New York Estate Planning & Elder Law Blog

What is the Best Trust for Special Needs Planning?

Published on: November 13, 2018 | by Ettinger Law Firm

Caring for a child with a disability creates challenges beyond our lifetime and often takes resources beyond what federal safety net programs can offer in order for our loved one to live the most comfortable and dignified life possible. While rules governing these federal programs place certain income restrictions on disabled persons to qualify, there are sanctioned trusts allowed specifically for special needs planning that allow for first party and third party benefits to supplement federal assistance.

In 2010, Congress passed the Achieving a Better Life Experience (ABLE) Act allowing beneficiaries to have up to $100,000 in a 529 special needs trust and retain Social Security Insurance benefits. Beneficiaries can also retain Medicaid coverage so long as the trust does not exceed the amount for a 529 college savings plan. The ABLE Act allows these trusts to be created so long as the beneficiary’s disability is established prior to the age of 26-years old.

Disabled persons can also create and fund their own first party special needs trusts through a (d)(4)(C). Funds for first party special needs trusts often come from sources such as a personal injury settlement, workers’ compensation award, or an inheritance left directly to the beneficiary. An amount equal to the annual federal gift tax exclusion (currently $15,000) can be deposited annually in the account while still maintaining the beneficiary’s eligibility for Medicaid and Supplemental Security Income

The Reinvestment Benefits of Viatical Settlement

Published on: November 11, 2018 | by Ettinger Law Firm

Viatical settlement has become a popular strategy for investors seeking immediate liquidity for end-of-life expenses. Distinct from other derivative products, viatical settlement also offers life insurance policy holders immediate cash for reinvestment without the extenuating contract obligations of other financial assets. Settlement transfers the title of a life insurance policy to a new buyer in exchange for a lump sum cash payment. Eligible insured can also avoid the hassle of collateral borrowing against the limit on a life insurance policy with viatical settlement, which affords an investor immediate cash in exchange for the full value of the policy.

Eligibility Requirements for Settlement

Life insurance policy holders in New York are eligible for life settlement depending on the terms and conditions of an agreement. An eligible policy can provide an investor with additional cash to offset finance medical or other important expenses. The seller and buyer must agree to any modification of a policy’s terms and conditions, such as obligation to premium payments assumed at time of origination. The full value of a life insurance policy must be determined prior to settlement. Distribution to named beneficiaries of a policy, or other condition to the sale of the policy value should be articulated before transfer. Unlike other key investments such as real estate, a life insurance policy settlement is a fast and efficient process for enhancing retirement liquidity.

Why a Life-care Policy is a Value-added Investment

Published on: November 9, 2018 | by Ettinger Law Firm

New York insurance laws allow for insurance providers to offer insured seniors life-care policy coverage. A specialized form of insurance coverage, a life-care policy indemnifies the holder for end-of-life care and treatment as part of an extended life services agreement. Distinct from a limited life insurance agreement, life-care coverage can be purchased as a separate policy. An option for estate planning clients, life-care can be written into an agreement as part of a comprehensive insurance policy. Combining life insurance with the added health and life expense benefits that may be required by an estate holder while still alive, life-care coverage protects valuable estate and trust assets in the interim. Insurance policies offering value-added, life-care coverage agreements:

1) Extended Life-care Policies

A comprehensive life-care policy will cover life insurance beneficiaries on death, as well as any life expenses a holder may have such as residential services, housing, treatment, and end-of-life costs. Some extended life-care policies also offer healthcare services agreements with unlimited access to medical providers at little to no difference in fee assignment. Extended life-care policies tend have a higher sign-on fees.

Jackpot!: Irrevocable Life Insurance Trust Planning

Published on: November 6, 2018 | by Ettinger Law Firm

Estate planners working with clients who have hit the jackpot in Atlantic City or Las Vegas, or have won the lottery, can assist in the formation of an irrevocable life insurance trust (ILIT) to enhance liquidity and pay assigned federal and state estate taxes before the event of their death. The federal Internal Revenue Service (“IRS”) restricts the transfer of lottery future payments, and some state laws also prohibit assignment of cash transfers of winnings without proper estate or gift planning in place. Creation of an ILIT allows for a decedent to protect family members from unexpected gift and estate taxation of winnings, and plan for distribution of any future payment streams resulting from one of these special assets.

Tax implications of a “win”

Federal estate tax rules for gaming and lottery assets are relatively straightforward. The IRS applies a 25% tax rate to all gaming, gambling, lottery or sweepstakes winnings above $5,000. Winnings less than that amount are exempt from federal taxation. An estate that holds a lottery or other gaming win as an asset is valued on basis of fair market value, but also the winner’s original interest in the asset at time of death.

Calculating your Break Even Point with Social Security Benefits

Published on: November 5, 2018 | by Ettinger Law Firm

Figuring out the best time to claim Social Security benefits is an important part of retirement planning that can have long lasting impacts on the type of lifestyle individuals and their spouses can expect to enjoy in their Gold Years. Depending on when individuals decide to take their Social Security benefits, from the ages of 62 to 67, it can mean the difference of hundreds of dollars per month to thousands of dollars of the course of a lifetime.

While the conventional wisdom is to wait as long as possible to claim benefits, and hopefully reach maximum payouts, for many beneficiaries there comes a time known as the “break even point” when the amount of benefits claimed would be essentially the same regardless of the amount received per month. This happens because the program is designed to give individuals more or less the same payout over their projected lifetimes, known as “actuarial neutrality.”

Determining one’s break even point is a fairly straightforward process but should take into account certain other factors that may artificially inflate any projected payout, namely excluding cost of living adjustments. Including projected cost of living adjustments will only create artificially high numbers that may not end up being actual benefits received.

