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By Nancy Burner, Esq.

Nancy Burner, Esq.

When the SECURE Act passed in 2019, the biggest impact on estate planning was the elimination of the “lifetime stretch” for most beneficiaries of individual retirement plans (IRAs). 

Before the SECURE Act, a beneficiary of an IRA had the option to take distributions over their own life expectancy. This allowed families to pass down tax-deferred accounts and accumulate wealth tax free across generations. Now, the only beneficiaries eligible for the stretch are spouses, disabled or chronically ill individuals, minor children of the plan owner, and those not less than ten years younger than the plan owner. For non-eligible beneficiaries, the 10-year rule applies. This rule requires that the beneficiary withdraw the entire inherited retirement account within 10 years.

The new SECURE Act 2.0, passed on January 1, 2023, brought new rules and clarifications. The original SECURE Act was silent on whether the 10-year payout rule required distributions on an annual basis. SECURE Act 2.0 clarifies that the beneficiary must take out at least the required minimum distribution each year, with a full payout by the tenth year. Luckily, anyone who inherited an IRA before the clarification will not be penalized for failure to take out the required minimum distribution. 

SECURE Act 2.0 has brought relief for stranded 529 Plans. Unused 529 funds can now be rolled over into a Roth IRA without a penalty. Beginning in 2024, the beneficiary of a 529 Plan can roll funds (capped at $35,000.00) into a Roth IRA. It used to be that a 10% penalty was imposed, and the withdrawals taxed if not used for qualified educational expenses. To qualify, the 529 account must have been open for at least 15 years. Keep in mind that there is a limit to the annual contribution amount, which is currently set at $6,500 for 2023. So it would take five years to move the maximum amount allowed into the Roth.

The new SECURE Act also fixed the issue of leaving a retirement account to a Supplemental Needs Trust. The Supplemental Needs Trust was not being afforded the lifetime stretch if the remainder beneficiary was a charity. SECURE Act 2.0 allows for a charitable remainder beneficiary without the loss of the stretch for the primary disabled beneficiary.

Another boon is that the age that a person must start taking their required minimum distribution has increased to 73 from 72. The penalty for not taking timely distributions has also decreased. For those 64 or younger, SECURE 2.0 increases the minimum age to 75 starting in 2033. This allows individuals to keep money in their retirement accounts longer, allowing it to grow without incurring taxes on withdrawals.

The SECURE Act and SECURE Act 2.0 have made major reform to longstanding retirement planning. It is advisable to speak with your estate planning attorney to discuss if these changes warrant updates to your estate plan.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Each year, the Department of Health will release updated resource and income levels for the  Medicaid program. This year there has been a significant increase. Beginning January 1, 2023,  New York State will be increasing the asset limits for community and nursing home Medicaid and income limits for community Medicaid. 

For both community (home health aides) and chronic (nursing home) Medicaid, the available  asset limit for 2023 is being increased to $28,133 for an individual applicant (the former asset  limit for 2022 was $16,800) and $37,902 for a married couple (up from $24,600), allowing  Medicaid applicants to retain significantly more assets and still be eligible for Medicaid.  

The income limit for community Medicaid applicants is being increased from $934/month to  $1,563/month for individual applicants and for married couples the income limit is being  increased from $1,367/month to $2,106/month. There is an additional $20.00 disregard that  can be added to each allowance; therefore, the total of income allowance for an individual  applying for Medicaid can have $1,583/month and married couples can have $2,126.00. 

Under  this program, any excess income can be directed to a Pooled Income Trust for the benefit of  the Medicaid applicant and the monies deposited into the trust can be used to pay the  household expenses of the Medicaid applicant. In New York, all Pooled Income Trust are  managed by charitable organizations. It is important to use the monies in the Pooled Income Trust because when the applicant passes away, the balance goes to the charity.  

