On March 30, 2011, New York’s Final Budget Legislation amended Section 369 of the Social Services Law.

The Department of Social Services has a claim against the estate of any Medicaid recipient in the amount of Medicaid assistance issued. The value of the deceased recipient’s estate is used to repay the Medicaid benefits. This new amendment expands the list of assets that are considered to be in an individual’s “estate.” After the death of a Medicaid recipient, the Department of Social Services will be seeking to collect recovery on assets that were not previously permitted.

Prior to March 30, 2011, (more…)

Tags: estate assets, medicaid, new york final budget legislation, section 369, social services law

Issues to Consider When Evaluating the Need for a New or Revised Will / Estate Planning Documents

As spring rolls around and we get ready for warmer weather, our thoughts turn to spring cleaning. Take this time to clean up your current estate planning documents and determine if they need to be revised. It is suggested that your estate planning documents be reviewed every five years to make sure they still comply with your wishes. If any of the categories listed below apply to you, it may be a good idea to embrace the season and make the necessary changes to your Last Will and Testament, Living Will/Health Care Proxy or Power of Attorney documents. (more…)

Tags: credit shelter trust, disclaimer trust, guardianship, health care proxy, last will and testament, living will, power of attorney, supplemental needs trust, will

HoganWillig’s Estate Department represented two siblings in a hotly contested and litigated estate. The siblings were alleged out-of-wedlock children of the decedent. Our position was that the decedent had a long-standing relationship with our clients’ mother, even though he was married with marital children. Although the decedent had not completed a genetic blood test during his lifetime, we were able to have genetic testing completed of the known marital children against the DNA of the out-of-wedlock children to show evidence of a genetic link between all of the children. (more…)

Tags: EPTL, estate, Estates Powers and Trusts Law, paternity

In March of this year, Governor Paterson signed into law the Family Health Care Decisions Act (FHCDA). The law allows family members to make medical decisions, including decisions about withholding or ending life-sustaining treatment, on behalf of individuals who have lost their ability to make such decisions and have not prepared advance health care directives (such as a Health Care Proxy or Living Will). (more…)

Tags: Family Health Care Decisions Act, FHCDA, health care proxy, living wills

As a follow up to our notice of last week, it would appear that no deal has been reached for the extension of the current Federal Estate Tax.  Instead, the Federal Estate Tax expired 12/31/09 and we will move into 2010 with the Federal Estate Tax repeal in place.  

Our sources anticipate that the legislature will seek a retroactive fix early next year to address this issue. As we have previously mentioned, the possibility of imposing an estate tax retroactively will create innumerable administrative and planning headaches going forward, especially if the law is not passed for any number of months into 2010. 

            As we move into the New Year, we will continue to keep you apprised of the status of this issue.  However, in the meantime, the current law states that there will be no Federal Estate Tax beginning tomorrow. 

As a reminder, please keep in mind that the current legislation and 2010 repeal does not mean that there won’t be any tax consequences for those who inherit assets or receive gifts.  Please refer to our previous notice for more information on this issue:

http://hoganwilligblog.com/2009/12/no-deal-likely-on-federal-estate-tax-extension/

Please feel free to contact our office if you would like to discuss these matters in further detail.

Tags: Federal estate tax extension

While the House recently passed a bill to reinstate the estate tax in 2010, last week the Senate rejected a measure to temporarily extend it.

As we previously announced, the House of Representatives voted to permanently extend the present 45% estate tax rate, and the $3.5 million (per person) exclusion from estate taxes.

However, arguments over the tax rate and the exclusion amount developed in the Senate. Democrats in general were ready to approve the House version, while some Republicans preferred a lower tax rate of 35% and a higher exclusion of $5 million. Therefore, as a result of a deficit of 60 supporting votes, the Senate did not pass an estate tax extension.

If the Senate adjourns without getting an extension before January 1st, Congressional leaders have said they plan to enact a retroactive fix early next year. Generally, when a law is passed, it becomes effective on the date of passage. However, this law would be an exception. In order to avoid a complete repeal of the estate tax in 2010, this law is expected to contain a provision making it retroactive to Jan. 1, 2010.

Even when setting aside the issue of the constitutionality of a retroactive tax, the possibility of imposing an estate tax retroactively would create administrative and planning headaches for financial planners, accountants, lawyers and heirs of estates.

However, given that there are not 60 votes yet in the Senate to support a temporary extension of the estate tax, it is not clear whether there will be a sufficient number of votes next year either. We will certainly keep you up to date as this matter develops. However, in the meantime, you should keep in mind that the current legislation and 2010 repeal does not mean that there won’t be any tax consequences for those who inherit assets or receive gifts.

The good news is, if Congress doesn’t act, there will be no federal estate taxes for 2010. Businesses, stocks, and other assets can be passed on to heirs without being hit with tax rates as high as 45%.

The bad news is that there are still state estate taxes to consider. Further, there will be only a limited step-up in basis. Under current federal estate tax laws, the assets of the deceased get a step-up in basis to the fair market value at date of death (or 6 months later). The benefits to the step up in basis are realized when heirs sell assets with little to no capital gains tax consequences. In 2010, if the estate tax is repealed, the step-up in basis is limited to $1.3 million for the overall estate, plus $3 million for assets transferred to a surviving spouse. According to a Congressional Joint Committee on Taxation, it is estimated that losing the step up in basis would affect a projected 71,000 estates in 2010.

Additionally, there will also be changes in gift tax rates, which are 45 percent in 2009 but will be reduced to 35 percent if estate taxes lapse in 2010. Finally, and most importantly, if Congress doesn’t take any action at all, in 2011, the former law regarding estate tax levels is reinstated, meaning that all estates over $1 million will be taxed, with federal tax rates up to 55%.

Again, we will certainly keep you up to date on these issues as we move forward into the New Year. However, you should also consider the various other benefits to estate planning beyond the strategy to minimize or eliminate estate tax. Other issues such as asset protection, dysfunctional family situations, disabled beneficiaries, disposition of retirements assets and business succession issues can be just as important, if not more so, than the traditional transfer tax issues.

Please feel free to contact our office if you would like to discuss these matters in further detail.

Tags: assets, businesses, Estate Planning, Estate Tax, estate tax rate, house of representatives, senate, stocks

House Cancels Estate Tax Repeal, Extends Current Tax Rate

Last week, the House voted 225 to 220 to permanently extend the estate and gift tax in its current form. This means that the first $3.5 million of an individual’s gross estate – and the first $1 million of gifts made during an individual’s lifetime - would be exempt from tax. The highest rate applied to the taxable portion of an estate would remain at 45%.

At first blush, it appears that no decision has been made concerning the potential repeal of the step up in tax cost basis. However, we are continuing to monitor this matter and we will continue to update you as we receive more information.

You may be aware that the step up in tax cost basis currently minimizes the potential for capital gains taxes. This occurs whether or not an estate is subject to federal estate tax. Stocks and other appreciating assets can benefit from the step up in tax cost basis, with the exception of stocks and other assets inside of IRAs or similar qualified retirement accounts. As you can see, almost all estates benefit in some way from the step up in tax cost basis benefit the tax code bestows. Taking away the step up in tax cost basis could result in one of the largest tax increases in estate tax law history, and would likely affect a majority of all estates that have appreciated assets or property, no matter their size. Again, we will keep you apprised of any changes.

If you have any questions or concerns about the extension or about step up in tax cost basis, please contact estate planning attorney Linda Grear at 716-636-7600.

Tags: Estate Tax, gross estate, IRA, IRAs, stocks, Tax Rate