1. In earlier entries, we warned of the changing tax landscape and the possibility that a new administration will bring a new set of tax laws and regulations. One aspect of the Internal Revenue Code particularly ripe for change is the high level of exemption amounts applicable to estates and gifts.

The Internal Revenue Service announced today the estate and gift tax exemption limits for 2021: the estate and gift tax exemption will be $11.7 million per individual, up from $11.58 million in 2020. That means an individual could give or bequeath $11.7 million to heirs and pay no federal estate or gift tax, while a married couple could shield $23.4 million. (The exclusion amount  for annual gifts remains at $15,000, or $30,000 for married couples under certain conditions.)

For high net worth individuals, this presents an opportunity. If these exemption amounts are reduced next year, any gifts made now will most probably be secure and free from IRS recoupment if and when new and much lower limits are enacted.  If you are in such a category, then it is worthwhile to consider some planning moves now.

See linked article from The Journal of Accountancy for this and additional income-tax related changes:

2021 IRS Tax Tables and Inflation Adjustments

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  1. Also, the Treasury Department just announced inflation-adjusted figures for retirement account savings for 2021. For the new year, one can save for retirement in tax-advantaged accounts the inflation-adjusted amount of $58,000. For more information, seek out the advice of your counsel or  accountant. We at Jaspan Schlesinger are fortunate to have as one of our colleague Victor M. Finmann, a nationally-recognized authority on such esoteric topics.

See linked article from Forbes  for this and additional pension plan and retirement savings accounts:

Forbes.com 2021 IRS Changes

 

‘Tis the Season to be scary. Halloween was grafted onto the ancient Celtic pagan holiday of Samhain. There are said to be places and times when the barrier between this world and that “other world” is very thin. In fact, the Irish have a word the “thin places,” Caol Áit. The holiday of Samhain is one of those times when ghosts and goblins are said to walk among us more freely and with greater insolence. What is the difference between these things that go bump in the night and timeshares? Unlike the ghosts and goblins, a timeshare can be a horror that is always with us.

For many, the burden of increasing annual maintenance costs and the diminishing satisfaction with their timeshares has resulted in a considerable number of attorneys who represent owners trying to get out of their timeshare contracts.  While some timeshare companies will release you from your obligation – for a price, others will prove less cooperative.

Most timeshares are like real property – they can be sold, given away in your Will, or pass by intestacy to your distributees.

The day may come when Mom or Dad says to child, “I’m leaving you my timeshare in my Will.”  In keeping with the season, is this a trick or a treat?  The prospect of owning a timeshare may be more of a horror than a delight.  The location is unpalatable, the process of swapping for other locations is a headache (if the option is even available), and those expenses keep rising.

From an estate planning perspective, there is no obligation to accept a gift, bequest, devise, or even a distribution from an estate of a person who died without a Will. Disclaiming the interest in the timeshare is possible, but the timeshare may remain an estate obligation that burdens the other distributees or residuary beneficiaries. Therefore, a season’s warning to parents out there: keep in mind the risks and benefits of your timeshares and their impact on your loved one when you pass from this world to . . . .

Some reference guides:

Timeshares and Vacation Plans, from the United States Federal Trade Commission:

Time Shares Consumer Guide

Before You Buy a Timeshare, New York Office of the Attorney General:

Real Estate Finance Bureau Timeshare updates

Vacation Timesharing, The Better Business Bureau of New York:

BBB Timeshares

Michael P. Ryan is chair of the firm’s trusts and estates and estate litigation practice groups. He counsels individuals, families, and owners of closely held businesses regarding estate and succession planning, charitable giving and tax matters. He also represents clients in contested estate proceedings, such as probate contests, administration proceedings, discovery and turnover proceedings, accounting proceedings, proceedings to suspend and remove fiduciaries, and guardianship proceedings.  Mike can be reached at mryan@jaspanllp.com or (516) 393-8253

 

 

For very wealthy individuals and families, the strong possibility of a change of administrations in Washington portends massive changes in tax policy and it is not too soon to consider the possible changes and to plan for them.