As for nursing home Medicaid applicants, the monthly income limit will continue to be $50, but the income limit for the non-institutionalized spouse is being increased to $3,715/month.  Additionally, federal guidelines permit community spouses to retain up to $148,620 in assets plus a primary residence with a maximum value of $1,033,000. 

Even if the community  souse has assets and income over the threshold, New York’s spousal refusal provisions provide even more protection in that a community spouse can elect to sign a document  which allows them to retain assets in any amount, including assets which were previously in the name of the spouse that requires care in a nursing facility. 

Individuals applying for Medicaid benefits after January 1, 2023, should apply based on the  asset and income limits discussed above. For those individuals who are already receiving  community Medicaid and are using a pooled trust for their excess monthly income, your  monthly budget/spend-down will remain the same until you recertify, at which time the  increased income limits will be applied. 

However, starting in January 2023 Medicaid  recipients may ask their local Medicaid office to re-budget their spend-down based on the  new income limits before their next renewal, enabling community Medicaid recipients to  keep more of their monthly income sooner. It is advisable to consult an elder law attorney  in your area to determine if a re-budget is appropriate in your case.  

While the asset allowance has been increased, keep in mind that the five-year look-back  period for nursing home Medicaid still applies, which means that any transfer of assets made  within this period for below market value will incur a penalty period and Medicaid coverage  will commence only after the penalty period has elapsed. Typically, there is always  Medicaid planning that can be accomplished even if the individual immediately needs  Medicaid coverage and has done no pre-planning. 

*Please note, the income and assets are based on the 2022 Poverty Level. This is subject to  change based on the 2023 Poverty Level. 

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Various types of property, such as bank accounts and real estate, can be owned jointly with another person(s). Depending on the type of joint ownership, the property may pass automatically to the joint owner, outside of probate and those named in the will.

A will only governs assets in the decedent’s sole name that do not have a designated beneficiary. For example, if a co-owner of a checking, savings, or deposit account were to pass away, the account would automatically become solely owned by the surviving owner, outside of probate, and the will of the deceased owner would not apply.

Real estate can be jointly owned in several different ways, each coming with a different set of rules:

Joint Tenancy: Also known as “Joint Tenancy with Rights of Survivorship,” Joint Tenancy provides that upon the death of a joint owner, that owner’s share automatically goes to the surviving joint owner and does not pass through probate and is not governed by a will. 

For example, if Mary and Bob owned property as Joint Tenants and Bob passed away, Mary would automatically become the sole owner even if Bob’s will directed that all his property should pass to his children. When Mary passes away the property would pass according to her will since she is now the sole owner. The main advantage of Joint Tenancy is that it avoids probate upon the death of the first Joint Tenant and probate (the process by which the court verifies the validity of a will) is typically costly and takes several months to complete.

Tenancy by the Entirety: Tenancy by the Entirety is a type of joint tenancy only available between spouses and is valid in a few states including New York. As with Joint Tenancy, upon the death of the first spouse their interest automatically passes to the surviving spouse outside of probate and is not governed by their will. 

In addition to avoiding probate, Tenancy by the Entirety provides several protections in that one spouse cannot mortgage or sell the property without the consent of the other spouse, nor can the creditor of one spouse place a lien or enforce a judgment against property held as tenants by the entirety. 

Tenancy in Common: Here, there is no right of survivorship and each owner’s share of the property passes to their chosen beneficiaries upon the owner’s death. Tenants in Common can have unequal interests in the property (e.g. 50%, 40%, 10%) and when one Tenant dies their beneficiaries will inherit their share and become co-owners with the other Tenants. 

A Tenant in Common’s share will pass according to their will (if they have one) which means the nominated Executor will have to probate the will by filing a petition with Surrogate’s Court. However, a Tenant in Common can still avoid probate if their share of the property is held in trust, in which case the terms of the trust (rather than their will) would control how the property passes at death and no court involvement would be needed.

