New York City Office
Westchester Office
Dutchess OfficeGifting Programs Can Help With Asset Protection
The federal gift tax exemption is currently $1 million — meaning you can gift up to $1 million cumulatively over the course of your lifetime without incurring any gift tax. There is not marriage penalty; married couples can give up to $1 million per spouse.
A gift made under $13,000 in 2009 will not count against your $1 million exemption. This is known as the annual gift tax amount exclusion. Gifting programs take advantage of these exemptions, mapping out a way to pass assets to heirs during one’s lifetime with minimum tax penalties. Assets can be kept within the family or passed to any charities one may feel drawn to. A gifting program not only helps protect assets, it also enables families to decide how hard-earned assets will be spent and allows heirs to benefit from current tax law.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
The Advantage of Using Life Insurance as an Estate Planning Tool
Obtaining life insurance is a necessary way to ensure that expenses are covered after the death of a loved one. This is certainly a benefit of any life insurance policy. Another benefit, not often considered, is the benefit to your estate plan.
There are three types of life insurance: whole life, term life and variable life. Whole life does exactly as its name implies, covering you for your entire life as long as premiums are paid. Term life covers you for a specific period of time that is specified by the policy “term.” Variable life insurance has variable returns and a variable investment component that the policy holder, not the insurance company, determines where the appropriate portion of their premium is invested.
Regardless of the type of policy, life insurance benefits are paid directly to the beneficiary in full upon your death. Because of this, your beneficiary receives all assets immediately without having to go to probate court or pay taxes. Also, since the full policy amount is available upon the policy holder’s death, life insurance is a good way to ensure a certain amount of money will be available at any time even if an unfortunate or sudden event should result in unexpected death.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Long Term Care Insurance and Medicaid Planning
When applying for Medicaid benefits, the look-back period for individuals seeking nursing home care is five years. The look-back period is the time period prior to the Medicaid filing Medicaid reviews to confirm the applicant’s financial eligibility. Any assets gifted to children or other individuals within 5 years of the need for nursing home care will cause a penalty period, or the amount of time the applicant must wait before qualifying for Medicaid benefits.
It may seem as though individuals who plan on purchasing long term care insurance and individuals who plan on taking advantage of Medicaid fall into different categories. However, in most cases, long term care insurance can be used as a part of overall Medicaid planning.
For example, anticipating the need for long term care, one could purchase a plan with a benefit period of five years. Assets can be transferred into a Trust, allowing for the individual to spend down their assets and become Medicaid eligiable. If the individual falls ill during the five year look-back period, s/he now has the long term care insurance to cover the cost of the nursing home or at home care. If this same individual had not purchased the long term care insurance but had transferred his.her assets into the Trust, s/he may now not be eligible for Medicaid benefits until the expiration of a penalty period. While premiums on long term care insurance can be expensive, they are often more cost effective than paying out of pocket for care during a penalty period. A good estate planning attorney can advise on the best way to plan for the need for future long term care.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Spousal Refusal as an Asset Protection Option
New York is one of the only three states that allow for the option of spousal refusal. Spousal refusal is an asset protection tool used wherein a spouse living the the community refuses turn over his or her assets or income to an ailing or incapacitated spouse for the purpose of seeking nursing home Medicaid benefits. This tool may make some people feel uncomfortable and may view its use as “abandoning” a spouse when s/he needs help the most.
However, employing spousal refusal is not tantamount to abandoning a spouse. Spousal refusal is simply a way of preventing assets from being drained over the course of an expensive nursing home stay. With the proper planning, spousal refusal can protect assets while at the same time permitting the spouse who needs long term care to qualify for Medicaid benefits. This will decrease the financial burden on the non-institutionalized spouse, allowing him/her to provide the emotional care and comfort to the ailing spouse.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Letters of Intent Aid in the Transition to a New Living Situation
A letter of intent is not a legal document, but it is still an important part of planning for the future of a child with special needs. A letter of intent contains important information about the child such as his or her history, likes, dislikes, current health and emotional status and hopes for the future. The letter may also include details about the parents’ wishes for the future care of their child.
No one can know the needs, habits and desires of a child with special needs better than a parent who has been caring for that child for his or her entire life. When writing a letter of intent, parents can ensure that future caregivers understand the personality of their son or daughter. The information contained in the letter goes beyond the financial and legal information contained in a Will or trust. This information will be valuable in ensuring the child with special needs will continue to get the care that he or she is accustom to.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Bypass Trusts Double Estate Tax Exemption
In 2009, any assets below the amount of $3.5 million can be bequeathed to heirs with no federal estate tax penalty. However, assets left to one’s heirs over this estate tax exemption amount will be taxed. Barring any changes by Congress, in 2010 the estate tax will be repealed entirely. However, in 2011, it will be reinstated with an exemption of $1 million and a maximum unified rate of 50%.
