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Attorney At Law

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.

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

A bypass trust was designed to prevent the estate of the surviving spouse from having to pay estate tax. Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

For a traditional married couple, the estate planning has become simpler in many ways. Before the estate tax was increased on both the state and federal level, we were fixated on saving estate taxes. Simple techniques like bypass and marital trusts and insurance trusts called ILITs were the gold standard in estate planning. Today many of those types of plans are irrelevant and maybe even harmful in an estate plan.

Bypass trusts are trusts created in the estate of the first spouse to die. So, for example, if a husband died when the exemption was $1.0, his will left $1.0 million in his bypass trust to protect his exemption (the amount he could pass to a nonspouse tax free) and then the balance would be distributed to his surviving spouse tax free. The idea was that when the second spouse died, she would have her own exemption and the monies in the bypass trust would pass tax free to the next generation.

If the exemption was $1.0 (or more) when the survivor died, then both the bypass trust amount and the exemption amount when the second spouse died would escape estate taxation. This is the most common type of estate plan that was utilized in the last 25 years and many clients still have these documents in place. In instances where the first spouse has died, there still exists a bypass trust for the benefit of the surviving spouse. For those couples with these types of estate plan but with assets under $5.25 million, it’s not too late to change them.

But, what if one spouse has died and the surviving spouse is still alive with assets in a bypass trust. Is there more planning to be done?   

Assume a couple in 2000 with $1.8 million worth of assets. Husband died and $1.0 million was payable to the bypass trust under his will for the benefit of his wife. According to the terms of the trust: (1) she can have all the income, (2) she is entitled to distributions for her health, education and support, and (3) a trustee can distribution all the trust assets to her for any purpose, even if the trust is depleted. The purpose of this trust was clearly to shield the first million of the estate from estate taxes when the surviving spouse later died but gave the trustee the power to make unlimited distributions to the spouse.

Now also assume the wife has, in the intervening years, protected her own $800,000 from the cost of long-term care by placing those assets into an irrevocable trust. In the meantime, the bypass trust has grown to $1.6 million dollars. There are two glaring problems: Capital gains tax and cost of long-term care.

When the surviving spouse dies, the assets in her irrevocable trust will be counted as part of her taxable estate. If she dies this year, she will have a New York state estate tax exemption of $5.25 million (increasing to $5.49 million in 2019) and her federal exemption is $11.18 million. Clearly, she does not have a taxable estate. Her assets will pass tax free to the next generation. However, the assets in the bypass trust will have a capital gains tax for any growth in principal.

Assuming the capital gain of $600,000 and a capital gain rate of 33 percent, there could be a capital gains tax of just under $200,000. If the bypass trust assets were not in the trust, but in the surviving spouse’s estate, there would be no estate tax and no capital gains tax. In this case, assuming no other facts, it would be best to distribute the assets to the surviving spouse and allow the assets to obtain a “step-up in basis at her death.”

The second problem with the bypass trust is that the broad distribution rights under the trust makes those trust assets available to pay for the spouse’s long-term care. She has protected her own assets, but likely the $1.6 million is available to be spent down. In this case, if the trustee were to distribute the trust assets to the surviving spouse, she could add those assets to her irrevocable grantor trust. She would enjoy the income in the trust, her estate (i.e., her heirs) would get a step-up in basis on her death, and the assets could be shielded for the cost of nursing home care or catastrophic illness after five years.

This same scenario applies in the case of insurance trusts that were created during the life of the first spouse to die. The trust was likely intended to shield the surviving spouse’s estate from estate taxes, but the increased exemptions make the insurance trust unnecessary. There is an income tax return due each year that is a burden in both time and money. There is no step-up in basis at the death of the surviving spouse, and the assets are probably not protected from the cost of long-term care.

While the trusts in this example give the trustee wide latitude in distributing trust assets to spouses, not all trusts are the same. If the trustee does not have the power to distribute outright to the spouse, there may be an alternative way to accomplish these objectives. New York state has a very generous decanting statute that may be utilized to “fix” the trust. It may not be too late.

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

There are planning tools an individual can employ to potentially safeguard wishes after death. Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

Inheritance is the practice of passing on property upon someone’s death. The rules of inheritance differ from state to state.  

In New York, a decedent generally cannot disinherit his spouse. This principle is governed by Estates, Powers and Trusts Law Section 5-1.1-A (Right of Election by Surviving Spouse) and requires that the surviving spouse receive a portion, or share, of the decedent’s estate. The surviving spouse’s share will be equal to the greater of $50,000 or one-third of the decedent’s estate.

