Should I Deed My Home to My Children?

March 30, 2016

deed to childrenI often receive phone calls from potential clients asking whether, as an estate planning and elder attorney, I recommend that they add their children as co-owners to the deed of their house, co-op, or condominium. The callers are usually concerned with avoiding probate or protecting their home from Medicaid if they need long term care. The answer is almost always no, and this article will outline some of the reasons why.

Risk of Children’s Creditors
Adding a child to your home makes him a joint owner, which opens your home up to his creditors; past, present, and future. If the child is at fault in a car accident, is sued for negligence, or owes money to a spouse or creditor, your house can be used to satisfy claims against him.

Loss of Control Over the Home
Want to refinance or sell the property? By adding a child to the title of your home, you will need their consent to do either. Additionally, the portion of the home which has been transferred to a child as a tenant in common will bypass your will and go through the estate of the child. That means that if the child predeceases you, you could wind up owning the house together with your son or daughter in law or grandchildren.

Medicaid Penalty
Adding a child on the deed is equivalent to gifting part of the house to them. Consequently, unless a specific exception applies, the gift will make you ineligible for New York Nursing Home Medicaid for up to 5 years.

Loss of Enhanced STAR Real Estate Tax Exemption
For seniors who are receiving a real estate tax break, also known as Enhanced STAR, adding a child under 65 to the deed can cause them to lose part of their tax exemption. That is because the rules requires that all owners must be 65 or older by the end of the calendar year in which the exemption begins. I have seen the New York assessor’s office attempt to collect 6 years worth of improperly granted exemptions after realizing that a child under 65 had been added to an otherwise eligible property.

Partial Loss of Homestead Exclusion Upon Sale
Under current tax law, a homeowner can exempt up to $250,000 ($500,000 if married) of gain upon the sale of their home during their life. If a child is added, and doesn’t live in the home, their portion of home is not subject to this exception resulting in an unnecessary capital gains tax (as high as 31.5%) if the home is sold.

Loss of Step-Up In Basis
In my opinion, one of the most compelling reasons not to add a child to a deed is the loss of one of the most valuable IRS “gifts” that we have been given: the step-up in basis upon death. This “gift” allows your beneficiaries to inherit your property, at the basis that the property will be worth when you pass away, wiping out any capital gains tax which they may otherwise have had to pay. Adding a child to the deed will cause them to pay capital gains tax if they sell the home after you pass away since they wont have the advantage of the step-up in basis for their portion.

In almost all situations, it doesn’t make sense to add a child to the deed as a joint or co-tenant. There are better ways to avoid probate and/or protect the home than simply gifting it to a child. Some clients will benefit most from a Medicaid Trust, other clients may find a life estate deed more appropriate, while still others may prefer a revocable living trust to suit their needs. Every situation is unique and a free phone consultation with an estate planning and elder attorney is a good step towards learning your options.

Roman Aminov, Esq. is an estate planning and elder law attorney. You can contact Roman now for a free phone consultation: Law Offices of Roman Aminov 147-17 Union Turnpike, Flushing, NY 11367 (347) 766-2685

Do You Need A New Power of Attorney?

July 6, 2015

As we had discussed in a prior article, a statutory short form durable power of attorney (“POA”) is an important document which every New Yorker should consider. To recap, a POA allows any agents you select, typically your spouse and/or children, to make financial decisions for you. This can be crucial if you are sick and not able to manage your financial affairs, and the POA is a standard and essential component of any estate plan. However, I have also noticed a troubling phenomenon. Clients often come to my office with existing powers of attorney, the majority of which would have serious challenges raised by any institution which may be asked to accept them. In this article, I will try to highlight a sampling of the issues I have seen and what you should look for when deciding if you may need an updated power of attorney.

Outdated Power of Attorney:
The most common POA clients show me is a POA which was drafted and executed prior to September 12, 2010, which is when the new POA laws went into effect in New York. The new law requires a Statutory Gifts Rider if the principal wants to allow the agent to make gifts of over $500 per year, including gifts which help qualify the principal for long term care Medicaid services. NY GOL 5-1504 states that a bank must honor a properly executed POA if it conforms with the requirements of the 2010 law. The law also “grandfathers” statutory POAs which were executed prior to September 12, 2010, as long as they were executed properly. The problem is that, in practice, banks and other financial institutions routinely reject POAs executed prior to 9/12/2010, and are generally comfortably only accepting the new POAs. Therefore, we generally recommend that clients who have a POA executed prior to 9/12/2010 have a new power of attorney which incorporates all of the latest changes and which it makes it easier for their agents to act if the need ever arises.

