Steps to Prevent a Contested Will

Emotions can run high at the death of a family member. If a family member is unhappy with the amount they received (or didn’t receive) under a Will, a Will contest may ensue. 

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Generally, only a person’s closest heirs, or “distributees” are able to contest a Will. Will contests can drag out for years, keeping all the beneficiaries from getting what they are entitled to. It may be impossible to prevent heirs from fighting over your Will entirely, but there are steps you can take to try to minimize squabbles and ensure your intentions are carried out.

Your Will can be contested if an heir believes you did not have the requisite mental capacity to execute the Will, someone exerted undue influence over you, someone committed fraud, or the Will was not executed properly.

The following are some steps that may make a will contest less likely to succeed:

  • Make sure your Will is properly executed. The best way to do this is to have an experienced elder law or estate planning attorney assist you in drafting and executing the will. Wills need to be signed and witnessed, usually by two independent witnesses.
  • Explain your decision. If family members understand the reasoning behind the decisions in your Will, they may be less likely to contest the Will. It is a good idea to talk to family members at the time you draft the will and explain why someone is getting left out of the Will or getting a reduced share. If you don’t discuss it in person, state the reason in the Will. You may also want to include a letter with the Will.
  • Use a no-contest clause. One of the most effective ways of preventing a challenge to your Will is to include a no-contest clause (also called an “in terrorem clause”) in the will. This will only work if you are willing to leave something of value to the potentially disgruntled family member. A no-contest clause provides that if an heir challenges the Will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
  • Prove competency. One common way of challenging a Will is to argue that the deceased family member was not mentally competent at the time he or she signed the Will. You can try to avoid this by making sure the attorney drafting the Will tests you for competency. This could involve seeing a doctor or answering a series of questions.
  • Remove the appearance of undue influence. Another common method of challenging a Will is to argue that someone exerted undue influence over the deceased family member. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your Will in drafting your will. Family members should not be present when you discuss the Will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive you to the attorney’s office.

Bear in mind that some of these strategies may not be advisable in certain states and certain situations. Feel free to talk to me about the best strategy for you.

(For more information on Wills click here.)

Regards,

Brian A. Raphan, Esq.

Top 10 Elder Law decisions of 2016

Below, in chronological order, is ElderLawAnswers’ annual roundup of the top 10 elder law decisions for the year just ended, as measured by the number of “unique page views” of our summary of the case.

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1. Medicaid Applicant’s Irrevocable Trust Is an Available Resource Because Trustee Can Make Distributions

An Alabama appeals court rules that a Medicaid applicant’s special needs trust is an available resource because the trustee had discretion to make payments under the trust. Alabama Medicaid Agency v. Hardy (Ala. Civ. App., No. 2140565, Jan. 29, 2016). To read the full summary, click here.

2. Trust Is an Available Asset Because Trustees Have Discretion to Make Distributions

A New York appeals court rules that a Medicaid applicant’s trust is an available asset because the trustees have discretion to make distributions to her. In the Matter of Frances Flannery v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. TP 15-01033, Feb. 11, 2016). To read the full summary, click here.

3. Medicaid Applicant Who Transferred Assets in Exchange for Promissory Note May Proceed with Suit Against State

A U.S. district court holds that a Medicaid applicant who was denied Medicaid benefits after transferring assets to her children in exchange for a promissory note may proceed with her claim against the state because Medicaid law confers a private right of action and the Eleventh Amendment does not bar the claim. Ansley v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-14-1383-D, March 9, 2016). To read the full summary, click here.

4. Mass. Court Bridles at Allegations in Request for Reconsideration in Irrevocable Trust Case

In a strongly worded response to a Medicaid applicant’s request for reconsideration of an unsuccessful appeal involving an irrevocable trust, a Massachusetts trial court strikes the applicant’s pleadings after it takes great exception to the tone of the argument.  Daley v. Sudders (Mass.Super.Ct., No.15-CV-0188-D, March 28, 2016). To read the full summary, click here.

