Frequently Asked Questions about Estate Planning
Estate planning can often seem overwhelming and confusing. To add some clarity to the process, our attorneys have compiled a list of our FAQs about estate planning in the space below. If you have further inquiries, do not hesitate to contact our office, and we will happily answer your questions.
Unfortunately, this is an all too common scenario for many. 70% of seniors will require long-term care in their lifetime. The average nursing home in New York City costs nearly $14,000 monthly, and full time home care can be just as expensive. Nearly 75% of singles and 50% of married people become destitute within a year of entering a nursing home. The good news is that with proper planning, this can be completely avoided. Using different trusting, gifting or other legal techniques, we help our clients avoid or drastically reduce long term care costs.
Using proper planning, almost anyone can become eligible for Medicaid. However, because Medicaid rules are complex, each case is unique and must be considered individually. Each person’s assets, marital status, and current physical health level must be evaluated. Then, after careful consideration, a plan can be put in place to qualify you for Medicaid.
Medicaid is available for those who need home care. However, Medicaid imposes asset and income limits to become eligible. However, with proper planning, it is possible to meet these limits and become eligible for Medicaid.
You will almost certainly not lose your home during the lifetimes of you or your spouse. However, Medicaid offices will often engage in estate recovery. This means that even if someone qualifies for Medicaid, the state will seek reimbursement from any asset they own after death. Thus, although it is possible to become Medicaid eligible while owning a home, that home will often be sold to pay back Medicaid. However, this can be avoided with proper planning, allowing you to qualify for Medicaid and pass your home on to your children.
This can be accomplished be executing properly drafted power of attorney and health care documents. A New York Statutory Financial Power of Attorney will allow you to designate an agent or agents to handle your financial affairs in the event of incapacity. A New York Statutory Health Care Power of Attorney will allow you to designate an agent or agents to make health care decisions in the event of incapacity. Additionally, Federal law bars doctors from discussing your health with anyone other than yourself without your consent. Thus, it is important to sign a HIPPA release form to allow your loved ones to receive your medical information in the event of incapacity. Finally, you may choose to sign a Living Will, which sets out your wishes on whether you would want to live on life support.
There are various government programs that provide benefits for special needs individuals, such as SSDI. However, there are strict eligibility requirements for these programs. It is important to carefully consider any assets that might be available for a special needs person, and that those assets are being used correctly.
The most common ways to ensure your assets will go to the persons of your choosing is by executing either a Will or a Trust. Either document will set forth your wishes and designate a person who will be responsible for following those wishes. For a Will, this person is known as an Executor; for a Trust, this person will be known as a Trustee. The significant difference between the two documents is that a Will must be probated in court, which can be costly and time consuming. A Trust, however, is a private document between you and your beneficiaries, and can save considerable money and hassle for your inheritors.
Probate is the process in which a Will is presented to the Surrogates Court. The Court will have to approve the Will as valid. At this point, you will be required to send out notice to any potential heirs, whether named in the Will or not. The court also provides the forum for any possible challenges to the Will. Depending on the complexity of the Will, Probate can take from several months to years.
In recent years, changes to both Federal and State Tax law have made it possible to avoid paying estate taxes even with larger estates. However, there are still several situations that require careful planning and opportunities to save significant amounts that would otherwise be paid in estate taxes. This requires a careful evaluation of your assets, and the use of a trust and/or gifting plan to save the maximum possible.
The fastest way for your assets to be distributed is through the use of Trusts. This avoids the delays of probate, which can be considerable. With a properly funded Trust, your assets can be available to pass immediately to the person of your choosing.
Probate costs vary with the size and complexity of the estate. Attorney’s fees will usually be determined as a percentage of the total value of the estate, ranging from 2-7%. Executor fees are statutorily set at 2.5-5% of the total value of the estate. These fees can be waived though, and often are if the Executor is a family member. Court fees will range from a few hundred dollars to over twelve hundred dollars depending on the value of the estate. It is important to note that total value of the estate is determined by the value of the estate before any debts are subtracted.
As detailed in the previous question, probate can be quite expensive. In contrast, a trust that is administered after death will usually cost nothing. There are no court fees, and generally no attorney or trustee fees. In very complicated estates, it might be necessary to pay a tax or legal professional for advice on administration, however, that cost would be necessary in any event.