Elder Law and Asset Protection Strategies
Effective February 8, 2006, the United States Congress enacted the Deficit Reduction Act of 2005 and modified the asset protection strategies available to its citizens entering nursing homes. It took New York State quite some time to implement the new law and still more time to train its employees on how to properly apply the new rules to Medicaid applications. During the summer of 2007, Lacy Katzen LLP’s Elder Law attorneys witnessed consistent and reliable application of its strategies and wishes to debunk common myths related to what those entering nursing homes can and cannot do to protect their assets.
Myth #1: IRA’s, 401(k)’s, SIP’s and other qualified funds have to be sold or liquidated before my spouse or parent can qualify for Medicaid. This is false. We routinely and without exception protect these important assets for all of our clients.
Myth #2: If my spouse enters a nursing home I must spend all or substantially all of my assets on his or her care before my spouse will be eligible for Medicaid. This is false. There are numerous, lawful, ethical and proven ways that the healthy spouse can retain all or substantially all of the couple’s assets without in any way, adversely affecting the spouse’s quality of care or quality of life.
Myth #3: If my single mother or father is entering a nursing home (or if my mother or father is already admitted to a nursing home), my parent is obligated to spend all but $4,350 on their care before Medicaid will pay for his or her care. This is false. A single parent can now keep $13,050 (this was just increased from $4,350) and can lawfully protect between 40% and 60% of their remaining assets.
Myth #4: The contract I signed (or the contract my spouse or mother or father signed) states that I must spend all of my assets on my care before I can apply for Medicaid or the nursing home will force me to leave. This is false. The nursing home admission contract simply states that the applicant (and his or her agents) will do nothing that adversely affects qualifying for Medicaid upon the exhaustion of his or her assets. In the Elder Law Planning Group at LacyKatzen, LLP, we assist our clients in protecting their assets in the face of ruinously expensive long term care costs and guide them through the application process. Nursing homes must provide equivalent care to Medicaid eligible and private pay clients. It is for this reason that Congress made rules that allow for lawful asset protection strategies finding that it would be unfair to penalize those who worked, paid their taxes and managed to save by requiring them to spend all of their assets on nursing home costs.
Elder Law attorneys at Lacy Katzen LLP are committed to maximizing the autonomy and independence of our seniors as they age in the community. We have developed a solution to the often asked question, “What can we do to protect our assets should one of us end up in a nursing home”? We are strong supporters of the use of long term care insurance as an effective asset protection strategy, but we know that many of our senior clients do not own this insurance product. If you have questions and want to know more about these lawful, asset protection strategies, feel free to contact the attorneys at Lacy Katzen LLP, 130 East Main Street, Rochester, New York 14604, 585-454-5650.
Fundamentals of Real Property Taxation in New York
The wide ranging impact of New York’s system of real property taxation is well known: these taxes affect a variety of property owners, as well as local governments and school districts throughout the State. Still, the details of the assessment process remain a mystery to many. A comprehensive analysis, including a step-by-step guide to specific, technical procedures, is beyond the scope of this article. Rather, the discussion below features selected issues of interest to taxpayers, municipalities and school districts alike.
Overview of New York State’s System of Real Property Taxation
If you find real property tax issues to be complex, you are not alone. Even the New York State Office of Real Property Services (ORPS), on its homepage, states that:
New York’s property tax system is arguably the most complex and confusing system in the nation. [ORPS] is working to improve the system’s equity, efficiency and transparency on behalf of taxpayers and taxing jurisdictions.
www.orps.state.ny.us, under “Reforming New York’s Property Tax System.”
Real property taxes are administered mainly at the municipal level, but these local efforts are overseen by ORPS, an independent agency within the Executive Department of New York State. The New York Real Property Tax Law (RPTL), among other things, establishes a State Board of Real Property Services (the “State Board”), which is comprised of five members appointed by the Governor, with the New York State Senate’s advice and consent. Under the Real Property Tax Law (RPTL) the State Board’s powers and duties include the “general supervision of the function of assessing” throughout the State.
