Authors Posts by Nancy Burner Esq., CELA

Nancy Burner Esq., CELA

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By Nancy Burner, Esq.

Nancy Burner, Esq.

The Tax Cuts and Jobs Act (the Act) increased the federal estate tax exclusion amount for decedents dying in years 2018 to 2025. The Act is set to sunset on Dec. 31, 2025. 

The exclusion amount for 2020 is $11.58 million. This means that an individual can leave $11.58 million and a married couple can leave $23.16 million dollars to their heirs or beneficiaries without paying any federal estate tax. This also means that an individual or married couple can gift this same amount during their lifetime and not incur a federal gift tax. The rate for the federal estate and gift tax remains at 40 percent.

There was concern that the sunset of the higher exclusion amount and reversion to the lower amount could, retroactively deny taxpayers who die after 2025 the full benefit of the higher exclusion amount applied to 2018-25 gifts. This scenario has sometimes been called a “claw back” of the applicable exclusion amount. In November, the IRS issued new regulations that make clear that gifts made within the time period of the increased exemption amount used before death will not be “clawed back” into the decedent’s estate and subject to estate tax.

There are no 2020 changes to the rules regarding step-up basis at death. That means that when you die, your heirs’ cost basis in the assets you leave them are reset to the value at your date of death. 

The portability election, which allows a surviving spouse to use his or her deceased spouse’s unused federal estate and gift tax exemption, is unchanged for 2020. This means a married couple can use the full $23.16 million exemption before any federal estate tax would be owed. To make a portability election, a federal estate tax return must be timely filed by the executor of the deceased spouse’s estate. 

For 2020 the annual gift tax exclusion remains at $15,000. This means that an individual can give away $15,000 to any person in a calendar year ($30,000 for a married couple) without having to file a federal gift tax return. 

Despite the large federal estate tax exclusion amount, New York State’s estate tax exemption for 2020 is $5.85 million. This is a slight increase for inflation from the 2019 exemption of $5.74 million. New York State still does not recognize portability.  New York still has the “cliff,” meaning that if the estate is valued at more than 105 percent of the exemption amount ($6,142,500 in 2020) then the estate loses the benefit of the exemption and pays tax on the entire estate. 

New York reinstated its short-lived elimination of the three-year lookback on gifts effective Jan. 15, 2019. However, a gift is not includable if it was made by a resident or nonresident and the gift consists of real or tangible property located outside of New York; while the decedent was a nonresident; before April 1, 2014; between Jan.1, 2019 and Jan. 15, 2019; or by a decedent whose date of death was on or after Jan. 1, 2026.

Most taxpayers will never pay a federal or New York State estate tax. However, there are many reasons to engage in estate planning. Those reasons include long-term care planning, tax basis planning and planning to protect your beneficiaries once they inherit the wealth. In addition, since New York State has a separate estate tax regime with a significantly lower exclusion than that of the federal regime, it is still critical to do estate tax planning if you and/or your spouse have an estate that is potentially taxable under New York State law. 

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. 

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Married couples often share everything. They can have joint assets including real estate, checking and savings accounts and brokerage accounts. However, there are assets that cannot be held in joint names. 

While a retirement account or life insurance policy can name the spouse as beneficiary, the owner is usually just one person. Therefore, if the nonowner spouse needs to contact the institution that holds the policy or account on behalf of their spouse, they will run into a roadblock if they do not have any legal authorization to do so. The mere fact that you are a spouse does not give you access to this information. 

It is for these types of assets that one spouse will need a power of attorney for another. This document states exactly what powers one person, the “principal,” is allowing another, the “agent,” to have over their affairs. If the power is not specifically included in the document, the agent cannot act on it. If the spouse is named as agent, it is often advisable to name a second and/or third person to act as successor agent if your spouse is unable to act. 

Beyond accessing certain assets, the power of attorney document can allow the agent to step into the shoes of the principal and act on his behalf in other instances. If the powers are properly granted, the agent can create and fund a trust for the principal, sign contracts, access safe deposit boxes, give charitable gifts, engage in Medicaid planning and so on.  

While signing a power of attorney in the presence of a lawyer is not a requirement, it is a good idea. The power of attorney document gives the option of attaching a contemporaneously signed statutory gifts rider. The document itself says that the preparation of the rider should be supervised by an attorney. In the rider, the principal is giving the agent authority to transfer assets out of the principal’s name. Any such transfers must be in the best interest of the principal.

