Asset protection is an area of interest for clients seeking to preserve their assets from future creditors. There are many types of potential future creditors you may wish to protect yourself against. Creditors can arise in context of divorces, bankruptcies, and of course the classic creditors, such as when a doctor or landlord gets sued for malpractice or negligence. Asset protection also comes up in context of Medicaid (yes, even Medicaid can be a creditor). Or you may wish to protect your loved ones against their potential future creditors.
The important thing to keep in mind is this: successful asset protection requires that you have done your asset protection before there are actual creditors (including creditors who haven't knocked on your door yet, but you have reason to think they are coming). Therefore, if asset protection is on your mind, you should initiate it sooner than later.
Asset protection can be rather basic, and it can be complex. The type of asset protection we recommend to our clients typically depends on two aspects: (a) the value and the types of assets you wish to protect, and (b) the level of protection you require. Therefore, as part of our asset protection analysis, we consider not only the use of companies and trusts to protect your assets – we also consider the state in which to establish your company or trust. This is particularly important because certain states provide better protection against creditors compared to New York, and so we will discuss the benefits and drawbacks of establishing asset protection entities in states such as Delaware or Nevada.
Furthermore, certain states provide creditor protection to the settlor (or grantor or creator) of the trust even if he or she remains a beneficiary of the trust. This is not possible in New York, because it is against New York public policy to provide creditor protection to somebody who creates a trust, funds it with his own assets, and continues to be a beneficiary of the trust. However, depending on how the trust is drafted, and depending on certain qualifications, this type of protection is available to you if you set up a trust in another state -- even if you continue to benefit from the trust.
At Abraham Mazloumi & Associates, our goal is to educate you so that you can make an informed decision.
Trusts & Estate Planning
An estate is comprised of all assets that a person may own during his or her lifetime regardless of how large or modest it may be. Every person wants to control how those assets will be managed for their own benefit and the benefit of those who will inherit. To ensure that those desires are carried out, a person needs to provide clear instructions indicating who will receive, what the beneficiaries will receive, and when they will receive it.
We recognize the importance of making an effective estate plan in order to achieve our client’s financial and personal objectives. An effective plan encompasses the use of Asset Protection and Estate Planning techniques, such as Wills and Trusts that facilitate the process of transferring assets to the loved ones.
Wills are an effective device for clients who want to leave, after death, their property to the people they choose and in the manner they wish. Also, in a will the testator chooses a trustworthy person who will manage the estate after death in accordance with his or her instructions.
Without a will, the after death distribution of assets would be according to the New York State Intestacy Laws, which may differ from the deceased's desires. Also, be aware that when a person lacks of a will, the court is empowered to choose and appoint a someone to manage and distribute the estate on behalf of the deceased.
By contrast, a will enables a person to set the rules for the distribution of assets and ensures that those would be transferred to their desired beneficiaries, which is more convenient and less costly. Keep in mind the flexibility of this device that may be modified at any time during the testator’s life.
Trusts are a legal tool often used in lieu of wills for estate planning purposes for their flexibility and financial advantages. A trust is a fiduciary agreement by which a person called the “Grantor” or “Settlor” transfers ownership of one or more of its assets to a third party called “Trustee” in order to manage the assets for the benefit of the beneficiary.
A Trust allows the during life or after death distribution of assets in accordance with the client’s objectives, and may reduce or even eliminate estate and income taxation. A trust also avoids wasteful probate proceedings and provides continuity in the management of assets. It is to note that the beneficiary may be the same person who constitutes the trust.
Our experience and professionalism enable us to provide our clients with personalized legal services to achieve their goals according to their wishes. We carefully incorporate the financial prospective of our clients in the preparation of estate plans that ensure the achievement of those desires. Be aware that each client has different needs, whereby each estate plan is unique and specially designed.
The trend during a person's life is to work hard to increase their assets, to secure a stable financial future for themselves and their loved ones. Therefore, it is paramount for our firm to provide our clients with a complete overview of the different legal strategies that can be used for the purpose of preserving their assets.