A comprehensive estate plan with an experienced attorney ensures that probate and non-probate assets work in harmony. In addition, there are capital gains consequences when transferring ownership interests during your lifetime — and such “gifts” should never be done without consulting an attorney or accountant. 

One of the biggest problems we see with DIY wills is the testator failing to account for the different types of ownership and what assets pass through the will.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

A Durable Power of Attorney (“DPOA”) is a statutory form that enables a person to empower a loved one or trusted individual to manage finances and property on their behalf. The concept is, even if one lacks legal capacity to handle their own financial and business affairs, their appointed agent will be able to use the document to access bank accounts, sign checks, pay bills, and carry out essential estate planning for Medicaid asset protection purposes. Note that not all powers of attorney are the same, the particular powers that the agent will have will depend on how the document is drafted.

As long-term care, including home care and nursing home care, is not covered by health insurance, many people look to Medicaid as a pay source. Medicaid, however, is a means- based program for which qualification requires an individual prove they have no more than $16,800 in assets (in 2022). Further, there is a 5-year lookback period for nursing home Medicaid. This means that upon application, there is a scrutiny of the prior five years of the financial life of the applicant and their spouse, looking for any assets gifted within the 5 years prior to applying. While there are certain allowable or exempt transfers, all other transfers will result in a “penalty period,” a period of time during which Medicaid will not assist with the costs of care.

Fortunately, there are several exempt transfers that do not incur a penalty period, the most common being a transfer of assets to one’s spouse. Thus, if one urgently needs nursing home care, but has assets above the Medicaid limit, they can transfer assets to their spouse to bring themselves under the resource limit to qualify for Medicaid without penalty. In certain circumstances, assets can also be transferred to individuals other than the spouse,

This is where the DPOA comes into play because if the Medicaid applicant lacks mental capacity, they will not be able to transfer assets. And, contrary to popular belief, a spouse does not have the authority to access the other’s bank accounts or other assets simply because they are married—unless the spouse were a joint owner, they would need a DPOA or be appointed legal guardian by the court, a costly and time-consuming process.

Since the standard statutory form does not include any gifting over $5,000, modifications must be included with additional provisions supplementing the authority granted to the agent. For starters, the document must specifically authorize gifting. In the scenario where assets need to be transferred to the spouse and the spouse is the agent in the document, it must also specify the authority for self-gifting.

While authorizing your agent to gift assets to themselves can be critical to securing Medicaid coverage, it should not be done without careful consideration. Any assets transferred would no longer be governed by the will, trust, or other estate planning documents of that person. Once property is transferred to another person, it is theirs and, while one would hope they would follow the wishes of the principal, it raises the risk that chosen beneficiaries will be disinherited. Choosing an agent that a principal trusts completely to follow their wishes and only do what is in their best interest is a necessary part of this type of planning.

The decision whether to grant the agent the authority to self-gift under a DPOA is not an easy one and there is no “right” answer. On the one hand, allowing the agent to gift assets to themselves may be the only way to quickly qualify for nursing home Medicaid coverage if one lacks the legal capacity to transfer the assets. On the other hand, an agent may never be needed to gift or self-gift because Medicaid is not needed or there are other ways of gaining eligibility.

The moral of the story is to address estate planning with an experienced elder law attorney sooner rather than later to advise on these issues and draft the appropriate DPOA document. There are various strategies by which assets can be protected for Medicaid eligibility while effectively ensuring that assets are left to chosen beneficiaries at the time of death.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner Esq.

Nancy Burner, Esq.

Being a Trustee of a trust carries serious responsibilities and trustees are compensated for their time. 

Section 2309 of New York’s Surrogate’s Court Procedure Act sets forth how to calculate the amount of commission. Under the statute, Trustees receive  commissions on the amount of property paid out and annually. However, keep in mind that the trust agreement can override the statute. The creator of the trust (Grantor) and Trustee may agree to a different amount, or the Trustee can waive the right to commissions altogether.

