Suffolk County, NY Estate Planning and Elder Law Blog

Monday, April 07, 2014

Taxation of a Decedent

Q: My father passed away in November 2013, and I was recently appointed Executor of his estate.  I know that it is tax season and I have to file tax returns, but am not sure what returns need to be filed and when they are due. Could you explain it to me?

A: You are correct that tax returns will have to be filed; the types of returns and when they are required to be filed are explained in greater detail below:

1. Individual Income Tax Return

            The first step is to file the decedent's final income tax return for the year of his or her death. This return includes income earned by the decedent from January 1 through the date of death. The return is due by April 15 in the year after the decedent died. For example, if your father died on November 30, 2013, his final income tax return would be due on April 15, 2014. The return can be filed by itself, or jointly with a surviving spouse.

2. Estate Income Tax Return

            You may also have to file a return for the estate's income. When a person dies, any income generated by assets that pass through their probate estate exceeding $600 is taxed. The probate estate consists of assets that are held in the decedent’s sole name without a joint holder or named beneficiary. The estate's first income tax year begins immediately after death. The tax year can end on December 31 or the estate can operate on a fiscal year (e.g. December 1, 2013-November 30, 2014). The estate income tax return must be filed by April 15, 2014 for a December 31, 2013 year end or the 15th day of the fourth month after end of the fiscal year.

            If the annual gross income of the estate is below $600, a return does not have to be filed. A tax return is also not required  if all the decedent's income-producing assets pass directly to the surviving spouse or other designated joint holders or beneficiaries.

3. Estate Tax Return

            If the total value of all assets in the estate are worth less than $5.25 million (for a person who dies in 2013 and $5.34 million for 2014) no estate tax is due to the IRS and a federal estate tax return is not required.

            The New York State estate tax threshold, however, is $1 million for all decedents that died before April 1, 2014. An estate tax return will have to be filed with the New York State Department of Taxation and Finance  and estate tax may be due if all assets in the estate are valued at or above $1 million.  There is no New York State estate tax for an estate valued at less than $1 million.  As of April 1, 2014, the estate tax threshold will increase annually until 2019 when it will be the same as the federal threshold of $5.9 million.

            If the estate is subject to federal and/or New York State estate tax, the return must be filed and the tax must be paid within nine months of the date of death.  The estate is granted a six month extension to file, however, an estimated tax payment must be made within nine months. If the return is not timely filed and the tax is not paid with in the nine months, the estate is subject to interest and penalties for the late filing and/or payment. 

            Determining which tax returns to file and when they are due can be complicated. It is not advisable to try to figure this out on your own. It is best to work with your estate administration attorney and accountant to make sure that you are timely filing any returns that may due and paying any tax that may be owed.


            By: Nancy Burner, Esq. & Kera Reed, Esq.

Friday, March 28, 2014

Life Insurance in your Estate

What You Need to Know About Life Insurance and Your Estate

 Many people choose to invest in a life insurance policy. Some choose to purchase a term life insurance policy wherein the insured pays a premium for a period of years and if he or she passes away during that period of time, the policy will pay out to the designated beneficiaries, while others purchase whole life insurance which works more like an investment product and has a guaranteed payout no matter the insured’s age.

 While there are many different kinds of life insurance policies, from an estate planning point of view, all proceeds from a life insurance policy are taxable in the estate of the policyholder. This comes as a surprise to many since typically life insurance does not pass through your estate.

 It is important to make a distinction between your “probate estate” and “gross taxable estate”.  Probate is the process in which your Will is admitted to and approved by the Surrogate’s Court.  Probate assets are those assets which pass through your Will, are collected by the Executor and are subject to the claims of your creditors. 

 Contrast the probate estate with the gross taxable estate. The gross taxable estate includes not only those assets which pass through your Will, but also include all other assets in which you had any incidence of ownership at the time of your death.  This includes but is not limited to life insurance proceeds, Individual Retirement Accounts (“IRAs”), and joint bank accounts.

