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Thursday, January 7, 2016

What are Gifts and how much can you gift and receive without paying taxes?

What is a gift: In general, a gift is the value of the property transferred in excess of the value of any consideration received therefore.

What is the current gift tax rate: The current federal gift tax rate (similar to the current federal top estate rate) is 40%. However, this rate is only applied after the applicable exclusion amount.

Who is responsible for paying the taxes: The donor who makes the gift is responsible to pay the tax. If the donor fails to pay the tax when due, then the donee is also liable for the tax.

What are the current exclusions:

Federal: In 2015, the federal exclusion amount is $5,430,000. This means that one can gift during one’s lifetime up to $5,430,000 and no federal gift taxes will be due.

Annual: But it gets even better! In addition to the federal exclusion amount, there is also an annual gift tax exclusion of $14,000 per donee per year. This means that if a husband and wife have 3 children, they can gift to them $14,000 x 3 x 2 = $84,000 per year, without filing a federal tax return or paying any gift taxes.

Other: Payments of tuition to a qualifying educational institution (but not for books, room or board), payments for medical care directly to a provider or for medical insurance, or gifts made to political organizations also qualify for an exclusion. No gift tax return needs to be filed for these types of gifts.

Spousal: There is an unlimited marital spousal deduction for all gifts between US citizen or resident spouses. As an alternative to an outright gift, the donor spouse can make a gift to a living trust which meets the Qualified Terminable Interest Property (QTIP) requirements to that the gift qualifies for the marital deduction.

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING


Wednesday, December 16, 2015

Power of Attorney Printed From the Internet Was Found Invalid

Plaintiff tried to bring a personal injury lawsuit against a College on behalf of his daughter, acting under authority of a Power of Attorney. The Power of Attorney was found and printed from the internet, and was not prepared by an attorney.

The defendant argued that the plaintiff lacked authority to bring the action, because the Power of Attorney was invalid as it did not comply with the statutory requirements of GOL 5-1501B(1)(d). The Court agreed with the defendant and dismissed the lawsuit, finding that the document did not contain the exact wording required by the statute. Berrian v. Siena College, 2015 NY Slip Op. 05431 (App. Div. 2d, June 24, 2015)

Morale of the Story: the Power of Attorney document looks very easy to prepare. A lot of people think that they do not need an attorney to do it. And yet a very large percentage of these documents later turn out to be invalid, either because a wrong form was used or because it was not signed in the right places. Talk to an attorney when executing this document!

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING


Monday, December 7, 2015

Are relatives required to pay for nursing home care?

A nursing home is prohibited from requiring a third party to guarantee payment from his own funds to the facility as a condition of admission or continued stay of another party. Any attempt by the nursing home to do so is a blatant violation of the law, and may be reported to the local District Attorney’s office.

On the other hand, a nursing home may require an individual who has legal access to the resident’s income or resources to sign a contract to provide payment from the resident’s income or resources for such care. An individual can have access to resident’s income and resources through a Power of Attorney, a joint bank account or through an appointment as Guardian.

If an individual signed a contract to provide payment to nursing home from the resident’s income or resources, and then that individual breaches this contract, then a nursing home may institute a cause of action. The individual may become personally liable for the cost of care if the resident’s funds were misspent and were not turned over to nursing home, as required.

 Nonetheless, very often certain nursing home facilities are in high demand and there is a waiting list. The chances of an individual’s acceptance into a particular nursing home may be greatly enhanced by some private pay in advance.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING.


Monday, November 30, 2015

What is Long Term Care Insurance and New York State Partnership for Long Term Care

Many seniors are not aware that Medicare does not pay for custodial long term care. An individual suffering from Alzheimer’s disease or dementia, which requires assistance with feeding, bathing, and taking oral medications will not be covered by Medicare not by a Medigap insurance. The only way of paying for custodial long term care are: private payments, Medicaid, or Long Term Care Insurance.

Long term care: this is care that can be provided in the home, in a nursing home or in an assisted living facility. Eligibility for benefits is based on medical necessity as evidenced by an individual’s inability to perform a specified number of personal functions (activities of daily living): bathing, toileting, dressing, self-feeding, lack of mobility or loss of cognitive capacity.

Home Care: Most long term care insurance policies have a home care component. It is usually beneficial for an elderly person to continue to reside at home: familiar surroundings, familiar people and familiar foods provide comfort and control. The long term care insurance policy can pay for the number of hours required by the patient. This is a large improvement over Medicaid: individuals relying on public programs (Medicaid) frequently find that the number of hours authorized may be significantly less than what is required for the individual’s health and safety.

Coverage Provisions: These vary, depending on the need and the willingness to pay. In New York, a policy must offer at least 24 consecutive months of coverage. Each policy generally provides for a specified payment level, based on whether care is received at home, in an assisted living facility or in a nursing home. If the cost of care exceeds the policy benefit, the full benefit will be paid. If the cost of care is lower than policy benefit, the actual cost will be paid. Most policies contain a deductible, usually measured in days. The benefit period can be as short as two years, and as long as the life of the insured, with everything in between.

