Tag Archives: elder law minute

The Elder Law Minute: How Will The Election Results Affect Seniors?


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By Ronald A. Fatoullah, Esq. and Yan Lian Kuang-Maoga, Esq.

Now that President Barack Obama has won a second term, what does it mean for seniors? What impact, if any, are seniors to expect with regard to long-term care costs and estate taxes? The good news is that his re-election means Medicare and Medicaid as we know them will likely be preserved for at least the next four years. However, with regard to estate, gift and generation skipping transfer taxes, we will have to wait for the final results. As of the writing of this column, President Obama and John Boehner are busy negotiating these issues. Only time will tell if we go over the so-called “fiscal cliff” or if Congress can put together a responsible fiscal plan that increases revenues while preserving important governmental entitlements that seniors rely on.

One of the biggest outcomes of the election is that the Affordable Care Act (ACA – a.k.a. “Obamacare”), which candidate Mitt Romney had promised to repeal, will almost certainly remain the law in our country. For seniors, the law has already begun to close the gap in Medicare’s prescription drug coverage known as the “doughnut hole,” and has been providing free preventative care for Medicare recipients. The ACA also included a number of provisions aimed at improving long-term care and helping recipients remain in their homes instead of being forced into nursing homes. These provisions will continue to be carried out.

On January 1, 2013, the terms of the Budget Control Act of 2011 will take effect (commonly referred to as going over the “fiscal cliff”) unless Congress acts to avoid it. Failing to act will bring about automatic tax increases and spending cuts agreed to as part of last year’s deficit reduction deal. Although Medicare and Medicaid will likely maintain their current structures, cuts may be made as a result of current negotiations. President Obama reportedly offered to increase the Medicare age to 67 in last year’s budget negotiations with Republicans.

According to a Reuters article, congressional Republicans are also expected to ask for concessions from the ACA, including delaying and scaling back the planned expansion of Medicaid. In addition, state lawmakers, many of whom are Republican, will decide how the ACA is carried out. Thirty states have Republican governors, some of whom have said that they will opt out of the Medicaid expansion provided for in the ACA. But President Obama’s re-election may boost the prospects for expansion, and prod reluctant states to move forward with the expansion, according to Kaiser Health News

With regard to estate taxes, if Congress fails to act the federal estate and gift tax exclusion is scheduled to be reduced from its current level of $5.12 million to only $1 million ($2 million for a couple). President Obama has proposed to set the federal estate and gift tax exclusion at $3.5 million ($7 million for a couple). New Yorkers must be reminded to engage in estate planning because even if the federal estate and gift tax exclusion does not revert back to $1 million, New York State has its own estate tax and will tax estates over $1 million.

While the re-election of President Obama provides some security to seniors with regard to the preservation of Medicare and Medicaid to pay for long term care costs, much is still up in the air. Now more than ever, seniors owe it to themselves and their families to get their affairs in order and to establish an elder law and estate plan in order to protect assets for themselves as well as their heirs.

Ronald Fatoullah is a leading expert in the fields of elder law & estate planning. He is the founder and managing attorney of Ronald Fatoullah & Associates, a law firm concentrating in elder law, estate planning, Medicaid eligibility, special needs, trusts, guardianships, & probate. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer’s Association. The firm’s offices are conveniently located in: Long Island, Queens, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law 1-877-Estates. This article was written with the assistance of Yan Lian Kuang-Maoga, Esq., an elder law attorney with the firm.

The Elder Law Minute: Gift tax exclusion will increase to $14,000 in 2013


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By Ronald A. Fatoullah, Esq. and Debby Rosenfeld, Esq.

The annual gift tax exclusion will increase from $13,000 to $14,000 effective January 1, 2013. In other words, an individual will be able to gift $14,000 per person (a couple may give $28,000) per recipient every calendar year without any gift tax ramifications whatsoever. Therefore, a couple with three children will be able to gift a total of $84,000 without filing a gift tax return. It is important to note that these gifts are not deductible, as is often believed to be the case. If only one spouse makes the actual gift, we advise the couple to elect to split the gift on the gift tax return (IRS Form 709) so the gift will not be attributed solely to the one spouse.

If an individual gifts in excess of the annual exclusion amount, the gift must be declared, and a gift tax return must be filed by April 15th in the year following the year in which the gift was made. In this way, the IRS can maintain a running tab showing how much of the individual’s “lifetime exclusion” has been used up. Many individuals erroneously believe that if they gift in excess of the annual amount, they must pay gift taxes, which is not the case. Rather, if an individual gifts in excess of the annual exclusion, he simply utilizes some of his lifetime gift tax exclusion, which is currently $5,120,000. In other words, he will not incur a gift tax until he gifts in excess of $5,120,000 over the course of his lifetime. It is important to note, however, that this $5,120,000 exemption is due to expire on December 31st of this year. If the current law is not extended, amended or repealed, the $5,120,000 gift tax exemption will revert back to $1,000,000 as of January 1, 2013.

Readers must be aware that there are other exceptions to the gift tax rules in addition to the annual exclusion. For example, there is a “marital deduction” which provides that any gifts to a spouse will not incur gift tax consequences if the spouse is a US citizen. In addition, payments for another individual’s tuition or medical expenses are also excluded, but the payments must be made directly to the education institution, hospital or doctor.

In order to qualify for the annual exclusion, the gift must be of a present interest. A gift of a future interest does not qualify for the gift tax exclusion. Therefore, a gift into a trust that does not give the beneficiary the right to use the gift presently, will not qualify for the annual exclusion.

