Tags Posts tagged with "Attorney At Law"

Attorney At Law

The IRS and the New York State Dept. of Taxation and Finance have extended the due date for personal income tax returns and related payments to May 17, 2021 due to the continued impact of COVID-19. METRO photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

In 2017, the Tax Cuts and Jobs Act increased the federal estate tax exclusion amount for decedents dying in years 2018 to 2025. The exclusion amount for 2021 is $11.7 million. This means that an individual can leave $11.7 million, and a married couple can leave $23.4 million dollars to their heirs or beneficiaries without paying any federal estate tax. This is a good thing because the federal estate tax rate is 40 percent.

Despite the large Federal Estate Tax exclusion amount, New York State’s estate tax exemption for 2021 is $5.93 million. Prior to April 1, 2014, the New York State estate tax exemption was $1 million, and many estates had to file New York State estate tax returns and pay New York State estate tax.

With the current exemptions, there would technically be no requirement to file either a New York State or federal estate tax return and no tax would be due. However, the inquiry does not end there. For example, if one spouse survived, and has approximately $5 million dollars in assets, it is recommended that he/she file a federal estate tax return to elect “portability” to capture the deceased spouse’s unused $11.7 million-dollar federal exemption. This would be necessary in the event of the living spouse’s assets appreciating over time and/or the federal estate tax exclusion decreasing leaving him/her with assets valued over the federal exclusion at the time of his/her death.

For those dying after December 31, 2010, if a first-to-die spouse has not fully used the federal estate tax exclusion, the unused portion called the “Deceased Spousal Unused Exclusion Amount,” or “DSUE amount,” can be transferred or “ported” to the surviving spouse. Thereafter, for both gift and estate tax purposes, the surviving spouse’s exclusion is the sum of (1) his/her own exclusion in the year if death, plus (2) the first-to-die’s ported DSUE amount.

In order for the surviving spouse to be able to use the unused exemption, the executor of the first-to-die’s estate must make an election on a timely-filed estate tax return. A timely filed return is a return filed within nine months after death or within fifteen months after obtaining an automatic extension of time to file from the IRS. Normally a federal estate tax return is only due if the gross estate plus the amount of any taxable gift exceeds the applicable exclusion amount (up to $11.7 million in 2021). However, in order to be able to elect portability, a federal estate tax return would have to be filed even if the value of the first-to-die’s estate was below the exclusion amount.

The problem occurs when the first spouse dies, and no estate tax return was filed. In that event, the second to die spouse could not use the deceased spouse’s unused exemption. What if the first spouse dies, no estate tax return is filed, and no election was made on a timely basis? Does the surviving spouse lose the exemption?

In June 2017, the IRS issued Revenue Procedure 2017-34. The Revenue Procedure is a simplified method to be used to make a late portability election. The IRS made this procedure applicable to estates during the two-year period immediately following the decedent’s date of death. This gives you 24 months to file rather than 15 months.

To be eligible to use the simplified method under the Revenue Procedure the estate must meet the following criteria:

(1) The decedent: (a) was survived by a spouse; (b) died after December 31, 2010; and (c) was a citizen or resident of the United States on the date of death;

(2) The executor was not required to file an estate tax return based on the value of the gross estate;

(3) The executor did not file an estate tax return within the time required; and

(4) The executor either files a complete and properly prepared United States Estate (and Tax Return) on or before the second annual anniversary of the decedent’s date of death.

If more than two years has elapsed since the date of death but all other criteria of Revenue Procedure 2017-34 were met, then the Executor would have to request a Private Letter Ruling from the IRS to obtain an extension of time elect portability and file a federal estate tax return.

For those that had spouses pass away after December 31, 2010, portability can be a valuable estate planning tool to save a significant amount of federal estate tax on the death of the second spouse. If a surviving spouse has assets that are close in value to the current federal exclusion amount, it is important to examine the records of the deceased spouse to make sure that a portability election was made on a timely filed federal estate tax return. If no return was filed, and no estate tax return was required to be filed, based upon this IRS Revenue Procedure it may not be too late to elect portability.

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

Photo from Pexels

By Nancy Burner, Esq.

Nancy Burner, Esq.

When a co-owner of real property passes away, what happens next depends on how the co- owners took title to the property. 

Upon the death of a co-owner, it is necessary to review the last deed of record to make this determination. There are three ways to own property in New York as co-owners: tenants in common, joint tenants with rights of survivorship or tenants by the entirety.

