Trusts and Estates Wills and Probate Tax Saving Strategies Medicaid

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Proposed work requirements to Medicaid eligibility could result in some family caregivers losing their vital coverage, according to a recent analysis of Kentucky’s reforms by advocacy group Justice in Aging. Medicaid is vital to helping caregivers take care of their own health while caring for a loved one but depending on how states implement work requirements or defines “work,” family caregivers may end up losing their health insurance or face additional hurdles to keep it.

Caregivers are unpaid individuals like  spouses, partner, family members, friends, or neighbors involved in assisting others with activities of daily living and/or medical tasks. The selfless work they do for others in need is vital to the health and wellbeing of the individual and cannot be taken for granted or impeded by barriers that would cause widespread hardship.

According to the National Alliance for Caregiving and AARP, an estimated 43.5 million caregivers have provided unpaid care to an adult or child in the last year and of that number, 34.2 million Americans have provided unpaid care to an adult age 50 or older in the same time period. The majority of caregivers care for one other adult while about one in six care for two-adults. About 15.7 million adult family caregivers care for someone who has Alzheimer’s disease or other dementia.

In 2018 new legal reforms were implemented that will effectively protect estate trusts from retirement benefit plan asset seizure by creditors.

Reform of the Employee Retirement Income Security Act of 1974 (ERISA) in the past year extends protections to estate trusts, and their assets. The latest ERISA rules cover managed retirement plans and welfare benefit plans held by nearly fifty-four percent of retirement benefits, and fifty-nine percent of insurance benefits associated with those plans. With the new reform, trust assets will be at a lesser risk of court ordered attachment by creditors for the collection of a decedent’s outstanding debts due to fiduciary bonding agreements to nondisclosure.   

Prudential Measure, Fiduciary Reform

The country’s largest trade group for health insurance companies is sounding the alarm on proposals from President Trump that would expand the sale of plans that cover fewer services to people who cannot afford some of the current short term plans. America’s Health Insurance Plans (AHIP) claims the proposal would lead to more Americans becoming uninsured or underinsured, resulting in higher healthcare costs in the future.

The rule proposed by the Trump administration would lift restrictions from the previous administration that limited short term health insurance coverage to a maximum of three months and allow individuals to purchase short-term health insurance for up to one year. The administration claims the move would create an alternative for those unable to afford plans compliant with ObamaCare covering a comprehensive list of services.

Opponents of the plan say the rule changes would mean insurance companies could end up charging individuals with pre-existing conditions more for their health care coverage, a major restriction placed on companies under current statutes of the Affordable Care Act (ACA). Instead, members of the AHIP suggest the short term health insurance plans be limited to only six-months of coverage, ensure clear disclosures to consumers about what short term plans do and do not cover, and inform consumers of the potential availability of discounted coverage through the marketplace.

 Beginning Tax Year 2017, the U.S. federal Internal Revenue Service (IRS) will now require some taxation of cryptocurrency that may affect estate planners and executors. As of this tax season, capital gains and losses on property transactions involving cryptocurrency, for example, must now be reported to the IRS (Notice 2014-21). Before the current tax year, the IRS offered exemption for “like kind exchanges” of crypto assets allowing swaps of digital currency for other assets. With IRS rule changes, and latest insights into the fluctuation of cryptocurrency value, make those assets a bit less attractive to investors than in recent years.

Capital Gains, Estate Tax, ICOs  

If market analysts have advocated cryptocurrency as an estate asset in the past several years, the rule reform will impact investors seeking tax-exemption from Bitcoin, Ethereum and Litecoin earnings. Once considered property rather than fiat currency by the IRS, the rules of have changed. The rules now also distinguish between the tax-exempt proceeds of equity funded trades, and cryptocurrency Initial coin offerings (ICOs), requiring that proceeds from the latter be treated as taxable income. In the short-term, it is likely that investors, including those responsible for estate trusts, will continue to invest in tax-exempt ICOs offered by off-shore banking institutions.   

For 55-years, Older Americans Month has been observed to recognize older Americans and their contributions to our communities. Led by the Administration for Community Living’s Administration on Aging, every May offers opportunity to hear from, support, and celebrate our nation’s elders. Ways to show your support for Older Americans Month include taking selfies and group shots while participating in activities that improve your mental and physical well-being then posting the image to social media using the hashtag #OAM18.

The 2018 theme for Older Americans Month is “Engage at Any Age” and emphasizes that that you are never too old (or young) to take part in activities that can enrich your physical, mental, and emotional well-being and celebrates the many ways in which older adults make a difference in our communities. Older Americans can get involved in the celebration by participating in activities promoting mental and physical wellness and offering their wisdom and experience to the next generation.

President Kennedy first declared May to be Senior Citizens Month in 1963 as a way to honor citizens 65-years and older and since then, every president has proclaimed May to be a month to show support for older Americans.  In 1980, President Jimmy Carter changed the name to Older Americans Month and as a show of support, the National Academy of Elder Law Attorneys declares the month of May to be National Elder Law Month.

