Finance & Law

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.

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By Linda Toga Esq.

Linda Toga, Esq.

THE FACTS: Last year my aunt Sue died without a will. She was widowed and owned a house that had been in our family for generations. The understanding was that when she died, the next generation, including me and my siblings, would inherit the house. Recently, my aunt’s daughter, Mary, signed a deed transferring the house to herself and her only sibling, Jane. 

THE QUESTION: Did Mary have the legal authority to transfer the property? 

THE ANSWER: Unfortunately for you, as Sue’s daughter and a distributee of Sue’s estate, Mary was well within her rights to transfer the property. If Sue had a will in which she left you and your siblings a share of the house, Mary would not have been able to transfer the property to herself and Jane. She would have first been required to obtain letters testamentary from the Surrogate’s Court (assuming she was named as executrix in the will) and she would then have to abide by the terms of the will by transferring the house to the beneficiaries named in the will. 

However, since Sue died without a will, by law title to the house automatically vested in her children when she died. In other words, as Sue’s only children, Mary and Jane immediately became the legal owners of the house when Sue died. The law that addresses vesting does not apply to you or your siblings because you are not in Sue’s direct bloodline. If Sue did not have any children, the outcome may have been different.  

If Sue wanted you and your siblings to have a share of the family home, she should have had an estate planning attorney prepare a will for her in which her wishes with respect to the property were memorialized. The executor of the estate would then be obligated to carry out Sue’s wishes and transfer the property to you, your sibling and any other beneficiaries set forth in the will. Absent a will, you have no claim to the house. 

Linda M. Toga provides legal services in the areas of estate planning/elder law, probate and estate administration, real estate, small business service and litigation 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.

Most insurance companies allow a third party to automatically receive notification if a premium is not paid. Stock photo

By Linda M. Toga, Esq.

Linda Toga, Esq.

THE FACTS: My father purchased long-term care (LTC) insurance decades ago. Since he had been widowed at a relatively early age, he felt it was important that he have coverage in the event he ever needed skilled nursing care or in-home care.

Recently it has become obvious that my father’s ability to handle his affairs is somewhat impaired. In addition, his health is failing and I believe he needs help with activities of daily living.

Since I am not in a position to assist my father on a daily basis, I decided that the time had come to file a claim for benefits under my father’s LTC policy to cover the cost of his care. When I filed a claim, I was shocked to learn that my father’s policy had lapsed two years ago based upon failure to pay the premium.

THE QUESTION: What are our options with respect to coverage for my father’s LTC insurance?

THE ANSWER: Unfortunately you don’t have any options when it comes to your father’s LTC insurance. When a payment is missed on such policies, companies sometimes give the insured a grace period during which the policy can be reinstated if payment is received. However, if your father failed to pay premiums for two years, I seriously doubt that reinstatement is an option.

Although it is too late to address the non-payment of the LTC insurance premium, you and your father should go through all of the paperwork relating to other insurance he may have, as well as accounts, contracts and recurring obligations, to be sure he has not missed any payments or failed to take whatever action may be needed to avoid penalties.

Most insurance companies allow customers to name a third party who will automatically receive notification if a premium is not paid. If your father had designated you as the person to receive notification of any nonpayment, you could have taken the necessary steps to pay the premium in a timely manner and his LTC policy would not have lapsed. Like insurance carriers, utility companies generally offer customers the option to name a third party to receive important notices regarding nonpayment. Your father should take advantage of these arrangements.

If he has recurring bills that need to be paid and is not able to designate a third party to receive late notices, he may want to consider arranging with his bank to automatically make those payments directly from his checking account. If automatic payments are set up, he will not have to worry about missing a payment because he misplaces the bill, is away when the payment is supposed to be made or simply forgets to send the check.

