Pierro Law Blog

The more one understands about the planning process, the better one’s chances will be to effectively plan for retirement; provide for his/her family; minimize the risks associated with aging; reduce costs and taxes; and dispose of assets in the manner they see fit. At the Pierro Law Group, our complimentary Estate Planning and Long-Term Care Planning Guides are intended to introduce you, your family and your clients to the estate and long-term planning process, and to serve as a reference to you as you advance through that process. For 2012 there have been a number of important changes we would like to highlight.

2012 Estate Planning Guide: The primary focus of traditional estate planning is the orderly and systematic transfer of one's assets to heirs and beneficiaries through wills and trusts. Modern estate planning, however, has had to expand that focus to cover the varied and complex issues that one faces in our current society. New for 2012: We currently have a $5,120,000 gift and estate tax exemption ($10,240,000 per couple). Combined with historically low interest rates, this presents a tremendous advantage for business owners and wealthy families to do planning now. If Congress does not act, both the estate and gift tax exemption will revert to $1 million at a 55% tax rate. President Obama's recently proposed 2013 federal budget would put the gift tax exemption at $1 million, estate tax exemption at $3.5 million, at a 45% top tax rate.

DOWNLOAD THE 2012 ESTATE PLANNING GUIDE

2012 Long-Term Care Planning Guide: Paying for long-term care is a personal responsibility which has become a burden not just for seniors and persons with disabilities, but for children, caregivers, and other family members. If provisions have not been made ahead of time, families can easily become overwhelmed with the high price and complexity of providing for an elderly parent or relative and persons with special needs. Our guide is designed to give you and your clients a better understanding of the components involved in long-term care planning: Self-Insuring, Tax Planning, Private Insurance, Medicare, Medicaid, and other Long-Term Care Planning concerns. This Guide has been substantially re-written for 2012 including New York's recently published Medicaid numbers, resource limits and Regional Rates for Calculating Transfer Penalty Periods. For detailed 2012 Medicaid numbers and how these numbers are applied, download our 2012 NY Medicaid Resource Handout and “Beware of the Medicaid Trap” article. 

DOWNLOAD THE 2012 LONG-TERM CARE PLANNING GUIDE

Proactive planning by creating a comprehensive estate and long-term care plans save families much turmoil in the event of incapacity or death. At the Pierro Law Group we take great pride in our ability to tailor our plans to a family's specific needs and wants. We welcome the opportunity to answer any questions you or your clients may have and look forward to our continued relationship in 2012. Please contact us at 518-459-2100 (Capital District), 212-661-2480 (New York City Area), toll-free at 866-951-PLAN or email info@pierrolaw.com.

A recent study published in the Annals of Internal Medicine studied how often patients with advanced cancer discussed end of life care with their health care providers.  The study found that most patients (73%) had end of life discussions, but most discussions happened less than 1 month before death and during hospitalization.  I was shocked by this study, primarily by the fact that these discussions were basically happening in the hospital shortly before death.  This is not the ideal time and place to make decisions regarding this type of care, as the patient is often in pain and the family members are often emotionally upset.  It is much better to make these decisions in advance, when you are fully competent and not distracted by the course of an illness.  There are many ways to make your wishes known in advance.

A Health Care Proxy is a document that allows you to appoint an agent to make medical decisions for you in the event you are not able to.  A Living Will is a document that states what your wishes are regarding end of life care, such as whether you wish to have CPR, artificial nutrition and hydration, pain medicine and antibiotics.  If you would want artificial nutrition and hydration stopped when you are in a terminal condition, then such wishes must be placed in writing, or there must be clear evidence that these are your wishes.  Without a Living Will or satisfactory evidence of your intent, a doctor will not be able to withhold nutrition and hydration, and you may be kept alive by artificial means.  Your wishes regarding this can be customized in many different ways.  I have seen clients place a number of days on how long they want to receive life support, and I have seen clients list certain medical conditions in which they would want life support removed.  I have had clients want nutrition only, or hydration only, and some have expressed a desire to have alternative medicine measures tried before any life support is removed.   Anything reasonable can be accommodated, as long as you put your wishes in writing.