For example, on the estate tax side of the ledger, the current estate and gift  tax exemption thresholds, which in 2020 are $11,580,000 per individual and $23,160,000 per married couple, are most likely to be drastically reduced. Transfers made before the end of the year will qualify for these high exemption levels and when the exemption amounts are reduced transfers made now in anticipation of those changes will in all likelihood remain effective and the Internal Revenue Service will not seek to “claw back” the savings achieved in this calendar year (at least that is their current position as stated in regulations issued in 2019). Hence, there may be great savings to be had if one acts now rather than later.

On the income tax side, it may be wise to realize long-term capital gains and to take those gains in the 2020 tax year rather than wait until 2021. The tax rate for such gains will probably be higher in the coming year, depending of course on the outcome of the election.

There is a wealth of information available for further study on the internet, but the best source of advice is to seek the individualized guidance of a trusted and experienced estate planning attorney. In the meantime, see the link below for an introduction to the shape of things to come. As one steeped in years of high school Latin classes, the old maxim comes to mind: “praemonitus, praemunitus,” or, “forewarned is forearmed.”

Financial Planning.com: Voices Prep Clients’ Tax Estates Now For A Potential Democratic Sweep

A cousin is a solicitor in the U.K. He describes a Will as a ‘crisis purchase.’ In other words, it is decision frequently delayed until the end. Hence, our title is taken from Shakespeare (another Will) and his play Richard II when the king realizes he is close to his royal and violent end. Then thoughts of mortality and executors force themselves upon his thoughts. And ours.

There are many misunderstandings about your choice of executor or executors or any such fiduciary such as a trustee.  Here is an article from MarketWatch that discusses the topic in an amusing “Dear Abby” sort of way:

Market Watch “My Mother Refuses To Appoint an Executor”

The article only scratches the surface of the issues involved, but it is useful for an entertaining read and commentary. Some selections from the article:

“My husband and I are not wealthy, but we do all right . . . Except for the fact that this is my mother’s wish, I couldn’t care less about her money. Call me corny, but I’d rather have the good memories.”

– OK, you’re corny. This quote is sure to bring a smile to the practitioners reading this. As we used to say in the  Brooklyn of my youth, the times of stickball and kick the can, “Yeah sure.”

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“My mom doesn’t have an executor, impartial or otherwise. She wants my sister and me to work out the details after her death.”

– Choosing an executor or executors is much more than an honor. It entails work and liability. When the relationship between multiple fiduciaries is troubled the usual outcome is discord and litigation. Whether Mom chooses one or both of her children to serve as executor(s), or she chooses a third party (who is not required to accept the nomination), the choice is hers. It’s a choice that should be made carefully and with an eye on ability and fairness of the person designated.

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“Should I suggest (again) my mom get an impartial executor?”

– The choice of an executor is a personal choice of the person executing the Will. While the testator may discuss her plans with her children, the children (especially the good child) should be careful not to provide ammunition to her sibling (the bad child) should there be litigation over the probate of Mom’s Will.

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“Your mother can name a professional fiduciary . . . an executor (if there is a will) — and that would help eliminate or at the very least minimize conflict after your mother’s gone…”

– True. But just because you nominate a professional fiduciary, like a bank or trust company doesn’t mean the nominee has to accept the nomination unless the assets are sufficiently large to entice them to do so. In New York, the court will always appoint a fiduciary and as a last resort there is even a public official to step in and act as a fiduciary of a decedent’s estate should no one come forward to act. It is called the Public Administrator.

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“I feel like this is my mother’s way of forcing me to have a relationship with my sister, using the inheritance as bait. It’s like a guillotine hanging over my neck.”

– A manipulative parent? Whoever heard of such a thing? To quote Wallace Shawn in The Princess Bride, “Inconceivable!” And to quote Mandy Patinkin’s response, “You keep using that word. I do not think it means what you think it means.” Issues like these are above the pay grade of any of us and Sigmund Freud is no longer around to help.

 

On Friday evening, September 18, 2020, along with countless millions of others, I was stunned to learn of the untimely passing of my legal hero, The Honorable Ruth Bader Ginsburg. Her death is a profound loss as our country suffers from intense division among party lines, unprecedented fires in the west, and the loss of 200,000 souls, so far, in a pandemic the likes of which have not been seen in more than 100 years. Because she survived bouts of cancer and other serious ailments for so many years, as well as the loss of her husband and greatest advocate, Martin D. Ginsburg, Esq., a decade before, I thought of Justice Ginsburg as invincible, almost immortal. But, there it was, the great “R.B.G.” had died.

