Other Planning Techniques

GIFTS

Gifts can be a method of asset preservation when you are in a crisis and sometimes can be advisable for estate tax planning. However, there are many disadvantages to making gifts which should be carefully reviewed:

(1) Transferring Assets can Create Feelings of Discomfort and Loss of Control for the Parents

(2) Gift Tax Consequences of Transfers

(3) Transfers Can Increase the Children's Income Tax Liability

(4) Transfer of Family Home Could Have Tax Consequences

(5) Transferring Assets Could Affect Grandchildren's Financial Aid for College

(6) Child Could Become Involved in a Divorce, File for Bankruptcy, Be Sued, or Predecease a Parent

(7) Child Could Become Ill and Need Long-term Care

Transferring assets to another person can be appropriate short-range emergency planning under certain circumstances. The Koldin Law Center, P.C. is available to review the advisability of making gifts as compared to other asset preservation options based on your situation.

LIFE ESTATES

As a form of estate planning, you may decide to transfer your home or other real property to your children and reserve a life estate to yourself.

The retained life estate has a value and is considered to be an asset for Medicaid eligibility purposes.

Therefore, the treatment of the life estate at the time of the Medicaid application is critical. There are important rules involving life estates which should be reviewed.

When you transfer assets to another person, there is a Medicaid transfer penalty period of ineligibility. When you reserve a life estate, the transfer penalty can be shortened.

There are important issues to review when deciding whether to transfer property and whether to reserve a life estate:

• Right to Use Property For Your Life
  
  
• Medicaid Transfer Penalty
  
  
• Life Estate Value for Medicaid Eligibility Rules
  
  
• Medicaid Treatment of Income Producing Property
  
  
• Medicaid Estate Recovery
  
  
• Capital Gains Tax Consequences
  
  
• Gift and Estate Tax Consequences

There are many advantages and disadvantages to transferring property to other people with the reservation of a life estate.

JOINT ASSETS

JOINT ACCOUNTS AVOID PROBATE

Joint bank accounts (or other joint assets) are often created for convenience and to avoid probate. Normally, either joint owner can make deposits and withdrawals to the account. Joint accounts are typically treated by state law as being survivorship accounts. This means that when one person dies, the other joint owner becomes the sole owner of the account.

MEDICAID TREATMENT OF JOINT ASSETS IS VERY COMPLEX

Making your assets joint with another person will not necessarily protect you in the event of a catastrophic illness. In New York State, a joint savings account is presumed to belong entirely to the Medicaid applicant.

There are different rules for joint bank accounts, joint securities, and jointly owned real estate. These rules have changed over time and some Medicaid agencies have misinterpreted the law and improperly counted joint stock brokerage accounts as belonging entirely to the parent. In an Administrative Hearing in the Fall of 2001, the Koldin Law Center successfully argued that a joint parent/child brokerage account is owned one-half by the parent and one-half by the child thereby saving the child a substantial sum of money. The Medicaid agency involved had counted the entire joint brokerage account as belonging to the parent for the purpose of Medicaid eligibility.

If you have joint accounts or joint assets, the rules are complex and a comprehensive review of your legal options is recommended.

LONG TERM CARE INSURANCE

Long Term Care Insurance is an important estate planning option for protecting your life savings in the event of a catastrophic illness.

Long Term Care Insurance does not in itself provide comprehensive estate planning. In conjunction with such insurance, you should also consider having the following legal documents:

• Living Trust to Avoid Probate
  
  
• Power of Attorney
  
  
• Health Care Proxy
  
  
• Will

There are many insurance companies selling Long Term Care Policies. There are many options and considerations which must be reviewed:

Two Basic Questions:

1. Can I Afford Such a Policy Based on My Income / Resources?

2. What Type of Coverage Should I Purchase?

Once You Have Determined That You Wish to Purchase a Policy, Then The Following Options on The Type of Coverage Must Be Reviewed:

• Daily Nursing Home Benefit Amount
  
  
• Daily Home Care Benefit Amount
  
  
• Daily Home Care Services Covered
  
  
• Activities of Daily Living Criteria
  
  
• Deductibles
  
  
• Lifetime Monetary Coverage Caps
  
  
• Cap on Policy Coverage Duration
  
  
• New York State Partnership Plan
  
  
• Cost of Living Increases

If you are already ill, Long Term Care Insurance will normally not be an option. You should review your immediate crisis asset preservation options in the Medicaid section of this Web Site.

If you cannot afford the premiums for a Long Term Care Policy, you may want to review the option of establishing an Irrevocable Trust.

It is also possible to purchase a Long Term Care Insurance Policy to protect you during the Medicaid transfer penalty period after making gifts or establishing an Irrevocable Trust.