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  • Writer's pictureAlan D. Feller, Esq.

Tax Planning for New York Seniors: An Elder Law Attorney's Insight

I always think of my grandpa, Harry. Every morning, he would wake up at 3:15 am. By 3:30 am, he would be seated at the kitchen table while my surprisingly agreeable grandmother toasted either an onion roll or a corn muffin for him and slathered it with butter. Harry drank a coffee substitute called Bambu which I always found funny for some reason. Apparently, a doctor in the 1960’s counseled Harry to take it easy on the caffeine. By 4 am, attired in a brown 2 button or double-breasted suit, Harry would position a fedora atop his head and exit the apartment, fortified for another day of work. Harry’s working life spanned the late teens (that’s 1910’s) as a child helping out in his parents’ store to 1995 (a year before he died), when he was selling wholesale leather goods. Harry did not own a car, nor did he ever fly in an airplane. His annual one-week vacation in the Catskills was the singular leisure activity on his calendar (the man liked to play volleyball in the mountains). He had the same 11 books sitting in one row in the bottom shelf of his TV stand and ate one banana per day under the close supervision of my grandma. The money he earned had one purpose – to ensure the continuity and stability of his family.

Harry hated taxes. He was not shy about his disdain for taxation. As the story goes, Harry was engaged in some spirited anti-tax banter while seated for dinner in a large table within the main dining room of his favorite Catskill Hotel. His tablemates, many of whom he did not know, listened politely. After Harry’s rant petered out, my grandfather inquired of the gentleman sitting to his right what he did for a living. “I work for the Internal Revenue Service.” Following that curt reply, according to my grandma, she kicked him in the shins so hard he had to skip volleyball for the rest of the trip.

As a professional, I do not advocate for holding such extreme views on taxes. Elder care attorneys approach taxes carefully. We advise our clients to employ a CPA or experienced accountant to receive expert guidance. For itemizing filers, being aware of medical expense deductions that encompass a broad array of services and home improvements can save money for a family. Understanding the IRA distribution and beneficiary taxation rules, especially the 10 year rule is vital for planning purposes. Many of the asset transfers that are necessary for Medicaid and estate planning carry important tax implications, as well.

For example, one’s primary residence can be gifted and deeded outright to an adult child or gifted to a Trust. A straight gift to an adult child can be problematic because the adult child retains the parent’s original cost basis for the property. A home purchased for $30,000 in 1969 and sold for $680,000 in 2023 may be subject to a 15% and 20% long-term capital gains rate on that $650,000 gain. Property placed in a Trust with elements of control being retained by the parent homeowner often allows for a stepped-up basis following the death of the Trust creator. Using the same example and assuming the Trust creator dies in 2023, instead of the old basis ($30,000 from 1969) the new basis for the home would be the date of death value or $680,000. This means there would be no capital gains issue if the house is sold in 2023.

For more information on how taxes and elder care and estate planning intersect, contact the professionals at The Feller Group, P.C.



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