ORPS’ Executive Director (who is also the State Board’s Executive Officer and Secretary) effectuates State Board policies and other “powers and duties” that the State Board may delegate. As a result, ORPS has significant responsibility for policy. ORPS’s website is an excellent resource for a variety of real property tax issues in New York State, including information and data on localities, e.g., organized by county, city, town and village.
Many local entities such as schools, counties and “special districts” (that provide services such as water, lighting and public safety) depend on real property taxes, but the actual work of assessment — that is, official annual valuations of all properties in a particular jurisdiction — is done by the “assessing unit.” Most often, this is a city or town but in some cases it will be a village or county.
The calendar governs important parts of our real property tax system. Many dates below are established by State law, but specific dates vary by municipality. Accordingly, taxpayers should contact their local assessors to ascertain precise dates.
Valuation Date: Most taxable real property in New York State is valued as of July 1 of the preceding year. For example, most real property on the 2008 assessment roll will be valued as of July 1, 2007. Until a few years ago, the Valuation Date was January 1 of the current year. In December of 2004 however, the State Legislature changed the Valuation Date to July 1 of the preceding year, in part to make the timing of valuations more uniform and consistent among municipalities, as many cities and towns base assessments on appraisals from the prior year. The Valuation Date is important to most property owners and local officials because it is the date as of which property on an assessment roll is valued.
Taxable Status Date: The taxable status (including condition and ownership) of real property in most cities and towns is determined annually as of March 1. Whether a particular parcel of real property is taxable or exempt, in whole or in part, is determined as of this date. In other municipalities, the Taxable Status Date can differ, and may be determined by local law. Again, you should contact your assessor to confirm dates and other important details. This date is important where, for example, there have been changes to the realty (including the construction or demolition of buildings or other taxable improvements), but for many, the Taxable Status Date is important principally because it is the deadline by which applications for exemption must be filed.
Tentative Assessment Roll: This is the date by which assessors complete, certify and file a roll with proposed assessments for each property in a particular assessing unit. Notices of changes in assessment or taxable status are usually mailed to property owners, but the best practice for anyone considering an assessment challenge is to take advantage of the opportunity provided for public inspection of the Tentative Assessment Roll.
Grievance Day: Generally, this is the last day for property owners to file formal administrative complaints (commonly known as “grievances”) seeking reductions in their tentative assessments; this is also the day that local Boards of Assessment Review (BARs) meet to hear assessment complaints. Taxpayers should contact their local assessor for the schedule and other details of the grievance process, as requirements vary by municipality. In addition, if a BAR requests additional documentation or other information, the taxpayer should make a diligent effort to comply fully, including, if necessary, requests for reasonable extensions of time. Even if the taxpayer does not have (and cannot reasonably secure) information requested by a BAR, the taxpayer should make that clear, as a willful failure to respond to BAR requests can preclude taxpayers from challenging their assessments later in court.
Formal rules and informal practices vary widely but both the municipality and taxpayer often benefit from resolutions that are negotiated before the assessment roll is finalized. The administrative grievance is often the best opportunity for these kinds of resolutions. Lacy Katzen LLP has experience representing both taxpayers and municipalities in this appeal.
Judicial Challenges to Assessments
Of course, not all valuation disputes can be resolved through grievances or negotiations. For taxpayers wishing to bring legal actions challenging their assessments, a threshold issue of critical importance is timing: these proceedings, which are authorized by Article 7 of the Real Property Tax Law and are commonly known as “Article 7” or “real property tax certiorari” actions, must be filed withinthirty (30) days after the final completion and filing of the assessment roll. (Under the statute, the roll is not considered finallycompleted and filed until the later of: the last day set by law for the filing, or when notice of the filing is given as required by law.)Most town assessment rolls are finally completed and filed on or about July 1 of each year. Article 7 proceedings against these townsmust then be commenced by or before July 31. This deadline is among the shortest statute of limitations provided by law, and is just one example of the technical requirements in the niche area of real property tax certiorari.
Costs are another important consideration. To start such a proceeding requires several hundred dollars just for out of pocket disbursements such as fees for filing and serving the pleadings. Adding attorney’s fees, the cost of commencing litigation will easily exceed One Thousand Dollars ($1,000.00). Of course, municipalities also incur costs to defend these proceedings, meritorious or not.Thus, negotiated resolutions early in a lawsuit often are in the best interests of both parties. This is especially true when you consider 24that most real property tax certiorari actions last several years, and a taxpayer wishing to continue the case from year to year must file a new proceeding (thereby incurring the associated costs) each year.
