2025 Update: Elder Law and Estate Tax Planning – Frequently Asked Questions
Planning for the future can feel like navigating a maze, especially when it comes to elder law and estate tax planning. Let’s break down some common questions to make this journey a bit smoother.
When Do Estate Taxes Kick In?
As of 2025, each individual has a federal estate tax exemption of $11.58 million, while New York State offers an exemption of $5.85 million. This means you can pass on up to these amounts without incurring estate taxes. However, without proper planning, a couple might miss out on maximizing these exemptions. For instance, without a credit shelter trust, the first spouse’s exemption could be lost, potentially exposing the estate to unnecessary taxes.
Can I Avoid Estate Tax by Naming Beneficiaries on My Accounts?
Simply adding beneficiaries to your accounts doesn’t sidestep estate taxes. While it might help assets bypass probate, it doesn’t exempt them from estate taxation. If avoiding taxes were that straightforward, the system wouldn’t function as it does.
What if the Estate Exceeds $11.7 Million?
For substantial estates, strategies like Limited Liability Partnerships (LLPs), Limited Liability Companies (LLCs), and trusts come into play. A common approach involves creating a business entity, funding it with assets like real estate or securities, and having children contribute a small percentage. This setup can lead to valuation discounts, reducing the taxable value of the estate. Over time, parents can gift their interest to their children, allowing appreciation to occur outside the taxable estate.
Can I Rely Solely on Medicaid Planning Instead of Long-Term Care Insurance?
Counting solely on Medicaid isn’t advisable. Medicaid should be viewed as the last resort, especially as eligibility criteria have tightened over the years. For example, the look-back period for asset transfers has extended from three to five years, with proposals to increase it further. Exploring long-term care insurance options is a prudent step to ensure comprehensive coverage.
How Should I Provide for a Child Who Needs More Help Than Others in My Will?
Striving for equality in your will can prevent potential conflicts among siblings. If one child requires additional support, consider setting up separate accounts or certificates of deposit (CDs) naming them as beneficiaries. This approach allows for equitable distribution without causing discord.
I Own My Home and Live There with My Second Husband. How Can I Protect Him If I Die First?
Instead of bequeathing the house outright, granting your spouse the right to occupy the home upon your death can be a wise move. This ensures they have a place to live without the risk of the property eventually passing to individuals outside your intended beneficiaries.
Does ‘Irrevocable’ Mean Nothing in the Trust Can Be Changed?
Not necessarily. A well-drafted irrevocable trust can allow you to retain certain powers, such as removing and replacing trustees or modifying beneficiaries. If your house is in the trust, it can still be sold with your written permission. These flexibilities ensure the trust serves its purpose while adapting to changing circumstances.
Conclusion
Elder law and estate tax planning are intricate fields, but understanding the basics can empower you to make informed decisions. Consulting with experienced professionals can further tailor strategies to your unique situation, ensuring your assets and loved ones are protected.