In addition to working out a system to ensure that your father’s bills are timely paid, you may want to talk to him about an arrangement to ensure that he takes the necessary steps each year to receive his minimum required distributions from any qualified retirement accounts he may have. If your father is unsure of whether he has accounts that require minimum distributions, you may want to ask him if you can speak with his financial adviser and/or accountant. These individuals should be able to assist you.

Assuming such accounts exist, you can ensure that the necessary steps are taken each year by simply making a notation on your own calendar of your father’s obligation to notify his plan administrator. Even if your father does not need the money, it is important that he take the minimum distribution every year since failing to do so can result in significant penalties.

When discussing with your father the lapse of his LTC insurance and suggestions for avoiding similar problems in the future, you may want to suggest to him that he retain an attorney with experience in estate planning to prepare for him a comprehensive power of attorney. The agent named in such a power of attorney will have the authority to handle your father’s affairs and will be in a position to ensure that he does not experience the types of problems discussed above.

Linda M. Toga provides legal services in the areas of estate planning/elder law, probate and estate administration, real estate, small business service and litigation from her East Setauket office.

New York offers two types of guardianship proceedings for adults.

By Nancy Burner, Esq.

Nancy Burner, Esq.

In New York State, when a person turns 18, they are presumed to be legally competent to make decision for themselves. However, if a person is intellectually disabled or developmentally disabled, as defined by Article 17-A of the Surrogate’s Court Procedure Act, a parent or concerned relative can ask the Surrogate’s Court to appoint a guardian to assume the decision-making functions for that person. 

If a young adult has issues with mental illness or other functional limitations, a parent or concerned relative can ask the Supreme Court to appoint a guardian for that person under Article 81 of the Mental Hygiene Law. There are differences in the application and procedure with these two statutory schemes which are described below. 

Article 17-A was originally enacted in 1969 to provide a means for parents of disabled children to continue to make decisions once their children reached adulthood. The belief was that the condition was permanent with no likelihood of improvement. Hence, the same powers that parents held over minors were appropriately continued for the rest of the person’s life.

Article 81 was enacted in 1993 and is directed toward adults who have lost or have diminished capacity. It presumes that all adults have full capacity and requires proof of specific incapacity before a guardian can be appointed to remedy the proven incapacity. Article 81 anticipates closely tailored guardianships, granting the guardian no more power than is necessary under the circumstances, and aims to preserve autonomy to the greatest degree possible.

Article 17-A is almost purely diagnosis driven, while Article 81 requires a more refined determination linking functional incapacity, appreciation of danger and danger itself. Unlike Article 81, Article 17-A provides no gradations and no described or circumscribed powers. Article 17-A is considered a plenary guardianship, meaning that the guardian has full power to make any and all decisions. 

The two statutes differ dramatically in the reporting requirements following the appointment of a guardian. Article 81 guardians have to file a report 90 days after appointment and thereafter on a yearly basis, while Article 17-A guardians have no duty to file any report. 

Procedurally there are significant differences between the two types of guardianships: 

• A hearing must be held for the appointment of an Article 81 guardian, with the subject of the proceeding right to cross-examination and the right to counsel. No hearing is required under Article 17-A where the petition is made by or on consent of both parents or the survivor. 

• When an Article 17-A hearing is held, the presence of the subject of the proceeding may be dispensed with in circumstances where the court finds the individual’s attendance would not be in their best interest; presence of the subject is presumptively required in Article 81.  

• Article 81 requires the appointment of an independent court evaluator to investigate and make recommendations to the court; the appointment of a guardian ad litem to perform a similar function is discretionary in Article 17-A.

• Almost all Article 17-A proceedings are determined by reference to medical certifications by treating physicians; The professionals making the certifications are not subject to cross-examination.

• Article 81 requires proof by clear and convincing evidence, while Article 17-A is silent as to the burden.

