Trusts and Estates Wills and Probate Tax Saving Strategies Medicaid

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New York law prevents spouses from being disinherited. Instead, a spouse who is disinherited may go to court and claim their “elective share” which is the greater of fifty thousand dollars or one-third of the estate.

Questions often arise as what the “estate” of the deceased spouse consists of. Naturally, any assets in the decedent’s name only and listed in the estate court proceeding apply. Other assets, known as “testamentary substitutes” because they do not pay by will, and is against which the spouse may make their claim are: bank accounts, investment accounts and retirement accounts with named beneficiaries other than the spouse or, similarly, those same asset if they have a joint owner other than the spouse. An exception would be if the other joint owner had made contributions to the joint account and then as to the contributions only.

Gifts made within one year of death are also available for the elective share claim. Oddly enough, life insurance is not considered a testamentary substitute however annuities are.

In the fall of 1990, some thirty plus years ago, your writer first heard of the proposition that if you set up a living trust your estate doesn’t have to go to court to settle – the so-called probate court proceeding for wills. Having spent the previous eleven years as a litigation attorney, and having faced numerous problems probating wills, this sounded too good to be true.

At the time, some of the best estate planning lawyers were in Florida. Perhaps you can guess why. In any event, off I went to Florida to train as an estate planning lawyer and, upon returning, closed the litigation practice and founded Ettinger Law Firm in April 1991, to keep people just like you, dear reader, out of probate court.

The reason I was so excited about the living trust, and continue to be so to this day, is the concept of taking back control from the courts and government and giving it back to you and your family. After all, who doesn’t want control over their affairs?

Published this year, “The Good Life” reports on the Harvard Study of Adult Development, the longest scientific study of happiness ever done. Tracking the lives of hundreds of participants for over 80 years, the report concludes that it is the strength of our relationships with friends, relatives and co-workers that most determine quality of life, health and longevity.

Regarding older adults, the authors note that time is suddenly very precious. Questions arise such as:

  • How much time do I have left?

Home care paid for by New York State is known as “Community Medicaid”. Paying your own living expenses, plus the cost of caregiving services, is beyond the means of many.

Since 2020, there have been numerous attempts to create a new thirty month look-back period for Community Medicaid eligibility. So far, none of these attempts have been successful and now 2024 is the earliest expected date for implementation. There is no current look-back period for Community Medicaid in New York. This means that you may move assets out of your name this month and obtain Medicaid home care benefits next month, provided you need the care.

Currently, an individual may keep about $1,700 per month plus the amount of any health care insurance premiums. Any excess income must be used towards their care. What if your living expenses exceed $1,700 per month? Enter the “pooled income trust”.

Spend-down. Look-back. Penalty Period. Uncompensated Transfer. These are just some of the terms Medicaid uses to determine eligibility for long-term care coverage. Medicaid is a combined federal and state program that pays for long-term care at home (community Medicaid) or in a nursing facility (institutional Medicaid). Asset, income and gift rules vary for community Medicaid versus institutional Medicaid.

To qualify for community Medicaid, an individual cannot make more than about $1,700 per month and cannot own more than about $30,000 in assets. A married couple cannot make more than about $2,300 per month and cannot own more than about $40,000 in assets. Applicants can “spend down” excess income to the allowed amount by paying for medical expenses.

To qualify for institutional Medicaid, an individual can keep $50 per month (the excess goes to the nursing home) and cannot own more than about $30,000 in assets. For married couples, the spouse at home can keep about $3,700 per month and can own between about $75,000 and $130,000 in assets. If the spouse at home makes more than $3,700 per month, she may have to contribute some of the excess to the spouse’s cost of care. For married couples, the residence, up to value of about $1,000,000 and one car are exempt (not counted as assets). Everyone can have a burial trust worth up to $1,500 or any amount in an irrevocable pre-paid funeral trust.

Each one of us experience countless injustices in the course of everyday living. Like other experiences, it is not the experience itself so much that counts, but how you process it. The Mayo Clinic addresses the health benefits of “forgiveness” which they define as “an intentional decision to let go of resentment and anger”. Letting go of grudges and bitterness can lead to:

  • Healthier relationships
  • Improved mental health

Estate planning is not written in stone.  Instead, estate plans should be revised and reconsidered when various major life events occur.

Marriage may or may not involve a prenuptial agreement.  Regardless, it may call for adding your new spouse’s name as beneficiary on insurance policies, on a will or trust, power of attorney, health care proxy and deeds.

Serious illness requires that you give thought to appointing someone to handle your affairs and making sure they have the documents needed to discharge the responsibility. You may want to add a second person to share the load or as a back-up. It is also the time to consider asset protection strategies should long-term care be needed one day, either at home or in a facility. One of the biggest mistakes we see, as elder law attorneys, is that the family becomes so focused on the medical side of things that they fail to focus on the legal side until it is too late.

In his best-selling book, “Successful Aging”, Daniel J. Levitin, Professor Emeritus of Psychology and Neuroscience at McGill University (your writer’s alma mater), shows how the brain is formed and how it changes, in surprisingly positive ways, as we age.

The author notes that Freud said that the two most important things in life are healthy relationships and meaningful work.

Socialization is crucial to maintaining our mental acuity. “Navigating the complex mores and potential pitfalls of dealing with another human being, someone who has their own needs, opinions, and sensitivities, is about the most complex thing we humans can do. It exercises vast neural networks, keeping them tuned up, in shape, and ready to fire. In a good conversation, we listen, we empathize. And empathy is healthful, activating networks throughout the brain.”

In order to contest a will, the objectant must have “standing”, meaning they would legally be entitled to a share or a greater share of the estate if the will was declared invalid. “Standing” alone, however, is insufficient. There must also be grounds for contesting as provided below.

1. Undue Influence: Independent caregivers and caregiver children who end up being named primary beneficiaries under the will are often scrutinized for having prevailed upon the decedent to leave them the lion’s share of the estate. The various means alleged may be physical or mental abuse, threats and isolation of the disabled person. Even non-caregivers who had influence over mom or dad may be challenged where they end up with more than their fair share. As with any court proceedings, proof of the claim will need to be made.

2. Improper Execution: The formalities for executing a will must be strictly observed. The formalities include that the witnesses believed the decedent was of sound mind, memory and understanding. There must be two witnesses who signed in the presence of the testator and of each other. The testator must declare in front of the witnesses that they read the will, understood it, declare that it is their last will and testament and approve of the two witnesses to act as witnesses to the will.

So many people who come in to see us do not understand the estate plan they have or do not know what is in their current plan. Some of the reasons for this are (1) time has inevitably blurred their memories, (2) the plan may be written in legalese and was never properly explained to them, (3) they may have misconceptions and misunderstandings of what their plan is; and (4) their lawyer may have lacked the knowledge required to find the right solution for their family in the event of death and disability. To this we say, “if you don’t understand the plan, you don’t have a plan.”

Ettinger Law Firm developed a process, in use for over thirty years, to avoid these problems. First, we offer a free initial consultation to go over the pros and cons of having a will or a trust and the differences between revocable and irrevocable trusts. So many people have misconceptions about trusts based on what friends have said or what they have read on the internet. For example, many clients are afraid to create an irrevocable trust because they think they will lose control. We explain why that is incorrect and how you can still change the trustee, change who you leave it to, take money out and even how you can revoke an irrevocable trust!

After the overview provided in the initial consultation, we give you a copy of our plain English book, “Elder Law Estate Planning”, and advise which chapters apply to your situation — maybe an hour or so of reading. We also invite you to watch the thirty minute estate planning video at trustlaw.com.

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