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Attorney At Law

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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.

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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.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Federal and state funding of COVID-19 related relief will likely require major budget overhauls and could potentially change the estate and gift tax landscape.

On the federal level, the 2017 Tax Cuts and Jobs Act doubled the estate and gift tax exclusion from $5,000,000 to $10,000,000, as adjusted for inflation, for decedents passing away between 2018 and 2025. However, the increase in the exclusion amount is temporary and is scheduled to sunset on December 31, 2025 and revert back to $5,000,000 (adjusted for inflation).

Currently, the federal 2020 lifetime exclusion amount is $11,580,000 per person, which can be utilized to transfer assets during life or upon death, free of federal estate or gift tax. In New York, the current estate tax exclusion is $5,850,000. New York does not impose a gift tax, although gifts made within three years of death are brought back into the estate for estate tax purposes.

Portability on the federal level allows a surviving spouse to use the deceased spouse’s unused federal lifetime exclusion. Therefore, if the first spouse to die has not fully utilized his or her federal estate tax exclusion, the unused portion, called the “DSUE amount,” can be transferred to the surviving spouse. The surviving spouse’s exclusion then becomes the sum of his or her own exclusion plus the DSUE amount. 

To take advantage of the DSUE amount, a timely filed federal estate tax return must be filed within 9 months from the deceased spouse’s date of death, or within 15 months pursuant to an extension request. Many surviving spouses may not be aware of this requirement or fail to see how filing a return would be beneficial at the time of the first spouse’s death with the current exclusion amount being so high. If ignored, upon the death of the surviving spouse, his or her estate is unable to utilize the DSUE amount unless other specific actions are taken. New York State does not currently have portability.

With the looming sunset, practitioners were concerned with what exclusion amount would be used to calculate the estate tax for a decedent dying after January 1, 2026 who made gifts between 2018 and the end of 2025, or the DSUE amount for the spouse that died between these dates that filed a return for portability. Finally, on November 26, 2019, the Treasury

Department and IRS issued regulations clarifying that the estate tax and DSUE amount will be calculated using the increased exclusion amount that was in place between December 31, 2017 and January 1, 2026, confirming that there will be no “claw back.”

Increased spending associated with COVID-19 will likely leave the government searching for revenue. One such avenue could be a reduction in the exclusion amount on the federal and/or state level, even prior to the current federal sunset date. It is more important than ever for an executor to file a federal estate tax return on the death of the first spouse to lock in the higher DSUE amount. 

Additionally, individuals with high net worth should consider gifting assets now to reduce their taxable estate on both the federal and state levels. 

With so many political and social changes on the horizon, it is of paramount important to work with an experienced estate planning attorney to discuss these issues, review your estate plan and potentially revise your current estate planning documents to include provisions for estate tax planning on the death of the first spouse. The potential to be subject to estate tax could increase for a significant number of individuals if the exclusion amount is lowered in the future.

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Community Based (homecare) Medicaid is a program that can assist families in paying for the cost of home health aides as well as other programs, supplies and equipment, to help people age in place. Medicaid, unlike Medicare, is a need-based program with certain asset and income requirements.

These separate requirements for Medicaid eligibility must both be met by the applicant. To meet the Community Medicaid asset requirements, an individual is permitted to own a home, have liquid non-retirement assets that do not exceed $15,750.00, retirement savings in any amount, an irrevocable pre-paid funeral account and one car. With respect to income, an applicant may retain a monthly income of $875.00 plus a disregard of $20.00. The recipient must continue to take required monthly minimum distributions from retirement accounts.

Unlike nursing home Medicaid, any excess income can be directed to a Pooled Income Trust for the benefit of the Medicaid applicant and the monies deposited into that trust can be used to pay the household expenses of the Medicaid applicant. These household expenses are not limited to shelter but can include food, luxury items and any non-covered medical expenses.

Until recently, under the New York Medicaid guidelines, there has not been a look-back for Community Medicaid, meaning an applicant for Community Medicaid could transfer an unlimited amount of assets in one month and be eligible the 1st day of the following month. Soon, this will no longer be the case. 

An amendment was made to New York Social Service Law Section 366 subd.5 under the 2020-2021 New York State Budget, wherein a thirty (30) month lookback was instituted for Community Medicaid coverage. The change is set to roll out on October 1, 2020. 

