New York Estate Planning Lawyer Blog

by Peter Lennington, Esq.

This post by American Association of Trust, Elder Law and Estate member, attorney Peter Lennington, examines the unique planning requirements of families with children, grandchildren or other family members with special needs including the establishment of Special Needs Trusts.

COSTLY MISTAKE #1: Disinheriting the child.
Many disabled people rely on SSI, Medicaid or other government benefits to provide food and shelter. Your clients may have been advised to disinherit their disabled child - the child who needs their help most - to protect that child's public benefits. But these benefits rarely provide more than basic needs. And this "solution" does not allow your clients to help their child(ren) after the client becomes incapacitated or is gone. When a child requires, or is likely to require, governmental assistance to meet his or her basic needs, parents, grandparents and others who love the child should consider establishing a Special Needs Trust.

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by Michael Ettinger, Esq.

"Elder Law Estate Planning" is a niche area of the law which combines the features of elder law and estate planning that pertain most to the needs of the middle class.

Estate planning was originally for the wealthy few. Middle class families did not consider themselves as having "estates" to plan. During the Reagan years (1980-1988), a great economic expansion occurred, raising the asset level of the middle class into the realm of estate planning. With middle class people suddenly exposed to "estate taxes", the need arose for estate planning, to reduce or eliminate those taxes. A few years later, in 1991, the American Association of Retired Persons (AARP) published "A Consumer Report on Probate" which concluded that probate was a process to be avoided, in all but the most exceptional cases. This marked the beginning of the end of traditional will planning and started the "living trust revolution". AARP recommended that families start using trusts rather than wills, to avoid probate and save their beneficiaries tens of thousands of dollars in the estate settlement process.

Since then, millions of people have set up trusts to:

• Save time and money in settling the estate

• Avoid legal guardianship if they become disabled

• Avoid having their personal and financial matters made public

• Reduce the chance of a "will contest"

• Keep control in their family and out of the court system

At about the same time as living trust planning became popular, the field of elder law emerged to help people navigate the increased complexity of state Medicaid rules and regulations, the soaring costs of nursing home stays, and the fact that people were living considerably longer.

Historically, estate planning was handled primarily by "white shoe" law firms in the deep canyons of downtown Manhattan, while elder law planning emerged out of the Department of Social Services. State employees began to take their expertise in Medicaid rules and regulations into the private sector.

To this day, these two fields continue to grow independently of each other, sometimes to the detriment of the clients lawyers are meant to serve. Estate planning lawyers mostly see estates averaging from the low hundreds of thousands to about two million dollars. Families with estates under one million dollars often cannot afford long-term care insurance. They may now or later need a Medicaid Asset Protection Trust (MAPT) to protect their estates from being depleted in the event a nursing home is required. Since the estate planning attorney is often unfamiliar with elder law, the client never gets the MAPT they need, and the estate plan to avoid probate proves useless when a nursing home stay ends up consuming all of the assets.

For the couple with over one million dollars in assets, estate planning is essential to reduce or eliminate estate taxes. In this case, they should split their assets into two trusts, thereby creating two estates, and doubling the exemption from one million to two million dollars. Still, this couple, while they may be able to afford long-term care insurance, may find one or both of them uninsurable due to health reasons. Perhaps what they really need are two MAPT's, not just to save estate taxes but to also protect the assets from nursing home costs, but they never get them because the estate planning lawyer is not experienced or trained in drafting these documents.

What happens when the estate planning client actually becomes disabled and needs long-term care? They, or the family, often consult with the estate planning lawyer who prepared their plan, but who may be unable to help them, due to his or her unfamiliarity with state Medicaid rules. Many families lose assets that might have been saved. Unknown to the estate planning attorney, elder law attorneys have developed numerous techniques to protect hard won assets, even when the nursing home is imminent, such as "spousal refusal" and the "gift and loan" strategy.

On the other side of the coin, what happens when the older single or couple meets with an elder law attorney instead of an estate planning attorney? These clients are usually sixty-five or over, and are looking for asset protection. The elder law attorney knows how to create a MAPT and often recommends them. However, on the estate planning side of matters, the elder law attorney may miss the need to set up two trusts for the couple to avoid the estate tax. He or she may have little knowledge about estate planning for second marriages, a growing segment of the population, or using Inheritance Trusts to keep the assets in the blood and protect the inheritance from children's divorces, lawsuits, and creditors.

