Estate and Business Planning Legal Blog

Federal law allows one to gift up to $14,000 per year to as many individuals as desired, without any adverse gift tax consequences and without the filing of a gift tax return.  Certainly, this is a very effective way of reducing one's estate and, therefore, reducing or even eliminating the estate tax.  In addition to this annual gift tax exclusion, one can pay medical and educational expenses for anyone, in an unlimited amounts, provided the payment goes directly to the institution. Lastly, these annual gifts can be used to fund a 529 college plan for children or grandchildren, and you can even make these annual contributions for up to 5 years in advance.

Surely, gift giving can be quite effective in reducing one's estate, assuming the donor is comfortable with this.  One caveat, however, is that New York law was changed relatively recently so that  the value of any gifts made within three years of death falls back into the taxable estate, for New York State estate tax purposes.  Moreover, these annual gifts may trigger a look-back period for medicaid eligibility. 

IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.

Clients are often reluctant  to spend money to purchase long-term health care insurance.  While that is understandable, if one can afford the cost and is healthy enough to obtain the insurance, it is indeed a very wise investment. With nursing homes currently costing in excess of $10,000 per month in the metropolitan New York area, it is difficult for all but the very wealthy to continue to pay that cost out-of-pocket.  The only option, besides paying for the care out of one's own funds, is to use long-term care insurance, or to divest oneself of essentially all of one's assets. If there is a spouse at home, the cost of such care can severely impact the lifestyle of that spouse.   Having long-term care insurance can certainly alleviate the financial and emotional pressure caused by the need for long-term care.

Terminating an employee is always a difficult job for an employer.  One of the biggest concerns an employer may have is that the employee will sue the company for wrongful termination.  There are some things an employer can do to reduce the chances of litigation.  First, the company should have a clear, written policy regarding termination, including procedures to be followed.  Someone at the company should be responsible for clearly and methodically documenting an employee's poor performance or wrongful behavior.  Occurrences should be reduced to writing and the employee should be promptly notified and/or warned,  in writing.  Additionally, it is often helpful to offer the employee some amount of severance pay and have that employee sign a release, promising not to bring legal action, as part of the severance package.

Clients often inquire about health care proxies and living wills and wonder what the difference is between the two, if any.  A health care proxy is simply a document where you appoint someone to make health care decisions if you become incapable of making them on your own.   These decisions are usually general in nature and include items such as surgery, blood transfusions, and other treatments.  Ordinarily, unless combined with a living will in the same document, the health care proxy does not permit the agent to make end-of-life decisions.   A living will is usually a free-standing document which states to the world one's wishes regarding life and death decisions, and does not usually give the right to make these decisions to anyone in particular.  Of course, the health care proxy and living will can be combined in one document, in order to give the agent the authority to make end-of-life decisions, in which event the decision is usually at the discretion of the agent.

               It is quite common for people to have two homes, usually one in New York and one in Florida or some other southern state.  While a will prepared in one state is usually valid in all other states, if done in accordance with the law of one's residency, that is not the case with health care directives.  Each state usually has their own laws and forms regarding  health care proxies and living wills, and is is quite common for institutions not to honor or recognize forms prepared in another state.  This is usually also the case with power of attorney documents, since they are state-specific.  It is highly recommended, then, if one spends a good deal of time in another state, to have a second set of these documents prepared by an attorney licensed to practice law in that state.

IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.

If you have a child who suffers from a type of disability which makes it impossible for the child to make his/her own decisions, then you will need to obtain legal guardianship of that child once the child nears the age of 18.   At eighteen years old, a child is considered an adult and, so, the parent is not able to make decisions for the child unless the parent has been appointed the legal guardian.  Of course, the guardianship can be done after the child's 18th birthday, as long as it is clear that the disability began before the age of majority.

   New York has made it relatively easy for the parents of disabled children to become the legal guardians.  It is accomplished through an Article 17A proceeding, and is done through the Surrogates Court.  This is a simpler, less expensive procedure that is specifically for disabled children.  There are several forms required to be filed with the Court and then a hearing date is set when the parents and child appear personally.  One of the many advantages of the procedure is that the parents can list other family members or persons to step in as legal guardian in the event they become unavailable. 

