Articles Posted in Estate Planning

A New York Surrogate’s Court judge recently handed down a ruling striking down a substantial state Tax Department penalty levied against the surviving spouse who became the beneficiary of a qualified terminable interest property trust (QTIP) established by the deceased husband. The judge’s order could have further reaching implications for other QTIP trusts established under similar circumstances.

The ruling effectively reverses a $462,546 levied by the state Tax Department against because the QTIP trust was established in 2010 during a one-year suspension of the federal estate tax. Under the wording of New York state tax laws, the state could not levy taxes on a trust that the federal government itself could not. The case represents a special set of circumstances that other individuals in similar positions may be able to take advantage of in order to avoid paying costly taxes on their QTIP trust.

Ordinarily, a QTIP trust allows a tax deferral on an trust, not a tax avoidance, by allowing the assets of a deceased spouse to pass on to the surviving spouse without taxation. However, upon the passing of the second spouse, the QTIP assets and the second spouse’s estate are subject to inheritance taxes. In this case, the lawyers for the trust holders were savvy enough to argue that the way New York estate laws were written would allow QTIP trusts established in 2010 to be passed on without any tax.

Starting in 219, seniors in many states will qualify for additional in-home services such as help with chores and respite for caregivers through private Medicare Advantage insurance plans, an expansion that can help some elders live in their own homes for longer periods of time. Many of the services now covered under the new Medicare Advantage plans are similar to those that seniors would receive in assisted living facilities but help prevent the immediate need for such types of care moving forward.

The expansions to Medicare Advantage plans offering these services will begin with 20-states in 2019, with the aim to expand the programs to more as time goes on. Eventually, the goal will be to incorporate some or many of what these programs to traditional Medicare plans, which is still the choice for two-thirds of seniors living in the United States.

To qualify, Medicare Advantage members will need a health related reason and while some plans may not have any added costs there will be some price variations for others, depending on the services offered. Some plans may cover up to one day a week at an adult day center while others may only provide for certain types of in-home care services.

The Internal Revenue Service (IRS) recently announced the official estate and gift tax limits for 2019 will increase over the previous year from $11.18 million in 2018 to $11.4 million in 2019 which means married couples can now leave up to $22.8 million in assets to heirs without paying taxes. While the estate and gift tax has increased over last year, the annual gift exclusion amount (the amount in gifts that may be given each year without tax) remains at $15,000 for individuals and $30,000 for couples.

Recent tax reform legislation has not only decreased corporate and income taxes but also greatly expanded the estate and gift tax threshold from previously long-standing levels. For many years, the estate and gift tax limits held firm at a base of $5 million per individual with adjustments for inflation but the 2017 tax reforms passed effectively doubled that until 2024 when the provisions expire. As a result, the number of estates subject to such federal taxes has fallen to less than 2,000 in 2018 from almost 5,000 in 2013.

In order for married couples to take advantage of the full $22.8 million in estate and gift tax exemptions, they will need to utilize a concept called portability. Essentially, this allows one spouse to leave his or her unused estate tax exemption to the surviving spouse and to do you must elect it on the estate tax return of the first spouse to die, even when no tax is due. If the portability option is not exercised, the surviving spouse may be left with a hefty federal tax bill.

Every single person, regardless of how large or modest they may feel their assets are, needs to have a well thought out estate plan that covers three very basic planning instruments that will serve your best interests. Those three planning instruments include a durable power of attorney, a health care proxy, and a last will and testament. Each of these will cover an important aspect of our lives and our family’s lives after we pass away and should be taken very seriously, regardless of what you believe your financial or lifestyle limitations may be.

First, your estate plan will need a durable power of attorney allows you to designate another person to manage your property and/or finances during your life in the event your are unable to do so for yourself. This authority should be vested in a trusted individual you can trust and be sure will act solely in your best interest should the time come that you will need to rely on another for some type of guardianship.

Next you will need to create a health care proxy, which is essentially a form of a power of attorney that deals solely with health care decisions. This durable power of attorney allows you to appoint another person to direct your medical care and make important end of life decisions should you be incapacitated. In New York, this health care proxy should will need a medical directive (also known as an advance directive) providing guidance to your health care agent.

Creating an estate plan is an important process every single person needs to undertake in his or her lifetime to ensure their final wishes are carried out and estate assets are distributed properly upon death. Despite this importance, many ordinary people still make excuses with one reason or another why they do not need an estate plan, last will and testament, or set up a health care directive.

One of the most common excuses people make for not having an estate plan is thinking that their estate is simply too small or they do  not have assets that warrant that level of planning. Even if your estate is modest, you still need to create a living will or health care directive to help loved ones make health and financial decisions on your behalf in the instance you may be left incapacitated or otherwise unable to act for yourself.

Another common excuse is believing that having joint ownership of bank accounts with children is a proper mechanism to transfer wealth to upon passing away. The reality is that unless you are only leaving behind a single child, it is nearly impossible to separate accounts for more than one child equal. This can become even more difficult if you find yourself suddenly incapacitated or unable to manage these accounts yourself.

Planning your estate is an extremely important process and should be taken very seriously in order to avoid hassles or any extra delay that could come with passing your estate through probate or otherwise transferring assets to loved ones and friends. With proper planning and attention to detail, most folks can avoid some of the most common estate planning mistakes and avoid any costly and prolonged probate process.