5. Caretaker Exception Denied Because Child Did Not Provide Continuous Care

A New Jersey appeals court determines that the caretaker child exception does not apply to a Medicaid applicant who transferred her house to her daughter because the daughter did not provide continuous care for the two years before the Medicaid applicant entered a nursing home. M.K. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-0790-14T3, May 13, 2016). To read the full summary, click here.

6. State Can Place Lien on Medicaid Recipient’s Life Estate After Recipient Dies

An Ohio appeals court rules that a deceased Medicaid recipient’s life estate does not extinguish at death for the purposes of Medicaid estate recovery, so the state may place a lien on the property. Phillips v. McCarthy (Ohio Ct. App., 12th Dist., No. CA2015-08-01, May 16, 2016). To read the full summary, click here.

7. Attorney Liable to Third-Party Beneficiary of Will for Legal Malpractice

Virginia’s highest court rules that an intended third-party beneficiary of a will may sue the attorney who drafted the will for legal malpractice. Thorsen v. Richmond Society for the Prevention of Cruelty to Animals (Va., No. 150528, June 2, 2016). To read the full summary, click here.

8. Nursing Home’s Fraudulent Transfer Claim Against Resident’s Sons Can Move Forward

A U.S. district court rules that a nursing home can proceed with its case against the sons of a resident who transferred the resident’s funds to themselves because the fraudulent transfer claim survived the resident’s death. Kindred Nursing Centers East, LLC v. Estate of Barbara Nyce (U.S. Dist. Ct., D. Vt., No. 5:16-cv-73, June 21, 2016). To read the full summary, click here.

9. Irrevocable Trust Is Available Asset Because Medicaid Applicant Retained Some Control

New Hampshire’s highest court rules that a Medicaid applicant’s irrevocable trust is an available asset even though the applicant was not a beneficiary of the trust because the applicant retained a degree of discretionary authority over the trust assets. Petition of Estate of Thea Braiterman (N.H., No. 2015-0395, July 12, 2016). To read the full summary, click here.

10. NY Court Rules that  Spouse’s Refusal to Contribute to Care Creates Implied Contract to Repay Benefits

A New York trial court enters judgment against a woman who refused to contribute to her spouse’s nursing home expenses, finding that because she had adequate resources to do so, an implied contract was created between her and the state entitling the state to repayment of Medicaid benefits it paid on the spouse’s behalf. Banks v. Gonzalez (N.Y. Sup. Ct., Pt. 5, No. 452318/15, Aug. 8, 2016). To read the full summary, click here.

Feel Free to contact me to see how any of these decisions may affect your personal situation.

-Brian A. Raphan, Esq. 

Should My Parents Give Me Their Home?

Many people wonder if it is a good idea to give their home to their children. While it is possible to do this, giving away a house can have major tax consequences, among other results.

When you give anyone property valued at more than $14,000 (in 2016) in any one year, you have to file a gift tax form.  Also, under current law you can gift a total of $5.45 million (in 2016) over your lifetime without incurring a gift tax. If your parents’ residence is worth less than this amount, they likely won’t have to pay any gift taxes, but they will still have to file a gift tax form

While your parents may not have to pay taxes on the gift, if you sell the house right away, you may be facing steep taxes. The reason is that when property is given away, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose your parents bought the house years ago for $150,000 and it is now worth $350,000. If they give their house to you, the tax basis will be $150,000. If you sell the house, you will have to pay capital gains taxes on $200,000 — the difference between $150,000 and the selling price. The only way for you to avoid the taxes is for you to live in the house for at least two years before selling it. In that case, you can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.

Inherited property does not face the same taxes as gifted property. If you were to inherit the property, the property’s tax basis would be “stepped up,” which means the basis would be the current value of the property. However, the home will remain in your parents’ estate, which may have estate tax consequences.