The statute lays out that the Trustee is entitled to a commission of 1% of any trust principal paid out. In addition to the 1% commission on distributions of principal, the following fee schedule sets out the Trustee’s annual commissions: 

(a) $10.50 per $1,000 on the first $400,000 of principal 

(b) $4.50 per $1,000 on the next $600,000 of principal 

(c) $3.00 per $1,000 on all additional principal.

Take the simple example of a trust with $1 million dollars in assets that directs $200,000 be paid out to the beneficiaries upon the Grantor’s death. The Trustee is entitled to a $2,000 commission for the distribution and then $5,200 annually. The statute also provides for reimbursement for reasonable and necessary expenses.

The trustee can choose to collect the commission at the beginning of the year or at the end of the year. But once the Trustee chooses a time they must collect the commission at that time of year every year going forward. Any successor or substitute Trustee must follow the same schedule.

Pursuant to SCPA §2309(3), annual commissions must come one-third from the income of the trust and two-thirds from the principal of the trust. Unless the trust says otherwise, commissions are payable one-third from trust income and two-thirds from trust principal. The only exception is for charitable remainder unitrusts or annuity trusts. In such cases, the commissions are paid out of principal, not out of the annuity or unitrust payments.

When deciding what the Trustee’s commission should be, it is important to keep SCPA 2309(3) in mind. This is especially true when the only asset in the trust is the Grantor’s home. Until the home is sold and the proceeds paid out, the Trustee is not entitled to the 1% commission.  Likewise, if the home is not generating rental income, then the one-third of the trustee’s commission is not payable under 2309. This may not be important if the Trustee is a beneficiary, but there is no incentive for a non-beneficiary Trustee in this situation.

Determining how to calculate the correct commission owed a Trustee can be complicated. Consulting an experienced estate planning attorney can make the process much easier to navigate. These discussions should be had upon creation of the trust as well as when the Trustee starts managing the trust.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Skilled nursing care is a high level of care that can only be provided by trained and licensed professionals, such as registered nurses, licensed professional nurses, medical directors, and physical, occupational, and speech therapists. 

Skilled care is short-term and helps people get back on their feet after injury or illness. Skilled nursing facilities are residential centers that provide nursing and rehabilitative services to patients on a short-term or long-term basis. Examples of the services provided at a skilled nursing facility include wound care, medication administration, physical and occupational therapy, and pulmonary rehabilitation.

Generally, patients who are admitted to skilled nursing facilities are recovering from surgery, injury, or acute illness, but a skilled nursing environment may also be appropriate for individuals suffering from chronic conditions that require constant medical supervision. If you or a loved one is interested in using Medicare for skilled nursing, though, there are specific admission requirements set by the federal government:

• The individual has Medicare Part A (hospital insurance) with a valid benefit period. The benefit period will start from the date of admission to a hospital or skilled nursing facility and last for up to 60 days after the end of the stay.

• The individual has a qualifying hospital stay. This generally means at least three in- patient days in a hospital.

• The doctor has recommended skilled nursing care for the individual on a daily basis. The care must be provided by skilled nurses and therapists or under their supervision and should be related to the condition that was attended to during the qualifying hospital stay.

• The individual is admitted to a skilled nursing facility that is certified by Medicare. A skilled nursing facility must meet strict criteria to maintain its Medicare certification.

Usually, the skilled nursing care services covered by Medicare include the room charges, provided that it is a semi-private or shared room, meals at the facility, and any nutritional counseling, as well as costs of medication, medical supplies, medical social services, and ambulance transportation. It also covers rehabilitative services that are required to recover from the condition, such as physical therapy, respiratory therapy, and speech therapy.

