Frequently Asked Questions:
1. What is a Will?
In simplest terms, a Will is a document in which a person expresses his intent or wish as to how his assets are to be distributed after his or her death. Each state has specific formal requirements as to how Wills should be executed and witnessed.
By not having a Will, you do not direct who inherits your property. You also do not control who actually handles (administers) your estate. All of this is controlled by NY law and not the person who passed away.
2. What is a Trust?
A Trust is basically a legal entity that is formed by one known as the Grantor, managed by a one (or more) known as Trustee(s) and it hold assets for a person or group of people known as the Beneficiaries. Trusts falls into two categories such as Revocable Trust and Irrevocable Trust. Different trusts are used for different purposes some of which are: probate avoidance, asset protection and tax minimization. Often Trusts are employed in Medicaid planning and asset protection of person receiving or planning to receive government benefits, such as Medicaid.
3. What is estate probate/administration?
If one passes away with a Will, that Will among other documents needs to be filed with the court for the court to ascertain the validity of the Will. Once the court deems the Will valid and the Fiduciary (Executor) is appointed, the Will is deemed “Probated.” The Executor that is appointed, will receive authority from the court to collect the assets of the decedent, pay the decedent’s debts, funeral bills, administration expenses and taxes (if any) and then distribute the net estate (assets) to the beneficiaries as designated in the Will.
If one passes away without having a Will, a Fiduciary (Administrator) is still appointed by the court. There is a statutory priority as to whom is allowed to become the Administrator. Once the Administrator is appointed, his or her job is similar to the executor above, except the beneficiaries of the estate of a person who dies without a Will are set by NY Law. For example, when a person passes away and leaves behind a spouse and children, his/her estate (after exempt property) passes as follows: first $50,000 to the spouse, then the balance passes half to the spouse and half to the children. The surviving spouse does not receive the whole estate of her deceased spouse – a common misconception.
4. What are estate taxes?
In simplest terms, estate tax is a tax on the transfer of assets from a decedent to his/her beneficiaries. Estate tax applies on all assets transferred, regardless of the type of assets. We have both a federal estate tax and a New York State estate tax. The good news is that there are various deductions that are allowed and assets passing to a surviving spouse (who is a US Citizen, at least for federal estate tax purposes) and to charities are not taxable. Furthermore, the federal estate tax exclusion mount is currently over $5.3 million and the NY state estate tax exclusion is currently over $2,000,000. Therefore, modest estates (under $2m) do not have to worry about estate taxes. Large estates do need to consider them since the maximum federal estate tax rate is 40% and NY maximum rate is 16%.
The estate tax is due within 9 months after one passes away. IRS and NYS only accepts money, not property, so if the estate is illiquid (only real property) that can be an issue. The responsible party to pay the tax is the appointed Fiduciary (Executor/Administrator) from the funds of the estate. If the Fiduciary does not pay, the responsibility falls on the beneficiaries.
5. What are advances directives?
Advanced directives are usually comprised of these three documents: Power of Attorney, Health Care Proxy and a Living Will. A Power of Attorney is a document which allows one to designate another individual to make financial decisions on their behalf (for example: investment decisions and bill payments) if and when one needs assistance with those tasks. The Health Care Proxy allows one to designate another individual to make medical decisions on their behalf, but only when he/she is unable to make decisions him/herself. A Living Will is a document that provides instructions to the health care agent regarding one’s wishes for the withholding of medical treatment. It is a document that states what medical treatments should and should not be performed in various medical conditions when one cannot make his/her own medical decisions, such as when one is in a coma or in vegetative state. Important thing to know is that when one does not have these documents in place and he/she becomes incompetent, the only recourse is to have a guardian appointed by the court. A procedure that can be lengthy and very expensive.
6. How does one obtain Medicaid?
Basically, Medicaid is a health insurance program that may also be used to receive homecare aid and nursing home care. It is a federal program that is administered by the states. It is meant for “poor people” and depending on your age and other criteria, different eligibility requirements apply. For seniors over the age of 65 or for individuals who are blind and/or disabled, there is also a resource test. Therefore, once someone turns 65, a good Medicaid plan involves a transfer of assets, usually to a trust. To qualify for Medicaid, we perform various transactions/transfers to bring the assets and income of an individual to below required levers – all legal and authorized by NY Social Services Law.