There is a popular misconception that the recipient of a gift will incur some type of tax. This is not the case. The only tax incurred by the recipient of a gift is income tax on any interest or dividends earned after the gift was received.

It is important to understand the ramifications of making a gift of property that has appreciated in value. The recipient of a gift will take on the “cost basis” (essentially the cost for purposes of determining gains taxes) of the property. As such, the donor of the property should inform the recipient of what the donor actually paid for the property when the property was acquired as well as the cost of any improvements made to the property. In the case of investment property, we would need to know how the property was depreciated for tax purposes. When the recipient ultimately sells the property, if there has been a gain, the recipient will pay income tax on such gain.

Ultimately, the gift tax exclusion is a basic tool used to reduce the value of one’s estate for purposes of minimizing estate taxes. Nonetheless, making gifts in $14,000 increments to an unlimited number of people in a given year may make sense for estate tax planning but may be problematic in the context of obtaining Medicaid eligibility. It is important to discuss any type of gift planning with a qualified estate or elder law attorney.

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, and wills. The firm has offices in Forest Hills, Great Neck, Manhattan, Brooklyn, and Cedarhurst, NY. Mr. Fatoullah has been named a “fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also served on the Executive Committee of the Elder Law Section of the New York State Bar Association for over 15 years. Mr. Fatoullah has been Certified as an Elder Law Attorney by the National Elder Law Foundation. Mr. Fatoullah is a co-founder of Senior Umbrella Network of Queens. This article was written with the assistance of Debby Rosenfeld, Esq., a senior staff attorney at the firm. Ronald Fatoullah & Associates can be reached by calling (718) 261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.

The Elder Law Minute: Do I Have the Right to Die?


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By Ronald A. Fatoullah, Esq. and Lian Kuang, Esq.

On October 5, 2012, a New York Appeals Court ruled in support of SungEun Grace Lee (Grace), a 28 year old banker who wanted to be taken off life support and allowed to die. Grace, who has terminal brain cancer, is paralyzed from the neck down and is being kept alive by artificial means. Her family disagreed with her decision and petitioned for guardianship to make health care decisions on her behalf. They argued that she was incapacitated due to her medicated state. The issue of an individual’s right to die is complex, to say the least. While the law does not permit assisted suicide, a patient always has the right to refuse medical treatment. This may include the refusal of life-sustaining treatment which could lead to death. Proper planning and possessing the necessary legal documents can help to enforce our right to refuse medical treatment. In addition, having the proper legal documents can help avoid or minimize conflict between loved ones when the difficult decision pertaining to “pulling the plug” arises.

Health care decisions, including decisions regarding life-sustaining treatments, are made by the individual patient. The issue presented in the case of Grace (and the famous Terri Schiavo right-to-die case), is one in which the capacity of the patient to make such decisions is questionable. In New York State, once a person is deemed incapable of making health care decisions, these decisions can be made by an appointed agent under a duly executed Health Care Proxy.

Planning for health care decision-making, in the event of incapacity, is not an easy process. It is often the most difficult process for our clients who are engaged in elder law planning. The issue requires individuals to delve into grim and morbid topics of illness and whether or not to “pull the plug” and in which scenarios to do so. Understandably, individuals often avoid signing a Health Care Proxy or sign a Health Care Proxy without having an informed discussion with their appointed agent. Having a Health Care Proxy allows one to choose the person he/she trusts to speak on his/her behalf and ensure that one’s rights and wishes are upheld. The discussion about one’s wishes regarding health care decisions is as important as naming the person to make these decisions. Again, the discussion ensures that decisions are made based on the individual’s expressed wishes. It avoids or minimizes conflict that can lead to litigation as in the cases of Grace and Schiavo. It also lessens any guilt on the part of the agent who may have to make the decision about whether or not to withhold or withdraw life-sustaining treatment. Most importantly, the law requires clear and convincing evidence of an individual’s wishes before an agent can have the authority to withdraw or refuse life sustaining treatment. Therefore, having a serious and in-depth discussion with the appointed agent and any successor agents is a vital part of the process of executing a Health Care Proxy.

As of 2010, if an incapacitated person has not appointed an agent under a Health Care Proxy, the Family Health Care Decisions Act (FHCDA) authorizes a surrogate from a prioritized list of individuals to make health care decisions for the incapacitated person. However, relying on the FHCDA is not recommended. One reason is that the FHCDA is only available to individuals who are in a hospital, residential care facility, or in hospice care. Oftentimes an incapacitated person will remain living at home and consequently the FHCDA does not apply. In cases in which the FHCDA is in effect, the surrogate chosen from the list of individuals provided under the FHCDA may not be the person who would have been entrusted with the incapacitated person’s health care decisions. Also, conflict can arise between multiple individuals who may have the same priority under the list, such as multiple children or siblings.

Whether or not we currently feel strongly about our right to live or die, having a properly executed Health Care Proxy is strongly recommended to ensure that our wishes are upheld and to avoid or minimize conflict between our loves ones.

Ronald Fatoullah is a leading expert in the fields of elder law & estate planning. He is the founder and managing attorney of Ronald Fatoullah & Associates, a law firm concentrating in elder law, estate planning, Medicaid eligibility, special needs, trusts, guardianships, & probate. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer’s Association. The firm’s offices are conveniently located in: Long Island, Queens, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law 1-877-Estates. This article was written with the assistance of Lian Kuang, Esq., an elder law attorney with the firm. Ms. Kuang speaks Mandarin and Cantonese and also assists with Ronald Fatoullah & Associate’s Chinese speaking clients