Blogs from 2022

Over your lifetime, you probably have accumulated a variety of worldly possessions. Your possessions may include a house, apartment, or multiple properties, a car, boat, or additional vehicles, money in the bank and maybe even under the mattress, investments of all kinds, retirement accounts, corporate interests, artwork, jewelry, a coin or stamp collection, and so on. Having a will or other estate plan will make sure that these possessions pass on to the people or organizations of your choice.

But what happens to your stuff if you die before preparing a will or other estate planning?

If you die without a valid will, it is called dying “intestate.” That means that anything that is left in solely your name alone is subject to an administration proceeding in the Surrogates Court that will determine:

1. Who will be appointed “Administrator” of your estate – the person that will be in charge of gathering your possessions, paying your debts and distributing your estate; and
2. Who will actually get your stuff – these people are your “distributees.”

Administrator

New York State has specific laws that govern who would qualify to be the administrator of your estate. Someone would have to petition the court and request to be appointed as the administrator of the estate. The court would appoint an administrator, giving preference in the following order of priority: (a) the surviving spouse (b) the children (c) grandchildren (d) parent (e) siblings, or even sometimes more distant relatives. Sometimes there is no one in the above list qualified or even interested in taking on this job, so the court may appoint a public administrator to serve in this role.

Distributees

If you have a will, trust, designated beneficiaries, or joint ownership of assets, there are other mechanisms that govern how your assets pass. Read more here: Five Ways Your Property Might Be Distributed When You Die.

However, if you leave behind worldly possessions that you own in your name alone and haven’t prepared a will, New York State has specific laws that govern who is entitled to inherit this property, known as your “intestate estate.”

The order of priority according to New York State law starts off with spouse and children. If you are survived by a spouse but no children, your spouse is your only distributee, and will inherit your full intestate estate. If you die unmarried and are survived by children, then your children would equally share in your intestate estate. If you are survived by a spouse and children, then your spouse will get the first $50,000 plus half of your estate and your children will share equally in the other half. Many people don’t realize this, assuming their spouse will get everything. This is especially problematic when the children are minors and can’t inherit directly.

Click here to download a chart that has more details on the order of intestacy – the priority of relatives that would inherit your estate if you died without a will or other estate plan.

There are many reasons why it is best to set up a plan in advance, and our office would be happy to meet with you and determine the best plan for you and determine the best plan for you.

The Social Security Administration has two programs under which a person with a disability can receive a monthly check to help with the cost of their living expenses. One such program and form of disability payment is called Social Security Income (SSI) and the other is known as Social Security Disability Income (SSDI). Often, people that receive a monthly check may not even realize that there is a difference and may not understand the significance of being clear about which program they are receiving their disability check. However, it is important for people to understand the difference as it may impact their benefits at some point in the future.

SSI and SSDI each have strict eligibility requirements. While they are both available benefits for individuals determined disabled under federal guidelines, SSI is a needs based benefit and SSDI is an entitlement. This significant difference will be explained below.

To be determined “disabled” under the Social Security Administration definition, an individual must be a person under the age of 65 who is not be able to engage in any “substantial gainful activity” (“SGA”) because of a medically determinable physical or mental impairment that is expected to result in death or last for a continuous period of at least a year. A person who receives earned income more than a certain amount each month is considered to have the ability to engage in substantial gainful activity and would not meet the SSA definition of disability.

Eligibility Rules for SSI:

A disabled individual is eligible for SSI monthly payments if they meet a two prong test. (1) The person must be determined disabled under the Social Security Administration definition of Disability; and (2) the disabled individual must have very low income and assets.

Income is the money you receive on a regular basis. The two categories of income are “earned income” such as your wages and “unearned income” which include payments you receive each month that you haven’t earned. In 2023, an individual will meet the income requirement if he or she has less than $914 a month of unearned income.  Some states, such as New York State, supplement these amounts.  The more countable income you have, the less SSI you will receive. If your income is above the allowed limit, you don’t get SSI at all. Earned income and other types of payments have additional rules.

Assets is defined as the money you have in your bank accounts, cash, stocks, bonds, or other resources that can be converted to cash. A parent’s assets are counted to determine if a child under 18 meets the eligibility requirement. To be eligible for SSI, an individual can have no more than $2,000 in countable resources in the month that SSI benefits are received. (The word “countable” is deliberate because some resources are not considered for eligibility such as the home you live in, the car you own that you use for your transportation, etc.)