The power of attorney is a complicated document that can have an extreme impact on your life as it is giving another person the ability to access your accounts and confidential information. This is an important document to have in the toolbox as one ages but only if you understand and feel comfortable with the powers being granted. For this reason, it is advisable to seek the counsel of an experienced elder law or estate planning attorney to explore the different scenarios in which your spouse may need to have power of attorney over your affairs.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

If you are the beneficiary of an estate or trust and you think that the fiduciary or person in charge is not meeting their obligations, there are procedures in which they can be removed. Surrogate’s Court Procedure Act SCPA §719 lists several grounds upon which a fiduciary can be removed. The grounds are straightforward and include when the fiduciary refused to obey a court order, the fiduciary is a convicted felon, the fiduciary declared an incapacitated person or the fiduciary deposits assets in an account other than as fiduciary of the estate or trust. 

However, many situations are not as straightforward as the grounds listed in SCPA §719. While you may be working with a fiduciary that does not act in the manner that you wish, oftentimes, the conduct does not rise to the standard that would warrant their removal. 

 Courts have held that the removal of a fiduciary pursuant to SCPA §719 is equivalent to a judicial nullification of the testator’s choice and can only be done when the grounds set forth in the statutes have been clearly established. The court may remove a fiduciary without a hearing only when the misconduct is established by undisputed facts or concessions, when the fiduciary’s in-court conduct causes such facts to be within the court’s knowledge or when facts warranting amendment of letters are presented to the court during a related evidentiary proceeding. 

Pursuant to SCPA §711 a person interested may petition the court to remove the fiduciary. Some of the grounds listed in the statute include: the fiduciary wasted or improvidently managed property; the fiduciary willfully refused or without good cause neglected to obey any lawful direction of the court; or the fiduciary does not possess the necessary qualifications by reason of substance abuse, dishonesty, improvidence, want of understanding or who is otherwise unfit for the execution of the office. Again, while there are many cases where fiduciaries have behaved badly, courts are generally hesitant to remove fiduciaries unless the assets of the estate/trust are put at risk. 

Even though you may be unhappy with the conduct of a fiduciary, not every breach of duty will result in the removal of the fiduciary. Many breaches can be addressed in an accounting proceeding either through surcharge or denial of commissions. While a fiduciary can be removed if conduct that violates SCPA §711 or §719 can be proven, it is often a lengthy and expensive process that involves the exercise of discretion by a court that is hesitant to remove a fiduciary chosen by the testator. 

A proceeding to remove a fiduciary should only be undertaken if it can be proven that the assets of the estate/trust are in danger under the fiduciary’s control. Mere speculation or distrust will not be enough to remove a fiduciary. If you believe that the fiduciary of an estate or trust is not managing the estate or trust properly, you should consult with an attorney experienced in estate administration matters that can review the facts and determine the best course of action. 

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. 

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Nancy Burner, Esq.

By Nancy Burner, Esq.

Losing a spouse is an extremely difficult time in life and handling the administration of their estate can be a stressful experience. When you are ready, it is important to seek the advice of an estate planning and elder law attorney to discuss what needs to be done on behalf of your spouse’s estate and also what planning you need to do for your own estate.

Your attorney will want to review all assets held by your spouse, whether individually or jointly with you, and all assets in your name. It is also important to review any previous estate planning documents you may have in place, such as last will and testaments, trusts, powers of attorney and health care directives. A thorough review of the assets and estate planning documents will help your attorney advise you on what additional planning, if any, needs to be done.

If your spouse was the owner of an IRA or other tax deferred retirement account, you are likely named as the primary beneficiary on the account. You will want to ensure that you roll over this account into an IRA account in your name. It will also be necessary for you to put your sole name on any accounts that are held jointly with you and your spouse or that name you as transfer on death beneficiary.

Furthermore, it is important you update the beneficiaries under these accounts where appropriate, especially if your spouse was previously listed as your primary beneficiary. 

You will need to go through a court process to gain control of assets held in your spouse’s sole name without a beneficiary.  The court proceeding is called “probate” if your spouse had a last will and testament or “administration” if your spouse died without a last will and testament. New York State law provides a scheme for the distribution of assets in the case of a person that did not execute a last will and testament.

If your spouse had children, you and the children will share in the assets of the administration estate. There are also certain rights that a surviving spouse has to assets of the estate about which your attorney can advise you.

Lastly, a review of your current estate planning documents will help determine if updates to your plan are required. For example, you will likely need to change your agents listed under your power of attorney and health care proxy if each document listed your spouse as agent.

Additional changes to your will and/or trust may be required if there are changes to the tax law, your family structure or personal health status, such as a need for long-term care.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

When planning for the differently abled, the use of supplemental needs trusts as part of your estate planning will ensure that you have provided protections for those with special needs and disabilities.