Since it is nearly impossible to predict what year one might die, estate tax planning is crucial for all families who have accumulated assets in excess of $1 million. One tool that may be employed to address this issue is a bypass trust. Bypass trusts allow parents to double the amount of money that can be passed on to children tax-free.
When the first parent dies, instead of leaving all their assets to the surviving spouse, assets up to the exemption amount can be left to a trust for the benefit of the children. Therefore, when the second parent dies, he or she may also leave assets up to the exemption amount to the surviving heirs. In this way, parents are able to collectively double the amount they would otherwise be able to leave to children tax-free.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
What You Should Know When Considering a Reverse Mortgage
Reverse mortgages are available to homeowners at least 62 years of age or older. A reverse mortgage is one of several options available to older homeowners that allows them to take advantage of any equity that has accrued in their homes. In a reverse mortgage, the homeowner receives income from the home’s equity tax free without having to take on a new monthly payment. The payments work in reverse, with the homeowner receiving monthly payments from the bank.
Anyone who meets the age requirement and has enough home equity can take out a reverse mortgage as long as they live in the home. No payment is due on the loan as long as it is outstanding and the homeowner still occupies the home. The loan becomes due only when the homeowner moves out.
A reverse mortgage can be an attractive option but it is not the right option for everyone. Reverse mortgages have up-front costs and can be expensive to originate. Reverse mortgages also take away equity that the homeowner may need for future emergencies or health care costs. And, since proceeds from the sale of the home are generally used to pay back the loan, reverse mortgages can take away from any inheritance that would be left to surviving children. Consult an estate planning attorney to see if a reverse mortgage fits into your plans.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Quick Supportive Housing Checklist for Adults with Special Needs
An important consideration for parents of a maturing special needs child is housing. Families will need to do significant research into their options to make sure their child is properly cared for when he or she can no longer live at home. If the child will require a group home or some other form or supportive housing, asking the right questions can help the transition go as smoothly as possible. Some of these questions include:
• What is the reputation of the provider with residents and with neighbors?
• Will the provider allow you to meet any of the other residents to see if the atmosphere is right for your child?
• Does the provider have “house rules” and other measures that may be in place to ensure residents will be good neighbors?
• What community safety measures are in place?
• What are the amenities? Are there common areas that will be available?
• Is there a plan to address grievances among residents?
Planning for housing for a child with special needs is a critical step in ensuring his or her future safety and happiness. Start planning early to make sure that all your questions are answered.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Estate Planning Helps Unmarried Couples Enhance Legal Rights
Unmarried couples do not enjoy the inheritance rights of married couples. Because of this, estate planning is especially important to unmarried couples so that they can be sure their wishes will be legally carried out.
Unmarried couples that have been together for many years, or even decades, may give little thought to inheritance issues. However, in the absence of a Will, the state will decide upon the distribution of assets, and the state is under no legal obligation to consider a non-spousal partner or his or her children. Unmarried couples should at a minimum draft a will and establish beneficiaries for their assets.
In addition to a Will, each person should have a Power of Attorney and a Health Care Proxy. These documents will ensure that both financial matters and health care matters will be handled in accordance with the couples’ wishes. Unmarried couples do not have the legal rights to make health care decisions for each other. Drafting a Health Care Proxy and a Power of Attorney will prevent a judge from making decisions that should be left to couples and their loved ones.
To learn more about New York elder law, New York Estate Planning, NY Elder, and New York Special Needs Planning, visit LittmanKrooks.com.
Trusts do Not Automatically Protect from Estate Taxes or Creditors
While a Living Trust is a valuable estate planning tool that can protect beneficiaries from the hassle and expense of probate, it does not automatically protect assets from estate taxes or creditors.
Currently, the Federal estate tax exemption is set at $3.5 million, meaning that only assets above that amount will be subject to Federal estate taxes. The estate tax will be repealed in 2010 and reinstated in 2011 with a $1 million exemption. If a Trust contains more than $3.5 million in assets, then those assets will be subject to estate taxes when they are distributed. Furthermore, the New York estate tax exemption is $1 million, so assets above that amount will be subject to New York estate taxes. A good estate planning attorney can help draft a plan for minimizing estate taxes using both Trusts and other planning tools.
Creditors can also go after property that is being held in a Trust if the creditor wins a lawsuit. Property in the trust will be treated just as if it is still owned in your name. Distributing assets from a trust does not legally prevent a creditor from collecting those assets directly from the beneficiaries.