As I compose this blog entry, I know there are many others writing blogs, articles, essays, tributes, and books about the life and legal career of this great woman. What can I say that has not or will not be said about Justice Ginsburg? We all know that she was a fierce advocate, a brilliant legal strategist and writer, and a champion for those who needed one and those who still do. By advocating for women, she helped to achieve equality for both woman and men. By advocating for the underprivileged, she helped to elevate all of us. By being a voice of reason, she helped foster civil relationships with the other Justices of our Supreme Court despite their ideological stripes, thereby leading them, at least on occasion, to join her ideological bent. But, there is so much left to be done. And, it is imperative now in the political climate raging in America, a country I love, that her good work be remembered and continued.

I concluded that perhaps the best way to honor Justice Ginsburg is with a quote of hers. But, which of the vast number of her words, all of which are worth living by? I have chosen one I think epitomizes Justice Ginsburg, the great woman she was: “If you have a caring life partner, you help the other person when that person needs it. I had a life partner who thought my work was as important as his, and I think that made all the difference for me.” To me, those words apply not only to life partners, but to all relationships among people. Do not undervalue others because in so doing you undervalue yourself. Rest in peace, Justice Ginsburg.

In the coming weeks we will be posting about elder abuse and the role of estate planning and guardianship proceedings in addressing a growing crisis.  As an introduction to the novel legal and medical issues posed by living longer lives, we link to two public presentations that you might find interesting. The first is from the American Bar Association and examines the many legal issues presented by elder abuse. The second is from a Harvard Law School seminar on the way science is expanding our definition of what constitutes “undue influence” in estate planning for the very elderly. For the estate planning attorneys out there, the concept of “undue influence” is changing and science will compel us to challenge the conventional wisdom of what constitutes undue influence with the very elderly.

The American Bar Association, Elder Abuse. July 7, 2020:

The American Bar Association, Elder Abuse

Our Aging Brains: Decision-making, Fraud, and Undue Influence

From the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School:

Harvard Law School, Our Aging Brains

From the Harvard seminar: “With over 70 million Baby Boomers retiring, elder financial exploitation has been labeled the “Crime of the 21st Century.” In this half-day event, we explored the neuroscience, psychology, and legal doctrine of financial decision-making in older adults. How does the aging brain make financial decisions, and when is it uniquely susceptible? How can courts best use science to improve their adjudication of disputes over “competency”, “capacity”, and “undue influence”? Is novel neuroimaging evidence of dementia ready for courtroom use?”

We began our Trusts and Estates blogging with an essay by a member of the Firm and colleague in our Trusts and Estates Department, Sally Donahue, on “The Human Touch.” One of the reasons we began our blogging was not just to be just another trusts and estates blog droning on and on about the latest case law but to give the reader a perspective on various general topics of trusts and estates that were readily understandable. With this entry, we expand our concept of the human touch. We introduce subjects that are of personal interest to our attorneys that might be “off topic” but that are, we hope, entertaining, informative, and indicative of whom we are as persons at Jaspan Schlesinger LLP. Today’s entry is along those lines.

Saturday, August 29, was the one hundredth birthday of an immortal genius of American classical music (as Dr. Billy Taylor referred to Jazz).  Charlie Parker was born in Kansas City in 1920.  Ask any listener of America’s one great contribution to world culture, Jazz, to name the top ten figures in Jazz history and all would agree to include Charlie Parker along with Louis Armstrong, Duke Ellington, Count Basie, Ella Fitzgerald, John Coltrane, et al.