Beyond the tax consequences, gifting a house to you can affect your parents’ eligibility for Medicaid coverage of long-term care.  There are other options for giving a house to children, including putting it in a trust or selling it to them. Before your parents give away their home, they should consult with your elder law attorney, who can advise them on the best method for passing on their home.

To read more articles about gifting from Brian A. Raphan, P.C. click here.

 

Life Events That May Have Tax Consequences for Seniors and Retirees

Many significant life events often come with a related tax consequence. Here are some issues that may be facing seniors and retirees with links to more information on their tax impact.

elder law nycAs listed by the IRS

Planning for Retirement?

Mutual Fund Distributions

Job Loss or Starting a New Career or Job

Persons with Disabilities

Decedents

  • Publication 559, Survivors, Executors and Administrators
  • Form 56, Notice Concerning Fiduciary Relationship
  • Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer
  • Form 4810, Request For Prompt Assessment Under Internal Revenue Code Section 6501(d)

Divorce or Separations

Marriage

Disaster

Moving?

Did You Receive a Notice?

Filing or Paying Late – Information Taxpayers Should Know!

Many people today need more time to prepare their federal tax return. They may want to consider an  for time to file. However, extension of time to file a return does not grant any extension of time to pay a tax liability.

Additional Assistance

News Releases and Tax Tips

Regards,

Brian

The Law Offices of Brian A. Raphan, P.C.

www.RaphanLaw.com

To Collect Debts, Nursing Homes Are Seizing Control Over Patients

The need to protect your assets is always at hand. Planning for long-term care with an elder law attorney can help protect your assets for the in home spouse and heirs. Medicaid Planning or Life Care Planning helps to ensure that you or your loved one get the best possible long-term care and the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home. The following article brings this issue to light.

Article via The New York Times: 

Photo credit: Piotr Redlinski for The New York Times

To Collect Debts, Nursing Homes Are Seizing Control Over Patients.

Lillian Palermo tried to prepare for the worst possibilities of aging. An insurance executive with a Ph.D. in psychology and a love of ballroom dancing, she arranged for her power of attorney and health care proxy to go to her husband, Dino, eight years her junior, if she became incapacitated. And in her 80s, she did.

Mr. Palermo, who was the lead singer in a Midtown nightclub in the 1960s when her elegant tango first caught his eye, now regularly rolls his wife’s wheelchair to the piano at the Catholic nursing home in Manhattan where she ended up in 2010 as dementia, falls and surgical complications took their toll. He sings her favorite songs, feeds her home-cooked Italian food, and pays a private aide to be there when he cannot.

Three Reasons Why Joint Accounts May Be a Poor Estate Plan

Many people, especially seniors, see joint ownership of investment and bank accounts as a cheap and easy way to avoid probate since joint property passes automatically to the joint owner at death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia. These are all true benefits of joint ownership, but three potential drawbacks exist as well:

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  1. Risk. Joint owners of accounts have complete access and the ability to use the funds for their own purposes. Many elder law attorneys have seen children who are caring for their parents take money in payment without first making sure the amount is accepted by all the children. In addition, the funds are available to the creditors of all joint owners and could be considered as belonging to all joint owners should they apply for public benefits or financial aid.
  2. Inequity. If a senior has one or more children on certain accounts, but not all children, at her death some children may end up inheriting more than the others. While the senior may expect that all of the children will share equally, and often they do in such circumstances, there’s no guarantee. People with several children can maintain accounts with each, but they will have to constantly work to make sure the accounts are all at the same level, and there are no guarantees that this constant attention will work, especially if funds need to be drawn down to pay for care.
  3. The Unexpected. A system based on joint accounts can really fail if a child passes away before the parent. Then it may be necessary to seek conservatorship to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child’s family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, the daughter-in-law was left high and dry despite having devoted the prior six years to caring for her husband’s mother.

