Asset Protection - Trust and Estate Planning Law Office

The Best Time to Update Your Estate Plan

When was the last time you thought to review and update your estate plan? It is a frequent misconception that once your estate plan is in place, it needs no further adjustments or review. However, as life is filled with exciting milestones as well as hardships, it is crucial that you regularly update your estate plan as life is constantly evolving. Planning an estate is a beneficial way to manage and protect your assets and ensure that your wishes and desires will be fulfilled after death. In this article, we will explore the importance of frequent revision of your estate plan and key life events that prompt reevaluation.

Why is it necessary to continuously review your estate plan?

Life is constantly filled with ups and downs including new births, deaths, marriages and divorces and it is important to be prepared for any situation. Regularly reviewing your estate plan can ensure that it aligns with your current circumstances and desires. This will allow you to address any recent changes in your family, designate beneficiaries and update other important information including appointing guardians for children. Periodic revision of your plan can lessen the potential for disputes among beneficiaries and family members and ensures that your wishes and desires are up to date.

Your financial situation is prone to change throughout your life. You may obtain and sell assets or might start a business which can have ramifications on your estate plan. By taking the proper steps to protect your assets, including updating your estate plan, you can ensure that they are distributed in alignment with your desires and lessen the potential for challenges in the future.

Additionally, Laws and policies are not static and they are always subject to change. Failing to be informed about recent policy changes can have implications on your estate plan. It is important to stay up to date about recent tax laws because it will provide you with the opportunity to maximize tax savings. Consulting with an estate planning attorney can help you ensure that your plan aligns with the most recent laws and regulations.

When is the best time to review my estate plan?

Below is a list of some essential life events after which you should consider reviewing and updating your estate plan accordingly.

Marriage or divorce- Whether you and your partner are joining lives through marriage, or separating through divorce, these events call for a review of your estate plan. Updating your plan after these life events provides you with an opportunity to account for your spouse, consider children from previous relationships as well as modify beneficiary designations.
Birth or adoption of a child- The welcoming of a new child into your life is an exciting milestone, and also prompts for an updated estate plan. A new child may encourage you to add guardians for your child and set up trusts in preparation of your child’s financial future.
Changes in your financial circumstances- Your plan should be reviewed thoroughly and updated in the event of substantial changes in your financial situation. For example, after the buying and selling of assets or receiving an inheritance, it is important to take advantage of new financial opportunities by updating your plan.
Death of a loved one- If a loved one or beneficiary in your plan passes away, it is essential to make the necessary adjustments to your plan including the addition of new beneficiaries.
Relocation- Moving to another state or country is a major event that requires the revision of your estate plan. Different states and countries have different laws and regulations in regard to tax and estate, therefore, in order to ensure your plan aligns with the local laws, it is necessary to review your plan and make the appropriate adjustments.
Changes in laws- Laws are constantly evolving and they are always subject to change. Therefore, when estate and tax laws are created or changed, it is important to review your plan and make sure it conforms to the current legal policies.
Retirement- As you approach retirement, it becomes especially important to address things such as income planning and healthcare in your estate plan as well as ensuring the future protection of your assets.

Regularly updating your estate plan is a crucial responsibility that should not be overlooked. Life can be extremely unpredictable, between family and financial circumstances, and it is essential to ensure your plan is up to date. Doing so can protect both your assets and your loved ones. To consult with a knowledgeable and experienced estate planning attorney, please contact the Trust and Estate Planning Law Office at (718) 333–2395.

“I Care A Lot” reveals the unfortunate reality of POA and Health Care Proxy

In 2021, Netflix released the movie “I Care A Lot.” In this film, a rich Marla Grayson repeatedly convinces the court that elderly individuals are not mentally stable and need to be taken care of. After the court grants her guardianship, she moves her victims into an assisted living facility, sedates them, and takes their phones to ensure zero contact with the outside world. During this period, Marla sells her client’s properties, cars, and assets and banks the profit. However to her surprise, her next victim Jennifer Peterson is a lot harder to manage. Peterson’s son is a dangerous mafia boss who makes it his mission to make Marla’s life miserable and release Jennifer from the assisted living facility. While the film is intended to be a satirical and dark comedy, it references many financial and healthcare issues that could have been prevented with a definitive estate plan that included a Power of Attorney and Healthcare Proxy.

“I Care A Lot” Teaches Valuable Estate Planning Lessons

One day, Marla knocks on Jennifer's door and randomly presents herself as a newly appointed guardian. This could have been prevented if Jennifer, an extremely wealthy elderly woman, had appointed a power of attorney and healthcare proxy. While many often believe the two tackle the same problems, that is incorrect. A power of attorney appoints someone to take care of financial decisions for you. On the other hand, a healthcare proxy appoints someone to make medical decisions for you when you are no longer mentally or physically capable to do so.

