Tags Posts tagged with "Nancy Burner"

Nancy Burner

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By Nancy Burner, Esq.

What does “look-back” mean? What is spousal refusal? Will Medicaid take my house if my husband has to go into a nursing home? All too often these are the questions we hear from our clients who are faced with navigating the Medicaid landscape once a crisis occurs. 

In New York State, the Medicaid program can provide a source of payment for those who are financially eligible and require care, either in a nursing facility or in their own home. In order to be eligible for Chronic Care Medicaid (payment for nursing home care), an individual must meet certain income and asset requirements.

To start, the applicant may have no more than $14,850 in liquid nonqualified (nonretirement) assets in their name. They may have qualified (retirement) assets in an unlimited amount provided they are taking a monthly distribution. 

When applying, the Department of Social Services will require a full financial accounting from both the applicant and his spouse for the five years immediately prior.  This is what is often referred to as the look-back. The purpose of this investigation is to determine among other things whether any transfers were made during this time period that would affect eligibility. The rule is that for every $12,390 that was transferred, a one-month penalty will be imposed.

For example, if in the financial review it is discovered that the applicant gifted $40,000 to his children during the look-back period, a determination will be made that imposes a penalty for roughly three months. This means that Medicaid will not pay for the first three months of nursing care, and the family will be responsible to pay privately. The aggregate result of this type of penalty is roughly a dollar-for-dollar penalty, meaning that for each dollar that you transfer you will have to pay a like amount in nursing home care should the need arise. This rule applies unless the transfer is considered an exempt transfer.  Transfers that are exempt do not create a penalty and therefore do not affect Medicaid eligibility. In New York State, transfers to spouses are exempt under the provisions of spousal refusal.

We use the term “spousal refusal” when the community spouse (the spouse who is not institutionalized) chooses not to contribute to the cost of care for an institutionalized spouse. This means that the institutionalized spouse cannot be denied Medicaid because the community spouse refuses to contribute. Moreover, the above penalties cannot be assessed due to the fact that the signing of a spousal refusal makes it such that the transfer is an exempt transfer.  The refusing spouse must still provide any and all financial information and cooperate fully with the Medicaid application. It is important to note that once Medicaid is approved, the county does have the right to seek recovery against the community spouse. Other exempt transfers include transfers to disabled children, transfers of the primary residence to a caretaker child and finally transfers of a primary residence to a sibling with an equity interest. 

With respect to income, an applicant for Chronic Care Medicaid may only keep $50.00 of his income monthly. His spouse may retain the greater of (1) all of his or her own income or (2) all of his or her income and enough of the institutionalized spouse’s income to bring them to $2,980.50. 

Community Medicaid is the program that covers care at home.  This program will cover the cost of a personal care aide to assist with activities of daily living such as bathing, cooking, dressing, etc. The program may also cover day programs, transportation to medical appointments, assisted living programs and some durable medical equipment and supplies. For 2015, an individual applying for Community Medicaid can have no more than $14,850, not including their home, in nonqualified (nonretirement) liquid assets. They may have qualified (retirement) assets in an unlimited amount, provided they are taking a monthly distribution. 

It is important to realize that the home is an exempt resource while the Community Medicaid recipient is alive; however, additional estate planning should be considered to avoid a Medicaid lien after the recipient’s death. While these limitations may seem daunting, the good news is that there is no look-back period. That means someone looking to get care at home can transfer assets in one month and be eligible for Community Medicaid the following month with no penalty assessed for the transfer of assets. 

With respect to income, an applicant for Community Medicaid may have no more than $845 per month.  An individual with an income over the $845 can opt to use a Pooled Income Trust. The excess income would be paid to a pooled trust company, and the trustees of the trust would pay expenses for the benefit of the applicant.

As you can see from this brief overview of Medicaid, there are many options available for care when the need arises. Make sure you are seeking advice from those knowledgeable in the area to make sure that you are getting the care that you require without sacrificing all that you have worked for.

Nancy Burner, Esq. has practiced elder law and estate planning for more than 25 years.