Another document that you can use to express your wishes is a Medical Order for Life Sustaining Treatment (MOLST).  This is a form that is filled out by you and your doctor, and is signed by your doctor.  It goes through various types of treatments, when you would want them, and is much more detailed than a Health Care Proxy or Living Will.  This is very useful if you want a very detailed plan for your care.  If you don’t want to go to that level of detail, at the very least you should have a Health Care Proxy and make sure your agent know your wishes as to your care.

If you do not sign any advance directives, there is a law in New York that addresses health care decisions for individuals without a pre-designated agent appointed. The Family Health Care Decisions Act (FHCDA) provides a “default” prioritized list of individuals who may make health care decisions for you if you have not named one. The list of individuals, in priority order, include: a court appointed guardian; your spouse or domestic partner; your adult children; your parents; your adult siblings; and a close friend.  The Family Health Care Decisions Act allows an individual to make end of life decisions for the patient, provided certain guidelines are met. Even then, the surrogate may not know your exact wishes and disputes can arise when family members or the doctor disagree about the decisions. When there is a dispute, the law requires all hospitals and nursing homes to have ethics committees to try to resolve the conflict. The dispute may be brought to Court if it cannot be resolved.  

The bottom line is that you can, and should, plan in advance for your medical care. One's final days should be a time of compassion and support, rather than family turmoil, confusion and emotionally driven decisions.

By: Jane-Marie Schaeffer, Esq.

Asset protection may have vastly different meanings for different people. One way that asset protection is defined is the preservation of wealth to facilitate its transfer to future generations while minimizing the adverse consequences of the claims of future creditors, unnecessary taxes and the costs and risks of probate or intestate (dying without a will) administration.

Common reasons to engage in asset protection include, but are not limited to:

• Protecting professionals and entrepreneurs from law suits. (Especially those with higher risk occupations such as physicians, dentists, lawyers, financial advisors, architects, contractors, builders, and small business owners);
• To protect everyday people from unexpected creditors, plaintiffs, medical emergencies, and long-term care costs;
• To avoid probate and/or expensive and lengthy will contests;
• To protect assets from divorce proceedings and future spouses;
• To protect assets for disabled beneficiaries or children/ grandchildren; and
• To minimize estate taxes.

How Asset Protection Should Not Be Used

Asset protection should not be used as a means to defraud creditors or evade taxes.

How Asset Protection Should Be Used

Asset protection may be used to protect assets for the use of third parties such as a spouse or children.  Although self-settled asset protection trusts are not available under New York law, there are a variety of statutory provisions and other options available to New York residents to protect their own assets.

Common Asset Protection Planning Tools

There are many different asset protection planning tools available depending on the situation and the desired outcome, including:

*Liability Insurance; *Life Insurance; *Long-Term Care Insurance; *Exempt Assets; *Business Entities (Corporations, Limited Partnerships and Limited Liability Companies); *Retirement Accounts; *Disclaimers/Renunciations ; *Sales for Reasonably Equivalent Value; and  *Trusts.

Exempt Assets

Assets which enjoy protection from creditors under New York law include the following:

• One primary residence (Homestead) but only up to a certain value depending on the county;
• Qualified Retirement Plans, which include qualified pensions, qualified profit sharing plans, IRAs and most other forms of retirement plans; 
• Life Insurance Policies (creditors may not accelerate payment of death benefits or special surrender value to satisfy claims);
• Trust Principal is exempt where created by a third party with spendthrift protection;
• 90% of salary for personal services is exempt from claims except where a court determines it to be unnecessary for judgment debtor and dependents. (A court can determine that 100% of salary is exempt, if circumstances warrant);  
• 90% of income from a qualifying trust to the extent reasonably necessary for the support of debtor and any dependent of the debtor;
• One motor vehicle not exceeding $4,000 in value above liens and encumbrances;
• Burial plot;
• Social security benefits, unemployment compensation, local public assistance benefits, and veteran's benefits; and; 
• Disability, illness, or unemployment benefits.