The right to elect to take your spousal right of election is governed by time frames. An election under this section must be made within six months from the date letters testamentary are issued but no later than two years after the date of the decedent`s death. A written notice of the election is required to be served upon the executor, or upon the person named as executor in the will if the will has not yet been admitted to probate. The written notice must then be filed and recorded with the Surrogate`s Court.  

Conversely, a decedent can disinherit a child. However, it is important to note that a child falls into a certain class of individuals who have the right to contest your will even if they are specifically disinherited, whether or not they are named as a beneficiary under your will or if they were left with a disproportionate share of your estate. A disinherited child has the right to challenge or contest your will because, had you died without a will, your child would receive a share of your estate through the laws of intestacy.  

However, there are planning tools an individual can employ to potentially safeguard wishes after death. An in terrorem provision in a decedent’s will “threatens” that if a beneficiary challenges the will then the challenging beneficiary will be disinherited instead of inheriting the full gift provided for in the will. An in terrorem clause is intended to discourage beneficiaries from contesting the will after the testator’s death. New York law recognizes in terrorem clauses, however, they are strictly construed.   

Keep in mind that simply having an in terrorem clause in your will may not be enough to dissuade beneficiaries from potentially challenging your will. Theoretically, however, for an in terrorem clause to have any weight at all, a beneficiary under a will must be left a substantial amount to incentivize their compliance with the will. 

An in terrorem clause may have no effect on a beneficiary who was not left anything under a will as they risk losing nothing by challenging the will. While in terrorem clauses may be effective in minimizing a will contest, for some it holds no power.  

As with many things in life, one size does not fit all. A successful estate plan takes all personal and unique factors to an individual into consideration. The documents are only part of the problem and solution. The fact is, there is no substitute for competent legal advice.   

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.

Concerns about accessing long-term care in the community is something we often discuss with our clients. How will they access the care? Who will pay for it? Is the care reliable? Can I safely and affordably age in place? 

The positive news is that there are many options for care in the community. We are fortunate to live in an area where care is accessible, reliable and affordable. Many of our clients are surprised to learn that Community Medicaid is a way to access care in the community. 

Unlike Chronic Medicaid, which requires a five-year financial look back as a prerequisite for eligibility, Community Medicaid does not have any look back. This means that with some relatively simple planning (in most cases) the financial eligibility requirements can be met with little to no waiting time.

It is important to note there are strict asset and income limitations for applicants for Community Medicaid. An applicant is permitted to have $15,150 in liquid nonretirement assets in his or her name (in New York for 2018). They can have an unlimited amount of qualified (retirement) accounts in their names so long as they are taking the required distribution as set out by the local Medicaid program. 

The primary residence is also an exempt resource, provided the Medicaid recipient remains in the home. It is advisable for all Medicaid recipients to do some estate planning with their home to ensure that it will remain protected should a need arise for care in a facility. Additionally, such planning can ensure that the home is protected from potential estate recovery after the death of the applicant. The applicant is also permitted to have an irrevocable prepaid prearranged funeral account.

With respect to income a single Medicaid applicant is permitted to retain $862 in monthly income. Any income amount over this allowance is considered “excess income.” The good news is that all of the Medicaid applicant’s excess income can be redirected into a pooled income trust, which is a type of special needs trust established and managed by nonprofit organizations for the benefit of disabled beneficiaries. The excess income transferred into a pooled trust can be used to pay the Medicaid applicant’s monthly household and personal expenses.

As you can see, with some relatively straightforward planning most people can qualify for Community Medicaid benefits. Once you have applied and been accepted under the Community Medicaid program, you can access a variety of services that will help you to remain in the community. 

For most of our clients the greatest benefit is the availability of a care provider who can come into their home and provide assistance with activities of daily living such as dressing, bathing, light housekeeping and meal preparation. 

Community Medicaid will also cover the cost of certain approved assisted living facilities and some adult day care programs. The availability and accessibility of care in the community is oftentimes far more available than most of our clients think. 

The community-based Medicaid program is invaluable for many seniors who wish to age at home but are unable to do so without some level of care and certain supplies the cost of which would be otherwise too expensive to sustain on their own. With some careful planning aging in place is certainly a viable option for most clients we meet.

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

The first question that must be answered is whether you are determined a resident of New York. Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

We have seen many clients considered “snowbirds,” those who maintain a residence in New York but travel down south during our harsh winters. For our snowbird clients who want to create estate planning documents and plan for possible care needed in the future, it is important to determine if you should see an attorney in New York or elsewhere. 