This means that an individual applying for Community Medicaid post-October 2020, will have to submit 30 months of financial disclosure for eligibility purposes. To the extent there are uncompensated transfers or gifting, the applicant will be penalized and not enrolled in Community Medicaid for a specific period. The divisor currently used is $13,407.00, meaning that for every $13,407.00 the applicant transferred for less than fair market compensation, he or she will be penalized for a period of one month.

For example, if it is determined that an application gifted $60,000.00 within the 30-month lookback, the applicant will be ineligible to receive Community Medicaid for approximately 4.5 months, requiring an out of pocket payment for care received for those months. This raises the question of where the money for that care will come from. 

What if you gifted the money without an expectation of receiving it back and without taking into consideration your own care needs? It is still unclear how the penalty period will run, from which date it will be calculated and how applicants will be able to mitigate any transfers they did make during the lookback. 

Similarly, it is not clear if the 30-month lookback will affect those currently enrolled in the Community Medicaid program. The law does not address whether transfers made prior to the change in the law will be exempted from the lookback and whether there will be a post eligibility lookback assessed to those already on the program. 

To remain eligible, a Medicaid recipient must recertify their Medicaid benefits annually. Under the current regulations, only financial documents showing assets and income as of the date of recertification need be provided. However, in light of the new lookback, it is uncertain if the recertification process will now require a 30-month lookback. Likewise, it is unknown whether the local department of social services will discontinue benefits for those recipients who had transferred assets in the last 30 months.

The Community Medicaid program in New York allows our seniors to remain in their home, receiving care. With careful planning this program can still allow many individuals to age in place. The changes to the Medicaid qualification process highlight the need for sound estate planning that includes consideration of asset protection planning.

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Congratulations! You’re going to be graduating from high school very soon and are (fingers crossed) heading off to college in the fall. In preparation, you are shopping for school supplies, bedding, a new wardrobe, and researching the best classes to take. What you’re likely not thinking about is ensuring you have the proper estate planning documents in place before taking that next step in your life.

Drawing up a will or advanced directives for a college student may seem like an unnecessary task and expense, but once you turn 18, you are considered an adult under New York State law. Since you are no longer under your parents’ care, they do not have an automatic right to make decisions on your behalf. While this may seem like your long-awaited initiation into the freedom of adulthood, the reality is that situations may arise where a parent or other family member’s input is crucial.

Students are especially prone to getting sick or injured and, combined with living on their own, make it necessary to put certain legal directives in place. The three documents every college student needs are a health care proxy, HIPAA release form, and durable power of attorney.

A health care proxy allows you to appoint an agent to make medical decisions for you if you cannot do so for yourself. You can only name one agent but can nominate alternate agents in case your primary agent is unable or unwilling to act. The HIPAA release form further authorizes your agent to obtain your medical information. Without these documents, your parent (or whomever you designate to make such medical decisions) is going to face resistance when it comes to inquiring about the status of your health or providing care instructions to your doctor.

The power of attorney names an agent to make financial decisions on your behalf. The power of attorney does not strip you of your financial powers but rather duplicates them so that your agent can act in your stead if you are incapacitated or otherwise unable to act. A power of attorney can be beneficial if you need someone to pay a bill, apply for financial aid, or hire a professional on your behalf, such as an accountant or lawyer.

Beyond the aforementioned documents, you may also consider a last will and testament and a living will. Although they sound similar, they are very different documents. Depending on the extent of your assets, either saved or inherited, you may want to designate beneficiaries in a last will and testaments or trust. A “living will” documents end of life decisions, such as whether you want to be kept alive by artificial means if you have an incurable disease or are in a persistent vegetative state.

Although these are questions that you will hopefully not face for decades, planning for your future is an important way of taking control of your life. Any new graduate — or eighteen-year-old for that matter — should make time to seek the advice of an Estate Planning attorney to discuss what documents should be in place as you enter the world of adulthood.

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

When a person does their estate planning, he or she will typically prepare a Last Will and Testament. A will contains a provision that nominates an Executor. Since there is a nominated executor, typically, in probate proceedings the appointment of the fiduciary is not complicated as it is controlled by the selection made by the testator.