Joint accounts do work well in two situations. First, when a senior has just one child and wants everything to go to him or her, joint accounts can be a simple way to provide for succession and asset management. It has some of the risks described above, but for many clients the risks are outweighed by the convenience of joint accounts.

Second, it can be useful to put one or more children on one’s checking account to pay customary bills and to have access to funds in the event of incapacity or death. Since these working accounts usually do not consist of the bulk of a client’s estate, the risks listed above are relatively minor.

For the rest of a senior’s assets, willstrusts and durable powers of attorney are much better planning tools. They do not put the senior’s assets at risk. They provide that the estate will be distributed as the senior wishes without constantly rejiggering account values or in the event of a child’s incapacity or death. And they provide for asset management in the event of the senior’s incapacity.

They provide that the estate will be distributed as the senior wishes without constantly rejiggering account values or in the event of a child’s incapacity or death. And they provide for asset management in the event of the senior’s incapacity.  To download a FREE GUIDE TO ESTATE PLANNING click here.

For more information about this article feel free to email me at info@raphanlaw.com

Regards, Brian

How Gifts Can Affect Medicaid Eligibility

We’ve all heard that it’s better to give than to receive, but if you think you might someday want to apply for Medicaid long-term care benefits, you need to be careful because giving away money or property can interfere with your eligibility. 

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Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid, you will be ineligible for a period of time (called a transfer penalty), depending on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $14,000 a year (in 2014) without having to pay a gift tax, Medicaid law still treats that gift as a transfer.

Any transfer that you make, however innocent, will come under scrutiny. For example, Medicaid does not have an exception for gifts to charities. If you give money to a charity, it could affect your Medicaid eligibility down the road. Similarly, gifts for holidays, weddings, birthdays, and graduations can all cause a transfer penalty. If you buy something for a friend or relative, this could also result in a transfer penalty.

Spending a lot of cash all at once or over time could prompt the state to request documentation showing how the money was spent. If you don’t have documentation showing that you received fair market value in return for a transferred asset, you could be subject to a transfer penalty.

While most transfers are penalized, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

  • your spouse
  • your child who is blind or permanently disabled
  • a trust for the sole benefit of anyone under age 65 who is permanently disabled

In addition, you may transfer your home to the following individuals (as well as to those listed above):

  • your child who is under age 21
  • your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay at home during that time
  • a sibling who already has an equity interest in the house and who lived there for at least a year before you moved to a nursing home

Before giving away assets or property, check with your elder law attorney to ensure that it won’t affect your Medicaid eligibility.

For more information on Medicaid’s transfer rules, click here.

State Can Recover From Entire Value of Property in Which Medicaid Recipient Had Life Estate

MEDICAID RECOVERY

The Idaho Supreme Court rules that the state may recover Medicaid benefits from the entire value of a property that a Medicaid recipient transferred to his daughter while retaining a life estate for himself. In re Estate of Peterson (Idaho, No. 40615, Aug. 13, 2014).

Melvin Peterson deeded property to his daughter, retaining a life estate for himself. He then applied for Medicaid benefits. When he died, Mr. Peterson had received a total of $171,386.94 in Medicaid benefits.

The state filed a claim against the estate to recover the Medicaid benefits it paid for Mr. Peterson’s care. Under Idaho law, the state may recover any property that passes outside of probate, including any property that that the Medicaid recipient had a legal interest in that passes to a survivor through a life estate or “other arrangement.” The trial court ruled that the life estate remainder interest, but not the retained life estate, was an estate asset, and the appeals court affirmed. The estate appealed, arguing Mr. Peterson had no interest in the life estate at his death, so it could not be subject to recovery.

The Idaho Supreme Court affirms in part holding that both the life estate and the remainder interest were estate assets subject to Medicaid recovery. The court determines that Mr. Peterson’s life estate interest in the property was transferred to his daughter when he died, and under state law “when assets of a Medicaid recipient are conveyed to a survivor, heir or assign by the termination of a ‘life estate,’ the assets remain part of the recipient’s ‘estate'” for purposes of Medicaid recovery. In addition, the court rules that the remainder interest Mr. Peterson’s daughter received is also part of Mr. Peterson’s estate as an “other arrangement.”

