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BE AWARE OF POTENTIAL CHANGES TO TAX LAWS

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Estate planning is an ongoing process. The estate plan that you initially create is going to reflect your life at that time. Things invariably change. In addition to changes within your own life, there can be relevant changes that impact the society as a whole, such as changes to tax laws.

When tax laws change, your existing estate plan may no longer be appropriate. If you are not aware of the lay of the land at all times, your family could ultimately pay a hefty price.

Federal Estate Tax

The maximum rate of the federal estate tax is 40 percent. The imposition of a tax of this magnitude could have a significant impact on the financial viability of your family for generations.

Your estate tax exposure (or lack thereof) will depend on the extent of your assets as they compare to the amount of the federal estate tax exclusion. In 2014 the amount of the exclusion is $5.34 million.

The exclusion is adjusted annually to account for inflation, so you may see a slightly higher figure next year. You should certainly be aware of the exact number, but these relatively small adjustments are probably not going to be enough to render your existing estate plan obsolete.

However, significant changes could come down the pike. For example, last year the White House proposed a budget that would reduce the amount of the estate tax exclusion. It would go down to just $3.5 million in 2018, and the maximum rate would be increased from 40 percent to 45 percent. This $3.5 million/45 percent framework was in place back in 2009.

We would like to emphasize the fact that this was a proposal; it is not a fact of life. However, changes to existing laws are possible. In addition to proposals that would increase the estate tax, there are always legislators that want to reduce it or eliminate it altogether.

As a resident of the state of New York you must be aware of the New York State estate tax as well as the federal estate tax. At the current time the amount of the New York State estate tax exclusion is $1 million. The maximum rate of this graduated tax is 16 percent.

State laws are always subject to change via legislative mandate. You should certainly be aware of the current state-level estate tax parameters at all times.

Ongoing Relationship

When you put your first estate plan in place you should be aware of the fact that it is probably going to need revisions over the years. If you develop an ongoing working relationship with your estate planning lawyer from the start, you can stay in touch and get together for estate plan reviews at regular intervals.

When you are alert and proactive you can be optimally prepared at all times.

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Thanks to monumental advances in medicine and healthcare, as well as an overall better quality of life in the United States, we are living longer. Although we can all expect to live longer today than our grandparents or great-grandparents did, the cost of living longer may be high. In fact, without long-term care planning, a lifetime of savings could be wiped out in a relatively short period of time.

This infographic provides an informational snapshot of long-term care – its actual costs and why New York long-term care planning is important. Though most Americans are not even thinking about it, the numbers say we should.

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When you work and pay taxes you accumulate retirement credits. You can accrue a maximum of four credits per year. Once you have accumulated 40 credits, you qualify for Medicare coverage when you reach the age of 65.

Medicaid is a program that provides health insurance for people with very limited financial resources. You don’t have to accumulate credits to qualify for Medicaid. Most working people qualify for Medicare when they retire, so they don’t need Medicaid at first.

Because of the fact that Medicare will not pay for long-term care, many seniors do in fact enroll in the Medicaid program late in their lives. Medicaid will pay for custodial care.

Because Medicaid is a need-based program there are certain guidelines that you must stay within to be able to qualify.

When someone who is married is applying for Medicaid to pay for long-term care, his or her spouse is allowed to keep a certain amount of property without impacting the eligibility of the soon-to-be institutionalized spouse.

Your home is not counted by the Medicaid program, but there is an upper equity limit of $814,000 in 2014. However, if your spouse is going to remain in the home after you enter an assisted living facility, there is no equity limit at all.

In addition to this, the healthy or community spouse is allowed to keep his or her half of community property up to a particular limit. In 2014 this limit is $117,240.

The healthy spouse is also entitled to a monthly maintenance needs allowance. If the healthy spouse is relying on the institutionalized spouse’s income, the healthy spouse may continue to receive some of this income.

The maximum amount that the community spouse could draw in 2014 is $2931.

Medicaid Planning

Because of the Medicaid program rules it is important to plan ahead with eligibility in mind if you intend to use the program to address future long-term care costs. We have shared a few of the facts here, but there are many other things to take into consideration.

While it is true that your spouse can maintain ownership of some property, you can potentially keep more property in the family by spending down in advance of applying for Medicaid.

