CHOOSING THE RIGHT ATTORNEY
LAST WILL AND TESTAMENT
LIVING TRUSTS
DURABLE POWER OF ATTORNEY
MEDICAID BENEFITS
HEALTH CARE PROXY
LIVING WILL
TAX ISSUES WITH ESTATE PLANNING
HOW GIFTING AFFECTS MEDICAID
ESTATE PLANNING WHEN YOU HAVE A CHILD WITH A DISABILITY
CHOOSING THE RIGHT ATTORNEY
How do I choose an attorney?
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LAST WILL AND TESTAMENT
Why should I have a Will?
A Will provides the opportunity to stipulate with clarity the people you would like to have receive your assets upon your death. In addition to establishing a plan for the distribution of your assets, it is the document in which you can name guardians of minor children who are under the age of 18 and to name a custodian to manage the assets for these minor children.
What if I die without a Will?
If a person passes away without a Will, we look to New York law to determine which people are to inherit the decedent's assets.
Who inherits if I don't have a Will?
This can be a variety of people, including a spouse, parents, children, brothers, sisters, etc. in some combination of percentages.
If my family is going to inherit my assets then why is this not a good approach?
The effect of not having a Will is that there will be substantially greater probate court involvement in the administration of the estate as we are relying on the state law to determine who will inherit. In the most extreme of circumstances, should you pass away without a Will and have no living heirs surviving you, then the assets will pass to the State of New York.
Does a Will control where all of my assets go?
Your Will only controls assets which are in your name alone at the time of death and that do not have designated beneficiaries.
What happens to my other assets?
Jointly-owned assets (such as a residence owned jointly by husband and wife or a bank account owned jointly by a mother and child) do not pass through your Will. In addition, assets which have a contract beneficiary (such as life insurance, individual retirement accounts and retirement plans) do not pass through your Will.
What is "probate?"
Probate is the process by which the Surrogate's Court determines the validity of a Will. Once deemed valid, the court then authorizes the executor to act on behalf of the decedent's estate pursuant to the terms of the Will.
The term "probate" is also often used to refer to the process of collecting the property of the estate and distributing it in accordance with the terms of the Will.
Can I avoid probate with a Will?
Any time a person passes away with assets in their name alone, the Surrogate's Court gets involved. In such cases, it is necessary for the Surrogate's Court to approve your Will before the Executor of your estate can follow the provisions of the Will. Through proper planning, the involvement of the Surrogate's Court can be minimized or avoided completely at the time of death.
Do I need a lawyer to prepare a Will?
It is not a legal requirement that you obtain legal counsel to prepare a Will. However, volumes of case law have been written about Wills that have been prepared but improperly signed or witnessed.
Who needs to sign a Will?
Under New York law, it is necessary that two individuals witness the signing of your Will and that the document be signed before a notary public. Failure to adhere to these requirements can invalidate the Will.
Can I change my Will?
A Will can be changed; however, to do so requires you to sign an amendment to your Will (known as a codicil) with the same witness and notary requirements as signing your original Will. It is preferable to have a new Will drafted.
Can I leave property to minor children in a Will?
Yes, however we generally recommend that property that is to be left to minor children should be left in trust for them. The terms of this Trust written in the Will itself and the Trustee of that Trust would hold and manage the property for the benefit of the children, pursuant to the terms set forth in the Will. Often such a Trust terminates and the property is distributed to the children once they reach a certain age.
Do I have to leave anything to my spouse?
New York law provides protection for spouses. When one spouse dies, the survivor is legally entitled to a portion of the deceased spouse's estate. If the surviving spouse is disinherited, he/she can assert her right to elect against the deceased spouse's estate for the amount to which she is entitled.
Can I put burial instructions in my Will?
Yes you can, but remember that a person is generally buried long before the Will has been probated.
How often should I have my Will reviewed and/or by an attorney?
Your Will, as well as your entire estate plan, should be reviewed any time you have a major change in your life, such as the death of a close family member, you or a close family member is suffering from a serious illness, a child reaches the age of majority and/or has children, you get divorced etc. Your estate plan should also be reviewed when changes to the law affect your plan. Unfortunately, you may not know of the changes, unless you consulted with an attorney. Accordingly, your estate plan should be reviewed, regardless of changes to your life, every few years.
If I have a Will, do I still have to pay estate taxes?
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LIVING TRUSTS
What is a Living Trust?
A Trust is an agreement between a person who is creating the Trust and the person(s) who has been named as the Trustee(s). This type of arrangement is written and stipulates the rules and regulations the creator feels is important for the particular circumstances.
