What’s New in Estate Planning?

Estate, financial and medical planning have significantly changed over the past few years. The various options available today are often overwhelming. Not only have the laws changed significantly, but there have also been revolutionary changes in medical technology, family relationships and public awareness. With proper planning, you can preserve your home and retain control of your medical and financial decision-making.

The advances in medical technology over the past two decades have allowed many people to live longer, healthier lives on their own. But these advances have also raised ethical issues as to when does life actually end. Medical technology over the next decade will facilitate treatment for diseases before they occur and sophisticated drug delivery systems which target specific parts of the body.

The “traditional family” is becoming a thing of the past. Divorces, remarriages, unmarried couples and blended families are becoming the norm. Wives are no longer at home to care for elderly relatives. Traditional types of estate planning do not work for nontraditional families. Prenuptial agreements, living trusts, testamentary trusts and property ownership agreements are necessary.

Public awareness of estate planning through seminars, magazines, books, newspaper articles, television, radio and personal acquaintances is greater than ever.

There are many significant recent changes in estate planning that you should be aware of: Medicaid, Supplemental Needs/Pay Back Trusts, Prudent Investor Rule, Living Wills, Health Care Proxies, Do-Not-Resuscitate Orders, Reverse Mortgages, Elective Share, Intestacy, Guardianship, The Limited Liability Company and Powers of Attorney.

  • Medicaid – The New York State Department of Health issued an Administrative Directive on July 20, 2006, advising Social Services districts of the nursing facility services Medicaid eligibility provisions of the Deficit Reduction Act of 2005 (DRA).
  • Supplemental Needs/Pay Back Trusts – permit a parent to provide for a developmentally disabled or mentally ill child without jeopardizing his or her eligibility for medicaid. An inheritance or a court award will usually render a child ineligible for medicaid. However, these trust assets are not considered a resource and he need not use up his inheritance before re-qualifying. The trust must indicate the creator’s intent to supplement, not supplant or diminish government benefits. Nothing can be paid directly to the beneficiary.
  • Prudent Investor Rule – Trustees must formulate an overall investment strategy that takes into account general economic conditions, inflation, the beneficiary’s needs, the duration of the trust and the tax impact. They usually must diversify their investments and can delegate their duties to outside experts.
  • Living Wills – are written declarations instructing a patient’s family and doctor about life-prolonging medical procedures when his condition is terminal and there is no chance of medical recovery. Under constitutional and common law, patients have the right to refuse medical treatment.
    A living will gives a person the opportunity to express his wishes in advance, since he may not be able to make them known when it becomes necessary to do so.
    Life-prolonging procedures include the use of machines for those who cannot breathe on their own, performing operations or prescribing antibiotics that cannot realistically increase the chances for recovery, starting the heart mechanically when it has stopped beating or feeding by tube. It can be directed that the only treatment rendered be the relief of pain.
    In a recent court case, a nursing home which ignored a living will and refused to remove a feeding tube until it was ordered to do so by the court, could not collect $14,000 in medical bills which accrued during the court battle.
  • Health Care Proxies – recognize a person’s right to appoint a health care agent that he trusts to decide about medical treatment in the event that he becomes unable to decide personally.
    Unless specified otherwise, the agent will have the same authority that the patient would have in deciding about treatment. The authority encompasses the right to forego treatment or to consent for needed treatment.
    The agent’s authority begins only when a physician determines that the patient has lost the capacity to decide about treatment.

  • Do-Not-Resuscitate Orders – are a direction not to revive a patient if his breathing or heartbeat stops, e.g. mouth-to-mouth resuscitation, chest compression, electric shock, open heart massage or injecting a heart with medication. In a recent court case, a patient’s estate was allowed to sue a hospital that saved his life, in spite of a Do-Not-Resuscitate Order, for negligence and battery. The patient suffered a stroke after resuscitation, but lived for two more years. His estate sued for his medical bills and the pain and suffering resulting from the stroke.
  • Reverse Mortgages – allow homeowners to tap into the equity of their homes through either a lump sum payment, monthly installment payments or a line of credit. The life of the mortgage can be for a specific term (e.g. 10 years) or for life.
    The New York Social Services Law exempts the proceeds of the reverse mortgage from being considered for Medicaid, public assistance, food stamps, SSI, HEAP and VA benefits.
  • Elective Share – You can disinherit your children, but you cannot disinherit your spouse, unless he or she signs a prenuptial or antenuptial agreement. The elective share of a spouse has been increased to $50,000 or one-third of the net estate, whichever is greater.
  • Intestacy – If you die without a Will, your spouse will receive $50,000 and one-half of the balance. The remainder of the estate will go to your children.
  • Guardianship – replaces the conservatorship and committee. A guardian will be given only such authority as is necessary to satisfy the specific personal and financial needs of the individual. The court must determine that the individual is incapacitated and that he cannot understand and appreciate the nature and consequences of his inabilities and, therefore, is likely to suffer harm.
  • The Limited Liability Company (LLC) – is a hybrid business entity which combines the best features of partnerships and corporations. LLCs will be commonly used for real estate ventures and family partnerships because of their tax advantages. LLCs can also be used for Medicaid planning and the ownership of life insurance policies.
    Family partnerships have been safe harbor for purposes of shifting income and allocating wealth among family members. Transfers can be made to family members without adverse estate, gift and income tax consequences and loss of control.
  • Power of Attorney – A revised form is required for immediate powers of attorney and powers of attorney to take effect in the future. Each delegated power must be affirmatively granted by initialing it on the form. The principal may now permit the attorney-in-fact to delegate his powers. The principal may specifically authorize the agent to make gifts. The power of attorney continues to be effective until third parties receive actual knowledge of its revocation.
    To qualify as a residence, the property must contain facilities for cooking, sleeping and sanitation. A residence may be a house trailer, mobile home, houseboat, condominium unit, single family house or stock owned by a tenant-stockholder in a cooperative housing corporation.
    The deduction is not allowed if the marital or charitable deduction is claimed. If only part of the property was used as a principal residence, the estate may deduct only the value of the property attributable to the principal residence. For example, if a part of the residence was used for income producing purposes, such as rental of a room or use as a home office, the value attributable to that part of the property would not qualify for the deduction.
    In light of this significant change in estate tax law, homeowners should review their wills and estate plans with their attorneys.
  • This has been a brief overview of the significant changes in estate planning. The law is constantly changing and is subject to various interpretations. You should act only on the advice of an attorney who has reviewed your particular situation.