The Most Common Mistaken Assumptions Made About Elder Law and Estate Planning Matters!
By: Anthony J. Enea, Esq.
It is not unusual for a client to tell me that they have taken steps to avoid probate by having their assets held in joint name with their spouse and/or loved one. While in a perfect world this may appear to be true, in many instances, there are mistaken assumptions:
(i) All of my jointly held assets (unless they are held as “tenants in common”) will pass by operation of law to the surviving joint tenant. This assumes that the person named on the account or other type of assets will survive you. If they don’t, then upon your demise the asset is in your name alone and thus, a probate asset (if there is a Last Will) or an administration asset (if no Last Will). For example, married couples typically own their home in New York as “tenants by the entirety” or “joint tenants with rights of survivorship”, however, when the first spouse dies it is not unusual for the surviving spouse to continue owning the home without transferring it to a Revocable Trust. Thus, upon their demise the house will be a probate or administration asset, requiring a court proceeding for its transfer / sale to occur and also subjecting the asset to the claims of the decedent’s creditors (including Medicaid). If they don’t have a Last Will, then the house and any other assets they own titled in their name alone will pass by the laws of intestacy to their closest living relative(s), including, those they did not wish to provide for;
(ii) I have a Revocable Living Trust, thus, I am not worried about Probate. I can’t begin to tell you how many clients will come to see me and have with them a large leather bound (faux leather) document that is their Revocable Living trust and other estate planning documents. Unfortunately, to their surprise the trust is not funded with any of their non-IRA liquid assets and/or their home(s). If unfunded, the trust does not control any of their assets and upon their death is of no use. Often the clients will state they thought this was something their attorney was going to do. However, while the attorney in most cases will deed their home(s) to the trust, it is highly unlikely that the attorney would arrange to transfer their bank and/or brokerage accounts to the trust as it is a significant undertaking that requires the authorization of the client;
(iii) It’s too late to do Medicaid planning. This statement is often uttered by those that are not informed of the Medicaid eligibility rules regarding “spousal exempt transfers” and the ability for one spouse to execute a “spousal refusal” so that the other spouse can become eligible for Medicaid. Medicaid permits the transfer of assets from one spouse to the other (there are also other exempt transfer that can be made) without impacting the eligibility of the applicant for Medicaid. Additionally, New York also allows one spouse to refuse to utilize their income and savings to support the spouse needing Medicaid home care and/or Medicaid nursing home. This is a valuable tool that despite Medicaid’s ability to pursue a claim for the expenditures they made on behalf of the recipient; can save the recipient and their spouse and family tens of thousands of dollars if properly implemented. This is especially true if the recipient needs to receive Medicaid benefits in a nursing home.
Additionally, while many are familiar with the five (5) year “look back” period for Medicaid nursing home eligibility, many are unaware that there is presently no look back period for Medicaid home care in New York. Thus, one’s assets can be transferred/gifted to a loved one (non-spouse) (though you need to be very careful of tax consequences when doing so) or to an Irrevocable Medicaid Asset Protection Trust (MAPT) without impacting the eligibility of the applicant for Medicaid home care (only impacting nursing home eligibility).
(iv) I have a Last Will and it controls the disposition of all of my assets. This assumption is mistaken on several levels. First of all, a Last Will & Testament (LWT) will not control the disposition of any of your assets unless it is first admitted to probate in the Surrogate’s Court of the County in which the decedent resided. Thus, unless a LWT is admitted to Probate it is not valid or useful. The Probate process is time consuming and expensive and the odds of your LWT being challenged/contested may be higher if Probate is necessary.
The next mistaken assumption about a LWT is that it controls the disposition of all of one’s assets upon one’s demise. This is not correct as a LWT only disposes of assets in the decedents name alone on their date of death. Thus, jointly held assets (with rights of survivorship), in trust for accounts, payable on death accounts, transfer on death accounts are not controlled by one’s LWT but, by the title on the account or property.
Because of this misconception, many times clients will believe that their assets will be equally distributed to their children (as the LWT states so), however, the title of their bank accounts transfers the asset by operation of law in an unequal manner to their children.
While the above stated are not the only mistaken assumptions made by the public at large, they are often the most costly and problem causing!
*Anthony J. Enea is the managing attorney of Enea, Scanlan and Sirignano, LLP of White Plains, and Somers New York. He focuses his practice on Wills, Trusts, Estates and Elder Law. Anthony is the Past Chair of the Elder Law and Special Needs Section of the New York State Bar Association (NYSBA) and is the past Chair of the 50+ Section of the NYSBA. He is a Past President and Founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Anthony is also a Past President of the Westchester County Bar Foundation and a Past President of the Westchester County Bar Association. He is fluent in Italian. He can be reached at 914-269-2367 or at [email protected]