Non New York/Non Statutory Power of Attorney:
Clients sometimes show me powers which are either not New York forms or, even if the language on the form states that they are valid in New York, are not statutory short form documents, which means banks do not have to accept them. I usually see that in the context of people who downloaded forms off the internet and filling them out themselves. It is important to note that each state has their laws regarding powers of attorney and that a power created under the laws of one state do not necessarily mean that it will be accepted in New York. It is equally vital to remember that a power of attorney created in New York must comport to the requirements of GOL 5-1501 – 5-1514 to enjoy the benefits of mandatory acceptance by financial institutions and that many online forms, even those claiming to be New York forms, do not comport to those rules.

Improperly Executed Power of Attorney:
While not as common as the aforementioned mistakes, I have seen otherwise valid POAs which simply have not been executed properly by the principal. The 2010 law requires a specific, and often time consuming, execution protocol which can trip up unwary clients and practitioners. A careful review by a seasoned New York elder care attorney is usually all it takes to uncover such defects.

Insufficient Power of Attorney:
Most attorney drafted POA’s that I review for clients fall into this category. The POA isn’t a simple off the shelf document. There are modifications which may, and almost always, should be added to it in order to give agents additional rights i.e. the rights to engage in Medicaid planning, to enroll in pooled trusts, to change beneficiary designations, etc. While many modifications may be made in the “Modifications” section of the actual POA, it is vital to execute an additional document, the Statutory Gifts Rider (“SGR”), at the same time as the POA. Without an SGR, many of the most power rights the principal can give to the agent are lost, including sheltering assets from long term care costs through the use of Medicaid trusts. I have found that, unless the POA was drafted by an estate planning or elder attorney, it is likely that it lacks an SGR and, consequently, a necessary document for effective incapacity planning.

 In all these cases, the most unfortunate situation is finding the mistake only after the principal has lost capacity to execute a new one. I have seen enough harm caused by improper or incomplete powers of attorney to always recommend a review of an existing POA for my clients. The old adage from Benjamin Franklin is as true with regards to powers of attorney as it is in any other field: an ounce of prevention is worth a pound of cure.

To schedule a consultation with an estate planning and elder law attorney to discuss your existing power of attorney, or the preparation of new one, please contact our office at 347-766-2685.

Spending Down Assets to Qualify for Medicaid Nursing Home Care

January 27, 2015

Medicaid nursing home care is a means-based program, which means that the government looks at your income and assets to determine eligibility. Since you can’t gift away your assets and qualify for nursing home care for up to 5 years, elder law attorneys need to find creative legal ways for over-resourced seniors to qualify for the care they need. In this article we will discuss a few common ways that New York seniors can qualify for nursing home care by legally spending their assets down. It is important to note that while married seniors have more planning options than single ones, these strategies work for either. It is also important to remember that it is far better to plan at least five years before you may need nursing care, and that these techniques are only last minute solutions which may not work in every situation. It is highly advisable to speak to an elder care attorney before undertaking any Medicaid planning on your own.

No Gifting
The first rule to remember is NOT to gift any money without speaking to an attorney. Many seniors are tempted to give away their money to qualify for care. Some erroneously think they can gift away $14,000 per year per person without a penalty. These actions may result in a penalty period which will delay coverage. Instead, speak with a Medicaid planning attorney to determine which gifts, if any, can be made without invoking a penalty.

Legitimate Debts and Mortgages
If you have medical bills, credit card debts, taxes, rent, utilities, a home equity loan, or a mortgage on your house, you can pay them off using your assets without incurring a penalty. Keep in mind that you will still need to protect your home from Medicaid liens and Medicaid estate recovery after your mortgage is paid off.

Purchasing Non Countable Assets
Need a new refrigerator? New home furnishings? A new roof? These purchases, along with other items you may need, including new clothes, a newer car, and vacations for yourself, may be purchased without incurring a Medicaid penalty.