One of the most common estate planning mistakes is adding a friend or younger family member’s name to a joint account as a matter of practicality to make accessing the deceased’s bank account after passing away to pay for funeral costs and other bills. While this may seem like a good idea to some, the reality is that this can create confusion over the deceased’s intentions and may complicate probate. A better alternative is to give a trusted  individual power of attorney to make financial decisions if incapacitated and a prepay for funeral expenses.

Instead of leaving assets to heirs in a will outright, individuals should consider setting up a trust for these assets to pass onto upon the grantor’s death. This way the heir does not take on unwanted wealth to his or her name and complicate tax considerations or Medicaid planning. This can also shield the assets from creditors who may go after the wealth to recoup debts incurred by the heir.

Family post trusts are a special type of trust that allow a trustee to allocate distributions among a class of beneficiaries and are often implemented because of the increased flexibility they offer regarding distributions. Unfortunately for trustees, administering these trusts is hardly straightforward and he or she will often have to manage delicate family situations and competing interests between beneficiaries. In situations where animosity exists among family members, these dynamics can create discordant expectations so clear guidance in the trust becomes a critical aspect.

While managing a family pot trust, the trustee (the individual tasked with administering the trust on behalf of beneficiaries) must keep in mind his or her fiduciary duty to the beneficiaries required under the law. This includes acting an impartial manner in order to treat beneficiaries in an equitable and equal manner in accordance with the conditions laid out in the terms of the trust. Essentially, the trustee of a family pot trust cannot favor one individual or class of beneficiary over another, unless specifically authorized by the trust.

To help make managing the trust easier, trustees should consider keeping a running total of all the distributions made to various beneficiaries, thus enabling him or her to know if all the beneficiaries are receiving benefits equal with the grantor’s wishes. Additionally, trustees should proactively communicate with beneficiaries in a direct manner to manage personalities and needs as well as financial duties under the trust. Such communications should also be documented as a hedge against any possible legal action taken by a beneficiaries who may feel slighted in some way.

A recent report by Reuters suggests that many older adults are abstaining from taking their prescribed antidepressants or continuing to use them as directed by their doctors, that according to a Dutch study examined by the news outlet. If true, the study highlights mental health challenges facing millions of people around the world who may otherwise be willing to continue medication issued by a psychiatrist but balk at treatment from primary care doctors.

The study examined roughly 1,500 people who were at least 60 years old and diagnosed with depression in 2012 by primary care providers finding about 14 percent of patients with depression failed to take their antidepressants within two-weeks. For those patients who did take their medication on time, 15 percent missed taking doses 20 percent of the time and 37 percent overall ceased taking their antidepressants altogether within one year.


The study also found that many patients in the study tended to be more consistent with taking medication when these individuals were already used to taking daily medications for a variety of other chronic health issues. Those patients already on other medications were 11 percent less likely to fail at beginning antidepressant regimens and 13 percent less likely to take these same drugs on an inconsistent basis.

A recent report by The Washington Post suggests Congress is considering legislation to help bail out billions of dollars worth of failing pensions and retirement accounts across the country in a move to try and solve a retirement crisis that threatens more than 1 million Americans. Claiming to have obtained a draft of the plan, The Washington Post reports the legislation would direct the Treasury Department to spend up to $3 billion annually to subsidize payments for retirees from certain underfunded pensions.

Additionally, the plan would require benefit cuts, higher premiums and new fees levied against companies and union members in an attempt to make the pensions as financially solvent as possible. The plan will cap contributions from taxpayers and ultimately ask for important concessions from all of the parties involved in the situation.

Due to issues such as mismanagement, inaccurate economic projections and in some cases corporate bankruptcies, many substantial pension funds are at risk of essentially going bankrupt and threatening the safety net many retirees were counting on. The problem is compounded by the fact that the multiemployer pensions which require workers from multiple companies pay into the same retirement benefit program, creating ripple effects when one becomes insolvent.

When an elderly family member is diagnosed with Alzheimer’s related dementia, it is time to discuss the details of legacy, financial, and estate planning. While connecting a loved one with support services is the priority when their memory is beginning to fade from age, formation or modification of financial and estate planning to meet their needs during their last years is often a key family decision. No matter how well an elderly family member has planned for financial and estate distributions, review of those plans to accommodate the expense of residential treatment or other medically related support costs will ensure that an elder is taken care properly while alive; as well as cover memorial and funeral costs at time of death. A licensed attorney can assist with the formation of a combined financial, estate, and legacy plan to suit an elder’s needs.

Law of Diminished Capacity

Within U.S. federal law, the definition of “diminished capacity” applies to incapacitated parties no longer exhibiting full mental ability. If an elder lacks the ability to make routine decisions about complex matters, they may be suffering from memory loss or dementia related to the onset of Alzheimer’s disease. Patients diagnosed with dementia still have legal rights to their property and assets. Spouses of incapacitated parties are the primary decision makers under law. According to New York rules of intestate succession EPTL 4-1.1, If no living spouse or will exists, and another family member has not already been given power-of-attorney, rights to legacy, financial and estate planning on behalf of  an incapacitated party may be assigned to court appointed trustee.

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