Real-World Implications

Although the film is clearly intended to be satirical and dramatizes the life of a fraudster, elder financial exploitation is no laughing matter and has been on the rise. According to a 2018 article from the Securities and Exchange Commision, a study in New York state found that financial fraud cost elderly victims $109 million, though that number is likely much higher due to underreporting and the higher occurrence of healthcare fraud since the beginning of the COVID-19 pandemic. An article from the American Bankers Association reports that financial crimes cost elderly victims $2.9 billion in 2022. Elder financial abuse is among the most frequent forms of elder abuse, and elderly people are more likely on average to be targeted for financial fraud. Two factors in the prevalence of elderly financial exploitation are social isolation and mental impairment. Those older persons without close family or friends and those with physical or mental impairments such as Alzhemeir’s are more likely to be victims of financial crimes and are the preferred targets of fraudsters.

Elder financial exploitation takes many forms. In some cases, it may involve a caregiver convincing the victim to sign over to them their power of attorney. In other cases, it might involve a caregiver stealing a victim’s cash, cashing their social security checks, or using their credit cards. In more extreme cases, it might involve the victim signing over inheritance rights to real estate or savings accounts to “new best friends” or previously uninvolved relatives. Because there are no physical signs of abuse, elder financial exploitation can be extremely difficult to catch and can continue for years before irregularities are finally realized.

How To Protect Your Loved Ones

To protect your loved ones from potential exploitation, it is important to look for warning signs and report them immediately. It is also important to familiarize yourself with the wide-range of warning signs and the organizations dedicated to investigating and preventing elder financial exploitation. Some warning signs include fraudulent signatures on financial documents, unpaid bills that had previously been recurring automatic charges, sudden changes in a person’s will, trusts, or insurance coverage, and an unexplained transfer of assets to a caregiver or unknown third-party. This list is not exclusive, as fraud can occur through investments and annuities, telephone “sweepstakes” scam, and phony home-repair charges.

Some of the many helpful organizations at your disposal include the Adult Protective Service, National Elder Fraud hotline, and Long-Term Care Ombudsman programs. An experienced elder planning and Medicaid fraud attorney will also help in perceiving cases of fraud and contacting the proper authorities. In addition to these resources, it is important to be open and honest when discussing finances with your loved ones. Never sign a financial document without a second opinion, and never feel pressured to engage in a business dealing or investment. Report anything you feel uncomfortable about to your loved ones or the proper authorities. Above all, do not remain silent!

Conclusion

The satirical “I Care A Lot” is a worthy watch and certainly has its humorous moments, however it is most important to heed its lessons. Elderly people are at particular risk for financial crimes, and they are often the preferred target for fraudsters because of their perceived vulnerability and fragile health. Although the signs of exploitation and fraud are varied and sometimes hard to spot, remaining vigilant and engaging in frank financial discussions with your loved ones will help protect you from becoming a victim. Having an experienced estate planning and asset protection lawyer in your corner will also help you to prevent any potential damaging financial occurrences. For all your asset protection needs, call the Trust and Estate Planning Law Office at (718) 333-2395.

Steps to Creating An Asset Protection Plan To Safeguard Against Creditors

An asset protection trust is a legal arrangement in which an individual transfers ownership of assets to a trust, with the intention of protecting those assets from future creditors or legal action. The trust is managed by a trustee, who is responsible for managing the assets in accordance with the trust's provisions.

As mentioned previously, the primary purpose of an asset protection trust is to shield assets from potential creditors or legal action. By transferring ownership of assets to the trust, the individual can protect those assets from future claims. However, it's important to note that asset protection trusts are not foolproof, and there are limits to their effectiveness.

Creating an asset protection plan can be a complex process, and it's recommended that you consult with a legal and financial professional who specializes in this area. However, here are some general steps you can take to begin creating an asset protection plan:

Identify your assets: Make a list of all your assets, including real estate, investments, and personal property.
Assess your risks: Consider the potential risks that could threaten your assets, such as lawsuits, bankruptcy, or divorce.
Review your insurance coverage: Make sure your insurance coverage is sufficient to protect your assets in case of any risks.
Separate personal and business assets: Keep your personal assets separate from your business assets to avoid liability issues.
Consider forming a legal entity: Consider forming a legal entity, such as a limited liability company (LLC) or a trust, to protect your assets from lawsuits and other legal actions.
Transfer ownership of assets: Transfer ownership of your assets to the legal entity you created. This can provide an additional layer of protection.
Create a succession plan: Create a succession plan for your assets in case of unforeseen events such as disability, death, or divorce.
Keep your plan updated: Regularly review and update your asset protection plan to ensure it continues to meet your needs and to stay up-to-date with changing laws and regulations.