Spending down is a term that is used to describe divestitures. You could give assets to family members who would have otherwise inherited these resources. Some people choose to spend down by living it up.

You have to plan ahead in advance if you want to engage in a spend down because of the five year look back. If you give away assets within five years of applying for Medicaid a penalty is applied, and your eligibility is delayed.

If you would like to learn about Medicaid planning in-depth, we invite you to download our free report on the subject. To access the report, click this link: New York Medicaid Planning Report.

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Everyone should have an estate plan in place. If you die without leaving behind any instructions with regard to the transfer of your property you will die intestate. Under these circumstances, the state will be forced to step in and sort things out.

Intestate Succession Laws

The state of New York will make an effort to find your next of kin if you die intestate. In many cases blood relatives will come forward, so there will be no particular need to conduct an exhaustive search.

There are clear-cut rules of succession, but they vary slightly from state to state. Generally speaking, your closest living blood relative or relatives inherit the intestate property that you leave behind.

In the state of New York, if you have children but no living spouse, your children would inherit all of your intestate property. Conversely, if you leave behind a surviving spouse but no children, your surviving spouse would be your sole heir.

Your parents would inherit all of your intestate property if you had no children and no surviving spouse. State law would allow for your siblings to inherit everything if you had no surviving parents, children, or spouse.

No Will, No Living Relatives

If you die without a will or any other estate planning document expressing your final wishes and you have no relatives still alive, the state can capture your resources under escheat laws.

There would be a three-year period of time during which a relative can come forward. If there are sufficient resources to finance such an effort, the court may allow a court-appointed personal representative to conduct a search.

If this period of time elapses without anyone materializing to claim an inheritance, the coffers of the state of New York would absorb the intestate estate.

Avoiding Intestacy

Intestacy succession laws would come into play if you die without a will or any other estate planning documents. There is no reason to submit to these specific parameters. You could be certain that your assets are distributed according to your preferences by executing an estate plan.

Many people go through life without making any plans for something that is absolutely inevitable because they think that they will always have time to handle the matter later on. In fact, no one has a crystal ball, and people pass away unexpectedly every day.

Another thing to take into consideration if you are procrastinating is the fact that incapacity is common among elders. You may not be in a position to execute a valid estate plan if you put it off until you are no longer capable of sound decision-making.

Intestacy is really not an option for responsible adults. If you are currently going through life without an estate plan, feel free to contact our firm to schedule your assessment.

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Estate planning is essential for adults of all ages. This is especially true for married people who have children.

When you hear about tragic circumstances that befall others because of estate planning error you understand why everyone should have a good estate plan. We are all day to day as they say in the sports world. This is simply the human condition, and there is nothing anyone can do about it.

Ordinary people should certainly take steps to make sure that their spouses and children are provided for, but wealthy people have yet another layer of concerns.

The estate tax can absorb a significant percentage of the wealth that you are leaving behind if you have assets that exceed the exclusion amount. At the current time the maximum rate of the federal estate tax is 40 percent, and here in New York we have a state-level estate tax as well.

THE STEVE MCNAIR ESTATE

With the Super Bowl behind us, here’s the story of a football player who did not take his estate planning game seriously. The onetime football star Steve McNair was killed in 2009, and he was paid extraordinarily well as a top rate NFL quarterback for years. He had not taken the time to execute a last will or any other type of an estate plan.

His assets were subject to estate taxes. This is one of the reasons why his resources were frozen in probate after he passed away. Because he didn’t have an estate plan he hadn’t positioned his assets with tax efficiency in mind.

When you draw up a last will you should consider the matter of estate administration. Somebody has to actually do all the legwork as it were to make your wishes a reality.

This individual is called the executor or executrix. An executor is a male who serves this role, and a female estate administrator is called an executrix.

In cases when someone dies without having executed a last will the Surrogate’s Court is forced to name a personal representative to handle the estate administration tasks. In the case of Steve McNair his widow was named the personal representative.

McNair had a home built for his mother in Mississippi years before his death, a ranch that sits on 45 acres. She was under the impression that this ranch was a permanent gift to her.

McNair’s surviving spouse didn’t see it this way at all because the house was in her deceased husband’s name. As the personal representative of the estate she had the right to demand rental payments from Steve McNair’s mother. She asked $3000 a month in rent.

