Suffolk County, NY Estate Planning and Elder Law Blog
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 superlawyers.com 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
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
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.
Friday, February 14, 2014
Using Pooled Income Trusts in Home Care Medicaid Planning
Question: My parents are in their eighties. Both are beginning to need assistance with their daily activities. Even so, neither one is ready to move to assisted living or into a nursing facility. Mom and Dad own their home and each receive social security and a pension. Other than that, they do not have much in savings. I have heard that Medicaid will cover this type of care so long as the recipient is under the income and asset limit set by Medicaid. Is there a way to preserve Dad’s income for Mom and secure services for him at the same time?
Answer: Yes. The situation that you have described is a situation in which many elderly couples find themselves. The good news is that an elderly person’s high income does not automatically disqualify them from receiving Medicaid Homecare Benefits. With careful planning and the use of a Not-for-Profit Pooled Income Trust, many elderly persons are able to age in place, get the homecare services that they need, and preserve their monthly income for payment of household bills.
For starters, in order for a person to be eligible for Medicaid Homecare Services they must be over 65 and disabled. In addition, because Medicaid is a means tested program, the homecare applicant must not exceed certain income and resource thresholds. For 2014, an individual Homecare Medicaid Applicant is permitted to keep $829.00 of his income and remain eligible for Medicaid services. Where a couple is applying for services together, they may keep a total of $12,112.00 monthly. Typically, Medicaid would be entitled to any income received by an applicant in excess of this amount as a reimbursement. For many couples like your parents who rely on their entire income to live, turning over this “excess” income would leave them impoverished and for that reason, Medicaid does not seem like a viable option. However, under the New York State Medicaid Rules, individuals who are otherwise eligible for Medicaid have another option. New York permits an applicant to deposit their excess income (everything in excess of $829.00 or $12,112.00 in 2014) into a trust fund, which is referred to as a “pooled trust.” These pooled trusts are created by not-for-profit agencies and are a terrific way for persons to take advantage of the many services available through Homecare Medicaid while still preserving their income for use in meeting their monthly expenses. Functionally, the way that these trusts work is that the applicant sends a check to the fund monthly for that amount which exceeds the allowable limit. Together with the check, the applicant submits household bills equal to the amount sent to the trust fund. The trust deducts a small monthly fee for servicing these payments and then, on behalf of the applicant, pays those household bills. As you can see, this process allows the applicant to continue relying on his monthly income to pay his bills, and at the same time, reduce his income amount to that amount which is permitted under the Medicaid rules.
There are a few things that you should keep in mind when considering whether the pooled trust is right for you. First, it is important to note that the trust may only pay non-medical bills on behalf of the Medicaid recipient, for most this is not an issue, as Medicaid will be covering the recipient’s medical expenses. Next, any bills submitted to the trust for payment must be in the name of the Medicaid recipient. Finally, the balance of any funds remaining in the trust at the time of the passing of the Medicaid recipient becomes the property of the trust. For this reason, it is important to keep current on bill submission so funds do not have a chance to accumulate. In conclusion, it seems as though Medicaid Homecare services together with a Pooled Trust may be just the right option for your family. You may want to contact an Attorney who is knowledgeable in this area to help you and your to family navigate through this process.
By: Nancy Burner, Esq. & Robin Burner Daleo, Esq.
Friday, February 07, 2014
Question: I am 50 years old and my financial advisor has suggested a deferred annuity. What is a deferred annuity? What are the tax aspects? What are the Medicaid implications?
Answer: Purchasing a tax-deferred annuity can be an excellent idea in certain situations. If needed, an annuity can provide you with a steady stream of income during retirement. For an instance, if you are still working and in a high income tax bracket, you can purchase an annuity with after tax dollars and defer paying income tax on the earnings until you withdraw monies from the annuity. If you wait until you are retired to take distributions, you will presumably be in a lower income tax bracket. In addition, it will grow tax deferred as long as it is in the annuity. In addition, you get the benefit of tax deferred growth.
A non-qualified deferred annuity is a type of insurance contract which you purchase with a lump sum using after tax dollars. According to IRS regulations, when that investment grows, it grows tax-deferred, provided the person is a “natural person”. No tax is paid until there is a withdrawal. A portion of the withdrawal is a return of principal and a certain portion is interest income which is taxable.
Payments from an annuity can be received regularly (i.e., monthly, quarterly) or in lump sums. You should be cautious however, because most annuity contracts do not allow withdrawals in excess of 10% per year without penalty, during the contract period. The amount of that penalty will be set forth in the contract and is usually reduced by 1% per year until the end of the penalty period. Typically, penalty periods end between 5 and 10 years. If you need access to the money you plan to invest, then an annuity may not be the best investment for you.
There are basically three types of annuities. Fixed Annuities are contracts that earn you a fixed interest rate during the term of the annuity. Sometimes the annuity begins at a high rate that is only guaranteed for a short period of time. Check the contract for the initial rate and for how long it is guaranteed before you make the purchase. Variable Deferred Annuities are contracts where the owner chooses the investment options. And lastly, Equity Indexed Annuities invest funds for growth similar to stocks but there is added protection against potential losses wherein a minimum contract rate is guaranteed at death.
There are some basic terms you should be familiar with in considering an annuity. The “annuitant” is the individual whose life is used to determine when payments begin and how much they are. The “owner” controls the contract and has the ability to transfer ownership or change the beneficiary. The owner does not have to be an individual; a trust can own an annuity. And the “beneficiary” is the party entitled to funds upon the death of the annuitant or the owner.
