Trusts and Estates Wills and Probate Tax Saving Strategies Medicaid

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Clients often ask whether the home should be deeded to the client’s adult children, while retaining a life estate in the parent or whether the Medicaid Asset Protection Trust should be used to protect the asset.

While the deed with a life estate will be less costly to the client, in most cases it offers significant disadvantages when compared to the trust. First, if the home is sold prior to the death of the Medicaid recipient, the life estate value of the home will be required to be paid towards their care. If the house is rented, the net rents are payable to the nursing facility since they belong to the life tenant. Finally, the client loses a significant portion of their capital gains tax exclusion for the sale of their primary residence as they will only be entitled to a pro rata share based on the value of the life estate to the home as a whole.

All of the foregoing may lead to a situation where the family finds they must maintain a vacant home for many years. Conversely, a properly drafted MAPT preserves the full capital gains tax exclusion on the sale of the primary residence and the home may be sold by the trust without obligation to make payment of any of the principal towards the client’s care, assuming we have passed the look-back period for facility care of five years.

Spousal refusal is a legally valid Medicaid planning option in New York. By way of background, certain income and assets are exempt from Medicaid if there is a spouse. Generally, the spouse at home, known as the “community spouse” may keep about $3,850 per month of the couple’s combined income and up to about $150,000 of the assets or “resources”. Not included in those figures are any other exempt assets, such as a home (up to about $1,000,000 of the equity only) and one automobile. The spouse who is being cared for in a facility is known as the “institutionalized spouse”.

Many a spouse has advised us that they simply cannot afford to live on the allowances that Medicaid provides. This is where spousal refusal comes in. We start by shifting excess assets into the name of the “community spouse”. He or she then signs a document which the elder law attorney prepares and files with the county indicating that they refuse to contribute their income and assets to the care of the ill spouse since they need those income and assets for their own care and well-being. Note that you may not refuse your spouse’s own income over the $3,850 per month exemption as it is not coming to you.

Once the “community spouse” invokes their right to refuse, and all of the other myriad requirements of the Medicaid application are met, the state Medicaid program must pay for the care of the institutionalized spouse.

For health care decision-making, when a doctor determines you are unable to make medical decisions for yourself, New York has the Health Care Proxy. The proxy, or agent, may make any medical decision for you except one – they cannot withdraw life sustaining measures, such as feeding tubes or a ventilator, unless they can prove this is what you actually wanted.

There are two ways to show that, in situations where there is no reasonable expectation of recovery from extreme disability, and there is no meaningful existence, you do not wish to be kept alive by artificial means. First, you may state in your health care proxy form that you have discussed your wishes regarding artificial life support with your proxy and they know what your wishes are or, secondly, you may execute a ‘living will’ which is essentially a statement that you do not wish to be kept alive in the circumstances discussed above.

The primary consideration in choosing an agent is who would be best suited to make these end-of-life decisions. Most people choose a spouse first and one of their children second. Nevertheless, there is no requirement that it be a family member. You may choose whoever you wish. We are often asked if the client can choose two or more of their children to act jointly. For good reason, the Public Health Law disallows this — if the joint agents didn’t agree, how would the doctor know what to do?

A client came in to see us for their follow-up consultation.  The client shared that, in between their two meetings with us, the husband‘s brother had suffered a stroke and was now in a rehabilitation facility.  He was a bachelor.  He had no power of attorney or health care proxy.  He may or may not have had a will — they didn’t know.  Further, they were unable to get access to his apartment to clean out the fridge and get his clothes because he had failed to put them on the list of persons approved to enter in the event of an emergency.

One of the most overlooked areas in estate planning is the question of who you are responsible for.  Do you have a friend or relative who you know will need to rely on you if something happens?  Either they have no one else or everyone else is too far away.  If you have the responsibility, then make sure that you have the documents you will need to carry out that responsibility.  Otherwise, the challenges become of a magnitude greater.

Similarly, so many of our clients have adult children with young families.  Do you know whether your children have wills, powers of attorney and health care proxies?

“Elder Law Estate Planning” is an area of law that combines features of both elder law (disability planning) and estate planning (death planning) and relates mostly to the needs of the middle class. Estate planning was formerly only for the wealthy, who wanted to shelter their assets from taxes and pass more on to their heirs. But today estate planning is also needed by the middle class who may have assets exceeding one million dollars, especially when you consider life insurance in the mix.

Estate planning with trusts became popular starting in 1991 when AARP published “A Consumer Report on Probate” concluding that probate should be avoided and trusts should be used to transfer assets to heirs without the expense and delay of probate, a court proceeding on death. Trusts are also widely used today to avoid guardianship proceedings on disability, protect privacy, and reduce the chance of a will contest in court.

As the population aged, life expectancies increased, and the cost of care skyrocketed, the field of elder law emerged in the late 1980’s to help people protect assets from the cost of long-term care by using Medicaid asset protection strategies.

According to the New York State Bar Association, “medical aid in dying is a medical practice that has been adopted in ten US jurisdictions (WA, MT, VT, CA, CO, D.C., HI, ME, NJ, NM) that allows a terminally ill, mentally capable adult with a prognosis of six months or less to live to request from their doctor a prescription for medication they can decide to self-ingest to die peacefully in their sleep.” New York’s MAID law will be considered by the legislature this year.

