Financial Planning

Should You Take Advantage of Tax Situation Now?

Published on: June 25, 2012 | by Ettinger Law Firm

The New York Times published a story this weekend on the continued uncertainty regarding the gift and estate tax and the questions it raises for many families. As each New York estate planning lawyer at our firm explains to local residents, the current tax situation is in flux, requiring many different considerations when engaging in estate planning. As it now stands, residents can each give up to $5.12 million tax free and then pay a 35% tax rate on any gift above that amount. The tax-free amount will drop and tax rate rise at the end of the year without Congressional action.

The uncertainty about the future of the tax details present very obvious challenges to many families. Giving away money to heirs now means reducing an eventual tax bill down the road. However, there are many questions about whether couples will have enough money to live on themselves after giving large sums to others. Obviously these considerations all depend on the value of the family estate. In general, only comparatively wealthy families are impacted by these issues. But for those families who are “on the cusp” and stand to pay more in taxes when the changes take effect, tough decisions will need to be made in the next six months.

One consideration beyond basic tax savings for estate planning purposes is the amount the any money passed on might grow over the years. For example, if a couple gave their child $5 million to take advantage of the favorable exemption, the gift could grow to nearly $30 million in about 30 years based on reasonable return rates.

Estate Planning Challenges For the “Asset Rich and Cash Poor”

Published on: March 29, 2012 | by Ettinger Law Firm

This week the USA Today shared a helpful story that analyzed some estate planning difficulties faced by certain families, often farmers, who have many physical assets but few liquid cash stockpiles. One obvious challenge for these families is dealing with the uncertainty of the estate tax. Estate tax considerations are of clear concern, because the family may be unable to pay the tax burden that comes with inheriting the assets without being forced to actually sell those very assets.

Currently, there is a $5 million exemption level for the estate tax. However, without federal action, that exemption level will drop to $1 million by the end of the year. All inherited assets that exceed that level will then be taxed at various rates up to 55%, with a 5% surcharge on estates over $10 million.

Our New York estate planning attorneys appreciate that these estate tax issues are of paramount importance to certain community members, like farm families or those with family-owned businesses. For example, it does not take much for farms of various sizes to cross over that $1 million threshold when taking into account land, buildings, and equipment. In addition, for many farmers, land values have risen steadily with advances in natural resource technology because of the increased profitability of available minerals. Many resources can now be extracted from land that was previously unattractive to the mineral industry. This increases the value of land but makes estate tax considerations a real concern for more families.

Money for Senior Care Services Fails to Keep Pace with Rising Need

Published on: March 28, 2012 | by Ettinger Law Firm

Surveys from the AARP suggest that more than ninety percent of seniors would prefer to stay in their own homes as they age instead of moving into a nursing home or assisted living facility. Our New York elder law estate planning attorneys work with many seniors who take preparations specifically to avoid being forced to move in the future.

Unfortunately, access to the support services that allow seniors to stay at home is getting harder and harder to come by. Transportation services, meal delivery programs, adult day care centers, and similar programs are finding it tougher to stretch stagnant resources to aid a growing number of seniors. The Times Herald-Record touched on these New York elder care concerns in a story this week.

For example, at the end of this month the Dial-A-Bus service will no longer be providing support to elderly community members in New Windsor, Cornwall, and many nearby towns. Senior care workers explain that it is hard to underestimate the value of those sorts of services. For some isolated seniors, the bus service was not simply the only way they had to get to doctors appointments, but it was often the only chance these seniors had to socialize and interact with those in the community.

Increase in Blended Families Cited For Causing “Uglier” Estate Fights

Published on: March 19, 2012 | by Ettinger Law Firm

The world is a different place today than it was in 1950. Several decades ago the vast majority of families were of similar make-up: father, mother, kids, dog, house, and car. Inheritance planning in those situations often followed very predictable patterns. A spouse received the assets after a death, and the children split the remaining assets when the second parent moved on. However, our New York estate planning lawyers know that there is much more complexity these days.

That is true for several reasons. On one hand, the law has changed, with different tax situations, legal tools, long-term care concerns and other realities forcing estate plans to take more into account. In addition, families are much more diverse these days than in the past.

Blended families are quite common, necessitating families take special care to account for their inheritance wishes. “Default” statutory inheritance rules may have been a bit less off-putting several decades ago. However, considering the unique make-up of most families these days, it is incumbent upon local residents not to risk their estate being split via default intestacy rules. As a new USA Today story explains, it is no longer a luxury to have the help of an estate planning lawyer–it is a necessity.

Mom Has Dementia and We Don’t Know What to Do

Published on: March 14, 2012 | by Ettinger Law Firm

There is no easy way for a family to deal with a senior grappling with a cognitive mental disease like dementia or Alzheimer’s. Like any health problems faced by loved ones, a family’s initial reaction is to try to get the senior the help they need. However, each New York elder law attorney at our firm understands that cognitive conditions are tricky, because the injury is not physical and often the senior may not be fully aware that they are even suffering from the problem at all.

One elder law advocate recently discussed this challenge in response to a reader question explaining her family’s difficulty dealing with her mother’s dementia. As published in the L.A. Times, the reader revealed that her 82-year old mother, who has dementia, began accusing the family of spying on her. As a result, the mother admitted to her doctor that she wouldn’t share anything about her health with them. The family has been left wondering what to do to help their ailing matriarch get through this difficult phase. Many local families visit our New York elder law estate planning attorneys with the same concerns about helping relative with cognitive issues.

