Suffolk County, NY Estate Planning and Elder Law Blog
Monday, April 21, 2014
New NY Estate Tax Law
New York’s Estate Tax law has just seen its most dramatic change in recent memory. Finally, the exemption has increased from $1,000,000.00 where it has remained since 2002, with the exemption set to increase annually until it matches the federal estate tax exemption in 2019. After 2019, the exemption will be indexed for inflation annually so that it will equal the federal estate tax exemption.
This means that for decedent’s passing away from April 1, 2014 through March 31, 2015, the exemption is now $2,062,500.00. The exclusion then increases each April 1st in the years 2015 through 2017. On January 1, 2019, the basic exclusion amount will be indexed for inflation annually and will be equal to the federal exclusion amount.
The exclusion and the timeframe for each increase are as follows:
From April 1, 2014 through March 31, 2015 - $2,062,500
From April 1, 2015 through March 31, 2016 - $3,125,000
From April 1, 2016 through March 31, 2017 - $4,187,500
From April 1, 2017 through December 31, 2018 - $5,250,000
From January 1, 2019 forward – Will match the federal exemption indexed for inflation
An item of particular concern is the “cliff" language contained in the new law. If the estate is valued between 100% and 105% of the exclusion amount, the amount over the exclusion will be taxed. 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.
New York repealed its gift tax in 2000. This meant that as a New York resident, if you made lifetime gifts to friends or family members, the gift was not taxed or included in your New York gross estate for purposes of calculating your estate tax. With the passage of the new law, there is now a limited three year look back period for gifts made between April 1, 2014 and January 1, 2019. This means that if a New York resident dies within three years of making a taxable gift, the value of the gift will be included in the decedent’s estate for purposes of computing the New York estate tax. The following gifts are excluded from the three year look back: (1) gifts made when the decedent wasn’t a New York resident; (2) gifts made by a New York resident before April 1, 2014; (3) gifts made by a New York resident on or after January 1, 2019; and (4) gifts that are otherwise includible in the decedent's estate under another provision of the federal estate tax law (that is, such gifts aren’t taxed twice).
The new law also repeals the New York generation-skipping transfer tax, eliminating it as a planning and administration concern for those people with estates valued below the federal exemption. In addition, the new law also provides relief for non-citizen surviving spouses, allowing a marital deduction without the requirement of a qualified domestic trust when a federal estate tax return is not required to be filed.
The new law does not contain a portability provision like in the federal estate tax law. Portability is a provision in the federal estate tax law that allows the unused estate tax exemption of a married taxpayer to carry over to his or her surviving spouse. Without portability, the manner in which a married couple holds title to their assets may continue to have a significant effect on the amount of tax ultimately payable upon the survivors’ death.
This new New York estate tax law is working to close, and eventually eliminate, the gap between the New York and federal estate tax exclusion amounts. For the next five years, however, as the exclusion amount increases and the 3-year look back for taxable gifts applies, planning will become more complex. That being said, it is important for anyone considering whether to make changes to their estate plans or gifting strategies to see an estate planning attorney specializing in these matters.
By: Nancy Burner, Esq. & Kera Reed, Esq.
Monday, April 07, 2014
Taxation of a Decedent
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?Read more . . .
Friday, March 28, 2014
Life Insurance in 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.Read more . . .
Friday, March 28, 2014
Taking Required Minimum Distributions from IRA's
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?Read more . . .
Friday, March 28, 2014
Do I Need a Power of Attorney?
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?Read more . . .
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 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.
Nancy Burner & Associates, P.C. has offices in Setauket, Westhampton Beach, and Manhattan New York.