Wealth preservation is the approach we have adopted to protect our clients’ assets and minimize the risks of financial losses. Therefore, we advise our clients in the construction of an outstanding estate plan that best ensures their wealth.
Tax planning is the art of adjusting our clients' affairs, their businesses and other investments according to the benefits provided by the Federal and New York tax law regulations. We accurately use the legal tax deductions and tax exemptions in order to protect the wealth of our clients.
As part of our tax planning approach we offer our clients a complete overview of their financial situation, and we build for them the tax plan that best suits their needs to maintain the wealth of their heritage.
Our taxation practice provides our clients with an overall plan that reduces or eliminates estate and income taxation. We specialize in structuring tax efficient strategies that can benefit companies and individuals in minimizing their tax liability.
We advise clients on all aspects related to the formation and operation of businesses and their legal and tax implications, to enable clients to choose the business type that best suits their enterprise.
The selection of the appropriate business company will depend on numerous factors. However, the main factor for most companies to consider is to shield owners from personal liability for the company's affairs. Be aware that operating a business that is not set up to provide limited liability means that the owners' personal assets can be reached by the business’s creditors. This unwanted situation can be avoided by choosing the appropriate company.
We assist our clients in drafting the agreements that will provide the guidelines for the company's management. These documents must be drafted carefully as they govern all the company’s operations, and also provide the instructions of how owners will share profits and losses, and make business decisions.
There are several types of companies that can be formed according to the needs and interests of our clients' business such as corporations, partnerships, limited liability companies, and non-profit corporations. Thus, it is important that prior to incorporating a business our clients have a comprehensive understanding of the tax implications, the liability of the officers or members, and the risk of loss.
We offer our expertise and valuable strategic mind to provide our clients with an overview of the implications of each company's structure, which enables clients to make an educated decision of the business that better fits their expectations.
Regardless of whether the client operates an existing business, or plans to open a new one, or wants to merge with another company, keep in mind that the success may depend on obtaining the proper legal advice.
Advantages of Using Elder Law Attorneys
The Difference between Hiring an Elder Law Firm Instaed of Relying on Non-Attorney “Medicaid Consultants”
We are Elder Law attorneys, with a focus on the needs of elderly clients. We are not just unlicensed “Medicaid Consultants." There are numerous “Medicaid Consultants” that are not attorneys and yet charge significant fees for preparing even basic Medicaid applications. The distinction between an elder law attorney and a “Medicaid Consultant” is important, because the Medicaid laws are complex and constantly changing. We know the latest laws, and we know how to interpret and apply them to your advantage. Providing legal advice is not something non-attorneys can or are allowed to do.
Furthermore, often it becomes necessary or helpful to do strategic and complex Medicaid Planning. For example, is the client better off with transferring assets to a trust? This may require a careful analysis of various legal issues. Strategic Medicaid Planning may involve sophisticated steps either to qualify for Medicaid or to protect your assets against future liens or estate recovery by New York State. When this type of Medicaid Planning becomes necessary (or advisable), “Medicaid Consultants” will often refer you to outside attorneys, because Medicaid Consultants are prohibited from engaging in the unauthorized practice of law. And before you know it, you may be left with having to pay two (2) entities (a Medicaid consultant and a law firm), having to obtain information from or report to two (2) entities, and when things don’t go according to plan, having to figure which of the two (2) entities is in charge of fixing your problem.
For example, occasionally the local Department of Social Services (DSS) or the Human Resources Administration (HRA) incorrectly denies a Medicaid application, or makes a determination that is not as advantageous as it should have been under the law. In that case, we rigorously intervene on our client’s behalf. And if that does not swiftly resolve the case in our client’s favor, we may even request a Fair Hearing.
At Abraham Mazloumi & Associates, you will deal with our staff at every step of the way, and we will guide you at every step of the way – especially when it comes to address any legal issues that may (and often do) arise. See also the following advisory from the New York State Bar Association. https://www.nysba.org/Sections/Elder/Articles,_Reports_and_Resources/Why_Your_Medicaid_Application_Should_Be_Entrusted_to_an_Elder_Law_Attorney.html
What are the typical situation where you may wish to apply for Medicaid?
