September 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.

IRS to Curtail Valuable Estate Planning Tool

The Family Limited Partnership (the "FLP," or Limited Liability Company, "the LLC") is a widely used Estate Planning strategy that provides wealth preservation and asset protection for people vulnerable to a State and/or Federal Estate Tax. This strategy gifts assets, under the control and direction of the Partnership or Operating Agreement, to beneficiaries at a discounted rate so the wealthy client can maximize their lifetime gift tax exemption.

The IRS aims to curtail the use of this strategy very soon. If you currently have a Family Limited Partnership or LLC, or are considering this strategy for the first time, it is imperative that you schedule a consultation.

The IRS seeks to disallow any discounts if the assets of the FLP or LLC are anything other than an operating business. For example, many of our clients have used investment accounts to fund the FLP or LLC; this is the type of asset the IRS may not allow a discounted value to be applied to.

Currently, the New York Estate Tax Exclusion is $3,125,000 and will eventually rise to match the Federal Estate Tax Exemption in 2019, projected to be approximately $5.9 million. The current Federal Estate Tax Exemption is $5.43 million per person. People with assets in excess of these thresholds commonly use strategies such as the FLP to reduce the value of their taxable Estate. Please contact us to schedule a consultation to see if this planning is appropriate for you.

Protect Your "Ass"ets

When a client comes to us for an Estate Plan, their primary focus is usually to design a plan to distribute their assets at time of death. Traditionally, a Last Will and Testament is the document used — the simplest method of documented Estate Planning. However, wise Estate Planning also includes a method to simplify the process and lessen delays and expenses: beneficiary designations, gifting, and various Trusts to avoid Probate and mitigate impending Estate Taxes. It is especially important to have an experienced attorney coordinate this planning so it is done correctly.

The most common mistakes we encounter include:

1. Gifting highly appreciated real estate to adult children. The consequence is that the children receive your original cost basis, so if they sell the property, they can incur a capital gains tax that would otherwise have been avoided had they inherited the property. Clients most commonly do this to protect the home should they require Medicaid assistance in the future. A specialized Trust known as an Irrevocable "Medicaid Income Only Trust" is appropriate here.

2. Naming the Estate as a beneficiary of life insurance benefits. Don't do this. Life insurance is inherently "asset protected," meaning it's difficult for creditors to stake a claim against the proceeds. But naming your Estate (by Will or Revocable Living Trust) makes the life insurance vulnerable to all creditors with a claim against your Estate, not to mention Probate. If you want control over how distributions are made to your beneficiaries, create an Irrevocable Life Insurance Trust to maintain asset protection.

3. Naming a minor as a beneficiary of a life insurance policy. Don't do this either. Minors are incompetent in the eyes of the law, so naming one requires a court-appointed guardian to administer the proceeds until the minor turns 18, at which point the proceeds become legally theirs — a young person having free rein over significant money is inherently problematic. The solution is an Irrevocable Life Insurance Trust, which provides creditor protection and directs administration of the proceeds for the benefit of minors, with a distribution schedule managed by a Trustee of your choosing.

4. Naming a person with disabilities, or someone over 65 who receives or may need Medicaid, as a direct beneficiary of anything. Medicaid and Social Security Disability are needs-based government programs, and an inheritance will interfere with eligibility and jeopardize those assets. A Supplemental Needs Trust can receive the inheritance and provide support without interfering with needs-based public programs.

An important Estate Planning philosophy is to protect your beneficiaries from their own inability, disability, creditors, and predators. Inability pertains to naivety due to age, inexperience, or maturity; disability is self-explanatory; creditors are those with a legal claim against an individual; and predators are those who manipulate, coerce, or exert undue influence over a beneficiary to access their assets. Good planning recognizes your heirs as they really are, not as you'd like them to be.

General Medicaid Background — 2015

Medicaid is a needs-based government benefit providing either in-home care ("Community Medicaid") or Nursing Home Medicaid. To qualify for either program, an applicant must meet a financial threshold test based on monthly income and available resources (assets).

For Community Medicaid, the 2015 thresholds allow a single person 65 or older to qualify as long as income does not exceed $845 per month and available resources do not exceed $14,850 (not including the primary residence, as long as its value is not in excess of approximately $828,000). There are strategies to transfer assets to become eligible, and there is no penalty or "look back" period for Community Medicaid — you can transfer assets this month and be eligible in about three months, the wait period used for processing the application.

For Nursing Home Medicaid, the applicant is limited to $50 of income per month and $14,850 of resources. There will be a lien against the home if it is in the recipient's name, and there is a five-year look-back period for non-exempt transfers, followed by a penalty period before Medicaid begins to pay for nursing home care.

Upon a Medicaid recipient's death, New York State will seek reimbursement for the cost of care from assets in the Probate Estate. While the home is exempt for Medicaid eligibility purposes (if equity is below the $828,000 threshold), it may still be subject to a Medicaid claim or lien at death without proper planning to avoid that outcome.

Medicaid rules are very intricate, and there are ways to plan for future eligibility while protecting assets from claims or liens. The establishment of an Irrevocable Medicaid Income Only Trust is a very popular planning device, though once assets are transferred into such a Trust, they are no longer available for unlimited personal use. This planning must be coordinated with your general Estate Plan.

Beware of Deed Retrieval Services

Many service providers issue notices, usually by mail, informing homeowners they must have a certified, recorded deed and offering, for a fee (usually $60–$120), to obtain it. This service is unnecessary and extremely overpriced.

A copy of your deed will usually already be recorded with the County Clerk's office, where you can obtain a copy for a fraction of the quoted cost. You typically do not need a certified copy absent extreme circumstances. You can also request a copy from a title company, or in many counties, obtain one online, all for far less than these deed retrieval services charge. If you receive a notice like this, ask us first before paying — it may be entirely unnecessary.

Announcement

Melanie A. Schanker, Esq., has left Schanker and Hochberg, P.C. to pursue a different career path outside the practice of law, in special needs public education. We wish her the best of luck with her new endeavor.

Unclaimed Funds

New York State's Office of the State Comptroller oversees the Unclaimed Funds program. According to its website, over $271,992,601 in unclaimed funds had already been returned in 2015. Unclaimed funds can be any account you forget about and ultimately abandon (a utility deposit or a small bank account, for example). We are happy to perform a search for clients, but you can also visit the website and search yourself, or search for family and friends. If you find that a deceased person is entitled to an unclaimed fund, please contact us, as this usually requires a Probate or Administration proceeding in Surrogate's Court.

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: Andrea B. Schanker, Esq. (Partner)

Andrea B. Schanker, Esq. — Partner, received her Bachelor of Arts degree in Clinical Psychology from University of Rochester in 1999 and her Juris Doctor from New York Law School. Andrea is a licensed member of the New York and New Jersey Bar Associations. She is the 2016–2017 President of the Huntington Lawyers' Club, a member of the Suffolk County Bar Association, and a member of the New York State Bar Association where she is an active member within the Trusts and Estates Section and the Elder Law and Special Needs Section. Ms. Schanker is also a member of the American Bar Association.

Ms. Schanker joined Schanker and Hochberg P.C. in 2004 as an Associate Attorney specializing in Estate Planning, Estate Administration, Business Succession Planning, and Elder Law. She regularly delivers Estate Planning presentations to professionals in the financial industry and their clients, and advises accountants, financial advisors, and insurance advisors in connection with her areas of expertise.

Andrea lives in Huntington with her husband, Michael Abruzzo, and their daughters, Patricia Gertrude Abruzzo and Sylvia Grace Abruzzo.

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.