Caregiver Agreements
New York Medicaid allows you to spend money on your care without incurring a penalty. This includes paying a child to provide care for you, thereby depleting your funds and helping you qualify. There are, however, a few important requirements. First, the agreement should be in writing and signed by both parties. The agreement must define the scope and cost of the services provided. The cost of the care must be reasonable. Daily time logs must be kept by the caretaker. If a lump-sum prepayment is made to the caretaker, the amount must be calculated using your reasonable life expectancy, and the contract should provide that any unearned funds shall be paid back to Medicaid when you pass away. All payments should be made with check or credit card, since cash payments are hard to prove. The money that you pay to the caretaker will be treated as income to them, subject to their paying income taxes on it. It is best to engage the services of an elder care attorney to prepare and oversee the caretaker agreement.

Prepaying Funerals
Medicaid allows you to use your funds to prepay your funeral, as long as the prepayment is irrevocable. In addition, you are allowed to pay for the funerals of your spouse, children, siblings, parents, and spouses of any of those individuals as long as the marriage is in effect. This can be a very effective way to make “gifts” to your family members while not having them count as a penalized transfer of assets.

To speak with a New York Medicaid Planning Lawyer, contact the Law Offices of Roman Aminov today at 347-766-2685.

Medicaid Planning with a Life Estate Deed

March 13, 2014

As we discussed in the previous Medicaid planningarticle, in order to avoid Medicaid liens and estate recovery, elder law clients would be well advised to learn about their rights to protect their homes. This is true whether they need Medicaid home care and wish to avoid estate recovery, or whether they are planning for nursing home care and wish to avoid liens and/or estate recovery. One strategy entails transferring the home into an irrevocable Medicaid trust which allows for the most flexibility. Another technique to protect the home involves transferring the home to loved one while retaining a life estate in the home. This article will discuss the benefits and drawbacks of a deed with retained life estate for the elder law client.

Life Estate Benefits:

  • A legal life estate allows the life estate holder the absolute and exclusive right to live in the property for the rest of their lives. Therefore, the senior can live in their home without worrying about the remainder owners (usually the children) kicking them out. This can also be accomplished with a Medicaid trust.
  • The life estate holder has the right to all the rents from the property if it is rented out during his/her life, similar to a Medicaid trust.
  • The property avoids probate after the death of the client since it passes by operation of law, similar to a Medicaid trust.
  • The life tenant retains their real property tax breaks including STAR, Enhanced STAR, SCRIE, SCHE, etc. which can also be accomplished with a Medicaid trust.
  • Under current (March 2014) Medicaid estate recovery laws, the home will not be available to Medicaid under an estate recovery action since the home avoids probate (see above).
  • The property receives a step-up in tax basis upon the death of the owner which saves the remainder beneficiaries capital gains tax if the property appreciated after it was purchased. This result is the same under a properly drafted Medicaid trust.
  • The transfer of the property with a retained life estate triggers Medicaid’s 5 year look-back period for nursing home care which means the earlier you transfer the home, the sooner you would be eligible for Medicaid nursing home care coverage. The same applies to transfer to a trust.
  • The transfer with a retained life estate will often result in a shorter penalty period than a transfer into a trust since the value of the life estate is subtracted from the amount gifted.
  • Life estates are cheaper and simpler to create than irrevocable Medicaid trusts.

With all these advantages, one may wonder why attorneys still recommend the use of irrevocable Medicaid trusts. The following disadvantages will highlight some of the reasons. A consultation with a Medicaid planning attorney is crucial before undertaking any course of action.

Life Estate Disadvantages

  • When you transfer property with a retained life estate to someone else, you can not sell the property without the remainder owners’ consent.
  • You also lose the right to change who the eventual owners will be; once the transfer occurs, you can’t take it back without consent. This contrasts with a trust which allows you to retain a limited power of appointment and change who the eventual beneficiaries will be at any time.
  • The property will become an asset of the remainder beneficiaries immediately upon the transfer and will also be available to the creditors and may prevent them from obtaining means tested governmental benefits such as Medicaid and SSI.
  • Although both a life estate and a trust transfer require the filing of gift taxes, the transfer of a property with a life estate is a completed gift for gift tax purposes and may therefore require the payment of gift taxes.
  • The sale of the home while you are in a nursing home will result in the life estate portion of that transfer (calculated using IRS tables) becoming an available resource.
  • If the home is sold, you would not qualify for the full $250,000 exclusion of capital gain tax ($500,000 if you are married filing jointly). Rather, you would be entitled to a partial qualification relative to the value of the life estate.