When considering your estate planning, it is important to consider any beneficiaries who may have special needs or disabilities. Receiving an outright inheritance could negatively affect these individuals, as oftentimes they are entitled to, and receive, need-based government benefits such as SSI, Medicaid and Group Housing, to name a few, which either supplement or fully cover the living and medical expenses of the individual.

Safeguarding these benefits by using supplemental needs trusts rather than an outright distribution can ensure that you can leave funds to a loved one who has special needs without the risk of interfering with their government benefits.

Supplemental needs trusts can be established as “first-party” or “third-party trusts.” This article highlights third-party supplemental needs trusts which are, simply stated, trusts funded with the assets of a third-party, anyone other than the differently abled individual.

To understand the difference, first-party trusts are funded with the assets or income of the differently abled person and are often used to safeguard benefits after the individual receives an inheritance or some other windfall. First-party supplemental needs trusts are also often used to protect money that was in the name of the individual at the onset of a disability. 

First-party supplemental needs trusts are available to persons under the age of 65, and thanks to recent legislation, can be created by the individual him or herself, a parent, guardian or through the court. Although a terrific planning tool, when possible it is preferable to address these planning needs ahead of time to ensure no interruption of benefits and a maximum preservation of assets. 

The first-party trust requires a payback provision which dictates that any monies that remain in the trust at the time of the individual’s death must be paid to the state in an amount equal to the medical assistance paid on behalf of the individual. 

Third-party supplemental needs trusts can either stand alone or be incorporated into your estate planning. These trusts can be created by anyone for the benefit of the disabled individual. They can be funded upon creation or can be prepared with the idea of funding at the time of the death of the creator.

The assets in the trust can be used to provide the individual with comforts they would otherwise not be able to afford. Because these trusts are set up with the fund of a third party, unlike the first-party supplemental needs trusts, they do not have a payback provision.

Upon the death of the original beneficiary of the trust, whatever assets remain in the trust can be distributed in accordance with the grantor’s wishes. By leaving assets in a supplemental needs trust, you would be able to provide for your loved one and ensure the continuation of imperative benefit on which he or she relies.

It is important to note that funds between a first-party trust and a third-party trust should never be co-mingled. Specifically, if monies which originated with the disabled individual go into a third-party trust, the protections afforded to third-party trusts (i.e., no payback provision) may extinguish and a payback could be required. 

Overall, supplemental needs trusts are invaluable for planning for those differently abled. The trusts can enhance the quality of life for the person and supplement the benefits he or she is already receiving.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Commonly, clients will create a trust to protect certain assets in case they need to apply for government benefits as they get older and require assistance with their daily activities. While certain provisions of this type of trust will be consistent from client to client, not all trusts are the same. Understanding your trust is the first step to successfully achieving your estate planning goals. 

The drafting process of the trust document is vital because it outlines the rules of the trust. Without understanding these rules, the creator of the trust or the trustee may be in jeopardy of making the trust assets available when they are assessed for Medicaid eligibility.  

The irrevocable trust for Medicaid purposes will state who the creator of the trust is and who is appointed by that person to serve as trustee of the trust. The document should also include a provision stating that the creator of the trust will not have access to any trust principal. 

Beyond that, multiple decisions need to be made by the client, in consultation with their attorney. These decisions will include whether or not the creator will have access to income generated from the trust, who will be able to remove a trustee or appoint a successor trustee, if the creator can change the beneficiaries of the trust and other critical points for the operations of the trust during the creator’s lifetime and after death.  

Part of the rules of the trust will include the distribution at the death of the creator. The trust says who will receive the assets at that time and how they will receive those assets. The distributions may be outright or in a further trust to protect the beneficiary from creditors or from losing government benefits they are receiving.  

If there is real property owned by the trust, the document could also direct who may live there before and after death, who is responsible for the costs associated with the property and whether it should be sold upon the death of the creator.  

Once the document is signed by the creator and the trustee(s), the next important step is to fund the trust. This means changing the ownership or title of certain assets to the name of the trust. It will make sense for a financial adviser and accountant, if you have either, to be aware of your trust and which assets you have placed into it. These advisers can work with you and your attorney to determine which assets to transfer into the trust and which to keep in your individual name. 

Trusts are often funded with real property, bank accounts, investment accounts and savings bonds. All assets that are transferred into the trust are then managed by the named trustee. This trustee can sell the assets in the trust, collect rents or any other income and reinvest the assets in alternative ways. The precise powers that the trustee holds are dictated by the trust document.  