Medicare generally offers coverage for up to 100 days of treatment in a skilled nursing facility. Note that if the patient refuses the daily skilled care or therapy as recommended by the doctor, then the coverage by Medicare may be denied for the rest of the stay at the skilled nursing facility. Many patients are advised that they will not get the full 100 days of Medicare benefits because they had reached a “plateau” or that they failed to improve. This is known as the Improvement Standard and was a “rule of thumb” used to evaluate Medicare patients. 

Applying the Improvement Standard resulted in the denial of much needed skilled care for thousands of Medicare patients. The denials were based on a finding that there was no likelihood of improvement in the patient’s condition. This standard ignored the fact that the patients needed skilled care in order to maintain their current state of health and to prevent them from deteriorating. More often than not, if the patient was not improving, Medicare coverage was denied. While this standard was widely used, it was inconsistent with Medicare law and regulations.

A court case brought by Medicare beneficiaries and national organizations against the Secretary of Health and Human Services (Jimmo v Sebelius) sought to change this. The plaintiffs argued that even though the term “plateau” does not appear in the Medicare regulations, it is this term that is often used and relied upon to deny coverage. The appropriate standard should be: will the covered services “maintain the current condition or prevent or slow further deterioration,” not whether the individual was showing signs improvement.

As a result of this litigation and the settlement on Jan. 24, 2013, patients should be able to continue receiving services provided by Medicare, even where improvement in the patient’s condition cannot be documented. However, the old standard continues to be used. Patients and their advocates should educate themselves on the correct standard to make sure coverage is not cut prematurely.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

When creating estate planning documents for clients, a common concern is how to protect the beneficiaries of the estate.

When it comes to providing creditor protection for oneself, there are not many estate planning options available, aside from giving assets away. This could result in undesired consequences, such as the loss of ownership of the assets or creating a taxable event. Fortunately, this is not the case for beneficiaries — there are certain planning techniques to provide beneficiaries with creditor protection, and other protections, that one would otherwise not be able to provide for themselves.

The Internal Revenue Code states that if a trust limits the distribution of principal to an ascertainable standard, the trust qualifies as a creditor protected trust. Limiting distributions to the beneficiary for their health, education, maintenance, or support (HEMS) falls within the IRS guidelines of an ascertainable standard that creates creditor protection for the beneficiary. 

While this type of trust may sound restrictive, the trust can essentially be used to maintain the beneficiary’s lifestyle. The principal of the trust can be used to pay for the beneficiary’s schooling, rent, taxes, medical expenses and more. 

Additionally, assets, such as a real property, can be bought directly in the name of the trust, thus protecting the assets immediately upon purchase. Lastly, the beneficiary can be their own trustee of the trust and have the right to withdraw the income generated from the trust, all while still maintaining creditor protected status.

If there is a concern that the beneficiary may want or need access to the trust beyond HEMS distributions, or that the trust may become too burdensome or impractical to manage, the estate planning document creating the trust can provide various ways to either completely undo the trust or to authorize a distribution of principal beyond the beneficiary’s health, education, maintenance, or support.

Aside from creditor protection, there are additional benefits that come with beneficiary trusts. If, for example, there is a concern that a beneficiary may end up with a taxable estate, any assets transferred to them in trust will not be includable in the beneficiary’s estate.

This could help reduce, if not eliminate, a large estate tax on the beneficiary’s death. Another benefit is the ability for the creator to maintain control of the distribution of trust assets should the beneficiary die before the complete distribution of their trust. 

If the beneficiary is unable to manage their personal finances for any reason, the document can name someone other than the beneficiary to be the Trustee of the trust. The document can include specific instructions on how to administer the trust, thus ensuring that the beneficiary is properly cared for and that assets of the trust will last for an extended period of time.

Beneficiary trusts can exist both within a last will and testament, also known as a testamentary trust, as well as a free-standing living trust. Either document can take advantage of this powerful tool.

Because it is not always immediately clear whether a beneficiary trust or outright inheritance is the right distribution method, it is important to meet with your estate planning attorney and provide them with as much information as possible in order for them to properly advise on the creation of your documents.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Not all estates require a probate or full administration proceeding. A small estate proceeding,  also known as a Voluntary Administration, is a simplified Surrogate’s Court procedure. 