Don’t Wait to Create A Plan:

One of the biggest mistakes an individual can make is to wait until a lawsuit has been filed or is about to be filed to begin protecting their assets. If you wait until this happens, your asset protection strategies may be exposed to creditors and used against you by a judge or a jury. Unfortunately, many people wait until something bad happens to begin asset protection planning, but for your plan to be effective, you need to create it before creditors come for your assets. Creating an asset protection plan is not something that should be done quickly and or serve as a temporary fix.

If you or a loved one are looking to draft a comprehensive asset protection plan that is unique to your circumstances, contact the Law Office of Inna Fershteyn at (718) 333-2395

Five Reasons to Protect Your Retirement Accounts

Throughout your lifetime, your retirement account offers asset protection, but as soon as you transfer it to a loved one, that protection ends. Creditors have the right to confiscate your retirement account even if your partner, child, or other close relative inherits it. Therefore, if you lose just one lawsuit, all of your hard-earned savings may be lost and your loved ones can end up without money. Thankfully, there is a fix for this issue. You can shield retirement savings from creditors by using a unique trust called a standalone retirement trust (SRT).

It is important to make sure that your intended recipients, like your loved ones, are receiving the benefits from your retirement account. Consider using an SRT to safeguard your retirement assets if any of the following apply to you or your beneficiaries:

Your combined retirement plans are sizable. An SRT can be used to protect loved ones' retirement accounts against creditors.
You worry that your beneficiary won't be very responsible with the money. If you are concerned over how your beneficiary might manage an inheritance, you should think about setting up an SRT since you can control the amount and timing of the distribution.
You worry about lawsuits, divorce, or other potential legal proceedings. A properly written SRT can safeguard the inherited retirement savings from those creditors if your beneficiary is embroiled in litigation, is about to be divorced, about to file for bankruptcy, or is otherwise involved in legal proceedings.
Your beneficiaries receive assistance. It's crucial to be aware that inheriting an individual retirement account could result in the beneficiary losing any needs-based government benefits they may be receiving or be eligible for. It is possible to draft an SRT to prevent disqualification.
You have remarried and have children from a prior marriage. Even if you named your children from a previous marriage as the contingent (backup) beneficiaries on your retirement account, identifying your partner as the primary beneficiary of the retirement account could allow your partner to purposefully (or unintentionally) disinherit your children. You can prevent this by designating your partner as the lifetime beneficiary of an SRT while designating your children from a prior marriage to receive the remaining funds after your spouse passes away.

An SRT is a unique kind of trust created for your beneficiaries to inherit your retirement assets after your passing. Your retirement account assets may be shielded from your beneficiary's creditors. In fact, an SRT can incorporate trust clauses that specifically shield your partner from harm in circumstances like:

Remarriages
Divorce
Failure of business
Bankruptcy
Lawsuits resulting from auto accidents, malpractice, or evictions

A Standalone Retirement Trust (SRT) that has been effectively drafted can offer creditor protection and help you plan for the future. If you would like assistance with protecting your retirement account, please contact the Law Office of Inna Fershteyn at (718) 333-2395.

Advice on Selecting The Right Trustee For Your Trust

You have worked hard to obtain and protect assets such as your house, car, business, etc…In order to properly protect your assets and to provide for the most important people in your life, you may be advised to put some or all of your assets into a trust.

If you are deciding on establishing a trust, you will need to appoint someone to make sure that the trust is administered in accordance with your wishes. A trustee is a person who takes on the position and responsibilities of managing the trust’s assets. The responsibilities and regulations which the trustee must follow are outlined in the trust. The creator of the trust can be a trustee and even one of the trust's beneficiaries. However, trust creators may also appoint another person or even an institution as their trustee.

After the death or incapacity of the trust’s creator, a person or institution is named as the successor trustee in order to manage the trust’s assets. The person or entity listed in a trust as a successor trustee should also be carefully appointed because an unreliable trustee can both mismanage and waste assets.

Because trustees have significant powers, a risk exists where an irresponsible trustee could end up harming a beneficiary. Selecting a trustee is a critical aspect of estate planning and many people tend to appoint a trustee without sufficient planning or thought. This article lists some important qualities to look for when selecting a trustee as well as some guidance on who to select as the right trustee.