Why would I have a Living Trust?
Living Trusts can be used for a variety of reasons such as for asset management; the protection of assets for minor children; avoidance of probate; minimization of estate taxes; and controlling assets after the death of the creator.
Should I have a Living Trust?
Not everyone needs a Living Trust, but many people can benefit from them for a variety of different reasons. A simple Revocable Trust offers no tax advantages over a Will, but it is not subject to probate. Many clients want to avoid the cost and delay involved in the probate process. It also makes the administration of the estate easier for the children in that all of the assets have been marshaled and combined in one place- the Trust-making it easier for the children to locate all assets. Another major advantage to a Trust is that it affords a co-Trustee or a successor Trustee the ability to access and manage the assets of someone under a disability, while that person is still alive. For example, you might establish a Revocable Living Trust now and appoint yourself as the Trustee. You can continue to manage your assets in the exact same way that you always have. If you suffer a stroke, the person whom you designated as your successor Trustee, generally a child, would take over your role and he/she would have immediate access to your assets without the need for court intervention. That person would continue to manage your assets for the rest of your life and even after death, without interruption, delay or expense. There would be no need for court involvement.
Does my Trust go through probate?
A Living Trust is specifically designed so that it does not pass under the control of the Surrogate's Court. If properly drafted, the Trust and all assets the Trust controls at the time of the creator's death, do not pass through the probate.
Does a Trust have the same witness formalities as a Will?
Under New York law, a Trust is valid if signed by the creator and by the Trustee. The witness formalities of a Will do not apply to a Trust. For this reason, the Trust is a more flexible document to change from time to time as the witnessing requirements of a Will do not exist.
What is the difference between an Irrevocable Trust and a Revocable Trust?
A Revocable Trust can be changed, amended and/or ended any time during the life of the person who established the Trust (the "Grantor"), as long as the Grantor has legal mental capacity to do so. An Irrevocable Trust generally cannot. Each Trust has its own purposes.
I thought that I needed to have a lot of money to have a Trust?
We often fund a Trust only with the home. The benefits to a Revocable Living Trust apply to everyone, regardless of the size of the estate. Such is not the case with Irrevocable Living Trusts which are used more often for those with larger estates or for asset protection purposes.
(See "Commonly Used Terms in Elder Law")
(See "Using Trusts in The Medicaid Context")
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DURABLE POWER OF ATTORNEY
What is a durable power of attorney?
A durable power of attorney is a legal document designed to provide another person with legal authority over your financial affairs should you become disabled. A Durable Power of Attorney becomes null and void at your death. A Power of Attorney is durable because it survives your disability or incapacity.
Why would I want to give some authority over my assets?
Both single and married people very often have assets in their name alone or have assets which mandate they be the signatories. If the owner of the account becomes disabled, no other person would have access to those assets. The durable power of attorney provides a cost-effective means for a family member or friend to take charge of financial affairs in the event of disability.
What do I do if I do not feel ready to give someone my power-of-attorney at this time?
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MEDICAID BENEFITS
If I apply for Medicaid benefits, do I need to provide account information for my spouse (living or deceased)?
YES. ALL financial information must be provided for any account or resource held in your name and/or your spouse's name.
If I apply for Medicaid benefits, do I need to provide information for accounts that have been closed:
YES. If bank accounts have been closed, you need to provide all documentation for the period the accounts were open and confirmation that they are closed. This includes all life insurance policies: if policies have been cashed in, you need to provide documentation regarding the account and confirmation that it was cashed in. This applies to all accounts and policies held within the last 36 months.
If I apply for Medicaid benefits, do I need to provide documents for my spouse (e.g. Medicare cards, Social Security cards, health insurance cards, etc.) if my spouse is deceased?
YES. All documents must be provided for both you and your spouse. Specifically, these documents are on this list with specific listings of "husband" and "wife."
What do I need to provide with regard to account statements and policies?
You will need to provide copies of ALL pages of all statements, even if these pages do not contain account financial information (such as balances, etc.) We must submit all pages of accounts. Additionally, all documentation regarding life insurance policies must indicate the cash surrender value or state that there is no cash surrender value, owner, insured and beneficiaries.
If I am eligible for Medicaid, should I cancel other health insurance policies?
No, you should not. Your other health insurance plans may offer coverage for something that Medicaid doe not pay in full or in part.
If my husband needs to be placed in a nursing home, must I get divorced to protect myself and my assets?
