Trusts and Estates Wills and Probate Tax Saving Strategies Medicaid

Schedule an in-office, Zoom or phone consultation Here.

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 hearingnumber.org, 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

Gifting to minors raises some unique considerations. For one, people under the age of eighteen lack the legal capacity to own assets.  The Uniform Transfer to Minors Act (UTMA) was created to protect assets that are passed on to minors.  This act determines when minors can receive an inheritance for assets passed to the control of a custodian.

The primary advantage of an UTMA account is that funds passed into it are exempt from paying a gift tax of up to $17,000 a year for 2023.  This gift may be in the form of money, bonds or stocks.  Any money earned on contributed funds is taxed at the minor’s rate.  Given that a minor’s income is almost always lower than an older donor’s rate, this often results in income tax savings.  One disadvantage to using an UTMA account is that it can make a recipient less eligible for needs based scholarship opportunities.

Whereas an UTMA account must pay out any unused balance to the minor at age 21, inheritances that involve substantial assets should be left to a trust instead which may extend the distribution to any age or “stagger” the distribution in a series of payments, or percentages, at stated ages.

  1. Trusts can shield your assets from the high cost of home care making you eligible for home health aides through the Medicaid program.
  2. Trusts start the five year “look-back” for institutional care, making you eligible for Medicaid benefits to pay for a nursing home.
  3. Trusts can ensure the inheritances you leave will stay in the bloodline for your grandchildren and not end up with in-laws and their families.

Two overriding questions govern your choices in an elder law estate plan. First, what will happen to your assets when you pass away? Second, what will happen to your assets if you need long-term care? A comprehensive plan covers both issues. You must protect assets from going to long-term care costs so that the assets may transfer to your beneficiaries instead.

Plan A, and the best protection from long-term care costs, is long-term care insurance. Factors to consider include the daily benefit amount and an inflation rider that keeps pace with the increasing cost of nursing homes. Long-term care insurance also pays for home health aides, which allows you to “age in place,” rather than go to a facility.

If you don’t have, or cannot get, long-term care insurance, Plan B is the Medicaid Asset Protection Trust (MAPT).  Assets that have been in the MAPT for a minimum of five years are protected from nursing home costs and, under upcoming laws, two and a half years for home care.

Planning for, and then executing, inheritances is often fraught with emotion.

Most families choose to leave the inheritance “to my children in equal shares, per stirpes.”  Per stirpes is Latin meaning “by the roots” so that if a child dies before the parent, their share goes to their children (if any) in equal shares.  If there are no children, then generally the inheritance is disregarded and their share goes to their surviving siblings in equal shares.

What about gifts to grandchildren?  Let’s say one child has five children and the other has two children — seven grandchildren altogether. When a significant gift is given to grandchildren equally, it is not uncommon for the child with two children to say “well it was my brother’s choice to have five children, why do I have to pay for it?”  Good estate planning also looks at inheritances from the heirs’ point of view as well.

An Aging Life Care Manager (ALCM) is a health and human services specialist who acts as a guide and advocate for families who are caring for older relatives or disabled adults.  The expertise of ALCM’s can be summarized into these knowledge areas.

Health and Disability.  From physical problems to mental health and dementia-related problems, ALCM’s interact with the health care system by attending doctor appointments and facilitating communication between doctor, client and family.  They help determine types of services – such as home health and hospice – that are right for a client and assist in engaging and monitoring those services.

Financial. Reviewing or overseeing bill paying or consulting with a client’s accountant or agent under a power of attorney.  ALCM’s provide information on Federal and state entitlements, connecting families to local programs when appropriate. They also help clients and families with insurance concerns, claims and applications.

Revocable living trusts, where the grantor (creator) and the trustee (manager) are the same person, use the grantor’s social security number and are not required to file an income tax return. All income and capital gains taxes are reported on the individual’s Form 1040.

Irrevocable living trusts come in two main varieties, “grantor” and “non-grantor” trusts. Non-grantor trusts are often used by the wealthy to give assets away during their lifetime and for all income and capital gains taxes to be paid either by the trust or the trust beneficiary but not by them. Gifts to non-grantor trusts are reported to the IRS but are rarely taxable. Currently, the annual exclusion is $17,000 per person per year to as many people as you wish. However, if you go over the $17,000 to any one person you must report the gift to Uncle Sam, but they merely subtract the excess gift from the $12,920,000 each person is allowed to give at death. Most of our clients are “comfortably under” as we like to say. These gifts then grow estate tax-free to the recipient.

Grantor trusts, such as the Medicaid Asset Protection Trust (MAPT), are designed to get the assets out of your name for Medicaid purposes but keep them in your name for tax purposes. You continue to receive income from the MAPT and pay income tax the same as before. The MAPT files an “informational return” (Form 1041) telling the IRS that all the income is passing through to you.  Gifts to non-grantor trusts take the grantor’s “basis” for calculating capital gains taxes on sale, i.e. what the grantor originally paid and, if real estate, plus any capital improvements.

Contact Information