Unfortunately, Lucille McNair could not produce this type of money on a monthly basis to remain in the home. She moved out, and she took her belongings with her.

McNair’s widow took things a step further and demanded that Lucille pay over $50,000 to account for the things that she took, though the late quarterback’s mother says that these items were her personal property.

It is unlikely that Steve McNair wanted his mother treated this way, and he could have prevented it with the proper estate planning.

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There are many different ways to arrange for the transfer of property to your children. The optimal course of action will vary depending on your objectives and the unique nature of your circumstances.

Joint tenancy is one option. A joint tenant is a co-owner of property. You could potentially add your child to your home deed or the title of some other type of property. He or she would become a joint tenant.

Under right of survivorship, he or she would inherit the entirety of the property after you die. This transfer would take place outside of the process of probate.

Probate is a legal process that comes into play when you maintain direct, sole possession of property until your death. It is not inherently negative, but it can be time-consuming. You can eliminate this step by arranging for asset transfers that take place outside of the process of probate.

Joint Tenancy & Medicaid Planning

In addition to the probate avoidance angle, joint tenancy can be useful for those who are engaged in Medicaid planning. Medicaid pays for most of the long-term care that is received by seniors in the United States. This is because Medicare doesn’t pay for long-term care.

To qualify you must have very limited financial resources, but you can maintain ownership of your home. However, the Medicaid program can seek recovery of monies spent after you die through the attachment of your property.

If you were to name your child as a joint tenant of your home, he or she may be able to assume ownership of the entirety of the home without facing the prospect of attachment by the Medicaid recovery unit.

Drawbacks of Joint Tenancy

The question of whether or not you should create a joint tenancy with your child is a complicated one. We have briefly outlined some of the positives, but there are drawbacks as well.

When it comes to Medicaid, there is a five year look back. You can’t find out that you need long-term care today, make your daughter the joint tenant of your home tomorrow, and qualify for Medicaid the next day. If you give away assets within five years of applying for Medicaid, a penalty is imposed. This penalty delays your eligibility.

Therefore, to use joint tenancy as a Medicaid planning strategy you have to act well in advance of applying for the program. You would be divesting yourself of full ownership of your property before there is any actual need to do so.

As a result, the property would be subject to attachment if your joint tenant was to experience financial difficulties. He or she would also have to sign off on the sale if you decided that you wanted to sell the home, and this is another drawback.

Learn More About Joint Tenancy

If you would like to learn more about joint tenancy, download our free special report on the subject. To access your copy of the report click this link and follow the simple instructions: The Trouble With Joint Tenancy.

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Most people have heard about last will challenges, but can you challenge a trust? If you look for the answer to this question on the Internet you may get some confusing answers.

Popular Misconception

Before we talk about trusts, let’s talk about last wills first. A will must be admitted to probate before the heirs to the estate receive their inheritances. It is up to the probate court to examine the will to determine its validity.

Because of this inherent court involvement it is relatively easy to challenge a last will. The will is in the hands of the court already. The court is charged with the responsibility of determining whether or not it is valid. Therefore, the entire process is set up to allow for challenges to the validity of the will.

Now, back to trusts. When you hear the above, you may immediately think that you could use a trust rather than a will to avoid challenges. There are those who contend that a trust will prevent a challenge.

When you arrange for asset transfers through the utilization of a trust rather than a last will, the transfers take place in a direct manner outside of probate. The trust is not admitted to the probate court like a will would be, so there is no built-in forum within which a challenge could be presented.

This does not mean that it is impossible to challenge a trust. You could challenge the terms of a trust by initiating a lawsuit.

No-Contest Clauses

There are those who will contend that you can eliminate this possibility by including a no-contest clause within your trust. A no-contest clause would stipulate the total disinheritance of anyone who challenges the terms of the trust.

Let’s say that your father creates a trust late in his life and makes you a beneficiary. He got remarried when he was in his eighties, and you are not receiving as much as some of the newer people in his life. You feel as though he was not of sound mind when he created the trust agreement. You have reason to believe that he was unduly coerced by his wife. The trust includes a no-contest clause.

If you initiate a lawsuit to challenge the terms of the trust and you lose, you will in fact be disinherited entirely. Therefore, a no-contest clause can certainly serve as a powerful disincentive, because you would be taking a big risk.