Important Qualities to Look For When Selecting a Trustee:

1.) The Capability to Perform the Job

In order to successfully administer and manage a trust, trustees have to be capable of performing various tasks. Trustees must have an understanding of both vocabulary related to trusts as well as the applicable laws. They should know how to successfully manage all types of assets (physical or intangible) as well as be able to diplomatically work with the beneficiaries. A trustee does not need to have experience in areas like finance or trust management, however, whoever is appointed as trustee should be financially responsible and have some dispute resolution skills. The person appointed as trustee should also be capable of making ethical decisions which means acting in the best interest of the trust creator and beneficiaries.

2.) Remain Impartial

A trustee has a fiduciary duty to the trust’s beneficiary, meaning that the trustee must act in the best interests of the beneficiaries in mind and not favor one beneficiary over another or engage in self-serving actions. Many older parents decide to appoint their children as trustees. Although appointing your child to be a trustee can be a good idea, it can also cause conflict within the family if the trustee is can not act impartially.

3.) Willing to Act as a Trustee

Unfortunately, being a trustee is an often unacknowledged and thankless position which is why it is important to make sure to appoint someone who would want to perform the necessary tasks to administer your estate. If a trustee ends up feeling over-burned and loses interest in performing the tasks necessary for trust administration, the chance of your trust failing and your wishes being unmet will increase.

Should My Trustee Be My Spouse Or Child?

You know the strengths and weaknesses of your family members which puts you in the best position to decide if your spouse or your child can successfully carry out a trustee’s responsibilities. Under state law, there are many responsibilities of a trustee. These include, but are not limited to, remaining impartial between the interests of the current and future beneficiaries, properly accounting for all beneficiaries, and prudently investing trust funds.

Questions to consider:

Can your trustee distinguish their personal feelings and interests from those of the beneficiaries?
Can your trustee analyze investments?
Will there be a temptation for your trustee to take risks hoping for a hefty return at the expense of the other beneficiaries?
What if your spouse re-marries?
Will all parties be treated impartially if, for example, your children are not your spouse’s children?
Will a child who is a trustee be able to exercise good judgment if a sibling is a beneficiary or could tension develop between them?
Can your sons-in-law and daughters-in-law and their children work successfully together?
Will a child who is balancing their family and career have adequate time to devote to serving as a trustee?

Should My Trustee Be An Attorney, Accountant, Or Other Trusted Advisor?

Attorneys, accountants, and financial advisers sometimes have a special and trusted relationship with their clients. Those who emphasize impartiality may look to their attorney, accountant, or other advisors. If you have an extended relationship with your attorney, accountant, or other advisors then it does not hurt to consider them a possible option to be a trustee. However, just because an accountant or other advisers may understand the nature of your business or your financial goals, they may not fully understand the scope of fiduciary duty or the inherent risks and responsibilities of being a trustee.

Questions to consider:

Does your professional adviser know and understand the dynamics of your family?
What experience do they have as a trustee?
How long have you been a client with the advisor?
Do your immediate family members know of and trust the advisor?

Should My Trustee Be A Bank Or Trust Company?

Banks and trust companies provide professional fiduciary services so they can act independently and impartially. Corporate trustees have procedures and systems that will ensure your properties are being managed and funds are being invested in a fair and consistent manner. Choosing a professional fiduciary could reduce conflicts between family members while receiving experienced and professional investment and administrative management. All fiduciaries are held to a very high standard especially corporate fiduciaries because their business is to provide fiduciary services.

Questions to consider:

How much of the trust assets will be spent on fees from a trust company and be unavailable to my beneficiaries?
Do the increased investment returns provide value for the fees charged?
Will the bank or trust company understand my family and their needs?
What can I expect from the administrator making decisions that directly affect my family and meeting the goals of my trust?

Advantages To Choosing More Than One Trustee

You may find it beneficial to choose one or multiple individuals to serve as a trustee along with a corporate trustee. It can be helpful to have more than one trustee in order to balance all of the responsibilities such as recordkeeping, investments, and other trustee duties.

A properly drafted trust agreement can concisely outline the duties of the various trustees, such as the retention of specific investments, the delegation of particular duties, or even the power to remove a trustee. One of the co-trustees could have a particular understanding of a beneficiary’s needs and help the other trustees and/or the corporate trustee in making discretionary decisions.

Choosing trustees for your trust can take time, but it doesn’t have to be difficult. Your ultimate decision should be well reasoned. You are the best one to recognize the responsibilities of managing your wealth and assets. You are also best able to understand the needs and capabilities of those closest to you. It is beneficial to consider the people who, when working together, have the knowledge, experience, and compassion to best carry out your remaining wishes.