Along with pioneers like Dizzy Gillespie, Bud Powell, and Max Roach, Thelonious Monk, Charlie revolutionized music with the bebop movement when the Big Band era was floundering in the late 1930’s and early 1940’s. The big bands were certainly not “floundering” for any lack of creativity or musical excellence on their part or any loss of America’s fondness for dancing.  But due to the enormous costs of keeping a big band together and traveling, and an experimental restlessness on the part of many young artists, the music moved away from the dance rhythms of the big bands to the small ensembles that emphasized improvisation, experimentation with musical forms, and technical virtuosity. Charlie Parker was there at the beginning, a prime mover of a new art form who overcame criticism and misunderstanding from the music establishment as Albert Einstein did 50 years before from the science establishment.

Yes, today’s established giants were once revolutionaries in their own rights. Charlie Parker  persisted in his work and changed music forever. He believed that music should be “freer” more open to improvisation and experimentation with tempos, harmonies, etc. Hence, the lightning-fast runs of bebop. While hardly dance music, bebop opened the scene to a huge variety of new modes of musical expression from the cool Jazz movement to modal Jazz to hard bop to free Jazz to fusion Jazz.  It all began with Charlie Parker (and his great collaborators). The tradition lives on in a world-wide explosion of musical talent and (until the Covid 19 crisis) a wealth of musical venues in New York to make the City once again the capital of the music world. Alas, the return of the small Jazz clubs is a long way off, but one can follow the great work done by a modern master, Wynton Marsalis and his Jazz at Lincoln Center organization. Their continuing concerts are readily available on a variety of internet platforms and should be supported.

Charlie Parker’s death at 34 was a loss to the wide world of music comparable with the untimely deaths of other immortals like George Gershwin (37),  Wolfgang Amadeus Mozart (35), Felix Mendelssohn (38), John Coltrane (40), Billie Holiday (44), Frederic Chopin (39).

The first and final word on Jazz always belongs rightfully to the one and only Louis Armstrong who said, “If you have to ask what Jazz is, you’ll never know.”

See our most recent post about important changes to Medicaid rules regarding eligibility for home care services.

The implementation of the thirty (30) month look-back period for Medicaid home care eligibility was originally scheduled to be effective as of October 1, 2020. Reportedly, it has just been postponed to January 1, 2021. It is somewhat unclear, but the thirty (30) month look-back may still be applied to transfers made on or after October 1, 2020, even though the implementation date was changed to January 1, 2021. Needless to say, the situation remains fluid, if not confused, but one thing is clear (at the moment). The State needs to raise revenue and is intent on this change being made. This is subject to confirmation, so stay tuned.

The new “take away” from this?  Again, even if you have more time to plan, you should consult an attorney with experience in estate planning and elder care planning for advice now.

As our population ages, worries about caring for our parents (not to mention ourselves), grow in importance. On October 1, 2020, New York will impose new restrictions on the eligibility for community Medicaid. This is a major change in the law. Before October 1, eligibility for such home care services was not subject to restrictions on the amount of property or assets a person had. Soon there will be restrictions in place.

Background

Community Medicaid (care at home) and Institutional (or Chronic) Medicaid (care in a nursing home) are two different things for New Yorkers. Home care services were always relatively free of financial limits and restrictions while nursing home care was not.

The law provides several opportunities for Medicaid planning for government-subsidized nursing home care even for people who have (or had – the distinction is important)  significant assets. Medicaid is a program originally designed to assist low-income seniors with limited assets to afford health care and long-term care, but with proper planning a wider range of people can become eligible for its benefits.

In order to qualify for Medicaid nursing home assistance, a person’s possessions may not exceed certain maximum income and assets levels. Reducing one’s assets in the proper manner is the key to making a person eligible for Medicaid nursing home benefits. However, a person generally cannot transfer all his or her assets to a family member and then the next day apply for Medicaid nursing home assistance. Generally, if a senior applies for Medicaid nursing home benefits and is deemed to be otherwise eligible at that moment but is found to have gifted assets within five years from the application then that senior will be disqualified from receiving benefits for a certain number of months. This is referred to as the Medicaid penalty period.

The rules were very different for Community Medicaid (care at home). Until now.

In the past, New Yorkers were generally entitled to a variety of home-based assistance under the State’s Medicaid rules even without showing financial need.

Here is the news you should know now. Starting on October 1, 2020, most asset transfers you make for up to thirty (30) months before application for Medicaid home care benefits will be counted for eligibility for various Medicaid home services. This is a major reduction in benefits.