Real property tax litigation depends heavily on experts — usually, real property appraisers, though in complex cases, other experts (such as environmental consultants or engineers) may be required. The effective use of expert witnesses is beyond the scope of this article, but it suffices to say that opinion evidence from professional appraisers can make or break a case. Many times, a lessformal (and thus less expensive) analysis from an appraiser can facilitate a resolution before parties incur the substantial costs – and risks – of trial.
Title 1-A of the RPTL provides for small claims review of properties that are, among other things: (1) improved by a one, two or three family owner-occupied structure used exclusively for residential purposes, or (2) if unimproved, too small (as determined by the assessing unit) to contain such structures. Other requirements apply, including grievance filing. In fact, BARs are required, upon determining grievance complaints, to provide eligible taxpayers with notice of their rights to, and instructions for, small claimsassessment review.
In June, the Commission on Property Tax Relief issued its Preliminary Report of Findings and Recommendations. The proposal, which has been widely covered in the media and on ORPS’ website, includes a call to cap annual growth in the property tax levy at the lesser of 4%, or 120% of the Consumer Price Index. The proposal also recommends a STAR exemption “circuit breaker”based on individual taxpayers’ ability to pay, mandate relief and other changes in State law e.g., to reduce costs. Governor Patersonhas introduced a tax cap proposal, but substantive action will likely have to await the next legislative session. If you have any questions please contact John Refermat, 585.324.5762.
Use our Personal Touch and Proven Experience for your Personal Injury Issues
Since the formation of Lacy Katzen LLP in 1950, the firm has represented thousands of injury victims in courthouses throughout New York State. Lacy Katzen LLP has experience in all areas of personal injury practice. We have represented accidentvictims killed or injured in car, motorcycle and trucking accidents, with broad experience in proving that the defendant driver was at fault. We employ investigators, accident reconstruction experts, life care planners, simulations and drawings to establish liability as well as damages.
Lacy Katzen LLP represents victims of medical error in meritorious medical negligence cases and nursing home neglect cases. Our firm carefully investigates any claim before bringing suit, assisted by medical consultants and nurses. Lacy Katzen LLP hassuccessfully represented individuals in a wide range of medical negligence cases, including surgical error and the failure to timely and accurately diagnose serious medical conditions. Lacy Katzen LLP is committed to the highest level of professionalism in these cases.
Lacy Katzen LLP represents those injured as a result of a fall or other type of accident on someone else’s property, if the injury was caused by the fault of the owner or the occupier of the property. The firm has handled hundreds of premises liability cases anddiligently prepares using investigators, architects and engineers to establish liability.
Lacy Katzen LLP has extensive experience in construction accident cases. The New York State Labor Law affords construction workers varying degrees of protection for construction related injuries, including falls from scaffolds or elevated work platforms causing injury.
Lacy Katzen LLP has successfully represented those injured as a result of defective products. We have successfully prosecuted product liability cases against major corporations. Product liability claims require not only experience but a commitment to meticulous investigation and research and the use of engineers and highly trained specialists to establish the defective nature of the product causing injury.
Please contact Peter Rodgers at 585-324-5707 or Jacqueline Thomas at 585-324-5717
Charitable Giving — the Best of Both Worlds
Do you have a special connection to a church, temple, school, or other charitable organization? Have you ever thought of providing for that organization in your estate plan, but were concerned that leaving it money would hurt your spouse, children or other loved ones? Of course, providing for your loved ones is paramount, but options exist to provide you with the best of both worlds. In addition to doing good for your chosen organizations, you may receive some significant income or estate tax deductions for your charitable intent.
