Glossary

Each person may currently gift $12,000 per person per year (to as many persons as he or she wants to) without filing a gift tax return.  It does not count towards the $1,000,000 lifetime gifting exemption.

Annual Exclusion

New York law now allows residents to use a form to designate who will be responsible for making decisions about their funeral and burial arrangements.

Burial Designation

(Bypass Trust)  This is a trust created in your will or a trust created during your lifetime.  It is typically created for the benefit of the surviving spouse for the purpose of allowing him or her to have the income and invasion of the trust assets without having the value of the remaining trust assets counted as part of the surviving spouse’s estate.  It is used to shelter an amount up to or equal to the current federal estate tax exemption on the date of the first spouse’s death.  Funding can be either mandatory or at the discretion of the surviving spouse with the use of  a Disclaimer Credit Shelter Trust format.  A disclaimer arrangement can allow the surviving spouse to decide how much to fund the Credit Shelter Trust with based on current tax laws at the death of the first spouse and is very flexible. 

Credit Shelter Trust

This document allows you to appoint one or more persons to make business and financial decisions for you.  It can be crucial in a time of crisis or disability.

Durable Power of Attorney

This is a process which occurs after your death if you have assets which were not joint, in a trust or did not name a beneficiary.  If you have a will, a probate petition will be filed with the Surrogate’s Court, usually by the Executor named in your will.  The purpose is to allow the Court to review the will to make sure it was validly executed and to issue Letters Testamentary authorizing your Executor to act.  The Executor can then use the Letters to gather your assets, pay your bills and then make distributions to your named beneficiaries.

If you die without a will, any assets you have which are not joint, in a trust or do not name a beneficiary will pass to your heirs at law.  If you have a spouse and children, part of those assets will pass to each of them.  If you have no spouse and leave children, your assets will go to your children.  Typically, your spouse or your children will petition the Surrogate’s Court for Letters of Administration to allow them to administer your estate.

Estate Administration

Currently, for Federal estate tax purposes, a person can leave $2,000,000 to his or her heirs free of estate tax.  In New York, the exemption amount is $1,000,000 which means that even if you have to pay no Federal estate tax, if your estate exceeds $1,000,000, it is likely you will have to pay New York estate tax.  There is no estate tax if he or she leaves more than those amounts to a spouse.  

Federal and State Estate Tax Exemptions

A court process whereby a person is  appointed to make personal and/or financial decisions on behalf of an incapacitated person.  This can generally be avoided if a competent person executes a Power of Attorney and Health Care Proxy prior to becoming disabled.

Guardian

These documents allow you to appoint someone to make health care decisions for you if you are unable to communicate your wishes.  It is always important for you to discuss your wishes with your agent and substitute agent before an emergency arises.

Health Care Proxy and Living Will

Personal care and other services received at home or in a medical day care setting can be paid for by Medicaid.

Homecare

There are many types of irrevocable trusts.  In the Elder Law context, Irrevocable Trusts are used to protect assets.  They are also known as Medicaid Trusts and Asset Protection Trusts.  An irrevocable trust is simply an agreement between you as the creator of the trust (usually called a Settlor or Grantor) and a Trustee.  You can not be the trustee of this trust.  Reliable older adult children are commonly chosen for this role.  Assets to be protected are transferred to the trust by re-titling them in the name of the trust.  The Trustee agrees to hold title to the assets subject to the requirements of the trust.  Upon your death, the assets typically continue to be held in the trust while your spouse is alive.  If you have no spouse or your spouse then dies, the assets pass to your designated beneficiaries.

Irrevocable Trust

This document specifies who is to receive your assets upon your death except in the following situations:

· Your assets are held jointly with another person with rights of survivorship

· Your assets already name a beneficiary

· Your assets are held in a trust

Title to jointly held property generally passes to the joint holder at the death of the first owner unless title is held as Tenants in Common.  Where you have named a beneficiary or your assets are held in trust, the beneficiary designation and the trust language supersedes your will unless your will specifically changes those designations or modifies the trust.  

You should still have a will even if you have taken all precautions to avoid probate because:

· The joint owner or beneficiary may predecease you

· Your beneficiary designation could be lost by the financial institution

· Upon your death, assets may be located which are solely in your name

The basic will can also contain designation of a Guardian for your minor children and Special Needs Trusts for disabled persons or Minors Trusts persons under a certain age.

Last Will and Testament

Currently, you are permitted to gift $1,000,000 during your lifetime without incurring gift tax.  This does not include annual exclusions or amounts paid directly to providers for educational and medical expenses of others.

Lifetime Gifting Exemption

A LLC may be created for a variety of reasons.  For example, if you have one or more rental properties, you may wish to transfer title to them to an LLC to limit your personal liability resulting from a lawsuit if someone is injured on the properties.  Also, LLC’s have member interests which can be gifted to your children or trusts for their benefit at a discounted value  while you continue as the Manager of the LLC.  An LLC can be used solely for asset protection and to manage a business or it can be used in conjunction with an overall gifting plan.

Limited Liability Company

Insurance you purchase to pay for your long term care at home, in assisted living and in a nursing home.  The earlier you purchase it, the cheaper it is. 

Long Term Care Insurance

This is a day care program for older disabled adults which takes place at a local nursing home and is paid for by Medicaid.  It is not a social model day care program (which typically is not paid for by Medicaid).  Persons can take part in the program from 2-7 days per week.  They are picked up in the morning and dropped off in the late afternoon.  The programs are usually designed to provide social interaction for the person as well as physical therapy and other activities designed to maintain and improve their physical and mental abilities.  This program is best used in conjunction with a homecare Medicaid application which will also allow aids to come into the house to assist the person for a number of hours per day (as determined by Medicaid). 

Medical Model Day Care Program

This is a trust created in your will or your lifetime trust which essentially provides that upon your death, assets received by persons under a certain age will be held in a Minors Trust.  Even though it is called a Minors Trust, the beneficiaries do not have to receive their money at 18 or 21.  Typically the trust provides that the Trustee can invade the trust at any time for the beneficiary’s health, education, support and maintenance.  At 21, the beneficiary starts to receive income from the trust.  Depending on the size of the trust, the creator may choose to release all assets at age 25, or half at 25 with the balance at 30 or some other variation on age especially if the trust is particularly large.  If it is known that the intended beneficiary has drug, alcohol or spending/creditor problems, the creator can mandate that the trust stay in place for the beneficiary’s lifetime.

Minors Trust

A trust created by you in your will to hold assets to provide for the long term care of your pet after your death.

Pet Trust

An agreement between you and your fiancée which becomes effective when you marry.  It sets out how property will be divided in the event of your divorce.  These are especially useful in second marriage situations where both parties have their own assets or in marriages where one party has all of the assets.   The agreement usually provides that they will retain ownership of those assets if they divorce.  It can also specify who will pay what type of expenses and may give the surviving spouse some rights to live in the house after the first spouse dies.  These should be reviewed by each party’s attorney and signed well in advance of the wedding.