It is significantly different when a person dies intestate (without a will). In these situations, the Surrogate’s Court is required to appoint an Administrator. The rules on the priority of who is eligible for appointment are contained in Surrogate’s Court Procedure Act. The statute contains a detailed order of priority in the court’s granting of letters of administration. Absent a showing that the person with statutory priority is ineligible to receive letters of administration due to several grounds including: that person is an infant; incapacitated; a non-domiciliary of the United States; a felon or does not possess the qualifications required of a fiduciary by reason of substance abuse or dishonesty, letters must issue to that person.

The decedent’s surviving spouse has priority to receive letters. Unless he or she is ineligible as stated above, the spouse will be appointed. This becomes an issue in many second marriage situations where the children of the first marriage do not get along with spouse from the second marriage. Unless there are grounds to disqualify the spouse, it is likely not worth pursuing objections to his or her appointment. Filing objections will delay the matter and cost a lot of money in legal fees with little likelihood of success.

Complications in the appointment of an Administrator also arise when there are several people in one category with equal priority to serve. This happens when the decedent has no spouse and several children. This situation can also arise in families where the decedent has no spouse, children, or surviving parents but several surviving siblings. Regardless of whose consent is required in each case, letters of administration can only issue to an eligible person(s) or person nominated by all interested parties.

It is not always advisable to resolve family disputes for letters of administration by agreeing to have the two or more administrators serve together. If the level of hostility is great, it is unlikely that they will be able to work together for the smooth administration of the estate. The parties might be able to agree on a third party to serve, known as a designee.

 If not, the court may appoint one of the parties or might appoint the Public Administrator. While the Public Administrator will ensure fairness in the process, its fees are typically higher than if a family member served. The Public Administrator will take statutory commissions if appointed, and the Public Administrator will also be entitled to have its attorneys’ fees and the expenses of its office paid from the estate.

The appointment of an Administrator can be as simple or as difficult as the family dynamics allow. Regardless, if you are seeking to become the administrator of an estate, you should seek the advice of an attorney experienced in estate administration to guide you through the process. Getting appointed by the court is only the first step in the process of administering an estate.

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Many people use irrevocable trusts as part of their estate plan for tax savings, asset protection and Medicaid planning. In all these types of trusts, the grantor (creator) of the trust is going to be limited to their access of the principal of the trust in order to ensure that their planning needs are met. This means that their ability to use trust assets as collateral for a loan is going to be limited. 

A concern that should be discussed before transferring real estate to an irrevocable trust, is whether or not you 1.) have an existing mortgage and plan to refinance in the near future and 2.) whether you think you may need to get a new mortgage or line of credit in the near future?

It is common, particularly in Medicaid planning, to transfer real estate to your irrevocable trust because Medicaid trusts typically provide that the grantor can reside in the property and shall maintain all tax exemptions formerly afforded to them. This makes the home an easy asset to protect since the transfer does not affect everyday use of the property. The biggest exception is the Grantor’s ability to refinance or secure new mortgage products once the property is in a trust since many banks will not lend to properties owned by an irrevocable trust.

While most irrevocable trusts do not expressly prohibit the Trustee from securing a mortgage with a trust asset, the loan industry’s underwriting guidelines typically do not allow it. 

Luckily, some banks are catching up with the times and have special products which can be secured against properties in irrevocable trusts. However, you should expect to pay higher interest rates.

If your preferred lending institution will not work with your property in the trust, then it may be possible to revoke the trust with the consent of the grantor and beneficiaries. However, once a trust is revoked, it will no longer afford you the planning goals it once did.
In other words, if your house was in a Medicaid Trust for 7 years and you revoke it to avail yourself to the low interest rates now available for mortgages, it will no longer be protected. The home would have to be placed in another Medicaid trust for an additional 5 years before it would be protected again should you require nursing home care and ask that the Medicaid program pay for said care. 

Always speak to your attorney before taking any asset out of an irrevocable trust. While everyone wants to pay the lowest interest rate possible, the protection you are getting by keeping the assets in the trust may outweigh the cost savings. If beneficiaries will not consent, or cannot consent due to death, disability or minority, the Trustee may be able to “decant” the irrevocable trust assets to a new trust with different terms which the bank may find more favorable. Decanting requires a Trustee who is not an interested party, so if the current Trustee is also a beneficiary, a new Trustee will need to be appointed. 