The decision of whether to use a life estate or an irrevocable Medicaid trust involves many different areas of law as well as individualized personal factors. Therefore, the decision to protect the home while qualifying for Medicaid should be followed up by a conversation with an elder lawyer to make sure that your plan comports with your wishes. Our estate planning/elder law office is available for a free consultation at 347-766-2685.

Medicaid Planning for the Home: Irrevocable Medicaid Trust

February 6, 2014

When it comes to long term care for seniors, our office recommends long term care insurance as the first choice. If that is not an option, planning for Medicaid becomes an important component of many families’ plans. While Medicaid allows seniors to own a home and still qualify for benefits, it is important to understand that Medicaid can impose a lien on the home if the senior is admitted to a nursing home. Additionally, Medicaid may collect against the estate after the senior passes away, regardless if they were receiving community or institutional Medicaid. It is therefore necessary to understand various planning strategies which allow seniors to obtain necessary benefits while protecting their assets for their heirs. One of the best techniques which attorneys use involves the transfer of the home into an irrevocable Medicaid trust, which will be discussed in this article.

Benefits During Life
The Medicaid trust involves transferring the home and other assets into an irrevocable trust which will then be managed by a trustee (or trustees) of your choice. The trustee can be a child, friend, sibling, or anyone you trust, excluding your spouse. A properly drafted trust entitles you to all of the benefits of ownership including:

1. The right to remain in the home as long as you and your spouse are alive.
2. The right to make the trust “income only” and collect any rent the property generates.
3. The ability to keep your existing STAR and Enhanced STAR property tax relief as long as you reside in the home.
4. The right to use the $250,000 (if single) or $500,000 (if married) capital gains tax exclusion if the home is sold during your life.

If the home is sold during your life, a new home can be purchased for your benefit. You can also allow the assets in the trust be used for the benefit of your children, grandchildren, or other beneficiaries. It is important to make sure that the trust does not allow the trustee to give the principal directly to you or your spouse. The trust can also allow you a limited right to change your trustee if you are not happy with how they are performing.

The trust also protects your beneficiaries from creditors. Instead of gifting your home outright, by placing it in trust, you are able to shelter it from the reach of your beneficiaries’ creditors. If one of your ultimate beneficiaries has a creditor which you wish to avoid, you can simply change your beneficiaries by using your limited power of appointment so that your assets don’t fall into unwanted hands.

From a planning standpoint, transfers into a trust should be done sooner rather than later since Medicaid imposes a 5 year look-back for nursing home care. By transferring your assets into a trust, you start the five year look-back clock running if you were to ever need nursing home care.

Benefits After Death
After you and your spouse both pass away, the trust will distribute the assets as per your wishes. During your life, you can retain the right to change your beneficiaries by retaining a limited power of appointment. This power allows you to change the beneficiaries either by writing a will or by executing any other writing during your life which makes reference to the trust. This means that the creation and funding of the trust doesn’t spell the end of your control of the ultimate disposition of your assets. It also means that the home will be included in your estate when you pass, and will receive a step-up in tax basis. The step-up in basis saves your heirs from paying capital gains tax upon the immediate sale of the home.

Additionally, the trust allows the home and other assets to avoid probate which saves unnecessary time and expense. By avoiding probate, you also avoid Medicaid estate recovery which is the government’s way of taking back the amount they paid for your care after you die. More about Medicaid estate recovery can be found here

We hope this article has shed some light on the Medicaid planning trust and highlighted the benefits of thinking about one with your elder care lawyer. Any specific questions or situations should be discussed with a competent attorney. We welcome you to contact our office for a free consultation at 347-766-2685.