For the full text of this decision, go to: http://www.isc.idaho.gov/opinions/40615.pdf

The above article is an example of why you need to understand the full spectrum of Medicaid Planning options. For more information on how we can help you protect your assets for feel free to call me at 212-268-8200 or email medicaid@RaphanLaw.com

Regards, Brian

www.RaphanLaw.com

Why Irrevocable Trusts vs outright Gifting

People often wonder about the value of using irrevocable trusts in Medicaid planning. Certainly gifting of assets can be done outright, not involving an irrevocable trust. Outright gifts have the advantages of being simple to do with minimal costs involved.

Brian Raphan, P.C.

So, why complicate things with a trust? Why not just keep the planning as simple and inexpensive as possible?

The short answer is that gift transaction costs are only part of what needs to be considered. Many important benefits that can result from gifting in trust are forfeited by outright gifting. These benefits are what give value to using irrevocable trusts in Medicaid planning.

Key benefits of gifting in trust are:

  1. -Asset protection from future creditors of beneficiaries. Preservation of the exclusion of capital gain upon sale of the Settlors’ principal residence (the Settlor is the person making the trust).
  2. -Preservation of step-up of basis upon death of the trust Settlors o Ability to select whether the Settlors or the beneficiaries of the trust will be taxable as to trust income.
  3. -Ability to design who will receive the net distributable income generated in the trust.
  4. -Ability to make assets in the trust non-countable in regard to the beneficiaries’ eligibility for means-based governmental benefits, such as Medicaid and Supplemental Security Income (SSI).
  5. -Ability to specify certain terms and incentives for beneficiaries’ use of trust assets.
  6. -Ability to decide (through the settlors’ other estate planning documents) which beneficiaries will receive what share, if any, of remaining trust assets after the settlers die.
  7. -Ability to determine who will receive any trust assets after the deaths of the initial beneficiaries.
  8. -Possible avoidance of need to file a federal gift tax return due to asset transfer to the trust.

If you have questions about any of the above items, please call me, Brian A. Raphan, Esq at 212-268-8200. There are additional measures available and your individual situation should be assessed before making any financial decision.

 AVVO PRO

Trusts Attorney – New York, NY.  AVVO Legal Guide Contribution

www.RaphanLaw.com  Medicaid@RaphanLaw.com

New: Visiting Lawyer Services for Elder New Yorkers

Visiting Lawyer Services

Why should the elderly that aren’t as mobile as they used to be, or live in an assisted living facility or are even at home wheelchair bound, not have easy access to the same professional legal care as others? Well, they should. And now they do.

Visiting Lawyer Services (VLS) is now available to New Yorkers that are homebound or unable to travel to a lawyer. With VLS our lawyers come to you. There’s no longer a need to coordinate aides, transfers or transportation as you won’t need it The same practice areas of elder law firm are the same available with VLS.  Most of the services that we handle in our office can be handled at your place. For example; signing of your Will, Living Will, Health Care Proxy, revising a Will, Estate Planning, Medicaid Planning or setting up a Trust. If witnesses are needed for signing documents we also arrange them to be with us as well. Other family members or loved ones may be present as well.

Visiting Lawyer Services

You remain in the comfort of your home, apartment or nursing facility and we’ll bring all the necessary documents. This has been very helpful for elder couples–as is often the case with elders, one spouse may be healthy and agile yet the other quite limited.

‘Not being burdened by travel time or hindered by physical ability also allows seniors to focus better on their legal needs. We’ve taken our hands-on approach, compassion and legal prowess to the next level’

For more information on how our Visiting Lawyer Services can help, feel free to call me at 212-268-8200. – Brian

http://www.VisitingLawyerServices.com

info@raphanlaw.com

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