TOP FIVE MYTHS AND MISTAKES IN ESTATE PLANNING WHAT NOT TO DO AND HOW NOT TO DO IT

After practicing law for almost twenty years, I have heard and seen a lot of misinformation about estate planning. Compiled below is my list of the top five myths and mistakes in estate planning. Number 1: If I don’t have a Will, the government will take all my money. In my last column in Saratoga Today, I explained how dying without a Will is known as dying “intestate.” If you die intestate, the rules of intestate succession under NY Estates Powers and Trusts Law section 4-1.1 determine which of your relatives will inherit your assets. The rules of intestacy, however, may not be consistent with your wishes. For example, the intestate estate of a deceased spouse is shared by the surviving spouse and his or her children. This is usually inconsistent with what people want, because they normally want everything to go to their surviving spouse. To avoid this result, it is best to have a Will or Trust in place to ensure your assets are left to the proper beneficiaries. Number 2: I have a Will so I have nothing to worry about. Having a Will is an important part of your estate plan, but you should remember that your Will does not necessarily dispose of all your non-probate assets. Non-probate assets include assets that pass upon death because they are jointly held with another or are payable to a named beneficiary. A common example of a joint asset is a house owned jointly with a spouse. A common example of an asset payable to a beneficiary is a life insurance policy. As part of your estate plan, you should review all non-probate assets to ensure that they will pass to the beneficiary that you want. For example, you may have forgotten that the insurance policy you obtained through work is still payable to your ex-wife and that a beneficiary change to your children is now in order. Number 3: I have my assets in a Trust so they are protected if I go to a nursing home. Transferring your assets to a Trust can potentially be an excellent strategy to protect them from having to be sold to pay for nursing home costs. Generally speaking, assets transferred into a Trust more than five years before you apply for Medicaid to pay for nursing home costs will not be counted as assets when determining your Medicaid eligibility. You have to be sure, however, that the Trust is an Irrevocable Trust properly drafted to protect your assets. If your Trust is a Revocable Trust, which was drafted primarily to avoid probate, such a Trust provides little or no protection of your assets from nursing home costs. Number 4: I can handle my spouse’s financial affairs because we’re married. In general, you and your spouse are individuals who can make financial decisions only for yourselves. If you have joint assets, like a joint checking account, you can withdraw and deposit money from the account without the other’s permission. Assets which you own individually, however, cannot be controlled by your spouse. As a result, it is generally recommended that spouses have Powers of Attorney to allow them to handle financial decisions for each other. Powers of Attorney are especially important in the event one spouse becomes incompetent and cannot handle their own affairs. Number 5: I can make gifts of $10,000 per year per beneficiary and not affect my later eligibility for Medicaid. The annual exclusion amount, which is the amount you can gift without needing to file a gift tax return, is currently $14,000/year but used to be $10,000 per year. This amount is irrelevant to Medicaid planning, because any gift made within five years of a Medicaid application to pay for nursing home care can potentially subject the donor to a Medicaid penalty period. The penalty period can delay the onset of the Medicaid coverage for weeks or months. With the advent of the internet, there is an abundance of misinformation regarding estate planning. Unfortunately, minor mistakes can quickly become major catastrophes after a person loses their competency or passes away. In order to avoid such mistakes, you should work with a qualified estate planning professional to ensure you have a plan consistent with your wishes. Matthew J. Dorsey, Esq. is a Partner with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his nineteen years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, This email address is being protected from spambots. You need JavaScript enabled to view it. and www.oalaw.com.