Pooled Trusts: Medicaid Home Care While Preserving Income

July 30, 2013

Many New York City residents who are in need of community Medicaid services such as home care, adult day care, or prescription drugs find that they exceed New York Medicaid’s income allowance, of $800 a month (plus a $20 personal needs allowance) in 2013. Many seniors receive social security, pension, and investment income which easily surpass this meager allowance and disqualify them from receiving much needed health services. Although Medicaid does give an otherwise qualified person the option to “spend down” their income by paying the difference to their health care providers and still receiving benefits; that option leaves a single person with only $820 to pay for rent, groceries, clothing, and other essential expenses. The amount for married couples, $1175 (plus $40) is even stingier. Who among us, especially in New York City, can afford to live on $820 a month? The solution for many New York residents, regardless of whether they are under 65 or over, is the use of Pooled Income Trusts, also known as Pooled Supplemental Needs Trusts, which are unique trusts permissible under both New York and Federal Law. In Queens and Brooklyn, the areas in which The Law Offices of Roman Aminov practices, these pooled income trusts are widely used.

Let us take an example to illustrate how a pooled income trust works: Harry is a single 72 year old man living in Flushing, Queens, who recently suffered a stroke and needs assistance with his basic daily activities. He currently receives $1100 a month from Social Security, $500 a month from his pension plan, and $400 a month from an annuity for a total of $2000 a month. His basic living expenses are $1800 a month. If Harry applied for Medicaid to assist him with home care, he would be allowed to keep $820, and the rest would need to be spent on his home health care service. Medicaid would then pay the difference.  In effect, there would be no way for Harry to maintain his current lifestyle. There is another option, described below, which many Medicaid recipients are using to help them maintain their lifestyles while receiving the care they so desperately need.

If Harry is determined by Medicaid to be disabled, or if he was already classified by Social Security as being disabled, he would be eligible to participate in a pooled income trust. Pooled income trusts are administered by not for profit organizations, such as the United Jewish Appeal or NYSARC, and are available to New York residents, including clients residing in Queens, Brooklyn, or Long Island. In Queens, estate lawyers routinely use pooled trusts to meet the needs of their clients. Instead of having to pay his health care bills until he only has $820 left each month, Harry would send his “excess” income to the non-profit instead of his Medicaid Long Term Care Plan (MLTC) which administers his care. The non-profit would then be able to pay for any services not covered by Medicaid including rent, mortgage payments, clothes, recreational activities, etc. Harry would simply send the bills to the organization which would use the “excess” income to pay the bills on his behalf. The assets in the Harry’s trust carry over from month to month, but any money which is left after Harry passes away belongs to the non-profit organization to continue their charitable work. There are fees associated with setting up and continuously managing pooled income trusts, but they pale in comparison to the amount which a client can save. In addition, if Harry was disqualified from Medicaid because he had assets over the allowable limit of $14,400 in 2013, he would be able to transfer the excess in the pooled supplemental needs trust as well.

Pooled trusts have certain drawbacks, although not nearly enough to avoid them in most cases. In addition to the initial setup and monthly fees, any assets which are transferred by an individual over the age of 65 will be subject to a five year look back period for institutional Medicaid services such as nursing home coverage. Secondly, Harry will not be able to directly withdraw the money from his trust; instead, he must submit his bills to be paid by the trust. Additionally, if Harry does not fully use his excess funds, they will be turned over to the non-profit organization when he passes away, and his heirs will not inherit them.

It is always recommended that a potential applicant, especially one with income over $820, consult an elder law attorney prior to applying for Medicaid. Working with an attorney can potentially save the client months of waiting for much needed care. For a free consultation with a Queens and Brooklyn based elder law attorney, contact the Law Offices of Roman Aminov today at 347-766-2685.

Planning for Incapacity With a Living Trust

July 3, 2013

As we covered in the first part of this series, the likelihood of becoming incapable of taking care of one’s financial affairs at some point in life is fairly high. Having already discussed incapacity planning vis a vis a power of attorney, we now turn to a more sophisticated method of planning for incapacity, the living trust. When clients step into our NY based Queens or Brooklyn offices, they walk out with a clear concept of the pros and cons of a living trust. In each situation, it is best to consult with an estate lawyer.

The idea of a living trust is rather simple: have a trusted person, a trustee, manage your assets on your behalf when you can’t. You, the grantor, would establish a trust while you are alive (i.e. a living trust). The trust can either be revocable or irrevocable. Revocable means you have the option to “undo” it, while irrevocable means that it generally can not be “undone”. Revocable trusts are more commonly used to avoid probate while irrevocable trusts can also be used avoid probate while at the same time sheltering assets from Medicaid and providing estate tax benefits.

