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.