New York Estate Planning & Elder Law Blog

CAN AN HEIR BORROW AGAINST INHERITANCE?

Published on: October 31, 2015 | by Ettinger Law Firm

Perhaps your prodigal child wants to start a law firm or a medical practice and needs start up funding. You have some money set aside for your children’s and grandchildren’s inheritance but agree to loan them the money out of this fund. It’s not uncommon for these monies to be secured by a promissory note, even though many parents would not strictly enforce its terms. If the promissory note is not paid off by the time the parents pass away, it becomes an asset of the estate that must be accounted for. If it is a significant amount of money, the IRS or state tax authority will impute interest. If the parent decides to forgive the loan, that is usually considered taxable income to the child.

LOAN DOCUMENTS AND ESTATE DOCUMENTS CONTROL

The parent controls these issues and to the extent that it can be controlled during his or her life, they should be. Loans should be in writing, with the repayment schedule outlined. Most loans obtained on the open market have extensive outlines of the remedies that the creditor reserves. These are not necessary unless the parent actually intends to exercise these remedies. If no remedies are outlined in the document, the parent always has the right to document his or her intentions on how the estate should treat these loans.

DONATE MY BODY TO SCIENCE

Published on: October 29, 2015 | by Ettinger Law Firm

Donating an organ or even a whole body for scientific study or medical education is a relatively common event, which permits a person with perhaps a rare or not well understood disease to contribute to medical science. Even if the person passes without a disease or any unique characteristics, medical schools need these volunteers for very important work. Some people see their act as an act of charity, a way of giving a gift to society. Organ donation helps to reach even more people by providing spare parts for surgeons, for those who need a replacement organ or tissue. It has been estimated that 114,000 Americans are awaiting organ transplants and that one person is added to the list every 11 minutes and that each year 6,600 people die each year while on the organ transplant list.

ANATOMICAL GIFTS PERMITTED VIA WILL

In 2005, the New York legislature passed a law which made it easier to give an anatomical gift. Organ donation is easy enough now, as it can be a mere check the box designation on your driver’s license. No additional signatures or witnesses are needed. New York further permits a person to validly donate their organs or their whole body by way of will. If the will is later invalidated, the donation is considered valid and any physician or medical school acting on the gift is shielded from liability. Some people with religious or moral objections to donating their body may still decide to donate organs without violating their conscience or religion. Even with these provisions in place, it is still best to discuss these decisions with your family and loved ones.

INTELLECTUAL PROPERTY IN ESTATE PLANNING

Published on: October 29, 2015 | by Ettinger Law Firm

Intellectual property is an umbrella term that includes several different specific areas of the law. Trademark law, patent law, copyright laws and trade secret laws are all examples of intellectual property laws. The constitution guarantees that the federal government has exclusive jurisdiction over patent and copyright laws. Patent and copyright laws are designed to “promote the progress of science and useful arts.”

COPYRIGHTS, OWNERSHIP, HEIRS AND ESTATE PLANNING

Copyrights created after 1978 are generally good for the life of the author plus 70 years. When written for a corporation, so called work for hire copyrights, the copyright is valid for 95 after first publication date to 120 years after the work is created. To pass a copyright on to heirs, you must be careful to do it the right way. If a painter passes a painting on to an heir the right to control the copyright of that painting does not necessarily follow. The painter will have only passed on the original painting. To pass a copyright, the trust, will or other document must specifically mention that the copyright to the painting passes to the heir. It is entirely possible for a painter to pass the original work to a friend or partner but pass the copyright on to another person.

Back to the Basics – Probate Administration

Published on: October 25, 2015 | by Ettinger Law Firm

The death of a loved one is an especially traumatic event. Lives can be upended and surviving family members and friends can be left feeling lost and confused about how to carry on. This is especially true when the death occurs suddenly or under tragic circumstances. Unfortunately, the law does not provide grief-stricken family and friends much time to mourn their loss before important work must be done. This important work involves admitting the deceased’s estate to probate and then administering that estate.

In New York and elsewhere, an individual who dies with a will or similar document in place is said to die testate. If a person does not have such a document in place, the person dies intestate.

Dying Testate: If the deceased left a will, the first step of administering the estate involves probating the will, or proving the will’s validity. Usually this involves simply introducing the will into the appropriate court. Once the will has been probated, the executor or administrator named in the will is tasked with carrying out the wishes of the deceased as expressed in the will, settling any lawful debts the deceased must pay, and providing an accounting or report to the court showing that the deceased’s assets were dispersed according to the terms of the will.

Health Care Power of Attorney Good Planning Tool for Seniors & Singles

Published on: October 19, 2015 | by Ettinger Law Firm

News reports reveal that America is increasingly becoming a nation of single people. For adults navigating life solo, careful planning about who will make health care decisions on their behalf in the face of unforeseen, incapacitating illness is a smart decision, especially for singles who are childless, have minor children and/or are estranged from their families. One available option is an advanced directive called a Durable Power of Attorney (DPOA) for health care. It allows singles to appoint an agent to step in and carry out their wishes when they are unable to make critical medical decisions for themselves.

Most states have enacted advanced directives legislation. This contract allows a person, called a principal, to designate to a selected agent the power to make decisions about the course of medical care should the principal become incapacitated. Decisions covered by a DPOA for health care include such things as the power to consent to or withdraw treatment for physical or mental conditions, or to determine when to initiate or terminate life-sustaining treatment.

