxy is very low. He only need know who you are and that he would like you to make medical decisions for you.  The law presumes that a health care proxy is valid unless evidence is introduced to support its invalidity. The law requires a higher capacity level for a durable power of attorney. To execute a valid durable power of attorney, your father would need to know who you are but also have a thorough understanding of what he was signing and the implications thereof. While analyzing capacity may seem easy, it can be a tricky task. Therefore, the decision of whether or not your father has the requisite capacity should be made by an attorney who has experience in Elder Law.


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Friday, December 18, 2015

Revocable Living Trusts

Question:  My friend just created a Revocable Living Trust and I am not sure if I should be considering creating one as well.  I am in my sixties and have an estate worth approximately $800,000.00.  My current Last Will and Testament disinherits my estranged son.  Is a Revocable Trust something I should consider?

Answer:  A Revocable Living Trust is a trust that you create during your lifetime and is great tool for those who wish to avoid the probate process. A Revocable Trust is designed to give you, as the grantor (creator) great flexibility.  With a Revocable Trust, you may act as your own Trustee. This allows you to maintain complete control over your assets during your lifetime. 

With a Revocable Trust, assets can be freely transferred in and out of the Trust.  You can also change or revoke the Trust at any time and make all decisions regarding the Trust.  Assets commonly transferred into these Trusts include residences and investments such as bank accounts, certificates of deposit, stocks and bonds.  


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© 2014 Nancy Burner & Associates, P.C.
12 Research Way, East Setauket, NY 11733 | Phone:631-941-3434
82 Main St., Westhampton Beach, NY 11978 | Phone: 631-288-5612
1115 Broadway , Suite 1100, New York, NY 10010 | Phone: 212-867-3520

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