The Trust Lawyers Blog

Transfer of Home With Life Estate

Posted by Dave DePinto on Thu, Jul 14, 2016

 

 

In certain situations transferring a residence with the retention by the owner of a life estate is a common technique. The life estate provides the transferor with a level of comfort in knowing that their legal right to remain in the property for life is reserved in the deed, and that the life estate cannot be extinguished by a future sale, unless consented to. The retention of a life estate has advantages in terms of the transfer penalty period calculation if nursinghome care is required, as explained below. However, once the life estate is in place, the house will not likely be able to be refinanced or mortgaged.

 

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Tags: trusts, Life Estates, Estate Law, Estate Planning, Elder Law, Estate Tax

The New Estate Planning Game

Posted by Dave DePinto on Mon, Jul 11, 2016

I. 2011/2012 Gifting Before Sunset

A. $5 million exclusion amount for gifts/estate/Generation Skipping Tax (GST)

B. Change of planning strategies

1. Gifts to Grantor Trusts rather than sales

2. Restructure prior sales that used guarantees

3. Increase use of Qualified Personal Residence Trusts (QPRTs)

4. Gift splitting up to $10 million

5. Larger gifts to life insurance trusts to avoid Crummey letters

C. Claw Back on Sunset

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Tags: Estate Planning, Elder Law, Estate Law, Life Estates, trusts, Minimize Taxes

Tax Planning for Trusts and Estates

Posted by Dave DePinto on Wed, Jun 22, 2016

I. CHOOSING THE STRATEGY TO USE FOR DIFFERENT TYPES OF PROPERTY

a. Real Property

A qualified personal residence trust ("QPRT") is a technique for gifting residential property at discounted values.  The QPRT is an irrevocable trust, which becomes the legal owner of the home during the trust term.  The grantor would continue to live in the home during the term of the trust, and continue to pay the real estate taxes, mortgage and maintenance expenses; the taxes and interest can be deducted on the grantor's personal income tax return, as it was before.  The grantor must remain personally and contractually bound to the trustee to pay off the mortgage indebtedness in order for the amount of the mortgage to be disregarded for valuation purposes.  At the end of the term, the beneficiaries would legally own the home but the grantor's spouse may have the right to live in the house for his/her lifetime.  At that point, the grantor may also remain living there due to spouse’s life estate.  Should the grantor's spouse predecease, the grantor could remain living in the house as long as fair market rent is paid.  The term of the trust is a period of years, selected by the grantor.  The longer the term, the greater the tax benefits.  However, if the grantor does not outlive the term, any tax benefit of this strategy is lost.

 

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Tags: trusts, QTIP, Estate Law, Life Estates, Elder Law, Minimize Taxes, Estate Planning, Asset Protection

Asset Protection for the Elderly

Posted by Dave DePinto on Mon, Jun 13, 2016
I.PROTECTING THE RESIDENCE

           

a. Life Estates

 

            An estate is used to express the nature, duration or extent of an interest in land. A life estate is an estate which is measured by the life of a specified person, by the joint lives of two or more specified persons, of by the last survivor of two or more specified persons.[1] A right to use and occupy is not a life estate.[2]

 

Advantages of a Life Estate:

    1. Right to live in house.
    2. Removes remainder interest in the house from Medicaid estate after five (5) years of transfer. 
    3. Medicaid will only count the value of the remainder interest on transfer, which is a significantly lower value than if the whole were transferred. 
    4. Original owner still maintains full control of property and its management also retains Veterans and STAR tax exemptions.
    5. Full value is included in original owner’s estate for tax purposes, but remainderman still receive a full basis step up to fair market value upon death.[3]

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Tags: Estate Law, Medicaid And Assets, Life Estates, Asset Protection, Advanced Elder Law, Elder Law, QTIP, Asset Protection for the Elderly

Trusts 101

Posted by Dave DePinto on Mon, Jun 13, 2016
I. CHARITABLE DEDUCTION PLANNING

 

a.Charitable Gifts: Gifts to qualified charities are income tax deductible.  In addition, the charitable component of a split interest trust (one where a portion of the trust has a charitable beneficiary, and another portion has a non-charitable beneficiary) is a reduction of total taxable gifts made during the year.  The deduction is unlimited as long as the gift is made without restrictions on the use of the property donated. Qualified charities include any corporation organized for religious, charitable, scientific, literary or educational purposes.  In addition, a charitable gift to the donor’s own private foundation qualifies for the deduction. 

