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Annual Exclusion Each person may currently gift $14,000 per person per year (to as many persons as he or she wants to) without filing a gift tax return. It does not count towards the $5,430,000 lifetime gifting exemption.

Burial Designation New York law now allows residents to use a form to designate who will be responsible for making decisions about their funeral and burial arrangements.

Cohabitation Agreement This is an agreement between unmarried parties who wish to set forth certain property and other rights between them. It is commonly used where two parties live together but either do not wish to marry or are not permitted by law to marry. The Agreement is usually covers what happens to joint or solely owned property if one of them dies or they separate. It also sets forth who is responsible for certain expenses and may create support obligations which would not otherwise exist under the law.

Credit Shelter Trust (Bypass Trust) This is a trust created in your will or a trust created during your lifetime. It is typically created for the benefit of the surviving spouse for the purpose of allowing him or her to have the income and invasion of the trust assets without having the value of the remaining trust assets counted as part of the surviving spouse’s estate. It is used to shelter an amount up to or equal to the current federal estate tax exemption on the date of the first spouse’s death. Funding can be either mandatory or at the discretion of the surviving spouse with the use of a Disclaimer Credit Shelter Trust format. A disclaimer arrangement can allow the surviving spouse to decide how much to fund the Credit Shelter Trust with based on current tax laws at the death of the first spouse and is very flexible.

Durable Power of Attorney This document allows you to appoint one or more persons to make business and financial decisions for you. It can be crucial in a time of crisis or disability.

Estate Administration This is a process which occurs after your death if you have assets which were not joint, in a trust or did not name a beneficiary. If you have a will, a probate petition will be filed with the Surrogate’s Court, usually by the Executor named in your will. The purpose is to allow the Court to review the will to make sure it was validly executed and to issue Letters Testamentary authorizing your Executor to act. The Executor can then use the Letters to gather your assets, pay your bills and then make distributions to your named beneficiaries.

If you die without a will, any assets you have which are not joint, in a trust or do not name a beneficiary will pass to your heirs at law. If you have a spouse and children, part of those assets will pass to each of them. If you have no spouse and leave children, your assets will go to your children. Typically, your spouse or your children will petition the Surrogate’s Court for Letters of Administration to allow them to administer your estate.

Federal and State Estate Tax Exemptions Currently, for Federal estate tax purposes, a person can leave $5,430,000(2015) to his or her heirs free of estate tax. In New York, the exemption amount is $3,125,000. This means that even if you have to pay no Federal estate tax, if your estate exceeds $3,125,000,($2,062,000 until April 1,2015 then it increases to $3,125,000) it is likely you will have to pay New York estate tax. There is no estate tax if you leave more than those amounts to a spouse.

Gifting In the year 2015, individuals are permitted to gift an annual exclusion amount of $14,000 per person per year without filing a gift tax return. (Spouses can each gift $14,000 to the same person.) In addition to the annual exclusion, individuals are permitted to gift up to $5,430,000 during their lifetimes without incurring gift tax. The annual exclusion gifts are not included in this amount, however, annual gifts in excess of $14,000 will be counted toward the lifetime maximum. In addition to annual gifting, individuals can pay medical and educational expenses for any person. Such payments will not be counted as a gift if they are paid directly to the provider institution .

Guardian A court process whereby a person is appointed to make personal and/or financial decisions on behalf of an incapacitated person. This can generally be avoided if a competent person executes a Power of Attorney and Health Care Proxy prior to becoming disabled.

Health Care Proxy and Living Will These documents allow you to appoint someone to make health care decisions for you if you are unable to communicate your wishes. It is always important for you to discuss your wishes with your agent and substitute agent before an emergency arises.

Homecare Personal care and other services received at home or in a medical day care setting can be paid for by Medicaid.

Irrevocable Trust There are many types of irrevocable trusts. In the Elder Law context, Irrevocable Trusts are used to protect assets. They are also known as Medicaid Trusts and Asset Protection Trusts. An irrevocable trust is simply an agreement between you as the creator of the trust (usually called a Settlor or Grantor) and a Trustee. You can not be the trustee of this trust. Reliable older adult children are commonly chosen for this role. Assets to be protected are transferred to the trust by re-titling them in the name of the trust. The Trustee agrees to hold title to the assets subject to the requirements of the trust. Upon your death, the assets typically continue to be held in the trust while your spouse is alive. If you have no spouse or your spouse then dies, the assets pass to your designated beneficiaries.

Last Will and Testament This document specifies who is to receive your assets upon your death except in the following situations:
  • Your assets are held jointly with another person with rights of survivorship
  • Your assets already name a beneficiary
  • Your assets are held in a trust
Title to jointly held property generally passes to the joint holder at the death of the first owner unless title is held as Tenants in Common. Where you have named a beneficiary or your assets are held in trust, the beneficiary designation and the trust language supersedes your will unless your will specifically changes those designations or modifies the trust.