Prudential Authority within Offshore and U.S. Trust Laws

Published on: November 1, 2018 | by Ettinger Law Firm

Trustees make difficult decisions about estate or trust investments, distributions and requests for disclosure of financial information. If an estate holder’s investment portfolio is comprised of assets held by onshore and offshore institutions, trustee decisions are especially at risk of an inquiry giving rise to significant claims. Where ambiguities exist, the prudential authority of an estate or trust entity must follow the laws of all jurisdictions involved. An estate attorney can provide a trustee with legal representation in a petition for court instructions in an estate or trust litigation matter.

Trustee Powers and Duties in U.S. Law

In the United States, the common law of estates provides trustees with prudential authority unless there Is reasonable doubt that the discretionary powers or duties are unreasonable (Restatement (Second) of Trusts § 259 (1959)). The Uniform Trust Code (UTC) allows for “judicial proceeding[s]] involving a trust may relate to any matter involving the trust’s administration, including a request for instructions[.]” (UTC § 201(c) (2010)). U.S. courts generally do not interfere prior to the exercise of a trustee’s discretionary authority, and trustees are entitled to request court instructions absent of a legal dispute.

Specifying “End of Life” Instructions in Estate Planning Documents

Published on: October 30, 2018 | by Ettinger Law Firm

Traditionally, estate planning has primarily been focused on transfer of assets to a tax-exempt shelter for distribution to named heirs or beneficiaries at time of an individual’s death. In addition to a written will, these five (5) directives specifying “end of life” actions to be taken by a Trustee or Personal Representative (“Executor”) may be part of an estate.

Advance Directives

If a decedent is expected to die soon, or has court ordered physician-assisted-suicide in response to a terminal illness, “end of life” directives can be created in a “Letter of Final Instruction” or “Disposition Authorization” with instructions for contact of family members, attorney representation, and funeral and burial arrangements, and organ donation if a “Living Will” is not already present. A “Designated Agent” may be identified to administer those arrangements. A Durable Power of Attorney for Health Care might already be present to manage the transfer of the decedent from a hospice to a hospital.

Federal Regulators Issue Warning About Risk of Cryptocurrencies Tied to Retirement Accounts

Published on: October 30, 2018 | by Ettinger Law Firm

The Securities and Exchange Commission (SEC) recently issued a warning to consumers about the risk associated with adding cryptocurrencies to so-called self-directed individual retirement accounts. These types of unregistered IRAs allow individuals to invest their nest eggs outside of the stock market and bond market and often incorporate holdings in real estate, private mortgages, precious metals, and more recently cryptocurrencies like bitcoin.

In an investor alert issued by the SEC, regulators warned that the agency has the power to oversee traditional IRA investments like stocks, bonds and mutual funds but lacks oversight of self directed IRAs. Although spokespersons for the SEC did not mention a specific scheme or incident to prompt the alert, the agency nonetheless felt it was important to issue the statement to warn consumers about the risks associated with the accounts.

The SEC also recently joined the Association of International Certified Professional Accountants in pointing out that this type of fraud associated with self directed IRAs can pose a unique opportunities for criminals to perpetrate elder abuse. With questions about the solvency of Social Security, rising health care costs, and other economic uncertainty may lead seniors and adults planning for retirement to consider these type of risky, self directed IRA accounts over traditional investment methods.

New York Homestead Exemption and Probate

Published on: October 27, 2018 | by Ettinger Law Firm

Homestead exemption protect property assets from probate. Properties recognized under laws of homestead are off-limits to creditors seeking attachment. New York homestead law protects property owner rights to the value of an asset transferred to an estate or trust. Homestead declarations are automatic for title holders of residential property in the state. Jointly owned property owned by a married couple is held as a single married entity, “tenancy by the entirety” – not as individuals. Trustees of revocable trusts seeking homestead protections for property assets from lien, can consult with a licensed attorney specializing in estate probate law.

NY Homestead Law

Federal and state property taxes are an exception to estate or trust homestead exemption from lien or attachment. No exempt homestead is exempt from taxation or from liquidation for purposes of payment of an outstanding assessment or tax lien. The NY C.P.L.R. §5206 Real property exempt from application to the satisfaction of money judgments outlines criteria for (a) homestead exemption; and (b) distribution of a property asset after the original owner has died. Homestead properties are “exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof: 1) lot of land with a dwelling thereon, 2) shares of stock in a cooperative apartment corporation, 3) units of a condominium apartment, or 4) a mobile home.”

New Study Predicts Factors for Longer Life

Published on: October 27, 2018 | by Ettinger Law Firm

A recent study by the University of California, San Diego School of Medicine suggests that women whose mothers lived healthy lives into their 90’s may be a key indicator for longevity and overall health. The study was published in the Journal of Age and Ageing and examined over 22,000 participants over a two-decade span and found that women whose mothers live to at least 90 years old with no health problems have a 25 percent chance of living past 90 years old.

In cases where both parents lived to be at least 90-years old, the study found that the likelihood of women living into their 90’s increased by 38 percent. However, researchers did not find any increased longevity in cases where only the subject’s father lived to be at least 90 years old. One key caveat to the study is that the subject’s parents not have suffered any chronic health conditions like heart disease, cancer, or diabetes.

The study is important because it helps to validate the view that genetic, environmental, and behavioral factors transmitted across generations may influence ageing outcomes among offspring. Although we cannot control the genes we are born with, we can however make healthy lifestyle choices, such as maintaining a good diet and getting exercise, that can create positive environmental factors to help us live longer, healthier lives and hopefully pass on those traits to our children.