Decanting has become popular in recent years not only for amending trusts to please the lenders, but to fix a myriad of issues that older trusts may present. This is a specialized area of the law and you should seek counsel that is familiar with sophisticated trust and estate principles before transferring any asset from one trust to another.

In sum, transferring your property to an irrevocable trust will likely limit your choices for refinancing or mortgaging the property in the future. If this is something you are considering, speak to your attorney about obtaining financing before you transfer your house to the trust to avoid the hassle later.

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

While the beginning of the year is typically tax season, it is important to remember that property tax exemptions can be applied for at this time. There are different programs that homeowners should be aware of in order to potentially save with respect to property taxes. 

Most individuals are familiar with the STAR program, which is the New York State School Tax Relief Program. Another program that people may not be as familiar with is the exemption for persons with disabilities. New York State offers local governments and school districts the ability to opt into a grant reduction on the amount of property taxes paid by qualifying persons with disabilities.

The eligibility requirements for this exemption is based on the individual’s disability, income, residency and ownership. For the disability component, the individual must demonstrate a physical or mental impairment that substantially limits the person’s ability to engage in one or more major life activity (e.g., walking, hearing, breathing, working). The applicant must submit proof of disability via an award letter from the Social Security Administration, an award letter from the Railroad Retirement Board, a certificate from the State Commission for the Blind and Visually Handicapped, an award letter from the U.S. Postal Service or an award letter from the U.S. Department of Veterans Affairs. 

If the disability is not permanent, the applicant will be required to certify the disability each year. For the residency requirement, the property must be the “legal residence” of the disabled person and currently occupied by the disabled person. There is an exception for absence due to medical treatment. For the ownership requirement, all property owners must be disabled. The only two exceptions are for spouse- or sibling-owned property. In those cases, only one owner needs to be disabled.

With respect to the income eligibility, the basic exemption is a 50 percent reduction in the assessed value of the legal residence. New York State allows each county, city, town, village or school district to set the maximum annual income limit at any figure between $3,000.00 and $29,000.00. If the disabled person makes between $29,000.00 and $37,399.99, the localities can give a less than 50 percent exemption based on a sliding scale. Proof of income of the most recent tax year is required to be submitted with the application. 

All income sources are countable except Social Security Income (SSI), Foster Grandparent Program Grant monies, welfare payments, inheritances, return of capital and reparation payments received by Holocaust survivors. Certain medical expenses can be used to offset gross income. For example, medical and prescription drug expenses that are not reimbursed or paid by insurance may be deducted from total income. 

Additionally, if the owner is an inpatient in a residential health care facility, the monies paid by the owner, spouse or co-owner will not be considered income in determining the exemption eligibility. Each municipality may be more generous with the exception than others.

Finally, even if all requirements are met, if there are children living in the home and attending public school, the disabled owner is typically not eligible for the exemption. This can be waived by the school district under specific circumstances.

New York State sets out broad eligibility requirements that each municipality can narrow down. It is important to find out the exact requirements for your specific municipality to determine if you qualify for the exemption. The exemption for persons with disability can offer a substantial relief for those who qualify.

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

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By Nancer Burner, Esq.

Nancy Burner, Esq.

The new Setting Every Community Up for Retirement Enhancement (SECURE) Act, effective Jan. 1, 2020, is the broadest piece of retirement legislation passed in 13 years. The law focuses on retirement planning in three areas: modifying required minimum distribution (RMD) rules for retirement plans, expanding retirement plan access and increasing lifetime income options in retirement plans. This article will focus on the modifications to the RMD rules and their effects on inherited individual retirement accounts. 

Before the SECURE Act, if you had money in a traditional IRA and were retired, you were required to start making withdrawals at age 70½. But for people who have not reached age 70½ by the end of 2019, the SECURE Act pushes RMD start date to age 72. By delaying the RMD start date, the SECURE Act gives your IRAs and 401(k)s additional time to grow without required distributions and the resulting income taxes.

Since RMDs will not start until age 72, the new law will give you an additional two years to do what are known as Roth IRA conversions without having to worry about the impact of required distributions. With a Roth IRA, unlike a traditional IRA, withdrawals are income tax-free if you meet certain requirements and there are no RMDs during your lifetime. The general goal of a Roth conversion is to convert taxable money in an IRA into a Roth IRA at lower tax rates today than you expect to pay in the future.