The trustee, whom you will appoint in consultation with your estate planning attorney, will be responsible for administering any assets that the trust owns. Therefore, ownership of any asset that you would want the trustee to manage would need to be transferred to the trustee of the trust. This needs to be accomplished by preparing new deeds, re-titling accounts, etc. Only those assets which are properly transferred to the trustee can be managed by him/her. In New York City, including Brooklyn and Queens, the recording of a deed is accomplished by filing the deed and ACRIS documents with the county register in the county where the property is located.

While you may be the initial trustee of your living trust and manage the assets you see fit, if you become incapacitated the trust will have a provision which allows a substitute trustee to manage your affairs for the duration of your incapacity. This will allow the relatively smooth transition from you managing your money to your trustee managing it on your behalf. Had the assets been held solely in your name at your incapacity, a guardianship proceed would need to be brought before the court to allow a guardian to manage your assets. Certain assets, such as actively traded securities and investment real estate can not wait months to be managed. Any delay can cause a tremendous and irreversible loss of value. This time consuming and expensive process can be obviated through the use of trusts, leaving no gap in management.

For your protection, the trust document should list the criteria which will determine incapacity, such as a letter from your treating physician, or from two independent doctors, before a trustee can act in your stead. If you regain capacity, the trust should be drafted to allow you to resume acting as trustee.

It is best to have both a power of attorney and a living trust, as certain assets may not be funded into the trust and will require a power of attorney or guardianship proceeding. The advantage of a trust over a power of attorney is that since you are transferring ownership of the assets to the trust directly, the institution will not require the typical verification that an agent under a power of attorney will have to provide. And even though institutions are obligated under the NY GOL to accept validly drafted and executed short form powers of attorneys, many insist on using their own forms and routinely reject the short form. With a properly funded trust, you are not at the mercy of each individual institution’s legal department. Additionally, for an institution to validate a power of attorney through their legal department may take weeks, causing potentially irreparable harm to assets in need of management. However, both a trust and a power of attorney are preferable to guardianship proceedings which take months and thousands of dollars in legal fees.

The Law Office of Roman Aminov, based in Flushing, Queens, with satellite offices in Brooklyn, New York, is a full service estate planning law firm concentrating in elder law, probate, Medicaid planning, and power of attorney services. Contact us today for a free consultation at 347-766-2685.

The Difference Between a Will and a Living Will

March 22, 2013

In my estate planning practice, as well as during the seminars that I give, I regularly speak to clients who are unsure of the distinction between a Will, also known as a last will and testament, and a living will. I have even had one client who had told me that she had a Will, when in reality all she had was a living will. The difference between the two is vast, and not knowing the difference could have cost my client tens of thousands of dollars.

Will (Last Will and Testament)

The purpose of a Will is to distribute your assets after you pass. If you have ever seen a movie with a lawyer reading a document to the family of a rich uncle who died, the lawyer is reading from this type of a will. A Will allows you to decide what you would like to go to whom, when, and how.

Without a Will, State law will determine who inherits your assets and handles your estate. A Will, as well as a living trust, allows you to structure the asset distribution to help avoid estate taxes, protect your heirs from creditors, and space out the distribution over time.

Family heirlooms can be expressly left to a beneficiary in a will to avoid fights. Only a Will can also be used to nominate guardians for your minor children if both of their parents pass away, although the court still has final discretion. A Will also allows the testator (person making the Will) to appoint executor(s) who will oversee the administration of the estate.

It is important to know that, unlike a living will, the last will and testament only takes effect after you die and can be changed, or revoked, any time prior to your death. To have any effect, your Will must be probated in the Surrogate’s Court where you last resided after you die.

Living Will

The purpose of a living will is to memorialize your health care wishes so that your family, doctors, and/or health care proxy (the person making your health care decision) know what you want done if you are not able to make decisions for yourself.

You are able to specify whether you would like to be kept alive by artificial means if there is no hope of recovery. You are also able to specify the level of care that you want to receive if you are in an accident or a coma.

A living will, although not officially authorized by New York State law, is enforceable as long as it provides clear and convincing evidence of your desires. Since it is hard to draft instructions for all the different possibilities which may arise, I generally advise clients to also prepare a health care proxy which appoints a trusted person to make decisions on your behalf.