Asset protection is a complex and always evolving field of law. Which asset protection technique used in any given case depends on various factors including the types of assets being protected, level of asset protection desired, and whether the planning is being done in advance or at the last minute. At the Pierro Law Group, our comprehensive Asset Protection Planning can reduce or eliminate those threats long before they appear and help preserve wealth. The failure to take basic steps such as obtaining adequate insurance and or forming the appropriate business entity may prove very costly if and when substantial creditor claims arise. As a respected New York Asset Protection Law Firm, we can strategize how to best protect your hard earned assets effectively and securely.

By Philip A. Di Giorgio, Esq.

The February 2012 applicable federal rates (“AFR”), which is the lowest interest rate the IRS will allow on a debt instrument without imputing interest, has declined from the January 2012 rates. While it was believed that the AFRs could not continue to decline beyond the already historic low rates, the February 2012 AFRs are slightly less than the January 2012 rates.  The AFRs for February 2012 are:

• Short-Term Rate (maturity 3 years or less): 0.19%

• Mid-Term Rate (maturity 3 to 9 years): 1.12%

• Long-Term Rate (maturity more than 9 years): 2.58%

The AFRs for February of 2012 increases the ability to transfer wealth to the next generation at greatly reduced costs. One method that can be used to transfer wealth or business interest to children (or other heirs) would be to sell the assets or business interest to the children and receive an installment note in return.  This technique freezes the value of the transferred assets or business interest at their current fair market value (principal owed on an installment note does not appreciate in value), with the seller (parent) receiving the interest payments on the installment note, which will hopefully be less than the growth in the value of the transferred assets or business interest.  Lower interest rates will allow for an increased spread between the growth in the assets or business interest received by the children and the interest rate paid to the parents.

This technique can be maximized by transferring the assets or business interest into an Intentionally Defective Grantor Trust (“IDGT”) created for the benefit of children, instead of transferring the assets or business interest directly to the children.  One of the advantages of transferring the assets or business interest to an IDGT is that the grantor (parent) will continue to pay the income tax liability of the IDGT, thus reducing the size of their taxable estate in the amount of income tax paid, while allowing the IDGT to grow income tax free (which is really a tax free gift to the children).  Allowing the IDGT to grow income tax free increases the spread between the growth of the assets or business interest held by the IDGT and the interest rate being paid on the promissory note. 

Given the 2012 $5,120,000 federal gift tax exemption ($10,240,00 per couple) and unlimited gifting ability in New York, now is an unprecedented time to lock in advantageous estate planning opportunities. Contact the Pierro Law Group for additional information on how to protect and preserve your assets and maximize these current estate planning strategies.  

By Christopher M. Klug, Esq.

A revocable living trust can improve your estate plan in many important ways.  While there are numerous advantages to having a revocable living trust, the following is a list of some of the more important advantages:

• Avoids expenses and fees associated with probate:  The probate process can be expensive and time consuming.  Your Last Will and Testament will need to be filed with a court and access to the information is public record.  Probate provides a forum for disgruntled heirs to bring disputes without paying legal fees and court costs.  If your property is held in a revocable trust and there are no probate assets, then a disgruntled heir would have to commence an action in court and incur the associated costs.

• Ensures your Family’s Privacy Following Incapacity or Death:  By transferring your assets to a revocable trust, the assets held by the revocable trust will be in the control of your trustee upon your incapacity or death.  Guardianship proceedings and probate proceedings require court involvement and the court’s file is available to the public.

• One Planning Document with Instructions for your Care upon Incapacity:  A power of attorney will not have instructions on how you wish for your financial affairs to be handled during your incapacity.  A revocable trust can and should provide instructions to your trustee on how your financial affairs will be handled during incapacity.

• Ensures that Your Trustee will be able to Manage your Financial Affairs:  A power of attorney is not effective upon your death.  Unless your attorney-in-fact is able to establish that you are still alive, an institution may be unwilling to honor the power of attorney.  This could be an issue if you are traveling, in a hospital, or otherwise unable to prove that you are living.  A revocable trust provides the trustee with authority over the assets held in the trust during your life, incapacity, and death.