The SECURE Act also removed the so-called “stretch” provisions for beneficiaries of IRAs. In the past, if an IRA was left to a beneficiary, that person could stretch out the RMDs over his or her life expectancy, essentially “stretching” out the tax benefits of the retirement account. But with the SECURE Act, most IRA beneficiaries will now have to distribute their entire IRA account within 10 years of the year of death of the owner. 

There are, however, exceptions to the 10-year rule for the following beneficiaries: surviving spouse, children under the age of majority, disabled, chronically ill and an individual not more than 10 years younger than employee. 

The SECURE Act means it is now very important to review the beneficiary designations of your retirement accounts. You want to make sure they align with the new beneficiary rules. Prior to the SECURE Act, a spousal rollover was generally the best practice to preserve the IRA. For many with large retirement accounts, it may now be better to begin distributing the IRA earlier in order to minimize exposure to higher tax brackets. It may also be beneficial to name multiple beneficiaries on an IRA to spread the distributions to more taxpayers, so the 10-year rule has less of an impact on the beneficiary’s income tax bracket. 

Prior to the SECURE Act, many people used trusts as beneficiaries of retirement accounts with a “see-through” feature that let the beneficiary stretch out the tax benefits of the inherited IRA account. The benefit of the trust was to help manage the inherited IRA and to provide protection from creditors. 

However, many of these trusts provided the beneficiary with access to only the RMD. With the new rule that all money must be taken out within 10 years, these trusts no longer have the same effect and could be troublesome, requiring that significantly more money be distributed to the beneficiary annually than initially intended. In addition, the trust funds would likely be exhausted after 10 years rather than providing funds to the beneficiary over his or her remaining life expectancy. 

Anyone with a trust as the beneficiary of an IRA should immediately review the trust language with an experienced estate planning attorney to see if it still aligns with his or her intended goals. 

If you are not sure what the new SECURE Act means for your retirement account, you should also contact an experienced estate planning attorney to review your beneficiary designations. 

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

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By Nancy Burner, Esq.

Nancy Burner, Esq.

The Tax Cuts and Jobs Act (the Act) increased the federal estate tax exclusion amount for decedents dying in years 2018 to 2025. The Act is set to sunset on Dec. 31, 2025. 

The exclusion amount for 2020 is $11.58 million. This means that an individual can leave $11.58 million and a married couple can leave $23.16 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.

There was concern that the sunset of the higher exclusion amount and reversion to the lower amount could, retroactively deny taxpayers who die after 2025 the full benefit of the higher exclusion amount applied to 2018-25 gifts. This scenario has sometimes been called a “claw back” of the applicable exclusion amount. In November, the IRS issued new regulations that make clear that gifts made within the time period of the increased exemption amount used before death will not be “clawed back” into the decedent’s estate and subject to estate tax.

There are no 2020 changes to the rules regarding step-up basis at death. That means that when you die, your heirs’ cost basis in the assets you leave them are reset to the value at your date of death. 

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 2020. This means a married couple can use the full $23.16 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 2020 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. 

Despite the large federal estate tax exclusion amount, New York State’s estate tax exemption for 2020 is $5.85 million. This is a slight increase for inflation from the 2019 exemption of $5.74 million. New York State still does not recognize portability.  New York still has the “cliff,” meaning that if the estate is valued at more than 105 percent of the exemption amount ($6,142,500 in 2020) then the estate loses the benefit of the exemption and pays tax on the entire estate. 

New York reinstated its short-lived elimination of the three-year lookback on gifts effective Jan. 15, 2019. However, a gift is not includable if it was made by a resident or nonresident and the gift consists of real or tangible property located outside of New York; while the decedent was a nonresident; before April 1, 2014; between Jan.1, 2019 and Jan. 15, 2019; or by a decedent whose date of death was on or after Jan. 1, 2026.

Most taxpayers will never pay a federal or New York State estate tax. However, there are many reasons to engage in estate planning. Those reasons include long-term care planning, tax basis planning and planning to protect your beneficiaries once they inherit the wealth. In addition, since New York State has a separate estate tax regime with a significantly lower exclusion than that of the federal regime, it is still critical to do estate tax planning if you and/or your spouse have an estate that is potentially taxable under New York State law. 

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