If you need consulting on setting up a trust and appointing a trustee, please contact the Law Office of Inna Fershteyn at (718)-333-2395.

How to Protect Your Home If You Need Medicaid

Most people wonder how to qualify for Medicaid and if their assets will be at risk when applying. Those who need long-term care worry about the possibility of losing their home in order to qualify for Medicaid. If you or someone you love need long-term care, you don’t have to sell your house in order to qualify for Medicaid to pay for long-term care. However, Medicaid could reach out in the future to recoup the costs of treatment. Once you are approved for Medicaid, the state may put a lien (charge) on your assets during your lifetime and collect the debt once you have passed away. This process is known as "estate recovery” which can lead to losing many assets that could have been passed down to future generations, even the family home.

So how can one keep the home if they need to apply to Medicaid for long-term care costs?

Adding Someone to the Deed May Not Be The Perfect Solution

People often believe that by adding another person to the deed to their home (aka a life estate), the home cannot be used to pay back Medicaid. Unfortunately, this method won’t be enough to protect the home, and here’s why:

If the property is sold before the Medicaid recipient passes away, the value of the home has to go towards their care.
If you decide to rent out the property, the net rental income is recoverable by the nursing facility, since it technically belongs to the recipient.
Although the house avoids probate after the Medicaid recipient passes away, there could be significant capital gains taxes for the beneficiaries.

Solution #1: Transfer Ownership of The House

What if I immediately transfer ownership of the family home to another person instead of adding them to the deed? This idea is to take the home out of their countable assets. However, unless the person who receives the house is an adult child, the transfer will only lead to problems.

A basic rule of Medicaid is that if you can afford to pay for your own care then you should. If you transfer property, let’s say worth $700,000, it means that a $700,000 gift has been gifted to someone. Another basic rule of Medicaid is that there is a five-year lookback period. This means that any assets you gave away or transferred in the five years before you applied for Medicaid, you still had the asset under your control. And Medicaid will not pay for your care in that case.

The good news is that there are some exceptions to the gifting rules. The following methods are not something to be navigated without the help of an experienced elder law estate planning attorney. Here are some of the exceptions:

Your spouse. The law recognizes that your spouse needs a place to live so a transfer of the home to your spouse does not result in penalties under Medicaid rules. This is a common practice and part of Medicaid planning.

A disabled child. A parent could transfer a house to their disabled child explaining that it is needed for self-support. It is not necessary for a child to lose a home just because a parent will need Medicaid.

Solution #2: Medicaid Asset Protection Trust

One of the best ways to protect your assets is to place your assets in a Medicaid Asset Protection Trust. These are also commonly called “income only” trusts because the appointed trustee (normally an adult child) maintains control of the principal, while the Medicaid recipient can only access the income from a pension or Social Security benefits.

A Medicaid Asset Protection Trust may be a better method for protecting the home if you:

Wish to continue living in the home. These trusts offer little to no disruption to a recipient’s life since they keep the exclusive right to use and occupy the home during their lifetime (and continue to receive all the tax exemptions on the home).
Are not going directly into care. Any assets transferred into a Medicaid trust are subject to a lookback period of up to five years. After five years, you can still live at home but if you need to go into a nursing home, the full value of your assets in the trust are protected. However, even if you end up needing long-term care earlier than you thought (before the five years) you get credit for any time that has passed since the creation of the trust. For example, if you created the trust today but need nursing home care after four years, then you would only have to pay for the remaining one year out of pocket.
Are contemplating selling the house. You will always have the option to sell your house without a Medicaid penalty because the money is paid to the trust. The trustee can also buy a new property (such as a smaller home) in the name of the trust so it remains protected.

If you need consulting on qualifying for Medicaid and how you can protect your family home, please contact the Law Office of Inna Fershteyn at (718)-333-2395.

Upcoming Changes to NY Medicaid 2022-23

Medicaid is operated on both federal and state levels, which provides a range of benefits in medical and health. Medicaid primarily is for individuals who suffer from chronic illness, are in cognitive or physical decline, injured/disabled, and require consistent medical treatment. Laws surrounding who qualifies for Medicaid change constantly, meaning it’s necessary to stay informed on the latest changes to be aware of your eligibility status. Below are some new and upcoming changes to Medicaid.

Upcoming Changes to Medicaid in 2022:

Independent Assessor for Home Care - In Effect May 1, 2022

As of May 1 2022, Medicaid applicants over the age of 18 applying for Personal Care or Consumer Directed Personal Assistance Program (CDPAP) services will need to go through nurse assessments conducted by New York Independent Assessor (NYIA). The NYIA will conduct nursing assessments for “Immediate Need” applicants and others who apply to the local Department of Social Services, which is the Human Resource Administration (HRA) in NYC for personal care or CDPAP.