Protections in the proposed law include (1) a requirement that two physicians confirm the person is terminally ill with a prognosis of six months or less months to live, (2) the individual is informed of palliative care and hospice options, (3) there is a mandatory mental health evaluation if either physician has any concerns about the person’s mental capacity, (4) the request be in writing witnessed by two people, neither of whom stand to benefit from the person’s estate, and (5) anyone attempting to coerce a person will face criminal prosecution.

MAID is inextricably tied to hospice and palliative care, of which a core value is patient dignity and autonomy. New York ranks last in the country for hospice utilization due to health providers failing to provide information and counseling on these end of life options. Options will now be required to be discussed under a provision requiring “informed consent”.

For 2024, the exemptions for estate taxes rise to 6.94 million for New York estate taxes, and to 13.61 million for Federal estate taxes. The annual gift tax exclusion rises to $18,000. If your estate is, or may become, greater than the New York threshold, early intervention can avoid the hefty New York estate taxes, which start at over $500,000. Some of the techniques are (1) setting up two trusts, one for husband and one for wife, and using them to double the New York exemption, (2) gifting out so much of the estate so as to reduce it below the New York exemption, at least three years before the death of the donor, and (3) using the “Santa Clause” providing that the amount over the threshold be donated to a charity or charities of your choosing so as to reduce the estate to no more than the exemption.

For Medicaid, the house is an exempt asset so long as a spouse is residing there, up to $1,071,000 of equity for 2024. Seeing as over 80% of nursing home residents do not have a spouse, it is better to plan ahead with a Medicaid Asset Protection Trust (MAPT) to get the five year look-back for nursing facility care. In that case, the house would be protected by the trust rather than the unreliable spousal exemption. Unless your other assets have been protected by the MAPT, an individual may keep only $30,182 and a spouse can keep up to $154,140.

The major change to Medicaid is the often-delayed imposition of the new two and a half year look-back for home care, commencing April 1, 2024. Previously, there was no look-back for home care. This resulted in people not having to worry about getting home care until they actually needed it. With the law change, the MAPT now becomes far more important as a tool to qualify you for home care than to simply protect your assets from a nursing home. Assets will have to be moved into the MAPT years ahead of time if you want to be able to afford to stay in your own home and get home health aides for assistance with the activities of daily living, should the need arise.

While studying the topic of dementia, your writer was surprised to learn that the single most effective preventative measure would be for more of the hard-of-hearing to wear hearing aids. Studies show that only one in six persons who needs a hearing aid actually uses one and the average person waits ten years before seeking treatment for hearing loss.

As discussed previously in this column, social engagement is the number one factor in maintaining one’s mental facilities as we age. It make sense then, that age-related hearing loss, also known as presbycusis, would diminish social engagement leading to social isolation, cognitive decline and anxiety. Quality hearing aids today may be obtained over-the-counter without a prescription. Check your hearing online by googling “free on-line hearing screening”, downloading the app Mimi, or visiting, sponsored by Johns Hopkins. A visit to an audiologist (covered by Medicare) is recommended, however, to rule out any physical causes.

Video calling, widely available today, gives you the benefit of seeing the speaker’s facial expressions and lip movements, helping listeners better understand what they’re hearing. On video you can watch the same show or movies together, even adding other parties. You can also virtually “attend” an event that you cannot make it to in-person.

Gratitude has to do with appreciation. Appreciation means to add value to. Things that appreciate tend to grow, just as being grateful for something or someone raises its or their value in our estimation.  Even though, at any given time, countless more things are going right than going wrong in most of our lives, too many of us focus more on what’s going wrong and take for granted what’s going right — our health, our loved ones, our resources.

“Gratitude interventions” is the term used for cultivating the attitude of gratitude in our lives. The father of positive psychology, Martin E. P. Seligman, suggests an exercise called “Three Good Things” whereby at the end of the day you write down three good things that happened to you and why. The “why” is very important.

An app called “Gratitude Plus” allows you to (1) share gratitude with your favorite people (2) easily reflect on the good in your life (3) create groups with friends and family (4) hear from people around the world (5) track progress and understand trends (6) use streaks to build a habit (7) get creative with a variety of prompts, and (8) stay positive with daily affirmations. As to the latter, your writer has found reading daily affirmations to be an invaluable resource for maintaining a positive mindset. The great motivational speaker Zig Ziglar notably said that “People say that motivation doesn’t last.  Neither does bathing – that’s why we recommend it daily”. Daily positive affirmations may be found by googling “daily affirmations” and choosing one of the free services that appeals to you.

When Husband Handled the Finances

While women and men have many issues in common, some of these issues tend to affect women more deeply. For example, in the case of the death or disability of a spouse, it is more often the surviving wife who is unfamiliar with handling the family finances. In the course of planning for such a couple, it is wise to find a financial advisor that the wife can turn to. Ideally, this relationship should be developed over the years while the husband is living, so that there is a seamless transfer of decision-making. Where such a relationship with a financial advisor is absent, one of the financially savvy children may be named as a co-trustee with the surviving wife or, should none of the children be suitable for that role, the attorney as co-trustee may be considered.

 Children from Prior Marriages

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