Only married couples who were married at the time they took title to the property can own property as tenants by the entirety — a type of ownership that provides certain protections. If the property is owned as joint tenants with rights of survivorship or as tenants by the entirety, the deceased owner’s interest passes automatically to the surviving co-owner by operation of law. 

Generally, it is not necessary to have a new deed prepared removing the deceased co-owner. When the surviving owner sells the property in the future, the deceased co-owner’s interest can be disposed of by providing his or her death certificate to the title company. If the surviving owner decides to transfer the property during life for no consideration, such as to a trust for estate planning purposes, a notation on the deed should be made by the attorney who prepares it. Upon future sale, the death certificate will still need to be provided to the title company to prove that the survivor is the legal owner of the property.

If, however, the property is owned as tenants in common or if the deceased spouse was the sole owner of the property, the deceased owner’s interest does not pass by operation of law upon death. Instead, the deceased owner’s interest passes according to his or her Last Will and Testament or according to New York Law if the decedent died without a will.

While New York law technically provides that real property vests in the decedent’s heirs as of the date of death and can be transferred or sold by those heirs, the heirs may have issues with the title company insuring the transaction, especially within two years from the date of death. 

It is typically best to have an Executor or Administrator appointed to transfer or sell the property from the estate. However, in order for a fiduciary to be appointed, a probate or administration proceeding will be necessary in Surrogate’s Court.

It is important to note that if the deed is silent as to whether co-owners took title as tenants in common or joint tenants with rights of survivorship, the default is tenants in common. If the deed is silent but the co-owners were married at the time they took title, then it creates a tenancy by the entirety.

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


Stock photo
Nancy Burner, Esq.

By Nancy Burner, Esq.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act became  effective on January 1, 2020. While the Act was aimed at improving retirement savings, there is a negative change which affects those who inherit retirement accounts from the original  participant. 

Prior to SECURE, designated beneficiaries of retirement accounts could take  required minimum distributions from the account over their life expectancy. This allowed for  another lifetime of deferred income tax payments and increased growth.  

After SECURE, with few exceptions, beneficiaries will now have to liquidate an inherited  retirement account within ten (10) years. For those with large IRAs and not many  beneficiaries, this equates to a big tax bite! Accordingly, some are looking for ways to structure  the distribution of their retirement account after death in a more tax efficient way. Additionally, some people have serious concerns that a particular beneficiary may not have  the self-control (due to spending habits or addictions) to make the inheritance last their  lifetime.  

A charitable remainder trust (CRT) is an irrevocable trust that distributes a certain percentage of the trust property to the trust’s lifetime beneficiaries either for their life or for a term of up to 20 years. CRTs are most often structured as Charitable Remainder Unitrusts (CRUTs) where the trust document sets forth a certain percentage that will be distributed to the beneficiary for the term of the trust.  

The CRUT must provide that the charity receives ten percent of the present value of the bequest at the death of the participant. So for the individual beneficiary with a shorter life  expectancy, the CRUT can pay out an income stream over the course of their lifetime, much  like the old stretch IRA. If the beneficiary is younger, the trust would need to be for a term of  years in order to comply with the 10% rule (up to a maximum of 20). 

At the end of the term, the lifetime beneficiaries’ interest terminates, and the balance of the trust property is paid to charity of the Grantor’s choosing. 

Why are Charitable Remainder Trusts becoming popular after SECURE? Because these types of trusts are income tax exempt. Accordingly, if you name your Charitable Remainder Trust as the beneficiary of your IRA, at your death, your estate receives a charitable deduction for the portion that is attributable to the charity. Only when your beneficiary receives a  distribution from the trust, will the income portion of the distribution be subject to income tax.  

An example of how the CRUT would work is as follows: The CRUT is named as the  beneficiary of an IRA with $2 million as of the death of the participant. The CRUT cashes out the IRA income-tax-free, then pays a 5% income interest to the decedent’s chosen beneficiary, in this case $100,000 per year. 

Over time, the distribution may fluctuate as the investments increase or decrease in value. However, the income stream lasts for their life, and not just 10 years like it would if you named that beneficiary  directly on the IRA. Essentially, this reinstates the lifetime income stream that used to be available for beneficiaries of retirement accounts. At the death of the beneficiary, the remaining trust assets would be distributed to the charity.  

Some negatives with naming a CRT as the beneficiary are that the beneficiary is limited to an  income stream. If they were named as a beneficiary on the IRA directly, they could remove as  much as they would like, although every penny is taxable as ordinary income. 