More often than not, divorce is not necessary. There are many other options and plans available to protect assets without the need to divorce.
If I get Medicaid, will I lose my house?
Medicaid cannot take your home as long as it is your primary residence and you or certain family members are alive and living in the home. A home can be a single or multiple family house, a condominium or a co-op.
Will there be a lien on my house?
Not necessarily. Generally, Medicaid will not place a lien against the property of a Medicaid recipient while the recipient is alive. There are several exceptions to this general rule. No lien may be imposed on the home if (1) the spouse of the individual is lawfully residing there, (2) a child of the individual who is under twenty-one years of age or who is blind or permanently and totally disabled is lawfully residing there, or (3) a sibling of the individual who has an equity interest in the home and who was residing in the home for a period of at least one year immediately before the date of the individual's admission to the medical institution is lawfully residing there.
No lien may be imposed on an estate of someone who has received Medicaid unless he/she was fifty-five years of age or older when he or she received that assistance.
Is it true that someone who is applying for Medicaid is not allowed to make any gifts within 36 months prior to the application?
No, this is not true. The law in this regard is far more complex. Although gifting within 36 months of applying for Medicaid is looked at (this is referred to as the "look-back" period) and the gifting may disqualify the applicant for Medicaid (depending upon to whom the gift is given and whether Medicaid is sought for nursing home or home care), the disqualification period will not necessarily be 36 months. The disqualification period will vary depending upon the size of the gift.
Is it true that I am allowed to give $10,000 in gifts each year?
Gifts of any size made within the look-back period can affect an applicant's Medicaid eligibility. Hence, the $10,000 gifts often referred to do have an effect on someone's Medicaid eligibility. The $10,000 that is often discussed relates to gift tax law. Every person is now allowed to gift $11,000 to anyone (this is not restricted to family members) each year without creating any gift tax liability.
If my spouse applies for Medicaid, what happens to our joint accounts?
The topic of jointly owned assets is a very confusing one and has become more so recently. Although New York State Banking Law does create a presumption that jointly owned assets are owned equally by each joint tenant, the Department of Social Services, which administers the Medicaid program, does not adhere to that concept. Pursuant to Federal as well as State Medicaid law, the presumption is that any jointly owned assets in the name of the Medicaid applicant belong solely to the applicant and not to the other joint tenant.
(See "Medicaid")
(See "Choosing the Proper Venue for Medicaid")
(See "Medicaid Penalty Period")
(See "Treatment of Retirement Funds in Determining Medicaid Eligibility")
Laws regarding Medicaid are very complex and there are many misconceptions. Advice from well-meaning family and friends is often misguided. Therefore, it is of utmost importance to seek advice from a qualified Elderlaw attorney before making any legal decisions.
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HEALTH CARE PROXY
What is a Health Care Proxy?
New York State law recognizes the validity of a Health Care Proxy. This document allows you to designate another person, who is over the age of 18, to make health care decisions for you if you are not capable of doing so yourself. The statute requires the health care agent to prove that he knows your wishes in regard to artificial nutrition and hydration.
(See "Commonly Used Terms in Elder Law")
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LIVING WILL
What is a Living Will?
A Living Will is a signed written statement of your health care wishes, generally addressing artificial life support issues.
Do I need both? Which is better?
You do not need both. It is most important to sign a Health Care Proxy.
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TAX ISSUES WITH ESTATE PLANNING
If I have a Will, do I still have to pay estate taxes?
Estate taxes are based upon all of the property in your taxable estate at the time of your death. Although only property that you own alone, without a designated beneficiary, passes through the probate of a Will, all property that you own, including property with a designated beneficiary or with a joint owner, pass subject to estate taxes.
How much are the estate taxes?
Estate taxes are based upon the size of the taxable estate, less deductions. At this time, the first one million dollars ($1,000,000) of your estate passes to your beneficiaries estate tax free.
How can I reduce or avoid estate taxes?
There are many ways to reduce or avoid estate taxes. The complexity of the plan will depend upon the size of the estate. If an estate is only slightly in excess of the estate tax exemption amount (currently one million dollars), you might consider making tax free gifts during your lifetime. With a larger estate, you should consider having an Irrevocable Trust funded with life insurance. With an even larger estate, you might want to gift other property to an Irrevocable Trust. To decrease estate tax liability further, we could draft an Irrevocable Trust funded with as many as two residences. These are known as qualified personal residence Trusts. We also use family limited partnerships, annuity Trusts, and limited liability companies to enhance the tax reduction.