The NYIA will be conducting a clinical assessment in addition to a standard nurse assessment by either a doctor, physician’s assistant, or nurse practitioner. With these tests, the NYIA will determine if an applicant is eligible for personal care or CDPAP. If the applicant is deemed ineligible, they have Fair Hearing rights, meaning they can appeal their decision.

If the NYIA deems the applicant eligible, they are referred back to their local Medicaid office. The previous assessments will then be used to determine how many hours of personal care or CDPAP should be authorized. If you are approved for over 12 hours of personal care a day, the Medicaid Office or plan must refer the case back to the Independent Assessor for a third assessment, which is an Independent Medical Review (IMR). An IMR is used to determine whether the proposed plan of care is safe and can maintain the health of the applicant when they are home.

Increases in Medicaid Eligibility of Applicants 65+ and Blind/Disabled Individuals - In Effect January 1, 2023

New York Governor Hochul and State Legislature passed four increases in Medicaid eligibility for New Yorkers who are 65+ blind, or disabled in the NYS budget. Below are the four changes that will go into effect:

Medicaid Asset Limit has increased by nearly 50%
Medicaid Income Limit has increased to the same amount used for Modified Adjusted Gross Income (MAGI) Medicaid for younger people (138% Federal Poverty Line or “FPL”)
Medicare Savings Program: Qualified Medicare Beneficiary limit increased from 100% to 138% FPL. Individuals with higher incomes not exceeding 186% FPL will be eligible for QI-1.
Undocumented Immigrants Age 65+ will not be eligible for full Medicaid benefits as opposed to only “emergency” Medicaid

New Medicaid Limits in 2023 for 65+, Blind, & Disabled

Benefit	Federal Poverty Line %		SINGLES		COUPLES
	2022	2023	2022	2023	2022	2023
Income Limit Per Month
Medicaid	82%	138%	$934	$1,563	$1,367	$2,106
QMB	100%	138%	$1,133	$1,563	$1,526	$2,106
QI-1	135%	186%	$1,529	$2,107	$2,060	$2,838
Medicaid Asset Limit			$16,800	$28,134	$24,600	$37,908

Public Health Emergency - Extended Through July 2022

The Biden administration extended the COVID-19 Public Health Emergency on April 13, 2022 for 90 days. This means that the government is prohibited from discontinuing or cutting funding for Medicaid through July 2022.

This means restrictions on eligibility cannot be implemented before October 1, 2022, which would include the 30-month “lookback” that would disqualify applicants from obtaining home care benefits, or require applicants from needing physical assistance with 3 activities of daily living or two if diagnosed with dementia in order to qualify for CDPAP.

For more information on NY Medicaid changes from 2022 to 2023, contact the Law Office of Inna Fershteyn at 718-333-2395.

Should I Create a Life Estate or an Irrevocable Trust?

As you are getting older, Asset protection and Elder Law planning becomes relevant. As you are researching an optimal estate plan to preserve assets from nursing home bills, a life estate deed transfer may initially sound appealing. After all, a life estate deed is a legal means for transferring home ownership rights. However, there are downsides you must fully understand before making this commitment. Prior to making the decision of adopting a life estate, it is crucial to fully understand the risks.

Life estates are characterized by two or more people having ownership over a property for non-overlapping periods of time. These parties are the life tenant and the remainderman. The life tenant owns the life estate and has full control during their life. The remainderman has ownership interest upon the death of the life tenant.

In many circumstances, executing a life estate makes the most sense. It is useful for those looking to simplify estate planning and avoiding the probate process. The transfer of the property to the remainderman is automatic, providing convenience without the need for a will. For example, parents can easily pass homeownership to their children while possessing their property for their entire lives. This provides transparency to the beneficiaries and affirms the life tenant exactly what will happen to their property when they pass away.

Additionally, a life estate deed protects the property from a Medicaid lien and increases the tax basis. If eligible for Medicaid, the government may try to recover the costs of care from their estate once they pass away. A life estate protects the home from being included in the Medicaid recovery process.

Although a life estate may seem appealing, some caveats come with them. There are three main unfavorable aspects. If you consider these reasons as dealbreakers, a life estate will not work for your personal estate goals.

Real Estate Related Challenges

Upon establishing a life estate, obstacles will arise if you plan to sell or mortgage property. The remainderman must agree if you decide to borrow or sell against the property. Nevertheless, this can be solved with a Testamentary Power of Appointment in the Deed. This allows life tenants to change who receives their property by directing its disposition in their will. While it won’t sell the property, it gives the life tenant more leverage in negotiation over the remainderman. An alternative to this is the Nominee Realty Trust, where one or more children act as Trustees for all so that decisions must be followed on a majority vote.