Exclusions: certain conditions are excluded by long term care insurance policies. These are, among others: alcoholism and drug additions, attempted suicide or intentionally self-inflicted injuries, mental and nervous disorders (except Alzheimer’s disease or demonstrable organic brain disease).

New York State Partnership for Long Term Care

These are specific long term care insurance policies approved by the New York Partnership policy.

Under a Total Asset Protection plan, the insurance policy will pay for the first three years nursing home care or six years of home care or a combination of the above (where two home care days are equal to one nursing home day). Individuals who have received these specified Partnership long term insurance benefits may apply for Medicaid and be eligible without regard to the value of their assets. Individuals may sell, transfer spend or retain assets, before during and after applying for Medicaid nursing home care – the penalty period does not apply. However, the Medicaid income levels will still be applied.

The policy premiums depend on age and coverage chosen. The Partnership policies are generally slightly more expensive than other policies. Annual premiums for a basic policy can range from $2,800 for a 40 year old to $13,000 for an 80 year old. However, the benefit is the ability to apply for Medicaid without transferring assets. All aspects must be considered and analyzed before a decision is made.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING.


Sunday, November 22, 2015

Can relatives supplement Medicaid covered nursing home care by paying for private nurses and private rooms?

Even though this concept appears reasonable (after all, most nursing homes are short on staff and rooms are semi-private at best), Medicaid does not permit it.

Medicaid is a payor of last resort: if there are any available sources of payment then these sources must be used first. If a resident, or anyone else on resident’s behalf pays for private nursing services, then it is considered a payment for a service for which Medicaid is already paying. As a result, Medicaid would then have to reduce its payment to the nursing home by the amount being private paid for the nursing services. This reduction would be unacceptable to the nursing home.

Similarly, Medicaid and Medicare pay a fixed fee to the nursing home for any room in the facility. As a result, Medicaid rate for a private room would be the same as the rate for a semi-private room. Therefore, most nursing homes reserve private rooms for private paying residents. Some relatives want to supplement the nursing home by giving additional payment for a private room. However, Medicaid would look to the private payment and reduce its payment to the nursing home by the amount of this private payment. The end result would be a nursing home receiving a similar rate for a private room and a semi-private room, which is not an acceptable business model. 

If a nursing home would accept a privately paid supplement on behalf of a Medicaid resident, either for a private room or for a private nurse, and if this payment was not reported to Medicaid, the nursing home would be committing Medicaid fraud. The consequences, both civil and criminal, are such that nursing homes are usually unwilling to discuss these supplements.

The one method that is available to supplement the nursing home care is to hire a “companion” to a Medicaid resident. Companion services are not considered medical, as a result they are not provided in the Medicaid nursing home rate. Placing a companion with a Medicaid resident will not have an effect on Medicaid payments. A skilled companion may provide various services to the resident, including bathing, toileting and feeding the resident.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Wednesday, November 18, 2015

There is a lot of government help available for low income seniors.

This article is an invaluable resource. It lists all the various government programs that are available to senior citizens, with links to criteria and additional information.

There is a lot of help available to seniors. The list of available programs includes, but is not limited to: Social Security, Medicare, Medicaid, Food Stamps, Property tax relief, legal help, housing vouchers and Supplemental Security Income.

The key is to know about them and have the ability or the knowledge to qualify.

http://www.investopedia.com/articles/personal-finance/100214/retirement-strategies-low-income-seniors.asp?layout=orig


Friday, November 13, 2015

Accident Liens – can Medicaid recover from personal injury or malpractice award?

It may come as an unwelcome shock to many personal injury plaintiffs, but Medicaid is entitled to recover medical expenses paid on behalf of an individual, from the proceeds of a personal injury or a malpractice action.

The entire award is subject to Medicaid recovery: there is no distinction between pain and suffering and medical expenses, both portions of the award are subject to Medicaid liens. Unlike estate claims, there is no limitation on the age of the recipient for Medicaid to impose its lien.

Limitations

The lien is limited to Medicaid payments made after the date the injuries were sustained. The lien is also limited to those Medicaid payments made for the treatment of injuries sustained. The rationale is that Medicaid is not entitled to recover for Medicaid properly paid (other than from estate claims).

One final limitation is that Medicaid is not entitled to a recovery when the claim is against a nursing home based on negligence or abuse of a Medicaid patient.

Legal Fees

Medicaid lien has the priority over all other liens, with the exception of the attorney fee for representing the injured party in an action to recover for the injuries in the accident. However, the attorney is not entitled to a fee from the proceeds being paid to Medicaid.

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Thursday, November 5, 2015

What is a Continuing Care Retirement Community?

These are alternative housing options for seniors, in which multiple levels of care, including independent living, assisted living and long term nursing home care are contained within one community. The number of these communities is growing rapidly in New York State.

An initial entrance fee is required. These entrance fees can range from $100,000 to $1MM, depending on the health of the resident, the type of housing, and the type of service contract. In addition to the down payment, the resident must pay a monthly maintenance fee, which can range from $3,000 to $5,000 a month. Additional fees may be incurred for housekeeping, social activities and transportation. The resident must maintain a Medicare and a Medigap insurance policy.

