Articles Posted in Estate Planning

Last week the Wall Street Journal‘s “Family Values” blog discussed the often challenging estate planning issues faced by families who are providing for a disabled loved one. Our New York estate planning lawyers know that more families are in this situation than some might suspect. The latest U.S. Census data shows that roughly 12% of the population has a severe physical or mental disability. When planning for the future it is particularly important for these families to closely consider how they want to leave assets to their heirs because of the effect that the asset transfers may have on their disabled relative’s access to public assistance.

Budget shortfalls are causing many state and local governments to cut support services to these residents. A common cost-cutting measure includes tightening income restrictions for those seeking to qualify for medical benefits and support services. As a result, it is vital that all families structure inheritances for disabled heirs so that they are not disqualified from the government help that they will likely need. Yet, research shows that two-thirds of parents and caregivers with disabled loved ones do not have plans in place to account for the long-term needs of these vulnerable heirs.

This is particularly unfortunate, because there are planning strategies that exist specifically to assist families in this situation. For example, a special needs trust can be used to leave assets to heirs with disabilities while ensuring that they keep government benefits like Medicaid and Supplemental Security Income (SSI). Before this trust was available parents were often forced to disinherit their disabled children lest they lose all their government support. Now, those who create a special needs trust can leave assets for the child’s use beyond that which they will receive from the government. Families can set aside funds for clothing, education, entertainment, household goods, healthcare costs, and many other future wants and needs for their disabled relative.

No matter what stage in life, all local residents have much to gain from conducting New York estate planning. However, proper financial preparation is particularly vital for those who have assets built up over a lifetime or who are nearing the age when long-term care planning is becoming more of a concern. One group which often faces unique planning needs are the recently widowed. As a New York Times article this weekend shared, these widows continue to be predominantly women and are often unfamiliar with issues like investing, taxes, insurance, and healthcare planning.

The article explains how one common problem faced by new widows is the myriad of individuals who may wish to take advantage of the situation. Many recently widowed have fallen victim to salespeople who make disingenuous promises while trying to sell investments, like annuities. Besides unscrupulous salespeople, some community members are also forced to deal with adult children who make requests that might not be in the individual’s best interest. For example, one advocate noted how some relatives may seek an advance on an inheritance by using arguments like, “How can you deny me this when we’re going through so much emotional pain already,” or “Dad would have given me the down payment money if he was still around.”

Dealing with these and similar demands can be particularly distressing for those already going through an incredibly difficult situation following the passing of a loved one. One advocate who now works as a counselor for the newly widowed explained that it is often best to let trusted financial assistants, like an estate planning attorney, help in those situations. She urges widows to “let that professional be the stingy one.” One of the main benefits of having professional guidance with these financial affairs is the aid that can be provided with complex inheritance issues and dealing with those who make demands on funds.

These tough economic times have placed many local residents in difficult financial situations. Many established families in our area may be considering ways to help out their less fortunate friends or family members who have faced recent financial bumps. However, there are often concerns about how tax issues will affect this generosity and whether or not certain giving will have consequences on inheritance plans. Whenever local families are considering large gifts it is helpful to consult with their New York estate planning attorney to understand how the law applies in their particular case.

Tax considerations are not the only thing that local families care about when considering helping out a friend or relative in need. However, there are various ways in which aid can be given, and it may be prudent to consider helping in one way instead of another based on tax issues. Unless the assistance is to one whom you are legally obligated to assist, such as a minor child, then the government will likely consider the gift in the same light that it would all others–including those intended to shrink an estate to protect it from other government taxes or benefit programs. These gifts will likely count against a lifetime gift exclusion amount, and therefore they may have consequences on a local family’s previous New York estate planning.

Forbes published a story this week explaining some options for families in this situation. For example, often the easiest way to avoid gift taxes is to give a value less than the annual federal exclusion amount of $13,000. Couples can combine this amount and may be able to give $26,000 to an adult child or other loved one in need without triggering tax consequences. Another alternative is to pay directly for the medical, dental, or tuition expenses of another. However, these payments must be made directly to the service providers, not to the individual whom the help is intended to benefit.