While some of the family's needs may be met, such as asset protection, other needs are left unserved, often because the clients are unaware that these two fields of law complement and overlap one another. In other words, they may get what they want but
not necessarily what they need. These oversights are often visited on the heirs.

Your writer made the conscious decision twenty years ago to develop expertise in these two fields of law simultaneously. This has proven to be invaluable to thousands of families. Clients who originally came in for estate planning services later became elder law clients, converting their revocable living trust estate plans into MAPT's as they got older, or through the use of Medicaid planning services to protect assets when the need for nursing home care actually arose.

Looking back on our experiences in over ten thousand cases at Ettinger Law Firm, we conclude that we have assisted in the creation of a new niche, "Elder Law Estate Planning".

We define this area of law as:

• Getting your assets to your heirs, with the least amount of taxes and legal fees possible

• Keeping those assets in the blood for your grandchildren and, in the meantime, protecting those assets from your children's divorces, lawsuits, and creditors

• Protecting your assets from the costs of long-term care and qualifying for government benefits available to pay for care

While estate planning involves tools for well-to-do families, with acronyms like GRITS, GRATS, and GRUTS, and where elder law serves the diverse needs of our growing senior population, including the less fortunate, through Medicaid, Medicare and Social Security, "Elder Law Estate Planning" addresses the concerns of the vast majority in the middle.

By Michael Ettinger, Esq.

Reflecting on this comment made to us by a client recently, the following thoughts came to mind. What do we actually do at Ettinger Law Firm?

All we do is save our clients a lot of time, many thousands of dollars and the not so petty annoyances they might otherwise have in settling their family's affairs on the death of a loved one. We help them reduce or eliminate taxes on the estate so that more passes down to help their children and grandchildren. These days, we also protect the inheritances our clients leave so that it is not lost should the heirs get sued or divorced and, better yet, we assure them that their wishes will carry on for decades after they are gone, by passing the inheritance on to their grandchildren one day. Should disability occur, our clients have had their assets protected years earlier through asset protection planning. For many who come to us in their hour of need, without preparation, we take on the burden of helping them through the Medicaid maze and help them save and protect much more of their assets than they ever thought possible.

On the planning side, we talk to our clients about their hopes and dreams, despairs and disappointments. Then we craft a plan to reflect the client's life and lifestyle, taking into great consideration the needs and feelings of the heirs and how it will be received. We are thoughtful to avoid unintentionally hurting loved ones and creating rifts between them with well intentioned, but ultimately misguided, gifts and bequests.

Yet none of the above good works were what the client was referring to with her causal remark that "you give lawyers a good name". We also hold three to four seminars for the public each week where we invite hundreds of people to dinner at our expense and explain all they need to know about elder law and estate planning, providing professionally prepared materials for them to take home and study. We maintain a 150 page website for their further research and review, together with an online video seminar to watch if they wish.

Then we invite every person, regardless of their means, to come into our offices and spend up to an hour with us, free of charge, where we share the vast knowledge, experience and insights we have gleaned in over twenty years of exclusive practice in this area. We also analyze and critique their current planning, letting them know where they stand, what to do and why.

Finally, we advise countless people each day, week, month and year that they do not need our services, that they are fine for the time being with the plan they have and can afford to wait, when they would be better off doing their planning with another firm, and then refer them to one with more expertise in solving their particular issues. For clients who do need us, we search for ways to achieve their goals with the least expense possible.

Clients see that we derive as much satisfaction from telling them that they are fine, that they do not require our services, as we do when our services are needed. Clients see that we are just happy that they took the time to come in to see us. And when clients see that we are on their side, that our true purpose is to serve them without regard to ourselves, then they say "you give lawyers a good name".

By Michael Ettinger, Esq.

So many clients are advised that they need a will. In fact, will planning is becoming obsolete for persons over sixty for many reasons.

Instead of actually solving problems, wills often create them. First, they must be proven to be valid in a court proceeding, the infamous probate, for estates in New York over $30,000.00. Court proceedings can be expensive, time-consuming and things often go wrong. Also, when the client dies, that will is usually out-of-date, having been created decades before. The executors may be the wrong persons, the beneficiaries or their percentages may be wrong or other changes in the family have not been taken into account.

Notice of the court proceeding must be given to certain relatives who may be difficult or impossible to locate. Complications arise with relatives in foreign countries who may need to go to the American Consulate for notarization or "consularization" of legal documents. If there is a disabled child, the court will appoint a lawyer to represent their interests, including preparing a report to the court, and your estate must pay that attorney's fees.