While annuities grow tax-deferred, there will come a time when the income tax is due. Unlike some other assets, there is no step-up in basis when the annuitant dies. The beneficiary will still have to pay the income tax at ordinary income tax rates (not at the more favorable capital gain rate). On the positive side, the annuity will pass to the named beneficiary and not be subject to probate, providing you designate a beneficiary. It is advisable to keep a copy of the beneficiary designation in a safe place with your other estate planning documents.
Don’t confuse non-qualified deferred annuities with IRA annuities. If the annuity is an IRA, then it is purchased with before tax dollars, it grows tax deferred as does any IRA investment, but distributions are fully taxable since these monies were never taxed. Also, the treatment of IRA annuities and non-qualified annuities is completely different when applying for Medicaid. We will discuss the Medicaid aspects next week.
By Nancy Burner, Esq.
Wednesday, February 05, 2014
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, allowing 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 as absolute owner. Assets commonly transferred into these Trusts include residences and investments such as bank accounts, certificates of deposit, stocks and bonds.
In the event of your incapacity, a Revocable Trust can provide for a seamless transition for the management of your affairs. The person(s) you have selected as successor or co-Trustee would simply take over the management of those assets titled in the name of the trust, possibly avoiding the need for a Property Management Guardian.
Assuming that your trust is properly funded it could also avoid the probate process after your death. Even though the initial cost to create a Revocable Trust may be more than the cost of executing a Last Will and Testament; if creating and funding the trust Probate is avoided, it may save your family money in attorney fees, time delays, and court fees. Upon your death, the assets held in your Trust would be distributed to your beneficiaries.
In addition, a Revocable Trust lessens the complications which sometimes arise when a child is disinherited. Unlike a Probate Proceeding, there is no notification required when a Trust is administered. Should Probate be required in order to administer your Estate, even though you have chosen to disinherit him, your son will be given notice of the proceeding and an opportunity to challenge. Although your wishes will likely be upheld, navigating through the process can be costly and time consuming, resulting in a smaller inheritance and delay for your intended beneficiaries.
When considering your Estate Planning, it is important to note that, a Revocable Living Trust does not protect your assets for purposes of Medicaid eligibility. How to best structure is an important and personal decision, which you should discuss with your Estate Planning Attorney and Financial Planner before making any final decisions.
By Nancy Burner, Esq., and Robin Burner Daleo, Esq.
Wednesday, January 29, 2014
Examples of Trust Commissions
Examples of Trusts Commissions
The decedent passed away with the following assets titled in her sole name:
- House valued at $350,000
- Bank Accounts valued at $50,000
- Stock Accounts valued at $100,000
Total Assets: $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
Total : $19,000 total commission payable
Let's say the same $500,000 in assets listed above were placed in an irrevocable trust by the grantor on January 1, 2012. The grantor of the trust passed away on January 1, 2013, and the assets were distributed on December 31, 2013.
The Trustee would be entitled to annual trustee's commissions for 2012 and 2013, calculated as follows:
1.05% of the first $400,000 ($400,000 x .0105) = $4,200
.45% of the next $600,000 ($100,000 x .0045) = $450
Total : $4,650 each year
For 2012 and 2013, the trustee would be entitled to commissions of $9,300
Upon the termination of the trust, the trustee would also be entitled to 1% of principal, calculated as follows:
■ $500,000 x .01 $5,000 one-time commission, upon the termination of the trust
The trustee would be entitled to total commissions in the amount of $5,000 + $9,300= $14,300
Monday, January 27, 2014
Recent Court Decision Suggests that Banks Cannot Evict Surviving Spouses from Homes Subject to a Reverse Mortgage
With people living longer, many turn to a Home Equity Conversion Mortgage, more commonly referred to as a reverse mortgage, for additional income. Reverse mortgages allow seniors to access the equity in their homes and convert same into an income stream. Before the property is sold, or upon the death of the borrower, the amount of money paid to the borrowers, plus interest and fees, must be paid back to the lending institution.
Typically, if a husband and wife both sign the loan agreement, when the first spouse passes away, the survivor can continue living in the house. However, a problem arises when only one spouse’s name is on the deed and they solely signed the loan agreement. This might happen if one spouse is under age 62 and ineligible to sign the mortgage and evidently some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way. In that case, if the borrower predeceases his or her spouse, the mortgage companies were requiring that the spouse repay the loan and if they could not afford to do so, the mortgage companies commenced foreclosure and eviction proceedings.
Because of the dire effect on the surviving spouses of reverse mortgage holders, AARP sued the Department of Housing and Urban Development (“HUD”) on behalf of three surviving spouses who faced foreclosure and eviction from their homes. AARP alleged in its complaint that by failing to protect surviving spouses from foreclosure, HUD was violating federal law.
A federal district court judge agreed with AARP. The plaintiffs relied on a federal regulation that stated that HUD could not insure a reverse mortgage unless the terms provide that the homeowner’s obligation to satisfy the loan is deferred until the homeowner’s death or the sale of the home. The regulation further went on to define a homeowner as not only as the mortgagor himself but also the mortgagor’s spouse.
While this decision is certainly an important step toward protecting the surviving spouses of reverse mortgage holders, it remains to be seen what steps HUD will take to ensure that surviving spouses are able to live in their homes as long as they wish. In the meantime, it appears that mortgage companies should cease from commencing foreclosure actions against spouses in light of this new decision.
By Nancy Burner, Esq.
Nancy Burner & Associates, P.C. has offices in Setauket, Westhampton Beach, and New York City New York.