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Allows for more meaningful estate planning

By Nancy Burner, Esq.

As the federal and New York State estate tax exemptions continue to increase over time, clients are less concerned with the tax consequences of their estates and more concerned with protecting the beneficiaries from outside invaders, like divorcing spouses, creditors and long term care expenses.

As a result, the wills and trusts we draft today are geared toward protecting those heirs. It may be time to review your estate plan in view of the changes in the estate tax laws and the general evolution of trust law itself.

A major shift is in how we transfer assets to beneficiaries. Many clients in the past would create trusts that distributed assets to children at specific time intervals, i.e. upon turning the age of 25, 30, and 35. While this is still an option, it does not provide the maximum level of protection for the beneficiary.

By creating trusts that we refer to as “descendants’ trusts,” the beneficiary can have creditor protection, protection from divorcing spouses, Medicaid protection and protection against estate taxes when the assets are passed on to the beneficiary’s heirs.

This trust can be drafted with different options. The beneficiary can be their own trustee, co-trustee at a stated age and then their own trustee at a later age, or have a co-trustee indefinitely. The beneficiary can be entitled to the income of the trust and can distribute principal to themselves for health, education, maintenance and support. If the beneficiary needs principal for any other reason, they can appoint a friendly, independent trustee to authorize principal distributions. The trust can state where the assets will go on the death of the beneficiary without the beneficiary having discretion over the disposition at their own death.

Alternatively, the beneficiary can have a “limited power of appointment,” which allows them to designate where the trust assets will go upon their death. The limited power of appointment will state that the beneficiary can designate in a will, trust or separate instrument, the group of people that the assets can be given to upon their death.

For example, a father creates a trust and states that upon his death the assets are put into two descendants’ trusts, one for each of his children. The trust can state that each child has the power to appoint the assets to their spouses, descendants, and/or charities. In certain circumstances, a larger group of persons may be designated as the group to which the assets can be appointed.

Another change clients are making in their estate plans relates to the trust structure when leaving assets to a spouse. When the estate tax exemption for New York State was $1 million, a typical middle class couple on Long Island could easily have a taxable estate because of the high value of their home.

For these people, it was extremely important to create a credit shelter or bypass trusts to save estate taxes at the death of the second spouse. Luckily, with the increasing exemption at $3,125,000 in 2015 and $4,187,500 in 2016, this is less of a concern, but many clients have documents from before 2014 that may be obsolete.

Furthermore, the will or trust can add “trigger” supplemental needs trusts that can protect the beneficiary if he or she needs long term care. With many of my clients living well into their 90s, their children may be in their 60s and 70s when the parent dies. The may have done their own asset protection planning only to inherit more assets from a parent that are not protected. By creating descendants’ trusts in their documents, this problem can easily be solved.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years.

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By Nancy Burner, ESQ.

For most of us, if a time comes when we need assistance, the preferred option would be to remain at home and receive whatever care services we needed in our familiar setting surrounded by family. For many, the Community-Based Long-Term Care Program, commonly referred to as Community Medicaid, makes that an affordable and therefore viable option.

Oftentimes we meet with families who are under the impression that they will not qualify for these services through the Medicaid program due to their income and assets. In most cases, that is not the case. Although an applicant for Community Medicaid must meet the necessary income and assets levels, oftentimes with planning we are able to assist in making an individual eligible with little wait.

An individual who is applying for homecare Medicaid may have no more than $14,850 in nonretirement liquid assets. Retirement assets will not be counted as a resource as long as the applicant is receiving monthly distributions from the account. An irrevocable prepaid burial fund is also permitted as an exempt resource. The primary residence is an exempt asset during the lifetime of the Medicaid recipient. However, when the applicant owns a home, it is advisable to consider additional estate planning to ensure that the home will be protected once the Medicaid recipient passes away. 