What estates qualify?

The  Voluntary Administration is available if the decedent passed away with $50,000 or less in  personal property. Personal property includes cars, cash, stocks — anything but real estate. The Voluntary Administration proceeding is not an option when the decedent owned real  property solely in their own name. It is available if the decedent died with or without a Will.  

Voluntary Administration is not only for decedents who had minimal assets. Sometimes  only certain assets were owned by the decedent in their sole name. This happens often with  married couples with joint bank accounts or who own real estate with rights of survivorship. A decedent may have named beneficiaries on most of their accounts. In such cases only some  property needs to pass through Surrogate’s Court. Other times a decedent conveyed most, but not all, of their property to a trust. If the assets left outside the trust are less than  $50,000, a Voluntary Administration is available.  

How to file

The small estate proceeding is initiated by filing of an “Affidavit of Voluntary  Administration.” The Petitioner is either the nominated Executor in the decedent’s Will or  the closest living relative when there is no Will. The Petitioner is asking the Court for the  authority to collect the decedent’s assets, pay off any debts, and distribute the property to  those with a legal right to inherit. If there was a Will, the beneficiaries named in the Will  inherit. If there was no Will, then the estate passes under the laws of intestacy. 

The Voluntary Administration Proceeding is less complex than a probate or full  administration proceeding. Consent and Waiver is not required from the decedent’s  distributees (heirs who will inherit under the estate). The Court only provides the  distributees with notice that the proceeding was filed. This avoids the expense of costly  litigation over the appointment of a fiduciary.  

Drawbacks

The Voluntary Administration Proceeding has some drawbacks. The appointed  Administrator only has the authority to collect the specific assets listed on the Affidavit of  Voluntary Administration. Such broad authority is only available in a full probate or  administration proceeding. The Administrator does not have the broad authority to collect  and distribute any additional assets. If the Administrator finds assets not listed on the initial Affidavit, they have to go back to the court. 

Further, if the assets exceed $50,000, the Administrator must convert the proceeding to a full probate or Administration. For this reason, when there is uncertainty about the assets, it may be wise to proceed with a full  probate or administration proceeding.  

A small estate proceeding costs only $1 to file. While the Voluntary Administration  Proceeding is simple and inexpensive, mistakes can be costly. It is always a good idea to  consult with an experienced Estate attorney to ensure that a small estate proceeding is the  best way to proceed. 

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

A key tool in the estate planner’s toolbox is a living trust. The term “living trust” refers to a document created during life that establishes a legal entity which can own certain assets.  The term differentiates a living trust from a “testamentary trust,” which is created after death. A further distinction to be made is whether the trust is Revocable or Irrevocable. Regardless of the title of the trust, the terms of the document will dictate the rules of how the assets in trust are managed and what control is retained by the trust creator.

A revocable trust leaves the creator with complete control over trust assets. The creator can be named as trustee with the power to revoke, amend, and restate the trust. Further, the creator’s Social Security number is used for the trust’s estate and income tax reporting. The main purpose of creating a revocable trust is to avoid court involvement after death. 

Assets that are not in a trust, do not have a joint owner, and do not name a beneficiary, require a court process after death. For those assets, the New York State Surrogate’s Court process is called probate, if the deceased person had a will, and administration, if they died without a will. There are several reasons to avoid the court after death, varying from disinheriting family members or not knowing your family, to owning property in multiple states or having disabled beneficiaries. For these and other purposes, the creation of a trust is often recommended.  

Beyond revocable trusts, circumstances may dictate the creation of an irrevocable trust. Irrevocable trusts are those that are written in a way to limit the creator of the trust in some fashion. The exact limitations will depend on the goals of the trust.  Common reasons to create an irrevocable trust are for Medicaid planning purposes or estate tax planning.  