A trust is a live entity that owns property and assets. It should be reviewed regularly, at least every five years, to make sure the trust rules are being followed and the trust continues to achieve your estate planning goals. Your trusted estate planning and elder law adviser should review these documents with you.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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By Nancy Burner, Esq.

In New York State, any individual over the age of 18 may designate an individual to make medical decisions on his/her behalf by signing a health care proxy and designating a health care agent.  

The health care agent is only authorized to act if your doctors determine you can no longer make your own medical decisions. By signing this document and designating an agent, you avoid any confusion or issues when it comes time for your family to make a medical decision on your behalf as your family and the doctors already know who you want to make those decisions. 

A valid health care proxy will allow your health care agent to make medical decisions for you if you cannot with any health care professional, not only decisions while you are in a hospital or nursing home.   

Additionally, when signing a health care proxy, it is also very important to sign a second document, called a living will, which states your preferences as they relate to life-sustaining treatment (medical treatments/procedures that, if not provided, will result in the patient’s death). Examples of life-sustaining treatments include cardiac pulmonary resuscitation (CPR), a feeding tube and ventilator.    

A living will is important because, although your health care agent can make most medical decisions on your behalf, a health care agent must know your wishes as they relate to life-sustaining treatment in order to make those specific decisions on your behalf. A correctly executed living will is “proof positive” of your wishes as they relate to life-sustaining treatment and cannot be questioned by other family members who may disagree. 

If you do not have a health care proxy and are admitted to a hospital or nursing home, the Family Health Care Decisions Act enacted by New York State will determine who can make medical decisions on your behalf. This act provides a hierarchical list of people who may make your medical decisions if your doctors determine that you lack the capacity to make your own medical decisions.   

The list is: court-appointed guardian, spouse/domestic partner, a child who is over 18 years old, a parent, a sibling or a close friend. The issue many people may encounter is that most people have more than one child who can act as the person who will make their health care decisions. In this situation, the doctors would have to specify one of the children to make the decisions, which can cause tension and disagreement among the children. Further, the Family Health Care Decisions Act is only applicable to decisions while a patient is in the hospital or a nursing home. Once a patient is discharged, the person designated to make the medical decisions no longer has authority to do so.  

In order to be certain the person you want is empowered to make your medical decisions, a health care proxy is the preferable option. It is also wise to sign a living will so your health care agent knows your specific wishes as they relate to life-sustaining treatment. It is best to consult with an estate planning attorney who can advise you on all your options and ensure your documents are valid.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. 

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By Nancy Burner, Esq.

Nancy Burner, Esq.

We live in a modern world where blended families are becoming more and more common.  

A blended family is one made up of two spouses where at least one spouse has children from a previous marriage or relationship. Blended families can also include two spouses, their children and grandchildren from multiple relationships. Because of the complexity involved in a blended family, proper estate planning is essential to ensure a client’s goals are met.

Spouses used to create what we refer to as the “sweetheart will,” which distributes assets from the first deceased spouse to the surviving spouse, and then to their children upon the death of the surviving spouse. A sweetheart will does not adequately provide for individuals who have been married multiple times and have children from previous relationships for whom they want to provide.  

For example, Joe and Molly get married and have three children together. Molly dies and Joe gets remarried to Cindy. Cindy has two children from a prior relationship. If Joe and Cindy were to create sweetheart wills, upon the death of the first spouse, assets would be transferred to the second spouse, and upon his or her death, assets will only go to the children of the second spouse.  

If Joe were to be the first to die, his children would effectively be disinherited. Joe and Cindy may instead want to provide for all five children in both of their wills, or in the alternative, ensure that each spouse’s assets go to their children from their prior relationship.  

To make matters even more complicated, under New York State law, a surviving spouse has an automatic right to take a one-third share of their deceased spouse’s estate. This is something to consider when deciding what type of plan to have and for whom you want to provide. Additional considerations should be given to the likelihood of an estate plan being contested, since members from different families may be involved and may not be happy with the new relationship.  

As elder law attorneys, we are always thinking ahead and how to protect assets down the road from Medicaid. If there is a good chance a spouse will need long-term care in the near future, we will want to protect any funds that may affect eligibility. Therefore, a transfer of all assets to a surviving spouse may not be the appropriate plan under these certain circumstances. 

Beyond the blended family, similar issues may arise in nontraditional family situations, such as partners who decide not to get married; spouses with no children, but instead have close friends for whom they want to provide; and those who have a desire to leave assets to pets, charities or the like.

A family can come in all different shapes and sizes. It is therefore important to meet with an estate planning and elder law attorney to discuss your specific goals and come up with a creative way to accomplish the best estate plan for you.   