Generally speaking, there are three (3) common situations where our clients need Medicaid.
Situation #1: you may require Medicaid because you just don’t have any health insurance. This could be a result of you being ineligible for Medicare or because you cannot afford private health insurance. In that case, you may need to obtain Medicaid as your primary health insurance provider.
Situation #2: you may require Medicaid because you have a chronic illness or disability and you need long-term care services (as compared to short-term rehab). Long-term care could mean you require the help of a home care aide for more than 120 days, or you may need nursing home care for more than 120 days. In other words, you need permanent care. Unfortunately, Medicare does not cover long-term care. If you require long-term care, you are often left with three (3) choices: (a) pay privately, (b) use your long-term care insurance, or (c) apply for Medicaid. For many of our clients applying for Medicaid is the only viable option, because they cannot afford to pay privately and because they don’t have or cannot afford long-term care insurance.
Situation #3: you may already have Medicare and a Medigap policy/Supplemental Plan, which pays the Medicare deductible and the 20% coinsurance. However, you might find the Supplemental Plan is too expensive, and you want to apply for Medicaid so that it (rather than your Supplemental Plan) would pay for the Medicare deductible and the 20% coinsurance. But before dropping your Supplemental Plan in favor of Medicaid you need to carefully analyze your health insurance needs, because despite its expense it is often advantageous to have a Supplemental Plan. For example, in order to be able to rely on Medicaid to pay for your Medicare deductible and the 20% coinsurance, you need to go to physicians who accept both Medicare and Medicaid.
Assuming you need Medicaid, here are some of the rules and issues to consider:
First, assuming you are 65 years of age or older, certified blind, certified disabled, you may already qualify for Medicaid because your monthly (countable) income is below $825 ($1,209 for couples) and your countable resources are below $14,850 ($21,750 for couples). In that case we help our clients (or perhaps more often, their busy caretakers), with collecting the required documents, preparing the Medicaid application and navigating the Medicaid system to ensure that Medicaid benefits can be obtained as swiftly as possible. Our ability to liaise with Medicaid personnel on your behalf often makes a difference.
Second, if you do not (or not yet) qualify for Medicaid because your monthly (countable) income exceeds $825 ($1,209 for couples) or your countable resources exceeds $14,850 ($21,750 for couples), you need to take various steps to qualify. In that case we advise our clients on how they may legally shelter their income, their resources, or both. For example, we might advise our clients to set up a pooled supplemental needs trust (aka pooled trust or pooled income trust) for the income, or we may advise them to establish an irrevocable Medicaid asset protection trust for some of their assets. Depending on your situation, you may need to shelter only your income, only your assets, or both. Of course, the more complex your situation is, the important it becomes to carefully devise a nuanced Medicaid plan. And that is what we do.
Why Medicaid Planning may be advisable even if you already qualify for Medicaid or already have Medicaid
There are two (2) types of Medicaid: Community Medicaid and Nursing Home Medicaid.
If you need Medicaid and wish to live in the community, such as in your home, then you need Community Medicaid. Community Medicaid does not have a look-back penalty period, which means you can transfer your assets today and apply for Medicaid benefits shortly thereafter. However, asset transfers you make today may affect (or even inhibit) your eligibility for Medicaid nursing home benefits in the future. The reason for this is because Medicaid nursing home rules have a 5-year look-back, and transfers made during that look-back period can trigger a transfer penalty. This means that Medicaid would not pay for your nursing home bill for a certain amount of time, until the penalty-period has run. And this could be months or even years, depending on the value of the assets you transferred. Because nursing homes can cost $15,000 per month, the ramifications of not qualifying for nursing home Medicaid benefits can be financially devastating. Therefore, it is important that you don’t make hasty decisions when it comes to transferring assets to qualify for Community Medicaid, without fully understanding and contemplating how certain transfers today may adversely affect you in the future.