1. What is a Will?
In simplest terms, a Will is a document in which a person expresses his intent or wish as to how his assets are to be distributed after his or her death. Each state has specific formal requirements as to how Wills should be executed and witnessed.
By not having a Will, you do not direct who inherits your property. You also do not control who actually handles (administers) your estate. All of this is controlled by NY law and not the person who passed away.
2. What is a Trust?
A Trust is basically a legal entity that is formed by one known as the Grantor, managed by a one (or more) known as Trustee(s) and it hold assets for a person or group of people known as the Beneficiaries. Trusts falls into two categories such as Revocable Trust and Irrevocable Trust. Different trusts are used for different purposes some of which are: probate avoidance, asset protection and tax minimization. Often Trusts are employed in Medicaid planning and asset protection of person receiving or planning to receive government benefits, such as Medicaid.
3. What is estate probate/administration?
If one passes away with a Will, that Will among other documents needs to be filed with the court for the court to ascertain the validity of the Will. Once the court deems the Will valid and the Fiduciary (Executor) is appointed, the Will is deemed “Probated.” The Executor that is appointed, will receive authority from the court to collect the assets of the decedent, pay the decedent’s debts, funeral bills, administration expenses and taxes (if any) and then distribute the net estate (assets) to the beneficiaries as designated in the Will.
If one passes away without having a Will, a Fiduciary (Administrator) is still appointed by the court. There is a statutory priority as to whom is allowed to become the Administrator. Once the Administrator is appointed, his or her job is similar to the executor above, except the beneficiaries of the estate of a person who dies without a Will are set by NY Law. For example, when a person passes away and leaves behind a spouse and children, his/her estate (after exempt property) passes as follows: first $50,000 to the spouse, then the balance passes half to the spouse and half to the children. The surviving spouse does not receive the whole estate of her deceased spouse – a common misconception.
4. What are estate taxes?
In simplest terms, estate tax is a tax on the transfer of assets from a decedent to his/her beneficiaries. Estate tax applies on all assets transferred, regardless of the type of assets. We have both a federal estate tax and a New York State estate tax. The good news is that there are various deductions that are allowed and assets passing to a surviving spouse (who is a US Citizen, at least for federal estate tax purposes) and to charities are not taxable. Furthermore, the federal estate tax exclusion mount is currently over $5.3 million and the NY state estate tax exclusion is currently over $2,000,000. Therefore, modest estates (under $2m) do not have to worry about estate taxes. Large estates do need to consider them since the maximum federal estate tax rate is 40% and NY maximum rate is 16%.
The estate tax is due within 9 months after one passes away. IRS and NYS only accepts money, not property, so if the estate is illiquid (only real property) that can be an issue. The responsible party to pay the tax is the appointed Fiduciary (Executor/Administrator) from the funds of the estate. If the Fiduciary does not pay, the responsibility falls on the beneficiaries.
5. What are advances directives?
Advanced directives are usually comprised of these three documents: Power of Attorney, Health Care Proxy and a Living Will. A Power of Attorney is a document which allows one to designate another individual to make financial decisions on their behalf (for example: investment decisions and bill payments) if and when one needs assistance with those tasks. The Health Care Proxy allows one to designate another individual to make medical decisions on their behalf, but only when he/she is unable to make decisions him/herself. A Living Will is a document that provides instructions to the health care agent regarding one’s wishes for the withholding of medical treatment. It is a document that states what medical treatments should and should not be performed in various medical conditions when one cannot make his/her own medical decisions, such as when one is in a coma or in vegetative state. Important thing to know is that when one does not have these documents in place and he/she becomes incompetent, the only recourse is to have a guardian appointed by the court. A procedure that can be lengthy and very expensive.
6. How does one obtain Medicaid?
Basically, Medicaid is a health insurance program that may also be used to receive homecare aid and nursing home care. It is a federal program that is administered by the states. It is meant for “poor people” and depending on your age and other criteria, different eligibility requirements apply. For seniors over the age of 65 or for individuals who are blind and/or disabled, there is also a resource test. Therefore, once someone turns 65, a good Medicaid plan involves a transfer of assets, usually to a trust. To qualify for Medicaid, we perform various transactions/transfers to bring the assets and income of an individual to below required levers – all legal and authorized by NY Social Services Law.