 Life insurance proceeds are transferred to your beneficiaries by a designation of beneficiary form properly filled out and delivered to your insurance company.  Assuming that you have designated someone as the beneficiary of your life insurance proceeds, these assets will not pass through your estate and therefore will not be subject to probate and will not be subject to creditor’s claims as the proceeds pass directly to the beneficiary.  

           However, the proceeds are taxable in your estate.  If you own an insurance policy, or have certain ownership interests (i.e., the right to change the beneficiaries on the policy), then the entire value of the insurance proceeds will be taxable in your estate when you die, even though these assets are not subject to the probate process. 

 If your estate is taxable, you can create an irrevocable life insurance trust which owns the life insurance policy.   Creation and proper funding of such a trust can avoid estate taxes on those policies owned by the trust If you already own an insurance policy and you transfer that policy to an irrevocable trust, the value of the policies transferred into the trust will be taxable in your estate if you die within three years of transferring these policies into the trust.  For this reason, it may make sense to create an irrevocable life insurance trust simultaneously with the purchase of a new life insurance policy.  If the trustee of the trust purchases the life insurance, then there will be no estate tax liability at any time because the three year rule does not apply.


 By Nancy Burner & Kimberly Trueman

Friday, March 28, 2014

Taking Required Minimum Distributions from IRA's

Q: I have an IRA, and someone told me that once I reach a certain age that I have to take distributions from that IRA. Can you explain this to me?

A: In general, you will have to take required minimum distributions from your IRA when you turn 70 ½.   The minimum withdrawal is, what the IRS calls, your “required minimum distribution” or “RMD.”  In general, IRA accounts are funded with pre-tax dollars.  (Roth IRA’s are the exception as the tax is paid first)  The government allows you to save for your retirement and defers the tax until you start to take distributions.  In this way, you are encouraged to save for your own retirement by deferring the income tax and allowing the account to grown tax deferred. 

The distribution rules for RMD’s are contained in IRS Publication 590. However, the publication is quite long and difficult to read. Publication 590 contains two tables. The first table is contained in Appendix C, Table III. It has very lenient withdrawal mandates.  For example, a 76 year-old has to withdraw only 1/22nd of the balance. For example, say the balance of your IRA on Dec. 31, 2013 was $200,000, and your age on Dec. 31, 2014 will be 76. The calculation of the minimum withdrawal for 2014 is $200,000 divided by the factor for someone who is 76 (which is 22) for a RMD of $9,090.  The first RMD must be taken in the calendar year in which the taxpayer turns 70½. 

The other table is contained in Appendix C, Table I. This table applies to an IRA that is inherited from someone other than a spouse. These divisors are smaller, so the RMD is larger. If you inherit an IRA, you must start taking distributions the year after the original owner dies, regardless of your age.  When a spouse inherits an IRA, the spouse can defer taking distributions on their rollover IRA until they turn 70 ½. 

An IRA containing after-tax money, known as a Roth IRA, has no withdrawal mandate for the owner or the owner’s surviving spouse.  A Roth IRA inherited from someone other than a spouse follows the same withdrawal schedule for inherited IRAs.

Calculating the RMD for an IRA that has been inherited more than once, is more complicated.  Assuming the first beneficiary was not a spouse, the second beneficiary of that IRA has to follow the payout schedule of the first beneficiary. For Example: Your grandmother leaves her IRA to your father, who dies at age 80, leaving it to you when you are 55. The year after he dies you have to take the RMD as an 81-year-old and the next year the RMD for an 82-year-old. To calculate the RMD for each year you would use the table contained in Appendix C, Table I.  The IRA institutions are required to calculate your distributions.  Since you may have different IRA’s with different distributions rules, it is best to review this with your tax professional.  The IRS collects a 50% penalty for any required distribution that is not taken. 

The link to the tables mentioned above can be found at:

By: Nancy Burner, Esq. & Kera Reed, Esq.

Friday, March 28, 2014

Do I Need a Power of Attorney?

Question: My husband and I own almost all of our assets jointly and those which we do not, have designated beneficiaries.  Is it still necessary to have a Power of Attorney?


