Powerless Power of Attorney

The Power of Attorney (“POA”) and Statutory Gifts Rider (“SGR”) are two of the most important documents drafted by an elder law attorney.  The absence of or deficiencies in these documents increases the likelihood of the need to commence a costly guardianship proceeding to be able to implement many common elder law planning techniques necessary to preserve assets.  While New York law provides for a statutory short form POA, the powers included in the statutory form are, unfortunately, insufficient when it comes to common elder law and estate planning techniques.  Even where the POA is prepared by an attorney, if that attorney is not an elder law or estate planning attorney, it likely that the form has not been properly drafted to include powers necessary to allow for the implementation of proper estate and Medicaid planning techniques.   

The Purpose of the POA and SGR

In 2009 and again in 2010, the New York State legislature entirely revamped the statute that governs the POA.  While the revisions are too numerous to discuss in this article, the most recognizable changes were the appearance of the POA form and the addition of the SGR.

The purpose of a POA is to give another person (an “agent”) the authority to handle your financial and property affairs.  The POA is effective immediately upon signing.  The agent does not have to wait until you become incapacitated to act; rather, their authority and ability to act is immediate.  The powers found in a POA are largely administrative powers (i.e., the power to pay your bills and the power to open a bank account).

The purpose of the SGR is to authorize your agent to enter into transactions that are considered “changes in beneficial interest” (i.e., the power to make gifts in excess of $500.00, the power to transfer assets to trusts, and the power to change beneficiary designations.)  An SGR is a completely separate document that needs to be signed at the same time as the POA.  Many people are unaware that an SGR exists, and some erroneously have executed an SGR years after executing the POA, rending the SGR ineffective.

Modifications to the POA

New York State law permits modifying the POA and SGR, and the key to a properly drafted and protective POA and SGR lies in the modifications added by an elder law or estate planning attorney.

A POA should be modified.  The primary modification is adding the power to create, amend, revoke, or terminate revocable or irrevocable trusts.  This power becomes imperative where an elder law attorney seeks to protect the value of a client’s home and other assets when planning for Medicaid.  There are many other modifications that an elder law attorney will use.

Modifications to the SGR

It is important to reiterate that the single most common oversight is the failure to prepare an SGR.  With that being said, the most common oversights in preparing an SGR is the failure to add modifications allowing the agent to (i) transfer assets in unlimited amounts and (ii) transfer assets to himself.

Both of the above modifications enable the elder law attorney to implement many techniques that create Medicaid eligibility.  If you lose your capacity and the SGR does not allow the agent to transfer your assets, the SGR is relatively useless.  Moreover, since your agent is usually the person that would be the recipient of the transfer (i.e., a spouse or child), not permitting the agent to make transfers to himself might necessitate using another family member or non-relative to receive your assets.

Conclusion

The failure to recognize the necessity of a POA and SGR is common.  Once you commit yourself to an estate plan, however, having a deficient POA and SGR is unacceptable.  If you do not have a POA and SGR or have documents that do not include the modifications discussed herein, please contact us.

Salvatore M. Di Costanzo is a partner with the firm of Maker, Fragale & Di Costanzo, LLP located in Rye, New York, and Yorktown Heights, New York. Mr. Di Costanzo is an attorney and accountant whose main area of practice is elder law and special needs planning. He is a member of the National Academy of Elder Law Attorneys and a frequent author and lecturer on current elder law and special needs topics. Since 2013, Mr. Di Costanzo has been selected each year by the rating service, Super Lawyers as a New York Metro leading elder law attorney.  He can be reached at (914) 925-1010 or via e-mail at smd@mfd-law.com.  Visit his practice specific website at  www.plantodayfortomorrow.com.
   
Gift Tax

How much can I gift each year?

Most people think you can only gift $15,000.00 per recipient in 2019.  You might be surprised to hear that you can gift a lot more than that.  You might be saying, “I thought the annual federal gift tax exclusion is $15,000.00”.  While you are correct, it is important to keep in mind the interplay between the federal gift tax limits and the federal gift tax and estate tax exemptions.

In 2019, the federal gift and estate tax exemption amount is $11,400,000.00.  If your lifetime gifts or the value of your estate upon death exceeds this amount, you will pay gift and/or estate taxes.  That means that you can gift during your lifetime or die with $11,400,000.00 tax-free.    The purpose of the annual gift tax exclusion is to allow for the gifting of assets above and beyond the lifetime exemption, because gifts made at or below the gift tax exclusion are not counted (i.e., they are excluded) when calculating how much you’ve gifted during your lifetime.

In order to more fully understand this concept, it helps to understand the history of the gift tax exclusion.  Let’s go back almost twenty years to 1999 when Y2K was a greater concern than gift taxes.  Back then, the exemption amount was only $650,000.00.  It was not uncommon for someone to have an estate that exceeded this amount.  Thus, if that person gifted or died with more than $650,000, taxes would be paid.  The annual gift tax exclusion was $10,000.00 and provided some relief.  If a taxpayer worth more than $650,000 adhered to a gifting strategy, annual exclusion gifts could have been made to an unlimited number of recipients, which would have lowered the taxpayer’s taxable estate upon death and reduced estate taxes.    

Now that the exemption amount has been increased to $11,400,000.00, however, most Americans do not have a gift or estate tax issue.  Thus, the increased exemption amount has rendered the annual gift tax exclusion meaningless to most.  With such an exemption amount, limiting your gifts to $15,000.00 stops making sense.    