• One Planning Document with Instructions for the care of your Loved Ones upon your Incapacity or Death:  A Power of Attorney will not provide your attorney-in-fact with instructions on how your loved ones are to be provided for upon your incapacity or death.  A Will provides no authority to the executor or executrix until the Will has been admitted to probate, which can be a slow process.  The trustee of your revocable trust will have the authority to provide for your loved ones during your incapacity or death, in accordance with your wishes as expressed in the trust document. 

• A Revocable Trust is a more Appropriate Beneficiary of a Life Insurance Policy then your Estate or an Individual:  If your estate is named as the beneficiary of your life insurance policy, then the life insurance proceeds will be subject to the creditors of your estate.  If you name an individual as a beneficiary of your estate, then the life insurance proceeds will be subject to the individual’s creditors.  Also, if the individual you name as the beneficiary of your life insurance policy is receiving government benefits through a means tested program (i.e., Medicaid), the life insurance proceeds received by the individual will create a period of ineligibility.  Through a revocable trust, you can have the life insurance proceeds continue in trust for the benefit of a beneficiary with creditor issues or who is receiving government assistance; while allowing the life insurance proceeds to be held for the benefit of the beneficiary without subjecting the proceeds to the claims of the beneficiary’s creditors or creating a period of ineligibility from government programs.

By: Christopher M. Klug, Esq., LL.M.

2012 Medicaid Regional Rates for Calculating Transfer Penalty Periods

Long Island: $11,849
(Nassau, Suffolk)

New York City: $10,957
(Bronx, Brooklyn, Manhattan, Queens, Staten Island)

Northern Metropolitan: $10,335
(Duchess, Orange, Putnam, Rockland, Sullivan, Ulster, Westchester)

Rochester: $9,363
(Chemung, Livingston, Monroe, Ontario, Schuyler, Seneca, Steuben, Wayne, Yates)

Northeastern / Albany: $8,540
(Albany, Clinton, Columbia, Delaware, Essex, Franklin, Fulton, Greene, Hamilton, Montgomery, Otsego, Rensselaer, Saratoga, Schenectady, Schoharie, Warren, Washington)

Western / Buffalo: $8,337
(Alleghany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, Wyoming)

Central / Syracuse: $8,015
(Broome, Cayuga, Chenango, Cortland, Herkimer, Jefferson, Lewis, Madison, Oneida, Onondaga, Oswego, St. Lawrence, Tioga, Tompkins) 
 
The Medicaid Regional Rates are based on average nursing home costs in each of the seven regions in New York State. When one gives money or property away, that individual and their spouse will be ineligible for institutional (nursing home) Medicaid for a certain number of months, known as the “penalty period”. A penalty period will be imposed on any gifts or transfers of assets within the previous five years (ie. 5 year lookback period). Medicaid will calculate the period of ineligibility by dividing the dollar value of the transfer by the Medicaid regional rate for the region in which the facility is located.

Other 2012 Medicaid & Medicare Updates: Due to a 3.6% cost of living adjustment (COLA) for SSA payments effective January 1, 2012, several figures used in determining Medicaid eligibility have be updated. With an increase to the SSI benefit levels, the medically needy income and resource levels will be adjusted accordingly. In addition, an increase in the Consumer Price Index (CPI) requires an adjustment to the Medicaid Income Standards used for Singles/Childless Couples and Low Income Families.

For More Information - Download the 2012 NY MEDICAID INCOME & RESOURCE LEVELS

A study released on January 5, 2012 (Medical Bankruptcy in the United States, 2007: Results of a National Study) by the American Journal of Medicine reported a dramatic increase in bankruptcies resulting from illness and medical bills. 62% of all bankruptcies filed in 2007 were tied to medical expenses, despite three-quarters of those who filed for bankruptcies having health insurance. Since 2001, the proportion of all bankruptcies attributable to medical problems has increased by 50%. Most medical debtors were well educated, owned homes, and had middle-class occupations.