Answer:  The answer is yes.  Clients often ask this question and our answer is always the same, no matter how your property is titled it is still necessary to have a comprehensive Power of Attorney document in place.  A Power of Attorney is a document in which a person (the Principal) can designate an Agent (an Attorney-in-Fact) to act on his or her behalf with respect to financial or legal matters.  A Power of Attorney, in most cases, is effective when signed and contrary to the beliefs of many, there is no requirement that the Principal be incapacitated or unable to handle their own finances in order for the Agent to act.  Once the document is signed, then both Principal and Agent have the power, concurrently, to transact business on behalf of the Agent, to the extent that the document permits. 

Although you can access all accounts that you and your spouse hold jointly without a Power of Attorney, you may still find yourself in a situation where one would be necessary.  A comprehensive document provides for more than just simple access to accounts.  For example, a Power of Attorney can allow your Agent to access and manage any retirement accounts you own. This is important because most retirement accounts are owned by only one person and, absent a Power of Attorney, the account could be inaccessible in a crisis.  Also, without a Power of Attorney, there is no person authorized to communicate with any Pension Plan or your employer should the need arise.  Another example of a time that you may need a Power of Attorney is in the context of Medicaid Planning.  If your spouse suffers a catastrophic illness and requires long term care in a skilled nursing facility, Medicaid Planning will be necessary to preserve the assets.  The healthy spouse can engage in crisis planning (despite the five year look-back), which will protect most if not all of their assets.  Part of this plan would be to transfer the home and any assets that were either joint or in the sick spouse’s sole name to the healthy spouse.  While you would be able to transfer the joint assets without the use of the Power of Attorney, you would be unable to transfer the assets in the sick spouse’s sole name without a Power of Attorney with an unlimited power to gift.  Without this power to gift, you would be facing a situation wherein you would need to seek Guardianship to have the power to make the requested transfers.  For these and many other reasons, the Power of Attorney can be invaluable in a time of crisis.

A Power of Attorney is an important document and we would advise you to meet with a professional who practices in this area to discuss this in further detail.

                                                                    -By Nancy Burner, Esq. and Robin Burner Daleo, Esq.  

Wednesday, March 12, 2014

Ancillary Probate Proceedings

Q:  My mother is a resident of Virginia.  She owns a condominium in Virginia and has several bank accounts in her sole name. She also owns a summer home in Westhampton that is titled in her sole name.  When she passes away, what is the procedure to transfer her Westhampton home to the beneficiaries named in her Will?


A: Real estate is governed by the laws of the state where it is located. Therefore, if a person dies owning real estate in two different states, the Executor would have to go to court to probate the decedent’s Will in the decedent’s home state and also commence an “ancillary” probate proceeding in the state where any other real property is located.  In your mother’s case, her estate would first need to be probated in the Virginia courts, and then the ancillary proceeding would be commenced in Suffolk County, where her Westhampton home is located.

The term “ancillary proceeding” refers to a probate or administration proceeding that is required in addition to the primary probate or administration proceeding in the decedent’s home state. Typically, an ancillary proceeding is necessary because a decedent owns real estate or personal property (i.e. car, boat, airplane) that is registered and titled outside of their home state. The laws of the state where the property is located, registered or titled will govern what will happen to the property. 

We find that many clients want to avoid the need for an ancillary proceeding at their death for two main reasons, cost and time.  An ancillary proceeding requires the payment of court filing fees and attorney fees in two states.  In addition, it can be a long process to bring two separate court proceedings for one decedent.  An ancillary proceeding can be especially difficult when a person dies “intestate,” meaning that the person died without a Will. Since intestacy laws vary from state to state, it is possible that the heirs (or beneficiaries) could be different in each state. 

Your mother can avoid the need for an ancillary proceeding by creating a revocable trust and titling her assets in the name of the trust.  Upon her death, her real and personal property, regardless of where it is located, will be distributed according to the terms of the trust and her estate will not be subject to the expense and inconvenience of having probate proceedings in two states. 



By: Nancy Burner, Esq. & Kera Reed, Esq.

Monday, March 03, 2014

Community Medicaid Income Options

Question:  My father recently fell and broke his hip, he is coming home from the hospital and will require some help at home.   I’ve heard that Medicaid can provide those services, however he has approximately $2,000.00 per month in income and my mother has approximately $1,000.00 per month income.  Can he qualify and if so, will he lose his income?