The new thirty (30) look-back period will be phased in between October 1, 2020, and April 2023, so the impact of the new law will be softened.

The law applies to home health care services, private duty nursing services, personal care services and assisted living program services. In order to obtain any home care services, an applicant and their spouse will need eventually to submit records of financial information for the thirty (30) months before the application.  (Spousal Refusal rights remains intact, along with Parental Refusal, and there are transfers exempt from the new law as they may be for nursing home expenses but a discussion of these techniques is beyond the scope of this article.)

The “take away” from this?  Consult an attorney with experience in estate planning and elder care planning for advice now.

A Power of Attorney is a very important and useful estate planning tool. But it is also a very dangerous one. A Will is effective only upon your death and then only when approved by the Surrogate’s Court. But a power of attorney is effective upon proper completion. It enables the person to whom it is given to act on one’s behalf in matters both personal and financial.  Think of the consequences of that statement. If accepted by your bank, the person who is given the Power of Attorney (called variously an “agent” or an “attorney-in-fact” [although not necessarily an actual attorney]) can withdraw cash from your bank account as you could. He or she could also execute a deed on your behalf transferring your ownership in real property to another. In other words, your agent will have a lot of control over your finances, and it is crucial that you trust him or her completely.

Why would you ever give someone such broad powers over your property? Because you trust that person and the law requires that person to act in your best interests, just as you would do on your own. It is also a great convenience when you are unable to do a relevant transaction yourself  because you are away or incapable of acting on your own behalf. It is this latter reason that makes the Power of Attorney a powerful estate planning tool. Let’s suppose you become incapable of acting on your own behalf due to illness or similar incapacity. A so-called “durable Power of Attorney” allows your agent to act on your behalf. The alternative in the case of incapacity might be a formal guardianship proceeding in the Supreme Court to appoint a guardian for you and that proceeding can be costly and time-consuming.

There are several types of powers of attorney: the limited power of attorney (one limited in scope or time or both); the durable power of attorney (one that continues for an unspecified time even if you become incapacitated); and the springing power of attorney (one that becomes effective only upon the happening of a specified event, for example when you become incapacitated, however that may be defined). All Powers of Attorney end at your death, or when you revoke them. It is safe to say that the durable Power of Attorney is the one that is most commonly used for estate planning purposes.

The abuses of a Power of Attorney could fill volumes. In fact, they do “fill volumes” –  in the case law of New York. A few examples may be illustrative.

  1. A very wealthy philanthropist and heiress was forced to live well below her means despite her great wealth, while her son and attorney (who jointly held her power of attorney) enriched themselves and looted her estate.
  2. Standard military practice requires mobilized soldiers to be supplied with Wills and Powers of Attorney by their unit JAG officer. Your writer can now confess that when doing the such legal and family assistance for mobilized members of the New York Army National Guard during Operations Desert Shield and Desert Storm he violated military doctrine when he refused to allow a few soldiers to sign Powers of Attorney over to recently acquired significant others. The danger was too great that when that soldier returned from Kuwait his or her significant other would have disappeared and so would the balance of that soldier’s bank account.

Here are New York’s statutory areas over which a Power of Attorney may be used (the list is not exhaustive):

– real estate transactions;

– chattel and goods transactions;

– bond, share, and commodity transactions;

– banking transactions;

– business operating transactions;

– insurance transactions;

– estate transactions;

– claims and litigation;

– personal and family maintenance, including gifts;

– benefits from governmental programs or civil or military service;

– health care billing and payment matters; records, reports, and statements;

– retirement benefit transactions; and

– tax matters.

Some points to ponder when consulting with your estate planning attorney:

– do you trust the person you are giving such powers;

– consider appointing more than one agent who must act together;

– check with your financial institutions. All attorneys have horror stories of perfectly valid Powers of Attorney, ones done on statutory approved forms being rejected by banks because they did not meet the banks’ requirements. May a bank do this? Technically no, but it is common practice nevertheless;

Some pointers:

– make your intentions clear to both your attorney and to your new attorney-in-fact;

– understand each power you choose to give your attorney-in-fact; and

– consider some sort of oversight over the activities of your attorney-in-fact.