The calculation on whether or not the CRT provides more in the hands of the beneficiary is going to depend on may things, such as how long they live and how much the assets grow. The longer the term  of the trust and the larger the trust assets, the more income the beneficiary receives. Thought of another way though, even if they receive roughly the same, there is a huge charitable gift at the end of their life as well which not only results in a charitable deduction, but fulfillment of goodwill.  

The desire to name a CRT as the beneficiary of a retirement account definitely has more appeal than ever after the SECURE Act, but like anything else in the estate planning arena, it’s not a one-size fits all. If you have retirement accounts and are charitably inclined, speak to your estate planning attorney to see if this is the right strategy for you. 

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

Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

When helping a parent or other adult loved one handle their affairs, we never think of the legal ramifications. As caregivers we just do what needs to be done. 

It starts out naturally enough — handling bills, writing out checks, paying property taxes, making doctor’s appointments. It is only when an impediment at the bank or hospital arises that caregivers realize that family members do not actually have the legal authority to handle these matters. Unfortunately, at that point your loved one may not have the mental capacity to give that power.

Every caregiver should make sure that three simple but crucial documents are in place: a Health Care Proxy, Living Will, and Power of Attorney. In fact, everyone should draft these “Advance Directives” while they are healthy. These simple but mighty documents can avoid a myriad of issues: guardianship hearings, asset depletion, and interfamily conflict.

A Health Care Proxy allows you to designate someone to make medical decisions for you if you are unable to do so for yourself. In most states, including New York, only one person at a time can fulfill this role in order to give healthcare providers clear direction. However, you can name multiple alternative proxies to act in case their predecessor is unwilling or unable to act. 

The New York State Family Healthcare Decision Act allows close family members to make such decisions but only if the person is in a nursing facility of hospital. Many times, caregivers need to make medical decisions outside of this context – even as to making appointments and deciding on routine medical procedures. Moreover, the statutory priority of decision makers (guardian then spouse then adult child then parent) is not always in line with the choice of proxy you may have chosen. Without a valid health care proxy, a “personal needs guardian” would have to be appointed by the court through a guardianship proceeding. Such proceedings can be expensive and intrusive.

A Living Will sets forth your end of life choices. Without evidence of your preferences, an agent under a health care proxy cannot make end of life decisions on your behalf. The agent must provide clear and convincing evidence of whether you would want cardiac resuscitation, mechanical respiration, artificial nutrition and hydration, antibiotics, blood, kidney dialysis, surgery or invasive diagnostic tests. 

Without documentation of your preferences, family members may end up in court arguing whether you would have wanted to be kept alive if your quality of life is so poor. A video, a letter, or a social media post could meet the “clear and convincing” burden.

A Power of Attorney is what gives caregivers the legal authority to take care of your financial affairs, such as writing checks and selling real estate. In New York, the Durable Power of Attorney allows someone, the “principal”, to name an agent to step into one’s shoes financially and act in the principal’s best interest. This is a powerful document that extends into incapacity and should only be granted to someone you trust completely. 

Although in NYS the statutory power of attorney can be downloaded for free, it does not include necessary modifications that an estate planning attorney would include. For example, these modifications are crucial for Medicaid planning and asset protection. Having a valid Power of Attorney avoids the necessity of an Article 81 guardianship proceeding to appoint a “property needs guardian.”

These simple Advance Directives should be a part of a checklist for everyone – caregiver and loved one. These are the type of legal documents that seem unimportant until you actually need them.

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

METRO photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

The 2017 Tax Cuts and Jobs Act (the “Act”) increased the federal estate tax exclusion amount for decedents dying in years 2018 to 2025. The exclusion amount for 2021 is $11.7 million. This means that an individual can leave $11.7 million and a married couple can leave $23.4 million dollars to their heirs or beneficiaries without paying any federal estate tax. This also means that an individual or married couple can gift this same amount during their lifetime and not incur a federal gift tax. The rate for the federal estate and gift tax remains at 40 percent.

The Portability Election, which allows a surviving spouse to use his or her deceased spouse’s unused federal estate and gift tax exemption, is unchanged for 2021. This means a married couple can use the full $23.4 million exemption before any federal estate tax would be owed. To make a portability election, a federal estate tax return must be timely filed by the executor of the deceased spouse’s estate.

For 2021 the annual gift tax exclusion remains at $15,000. This means that an individual can give away $15,000 to any person in a calendar year ($30,000 for a married couple) without having to file a federal gift tax return and without counting toward their lifetime exemption amount.