Answer:  Assuming your father meets the asset requirements for Medicaid, his income will not hinder his ability to qualify for Medicaid benefits.  More importantly, he will be able to receive the homecare benefits without losing his monthly income.  Prior to a recent change in the law regarding homecare benefits, your father would have been permitted to keep $829.00 in monthly income and would have established a pooled income trust for his excess income.  The overage sent to the pooled trust each month (approximately $1,170) would have been used to pay your father’s household bills.  For many families this system has worked quite well, providing a way for persons in need to get the help they require and still have access to their income (minus some small fees) to assist in paying household bills.  This recent change in the law offers a new option for Medicaid recipients who are enrolled in a Managed Long Term Care program and who have a well spouse living with them in the community.    

Simply put, the budgeting rules, referred to as “spousal impoverishment budgeting,” which were previously available only to those couples where one was residing in a nursing home and applying for Medicaid, are now available to those who are living in the community and applying for homecare benefits.  Under spousal impoverishment budgeting, if one spouse has applied for Medicaid, he or she can transfer income to the community spouse in order to bring the community spouse’s income level to the amount permitted under the current Minimum Monthly Maintenance Needs Allowance [MMMNA], $2,931.00 per month in 2014, and the Medicaid applicant can keep a personal needs allowance in the amount of $383.00. 


As you can see, the new budgeting would benefit your parents.  All that would need to be done is a shift of approximately $1,600.00 of your father’s income to your mother each month.  He could keep his personal needs allowance of $383.00 and the balance of his income would be transferred without the need for the establishment of a pooled income trust.  Please note that while this budgeting benefits your parents, it may not be beneficial for all couples.  Based upon the amount of income of each spouse, couples have the option to choose the budgeting system that is most beneficial and yields the most income to the couple. 


By: Nancy Burner, Esq. and Robin Burner Daleo, Esq.

Monday, February 24, 2014

Compensation of an Executor

Q: My aunt has nominated me as the Executor of her estate. Someone told me that I am entitled to payment for serving as Executor, is that true?

A: Yes, that is true. Executors get paid commissions which are calculated as a percentage of the value of the probate estate, less any specific bequests (items of real or personal property left to a named beneficiary). The probate estate is defined as all property held solely in the decedent's name. It does not include jointly held real property or financial accounts as said property does not pass under the Will. Bank accounts which are held in trust for another individual, pension plans, life insurance, IRAs and any other accounts or policies which are paid directly to a beneficiary also do not pass under the Will.

If the probate estate (less any specific bequests to named beneficiaries) is valued at less than $100,000, and if there is more than one Executor, the Executors will be required to share commissions. If the value of the probate estate is more than $100,000 but less than $300,000, each Executor (up to a total of two) is entitled to be paid a full commission. If more than two Executors are serving, they must split two full commissions. If the probate estate is more than $300,000 and if there are more than three Executors, they must split three full commissions, unless the decedent has specifically provided otherwise in the Will.

The commission rate in New York for Executors is 5% on the first $100,000 in the estate, 4% on the next $200,000, 3% on the next $700,000, 2-1/2 % on the next $4,000,000 and 2% on any amount above $5,000,000.

If the probate estate is valued at $500,000, the Executor’s commissions would be calculated as follows:

5% of the first $100,000         ($100,000 x .05)                      $5,000

4% of the next $200,000         ($200,000 x .04)                      $8,000

3% of the next $700,000         ($200,000 x .03)                      $6,000

                                                                                                $19,000 total commission payable

It is important to note, any commission paid to an Executor is taxable income to the Executor.  In some cases, the Executor may want to waive commissions.  For instance, when the Executor is also the sole beneficiary he or she is going to receive the entire estate as the sole beneficiary, and avoid any income tax.  Another example is where the Executor is one of two beneficiaries, where the beneficiaries are to receive the estate equally.  If the Executor waives commissions, the Executor will nonetheless receive, as one of two beneficiaries, half of the amount of commission waived. 

