Estate And Long Term Care Planning 2018: What You Need To Know

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The average life expectancy is higher today than in any other period in history. Improvements in health care and medical research are likely to increase life expectancy even more. At the same time, however, the rising costs of health care, along with the increase of debilitating diseases make the proper estate and elder law planning more imperative than ever. Therefore, it is important for each family to consider the following matters to address these rising concerns:

Tax Planning;Long Term Care Planning; and Succession Planning.

Tax Planning

Federal tax laws have changed as of December 20, 2017 and currently provide every citizen with a one-time unified credit that exempts $11.2 million per individual from the estate and gift tax. This law is scheduled to expire on December 31, 2025 at which time the $11.2 million will revert back to the original $5 million exemption amounts plus the relevant inflation amount at such time. Under current tax laws, these exemptions should remain in effect unless new legislation is passed by Congress.

New York State tax laws have changed as of April 1, 2014. New York State tax laws currently provide as follows: New York’s basic Estate Tax exclusion amount was increased from $1 million per decedent prior to April 1, 2014 to approximately $5.25 million per decedent in the year 2017. Thereafter, it will be indexed for inflation. Under the current tax laws, these exemptions should remain in effect unless new legislation is passed by New York.

The use of your individual unified credit can provide significant estate tax savings.

At the same time, it is important to note the value of maintaining assets as part of your taxable estate for estate tax purposes. In most cases, the value of an asset will be greater at the time of your death than when you first acquired the asset. If an asset is part of your taxable estate for estate tax purposes, then upon your death the asset will receive the “step up” in basis. This means that the cost basis of the asset will rise to the value of the asset as of the date of your death, as opposed to when you first acquired it.

The significance of the “step up” in basis is that it minimizes the beneficiary’s capital gains tax. For example, suppose you have a parent who purchased a property for $20,000.00 in 1975, and the parent left the property to you upon his/her death at which time the property is worth $1,000,000.00. For tax purposes, the value of the property would receive the “step up” in basis, meaning your cost basis for the property would be “stepped up” and become the market price of the property on the date of your parent’s death, or the $1,000,000.00. If you were going to sell the property after your parent’s death, any capital gains tax you would pay in the future will be based on the “stepped up” basis of $1,000,000.00, and not the original $20,000.00. If your parent transferred the property to you during his/her lifetime with the same values as above, when you go to sell the property your cost basis will be the original $20,000.00 purchase price causing you to be responsible for a significant capital gains tax.

There are methods to transfer assets to trusts to protect the assets for long term care purposes while still maintaining your assets as part of your taxable estate for estate tax purposes so that your beneficiaries can receive the benefit of the “step up” in basis.

Long Term Care Planning

There are two ways you can have long term care provided for you: (1) Long Term Care Insurance; and (2) Medicaid.

Long Term Care Insurance: Long Term Care Insurance is an insurance product that helps provide for the cost of long-term care which generally covers home care, assisted living, adult daycare, respite care, hospice care, nursing homes, etc. Premiums, however, may be expensive.

While long term care insurance offers more options and flexibility than most public assistance programs, the cost of this product is high. The cost of a long term care insurance policy can be based on your age when you purchase the policy, the amount that a policy will pay per day, the number of days or years a policy will pay, any optional benefits, etc. It is important to note that some people may not qualify for long term care insurance as most long term care insurance policies require medical underwriting. Therefore, while long term care insurance may be preferable, it is not applicable in most situations.

Medicaid: Medicaid is a means-tested program that is jointly funded by the state and federal governments and managed by the state, with each state currently having the right to determine who is eligible for its implementation of the program. States are not required to participate in the program, although all currently do. Accordingly, each state has its own Medicaid eligibility rules.

When determining eligibility for Medicaid in New York there are two “tests” that you must pass: (1) the Asset Test; and (2) the Income Test.

According to current rules in the year 2018, for a couple to be eligible to receive care, their total assets must be less than $22,200.00 and their income less than approximately $1,233.00 is protected. For an individual to receive care, his or her total assets must be less than $15,150.00 and his or her income less than approximately $842.00 is protected. There are strategies available to protect additional income if home care services are needed.

As there are exceptions to every rule, there are assets that are considered “exempt” from the Asset Test which means that they do not count towards the $22,000.00 or $15,150.00, respectively. Some exceptions include (but are not limited to) retirement accounts, Holocaust reparations, and your primary residence (assuming that it meets certain criteria). Those exempt assets can stay in your name and would not be a problem for Medicaid eligibility. However, there is one caveat. Medicaid may put a lien on a primary residence and/or put a claim against your Estate after your death, if you keep your primary residence in your name. To deal with this, most people transfer their residence before they apply for Medicaid.

There is currently a five year look-back period for Medicaid Nursing Home care and/or other institutional care. This means that if an individual needs Nursing Home care, the individual will need to provide all financial statements for the previous five years. Medicaid will “look back” for that period of five years to see whether the individual made any transfer of assets without fair compensation or consideration. If the individual has made transfers without fair compensation or consideration, then there is a “penalty period” during which time the individual will have to privately pay for his or her Nursing Home care until Medicaid will start to pay. The penalty period is calculated using a formula based on the Medicaid regional rate for Nursing Home care at the time the individual is otherwise eligible to receive care.

There is currently no look-back period for Medicaid home care (Community Medicaid).

There are ways for you to protect your assets while still becoming eligible for Medicaid. Some examples include (but are not limited to) outright transfers to loved ones and irrevocable trusts. These examples also help you avoid probate which will prevent Medicaid from making a claim against your estate after your death.

Succession Planning

Succession planning is ensuring that your assets pass in the manner you intend upon your death.             There are three ways your assets can pass upon your death: (1) Operation of Law; (2) Trust; and (3) Last Will and Testament.

Operation of Law: these are accounts with named beneficiaries, joint accounts with rights of survivorship, in trust for accounts, etc. If you have any of these kinds of accounts, then upon your death these assets will automatically pass to the named beneficiaries, to the joint owners, etc. by operation of law.

Trust: if there are assets held in a trust, the terms of the trust will dictate where the trust assets will be distributed upon your death.

Last Will and Testament (“Will”): your Will provides where all of the rest of your assets held in your individual name will pass upon your death. That means your Will does not apply to any assets held in a joint account, or an account with named beneficiaries; further, your Will does not apply to any assets held in a trust.


Some other things to consider include succession planning for a business. If you own a business, it provides for your family, your employees, and your clients. Business succession planning is critical for the business to continue in your absence. You may want the business to be run by one of your children, a business partner, or a key employee. Without a written plan, the funding to make it happen and careful grooming of the right successor, the business you spent most of your life building and running will likely disintegrate without you.

Succession planning for a family member and/or minor children is critical too. If you provide financial assistance or hands-on care for an aging parent, your spouse, or a child with special needs, you need to plan for a successor. Someone will need to manage money, write checks, and make financial decisions. You will also need a plan for this person’s care if they outlive you. Will another family member take over? Will the loved one need to move to a care facility? The more you do now, the smoother the transition in your absence.

These are just a few of the topics that are covered in a meeting with an elder law attorney. Of course there are additional scenarios and documents that must be discussed, including but not limited to Powers of Attorneys and Health Care Proxies.

We hope that this article has shed some light on the intricate and ever changing elder law arena. Because every situation and family is unique, it is a good idea to contact an elder law attorney to learn about the best plan for your family.

By: Keren G. Birnbaum, Esq. 
Korsinsky & Klein, LLP