SSI and Medicaid: If a person receives SSI in a given month, they are automatically qualified for Medicaid. If a person loses their SSI, they may lose their Medicaid, unless they can qualify for Medicaid separately. So while a person may decide that they can live without an SSI check each month, they must be careful that they don’t lose their health insurance coverage if they were relying on Medicaid for their health insurance.

Eligibility Rules for SSDI:

The eligibility rules for SSDI are complex and the benefits vary for each person. However, the general rule is that there is a (1) Disability requirement and (2) Work Credit Requirement. The huge difference between SSI and SSDI is that for SSDI there is no income or resource requirement. A person will qualify for SSDI benefits based on their own past work history or the work history of their retired or deceased parent. The work history must reflect sufficient work credits to qualify. One work credit is obtained for working a minimum amount in an annual quarter (fluctuates each year), and up to 4 work credits can be earned in a year.  The older the applicant is, the more credits a person would need to meet the work history requirement. For example, someone that is 58 will need more work credits than someone that is 29. The amount of the SSDI check that a person receives each month is based on the amount that you (or your parent) has paid in social security taxes. The amount of this check can be substantially more than an SSI check.

SSDI and Medicare: If a person qualifies for SSDI, then after a 24 month waiting period, you can also receive Medicare benefits. Some disabled individuals may still wish to access Medicaid benefits as well as they may wish to access certain programs that are only available through a Medicaid program.

The differences between these programs are significant and important to keep an eye on if you or a loved one are enrolled in either. A change in your circumstances can result in loss of your monthly benefits check, or a surprise loss of your medical insurance though Medicaid. If you have any question about the type of benefits that you are receiving, or would like to learn more about your options, you should contact your local social security office or speak with an attorney that is familiar with these programs.

October 2022 Update

Update on the Community Medicaid Lookback!

New York State Department of Health has announced that it will not be implementing the Community Medicaid 30-month lookback earlier than March 31, 2024. In alignment with the requirements under the American Rescue Plan Act relating to Home and Community Based Services, as well as the Maintenance of Effort requirements under Section 6008(b)(1) of the federal FFCRA (Families First Coronavirus Response Act), the state has further delayed implementation. This means that those seeking community-based Medicaid services, such as home care health aides or an assisted living, can still apply for Medicaid long term care and be granted Community Based services without a lookback at transfers of assets. To further break this down, you can still transfer and protect assets and obtain Medicaid community care without being subject to transfer penalties.

May 2022 Update

As you may have heard, New York State intends to implement a new lookback and related transfer penalty that will apply to Medicaid applicants seeking community based long term care services, such as home care or assisted living care. While the new rule was in place since October 1, 2020, the implementation has been delayed several times during the Coronavirus Pandemic. It has now been further postponed due to protections enacted under the Families First Cares Act (FFCRA). The federal act prohibits states from restricting eligibility during the Public Health Emergency (PHE). Further, the New York State Department of Health has not yet issued guidance on the specifics of how the lookback will be implemented. At this point, the lookback will not begin before October 1, 2022, and may even be delayed further. That is good news for you. It means that while the PHE is ongoing, you still have time to preserve and protect your assets and become eligible for Medicaid home care services. Be sure to do so immediately but certainly before October 1, 2022. If you wait and need home care or assisted living Medicaid services once the lookback has been implemented, then uncompensated transfers of your assets that were made within 30 months of your application (only going back to October 1, 2020) may result in a transfer penalty. If you haven’t yet consulted with an elder law attorney, now is the most opportune time to do so before the new law is implemented. Call us today and we can help you get started.

Read more about the new lookback here.

Under New York State law, a child is a default beneficiary of a deceased person’s estate. However, as long as you have mental capacity, you can create an estate plan directing the distribution of your estate to whomever you wish. Cutting your child off in your will is a serious and painful decision and an Estranged Child in Estate Plan can cause complications. While it is usually awful circumstances that led to the broken relationship, it is sometimes a parent’s wish to disinherit a child from their estate or substantially reduce the portion of the child’s inheritance.

There are different approaches that can be taken when dealing with an estranged child in your estate plan. The severity and circumstances of the estrangement are factors to consider when deciding on an approach. The following are some strategies for dealing with an estranged child in your estate plan.