The health care proxy should be given a copy of your living will so that they can use it as a guide as they make decisions. For individuals who wish to have decisions made according to the laws of their religion, such as organ donation and cremation, it is important to appoint a proxy who is sensitive to those wishes and to specify those wishes in the living will.

Similar to a power of attorney, which is used by your agent for financial and business transactions, a living will ceases to be effective after you pass away. Additionally, a person may also have a form which designates an agent to carry out his burial wishes. Such a designation, which is sanctioned by NY Public Health Law, is superior to instructions in a Will which take time to access.

Both a Will and a living will are important pieces of any estate plan. Each should be prepared under the guidance of an attorney and both need to be witnessed by two disinterested witnesses. That is where the similarities end. It is important for clients to understand that while a living will deals with health care decisions, a Will deals with distribution of property and the appointment of guardians and fiduciaries. Contact us for a free consultation with an attorney who can explain the difference between these documents and prepare the proper estate plan for your individual needs.

Protecting Your Home and Assets From Medicaid

December 21, 2012

I often see clients who are Medicaid recipients and are concerned that Medicaid may try to take their home or other property after their death. It is also a real concern to many elderly clients who are thinking about applying for Medicaid in New York. If you are one of the many people who are unsure of what can happen to your assets after your passing, then please read on. If you are interested in qualifying for New York Medicaid, please read my previous article here.

As I sit with clients to understand their situation, I advise them that the answer to this question is quite complex and depends on many factors including their age, familial situation, and the type of care that Medicaid is providing them. Medicaid is divided into two general categories: (1) Institutional, which includes nursing home and intermediate care facilities, and (2) Community-based which includes all the other services Medicaid provides including home care and insurance. Let us look at what Medicaid can do with your property in each situation:

If you (1) are receiving nursing home care, (2) are deemed a “permanently institutionalized individual (PII)” (meaning you are deemed not to have an intent to return home) , (3) and own your home, Medicaid must place a lien on your home for the amount that they pay out. When the property is eventually sold, the lien must be satisfied before your heirs get the remaining proceeds. There are a few exceptions. First, a lien may not be placed upon your home if certain people are lawfully residing in the home, including a spouse, a child under 18, or a child of any age who is certified blind or certified disabled. Second, if you return home after being a PII, Medicaid must remove the lien. Third, prior to imposing a lien against your home, Medicaid must allow you to transfer the home to the aforementioned individuals, assuming you are able to.

Regardless of whether you are receiving institutional or community-based Medicaid, Medicaid can seek “estate recovery”. Estate recovery is when Medicaid tries to recover the amount it paid for your care from your probate estate. Your probate estate only includes assets which you held in your own name and which do not pass by operation of law or through a beneficiary designation. If Medicaid is providing you with either nursing home care, home care aid services, doctor’s visits, prescription coverage, or hospital visit coverage, they may go after your probate estate to recover their outlay. The operative words here are “probate estate” and much can be done, relatively simply and inexpensively, to remove your home from your probate estate. There are a few caveats and exceptions to estate recovery. First of all, for community-based care, Medicaid can only collect services provided to you since your 55th birthday. Secondly, for either community or institutional care, Medicaid can only recover up to 10 years worth of benefits counting back from the date of death. Third, no recovery may be made during your spouse’s life, or at a time when you have a surviving child who is less than 21 years of age or who is certified blind or certified disabled.

Assuming that the Medicaid agency in New York has not placed a lien on your property, you have the opportunity, with some careful planning, to prevent this from happening sometime in the future. A knowledgeable elder law attorney can utilize different methods such as deed transfers with retained life estates and income only Medicaid trusts along with properly drafted powers of attorney to shelter your home from Medicaid claims. An elder care attorney can also help you prepare a proper estate plan consisting of a will, power of attorney, health care proxy, and a living will. The important thing to know is that the sooner you speak with an estate planning/elder law lawyer, the more likely it is that you can receive the care you need while protecting your home for your heirs.

For a free consultation with a New York estate planning/elder law attorney, contact us by calling (347)766-2685 today.