However, such a clause does not make it impossible for you to challenge a trust. You could win the lawsuit and you would not be disinherited, but others who thought they were protected by the no-contest clause may fact be left out in the cold.

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You may get the impression that a trust of any kind will provide asset protection. The idea is that you are divesting yourself of personal ownership of property that you convey into a trust.

This is not entirely true. Let’s look at some of the details.

Revocable Living Trusts

Revocable living trusts are very popular, and part of the appeal lies in the fact that you can retain control of assets that you convey into this type of trust.

A trust involves the grantor, who is the person who creates the trust; the trustee, the individual or entity that administers the trust; and the beneficiary, who is the person that receives distributions out of the trust.

When you create a revocable living trust you are the grantor. Even though you are the grantor, you may also act as both the trustee and the beneficiary while you are alive and of sound mind. Because of this, you have full control of the assets that you have conveyed into the trust.

Beyond this, remember, this is a revocable living trust. Aside from the control that you retain while the trust is active, you can actually revoke it at any time. It would no longer exist, and the assets that you have conveyed into it would become your personal property once again.

Because you are retaining incidents of ownership, the assets that have been conveyed into the trust are not going to be protected from tax collectors, creditors or litigants seeking redress.

You may be wondering why anyone would want to create a revocable living trust given the fact that they do not provide asset protection. Even though you retain a great deal of control, revocable living trusts facilitate the transfer of assets outside of the process of probate. They are useful as a probate avoidance tool.

Other Types of Trusts

There are other types of trusts that could be useful for those who are seeking asset protection. When you create an irrevocable trust you are surrendering incidents of ownership. Therefore, certain types of irrevocable trusts are used by people who want to protect assets.

Asset Protection Planning: Explore Your Options

When you have been successful throughout your life you should certainly do everything possible to protect the assets that you have been able to accumulate. On the one hand you should protect them for your own purposes, and on the other you should make sure that assets that you are passing along to your loved ones are protected.

You have various different options available to you. If you would like to discuss asset protection planning with a licensed estate planning attorney, we invite you to contact our firm to request a free consultation.

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Many estate planning attorneys also focus on elder law issues. When you hear the term “elder law” you may wonder exactly where the focus lies.

In a general sense, elder law attorney assist people who are concerned about legal issues that are of interest to senior citizens. Some elder law attorneys focus on legislation that impacts seniors. They may advocate certain positions.

Most elder law attorneys are involved in personal interactions with clients who want to prepare for the eventualities of aging.

The most pressing issue that an elder law attorney in Kew Gardens NY is facing at the present time is the matter of long-term care. The United States Department of Health and Human Services tells us that the majority of senior citizens will need assistance with their activities of daily living eventually.

Fortunately, a lot of this care is provided by family members, friends, and neighbors. In many cases seniors who need help with their day-to-day needs can remain in their homes.

However, this is not always the case. A significant percentage of seniors ultimately reside in assisted-living communities and nursing homes.

These facilities are expensive, and they are totally out of reach for some people. Others could possibly afford it, but it would wipe out the assets that they always intended to leave behind to their loved ones.

Medicaid Planning

Elder law attorneys focus in large part on Medicaid planning. Medicaid actually pays for most of the long-term care expenses that are incurred by elder Americans. This is because of the fact that Medicare will not pay for an extended stay in an assisted living community or a nursing home.

Medicaid rules are complex. Because it is a need-based program, technically you must be in possession of assets that do not exceed $14,550 (2014) if you want to qualify.

The good news is that some of your assets, such as your home up to $814,000 of equity in 2014, don’t count initially. This can be comforting, but Medicaid recovery is a factor. The Medicaid program could seek reimbursement from your estate after you pass away.

If you retained personal ownership of your home at the time of your death, it could potentially be lost to Medicaid recovery.

Elder law attorneys assist clients who are interested in qualifying for Medicaid without losing everything that they own in the process. If you plan ahead effectively well in advance of applying for the program, you may be able to keep a significant store of assets within your family.

Because of the fact that the population is rapidly aging the field of elder law is becoming more and more important. Seniors are looking for answers, and if you are among them you can become fully informed if you discuss everything with a licensed elder law attorney in Kew Gardens NY.