Despite the large Federal Estate Tax exclusion amount, New York State’s estate tax exemption for 2021 is $5.93 million. New York State still does not recognize portability. New York has a three-year lookback on gifts as of January 16, 2019. However, gifts will not be includable in your estate if made within this time period if made by a resident or nonresident of real or tangible property located outside of New York State; while the decedent was a nonresident; before April 1, 2014; between Jan. 1, 2019 and Jan. 15, 2019.

If you are concerned about an increase in the federal estate and gift tax rate and decrease in the exemption due to the change in the presidential administration, now is the time to use your estate and gift tax exemption through lifetime gifts. By making lifetime gifts over the $15,000 annual exclusion, you utilize your estate and gift tax exemption. The IRS finalized rules in 2019 stating that it would not “claw back” lifetime gifts when the exemption is lowered. This means that an individual can give his or her entire estate and gift tax exemption ($11.58 million) in 2020 and not be affected by a reduced estate and gift tax exemption under the new administration.

To utilize the benefit of the larger estate and gift tax exemption in 2020 from a potentially reduced amount in 2021 and beyond, the gifts need to be substantial. Meaning that this gift would have to greater than the anticipated new exemption (the Biden plan proposes a $3.5 million exemption) to utilize what would be “excess” exemption. The proposed estate tax rate on amounts over $3.5 million is increased from 40% to 45%. If the excess exemption is not used before the exemption is lowered by Congress in a new legislation, then that “excess” would be lost and amounts remaining in your estate over $3.5 million at your death (assuming there is no surviving spouse) would be taxed at 45%.

Most taxpayers will never pay a federal estate tax under the current Act. If the federal estate tax exemption is reduced to $3.5 million, many more estates would be subject to a federal estate tax, especially on Long Island.

It is critical to do estate tax planning if you or your spouse have an estate that is potentially taxable under New York State law or taxable under the proposed changes to the federal estate tax laws.

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

METRO photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

In order for a person to contest a last will and testament (“will”) in New York, he or she must have legal grounds; a reason based in the law that the will is invalid and should not be admitted to probate.

Admitting a will to probate means that the executor named in the will is appointed by the Surrogate’s Court. The executor then distributes the decedent’s assets as dictated by the will. The most common grounds for challenging a will are improper execution, lack of testamentary capacity, and undue influence.

Having grounds for contesting a will takes more than simply disliking the terms of the will or being unhappy with its distribution.

A will must be properly executed to be valid. The requirements for the proper execution of a will are as follows: (1) the will must be signed at the end thereof, (2) the will must have been signed in the presence of two witnesses, (3) the decedent must have declared the document to be his or her will, and (4) the witnesses must have signed the will as witnesses at the request of the deceased.

When an attorney supervises the execution, the will is entitled to a presumption that it was properly executed — known as the presumption of due execution. Wills prepared from online DIY services and executed without an attorney do not enjoy this presumption.

The decedent must have also possessed testamentary capacity when he or she signed the will. The Surrogate’s Court looks at the following three factors to determine whether the decedent had the requisite capacity to sign a will: (1) the decedent understood the nature and consequences of executing a will, (2) the decedent knew the nature and extent of his or her property, and (3) the decedent knew the natural objects of his or her bounty and his or her relations with them.

If a will is the product of undue influence, it will not be admitted to probate. A will may be invalidated on the ground of undue influence if there was: (1) motive, (2) opportunity, and (3) the actual exercise of undue influence. The influence exercised must rise to a level of coercion that restrains the free will and independent action in a forceful way. The inquiry into whether a will is a product of undue influence is fact specific and involves the examination of the decedent and his or her circumstances, the will and its procurement, and the person alleged to have exercised the undue influence.

If it is determined that any of these grounds exist, then the Surrogate’s Court would refuse to admit the will to probate. The result of the denial of probate would be that the decedent’s next of kin would inherit the estate under the laws of intestacy or the beneficiaries of the decedent’s prior will would inherit.

It is difficult — but not impossible — to contest a will. The requirements of due execution and testamentary capacity are easily achieved by presumptions that are obtained through attorney supervised will signings. Undue influence is not easily demonstrated and generally takes a thorough investigation to uncover significant facts. These matters are usually complicated both factually and procedurally, and the assistance of an experienced estate litigation attorney is essential.

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

METRO photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

A “closing” in legal lingo is the final step in a real estate transaction. A real estate closing is when the purchaser obtains title to the property, evidenced by a deed from the seller to the purchaser or stock in a cooperative apartment.