#1 Outright Disinheritance

If you really don’t want your estranged child to receive anything from your estate upon your death, you can create an estate plan that does not provide at all for your child, fully disinheriting the child. It Is advisable that if you are leaving a child nothing, you should still specifically include the name of your child and a statement that you are disinheriting him or her to make it clear that you did remember that child but have made the conscience decision to disinherit that child. If you fail to mention him or her at all, it may be easier for your child to challenge your will. However, there is no need to go into any detail in your document as to why you are disinheriting the child and it is advisable not to list reasons in your will.

Disinheriting a child can certainly impose an unintended consequence on your other family members, specifically the individuals you name as your executor or trustee. Your disinherited child may contest the will in court, which can cost your estate time and money and take an emotional and time-consuming toll on the rest of your family.

There are steps you can take to minimize the chances of a challenge to your estate plan and prevent a will contest. First, you should make sure that your will is properly executed and other testamentary dispositions are properly addressed (such as trust fundings, and beneficiary designations). Second, you can write a letter to your estranged child which will provide context and the reasoning behind your decision. This can serve as evidence that there was no undue influence in your decision, and may also result in your estranged child more readily accepting your decision. Third, you should be cautious to remove any appearance of undue influence by other children in the estate planning process.

Avoiding probate altogether may be an even better strategy. Funding your assets in trust during your lifetime and/or designating beneficiaries for your assets will allow those assets to transfer to your beneficiaries without court involvement or required notice to your estranged child. However, keep in mind that while certain strategies will make it more difficult for your estranged child to stir up trouble or prevail on a challenge, the courts are always open for trouble makers and there is no absolutely foolproof strategy!

#2 Smaller inheritance for Estranged Child in Estate Plan

If you don’t want to disinherit your child entirely or wish to make it less likely the estranged child will contest the will, you may want to leave them an inheritance that is smaller than the amount you leave to your other children or smaller than the amount they would have inherited by law, had you not prepared an estate plan. Leaving a child a reduced inheritance rather than nothing at all may prevent him or her from contesting the will, especially if you include a no-contest clause (also called an “in terrorem clause”) in the will. A no-contest clause provides that if your child challenges the will and the loses, he or she will then get nothing from your estate. The inheritance that you do include must be substantial enough that a challenge would not be worth the risk of forfeiting the inheritance.

#3 Leave the Inheritance in a Trust

If the reason you are estranged from your child is due to their abuse of alcohol or substances and you do not want to leave such a child an inheritance because you are worried about how they will use the money, there are other options. You can consider leaving a portion of your estate in a trust for the child with conditions that must be met before distributions can be made. You can provide instructions to the trustee on when and how the trustee should disburse the funds in the trust. For example, you can instruct the trustee to disburse the money in small increments or only if the child meets certain conditions, like staying drug- or alcohol-free or working a full-time job.

Figuring out how to treat an estranged child in your estate plan is complicated and emotional. Feel free to contact our office to discuss your unique situation and determine the best strategy for you.

While unpleasant to think about, avoiding this topic will be much more unpleasant to deal with in the long run. Parents are often the bedrock and support of children well into their adult years. The death of a parent irrespective of a child’s age can be painful and difficult. The death of a parent is often more traumatic to a person with special needs because of the deep reliance that the child may have on his parent as a caretaker.

It is so important for every parent to have an estate plan in place, but even more important for parents of special needs children (whether minor or adult children) to have their estate plans in order. If a proper plan was not in place during the parent’s lifetime, an inheritance to the child could jeopardize the child’s much needed government benefits. Without a plan in place, imagine the added trauma of having government benefits cut in addition to the loss of the parent.

Eligibility for government benefits most often have very strict income and asset requirements. During the parent’s lifetime, the child may have little or no money, allowing them to qualify for benefits. Under New York State law, without a will or other estate plan in place, a child will inherit from a deceased parent’s estate. This could result in a child having too much money to continue receiving much relied upon government benefits for health care, housing, social services, or long term care, but not enough money to independently support himself or herself or pay for needed services.

Most basically, a parent of a child with special needs who relies upon or may rely upon government benefits in the future, must ensure that the child’s inheritance is protected within a third party supplemental needs trust. The parent can establish a lifetime supplemental needs trust during his or her own lifetime, that can continue after the parent’s death during the child’s lifetime, or the parent can have language drafted in his or her will providing for the child’s share to be held in a supplemental needs trust that will enable the child to benefit from his or her inheritance without jeopardizing government benefits or the inheritance.

