New York Estate Planning & Elder Law Blog

Taxation of Trusts

Published on: July 13, 2023 | by Ettinger Law Firm

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.

You Cannot Disinherit Your Spouse

Published on: July 7, 2023 | by Ettinger Law Firm

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.

Taking Back Control with a Living Trust

Published on: June 29, 2023 | by Ettinger Law Firm

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?

Book Review: “The Good Life”, by Robert Waldinger, MD and Marc Schulz, PhD

Published on: June 20, 2023 | by Ettinger Law Firm

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 with Community Medicaid

Published on: June 8, 2023 | by Ettinger Law Firm

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”.

Qualifying for Medicaid to Pay for Long-Term Care

Published on: June 1, 2023 | by Ettinger Law Firm

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.

Health Benefits of Forgiveness

Published on: May 26, 2023 | by Ettinger Law Firm

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

Reasons to Revise Your Estate Plan

Published on: May 19, 2023 | by Ettinger Law Firm

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.

Book Review: “Successful Aging” by Daniel J. Levitin

Published on: May 2, 2023 | by Ettinger Law Firm

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.”

Contesting a Will

Published on: April 26, 2023 | by Ettinger Law Firm

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.