The first question that must be answered is whether you are determined a resident of New York or of the other state you are visiting. Some factors to determine residency include the amount of time spent in each state, your mailing address, which state your driver’s license is held, where your car is registered, where you are registered to vote and where you file your income taxes.

Once you determine which state is your primary residence, there are other considerations to be examined regarding your estate plan. Snowbirds should consider where they plan on living in the future and where they think they will likely receive care. There may be a possibility that you move down south upon retirement but you plan to move back to New York to be with family members when you are in need of assistance. Since most clients do not have a plan set in stone, they should have estate planning documents, which may include Medicaid asset protection, that would cover them in either state.

Because the laws governing estate planning and Medicaid benefits differ from state to state, it is advisable that you have your documents reviewed by an attorney in both states to ensure that they comply with the laws in both places. For example, there is an additional signature required on a last will and testament in Florida that is not required in New York. Complying with Florida law when executing a last will and testament will not invalidate the document if it is probated in New York. This will avoid any issues or delay in administration if your will is probated in Florida. 

Additional examples of differences in the law are for powers of attorney and advance directives, including health care proxy and living will documents. Since these are state-specific laws, they often have different terminology that can be confusing when moving between locations. 

For a health care proxy in New York the person named to make your medical decisions is called your “agent.” In Florida the term for the agent acting as your health care proxy is a “surrogate.” In Florida the term used under the law to name the default agent appointed is “proxy.” This could cause unnecessary confusion and should be addressed by your estate planning attorney. 

The language and powers listed in your power of attorney will also differ by state. This becomes especially important when your agent is assisting in long-term care planning. You should make sure that your power of attorney includes all of the possible powers your agent may need should you need long-term care whether it is by privately paying or applying for Medicaid to cover your care costs. This may include: the power to prepare, sign and amend a trust agreement; allow for transfers of assets to your agent; and enter into contracts for caregivers or home health care services. 

For our snowbird clients it is important to consider where you are likely to receive care in the future. We recommend that you have your estate planning documents reviewed by an elder law and estate planning attorney in New York and your warm winter destination. 

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.

Gifting and Medicaid planning is commonly misunderstood. We often see clients who believe that the gifting rules for Medicaid are the same as the IRS gifting regulations. 

The IRS allows a person to give up to $15,000 per person annually without penalty. Under the code, all gifts made in any given year are subject to a gift tax. However, the first $15,000 gifted to each individual in any given year is exempted from the gift tax, and for that reason, for many individuals, gifting during their lifetime is a way to distribute wealth and reduce their taxable estate at death. Medicaid is not the same.  

Oftentimes, seniors and their children believe that this same exemption holds true for Medicaid eligibility, and that gifting this amount of money away annually will not affect them should they need to apply for Medicaid benefits in the future. 

Medicaid requires that all Medicaid applicants account for all gifts and transfers made in the five years prior to applying for Institutional Medicaid. These gifts are totaled, and for each approximately $13,053 that was gifted, one month of Medicaid ineligibility is imposed. It is also important to note that the ineligibility begins to run on the day that the applicant enters the nursing home rather than on the day that the gift was made.  

For example, if someone has approximately $180,000 in his or her name and gift annually $15,000 to each of four children, the $180,000 would be gone in approximately three years. Under the IRS code, no gift tax return would need to be filed and no tax would be owed. If at the end of those three years the individual then needed Medicaid, those gifts would be considered transfers “not for value” and would have made him or her ineligible for Medicaid benefits for approximately 13 months.  

In other words, the individual would need to privately pay for the nursing home care for the first 13 months before Medicaid would kick in and contribute to the cost of care. 

The amount the individual would pay on a monthly basis would depend on the private monthly cost of care at the nursing facility. If the nursing facility costs $17,000 per month, the individual would need to pay that amount for 13 months totaling approximately $221,000.  

What makes this even more difficult for some families is that an inability to give the money back or help mom or dad pay for her or his care is not taken into consideration, causing many families great hardship. It is important for families who have done this sort of gifting to know that there are still options available to them.  

An elder law attorney who concentrates his or her practice on Medicaid and estate planning can help you to optimize your chances of qualifying for Medicaid while still preserving the greatest amount of assets.      

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

By naming a trustee to decide the amount of distributions to be taken, the account holder can rest assured that the IRA savings won’t be squandered. Stock photo

By Nancy Burner, ESQ.

Nancy Burner, Esq.