In 1981, 8% of families filing for bankruptcy did so in the aftermath of a serious medical problem. A 2001 study in five states found that medical problems contributed to at least 46% of all bankruptcies. As we move into 2012 health costs and the numbers of uninsured and underinsured have increased, and bankruptcy laws have tightened making filing more difficult and expensive. Those with insurance found themselves responsible for thousands of dollars in out-of-pocket costs and others with private coverage lost it when they became too sick to work. The income loss due to illness, coupled with high medical bills, sent families into a tailspin. These numbers do not take into account those that have spent their entire life savings and assets on nursing home care in order to qualify for Medicaid.

Before the most recent economic downturn, an American family filed for bankruptcy resulting from a medical problem every 90 seconds. Since 2007 the number of personal bankruptcies rose to 1.5 million in 2010, according to the American Bankruptcy Institute. An age breakdown of the data for 2009 showed that older people are making up an increasing proportion of the nation’s bankruptcy filers. Seniors, who often live on a fixed income, have turned to credit cards, emptied retirement accounts, and refinanced homes in order to pay for expensive medical treatment, gas, food and other necessities.

This alarming data shows the increased need to properly plan for health care and long-term care expenses. Just having health insurance is not an adequate solution, and private long-term care insurace for Medicaid Trust planning must be considered. Contact a qualified estate planning and elder law attorney at the Pierro Law Group to help protect your family and plan for the unexpected.

For many families the December holidays bring much joy, giving, cheer, traditions and perhaps a bit of chaos. The holidays are also a great time to have an open family discussion on other things that matter such as estate planning, where important documents are kept, who will make health care and financial decision should one no longer have that ability, and where and how will long term care be provided and paid for should the need arise. Adult children of aging parents and other family members often dread and avoid “the aging talk”, fearing it may ruin a happy occasion. However, with busy schedules and out of town family members, when was the last time your entire family was under the same roof? When is the next time it will happen again? For many, the holidays are the one time a year when everyone is together at the same table. It is common to find out the existing Will may be 20, 30 or 40 years old and the beneficiaries on insurance policies might be predeceased or no longer appropriate.

Despite the insistence that “everything is fine”, there are several clues that can be observed indicating that an aging family member may need some assistance.

Take a Look Around the Home: Are there tripping hazards, fire hazards or home repairs that have not been tended to? Does the bathroom have appropriate handles? Are there expired prescriptions around? Can kitchen shelves be reached? Are bills and late notices stacking up? Are there new dents or dings on the car or garage?

Observing Behavior: Can they still manage the stairs? Can they still prepare a meal? Do they remember to take take their medications? Are they easily confused or forget routine items? Talk to other family members and neighbors to get their input.

While holidays may be a bit hectic time of the year, getting your family to discuss important issues may save much aggervation later on and provide peace of mind. Talk to one of our qualified Estate Planning and Elder Law Attorneys to find out how to get the planning process started.

 
Warm Wishes for the Holidays
from the Pierro Law Group.

A Will is only effective after death and does not provide any authority to preserve and manage assets in case of disability, disease or incapacity. Instead, various types of trusts may be used during the grantor’s lifetime in order to preserve assets and ensure that, even if the grantor becomes incapacitated at a later time, the assets will be managed and expended in a manner consistent with the grantor’s intent. Further, upon the grantor’s death the Trust can ensure assets are distributed to the beneficiaries designated by the grantor. Below are four common trusts that can be used to plan for incapacity.

Revocable Living Trusts
A Revocable Living Trust is a complete Will substitute. It can provide for the management of your assets both during your lifetime and for the proper disposition to your beneficiaries upon your death. You may change or revoke the terms of the trust at any time and may designate anyone you like – a professional manager, your spouse, an adult child, an attorney, or even yourself - as Trustee. This type of trust is also useful if you become incapacitated and/or incompetent, because the Trustee or successor Trustee will be able to manage your assets and provide for your needs without the time, expense and other burdens associated with the court intervention that may otherwise be required.