Although the home is considered an exempt resource as long as the Medicaid recipient is living in it, once the applicant passes, Medicaid can assert a lien on the home if it passes through the probate estate. One way to avoid this is to ensure that at the time of the death of the applicant no assets pass through the probate estate; this can be achieved by transferring the home to a trust. Once this is done, the home will pass to the intended beneficiaries without a probate proceeding and without an opportunity for Medicaid to seek recovery against the home. 

With respect to income, an applicant for Medicaid is permitted to keep $825 per month in income plus a $20 disregard. However, where the applicant has income that exceeds that $845 threshold, a Pooled Income Trust can be established to preserve the applicant’s excess income and direct it to a fund where it can be used to pay his or her household bills.  It is important to note that there is no “look back” for Community Medicaid. This means that for most people, with minimal planning, both the income and asset requirements can be met with a minimal waiting period allowing families to mitigate the cost of caring for their loved ones at home, in many cases making aging in place an option.   

Individuals looking for coverage for the cost of a home health aide must be able to show that they require assistance with their activities of daily living. Some examples of activities of daily living include dressing, bathing, toileting, ambulating and feeding.

Community Medicaid will not provide care services where the only need is supervisory; therefore, it is important to establish an assistive need with the tasks listed above. Once this need is established, the amount of hours awarded will depend upon the frequency with which assistance with the tasks are necessary. 

For example, an individual who only needs help dressing and bathing may receive minimal coverage during the scheduled times, maybe two hours in the morning and two hours in the evening. Contrast that with an individual who requires assistance with ambulating and toileting. Because these tasks are considered “unscheduled,” the hours awarded will be maximized.

In fact, where the need is established, the Medicaid program can provide care for up to 24 hours per day, seven days per week. Once approved, the individual may be enrolled in a managed long-term care company. The MLTC may also cover adult day health care programs, transportation to and from nonemergency medical appointments and medical supplies such as diapers, pull-ups, chux and durable medical equipment.

The Community-Based Medicaid Program is invaluable for many seniors who wish to age in place but are unable to do so without some level of assistance.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years.

By Nancy Burner, Esq.

Clients often ask how they can ensure the home in which they live or their vacation home can be protected against the cost of long-term care.  These assets are often worth much more to our clients than the cash value; they represent hard work to pay off the mortgage and are wrapped in memories.

Prior to the sophistication of trust law, many individuals would pass a residence to their beneficiaries by executing a deed with a life estate. For the owner, this would mean retaining the right to live in the home until death, but upon their demise, the property would be fully owned by the beneficiaries.

Because they retained a lifetime interest in the property, they would still be able to claim any exemptions with respect to the property. Moreover, when the owner died, the beneficiaries would get a “step-up” in basis, which eliminates or lessens capital gains tax due if they did sell the property.

The negative aspect to this kind of transfer is loss of control. Once the deed is transferred to the beneficiaries, they have the ownership interest. If the original owner wanted to sell the property or change who receives it upon their death, they would have to get the permission of those to whom they transferred the property. Another negative aspect is that if the individual is receiving Medicaid benefits and the house is sold, a share of the proceeds, the life estate interest, would be paid out to the individual and could put their Medicaid benefits in jeopardy.

A better option for protecting a residence is by executing an irrevocable Medicaid Qualifying Trust, which can transfer real property at death. Like the deed with a life estate, this trust grants all the tax benefits and exclusive occupancy during life, i.e., STAR exemption, veteran’s exemption, capital gains exemption.

This method is superior to the deed with a life estate because if the property is sold during your lifetime, the full amount of the proceeds are protected within the trust and will pass to your beneficiaries upon your death. The trust also gives the ability to change the beneficiaries at any time, leaving some control in the hands of the original owner of the property.

A person’s residence is their most treasured and often most monetarily valuable asset. It is important to meet with an experienced attorney to ensure protection of your home or vacation home.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Nancy Burner, Esq.

The New York State estate tax exclusion amount has increased again, as of April 1, 2015, to $3,125,000.00.

This is an increase from the $2,062,500 exclusion amount which was in effect from April 1, 2014 to March 31, 2015. The exclusion will increase again, each April 1st, in 2016 and 2017. On Jan. 1, 2019, the basic exclusion amount will be indexed for inflation annually and will be equal to the federal exclusion amount.