One of the most misunderstood planning strategies is that retirement funds, such as 401(k)s, 403(b)s, traditional individual retirement accounts (IRAs) and Roth IRAs, should not name a trust as designated beneficiary. My clients are often advised by their financial adviser to name individuals and not trusts, even minor or disabled beneficiaries. That could be the most expensive mistake made by a retirement account holder and one I often see. The IRA retirement trust is the answer.

First, clients are concerned about protecting their beneficiaries from claims of creditors: that is, divorcing spouses, judgment creditors and Medicaid if the beneficiary needs long-term care.  

While IRA accounts are protected from creditors of the original account holder and surviving spouse, the same is not true for inherited IRAs. The Supreme Court of the United States has ruled that when someone other than the spouse inherits an IRA, the account is subject to beneficiary’s creditors. Thus, if parents want to protect their child, they can name a trust as the beneficiary of the account, instead of naming the child directly. Correctly written, the trust can allow the trustee to use the beneficiary’s life expectancy, commonly referred to as a “stretch IRA.” 

Under federal tax law, designating an individual as the beneficiary of a retirement account results in tax efficiencies by allowing the beneficiary to take the benefits over their life expectancy based upon the beneficiary’s age at the time of the owner’s death and the use of an IRS actuarial table. 

Each year the beneficiary of the IRA must take a minimum distribution from the inherited IRA and must pay income tax on the distribution. The balance of the IRA continues to grow tax deferred, only distributions are taxable. Therefore, a young beneficiary will be able to defer the tax longer (commonly known as “stretch”) and enjoy exponential growth. In the case of a Roth IRA, the account holder has already paid the tax, so the beneficiary can continue to have tax-free growth, not tax deferred, over his or her life expectancy.

In order to use the trust beneficiary’s life expectancy, the trust must meet the following criteria: 

The trust must be valid under state law; the trust must be irrevocable by the time of the account holder’s death; the trust beneficiaries must be identifiable within the trust document; the retirement beneficiary custodian, issuer, administrator or trustee must be provided with a copy of the trust document by Oct. 31 of the year after the year of the retirement owner’s death and there must be an agreement to that information in the event it is ever changed; and all the “counted” beneficiaries of the trust are “individuals.”

Typically, trusts that satisfy the above criteria will qualify for the stretch. The trusts are drafted as either a conduit trust or an accumulations trust. 

The simplest trust is a conduit trust, which allows the trustee to decide on the amount and timing of any and all distributions from the trust. However, any distributions taken must be paid immediately to the beneficiary — who must be an individual. The trust can be drafted to give the trustee the power to take only minimum distributions or distributions more than the minimum.  

The second type of trust is a qualified accumulation trust. This trust permits the trustee to accumulate annual minimum required distributions in the trust after the distributions are received from the inherited retirement benefit and is used for beneficiaries that have existing creditor problems to protect the annual distributions from a creditor’s reach. 

If the payment were to be paid to the beneficiary outright, the creditor would be able to take the distribution. This type of trust is also used for a supplemental needs trust for a disabled individual. Since most supplemental needs trusts are intended to protect government benefits, it is imperative that the distributions be permitted to accumulate in the trust.  

Under New York law, for example, the beneficiary (other than supplemental needs beneficiary) can be her own trustee with the power to make distributions to herself for an ascertainable standard of health, education, maintenance and support without subjecting the trust to claims of her creditors. In cases where the beneficiary is unable to act as trustee, because of lack of maturity, irresponsibility or disability, someone else can be named as trustee. Importantly, the trustee will be the “gatekeeper” and take minimum distributions and exercise discretion to take even more from the IRA if needed and permitted by the trust terms.  

By naming a trustee to decide the amount of distributions to be taken, the account holder can rest assured that the IRA savings won’t be squandered. Beneficiaries that are not financially savvy can create tax problems by taking distributions without considering the income tax consequences. Not only will the distributions be taxable, the distribution may put the beneficiary in a higher tax bracket for all their income. 

Retirement funds are often the largest assets in a decedent’s estate and usually given the least amount of consideration. Consideration should be given to naming a retirement trust as the designated beneficiary.

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

A comprehensive estate plan will ensure the appropriate needs and goals are met. Stock photo

By Nancy Burner, ESQ.

Nancy Burner, Esq.

Young adults may have the misconceived notion that estate planning is only necessary for certain people, such as individuals of a high net worth or those who are aging. However, there are certain documents that everyone should consider, including the youngest generation of millennials. Having such a plan in place can avoid costly court proceedings as well as plan for your family should you become incapacitated or upon your death. 

An estate plan for a millennial would likely include a health care proxy, living will, power of attorney and a last will and testament.