In other words, having your assets owned by a revocable living trust can substantially reduce the risk that a costly court guardianship proceeding will become necessary if you become disabled. You can establish detailed instructions for how your successor trustee is to handle and manage your assets upon your disability. By avoiding guardianship, you will not only save on the associated fees, but you will avoid family conflict, save time and preserve continuity of the management of your assets that would be lost with a guardianship proceeding.

Planning Tip: If you name yourself the initial trustee of your revocable trust, it is critical that a successor be named to assume the role of trustee in the event of the your incapacity.  It is also critical to provide a provision in the trust which defines “incapacity” for purposes of the Trust and the steps that will be required to appoint a new trustee.

Standby Trusts
A popular estate-planning technique combines the common Power of Attorney with a Standby Trust. This technique is ideal for clients who wish to plan for disability or incapacity but who are unwilling to relinquish present control. The standby trust is created, executed and funded but only with nominal assets. The power of attorney is also executed, providing the agent with authority to transfer the client’s assets to the trust in the event of incapacity or disability. The planner should consider using a springing power of attorney for this purpose.

Planning Tip: In New York, the authority to create and fund trusts is not clearly conveyed by the typical short-form Power of Attorney. If broader authority is desired, the power of attorney may include not only the power to fund a trust, but also to create one. Such a provision, combined with the proper gift-making authority, will enable the agent to make gratuitous transfers into a trust on the principal’s behalf, thereby accomplishing a number of planning goals. Whichever form is used, the Power of Attorney must clearly define “incapacity” and “disability”.

Supplemental Needs Trusts
If the grantor is concerned with preserving assets for the use of a third party, such as disabled child or disabled spouse, without jeopardizing that party’s eligibility for government benefits, then a Third Party Supplemental Needs Trust may be appropriate.

If the grantor is concerned with preserving assets for his or her own use without jeopardizing eligibility for government benefits, a First Party Supplemental Needs Trust may be appropriate.

Planning Tip: The primary difference between the First and Third Party SNT is that the first party trust must include a payback provision for DSS, upon the death of the beneficiary, to the extent that DSS has paid out benefits on behalf of the beneficiary.

Medicaid Asset Protection Trusts
Private Long-Term Care Insurance is the optimal way to plan for home care or nursing home care, but if you can’t buy insurance due to health conditions, or personal income and resources are not sufficient to pay for long-term care insurance, the planning tool to consider is a Medicaid Asset Protection Trust. You can retain the income for yourself, and preserve the principal of the assets (the assets held by the Trustee) for your spouse, children or other beneficiaries.  When properly drafted, the trust will provide asset protection (to qualify for Medicaid benefits) along with significant tax benefits, including avoidance of gift taxes, and a reduction of capital gains taxes. 

Planning Tip: In order to avoid Expanded Estate Recovery in New York, the Grantor can not have any right to trust principal. If the Grantor retains the income for himself or herself, once he or she starts receiving Medicaid benefits, any income over the requirement will be paid back to DSS. Retaining the right to change Trustee is not considered the right to income or principal.

By: Philip A. Di Giorgio, Esq.
Read Bio

The Estate Planning and Elder Law firm Pierro Law Group, LLC has been named among the 2011-2012 “Best Law Firms” for the Albany, New York area by U.S. News & World Report. These rankings showcase the highest nationally rated law firms within 177 metropolitan areas across the United States. Over 3.9 million evaluations of 41,284 individual leading lawyers were used to determine into a combined overall “Best Law Firms” score for each firm. This data was then compared to other firms within the same metropolitan area and at the national level.

This is the second edition of the U.S. News Media Group’s highly-anticipated annual analysis of “Best Law Firms” rankings. The U.S.News – “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process. An unprecedented amount of data was collected in the project’s second year, and this combined data resulted in the 2011-2012 “Best Law Firms” rankings.The national first-tier rankings are featured in U.S.News & World Report’s Money issue, on newsstands November 15, 2011.

For more information on the “Best Law Firms”, please visit www.bestlawyers.com.