Proof problems with the will lead to delays that often prevent needed funds getting to surviving spouses or children. It is fairly common for real estate to be tied up, while the probate process drags on, causing potential buyers to be lost. In some cases, stock cannot be sold even though it may be falling in value rapidly. Law firms routinely commence probate proceedings as a courtesy for families who cannot even afford the legal fees to get the matter started. Needless to say, the cost of court proceedings today may be expected to be in the five figure range.

Two other pitfalls of will planning bear mentioning. First, since the will is filed in court, it becomes a public record. Anyone may then go into the courthouse and order a copy of your will to see what you had and who you left it to. Your privacy is out the window. Secondly, since notice must be given to the heirs you may have left out, or left less than they may feel they are entitled to, you run the risk of a will contest if your estate is distributed in anything but equal shares.

When you are in probate court, who is in charge? The judge, not you or your lawyer. Don't suppose that the Judge will always act in your best interests, as the court may have other interests to consider.

Always better to stay out of court, in our opinion. By using a living trust, instead of a will, you avoid probate court and keep control, or at least control rests with those you have chosen, if you die or become disabled. The expenses are so much less without court proceedings that you may easily save tens of thousands of dollars.

The other problem with a will? It only takes effect when you die. Today, about half of all people eventually become disabled. Since the will does not provide for disability, you risk guardianship proceedings. These proceedings occur later in life when someone becomes unable to handle their affairs and does not have an adequate plan set up. In a guardianship, the court will appoint someone to handle your affairs. Not only may it not be the person you would have chosen, it may not even be someone you know. Trusts, which take effect while you are living, are considered a highly effective tool to avoid guardianship proceedings and guarantee that the person or persons you choose will be in charge. This way, you may be certain that your best interests will be looked after.

In short, when someone tells you that you need a will, think again. It may be a living trust that you need instead.

by Michael Ettinger, Esq.

Same sex couples face unique estate planning issues since, in many jurisdictions, their unions are not legally protected. New York, for example, does not permit same sex marriages although the state does recognize same sex marriages performed elsewhere (i.e., Massachusetts, Connecticut, Vermont, Iowa and D.C.).

Living trusts are often the estate planning vehicle of choice for the GLBT community for a number of reasons.

1. They provide for your partner to be able to handle your assets should you become disabled. Powers of attorney and health care proxies/living wills are ancillary documents that also help insure that your partner will be in charge of all legal , financial and medical decision-making in the event of disability, free of interference from other family members.

2. Will planning has fallen into disfavor because (a) wills are significantly easier to challenge than trusts (b) a notice of the proceeding must be given to your closest legal heirs, providing them with an opportunity to object (c) the will is a public record, eliminating privacy, and (d) the legal process may be time consuming possibly delaying the surviving party's access to needed funds.

3. Simply putting your partner's name on your assets, or joint tenancy, seems to be a simple solution to many, until they learn of the pitfalls. First, for appreciated assets, such as stocks and real estate, there are tax disadvantages to receiving assets from a joint tenant. While inheriting from a will or trust at death eliminates taxable capital gains for the survivor, joint tenancy only eliminates one-half of those capital gains since you are only "inheriting" one-half of the property. Secondly, you may be exposed to the debts and liabilities of your partner. Thirdly, you lose control over where the assets go after your surviving partner dies. Perhaps you may want to provide for your partner for life, but state where the unused assets will go after he or she passes. Finally, once you make your assets joint with your partner, you may have more difficulty in getting those assets back in the event of a break up in the relationship.

4. Funeral and burial arrangements are often contentious matters. New York law allows you to designate the person you wish to have control of the arrangements as well as providing in writing the specific type of funeral and burial that you may wish.

5. On the other side of the coin, the inability of same sex couples to marry in New York does offer a couple of distinct Medicaid planning advantages in later years. Whereas for married couples the combined assets of the couple are available for the care of the ill spouse, such is obviously not the case for unmarried couples. So your assets are legally protected from your partner's cost of care. Further, while married couples who wish to plan ahead five years be setting up a Medicaid Asset Protection Trust (MAPT) may not name each other as trustee, such is not the case for unmarried couples. So if you wish to protect your home and life savings from nursing home costs, and cannot obtain long-term care insurance for any reason, you may each establish MAPT's for each other and need not go outside the relationship to put someone else in charge in order to protect your assets.

In our experience, crafting an estate plan for a same sex couple, that is thought through addressing all the potential social, legal, financial, health and tax issues, is a loving act that provides peace of mind knowing your choices will be legally protected and honored.