Even when young adults meet the medical criteria for an Article 17-A guardian, courts are taking a more wholistic view and looking at that person’s functional capacity and assessing if an Article 17-A guardian is the least restrictive alternative or if an Article 81 guardianship is appropriate to address a certain deficit. For instance, take the young adult with a diagnosis of autism where he or she is considered “high functioning” by the medical experts and they may have other mental health issues that impair decision-making. In this case an Article 17-A guardian may not be the least restrictive alternative, an Article 81 guardianship may be more appropriate.   

Courts are also looking to see if the young person can execute advance directives such as a health care proxy and power of attorney so their parent or concerned relative can assist in making medical or financial decisions for that person without court intervention to preserve their rights and autonomy. 

The lesson to be learned is that while that statute is clear about the medical diagnoses needed for an Article 17-A guardianship, not just anyone with a diagnosis is the proper subject of an Article 17-A proceeding. You may find that the needs of the disabled individual are better met through a limited Article 81 guardianship or that they are able to execute advance directives. The differences in the statutory schemes can be nuanced and if you have a child or relative in this situation, before any court proceedings are commenced, you should consult with counsel experienced with these issues. 

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

The distribution of the assets in an account with a TOD designation is independent of the terms of a will. Stock photo

By Linda M. Toga, Esq.

Linda Toga, Esq.

THE FACTS: My mother had a savings account which held nearly $50,000. About a year ago while my daughter was visiting my mother, my mother and daughter went to the bank to make a deposit. While there an employee of the bank advised my mother that it was important that she name a beneficiary on her savings account. The bank employee suggested that not having a beneficiary on the account would create problems when my mother died. 

Although my mother has a will that provides that her grandchildren get equal share of her estate, my mother trusted the employee and signed a “transfer on death” designation naming my daughter as the recipient of the account following my mother’s death. 

My mother recently told me about this visit to the bank and was quite upset to learn that the result of her signing the form at the bank was that my daughter would inherit approximately $50,000 more than her siblings and cousins. 

THE QUESTION: What can my mother do to ensure that all of the grandchildren receive equal shares of her estate?

THE ANSWER: If your mother wants her grandchildren to receive equal shares of her estate when she dies, she has two options: she can change the transfer on death (TOD) designation or she can change her will. 

HOW IT WORKS: Before detailing each option, it is important to know that assets passing under your mother’s will are not treated the same as assets passing pursuant to the TOD designation. 

Assets passing under the will are called probate assets. Their distribution is controlled by the terms of the will. The assets in the account with the TOD designation are nonprobate assets and their distribution is independent of the terms of the will. As long as the TOD designation is in place, the assets in the account will not be governed by your mother’s will even if she makes an explicit bequest of those assets in her will. 

With respect to the TOD designation, your mother can either revoke the designation entirely or she can change the designation form. If she revokes the TOD designation, the funds in her account will be deemed probate assets and they will pass under her will. The end result would be that each grandchild would receive an equal share of the account. 

Alternatively, your mother may revise the TOD designation by adding her other grandchildren’s names to the form and stating that the funds are to be divided equally between the named beneficiaries. In this scenario, the funds in the account will still be considered nonprobate assets, but the bank will be required to pass an equal share of the assets to each of your mother’s grandchildren. Since the revocation or modification of the TOD can be done by simply going to the bank and signing a new form, changing or revoking the TOD designation is the easiest and least expensive way to address the problem. 

The second option open to your mother to ensure that her grandchildren receive equal shares of her estate is for her to leave the current TOD designation in place and to revise her will. She would have to add language to the will that provides that the amount of the bequests passing to each grandchild under the will shall be adjusted to take into consideration any nonprobate assets they may receive. 

For example, if your mother’s current will provides that $100,000 of probate assets is to be divided equally between three grandchildren, the provision would dictate that the $50,000 in nonprobate assets passing to your daughter should be added to the probate assets so that the total value of estate assets earmarked for grandchildren could be calculated. That total ($150,000) would then be divided equally between the three grandchildren. Using the figures above, the end result would be that each grandchild would receive the same amount of money from your mother’s estate; $50,000.  