The advantage of these communities is having multiple levels of care prearranged in a single place, without a need for multiple moves. Since home care and nursing home care is arranged, Medicaid planning will not be necessary. There will be no need to transfer assets and the individual can retain control of all of his assets. Furthermore, depending on the contract, the down payment may be protected from an unexpected death. If a resident enters the community and dies 3 months later, the contract may provide for a refund to the family of a percentage of a down payment

Wednesday, October 28, 2015

What are the Current Gift and Estate Tax Laws?

 

Current Tax Rates: The top federal estate tax return is 40%. The top New York State estate tax return is 16%.

Federal Estate and Gift Tax Exclusion: In 2015, the federal estate and gift tax exclusion is $5,430,000. That means that no federal taxes will be due for gifts made during one’s lifetime that in total did not exceed this amount. Similarly, no federal taxes will be due for estates whose assets do not exceed this amount, even where assets are passed to children or other non-spouse beneficiaries.  

The New York State has an exclusion of $3,000,000. This number is set to increase annually, until it reaches the federal exclusion in 2019. The New Jersey State has the smallest estate tax exclusion in the country of $675,000.

Portability of Spousal Estate Tax Exemption: if a predeceased spouse did not fully utilize his or her $5,430,000 estate tax exemption, the surviving spouse can utilize the unused exemption of her predeceased spouse.  This benefit, however, is only available for federal returns, and not for New York State returns.

Marital Deduction: No estate tax is due on any property which passes from the decedent to his or her surviving spouse. However, this deduction is only available as long as the surviving spouse is a United States citizen. If the spouse is not a US citizen, then, to take advantage of this deduction, property should pass to a “Qualified Domestic Trust” for the benefit of the surviving spouse, at which point it becomes fully deductible. However, there are a lot of requirements that need to be fulfilled for the QDT.

Step Up in Basis: the basis of a property acquired from a decedent is its fair market value (FMV) at the time of death. The income tax benefit is always a consideration when planning for estate taxes. When the beneficiary sells the property, his capital gains tax will be calculated on the difference between the market value at the time of sale and the FMV at the time of sale. If these are close in time, little or no capital gains taxes may be due.

  • When a husband and wife own property as tenants by the entirety, one half of the property is included in the deceased spouse’s estate, resulting in a step up in basis as to one-half of the property.

  • Where there is a joint tenant other than a husband and wife, there is a full inclusion in the estate of the first to die and a corresponding 100% income tax step up, unless the survivor can prove that she supplied part or all of the consideration.

  • When an owner reserves a life estate in real property and transfers the remainder to another party, there is a 100% tax step up in basis upon the life tenant’s demise.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Tuesday, October 20, 2015

When is Medicaid entitled to recovery of benefits paid? Part 1

  1. If Medicaid was paid improperly, the Department of Social Services is entitled to recover all improperly paid benefits.

         If Medicaid discovers that an individual was ineligible because the information provided was false, there will be 3 steps taken. First, any further medical assistance will be discontinued. Second, the case can be referred to the local District Attorney office for criminal prosecution. Third, a lawsuit for the civil recovery may be commenced, to recover the money overpaid.

         The first step in this process is usually a letter, received by Medicaid recipient, informing him that he is being investigated for Medicaid fraud, and asking him to come in for an interview.

 

2.     Medicaid is entitled to recover from the estate of anyone who was 55 or older when the assistance was granted. However, this recovery is limited by several important considerations:

  1. The recovery is limited to benefits paid within 10 years of individual’s death.

  2. Medicaid is excluded from making a claim against the estate of an individual who is survived by a spouse, a minor child, or a disabled child. However, the lien is held in abeyance only. Once the surviving spouse dies, a lien can be placed against the second to die spouse’s estate to recover Medicaid benefits paid to the first spouse.

  3. Medicaid may only make the recovery from the probate assets of an individual (those assets that pass under a will or by administration if there is no Will, and not part of a revocable trust, life estate or joint tenancy agreement).

Medicaid is a preferred creditor. As a result, Medicaid’s lien must be satisfied before other creditor’s claims and before any bequests to beneficiaries are distributed.

Most Medicaid liens can be negotiated.

3. Medicaid is entitled to recover from the proceeds of an action arising from an accident or malpractice, as the result of which the injured party received Medicaid benefits.           

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Monday, October 12, 2015

Estate Tax Implications for Fractional Art Ownership

In the past, the IRS has denied valuation discounts for fractional undivided interests in the work of art. As a result, shared ownership in a painting was not entitled to a tax discount during estate value calculation.

In a recent case, Estate of Elkins v. C.I.R. 140 TC 86 (2013), 764 F.3d 443 (5th Cir. 2014), a Tax Court and a Fifth Circuit Court of Appeals appear to consider express restrictions on sale and use. Unfortunately, no decision on the ultimate discount value was given. However, the law is likely to develop on this issue further.

As a result, art owners who are willing to relinquish a part of their ownership to children, grandchildren or other family members, may now use this discount method to achieve substantial estate tax savings.

The information in this blog was adopted from the following article

 https://news.artnet.com/market/estate-tax-on-inherited-art-collections-323840

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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