The NY Power of Attorney

November 15, 2012

Planning For Incapacity Part 1: The New York Power of Attorney 

While no one wants to think about it, becoming incapacitated during your lifetime is not an unlikely event. According to the National Association of Insurance Commissioners, one in four 25-year-olds will experience at least one period of disability before they are 65. Other Insurance statistics indicate that there is a 79% chance that an individual will be disabled for at least 90 days or more at some time in their life. What will happen to your home and bank accounts when you are not able to pay bills or deposit checks? What will happen with your IRA or investment accounts if you are not able to manage them? In the “Planning for Incapacity Series” we will discuss different options individuals can utilize to protect themselves and their families in the event of disability or incapacity. The first article will answer some basic questions regarding a New York Statutory Short Form Power of Attorney, or “POA” for short. Subsequent articles will discuss other facets of planning for disability or incapacity.

What Is A Power of Attorney?

A POA is a powerful and inexpensive tool which allows a competent individual who is at least 18 years old (the principal) to designate an agent to handle their financial, business, and real estate related affairs. Through a detailed and statutorily recognized writing, the principal can empower his agent to act on his behalf as per the directions and limitations spelled out in the POA. The agent can do no more than a properly drafted POA allows, which makes proper drafting crucial. A POA can allow an agent to deposit checks, pay bills, transfer real estate, manage finances, and open and close financial accounts on behalf of the principal while acting in a fiduciary capacity. The principal will have peace of mind knowing that his finances, and his family, will be taken care of in the event that he is not capable of handling them on his own. Preparing a POA can save thousands of dollars and many months which are required to obtain guardianship over an incapacitated individual’s finances.

Who Can Be An Agent?

The agent can be anyone that the principal trusts to manage his/her affairs, but is generally the spouse and/or children. A typical POA appoints the spouse as the agent and the child(ren) as successor agents in the event that the spouse is unable to act. Since a POA gives the agent power to manage the principal’s finances, it should be given with much thought.  The general rule is that you should only appoint those individuals whom you would trust with your credit card or a blank check. A principal can name co-trustees which means that multiple agents will have to act together to accomplish anything. This can be an effective way to prevent one agent from having unbridled control but can make it more difficult to accomplish even simple transaction. Another way to oversee the acts of the agent is to appoint a monitor over him/her, although this is seldom done. If you need someone to monitor your agent, maybe you shouldn’t appoint them in the first place.

When Can The Agent Begin to Act?

The powers can be given to the agent immediately upon execution of the POA or can “spring” into effect upon the principal’s incapacity. If “springing powers” are used, the agent can only act after the principal is shown to be incapacitated by a letter from the principal’s treating physician, or by another physician if the treating physician is not available. This will assure the principal that the agent can not do anything while the principal is competent, but will make it more burdensome for the agent to prove that the principal is, in fact, incapacitated or incompetent.

When Does the Power Terminate?

A competent principal can revoke the POA at any time by giving notice to the agent and preferably any institutions which the agent may have already used the POA. If the principal does not, or can not, revoke, we look at what type of POA was given. There are two general types of Powers of Attorney: (1) Durable Power of Attorney and (2) Non-Durable Power of Attorney. A durable power of attorney survives the principal’s subsequent incapacity while the non-durable power of attorney ceases to be valid if the principal becomes incapacitated. For obvious reasons, the durable POA is the only one that I recommend clients use in order to plan for incapacity. A non-durable POA is useful in situations where incapacity is not the reason for its creation, such as when one spouse can not attend a house closing in person. A POA can also terminate the agent’s authority at a certain date or after a certain goal has been accomplished.

How Do I Execute a Power of Attorney?

After a POA has been properly drafted, preferably by a knowledgeable attorney, the principal needs to initial next to each power which they wish to confer upon the agent. The principal also has the option to expand and define the power of the agent beyond those listed on the statutory form. This provides a ripe opportunity for the elder law/estate planning attorney to explicitly give the agent the right to do Medicaid and estate planning on behalf of the principal. The principal then signs the POA and has his signature notarized. The POA is not effective, however, until the agent signs and acknowledges that he has read the section titled “Important Information For Agent” which explains the agent’s role, fiduciary obligations, and limitations on his authority. The agent does not have to sign at the same time as the principal, and successor agents do not have to sign at the same time as the primary agent.

The Statutory Short Form Power of Attorney is a fundamental document of any estate plan and should be considered for all individuals regardless of their financial situation. It helps the family deal, at least financially, with the incapacity of a loved one and is a much more inexpensive way to deal with such an occurrence. To discuss this issue with a Queens estate planning lawyer who specializes in these matters, contact our office at (347)766-2685.

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