Another obstacle is that if the property is sold, the remainderman is entitled to a portion of the profits equal to what their interest is determined to be at that time. It is also difficult to remove or change a name once it is on a real estate deed.

Legal Responsibility of Remainderman

The problems of the remainderman become your problem as well. If this individual is in any legal predicament, such as being sued, getting a divorce, owing taxes, or filing for bankruptcy, the interest in the home is not protected. However, while claims can be made against the property, nobody can kick you out for the duration of your lifespan.

Medicaid and State Assistance Disqualification

Giving away an interest in the property could result in disqualification from Medicaid assistance, should you need long-term care within five years of the transfer. To add on, that state could file a claim against the income portion of the payments it has made on your behalf. In this case, at least the portion of the proceeds allocated to your child would be protected.

Irrevocable Trust

Irrevocable trust is a much better alternative to protect your property from creditors including Medicaid liens and nursing home costs. For more information on irrevocable trust, please contact the Law Office of Inna Fershteyn at (718) 333-2395.

3 Reasons to Create a NY Irrevocable Trust

Elder planning is an important and necessary step to take in order to make sure that your wishes for the future are carried out in the way you intended. In this process, a decision you will make is what type of trust is best for you. A trust allows a trustee to hold assets on behalf of beneficiaries.

One type of trust is an irrevocable trust, which cannot be changed or revoked after signing. Giving up control over your assets is a big commitment that must be carefully considered. Individuals who would benefit from an irrevocable trust typically fall into one of three categories.

3 Reasons to Create NY Irrevocable Trust

Minimize Estate Taxes

The primary benefit of an irrevocable trust is minimizing estate taxes. An irrevocable trust removes all incidents of ownership, meaning your assets are removed from your name. Assets in an irrevocable trust are no longer a part of your estate, which allows for tax efficiency.

Government Programs

Unfortunately, Medicare does not cover all costs that a senior citizen needs. Medicaid would pick up the tab for long-term care, but the program has strict need-based limitations. To qualify for the Medicaid income threshold, you could transfer your assets into an irrevocable trust. As long as you fund the trust at least five years before submitting your Medicaid application, the assets will not count in your qualification. After executing your irrevocable trust, a tax ID number is created which allows individuals qualifying for Medicaid to move their assets out of their name.

Protect Assets

To protect your assets from creditors, it usually requires your trust to be irrevocable. The Trustee and Beneficiary must be unrelated parties. For people who face lawsuits frequently, having “asset protection trusts” is important. An asset protection trust allows your hard earned money, property, etc. to be safe from creditors.

Living In a Property Transferred in an Irrevocable Trust

If you are living in a property transferred in an irrevocable trust, the creator of the trust will still play a role. For example, they are responsible for all household expenses but reserve the right to live in the house. This is known as a “life estate.” Your house becomes safe from creditors and estate taxes. However, if you change your mind about having an irrevocable trust, the grantor cannot make any changes without the permission of the beneficiary(ies). Moreover, having an irrevocable trust is a significant commitment that should not be taken lightly.

For more information on how to decide if an irrevocable trust is right for you, please contact the Law Office of Inna Fershteyn at (718) 333-2395.

The Importance of Creating an Asset Protection Plan

Asset protection planning is important for everyone, from all walks of life. If you have any money, investments, or property that you want to protect, if you own a business or are starting one, you need to make sure you have a solid plan in place to protect your personal assets. There are many different risks to your financial security, and your plan for asset protection needs to focus on the things that are most likely to impact your savings.

Why is Asset Protection Planning Important?

Asset protection planning will benefit you by keeping your property and money protected during your lifetime. It can also ensure that you can leave a legacy for your loved ones. There are many specific reasons why asset protection planning is important including:

The risk of incapacity: If you become incapacitated (ex: diagnosed with Alzheimer’s) you won’t be able to take care of your assets or manage your finances. Substantial losses could accrue unless you assign someone trusted and reliable to manage your assets. You should plan ahead and assure that you have chosen the right person to manage your assets in case you’re ever incapacitated. Incapacitation can be gradual (ie. dementia) but it can also happen suddenly (ie. falling comatose). It’s better to plan ahead and early; better be safe than sorry. A living trust and/or a power of attorney are useful legal tools that could be used to protect your assets in case of incapacity.
The risk of business losses: If you run your own business, you could face the risk of personal loss if your business goes bankrupt or if you or your business is sued. You don’t want your own personal home or other property to be lost because of business problems so you should explore legal methods to ensure your own assets are kept safe. Incorporating or forming a Limited Liability Company (LLC) could be an appropriate solution because, as long as you follow corporate rules, you will limit the risk of losing money invested in your business and limit the risk of losing personal assets.
The risk of going into a nursing home: As everyone ages, nursing homes are a common long-term care plan. However, the cost of a nursing home can be extremely costly and nursing homes are not covered by most types of insurance, including Medicare. Many people are forced to spend all of their money and even sell their property to pay for a nursing home if they need care. Once the money is spent, then Medicaid begins to pay. However, if you create an asset protection plan, you can prevent your property from being included when determining if you’re eligible for Medicaid so you can get nursing home costs covered without giving away or spending your assets.
Losses due to estate tax: When you pass away and leave your assets to heirs, estate taxes could be imposed which could significantly reduce the value of an inheritance. This is mainly a problem for people with larger estates. As of 2021, estate taxes are assessed only if an estate exceeds $5.93 million. But, people with farms or business assets that count as part of their estate could quickly reach this amount and an inheritance could be at risk if there isn’t enough money to pay the taxes on potentially inherited farmland or business assets.
The risks presented by your heirs: You should protect your money and property even after you are gone. You can structure an inheritance so it will not be lost or spent recklessly if heirs get divorced or go bankrupt. You can also opt for creating trusts like special needs trusts or spendthrift trusts to meet the specific needs of beneficiaries who will inherit your assets.

You work hard to amass money and property, and you deserve to protect what you have built so you can enjoy financial security in your old age and so you can make a difference by giving to people or causes you believe in after your death.

What Are Some Ways to Protect Assets?

1.) Trusts- Irrevocable, Revocable, Medicaid asset protection

Trusts are legal documents that establish legal transfers of your assets. There are many different types of trusts, each serving its own purpose. Three common types of trusts used to protect assets are irrevocable trusts, revocable trust, and Medicaid asset protection trust.

Irrevocable trusts are trusts that cannot be amended once created. Once it has been made, it cannot be changed or terminated without the permission of the grantor’s beneficiary. You also relinquish control of the trust’s assets and control is transferred to the trustee, the person who is legally responsible for managing the trust, and all changes/distributions are left to their judgment. There are many types of irrevocable trusts like asset protection trust, special needs trust, charitable trust, and Medicaid trust. The most common is asset protection trust because, in the event that a creditor files a lawsuit against you, the assets you transferred to the trust will no longer be considered yours.

Revocable trusts (aka living wills) are the opposite of irrevocable trusts. It lets you freely make changes to it up until you die. It allows you to keep control of your assets while you are alive as opposed to giving up control in an irrevocable trust. You can also use it to determine who will inherit your assets after you die. A revocable living trust is preferable to a will since it does not require probate and can be revoked or amended at any moment while you are still alive. Revocable living trusts actually provide little asset protection but are a great way to ensure that your estate avoids the probate procedure after you die.
Medicaid Asset Protection Trust sometimes called Pooled Income Trust, is a tool to protect your assets and allow people to qualify for Medicaid long-term care. A Medicaid Asset Protection Trust is a type of irrevocable trust so the transfer of assets into this kind of trust is considered a “gift.” To protect your assets, the trust has to be created 2.5 years before home care Medicaid is needed or 5 years before nursing home care is needed. This is because Medicaid inputs a look-back period when someone applies for Medicaid.

2.) LLCs

A limited liability company (LLC) is a legal status given to businesses. This establishment means the business will be its own legal entity and the owner(s) can be relieved of personal responsibility for their company’s debts or liabilities. An LLC will protect a business owner’s assets like bank accounts, properties, and cars in the event of a bankruptcy or other legal disputes. The owner’s assets cannot be viewed as the company’s assets.

3.) Retirement accounts

If you have a 401(k), you might want to consider moving some cash into it. Individual retirement accounts (IRAs) enjoy protection under federal law as long as they are ERISA-qualified (such as a 401(k)). ERISA-qualified generally means the retirement account is employer-sponsored so pensions would count too. Your IRA might have even more protection depending on your state’s laws. Retirement accounts are also useful to avoid the probate process so some of your possessions can directly pass to your heirs without being dictated in the will

How can an Elder Law Attorney help?

Asset protection planning is not just for wealthy people, it’s important for everyone. If you have any money, property, or investments that you want to protect, you should create a plan. Planning is also important when you are young, because you can protect more of your assets if you take action early.

To learn more about asset protection planning and discover what plan works best for you, contact the Law Office of Inna Fershteyn at (718)-333-2395 for highly qualified advice.

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