You should still have a will even if you have taken all precautions to avoid probate because:

  • The joint owner or beneficiary may predecease you
  • Your beneficiary designation could be lost by the financial institution
  • Upon your death, assets may be located which are solely in your name
The basic will can also contain designation of a Guardian for your minor children and Special Needs Trusts for disabled persons or Minors Trusts persons under a certain age.

Lifetime Gifting Exemption Currently, you are permitted to gift $5,430,000 during your lifetime without incurring gift tax. This does not include annual exclusions or amounts paid directly to providers for educational and medical expenses of others.

Long Term Care Insurance Insurance you purchase to pay for your long term care at home, in assisted living and in a nursing home. The earlier you purchase it, the cheaper it is.

Medical Model Day Care Program This is a day care program for older disabled adults which takes place at a local nursing home and is paid for by Medicaid. It is not a social model day care program (which typically is not paid for by Medicaid). Persons can take part in the program from 2-7 days per week. They are picked up in the morning and dropped off in the late afternoon. The programs are usually designed to provide social interaction for the person as well as physical therapy and other activities designed to maintain and improve their physical and mental abilities. This program is best used in conjunction with a homecare Medicaid application which will also allow aids to come into the house to assist the person for a number of hours per day (as determined by Medicaid).

Minors Trust This is a trust created in your will or your lifetime trust which essentially provides that upon your death, assets received by persons under a certain age will be held in a Minors Trust. Even though it is called a Minors Trust, the beneficiaries do not have to receive their money at 18 or 21. Typically the trust provides that the Trustee can invade the trust at any time for the beneficiary’s health, education, support and maintenance. At 21, the beneficiary starts to receive income from the trust. Depending on the size of the trust, the creator may choose to release all assets at age 25, or half at 25 with the balance at 30 or some other variation on age especially if the trust is particularly large. If it is known that the intended beneficiary has drug, alcohol or spending/creditor problems, the creator can mandate that the trust stay in place for the beneficiary’s lifetime.

Pet Trust A trust created by you in your will to hold assets to provide for the long term care of your pet after your death.

Pooled Income Trusts A Pooled Income Trust can be set up through NYSARC. This is especially useful when a person is receiving homecare Medicaid benefits. The Medicaid recipient’s income in excess of that allowed by Medicaid can be paid to the trust and used to pay household and other expenses incurred by the Medicaid recipient without affecting his or her benefits.

Prenuptial Agreement An agreement between you and your fiancée which becomes effective when you marry. It sets out how property will be divided in the event of your divorce. These are especially useful in second marriage situations where both parties have their own assets or in marriages where one party has all of the assets. The agreement usually provides that they will retain ownership of those assets if they divorce. It can also specify who will pay what type of expenses and may give the surviving spouse some rights to live in the house after the first spouse dies. These should be reviewed by each party’s attorney and signed well in advance of the wedding.

Probate Probate involves petitioning the Surrogate’s Court in your county and providing them with your original will. This process allows the Executor named in your will to become vested with powers to gather and distribute your assets after your final debts are paid according to the terms of your will. If you do not have a will, an Administration proceeding can be brought to appoint an Administrator to distribute your assets to your heirs at law.

Revocable Trust Revocable Trusts are commonly used to avoid probate. This is especially useful if you have out of state real estate because your will might have to be probated both in New York and that state in order for your executor to gain control of the property. The Revocable Trust is simply an agreement. Initially you and/or your spouse would be the trustees and you would name successor trustees to manage the trust assets upon your disability or demise. Upon your death, the assets typically continue to be held in the trust while your spouse is alive. If you have no spouse or your spouse then dies, the assets pass to your designated beneficiaries The difference between this type of trust and an Irrevocable Trust is that the Revocable Trust will not protect your assets if you need Medicaid. There are other reasons one might use a Revocable Trust which can be discussed with your attorney.

Special and Supplemental Needs Trusts There are a number of Special Needs (also known as Supplemental Needs) Trusts. SNT’s are used to hold assets for the benefit of disabled persons in order to preserve their right to obtain benefits from government programs such as Medicaid and SSI. The would otherwise be disqualified if they held the assets outright

Special Needs Trust: A Special Needs Trust is a trust created for the benefit of a disabled person under the age of 65 by a parent, grandparent, guardian or by a court. The disabled person’s assets are used to fund the trust. Any funds not used for the needs of the disabled person must first be used to repay the government for any Medicaid benefits received by the disabled person. Any remaining assets must be paid to the estate of the disabled person. These are commonly used in conjunction with settlement of personal injury lawsuits. These are also called First Party Special Needs Trusts and Payback Trusts.

Supplemental Needs Trust: Any person may create a Supplemental Needs Trust for another person with disabilities using the creator’s own assets. It can be created in a will or in a lifetime trust, except that an SNT created for a spouse can only be created in a will. If it is created in the will, it is usually funded with assets of the creator at his or her death. If it is created by a lifetime trust, the creator can transfer assets to the trust while he or she is alive. Because the creator’s assets are used to fund the trust, this is considered a third party SNT and no part of it has to be paid back to the government at the death of the disabled beneficiary if the disabled beneficiary was receiving Medicaid or SSI.