For one thing, in many cases a doctor will not be willing (or legally able) to discuss the mother’s condition without legal documents in place. This is particularly true when the doctor suspects that there may be a family rift. Creating those legal documents is a large part of the work done by elder law estate planning lawyers. The documents help ensure that the senior can receive help with their legal, financial, and healthcare decisions. Creating a trust may allow a third party to manage an ailing senior’s assets. A durable Power of Attorney allows financial decisions to be made by another. Health Care Proxies are needed to make key medical decision when another is unable to do it on their own.

DOMA Developments May Have Implications for Married Same-Sex New York Couples

Published on: March 9, 2012 | by Ettinger Law Firm

The Defense of Marriage Act (DOMA) is a federal law passed in 1996 that defines marriage for federal purposes as only between one man and one woman. As our New York estate planning lawyers have often discussed, this means that same-sex couples married in our state are still not considered married for federal purposes. This has serious implications for tax preparation, estate planning, and a host of other concerns facing these residents. DOMA prevents married individuals from filing joint federal tax returns, receiving Social Security benefits, or having tax-free inheritances.

Many advocates on all sides of the aisle are working to overturn the law. Bills have been advanced in Congress which would repeal DOMA. However, with the current partisan split it appears unlikely that these legislative measures are likely to pass anytime soon. But that does not mean DOMA is here to stay. Most of the recent action on the issue has taken place in the courts. Several federal lawsuits have been filed which challenge the constitutionality of the legislation. President Obama has refused to defend the measure, and so the law is currently being defended under the auspices of the Republican leadership in the U.S. of Representatives.

Last month a U.S. District Court judge in one of those cases found that DOMA (or at least section 3 of the law) violates the equal protection clause of the U.S. Constitution. The case is being appealed to the federal appellate court. This particular ruling relates only to one provision of the law as applied to one couple. However, it is a clear indicator that the entirety of DOMA may one day–perhaps soon–be found unconstitutional.

More Americans Financially Supporting Aging Parents

Published on: October 31, 2011 | by Ettinger Law Firm

Last week Reuters discussed the growing number of adult Americans who are financially supporting their senior parents. As the author quips, many of these residents have becomes the “Bank of Sons and Daughters” after the recent financial crisis decimated the savings of many elderly family members. According to MetLife‘s new National Health and Retirement Study, the percentage of adult children spending time and money on their parent’s care has tripled in the last decade and a half. This comes as no surprise to our New York elder law attorneys who know that rising long-term care costs, the economic downturn, and failure to plan ahead for senior care places many families in tough situations when a loved one ages and needs extra day-to-day care.

The MetLife data found that roughly a quarter of all adults are currently providing at least some financial assistance to their parents. A similar survey from Caring.com suggests that adult children may be providing even more support, as thirty two percent of respondents said they’ve spent at least $5,000 on their parents’ living expenses within the last year. A large majority of that group admitted that supporting their parents leads them to worry about their own long-term financial situation. As one researcher involved in the data collection explained, “There are just a ton of families where the second or third generation needs to help the first generation. People are asking, a lot, about how to do it.”

Not only does financially supporting aging parents often place stress on the finances of the adult children, but, if not done properly, it may actually be harmful to the senior. As each New York elder law attorney at our firm has explained to local residents, it is important to properly tailor financial gifts such that they don’t inadvertently disqualify the parent from government benefits. Certain programs are in place to help seniors receive the care they need even if they do not have the resources to purchase it. However, qualification for those programs, such as New York Medicaid, is based on need. If adult children do not take those qualifications into account, they may unknowingly complicate their parent’s program participation.

Economic Uncertainty Leads to Rise in Estate Planning Interest

Published on: October 27, 2011 | by Ettinger Law Firm

An article this week from West Fair Online explained how professionals working with residents on financial issues have seen a significant increase in demand for their services as of late. While there may be a tendency among some to become paralyzed when the economy is so volatile, many others view the instability as a time to act prudently and plan ahead as much as possible. The article reports what our New York estate planners have long known: the need to have an estate plan remains strong regardless of the circumstances.

Experts know that the need for prudent planning is perhaps even more important at times like these, when there tax and policy uncertainties at the local, state, and federal levels. One planner interviewed for the story explained how in turbulent financial times “the area’s residents should have a vested interest in knowing what the stakes are for their assets.” While those residents at the top income levels are often more aware of how the laws affect them, many middle class families have just as much to gain by using the legal tools available to plan their financial future and save taxes in the long-term.

Most observers have applauded the steady rise in estate planning awareness. However, there are still a few groups which continue to neglect their planning needs. For example, many local small business owners continue to miss out on opportunities to visit with a New York estate planning lawyer to take care of long-term financial goals. Of course, small business owners wear many hats. Rarely do they have time to accomplish everything on their “to do” list each day. Yet, many benefits have been reported by those who have carved out time to visit with financial professionals to protect assets, create a succession plan, and conduct similar tasks.

The Medicaid Asset Protection Trust (MAPT) – Do’s and Don’ts

Published on: April 13, 2010 | by Ettinger Law Firm

by Michael Ettinger, Attorney at Law The Medicaid Asset Protection Trust (MAPT) is a technique commonly used by elder law attorneys. It consists of an irrevocable trust, usually set up by a parent of parents sixty-five and older. One or more of the adult children are named as “trustees” to manage the trust for the benefit of the “beneficiaries” who remain the parents during their lifetimes. For example, the parents retain the right to the exclusive use and enjoyment of the home and the income from all of the trust assets. The establishment and “funding” of the trust, i.e. retitling the home and the investments in the name of the trust, starts the five year look-back period running. After five years, those assets become exempt and are protected from the costs of long-term care.

Once the MAPT is established, there are certain things the parties can and cannot do. Below are a list of the “Do’s and Don’ts” concerning the MAPT.

Do’s