By: Nancy Burner, Esq. & Kera Reed, Esq.

Friday, February 21, 2014

Nancy Burner has been named by "New York Super Lawyers" magazine as one of the top attorneys in the State of New York for 2013

Nancy Burner has been named by New York Super Lawyers magazine as one of the top attorneys in the state of NEw York for 2013. Only five percent of the lawyers in the state are named by Super Lawyers. This is Nancy's sixth year as an Elder Care and Estate Planning attorney receiving this honor.


The selections for this esteemed list are made by the research team at Super Lawyers, which is a service of the Thomson Reuters, Legal division based in Eagan, MN. Each year, the research team at Super Lawyers undertakes a rigorous multi-phase selection process that includes a statewide survey of lawyers, independent evaluation of candidates by the attorney-led research staff, a peer review of candidates by practice aream and a good-standing and displinary check.

Thomson Reuters Legal publishes Super Lawyers magazines across the country. In addition to the magazines, Thomson Reuters Legal publishes newspaper inserts and special sections devoted to Super Lawyers. In 2011, Super Lawyers reached more than 15 million readers. Super Lawyers can be found online at where lawyers can be search ed by practice and location.

Nancy will also be featured in the special section of The New York TImes Magazine, The Top Women Attorneys in New York on Sunday, March 23, 2014.

Wednesday, February 19, 2014

Annuities and Medicaid

This week’s column is a continuation of our column from last week where we answered questions regarding tax-deferred annuities, the different types and the tax benefits and consequences of purchasing or owning one. Included in the questions posed last week was “what are the Medicaid implications for the owner of an annuity.”  We address that issue separately because it can become quite complex.  A tax-deferred annuity is essentially an insurance contract. An Annuity contract can either be “qualified” which means it was purchased with pre-tax dollars or “non-qualified” which means it was purchased with after tax dollars.  In the Medicaid context it is important to distinguish these two annuities from one another as they are treated differently for eligibility purposes.

Qualified annuities, or as some people call them “retirement annuities” are an exempt asset for the purpose of qualifying for Medicaid so long as certain conditions are met.  A Qualified annuity will not be counted as an asset for the purpose of determining Medicaid eligibility so long as the applicant has “maximized periodic payments.”  What this means is that the applicant must be receiving a monthly periodic payment as calculated by the department of Social Services. The IRS mandates a Required Minimum Distribution on all retirement accounts for persons 70 ½ years of age.    Typically, the Department of Social Services in Suffolk County using their own tables, requires that applicants take a distribution from their qualified accounts that exceeds the amount required by the IRS. Other counties rely on the IRS RMD tables, therefore the practice is not uniform throughout the state.  In a situation where the monthly payment for the Annuity is fixed, and not able to be changed, proof of that will be sufficient and failure to maximize will not negatively affect the application for Medicaid. 

Non-qualified annuities require special attention when an application for Medicaid is being processed.  Recent changes in the Medicaid regulations require that where an applicant for Medicaid or the spouse of the applicant is the owner of a non-qualified annuity, the State be named as the remainder beneficiary in the first position for at least the amount of Medicaid paid on behalf of the institutionalized individual.  Where the Medicaid applicant has a spouse or minor child in the community, the State need only be named in the second position, behind that spouse or minor child.  In practice, one example of this requirement looks something like this:  Husband is applying for Medicaid and owns a Non-qualified Annuity contract in the amount of $100,000.00.  The annuitant (or in other words the person whose life is insured) is the wife.  At the time of application, Husband transfers his interest in that annuity to his wife who is residing in the community.  She is now the owner as well as the annuitant.  As required, she names the State as beneficiary on the annuity.  The Medicaid application is filed, and is in process when unexpectedly, eight months later, the wife passes away.  In this case, the State, as the beneficiary on the annuity for an amount equal to benefits paid on behalf of the husband, will be reimbursed for benefits paid.  Here, because the Husband was residing in the Nursing Home  pending the approval of the application, the State likely paid out an amount equal to or close to the entire value of the contract.  A better solution may have been to liquidate this contract and transfer the cash to the wife, avoiding the requirement that the State be named as beneficiary. Under current law, a transfer to the spouse is an exempt transfer.  Although the death of the spouse will likely result in some amount of the assets being spent on care, there would have been greater opportunity to preserve assets had the annuity been liquidated.  However, it is important to note that liquidating an annuity may have income tax consequences. For that reason, it is important to consult with a professional who can advise you as to the best course of action when applying for Medicaid.