Your mother should seek the assistance of an experienced estate planning attorney if she opts to revise her will. She cannot revise her will by simply writing in the margins or making other notes in the will as to her wishes. Such handwritten attempts at changing a will are not enforceable and the end result would be that your daughter would receive a share of the probate assets plus any funds remaining in the savings account at the time of your mother’s death. 

Linda M. Toga provides legal services in the areas of estate planning/elder law, probate and estate administration, real estate, small business service and litigation from her East Setauket office.

Your spouse receives his/her elective share from your estate at the time of your death. Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

We are frequently asked whether it is a good idea to disinherit your spouse due to the possibility of nursing home care in the future. While updating your estate planning documents is a good idea, simply disinheriting your spouse may not protect your estate in the event she or he needs to go to a nursing facility. 

If your spouse requires care in a nursing facility and wants to rely on Chronic Medicaid to pay for it, the Department of Social Services will conduct a five-year lookback. 

During the examination, the Department of Social Services will inquire whether your spouse received his or her “elective share” from your estate at the time of your death. If your spouse did not receive his/her elective share, the Department of Social Services will issue a dollar for dollar penalty that will delay Chronic Medicaid benefits.

An elective share ensures that surviving spouses in New York receive the first $50,000 or one-third of an estate, whichever is greater. The surviving spouse has a time limit when he or she must demand the elective share. If the elective share is not demanded within the time frame, the surviving spouse forfeits his/her right to receive the share.  

For example, if you pass away with $300,000 in your estate, your spouse would be entitled to $100,000 even though your last will and testament specifically excluded your spouse. If the elective share of $100,000 is not paid from your estate, the Department of Social Services will issue a penalty of about seven months. In other words, Medicaid will not pay for the first seven months of care in the nursing facility.  

There are options available to you now in order to preserve your estate even if your spouse requires care in a nursing facility. One option is to set up a supplemental needs trust through your last will and testament that benefits your spouse but protects the estate. You would appoint a trustee to manage the assets in the trust on behalf of your spouse. 

The supplemental needs trust is a vehicle to supplement and not supplant government benefits. This would allow the money to be used for your spouse’s benefit but not interfere with an application for Medicaid benefits. Another option would be to provide that your spouse receives one-third of your estate and the reminder goes to your children.

Finally, in New York State, we have a program called Community Medicaid, which will pay for a home health aide to come into your home and assist your spouse with activities of daily living. If your spouse received this assistance in the home, there would not be a five-year lookback and he or she would not be required to elect against your estate. This may be a viable option now, so you are not the sole caregiver.    

It is important to review your estate planning documents with an elder law attorney in your area to ensure you and your spouse are protected and have the appropriate documents in place for your specific situation.  

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

A power of attorney is a legal document that gives someone you choose the power to act in your place. Stock photo

By Linda M. Toga, Esq.

Linda Toga, Esq.

THE FACTS: My elderly aunt, Mary, has no spouse or children and is getting to the point where her health is failing and she is forgetting to pay her bills. Mary has a will and a health care proxy, but she has not appointed anyone to handle her financial affairs or assets. 

THE QUESTION: What do you suggest?

THE ANSWER: Mary should make an appointment with an experienced estate planning/elder law attorney to discuss the benefits of having a power of attorney prepared. 

HOW IT WORKS: A power of attorney is a legal document whereby a person can delegate to another person authority to carry out specific types of transactions on their behalf.

The person who delegates authority under a power of attorney is the principal. The people to whom authority is delegated are called agents. A principal can name a single agent or co-agents. When a single agent is named, it is important to name a successor agent in case the person who is named as the sole agent is unable to serve. If co-agents are named, the principal must decide whether the agents must act together or may act alone. 

The New York State Legislature created a basic power of attorney form that was most recently revised in 2010. This statutory form allows the principal to delegate authority to carry out banking transactions, sell real and personal property, deal with insurance carriers and address health care billing and payment matters, among other things. 