A charitable remainder trust combines the tax benefits of charitable giving with the ability to provide your loved ones with a source of income. In this type of trust, assets such as stocks, bonds, or retirement plans are transferred to the trust without any income tax consequences. For example, if you own stock having significant appreciation, selling it would require you to pay capital gains on the appreciation. Alternatively, if you transfer the stock to the trust, it can sellthe stock without having to pay capital gains tax. How does your beneficiary benefit from the trust? The trust is required to make annual payments to the beneficiary (which can be more than one person), either for the life of the beneficiary or for a fixed number of years, up to 20 years. At the end of the beneficiary’s life or the fixed number of years, whatever remains in the trust is distributed to your selected charities.
The annual payment may be calculated in one of two ways. The first option, an annuity payment, pays the beneficiary a set percentage of the amount contributed to the trust. For example, if the stock mentioned above is worth $100,000 when contributed to the trust and the trust requires a 5% annuity payment; annual payments of $5,000 will be made to the beneficiary. The second option, a unitrust payment, pays the beneficiary a fixed percentage of the trust’s value at a fixed date each year. Because of this, the annual payment will fluctuate as the values of the trust’s assets fluctuate.
A charitable remainder trust may also provide you with income or estate tax deductions for a charitable contribution. If you create and fund a trust during your lifetime, you will be eligible for a charitable deduction on your personal income tax return. Alternatively, if you instead choose to fund a trust at your death, your estate is eligible to takea charitable deduction on your estate tax return. In both instances it is necessary to calculate the deduction using a complex IRS formula that takes into account the annual payment percentage, the beneficiary’s life expectancy, and the IRS’ expectation of future interest rates.
The charitable remainder trust is only one of many possibilities that combine the goodwill of charitable giving with the security of providing for loved ones. If you wish to learn more about charitable giving options or other estate planning options, both Karen Schaefer, at 324-5718, and Tim Muck, at 324-5727, of our Trusts and Estates department are available to discuss your charitable and personal estate planning needs.
Do you have employees that earn all or part of their income on a commission basis? If you do, you need to make sure you are in compliance with Section 191 of the New York State Labor Law. Section 191 was amended in October 2007 to provide that employers must have a written agreement outlining the terms of a commissioned salesperson’s employment.
The agreement should clearly lay out the formula for calculating commissions, when commissions are payable, if there are any offsets, and how the commissioned employee will be paid commissions on termination. In the event that there is no written agreement in place, the presumption will be that the terms an employee presents are the correct terms.
Notwithstanding this amendment to the Labor Law, clearly defining an employee’s compensation in writing is a sound business practice. If there is ever a dispute, you, as an employer, will have documentation to support your position.The written agreements should be maintained with an employee’s files and the law requires them to be maintained for a period of three years.
If you are in need of assistance in preparing a commission or employment agreement or would like an attorney to review an existing agreement to ensure compliance, please contact either Jennifer L. Chadwick, Esq., 585-324-5721, or Matthew A. Ryen, Esq., 585-324-5701.
News With The Firm
Mike Schnittman was awarded The President’s Award for 2008 at the annual Monroe County Bar Association Installation Dinner on June 18. This is one of the of the most prestigious awards from our Bar Association. The award is in recognition of Mike’s outstanding work in the Bar Assocation as a Trustee, Chair of the Professional Performance Committee and President of the Volunteer Legal Services Committee, among other things. Mike has been an active member of the Assocation for years.
Peter T. Rodgers was asked to give a talk on direct examination and cross examination of medical expert witnesses for the New York Academy of Trial Lawyers in April 2008.
Michael Schnittman and Timothy Muck gave seminars to the Monroe County Bar Association. Michael’s topic is “Debt Collections: What to do When the Check is Not in the Mail.” Tim’s topic is: “Reading Financial Statements.”Michael Schnittman has been elected to the President of Volunteer Legal Services Project.
Lisa Arrington was a panelist at the GRAPE (Greater Rochester Area partnership for the Elderly) workshop and annual dinner meeting speaking on the topic of Medicaid in “plain English” held this year at the Burgundy Basin Inn on June 4th. GRAPE is an organization dedicated to improving the quality of services for older people in our community. The keynote speaker was R. Carlos Carballada Commissioner of Economic Development, City of Rochester. Lisa is chairperson of the by-laws committee for GRAPE.
Louis A. Ryen has had one of his images accepted to be on permanent display in the Franco-American Institute gallery in Rennes, France.