Advanced Document Drafting
for the Elder Law Attorney
David J. DePinto, Esq., LL.M., CPA, CELA
DePinto Law Associates, P.C. 445 Broad Hollow Road Suite 230
Melville, New York 11747 (631) 249-8200
Elective Share
NY elective share statute is designed to protect the surviving spouse from being disinherited from the other spouse’s Will (EPTL 5-1.1-A). The greater of $50,000 or 1/3 of the net estate.
Must be made within six (6) months of issuance of letters but before two (2) years of death.
Defenses:
Prenuptial Agreement or Waiver
Abandonment
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© 2013 DePinto Law Associates, P.C.
Elective Share Issues
for Non-Ill Will
Disinherit Spouse and leave to children
Testamentary Supplemental Needs Trust for Ill Spouse
Sample Language for Will: “Notwithstanding anything herein to the
contrary, my Executor shall have the authority to distribute from my estate, prior to the funding of any trust(s) hereunder, the elective share of my spouse under New York law, but only if such election is made by my spouse, and the balance of my estate shall be divided, managed and distributed in accordance with the provisions herein.”
Promissory Note Planning for 1/6th
Revocable Living Trust for Community Spouse
Elective share in Guardianship context – duty to elect?
© 2013 DePinto Law Associates, P.C.
Typical Trusts
Revocable Living Trust
Irrevocable Medicaid Trust
Self-Settled Supplemental Needs Trust (SNT)
Third party Supplemental Needs Trust (SNT)
Estate Tax Planning Trust
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Typical Trusts
Inter vivos Trust
Testamentary Trust
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Credit Shelter Trust –
Available resource?
Testamentary Credit Shelter Trust
– Required HEMS (health, education, maintenance and
support) AVAILABLE
– Spouse as Trustee has unrestricted access
AVAILABLE AND TAXED IN ESTATE
– Non-spouse Trustee has pure and sole absolute
discretion (NOT AVAILABLE under 96 ADM-8)
© 2013 DePinto Law Associates, P.C.
Credit Shelter Trust –
Available resource?
Inter vivos Trust – Revocable Living Trust
– If Credit Shelter Trust created under Revocable Living Trust, then it is not “testamentary” under 18 NYCRR 360-4.5 and therefore not a “third party trust” under 96 ADM-8. Corpus is available provided spouse is a principal beneficiary. – If Supplemental Needs Trust under Revocable Trust – cannot
use for spouse (EPTL 7-1.12(a)(5)(iv)
– Consider paying to testamentary Credit Shelter Trust or Supplemental Needs Trust under Will instead.
© 2013 DePinto Law Associates, P.C.
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Medicaid Trust for Estate and Income
Tax Planning
Example: Married individuals with $2 million ($1 million cash; $1 million house with $40,000 basis)
Avoid joint Medicaid Trusts – step-up issues/estate tax on second to die
Two (2) separate typical Medicaid Trusts – One (1) for husband and one (1) for spouse
– Put $1 million in each trust (1/2 house; 1/2 cash) – Pass to trust not included in estate of surviving spouse – No principal to spouse to avoid Medicaid availability – Obtain one-half (1/2) step-up in basis on house at first death
© 2013 DePinto Law Associates, P.C.
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Medicaid Trust for Estate and Income
Tax Planning
Example: Unmarried individual with $2 million ($1 million cash; $1 million house with $40,000 basis)
Completed gift to Irrevocable Trust
Transfer high basis assets
No step-up
No income to Grantor
No special power of appointment in Grantor
Limit ability to change trustee to IRC 672(c)
No payment of funeral or administrative expenses of Grantor
© 2013 DePinto Law Associates, P.C.
Medicaid Trust for Estate and Income
Tax Planning
Example: $2 million estate: NY estate tax is $99,600.
After gifting $1 million and dying $1 million: NY estate tax is $33,200
Tax Savings: $66,400*
After gifting all $2 million and dying with $0: NY estate tax is $0.
Tax Savings: $99,600*
*Caveat: This only works well with high basis assets due to capital gains rates and NYS income tax.
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Life Estates v. Use & Occupy
Classic example: Second marriage testator owns house;
life estate in Will can be severed and cashed out by
surviving spouse (In re. the estate of Sally E. Sauer,
November 18, 2002 [November 18, 2002]).
Use and occupancy clause instead
Add 60, 90 or 120 day vacancy clause
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Specific Bequests
Tangible personal property – so as not to pass out DNI Options for disputes over tangible personal property: – Draw straws
– By age – Discretion of one – Lottery – Auction
Real Estate – passes to heirs at law without administration proceeding if the only asset of estate under RPAPL
– Need to probate Will if only heirs? – Not commissionable to executor – Watch furnishings clause
Cash gifts – Debt of estate (EPTL 13-1.3); subject to priority of other creditors (SCPA 1811)
– Funeral
– Administration expenses (Attorney fees) © 2013 DePinto Law Associates, P.C.
Tax Allocations
Ask client if specific bequest is to bear tax
or not
Default is it does under EPTL 2-1.8
Charity and QTIP trusts NEVER should
bear estate tax
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