The New York State and federal exclusion amount is estimated to be $5,900,000.00 in 2019.

The exclusion and the time frame for each increase are as follows:
From April 1, 2015 through March 31, 2016 – $3,125,000.
From April 1, 2016 through March 31, 2017 – $4,187,500.
From April 1, 2017 through December 31, 2018 – $5,250,000.
From January 1, 2019 forward – Will match the federal exemption indexed for inflation.

An item still of particular concern to many is the “cliff” language contained in the law.  If the estate is valued between 100 percent and 105 percent of the exclusion amount, the amount over the exclusion will be taxed.

In 2015, the 105 percent amount is $3,281,250.00.  However, once an estate exceeds the exclusion amount by more than 5 percent, not just the amount in excess of the exclusion amount is taxed, but, rather, the entire estate is subject to estate tax.

Practically, this means that taxable estates greater than 105 percent of the exclusion amount receive no benefit from the exclusion amounts shown above and will pay the same tax that would have been paid under the prior estate tax law.

New York repealed its gift tax in 2000.  This meant that as a New York resident, if you made lifetime gifts to friends or family members, the gift was not taxed or included in your New York gross estate for purposes of calculating your estate tax. With the estate tax law as enacted in 2014, there is a limited three year look-back period for gifts made between April 1, 2014 and Jan. 1, 2019. This means that if a New York resident dies within three years of making a taxable gift, the value of the gift will be included in the decedent’s estate for purposes of computing the New York estate tax.  The following gifts are excluded from the three year look back: (1) gifts made when the decedent was not a New York resident; (2) gifts made by a New York resident before April 1, 2014; (3) gifts made by a New York resident on or after January 1, 2019; and (4) gifts that are otherwise includible in the decedent’s estate under another provision of the federal estate tax law (that is, such gifts aren’t taxed twice).

The New York State estate tax law does not contain a portability provision, like in the federal estate tax law. Portability is a provision in the federal estate tax law that allows the unused estate tax exemption of a married taxpayer to carry over to his or her surviving spouse. Without portability, the manner in which a married couple holds title to their assets may continue to have a significant effect on the amount of New York State estate tax ultimately payable upon the survivor’s death.

This New York estate tax law is working to close, and eventually eliminate, the gap between the New York and federal estate tax exclusion amounts.  For the next four years, however, as the exclusion amount increases and the 3-year look-back for taxable gifts applies, tax planning will still be complex. That being said, it is important for anyone considering whether to make changes to their estate plans or gifting strategies to see an estate planning attorney specializing in these matters.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years.

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By Nancy Burner

Retirement can be an exciting new chapter in someone’s life, but it can also be stressful. The change of lifestyle and income source can lead to anxiety for many individuals reaching retirement. There may be a fear that there is not sufficient income to meet monthly needs or sufficient resources to last the remainder of his or her life.

The reality is that people are living longer and require stable income to meet their daily expenses. A person can maximize benefits and income while preserving assets for the next generation provided that the proper planning has been put into place.

One key strategy in planning for retirement income is maximizing your benefit under the Social Security system. Social Security income will play a major role in monthly income for many retired seniors and should not be overlooked or ignored. Knowing the appropriate time to start taking the benefit will impact the amount of income a person will receive.  “Full retirement age” will depend on when the individual was born.

For those born in 1954 or before, the full retirement age is 66 years old. For those born after 1954 but prior to 1960, the full retirement age gradually rises a few months at a time. For example, someone born in 1957 has a full retirement age of 66 years and 6 months. Anyone born in 1960 and later has a full retirement age of 67 years old.

Taking Social Security prior to the “full retirement age” can result in reduction penalties that could potentially cost the individual almost half of what might have been earned if the individual had waited. Once a person reaches “full retirement age,” it may be advantageous to wait a few years longer until 70 years old to begin collecting Social Security. Unfortunately, the only way to determine if waiting until age 70 is beneficial would be to know how long you are going to live.