Sadly, without proper guidance, parents make the mistake of leaving the child’s share outright to his or her sibling with the expectation that the brother or sister will provide for their sibling, or worse, disinheriting the child with special needs altogether. Even with the best of intentions, a well meaning sibling may not be able to carry out mom or dad’s instructions. Divorce, bankruptcy, creditor issues, death, are just some ways that the money could disappear beyond the control of the family. Not to mention a situation that may test a sibling’s loyalty, such as the healthy sibling going through a hard financial time and a need to “borrow” the money earmarked for the disabled sibling.

It is also important for parents to name a guardian for their child with special needs, to ensure that the person who they find most appropriate will have the legal authority to manage legal and financial matters and health care decisions for the child. For a minor child, this can be addressed in the will. For an adult incapacitated child, this may require petitioning the appropriate court to have the court appoint the standby guardian after the parent can no longer serve as guardian for the child. It is best if this is addressed while the parent can still make these choices and manage the process.

It is important for every adult to have an estate plan, but the stakes are higher when there is a beneficiary with special needs. Parents of children with special needs certainly have extra responsibilities but having an estate plan in place is a responsibility that should not be ignored until it is too late.

Medicaid has strict limits on the amount of money a Medicaid applicant and his or her spouse can have (resource limit) in order to qualify for Medicaid long term care benefits, as well as specific income limits while receiving services. (See Medicaid Eligibility Limits for specific figures.)

In New York State, Medicaid Asset Protection Trusts and a Pooled Income Trusts are both tools utilized in asset preservation planning in connection with Medicaid long term care benefits. Medicaid is a federal program that is administered separately in each state. Therefore, the rules vary by state. The following will explain and compare a Medicaid Asset Protection Trust and a Pooled Income Trust as per New York State law.

Trust to Protect your Assets

A Medicaid Asset Protection Trust is set up to preserve a person’s assets in order to qualify for Medicaid long term care services without having to spend down those assets first. The person who creates and funds the trust is called the Grantor. The Grantor, or his spouse, would also be the future recipient of Medicaid services so in order to protect these assets, trust assets can no longer be available to the Grantor once funded into the trust. The strict rule of this asset trust is that distributions of trust principal can NEVER be made to the Grantor and his spouse, or to a third party for either the Grantor or his spouse’s benefits. This makes sense: if the assets were available to the Grantor, Medicaid would say “You don’t need our services, you have all this trust money available, go pay for yourself!”

It is recommended to set up a Medicaid Asset Protection Trust and fund it with a portion of your assets far in advance of your possible need for long term care because there is a “look-back” period and you want to be well past the “look-back” period by the time you may need care. (Read more about Medicaid Planning here.) You should always leave out of the trust enough funds to cover your expected expenses for the next five years (combined with your income).

A house is a very common asset to fund into this trust because it is usually a person’s greatest asset and it can be protected while still continuing to live in the house. But funding the trust with financial accounts should be considered preservation of the next generation’s inheritance. You should not plan to tap into any equity funded into the trust. Of course, we cannot 100% predict the future, so if access to the trust funds are needed in the future, there is a carve out in the trust to do so and it is possible to access the trust assets if needed.

Trust to Preserve Your Income

While it is advisable to set up and fund a Medicaid Asset Protection far in advance of your need for long term care, a Pooled Income Trust is applicable only once you require Community Medicaid benefits. When a person is budgeted for Medicaid home care services, they are allowed to keep some of their income, but if their income is over the allowable limit (Medicaid Eligibility Limits) they either have to contribute the excess income as a Medicaid “co-pay” or they can preserve it by depositing it into a Pooled Income Trust account. The money deposited into the account can then be used for the Medicaid recipient’s expenses. The Pooled Income Trust enables a Medicaid Community Care recipient to preserve his or her income while receiving Medicaid services.

The strict rule of the income trust is the opposite of the asset trust: Distributions from this trust can ONLY be made for the Medicaid recipient’s expenses.

The company that administers the pooled income trust is a non-profit and operates for charitable purposes. They get a small management fee each month for managing the trust accounts and paying bills on behalf of the Medicaid recipient. Any balance remaining in the trust upon the death of the Medicaid recipient remains with the charity.

Below is a chart that compares the differences between the two types of trusts.

Whether you won’t need long term care for several years or are already in need of care, our office can guide you through your options and optimal long term care planning strategies.

Schedule your consultation today.