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

By Nancy Burner, Esq.

Nancy Burner, Esq.

The best way to manage your own affairs while you are alive and to provide properly for your beneficiaries at your death is to have an estate plan. There is a distinction between having a “plan” and having documents. The close attention to detail, knowledge of the law and past experiences of the attorney you are dealing with should help you create the plan that fits your own circumstances.

The first step of the process is to gather a comprehensive list of your assets. Since everything in the plan is different depending on the personal circumstances, it is important for the attorney advising you to know what type of assets you have and in what quantity. An individual with a home worth $400,000 may require a very different plan than an individual with the same amount of assets that are held in cash or retirement accounts. 

Once you have your list of assets together, you can review it with the attorney and discuss the goals of the representation. For many clients, the primary goal is to make sure they are taken care of during their own lifetime with the maximum amount of control over their assets without concern for what happens upon their death, while others may have concern for those they wish to benefit at their death.  

Take the single mother with a disabled child; while she is concerned about her own well-being, she would likely consider the well-being of her child to be equally as important. By contrast, a single person with no children will have different concerns and, therefore, a different estate plan. 

Discussing your goals with an attorney is the greatest value the attorney can provide. Estate planning attorneys are more than just document drafters. They are advisers. With your attorney, you should be running through the different scenarios that may occur at the time of your death and making sure that you are satisfied with the outcome of each based on the plan you decide to create. 

The estate planning attorney can flag for you other issues that may be of concern. Depending on your age, income and assets, it may be prudent to discuss long-term care insurance or asset protection planning for Medicaid purposes. You can discuss whether or not your beneficiaries will need a trust for any reason, including creditor protection, protection of government benefits or protection from themselves if they overspend and undersave. 

After you have discussed your assets and goals with the attorney, they can recommend options for you. Often, there is more than one option available. A description of the pros and cons of each plan and the cost to you should help you determine what is best in your circumstance. This is the point at which the documents can be created in draft form. If you are satisfied with the documents as written, they will then be signed with the attorney. Each document will have its own signing requirements for validity that will include the presence of witnesses and/or a notary public.  

If you have never created an estate plan or have not reviewed it in the last five years, you should reach out to an attorney to start the process.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

By Nancy Burner, Esq.

Nancy Burner, Esq.

For many clients the idea of creating and funding an irrevocable trust with an end goal of protecting assets should the need for long-term care arise raises questions and concerns about the potential tax implications.

Specifically, questions surrounding taxation of the assets that are transferred to the trust and concerns about losing property tax exemptions such as STAR and Enhanced STAR are common in our practice.

Although there is some truth to the idea that there could be negative higher taxation when income is earned on assets held in a trust, the grantor trust rules of the Internal Revenue Code provide that where a trust is created as a grantor trust, following the rules set forth under the IRC Sections 671 through 678, the income earned and assets held within will be treated for tax purposes as if they are still owned by the grantor. As a result, any income earned by the trust will be taxed at the (presumably) lower rate of the grantor and all tax abatements can be retained as the grantor will typically retain beneficial ownership of the property.

Although grantor trusts are subject to the same general rule for tax reporting as other trusts, specifically trusts with gross income that exceeds $600 are required to report, the method of reporting is far less complicated than you may expect. The trust may file a form 1041, U.S. Income Tax for Estates and Trusts form. In this case we refer to the 1041 as an “information only” return, listing the name of the trust, the tax identification number and the address used for notices on the trust.

By doing this the IRS is placed on notice that the trust exists, and that all income and any other relevant information will be reported on the grantor’s personal return. This provides that the grantor will be treated as the owner of the assets held in the trust; and, accordingly, all income earned from the trust is reportable on the grantor’s personal tax return. Although there are alternate reporting methods available, we have found this method to be the most convenient for most of our clients.

With respect to the transfer of real property to an irrevocable grantor trust, because the grantor is considered the beneficial owner of the trust all tax benefits that flow to individual owners of real property will continue on uninterrupted. Where the homeowner benefits from tax reductions through the STAR or Enhanced STAR program, veteran’s benefits or any other tax rebate, transfers into a properly drafted irrevocable grantor trust will allow those benefits to continue.

Finally, because the assets are still considered part of the grantor’s estate for tax purposes, upon the death of the grantor, the beneficiaries will benefit from a full step-up in basis on the value of the home or any other appreciated asset, eliminating any concerns about capital gains implications.   

By creating and funding an irrevocable grantor trust, the grantor is able to protect assets if the need for long-term care arises while preserving grantor tax status and tax advantages and exemptions.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.