Another reason (and there are many more) why you may wish to do Medicaid planning is when you own your home – be it a house, condo or coop apartment. Yes, you can qualify for Community Medicaid even if you own your home. In other words, you don’t necessarily have to transfer your home to qualify for Medicaid. However, this gives many people a false sense of security, because you may not be aware of the following: when you die, the Department of Social Services has the right (and in our experience usually will) seek from the deceased Medicaid recipient’s estate reimbursement for services provided by Medicaid. And depending on the level and length of services, this can amount to tens of thousands of dollars, payable by the estate. This procedure of making a claim against the estate is called “Estate Recovery.” This means that when the home gets sold, some or all of the sale proceeds have to paid to Department of Social Services. So if your goal is to protect your home for your loved ones, it may be prudent to include your home in your Medicaid planning.
At Abraham Mazloumi & Associates, we focus on the big picture – taking into account not only the immediate needs of our clients, but also planning for the future.
 If you have to pay privately, you can expect to pay a home care agency approximately $24 per hour. This means that even if you require “only” 5 hours per day of home care services, this amounts to $3,600 per month.
Guardianship is the process in which the court appoints a person known as the "Guardian" to act on behalf of another person who is unable, or has lost the ability to manage his or her regular business or to make health care decisions.
While the future cannot be predicted, it is worth being prepared for the unexpected. We advise our clients on the various ways in which the process of appointment of a guardian can be avoided through an advanced estate planning. Having drafted certain legal documents, such as a power of attorney, a health care proxy, or a living will enable our clients to be represented by the people they want and most importantly according to their terms.
Health Care Proxy, it is a document used to appoint an agent to make medical treatment decisions on behalf of the principal based on the person’s wishes.
Living Will, it is a document that contains instructions about life sustaining medical treatment in case a person loses capacity to make such decisions. This document can provide guidance to agents appointed under health care proxy regarding a person’s wishes with respect to medical treatment in context end-of-life situations.
Power of Attorney, it is a document that gives the authority to another person (the agent) to act and make decisions on behalf of the principal. The principal can give very specific and very broad authority.
Be aware that these legal documents require special language in context of Medicaid planning and Estate planning. Thus, documents that are not properly drafted that is to say do not have the necessary language, may prevent the individuals appointed to have the ability to make personal decisions on behalf of the person in need. We advise our clients on how to avoid these mistakes and also the need for guardianship proceedings.
Real estate is the area of law that covers people’s property rights of both commercial and residential property. We represent clients in all real estate transactions, and also, we advise them in handling the structure and terms of their real estate related matters at a local, national and international level.
Until a Last Will & Testament is admitted to probate, it has no effect: the provisions of the will cannot be followed yet, and the assets cannot be transferred yet. For example, if a will leaves money in the bank account to a beneficiary, he or she can’t necessarily just go to the bank and claim the money. Instead, the will may have to be probated. This is the process by which the Surrogate’s Court validates and gives effect to the decedent’s wishes as memorialized in the Last Will & Testament. The goal is for the executor to obtain “Letters Testamentary” from the court, which would authorize the executor to act and to distribute assets.
In the course of a probate proceeding, the court examines – or “tests” – the will. Court staff check the document itself to see whether there are any physical irregularities. For example, if there are holes for staples where there are no staples, or if the pages are out of order, or if a page is missing, the court will require an explanation at the very least and may even reject the will altogether if the irregularity is severe enough. The court staff then reviews the document to make sure it complies with all the statutory requirements: Is it signed at the end in front of at least 2 witnesses? Are the witness affidavits in order? Did the testator declare the document to be his or her will? If, for example, the witness affidavits are not in order, or are not present, then the court will require the witnesses to be examined. And if the testimony by the witnesses doesn’t satisfy the court that all the formalities of will execution were followed, the court can deny probate – even if no one else objects. As you can see, careful attention to detail is required both during the will signing, and then during probate.
At the end of the probate process, the court issues “Letters Testamentary” to one or more people, and that person, the executor, now has full authority to marshal the decedent’s assets, pay the decedent’s debts, and ultimately distribute the decedent’s remaining probate assets to the decedent’s beneficiaries.
Our legal services include the preparation of legal documents and court appearances required to properly handle probate proceedings. For clients wishing to avoid (or at laest reduce) the complexity of the probate procedures, our firm can discuss how a trust and other estate planning techniques may help to achieve that goal.