 

b. Charitable Remainder Trust: A charitable remainder trust (CRT) is an irrevocable trust (an example of a split interest trust) to which the grantor contributes assets retaining a stream of income for either a term of years or for life, with the remainder passing to charity at the end of the term. The grantor is allowed an income tax deduction for the present value of the remainder interest that passes to charity, and the property contributed is permanently removed from his gross estate. The IRS requires the grantor to take an annual distribution of not less than 5% of the trust’s value.  The present value of the charity's remainder interest must be at least 10% of the trust's original value in order to ensure that the charity will receive some benefit at the end of the term. The duration of the trust may be a term of years not to exceed twenty (20), for the life of the donor, or the life of the donor and his survivor.

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Tags: Estate Law, Revocable Trust, Dynasty Trusts, Estate Planning, Residence Trust, Elder Law, Charitable Remainder Trust, CRAT, CRUT

Elder Law Benefits

Posted by Dave DePinto on Fri, Jun 10, 2016

I. Impact of Medicaid Requirements in Drafting Trusts

Medicaid rules differ from the various types of trusts. Below are the three (3) different types of trusts and the impact of Medicaid requirements for each:

1. Revocable Trusts

According to 18 NYCRR §360-4.5(b)(2), the trust principal and income of a revocable trust must be considered an available resource. Payments made from a revocable trust to or for the benefit of the applicant/recipient must be considered to be available income in the month paid.

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Tags: Estate Law, Medicaid And Assets, Elder Law, Elder Law Benefits

Advanced Elder Care

Posted by Dave DePinto on Fri, Jun 10, 2016

I. ABUSE BY RELATIVES, CAREGIVERS, POWERS OF ATTORNEY/GUARDIANS, OR TRUSTED OTHERS

1. Common Perpetrators  

Common perpetrators include "anybody" such as trustees/fiduciaries, children, family members, caretakers, home aides, nurses, attorneys, agents, neighbors, etc.

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Tags: Estate Law, Medicaid And Assets, Estate Planning, Advanced Elder Law, Elder Law

Life Estates

Posted by Dave DePinto on Fri, Jun 10, 2016

I. LIFE ESTATES

1. Definition: 

    a. An estate is used to express the nature, duration or extent of an interest in land. A life estate is an estate which is measured by the life of a specified person, by the joint lives of two or more specified persons, of by the last survivor of two or more specified persons.[1]

    b. Right to use and occupy is not a life estate.[2]

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Tags: Estate Law, Medicaid And Assets, Estate Planning, Asset Protection Trust, Life Estates, Asset Protection

Taxation Of Trusts

Posted by Dave DePinto on Fri, Jun 10, 2016

1. Simple Trust: A simple trust requires all income to be distributed annually to named beneficiaries. Income of the trust is taxable to recipient.

2. Complex Trust:   A complex trust does not require all income to be distributed annually. The trust provides that income may be distributed to beneficiaries or accumulated.   Income of the trust is taxable to recipient to the extent distributions are received.

3. Grantor Trust:  A grantor trust is a trust in which all items of income, gain, loss or deduction will be reported on the grantor’s personal income tax return.

 

 

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Tags: Estate Law, Dynasty Trusts, Estate Planning, Life Estates, Asset Protection

Gifting in 2012: Questions You Should Ask Yourself

Posted by Bridget T. Faldetta, Esq on Thu, Jun 14, 2012

Making gifts are a great way to shift your assets to your intended beneficiaries as well as reduce your tax liability upon your death.  The current laws for gifting in 2012 are some of the most favorable we've ever seen.  This is definitely the time to start thinking about putting a gifting plan in place before year end.

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Tags: Estate Law, Gifting in 2012, Income Tax