FAQ: New York Estate Planning & Elder Law

Yes, for as long as you are able to manage your own affairs, there are no legal restrictions to serving as Trustee of your own Medicaid trust. You and your own spouse can serve as Co-Trustee together as well. There are some risks with serving as Trustee of your own Medicaid trust, and you really need to stick to the trust rules in order to make it work for Medicaid qualification purposes.

As a general rule, you can manage your assets in the trust the same way you would outside of the trust. If you own a stock portfolio, you can continue buying and selling stock. If your house is in the Medicaid trust you will retain property tax exemptions and the ability to sell your house without requiring permission from anyone. The major restriction on the trust is that you cannot distribute principal to yourself. If you need a new roof on the house, principal can be used for that purpose (or anything connected to your residence), but you cannot simply cash $50,000 in principal out of the trust to purchase a new vehicle or go on a trip.

Yes. Any income, interest, rent, or dividends generated by the trust goes to the trust creator. This gives the trust creator cashflow to cover ongoing expenses that cannot be paid for by the trust. We usually draft the Medicaid trust so that the right to take this income lapses at a certain point if it is not withdrawn, to help qualify for Medicaid.

Not exactly. Our Medicaid trust is designed to be income tax neutral. What this means is that you will continue to report trust income on your personal income tax return. You will not need to pay to have an extra income tax return prepared and you will continue to pay income tax at the lower bracketed rates for individuals rather than the higher rates at which trusts pay income taxes.

If you want or need to withdraw principal from the trust, the Trustee can make a distribution of principal to a child/grandchild or other beneficiary of the trust specifically designated in the trust document. That person would then make a tax-free gift of the principal back to you. This has to be structured in a way to avoid gift tax reporting, and you need to consult with an attorney or CPA to do this properly.

Once you pass away, the terms of the trust should mirror the terms of your Last Will and Testament and provide for distribution to the beneficiaries of your choosing, either outright or staying in trust for them for a period of time.

Once your assets are re-titled to the trust, you do not need to have any ongoing expenses. Most of our clients choose to enroll in our Annual Maintenance Plan that provides annual meeting opportunities and other benefits, but there is no requirement to enroll. Also, there won’t be any added taxes or administrative expenses.

Medicaid trusts often come under scrutiny when the government is trying to save money on health expenses for the elderly. The amount of time you need to create a Medicaid trust in advance of needing care expanded from 36 months to 60 months. There is consistent talk in Congress to expand this period beyond 60 months. These Medicaid trusts will nonetheless remain a valuable planning tool, they just may need to be implemented even earlier in order to be as effective as possible.

The major hurdle for most people is the restriction not allowing principal to be distributed to the trust creator. We spend a lot of time with clients discussing trust funding and making sure they have enough money outside of the trust in order to not encounter this problem. The only other major disadvantage is for people who do not make the 60-month loopback period and potentially have to unravel the trust to complete the Medicaid qualification process.

A Power of Attorney is a legal document where you (the “Principal”) give authority to make financial decisions to someone you trust (the “Agent”). The Power of Attorney is often referred to as the POA.

Anyone who is over eighteen (18) years of age in New York can sign a Power of Attorney if they understand the nature of what they are signing and have legal capacity.

The Power of Attorney is the cheapest and most effective way to appoint someone to manage your financial affairs if you become unable to do so. If you do not have a Power of Attorney, your family may need to go to Court and ask a judge to appoint a guardian for you. This applies even if you are married because spouses do not have a right to access accounts owned by the other spouse individually and in their name alone.

Anyone who is over eighteen (18) years of age and that you trust implicitly to make responsible decisions that will consistently be in your best interest. Most often this is someone in your family. Lawyers, accountants and other professionals can also serve in this capacity if no one in your family is available to handle the responsibility.

The Power of Attorney takes effect in New York when it is signed by the Principal and the Agent. The requirement that the Agent signs is relatively new to the law and was designed to minimize the financial exploitation these documents were causing among the elderly population. Often we will have the Agent sign the document much later so that it is not in effect until the document needs to be used.

Generally the Power of Attorney has to be honored in New York, but not in any other state. The document may be honored in another state, but it is best practice to contact an attorney in your new state to determine whether the document will be honored.

The biggest disadvantage is not having a Power of Attorney! You should be careful with the person you select as Agent and how much authority you give to that person. There are mechanisms in the law that let you appoint someone to monitor the Agent and give your family the right to ask the Agent how they are managing your funds which helps to ease many people’s fears.

A Health Care Proxy is a legally enforceable document in New York utilized to appoint someone (your Agent) to make health care decisions for you if you become unable, even temporarily, to make health care decisions for yourself. Appointing an Agent lets you control your future medical care and allows your agent to make health care decisions on your behalf as you would want them decided. Selecting your Agent could avoid conflict or confusion among family members and loved ones.

Anyone 18 years of age or older can be an Agent under your Health Care Proxy form. The person you are appointing as your agent or your alternate agent cannot sign as a witness on your Health Care Proxy, and it is not a good idea to select your treating physician because of conflict of interest policies that would require they stop treating you if they are your Agent.

Your health care agent would begin to make health care decisions after your doctor decides that you are not able to make your own health care decisions. As long as you are able to make health care decisions for yourself, you will have the right to do so.

Your agent will be able to make any health care decision that you could have made if you were able to decide on your own. Your agent can agree that you should receive treatment, choose among different treatments and decide that treatments should not be provided, in accordance with your wishes and interests.

Even though you are not elderly or terminally ill, it is a good idea to sign a Health Care Proxy now. An Agent under a HCP can act on your behalf if you become even temporarily unable to make your own health care decisions (i.e. during surgery or if you are incapacitated by an accident). When you regain the ability make your own health care decisions, your health care agent will no longer be authorized to act.

Your Agent must follow your wishes, as well as your moral and religious beliefs. You may write instructions on your Health Care Proxy form or simply discuss them with your agent. However, your agent can only make decisions about a feeding tube if the Agent knows your wishes from what you have said or what you have written. The Health Care Proxy form does not give your agent the power to make non-health care decisions for you, such as financial decisions, this is covered by your Power of Attorney.

You may appoint an alternate Agent to decide for you if your primary Agent is unavailable, unable or unwilling to act. Likewise, you can put the Agent’s cell phone number on the Health Care Proxy form to permit out-of-town Agents to still converse with your treating medical professionals. Otherwise, health care providers will make health care decisions for you that follow instructions you gave while you were still able to do so, if any. Any instructions that you write on your Health Care Proxy form will guide health care providers under these circumstances.

A living will is a document that is not legally enforceable and only provides instructions about end-of-life treatment. As a best practice, we always include these instructions on the Health Care Proxy form. The Health Care Proxy allows you to choose someone you trust to make health care decisions on your behalf, and does not require that you know in advance all the decisions that may arise. If you want to indicate your end-of-life preferences in writing, the best method is to include them on your Health Care Proxy form.