In New York, a court will decide if spousal maintenance (“alimony”) should be extended to a former spouse’s estate. Marital property part of a decedent’s estate is only considered an asset of the former spouse if no other heir or beneficiary is designated in a written will. Division of marital property and major assets are a considerable decision in the distribution of resources during a divorce proceeding. Court award of finance and other property assets during a divorce is the result of judicial review. A range of factors are considered before a court issues an order for spousal maintenance. Rules to Special controlling conditions to division of property and spousal maintenance stipulated in New York Consolidated Statutes, Art. 13 §236. The same rule applies to award of estate assets.

New York Estate Laws and Marital Property

The adoption of the Uniform Disposition of Community Property Rights at Death Act of 1971 in New York legislation, recognizes community property rules to addressing equitable distribution at time of one ex-spouses death  (Estates, Powers and Trusts Laws §§6-6.1, et seq.). The Act preserves community property ownership rights of spouses that have moved from a community property state to New York, a non-community property state.

Partnerships, or “limited partnerships” LP, established with individual member capital contributions of money and property in the interest of forming a business are potentially asset that can be a substantial factor in estate planning. The transfer of business and personal capital to legacy capital establishes a trust for grandchildren or other beneficiaries who will benefit from a decedent’s wealth long-term. One of the main challenges is protecting those former business assets from taxation.

“Pass-through” Partnership Tax Rules  

The legal treatment of a LP is one of discretionary liability where partners are concerned. This bodes well for estate planning, as there is little worry of another general partner influencing the actions of an estate. All U.S. states have adopted the Revised Uniform Partnership Act (RUPA) so that all laws are consistent with federal rules to partnership. Partnerships (IRC §761) comprised of two or more members are not considered taxable entities as result.

State regulators recently took control over dozens of nursing homes owned and operated by a New Jersey-based company that is responsible for over 100 facilities in eight states across the country, including three in New Jersey. In addition to operating homes in the Garden State, Skyline Health Care, LLC, owned by Joseph Schwartz, is the parent company for nursing homes and other facilities in Arkansas, South Dakota, Tennessee, Pennsylvania, Massachusetts, Nebraska, Kansas, and Florida.

According to reports, the company has failed to make its payroll in both Nebraska and Kansas, prompting state health department officials to take receivership of a combined 36 nursing homes, adult day cares, and assisted living facilities serving thousands of patients in those states. New Jersey Health Department officials acknowledged they are aware of the issues with Skyline Health Care facilities in Nebraska but has not received any reports of problems in New Jersey.

Nebraska health authorities placed 21-nursing homes and 10-assisted living facilities owned by Skyline in receivership in late March after determining that Skyline became unable to pay staff and ensure the future care of residents. Around the same time, Kansas state courts authorized a temporary receivership and are seeking a permanent one for 15-skilled nursing facilities with 845 patients, making it the largest takeover ever by that state’s Department for Aging and Disability Services.

When a person dies without a will in New York, probate rules to intestate succession guide the distribution of asset to relative survivors. New York rules of intestate succession provide that the closest living family member surviving the deceased is entitled to transfer of assets from an estate. The law of intestate succession limits asset transfer to property that would customarily be assigned to beneficiaries by an estate during probate. This default provision allows for persons identified as family members such as spouses, followed by children, parents, and siblings to be justly enriched should no beneficiaries be named in a will.  

What is the Law of Intestacy?

In New York, the Law of Intestacy states that asset transfer from “the Decedent’s estate when there is no will” is accorded to “distributees” who are or surviving relatives. When surviving relatives include a spouse and children, New York Consolidated Laws, Estates, Powers, and Trusts Law mandates “the spouse inherits the first $50,000 plus half of the balance,” and “the children* inherit everything else” (EPTL § 4-1.1). If parents exist and no spouse or children, the parents retain 100% of the estate. Where siblings survive the deceased, and there are no spouse, children, or parents, probate law allocates the entire estate to the former.

Probate law demands that an executor must pay the debts and other financial obligations of an estate prior to distribution of assets to a Decedent’s beneficiaries. Although heirs and beneficiaries are not legally responsible for paying off estate debt, the total value of the estate can be greatly reduced as result of debt obligations.

Priority debt obligations.

Living trusts have little protection from creditors while a Decedent is alive. Revocable trusts enable an executor to coordinate debt payments in advance. Claims made against irrevocable trusts can also provide a creditor access to additional funds during the probate process after a Decedent has died. Insolvent estates without adequate liquidity to pay debts and obligations may still be subject to debt obligations after court filing fees, attorney’s fees, and executor costs to administer the estate have been paid. Other priority debt obligations include funeral and burial costs; federal and state taxes; medical bills; child support claims; dependent family support claims; judgments; followed by all other debt.

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