For estate tax planning, two such trusts are an Intentionally Defective Grantor Trust (“IDGT”) and a Spousal Limited Access Trust (“SLAT”). Assets owned by an IDGT are removed from the creator’s estate, placing the growth outside of their taxable estate while taxing the income to the creator.  A SLAT is an irrevocable trust created by one spouse for the benefit of the other. The SLAT can provide income and principal distributions to the spouse and other beneficiaries. While the contributing spouse makes an irrevocable gift to the trust and gives up any right to the funds, the beneficiary spouse and other beneficiaries are provided immediate access to the gifted funds. Both the IDGT and SLAT are tools for claiming the benefit of the current Federal estate tax exemption ($12.06 million in 2022) before it expires.

Most people do not realize that the death benefit of life insurance is taxable in your estate. Creating an Irrevocable Life Insurance Trust (“ILIT”) and transferring policy ownership to the trust removes the death benefit from the taxable estate. This also provides liquidity to pay any taxes imposed on the balance of the estate.

If the goal is to protect assets while obtaining eligibility for Medicaid benefits, it may be prudent to create a Medicaid Asset Protection Trust (“MAPT”).  Under this type of trust, the creator should not be the trustee.  While the creator can receive income distributions, they are restricted from accessing principal of the trust.  

All trusts, whether revocable or irrevocable, can avoid court process after death so long as the document is drafted and funded properly. The type of trust and exact terms can be determined by an estate planning attorney to ensure the client’s specific circumstances and goals are considered. 

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

The legalities surrounding a Last Will and Testament stem from Roman times, when six witnesses affixed their personal seals to a will. The will was later validated by examining these seals to make sure they remained intact. 

Today we use staples instead of seals, but, because the probate process remains so formal, many misconceptions exist. Let’s discuss some of the more prevalent myths surrounding probate that we encounter.

Myth: If I have a will, my estate doesn’t have to go through Probate.

While a will documents where your assets go at death, a will does not avoid probate. Probate is a Surrogate’s Court proceeding whereby a decedent’s Last Will and Testament is validated and given effect. 

In New York, a will is admitted to probate after the Executor files a petition. The probate petition includes the original will, as well as a death certificate and funeral bill. Proper notice must be given to the individuals who would have inherited had the decedent died without a will. 

The court issues “letters testamentary” which give the executor the authority to act. The executor opens an estate bank account, pays the debts of the estate and then makes distributions to the beneficiaries.

The only way to avoid probate is to place all assets into a trust or die owning only “non probate assets.” Non-probate assets are those held jointly or that list beneficiaries. Common non-probate assets with beneficiary designations are retirement accounts and life insurance policies. Not all types of accounts allow designated beneficiaries or transfers on death. Naming others as joint owners can have catastrophic drawbacks, such as capital gains tax and creditor issues. A revocable trust is the gold standard in avoiding probate.

Myth: I don’t need a will because my spouse will inherit everything.

The only way your spouse inherits everything is if you do not have children or grandchildren. People are often surprised to learn that if they have children, their spouse does not inherit all their assets. 

In New York State, if someone is married with children and dies without a will, their spouse gets the first $50,000 and half of the remaining assets. The children split the other half amongst themselves. This means that without a will, minor children or children from a previous marriage inherit almost half of your assets. 

This is not what most people expect or want. The only way to make sure your spouse inherits 100% of your assets is to draft a will or trust. 

The probate process can be avoided if the couple owns all assets jointly. Joint ownership has its own problems — especially considering estate taxes or if there are children from a previous marriage. 

The probate process may sound confusing, but the procedure is easy and orderly with the help of an estate attorney. One of the kindest things you can do for your family is to draft a well-thought-out estate plan so that your assets pass in an orderly manner. At Burner Law Group, we charge flat fees so that clients fully understand their options and receive an estate plan custom tailored to them.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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