   Guardianship will permit the parent (or other guardian) to make all decisions for the child, including health care decisions, and to manage the child's income and assets, if any.  While the proceeding can be done without an attorney, it is highly recommended that a lawyer experienced in handling these proceedings be retained for this purpose.

It is a well-known fact that nursing care, whether rendered at home or in a nursing facility, is extremely expensive. Even if one possesses substantial assets, those assets will be eroded quickly as a result of spiraling health care costs.  Often, the most significant asset owned by the person needing such care is the family home.  Therefore, it is important to take steps to ensure its protection.

A common method of financing long-term health care costs is the utilization of benefits available under the federally funded Medicaid program. Unfortunately, in order to qualify for benefits, the value of the assets which you own (including your residence) must be minimal.

A properly drafted irrevocable trust can preserve your home, and at the same time, avoid adverse gift tax and capital gains tax consequences.  It can also provide you with a great deal of flexibility and some degree of control. For example, the trust can be designed to provide you and your spouse with the right to reside in the home for the remainder of your lives.  If you later decide you want to move, you can require the trustee to sell the home and either buy another home in its place or invest the proceeds of the sale in order to provide you with income.  Lastly, such a trust can provide for disposition of the home upon your death without the necessity of your heirs going through probate.

IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.

Unfortunately, not getting paid promptly, or at all, for services or products supplied is a common problem experienced by businesses.. There are a number of simple steps a business owner can take in order to decrease the occurrences of such non-payment, without resorting to litigation.   

       Of course, it is always better to be paid in advance, but most customers are not  willing to do so.  
One of the first things a business owner can do in order to improve collections is to make sure that detailed invoices are promptly sent  to the customer, with the total owed shown clearly and boldly, along with a prominently displayed statement that payment is due within a certain, short time period, and that interest will accrue if the invoice is not paid promptly.  Putting this additional language in your invoices may invoke a negative response from customers, but it also shows customers that you are serious about getting paid. 

                           It is also extremely important for a member of the Company's staff to be in charge of quickly following up with customers who do not pay in a timely fashion, whether it be by sending out a second invoice, or by calling the customer.  The longer one waits to pursue payment,  the less likely collection will be successful. If  the call and/or second invoice doesn't yield positive results, a letter from the company demanding payment should be sent out on company letterhead.  As a last resort, the business owner should have his/her attorney send a collection letter to the customer, threatening litigation.

Parents are usually relieved when their child turns eighteen (18) years old. One reason is that they no longer need to worry about having a guardian for that child in the event something happens to the parent(s).  By the same token, however, once the child becomes an adult under the law, the parent may experience difficulties in making medical and financial decisions for the child, and even in trying to obtain information regarding the child.  It is essential, then, for the parent to have a health care proxy, living will and power of attorney prepared for the child.  These documents need to be properly executed, thus giving the parent the ability to make health care decisions and assist with financial matters, notwithstanding the fact that the child is now an adult under the law.

New business owners are often concerned about liability, and rightly so.  Once a business begins operations, or even before it, one should consider what type of legal entity should be formed in order to protect the owner(s) from personal liability.  The two most common choices are corporations and limited liability companies.  There are two types of corporations: an “S” corporation, which avoids double taxation, but which has restrictions on the number and type of shareholders, and a “C” corporation, which does not contain restrictions but usually results in two layers of taxation, one at the corporate level and another at the individual level.  A limited liability company is another consideration.
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                       It is extremely important for the parents of a child with special needs to embark on estate planning early on in the child’s life. First, in order to permit the child to collect government benefits, assets should not be held in the child’s name.  Perhaps more importantly, the parents should establish a special needs trust, to enable them to leave monies to their child upon their death without jeopardizing those benefits.  The monies in the trust will also be available to the trustee in order to enhance the quality of the child’s life.  While many parents expect that their other family members will look after the special needs child, financially and otherwise, there can be adverse tax and other consequences if they provide financial assistance without the benefit of such a trust.

IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.