Salvatore M. Di Costanzo is a partner with the firm of Maker, Fragale & Di Costanzo, LLP located in Rye, New York, and Yorktown Heights, New York. Mr. Di Costanzo is an attorney and accountant whose main area of practice is elder law and special needs planning. He is a member of the National Academy of Elder Law Attorneys and a frequent author and lecturer on current elder law and special needs topics. Since 2013, Mr. Di Costanzo has been selected each year by the rating service, Super Lawyers as a New York Metro leading elder law attorney.  He can be reached at (914) 925-1010 or via e-mail at smd@mfd-law.com.  Visit his practice specific website at  www.plantodayfortomorrow.com.

First and foremost, I recommend that you have an open discussion with your family about the disposition of your remains. These are very sensitive issues and there is no substitute for a well- informed family. New York State law, however, does provide a mechanism for you to express your wishes in writing.

Section 4201 of the Public Health Law, for anyone that cares to read it, provides a form that allows you to appoint an agent to control the disposition of your burial remains. This form is analogous to a health care proxy and is often used where an individual has very specific wishes that may be uncommon or that may not be adhered to by surviving family members. For instance, you may want to complete a burial remains form if you would like to be buried with your pets, which is now permissible in certain pet cemeteries. Other uses might include expressing your desire to not be embalmed or to be cremated. If you intend to donate your organs for scientific research, this is a good place for that as well, but I would also recommend registering as an organ donor and notifying the organization you intend to benefit.

If, for some reason, your agent cannot act, perhaps by reason of incapacity or death, the statute creates a hierarchy of persons who can act on your behalf, beginning with your spouse or domestic partner. Interestingly, the statute prohibits anyone having something to do with the cause of your death from acting as agent. I wonder what the social policy is behind that portion of the statute?

When combined with a properly drafted estate plan, a burial remains form can ensure that your final wishes are honored.

 

Salvatore M. Di Costanzo is a partner with the firm of Maker, Fragale & Di Costanzo, LLP located in Rye, New York, and Yorktown Heights, New York. Mr. Di Costanzo is an attorney and accountant whose main area of practice is elder law and special needs planning. He is a member of the National Academy of Elder Law Attorneys and a frequent author and lecturer on current elder law and special needs topics. Since 2013, Mr. Di Costanzo has been selected each year by the rating service, Super Lawyers as a New York Metro leading elder law attorney.  He can be reached at (914) 925-1010 or via e-mail at smd@mfd-law.com. Visit his practice specific website at www.plantodayfortomorrow.com.

 

Traditionally, Medicaid has paid for long-term care in a nursing home, but because most individuals would rather be cared for at home and home care is cheaper, all 50 states now have Medicaid programs that offer at least some home care. In some states, even family members can get paid for providing care at home. 

Medicaid is a joint federal-state program that provides health insurance coverage to low-income children, seniors, and people with disabilities. In addition, it covers care in a nursing home for those who qualify. Medicaid home care services are typically provided through home- and community-based services “waiver” programs to individuals who need a high level of care, but who would like to remain at home. 

Medicaid's home care programs are state-run, and each state has different rules about how to qualify. Because Medicaid is available only to low-income individuals, each state sets its own asset and income limits. For example, in 2019, in New York an applicant must have income that is lower than $845 a month and fewer than $15,150 in assets to qualify. But Minnesota's income limit is $2,250 and its asset limit is $3,000, while Connecticut's income limit is also $2,250 but its asset limit is just $1,600. 

States also vary widely in what services they provide. Some services that Medicaid may pay for include the following: 

  • In-home health care
  • Personal care services, such as help bathing, eating, and moving
  • Home care services, including help with household chores like shopping or laundry
  • Caregiver support
  • Minor modifications to the home to make it accessible
  • Medical equipment

In most states it is possible for family members to get paid for providing care to a Medicaid recipient. The Medicaid applicant must apply for Medicaid and select a program that allows the recipient to choose his or her own caregiver, often called “consumer directed care.” Most states that allow paid family caregivers do not allow legal guardians and spouses to be paid by Medicaid, but a few states do. Some states will pay caregivers only if they do not live in the same house as the Medicaid recipient. 

To find out your Medicaid home care options, you should check with your elder law attorney. 

One of the most unfortunate situations in my practice is when I hear that someone spent most, if not all, of their assets on the cost of a nursing home or home care aides because they believed they were ineligible for Medicaid as a result of having income and assets.  Most often it is due to a misinterpretation of the applicability of the 5-year look-back period.  There are many ways to become eligible for Medicaid when you have assets.

Many people don’t know that in a home care situation, there is no five-year look-back period.  That means that you can transfer your assets, let’s say in January, and become eligible for Medicaid in February.  In a Medicaid home care scenario, there is also an opportunity to protect your income so that you don’t need to spend it on your care, thereby preserving it for household expenses.

The five-year look-back period applies to Medicaid nursing home eligibility.  There are several planning opportunities for Medicaid eligibility in a nursing home where there are assets.  If you are married, you can transfer your assets to your spouse, who can then refuse to use those assets for your care.  This is commonly referred to as spousal refusal.

Even in situations where there is no spouse, there is planning that can save approximately 40% of your assets.  This is a complicated planning technique that must be implemented by an attorney.  It is commonly referred to as a promissory note/gifting strategy.

Finally, it is worth noting that in New York, some assets are not considered available to Medicaid, like IRAs. Moreover, Medicaid allows you to make certain exempt transfers that are not subject to the five-year look-back period such as transferring your house to a caretaker child or transfers of any assets to a disabled child.  You are also permitted to pre-plan and pre-pay your funeral.

You should never spend your income and assets towards the cost of home care or at a nursing home without consulting with an elder law attorney.

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