Although the basic power of attorney may be sufficient for some people, due to her age and her situation, Mary should sign what I refer to as an enhanced power of attorney. An enhanced power of attorney allows people to delegate authority to another person to perform transactions that are not covered in a basic power of attorney and that may be needed in the context of estate and Medicaid planning. 

These transactions include, but are not limited to, creating and/or revoking trusts, changing beneficiaries on accounts, life insurance policies and pension plans, accessing online accounts, entering into care giver agreements, borrowing money, making loans, making arrangements for pet care, waiving attorney/client privilege and signing intent to return home letters for Medicaid purposes. 

As mentioned above, the basic power of attorney is not adequate to address the countless types of transactions that may be needed in the context of estate and/or Medicaid planning. That is why it is important for Mary to speak with an attorney who concentrates in the areas of estate planning and elder law. 

In addition to being able to provide Mary with a power of attorney that meets her needs, the attorney will be able to discuss with Mary the importance of signing the Statutory Gifts Rider that is part of the New York statutory form. By signing the rider, Mary will be able to give her agent gifting authority to make gifts in excess of $500 per year to individuals or charitable organizations. This gifting authority is essential if Mary will be applying for Medicaid and has assets that must be moved out of her name in order to qualify for benefits. 

Without the rider, the power of attorney will not allow Mary’s agent to engage in last minute Medicaid planning that could mean the difference between being eligible for benefits and being forced to spend down her assets before receiving Medicaid. 

Linda M. Toga provides legal services in the areas of estate planning/elder law, probate and estate administration, real estate, small business service and litigation from her East Setauket office.

CDPAP gives Medicaid recipients an alternative way to receive home-care services. Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

The Consumer Directed Personal Assistance Program (CDPAP) is a Medicaid program that allows a Medicaid applicant, or their representative, to choose the individual (or individuals) to provide care at home rather than using an aide from a home health agency. 

Under the Medicaid process, once an applicant is approved for Medicaid, they will undergo at least one assessment to help determine how many hours of care the applicant will receive with a managed long-term care (MLTC) plan. The applicant then signs up with a home-care agency that contracts with the MLTC, and aides are sent to the home to provide the hours of care.

If the applicant is unhappy with the current aide, he or she can request that the agency replace the aide; however, the agency has full discretion on choosing a substitute. The agency only needs to make sure that they are providing the care set up by the predetermined hours.  

There are also limits as to what the aide can do in terms of the care they provide. An aide can assist with most tasks, such as walking, bathing, grooming, light cleaning and cooking, but they cannot perform “skilled tasks,” such as administering medication. 

For example, if an applicant is diabetic and requires daily insulin injections, the aide is not allowed to administer the injection. An aide, however, can give certain cues, such as placing medication in front of the patient, letting them know it is time to take said medication.

Many applicants are satisfied with the care provided by the home health aides, but there are some that may require an aide that can perform skilled tasks, or others already have an established relationship with a specific aide and do not want to switch to a different caregiver.

Under CDPAP, any individual can be hired as the caregiver so long as said individual is not a legally responsible relative, such as the applicant’s spouse or guardian.

The applicant, or their representative, will determine who the aide will be, their work schedule, and what kind of assistance the aide will provide. There is no prerequisite to be certified as a home health aide or registered nurse. Training the aide occurs at the home and the aide gets paid through Medicaid. The aide can perform skilled tasks that are not otherwise allowed under the standard Medicaid program.  

It is important to note that under CDPAP, the aide is considered an independent contractor, not an employee of the agency.  The applicant is therefore fully responsible for finding and setting up the care. The applicant will also not be able to take advantage of some of the benefits an agency provides, such as sending in backup care if the current aide is sick or cannot work for whatever reason.   

To discuss your options, you should contact an elder law attorney who has extensive experience in this field and can navigate the Medicaid system to help provide you with the best care for your specific needs.

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

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