What is a tax free gift?
The government allows us to gift a certain amount in certain ways without subjecting the gift to gift taxes. Each of us is allowed to gift up to $11,000 per person per year. There is no restriction as to whom you may gift this money. If you are married, both you and your spouse are allowed to make this gift to the same person, thus allowing you together to make a $22,000 gift to one person. The number of persons to whom you make these gifts is unlimited and you can do this each year.
Additionally, you are allowed to pay the medical and educational expenses of any other person. The amount that may pay is unlimited and although such expenditures would be considered gifts, these gifts are not subject to gift tax, as long as the payment is made directly to the medical provider or educational institution.
Does this mean that I can gift up to $11,000 per person per year without affecting my eligibility for Medicaid?
The law that permits tax free gifts of $11,000 per person per year is tax law. Medicaid law scrutinizes all gifts made within a 36 month period prior to the submission of a Medicaid application for nursing home benefits.
When I sell my house, will I owe taxes?
When an asset, such as a house appreciates in value, upon its sale, there can be a capital gain for which taxes will be due.
When you purchased your home, the price that you paid for it is your basis. If you transfer the house to someone during your lifetime, the Grantee obtains your basis and his or her capital gain upon the sale of the house is the same that the Grantor's would be. The only difference is that they may not be able to take advantage of the $250,000.00 exclusion. When someone inherits a house at the owner's death, they get the benefit of a "step-up in basis" which means that their basis is the fair market value of the house at the time of the death of the owner. This same step-up in basis can be accomplished by having the grantors of the gift retain a life estate in the house. Upon the death of the grantors, estate tax returns must be filed, listing the gifted house as an asset of the estate.
What is a Life Estate?
A life estate is an ownership interest in real property allowing the life estate holder to live in and/or use the house for the rest of their life. If a house is gifted and the owner retains a life estate, the value of the gift is reduced by the value of the life estate, for Medicaid purposes. This results in a shorter penalty period as the gift is of a smaller amount.
There are several advantages, as well as disadvantages, to transferring assets while reserving a life estate. One advantage is to reduce capital gains upon the sale of the house after your death. If you were to sell the house before you died, you would incur a capital gains tax on the difference between your basis in the house and the sales price, less your $250,000 exclusion. If you transfer the house outright, the recipient of the transfer would not have the same exclusion. However, if you transferred the home while retaining a life estate, and the home were sold before you died, the recipient of the transfer, called the remainderman, would incur capital gains tax on the remainder interest. You would be able to offset your capital gains on the life estate portion with your $250,000 exclusion (but only up to the value of the life estate). If the house is retained until your death, the remainderman gets the benefit of a step-up in basis, thereby reducing any capital gains liability upon sale.
(See "Estate Planning")
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HOW GIFTING AFFECTS MEDICAID
Does Medicaid take those gifts back?
Medicaid does not generally go after assets that have been gifted. If you gift assets of any kind within the 36 month period prior to submitting an application for Medicaid, Medicaid will look at those gifts. Unless you can prove that the gifts were made for a purpose other than to qualify for Medicaid, and unless those gifts were made to certain exempt people, those gifts will render you ineligible for Medicaid in a nursing home?
How long will I be ineligible for Medicaid?
The period of ineligibility is determined by dividing the amount gifted by the penalty rate then in effect. The penalty period is referred to by number of months and that period of ineligibility starts to run from the first day of the month following the gift.
Will I be ineligible for Medicaid in the home as well?
Gifts will not affect your eligibility for Medicaid benefits in the home unless you are receiving benefits through a waivered program, such as Lombardi/Long Term Home Health Care/Nursing Home Without Walls.
I heard that there are certain exceptions to this rule?
There are many exceptions to this rule. They are all set forth in Understanding the Complexities of Elder Law, a copy of which can be obtained at no cost by sending us an e-mail.
(See "Medicaid")
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ESTATE PLANNING WHEN YOU HAVE A CHILD WITH A DISABILITY
I have a child who is autistic. Should I leave him anything in my Will?
My parents want to make a gift to my child. How do we do this?
How do I provide for my child after my death?
You may leave anything you chose to children with a disability as long as you leave it in a Supplemental Needs Trust established through the terms of your Will or established by a Living Trust. Be sure to review my article Supplemental Needs Trusts.
(See "Estate Planning")
To receive a free copy of A Simple Guide to Understanding the Complexities of Elder Law - a helpful booklet we distribute to our clients which contains definitions and explanations of some important terms - please contact us.
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