Simultaneously, the seller obtains the net proceeds from the sale. This event is usually attended by the seller, purchaser, their respective attorneys, the title closer, the bank attorney (if the purchaser has obtained financing) and the real estate agents.

In our post-COVID world, closings have looked a little different with closings occurring by mail, with parties pre-signing documents and agents not attending closings.

What an attorney does during the closing depends on which party he or she represents. Ideally, all of the complications have been worked out before the parties get to the closing table, although occasionally an issue will arise during the final walk-thru of the property that will need to be addressed.

If there is a bank attorney, he or she is required to have all of the numbers ahead of time so that they can complete the closing disclosure that will provide a detailed itemization of all fees to be paid at the closing and an exact number that the borrower/purchaser will be paying and the seller will be receiving.

The bank attorney provides the documentation required by the bank to be signed by the borrower/purchaser and provides funding only when the title company provides a loan policy to the lender.

The seller’s attorney is responsible for preparing the deed and governmental transfer documents which will be signed at the closing by the parties and for obtaining any payoffs and appropriate checks to pay the liens or judgments that may have been presented in the title report against the property or the seller. The seller’s attorney will typically ask for bank checks for these items to be provided by the purchaser which will be deducted from the total proceeds owed.

The title closer will make sure that any mortgage, judgments or liens are paid off and that any new mortgage will be recorded along with the deed. The purchaser will leave with only a copy of the deed as it will be recorded by the title closer in the county clerk’s office once the closing has concluded.

The title company insures the purchaser as to the ownership and also the lender that their mortgage has priority and is valid. Once the title closer is satisfied with the documentation and has provided the title policies, the closing is officially concluded and the purchaser will be provided with the keys and the seller will receive the checks.

The purchaser’s attorney is responsible for having the purchaser bring the correct checks to the table, explain the lender’s documents, and ensure that the title company is insuring the purchaser’s title to the property.

As you can see, there are sometimes three attorneys present at a residential closing, each with different roles. The main role for any attorney you retain is to protect your interests — whether you are the buyer, seller or the bank.

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

Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

Making medical decisions for a loved one is extremely difficult, but making end of life decisions for someone is legally impossible without proof of his or her wishes. In New York, nobody may make end of life decisions for another — such as to forgo life sustaining treatments which only serve to artificially prolong one’s life — unless there is “clear and convincing” evidence of that person’s medical wishes. A Living Will document is the standard manner in which that burden is met.

A Living Will is part of a trio of “advanced directives,” which include a health care proxy and durable power of attorney, that help people plan for incapacity. Although you may name an agent to make medical decisions for you under a Health Care Proxy, that person cannot use his or her own judgment to reject life prolonging medical treatment for you — even if you are in a vegetative state with no hope of recovery.

The agent must provide sufficient proof of whether you would want cardiac resuscitation, mechanical respiration, artificial nutrition and hydration, antibiotics, blood, kidney dialysis, surgery or invasive diagnostic tests. A Living Will document specifically states what medical actions should be taken if you are in a terminal state with no reasonable hope of recovery and cannot communicate your wishes. Without it, your family members may end up in court offering testimony of why you would not have wanted to be kept alive if your quality of life was so poor. A video, a letter, a Facebook post — any such evidence could meet the “clear and convincing” burden.

A standard living will refuses all life-sustaining procedures if such measures only serve to artificially prolong one’s life. Such treatments are limited to making the patient comfortable and maximizing pain relief. However, this is not a requirement. A Living Will can and should be tailored to an individual’s specific needs and beliefs, even if it means that person wants all life-sustaining measures to be taken. Before executing a Living Will, you should consider what medical treatments are to be administered and under what medical conditions. Additionally, a Living Will can state your preference to be kept at home, if possible, rather than in a hospital.

It is important that when deciding who will act as a health care agent, you choose an individual who not only understands your wishes but is also willing to carry them out. Religious beliefs, for example, may prevent someone from “pulling the plug” even though you specifically instruct your agent to do so. A loved one may have a hard time carrying out your wishes for emotional reasons.

Before appointing an agent, you should have a discussion with them to ensure they understand your treatment plan and agree to follow same. If you cannot find an agent to carry out your wishes, the living will can be filed with your doctor or the hospital so that it is on record and provides instructions to your attending physician.

As you can see, a Living Will is a crucial estate planning document that all individuals should have in place. It is important to discuss your wishes with an Estate Planning attorney to ensure that your preferences will be carried out are legally valid.