By: Nancy Burner, Esq.  & Robin Burner Daleo, Esq.

Wednesday, February 19, 2014

Decendants Trusts

As an Elder Law attorney, many clients consult with me with regard to trust planning to protect assets from the cost of long term care. However, many clients do not realize trusts can also be used to protect assets for your children. These types of trusts are known as Descendants’ Trusts and can be incorporated into a Will, Irrevocable Trust or Revocable Trust.

A Descendants’ Trust is very versatile and can be drafted various ways depending on your objectives. The trust can allow the beneficiary to be their own trustee or you can choose a trustee to manage the assets on behalf of the beneficiary.  To the extent that assets remain in the trust, they are protected from the beneficiary’s creditors, divorcing spouses and even the IRS. If drafted properly, the assets left in the trust at the child’s death will also pass tax free to their own children.

            Whether your estate plan includes a trust or a traditional last will and testament, it is important to consider leaving your assets to your beneficiaries in a creditor and divorce protected Descendants Trust.

Friday, February 14, 2014

Homecare Medicaid

The Community Based (Homecare) Medicaid program can assist families in paying for the cost of care in the home and will also pay for certain adult day care programs so long as certain eligibility requirements are met.  First, the applicant must meet the necessary income and assets levels.  An individual who is applying for homecare Medicaid may have up to $14,550.00 in assets.  An irrevocable pre-paid burial fund is also permitted.  Ownership of a home does not create an issue for homecare Medicaid however, where the applicant owns a home it is advisable to consult an attorney to avoid any potential estate recovery after the Medicaid recipient passes away.  With respect to income, the applicant is permitted to keep $809.00 per month in income plus a $20.00 disregard. However, where the applicant has income which exceeds that $829.00 threshold, a Pooled Income Trust can be established to preserve the applicant’s excess income and direct it to a fund where it can be used to pay his or her household bills.  It is important to note that there is no “look back” for community Medicaid.  What this means is that for most people, with minimal planning, both the income and asset requirements can be met with a minimal waiting period allowing families to mitigate the cost of caring for their loved ones at home, in many cases making aging in place an option.   Persons over the age of sixty-five are presumptively disabled for the purpose of Medicaid eligibility, so, while there is no need to prove disability, the individual who is looking for coverage for the cost of a home health aide must be able to show that they require assistance with their activities of daily living.  Some examples of activities of daily living include dressing, bathing, toileting, ambulating and feeding.  Community Medicaid will not provide care services where the only need is supervisory; therefore, it is important to establish an assistive need with the tasks listed above.  For some clients, this is not a difficult threshold to reach.  However, for many of our clients, when we first inquire as to whether the individual in need of care requires assistance with these tasks the answer is no.  Only after additional discussions does it become clear that they do in fact require assistance with many of these activities.  The reason for this discrepancy is that all that needs to be established is that he person applying for assistance is unable to complete these tasks unassisted.  It is not necessary that there be a showing that they are unable to manage any part of the task, only that they need some level of help.   Once this need is established, the amount of hours awarded will depend upon the frequency with which the tasks are necessary.  For example, an individual who only needs help dressing and bathing may receive minimal coverage during the scheduled times, maybe two hours in the morning and two hours in the evening.  Contrast that with an individual who requires assistance with ambulating and toileting, here because these tasks are considered “unscheduled” the hours awarded will be maximized.  In fact, where the need is established, the Medicaid program can provide care for up to twenty- four hours per day, seven days per week.  The Community Based Medicaid Program is an invaluable program for many seniors who wish to age in place but are unable to do so without some level of care.

-          By Nancy Burner, Esq. and Robin Burner Daleo, Esq.

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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: 631-941-3434

Attorney Website Design by
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