Social Security Administration determines your benefit based on the average life expectancy. If the person outlives the average life expectancy, then it was a better choice to wait until 70 to begin the benefit. Nevertheless, no one knows how long they will live, but the reality is that people are living longer and it is essential to make sure you have sufficient income to support your daily needs regardless of how long you live.

It may be much easier said than done to wait to take Social Security. In a perfect world, everyone could wait until the perfect age to start taking Social Security in order to maximize their benefit. The reality may be that income is needed sooner than the ideal age. In this circumstance, there are several tactics that can be used in order to get income, but preserve your Social Security income and allow it to grow until you reach 70 years old.

It is essential to understand that a person may be entitled to Social Security benefits based on a spouse, ex-spouse, deceased spouse or deceased ex-spouse’s earning record. Once a person reaches “full retirement age,” but has not reached age 70, it may be advantageous to use a restricted application and apply only to claim a spousal (or ex-spousal) benefit and wait until 70 to collect your own benefit. This would enable you to start getting Social Security income, but preserve your benefit to allow for the possibility of a higher income. It is important to consult a professional in your area regarding different tactics that can be used to maximize your retirement benefits.

Retirement should be the time in your life where you can relax. The stress of not having enough income to meet necessary daily expenses can be avoided with having the proper plan in place to meet your income needs and give you peace of mind.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Nancy Burner

With tax planning becoming less of an issue for the average client, the focus in estate planning has shifted to asset protection for intended beneficiaries. As attorneys, we often hear our clients tell us that they plan to leave everything equally to their children but that they are concerned that one (or more than one!) has creditor issues or are going through a divorce. How can they ensure that whatever they leave to this child will not have to be spent on his or her debts or given to his or her soon-to-be ex-spouse? The answer is with the use of a descendant’s trust.

Whether an estate plan includes a traditional last will and testament or a trust, planners should direct that any asset left to a child with potential creditors or divorces be left in a descendant’s trust, also commonly referred to as an inheritor’s trust. This is a trust written into the last will and testament or trust document that does not come into effect until after the death of the creator, which will protect the child’s inheritance from outside invaders, including creditors or divorcing spouses. To the extent that assets are left in the trust, creditors do not have access, and the assets are considered separate and apart from the marital estate.

Typically, the descendant’s trust provides that any income generated from an asset in the trust shall be paid to the beneficiary, and principal distributions can be made for health, education, maintenance and support if the child is his or her own trustee or for any reason if there is an independent trustee. An independent trustee is a person not related by blood or marriage to the beneficiary and is not subordinate to the beneficiary, i.e., does not work for the beneficiary.  However, your lawyer can customize the language to provide for you and your beneficiaries’ specific circumstances.

While a beneficiary can be his or her own trustee, if there is a concern about the child’s “questionable spending habits,” a trust creator can consider naming someone else to be trustee for him or her or naming a co-trustee to act with the child. This could be a sibling or another trusted individual.

It is important to remember that many assets are disposed of by beneficiary designation, such as retirement accounts and life insurance. This means that once you draft the descendant’s trust in your estate plan, you must designate the trust created for their benefit as the beneficiary for their share of your assets. This will ensure that the asset passes to their trust and not to them directly.

However, be cautious when designating a trust as the beneficiary of retirement assets. When an individual inherits a retirement account, he or she must begin taking minimum distributions according to his or her life expectancy, but the principal of the retirement account continues to grow tax deferred. When a trust is designated as a beneficiary, the IRS forces the account to be paid out over a five-year period since there is no individual on whom to calculate a life expectancy. In order to ensure that a trust can still get the “stretch-out” over the child’s life expectancy, there must be certain provisions included so that the trust can accept the retirement account. Accordingly, be sure to discuss any beneficiary designations with your estate planning attorney before executing same.

Whether your estate plan includes a simple will or a complicated trust-based plan, incorporating descendants trusts is an excellent way to safeguard assets for your intended beneficiaries.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.