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

Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

Incapacity and death are usually topics that one attempts to push off to a future date or sweep under the rug. We rationalize — “I am young” or “I am still handling my affairs” or “I will worry about it later.” It is not until we are faced with a lifechanging event that propel us on a path to deal with the situation at hand.

Usually these lifechanging events are individual to the person — a catastrophic health condition, an accident or maybe seeing a close family member or friend going through some event. It is rare that we are faced with a national health crisis that make us all stop and consider this type of planning. In the light of recent events with COVID-19, the world is faced with an epidemic that has many people scrambling to have their affairs in order.

In the uncertainty of becoming incapacitated and unable to handle your own affairs, it is more important than ever to have basic advanced directives in place. Anyone over the age of eighteen should have the following documents: Health Care Proxy, Living Will (if desired), HIPAA release form and General Durable Power of Attorney.

The health care proxy is a document that states who you would like to make your medical decisions in the event you are unable to make them for yourself because you have been deemed incapacitated by a doctor. The living will states your wishes regarding the withdrawal of treatments. This document can direct that certain treatments be stopped if they are serving to prolong your life without any reasonable expectation of recovery.

A HIPAA release allows the listed individuals to be able to obtain copies of your medical records. A power of attorney authorizes your agent to control your financial life — including but not limited to banking, pension plans, life insurance, etc. Your agent would step into your shoes and be able to handle all of your financial affairs.

Absent having these documents in place, no one would have the authority to act on your behalf in the event you become incapacitated. If you are hospitalized or quarantined, no one will be able to access your bank accounts on your behalf — pay bills or ask for relief in payments. If you are incapacitated and cannot make your own medical decision, you will not be able to choose your agent.

This is typically where we explain to our clients that this could result in a guardianship court proceeding which is costly and invasive. However, in light of COVID-19, the court system is not even available due to the closure that started on March 17, 2020. Without the proper documents in place and not being able to turn to the court, this could result in a huge delay of anyone acting on your behalf.

As we continue to forge ahead in this worldwide crisis, take the time to speak with your family members and come up with a plan. Estate Planning attorneys in your area are available to explain your options and set up a comprehensive plan to ensure that your loved ones are not scrambling to assist you.

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

Stock photo

By Nancy Burner, Esq.

Nancy Burner, Esq.

For certain retirement accounts, the IRS requires you to take distributions based upon your life expectancy once you reach the age of 72 ½ (the required age was raised from 70 ½ with the passage of the SECURE Act in December 2019).

As a result of the COVID-19 emergency, the CARES Act suspended the requirement to take these distributions in 2020. There are many who did not yet take a distribution for the year. For them, they can decide if it is a piece of income they need and whether to take it. However, some took their Required Minimum Distribution (RMD) at the beginning of the year and they may now be realizing that they did not need this income and that they do not want to pay the associated income tax on the distribution. Even worse, they may have taken it in January and have found themselves in a position where the time period to return it without taxation has lapsed.  What can they do?

The IRS has issued guidance for individuals who received an RMD for retirement accounts in 2020 prior to the COVID-19 emergency and now wish to return it. Notice 2020-51 provides procedure and rules allowing for a return of these monies in light of the fact that an RMD is not required for this year. In many instances, you may be able to return the distribution, thus eliminating the income tax liability on that amount. Most importantly, this rollback must be done by August 31, 2020.

The ability to return the RMD without tax consequences extends to those who took a lump sum distribution as well as to those who received an amount monthly.  It will also apply to persons of all ages that are the beneficiary of an inherited IRA. Note that while the RMD can be returned, the IRS did not extend these provisions to allow you to “rollback” or give back an amount in excess of your RMD.

In addition to the RMD rollback provisions, the IRS Notice 2020-51 allowed special provisions for Corona-Virus related distributions. If you fall in the broad category of persons impacted by COVID-19, you can receive an early distribution of your retirement account without the 10% additional tax/penalty that would otherwise have been assessed. This is significant if you are under 59 ½ and you need to use funds in your retirement account but wanted to avoid the large penalty. 

If you received some or all of your required minimum distribution from your retirement account in 2020 before the enactment of the CARES Act, you should contact your financial advisor, accountant or attorney to determine whether you qualify for these special rollbacks and if it is in your best interest to take advantage of this provision.  Not all retirement accounts have the same treatment so an individualized look is essential and should be done as soon as possible to comply with the August 31, 2020 deadline.

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