2013-02-01 / Columnists

Spotlight On Elderlaw

Commentary By Nancy J. Brady, RN, Esq. And Linda Faith Marshak, Esq.

As the calendar turned to 2013, Congress reached a compromise and passed legislation to avert the “Fiscal Cliff.” This development has provided some clarity and stability (for the time being at least) for those that want to enact an estate plan that meets their personal goals. The most common of these goals is to ensure that one’s assets can be passed on to future generations, and remain within the family. As will be explained further below, no matter how large your estate, there is planning you should take advantage of under the current state of the law, so as to maximize protection of your assets going forward.

As you may have recently heard in media reports, if Congress had not acted to avert the “Fiscal Cliff”, the federal estate tax exemption was scheduled to drop on January 1, 2013 from $5.12 million to a mere $1 million per individual. However, Congress did reach a deal that made permanent the federal estate tax, with an exemption of $5.25 million for 2013 per individual, and a tax rate of 40 percent for amounts over the exemption. Therefore, if a person dies with less than that amount in his or her estate (this includes real estate, personal property and financial holdings such as bank accounts, annuities, life insurance, etc.), there will be no federal estate tax due.

Despite Congress providing for the federal estate tax reprieve for estates under $5.25 million, the New York State estate tax exemption remains only $1 million. New York imposes an estate tax on any decedent who dies a resident of New York, along with others who own property in New York. Estates above $1 million can be taxed up to a rate of 16 percent by the state. Payment of the tax is due within nine months of the date of death.

If your holdings are above, or close to, the $1 million threshold, it is advisable that you consult with an elder law / estate planning attorney so he or she can best advise you on what methods to employ to ensure that when you pass away, your assets pass to your intended beneficiaries, minimizing estate taxes to the extent possible. This goal may be accomplished through trust planning, with different types of trusts being appropriate for different family circumstances, lifetime gift giving, and other methods. Please note that with planning, married couples can pass up to twice the exemption amount ($2 million at the state level for New Yorkers; up to $10.5 million at the federal level). Therefore, it is obvious that, for married couples, proper planning to be sure each spouse’s exemption is fully utilized is key to result in maximum tax savings.

Please note, even if your total assets do not approach the $1 million thresh- old, there is still significant advanced planning that can be useful to your life circumstances. A consultation with an elder law / estate planning attorney will ensure that you have the proper forms in place should you become incapacitated (such as a Health Care Proxy, Living Will, or Power of Attorney), that your assets will pass on according to your wishes upon your death (utilizing Last Will and Testament and in certain circumstances

Trusts) and, with proper planning, that those assets should pass without a costly probate proceeding. Finally, you and your attorney could also formulate a long term care plan to protect your assets should you need long term medical assistance in the future.

Brady & Marshak, LLP, Attorneys at Law can be reached at 1-718-945- 777 or 1-718-738-8500.

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