Health care DPOA gives singles autonomy

Using Beneficiaries as Part of Your Estate Plan – Part II: Considerations

Published on: October 13, 2015 | by Ettinger Law Firm

An earlier post on this blog provided an overview of using beneficiary designations as part of your estate plan. Recall that beneficiary designations are a way to transfer property automatically upon the death of the asset owner outside of the probate process. This post is part II of that discussion, and include some of the pros and cons of using beneficiary designations, as well as a few special considerations related to certain forms of beneficiary designations.

Pros and Cons of Using Beneficiary Designations

Beneficiary designations can be a simple and effective mechanism to transfer your property in much the same a will or trust distributes your property. The advantages of beneficiary designations include the ease in which it can be set up and the speed and in which the beneficiary receives the asset. Also, the owner of the asset has flexibility to designate any of combination of shares to any number of primary and contingent beneficiaries. Beneficiaries may be individuals, trusts, charities, or the property owner’s own estate by way of its personal representative.

Using Beneficiaries as Part of Your Estate Plan – Part I: Overview

Published on: October 9, 2015 | by Ettinger Law Firm

One of the essential functions of an effective estate plan is efficiently distributing your assets upon death. Using a beneficiary designation on assets that transfer on death can be a tool to efficiently transfer certain assets with ease if properly completed. Assets that can be transferred to a designated beneficiary upon death include insurance policies, bank accounts, retirement accounts, or other investment vehicles that feature a transfer or payable on death designation.

Types of Beneficiary Designations

Beneficiary designations include primary, contingent, and sometimes default beneficiaries. Upon the death of the owner, the asset will be transferred or disbursed to the primary beneficiary. If the primary designation fails, then the contingent beneficiary will receive the transferred asset. The default beneficiary will receive the transferred asset in the event there are no other primary or contingent beneficiaries designated to receive the asset. In some cases the default beneficiary may be a trust established by the owner of the asset, or the owner’s estate.

Early Withdrawals from Qualified Retirement Plans

Published on: October 8, 2015 | by Ettinger Law Firm

Are you not quite at retirement age, but in need of early access to your qualified retirement plan account? If you are not close to retirement, are you thinking about taking a withdrawal or loan from your qualified retirement plan account to help out with the care of your aging parents or relatives? Whatever the reason may be, whether you will be able to withdraw or borrow funds from you qualified retirement account before the age of 59 ½ depends on the rules contained in your specific qualified retirement plan. Many qualified plans allow you to borrow up to one half of the fund balance as a loan, which you will typically have to pay back within 5 years at a modest interest rate to cover your loss of investment growth. An early withdraw will generally trigger tax penalties under the Internal Revenue Code (“IRC”) and leave you with a hefty tax bill, including a 10 percent penalty on the early withdrawal. You can avoid the 10 percent penalty in a variety of situations, including the following common circumstances.

Rollovers. Under section 72(t)(1) of the IRC, rollovers from a qualified plan or individual retirement account into another individual retirement account within 60 days from the date of the withdraw will not trigger the 10 percent penalty tax.

Beneficiary Distributions. If the owner of a qualified retirement plan or individual retirement account passes away, section 72(t)(2)(A)(ii) of the IRC provides that the penalty shall not apply if the distribution is to a beneficiary.

Federal Court Confirms Use of Annuities in Medicaid Planning

Published on: October 6, 2015 | by Ettinger Law Firm

Medicaid is a joint federal and state program that provides needed health care coverage for many americans, including those requiring long term care. Since Medicaid is a means-based program, individuals often need to spend down their assets in order to qualify for Medicaid. One way to accomplish this is through the purchase of short term annuities to reduce available assets for purposes of Medicaid. In Zahner v. Secretary, Pennsylvania Department of Human Services, the United States Court of Appeals (3rd Circuit) heard appeals from two individuals that applied for Medicaid, but were denied the advantage of using annuities to reduce their countable assets for purposes of eligibility. While the case arises out of Pennsylvania, it is instructive for those seeking Medicaid coverage in the State of New York, as well as other states.

Facts of the Case

In Zahner, two Medicaid applicants each made substantial gifts to family members leading up to their application and need for Medicaid institutional care, which lead to a period of ineligibility. To help cover the cost of their nursing facilities during the period of ineligibility the appellants purchased a short-term annuity. One applicant paid approximately $84,000 to receive approximately $6,000 over a 14 month period, and the other paid approximately $53,000 to receive approximately $4,500 over a 12 month period. Each annuitant paid $1,000 to set up the annuity. When including fees, the cost of the annuity exceed the return on both annuities. The state’s department of human services determined that the transactions were not annuities and counted the transaction as a resource for purposes of their application, thereby re-calculating the period of ineligibility for Medicaid institutional care.The Medicaid applicants sued, and the district court found that the annuities were sham transactions set up to shield assets for purposes of Medicaid eligibility. On appeal the 3rd Circuit considered whether the purchase of the annuities qualified for the safe harbor by which certain annuities are excluded as an available resource for purposes of Medicaid eligibility.

Distributions from Special Needs Trusts

Published on: October 2, 2015 | by Ettinger Law Firm

If you have included a special needs trust as part of your estate plan, you need to know the importance of making sure the distributions from that trust are permissible per the terms of the trust and do not defeat the purpose of the trust by affecting eligibility for needed government programs.

Effect of Distribution

A special needs trust is one way to supplement the needs of a disabled loved one without compromising eligibility for means-tested government benefits, including Supplemental Security Income and Medicaid coverage. With respect to means-tested programs, federal law will require a reduction in benefits to the extent the beneficiary receives income or assets are otherwise made available to the beneficiary. For example: