April 2015 Newsletter

Welcome Back

Schanker and Hochberg P.C. is a premier Estate Planning law firm. We offer legal services for sophisticated Estate and Gift Tax planning, Decedent Estate Administration and Probate services, Business Succession Planning, Charitable Giving, Special Needs Planning for persons with disabilities, simple Will planning, and all aspects of Elder Law planning including Medicaid planning and applications.

Our website provides detailed information about our practice and the services we offer. It also is an excellent resource for articles of interest about Estate Planning and Estate and Gift Tax Laws. A copy of each newsletter will always be available on our website.

Estate Planning is so much more than just tax planning. There is a considerable decision-making process. Schanker and Hochberg P.C. has over 30 years of experience in counseling clients for their Estate Planning needs.

2015 Estate Tax & Elder Law Changes

Federal Estate Tax Exemption: Goes up to $5.43 million per individual ($10.86 million per couple due to portability).

New York State Estate Tax Exclusion (top rate of 16% tax on amounts in excess of 105% of the exclusion amount):

  • April 1, 2015 and before April 1, 2016: $3,125,000
  • April 1, 2016 and before April 1, 2017: $4,187,500
  • April 1, 2017 and before January 1, 2019: $5,250,000
  • After January 1, 2019: $5,900,000 (projected)

New York offers no portability, so special planning must be done to preserve the maximum exemption per married couple.

Medicaid Income and Resource Levels for 2015:

  • Income level for one person: $825 (was $809 in 2014)
  • Income level for two people: $1,209 (was $1,192 in 2014)
  • Resource level for a one-person household: $14,850 (was $14,550 in 2014)
  • Resource level for a two-person household: $21,750 (was $21,450 in 2014)
  • Minimum monthly maintenance needs (income) allowance: $2,980.50 (was $2,931 in 2014)
  • Maximum community spouse resource allowance: $119,220 (was $117,240 in 2014)

Gifting Power in New York's Durable General Power of Attorney

New York State updated its statutory Power of Attorney form in 2010. One of the most significant changes is that the Principal now has to specifically sign off on giving a gifting power to the Agent, rather than that power automatically being included, as in the prior version of the form. This raises an important decision for clients: should the Agent have this gifting power? Two reasons stand out as most important:

1) Estate Tax. The gifting power allows the agent to give away assets in order to bring the taxable Estate below the Federal and/or state estate tax exemption amounts, minimizing or even eliminating Estate taxes at death. A prime example is someone on their deathbed with a taxable estate who lacks the competency to enter into legal transactions — gifting requires competency to be valid, so this power lets someone else save significant money from going to the government upon death.

2) Medicaid Planning. The gifting power allows the agent to give away assets to help qualify for Medicaid to pay for long-term care expenses, potentially preserving some assets without having to spend down to the Medicaid limits.

Of course, you must always trust your agent, as the Agent named under a Power of Attorney is given significant trust and responsibility.

Immediate vs. Springing Powers of Attorney

A Power of Attorney is a critical document every adult should have. It gives someone (your "agent") authority to make decisions on your behalf concerning your financial accounts and other affairs if you become unable to do so yourself. There are two types: Springing and Immediate. A Springing Power of Attorney "springs" into effect upon certification by two doctors of your incompetency. An Immediate Power of Attorney is effective right away, even while you are competent.

Advantage of a Springing Power of Attorney: If you want total control of your money while competent, this version only gives someone authority over your accounts and affairs once you are incompetent. Some people feel safer with this arrangement — though if you don't trust your agent while you're competent and able to monitor them, would you trust them more once you're not?

Disadvantage of a Springing Power of Attorney: If the Agent needs to take over your affairs immediately, they must first scramble to get two doctors to certify your incompetency, causing delays — and many doctors are hesitant to sign off on such determinations.

Advantage of an Immediate Power of Attorney: It's effective right away, so if the agent needs to act on your behalf, they can do so immediately without hurdles such as letters from doctors.

Disadvantage of an Immediate Power of Attorney: Because it's effective right away, your agent has authority over your accounts and affairs even while you are competent and don't need them to act. If you trust your agent, this shouldn't be a problem, and the document only gives them power if they have it in their possession — so you can choose when and whether they access it.

Which type is best depends on the client and their personal preferences.

Another Reason to Avoid Probate

We always remind clients of the many reasons Probate should be avoided. Probate is the process of proving the validity of a Will to the Court, and it creates unnecessary time delays, added costs, and a lack of privacy. Another important reason to avoid Probate is that it leaves your beneficiaries at the mercy of the Court at death for critical decisions. For example, courts have been known to appoint a Guardian Ad Litem even where a valid Power of Attorney exists, to represent the interests of an incompetent party in a Probate — and the Estate is charged for that attorney's fees on top of the administering attorney's fees.

Probate can be avoided if you plan your estate properly before you die — creating Revocable Trusts and re-titling assets into them, changing the title of accounts, and making sure living beneficiaries are named on as many accounts as possible. If you are uncertain whether you're set up to avoid Probate at death, we recommend a complimentary review of the titling of your assets. A few simple changes can make your Estate that much easier to administer.

Asset Protection

Many of us are concerned about asset protection, especially in this day and age of an increasingly litigious society. Asset protection involves techniques to protect assets of individuals and businesses from creditors and predators (potential future ex-spouses, in our shorthand). Below are the most common ways to protect assets:

1) Life Insurance Trusts and Gifting Trusts — irrevocable trusts set up to house life insurance policies and/or gifted assets.

  • Advantages: asset protection from creditors and predators; removes assets from your taxable Estate; gives you control beyond the grave through distribution ages and conditions.
  • Disadvantages: loss of control while alive (a trustee other than the person gifting the assets must control the trust); expense of setting up and filing annual income tax returns.

2) Exempt Assets — assets that are creditor/predator-protected by their very nature, such as: retirement plans and IRAs (inherited IRAs are unprotected for non-spouse beneficiaries unless placed in a qualified Trust); primary residence (state-law specific, may be very limited); life insurance (state-specific); and annuities (limited).

3) Limited Liability Companies and Family Limited Partnerships — particularly useful for businesses and income-producing real estate.

  • Advantages: asset protection; potential to move assets outside your taxable estate at a discount.
  • Disadvantages: expense of setting up and, in some cases, filing annual income tax returns.

This is a broad overview, and rules vary state by state, so consult with a professional before taking action. Note that these strategies do not apply to "super creditors" such as the IRS or child support.

Schanker and Hochberg, P.C. Is a Premier Estate Planning Law Firm

After nearly four decades in practice, we continue to strive for excellence on behalf of our clients. Being extremely hands-on, with the philosophy that we are our clients' trusted counsel, allows us to form and maintain long-term relationships. Our valuable services include a complimentary initial consultation, a written summary following all meetings, quarterly newsletters, alerts and updates for significant tax or legal changes, flat fees for Estate Planning, complimentary annual review and family meetings, and coordinated asset transfers to ensure titling matches your intent.

Extensive Services at Schanker and Hochberg P.C.

  1. Complimentary Initial Consultations for Estate Planning, Probate, and Estate Administration (not for matters of Elder Law or Special Needs Planning)
  2. Complimentary Annual Review meetings for existing clients
  3. Complimentary Family meetings for existing clients
  4. Tax alert services for existing clients

Our main office is housed in an elegantly restored Victorian structure in the heart of Huntington Village. Here, we welcome you and your family into a relaxing, warm setting where we will work together to improve your circumstances and achieve your goals. To better serve our clients and their families, we also have convenient office locations in Midtown Manhattan and New Jersey; we also offer our services to clientele in Florida.

Highlighted S&H Attorney: R. Mark Hochberg, Esq. (Partner)

R. Mark Hochberg received a Bachelor's degree in Economics from Rutgers University, a law degree from Brooklyn Law School, and a graduate law degree with a concentration in estate planning and taxation from the University of Miami Law School. Mr. Hochberg is a member of the New York, New Jersey, and Florida Bars and is admitted to practice before the United States Tax Court and the Supreme Court of the United States.

Mr. Hochberg has lectured and written extensively on estate planning topics. He was an adjunct instructor at Adelphi University for ten years and is a former columnist for Financial World Magazine, where he wrote a monthly column on personal and estate planning. Mr. Hochberg has been interviewed by the New York Times and other prominent publications, and has written articles for The Tax Advisor and The CPA Journal.

Mr. Hochberg resides in Plainview, New York, with his wife, a financial consultant.

GENERAL DISCLAIMER: While we hope this newsletter provides useful information, please know that this newsletter does not predict or guarantee the outcome or result in any particular situation, and no attorney-client relationship exists or is established as a result of this newsletter or its receipt.