First, anyone over the age of 18 should have advanced directives including a health care proxy and power of attorney. A health care proxy is a document that states who will make your medical decisions if a doctor deems you unable to make them for yourself. 

Many people assume that either their spouse or parent is entitled to take on this responsibility should they lose their mental capacity. This is not entirely incorrect. New York State has the Family Health Care Decisions Act that establishes the authority of a patient’s family member or close friend to make health care decisions when the patient did not leave prior instructions. 

However, this is only in effect when you are in a hospital or a nursing facility. Therefore, without an agent named on your health care proxy there is no one with authority to make decisions outside of these settings. Additionally, the person who would have authority under this law may not be the one you would have ultimately chosen to make such decisions. By naming someone in advance, you will avoid these potential issues. 

You may also wish to execute a living will. This document specifically addresses treatments or procedures you may want or want to withhold in relation to end of life care.

The next document you should execute is a comprehensive durable power of attorney. This is a document that allows your named agents to make financial decisions on your behalf and assist in taking care of your daily financial obligations. A power of attorney is practical should you become incapacitated or unable to handle your bank accounts or assets at any time. 

Should you not have these advanced directives in place and become incapacitated, your loved one may have to commence a guardianship proceeding to have the authority to make these decisions. Guardianship proceedings can be costly and time consuming for all involved. Additionally, it may involve family members in the court proceeding that you did not intend to include in your daily affairs.

Finally, when executing a last will and testament, you can designate your beneficiaries, the specific items or amounts you will leave them and how they will receive your assets. These designations are especially important for individuals with minor or disabled beneficiaries. If your beneficiaries include minors or disabled individuals, an attorney can draft your last will and testament to make sure they receive their share in an appropriate trust and that a specific person or entity is named to manage the assets on their behalf. Additionally, you can name whom you would like to act as the guardian for your children within your will.

Regardless of your age, a comprehensive estate plan will ensure the appropriate needs and goals are met for you and your family during your lifetime and upon your death.

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

Creating an estate plan can give you the peace of mind you need. Stock photo

By Nancy Burner, ESQ.

Nancy Burner, Esq.

Planning for the future can sometimes be difficult. Creating an estate plan can give you the peace of mind you need, while also making it easier for your loved ones to handle your affairs when you die. We often find that while our clients understand the basics of certain estate planning documents, they are often surprised to see that many of these documents are multifaceted and serve multiple purposes.

A last will and testament is a legal document memorializing your wishes on how you, the testator or creator of the will, want your estate to be distributed after you die. If you die without a will, your assets will be distributed according to state statute, also known as the laws of intestacy.  

For example, in New York State, if you die with a surviving spouse and children, your spouse will receive the first $50,000 of your estate and then one-half of the balance. The remainder will be distributed equally among your children. This is not ideal for someone who wants all their assets to go to their surviving spouse.   

Instead of being bound by the laws of intestacy, one can create a will that specifies to whom they want their assets to go and how they want their assets to be distributed. Under the scenario above, a will would allow the testator to distribute their assets to their surviving spouse. Only if the spouse predeceases the testator should the assets be distributed to their children.

The will has functions other than just listing the distribution of assets upon death. For parents with young children, a will allows a guardian to be named for minor children. Also, if there are beneficiaries that are minors or incapacitated, the will can provide that the assets be distributed in trusts on behalf of those beneficiaries. 

Many clients will choose to leave assets to beneficiaries in trusts in other circumstances, such as for creditor protection or to delay the age by which they can have full access to the funds. 

A will can also create a supplemental needs trust for beneficiaries who currently receive, or may be in need of, means-tested government benefits.  

Another advantage of executing a will is that it allows the creator to waive any bond that the executor would otherwise have to pay in order to administer the estate. A bond is often required by the court to protect the interests of the distributees and beneficiaries of one’s estate.  

Depending on the size of the estate, the bond may have a large annual premium that will be paid out of the assets of the estate. A will can also provide for the decedent’s wishes regarding funeral arrangements and cremation.

It is important to have a will even for individuals who hold all accounts jointly with another person. While the joint assets will go directly to the co-owner, the terms of the will can be used to administer any assets that are held outside of the joint accounts. An estate account will have to be opened to cash any checks delivered after death that are made payable to the decedent, including tax refunds or a return of other funds. Having a will ensures that these funds are distributed to the appropriate persons.  

Creating a last will and testament can help avoid many of the pitfalls that occur when a person dies without any estate plan in place. We strongly recommend seeking a trust and estates and elder law professional to help determine the right estate plan for you.

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

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