Trust, Estates & Elder Law Newsletter - 4th Quarter 2013

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O’Connell & Aronowitz Attorneys at Law

Trusts, Estates, and Elder Law Update Fourth Quarter 2013

Pictured above are the attorneys of our Trusts, Estates, and Elder Law Department, left to right: Matthew J. Dorsey, Esq. William A. Favreau, Esq. Heidi Dennis, Esq. Fred B. Wander, Esq. Jami Durante Rogowski, Esq. Not pictured: Brittnay M. McMahon, Esq.

In This Issue: • Could A Reverse Mortgage Be Right For You? • How To Choose A Nursing Home For Your Loved One • Year End Tax Tips • Meet Pamela Nichols, Esq. • Ask the Lawyer: Q&A On Reverse Mortgages • O&A Events • General Information about O’Connell & Aronowitz

A Primer on the Use of Reverse Mortgages Could a Reverse Mortgage be Right for You?

If you own a home, are struggling to pay your debts, or need to make a home improvement, a reverse mortgage may assist you in achieving your financial goals. A reverse mortgage allows you to draw from the equity in your home to obtain either a lump sum of cash, a monthly income stream, or a line of credit.

Reverse mortgages are available to individuals over the age of 62. In the event there is more than one homeowner, both individuals must be at least 62 years of age. Each borrower must participate in an educational seminar, which is required by the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA), to ensure his or her complete understanding of the program. Further, each borrower must meet the necessary credit requirements and all outstanding debts liened against the home must be satisfied prior to the reverse mortgage closing.

After the borrower’s home is inspected and deemed to satisfy FHA guidelines, the loan may be closed and the proceeds can be used in any way the borrower sees fit. Quite commonly, the borrower uses the proceeds for medical expenses, home improvements, or general debt payments.

All proceeds from a reverse mortgage are non-taxable since they are not considered to be income. The borrower continues to be responsible for the real estate taxes Saratoga Office: 1 Court Street Saratoga Springs, NY 12866 518.584.5205 Fax: 518.584.5441

and homeowner’s insurance payments associated with ownership of the home.

The borrower is not obligated to pay any part of the mortgage loan during his or her lifetime. Repayment is only required upon the borrower vacating the home, although the homeowner may repay any or all of the debt at any time without a pre-payment penalty.

Essentially, the outstanding debt becomes payable upon the death of the borrower, the sale of the home, or in the event the borrower decides to move to another residence. Lastly, all reverse mortgages are “non-recourse,” which means the borrower does not have any personal liability in connection with the loan.

Reverse mortgages are not the solution for every individual. It is critical to seek advice from legal counsel and an accountant so that an informed decision can be made. Thereafter, a call to a licensed loan originator will begin the process. If you are interested in learning more about whether a reverse mortgage is right for you, please contact the attorneys of O’Connell and Aronowitz at the office closest to you.

Thank you to Richard Norelli of Homestead Funding for his contributions to this article.

Mr. Norelli assists borrowers with reverse mortgages and may be contacted at (518) 292-1684.

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Albany Office: 54 State Street Albany, NY 12207 518.462.5601 Fax: 518.462.2670

www.oalaw.com

Plattsburgh Office: 206 West Bay Plaza Plattsburgh, NY 12901 518.562.0600 Fax: 518.562.0657

New Developments in Trusts, Estates, and Elder Law Year End Tax Tips to Consider

What Should You Do Before December 31st?

With year end fast approaching, here are some tips to consider before December 31st:

IRA and 401(k) Distributions: If you’re over 70 ½, remember that you need to take your minimum required distribution for 2013. You have until December 31st to take your distribution. Remember that a failure to timely take your distribution results in a penalty of 50% on the minimum amount you should have taken!

IRA Catch Up: If you’re 50 or older, you can make “catch up” contributions to your IRA or 401(k) that exceed the otherwise permissible maximum amounts. You can put an additional $1,000 into your IRA and an additional $5,500 into your 401(k).

As with retirement contributions in general, this will reduce your 2013 taxable income.

Harvest Gains or Losses: If you expect your income to rise next year, you

may want to consider selling some of your appreciated stocks so that you can potentially pay tax on the gain at a lower rate. Conversely, if you expect your income to drop next year, you may want to consider selling some of your losing stocks in order to potentially take capital losses against your higher taxed income this year. Take the opportunity now to talk to your accountant and investment advisor on what is best for you.

may be the time to make that gift. Gifts made in 2013 will provide deductions against the higher income you receive this year. If you’re not sure which charity to give to, you can consider giving to a donor advised fund in order to defer the decision on recipients to a later time. Charitable deductions apply if you itemize your deductions.

Annual Gifting: If you’re considering gifting some of your assets to reduce your taxable estate, the annual exclusion amount (the amount you can gift without filing a gift tax return) is $14,000 for 2013. If you haven’t made contemplated gifts, now is the time before you lose your $14,000 exclusion for this year.

Roth IRA Conversion: If your income is lower this year and you expect it to increase in the years to come, you may want to consider converting your traditional IRA into a Roth IRA. You’ll pay income tax on the conversion, but at your lower 2013 rate. Roth IRAs provide important benefits, such as tax free withdrawals and no minimum required distributions for the original owner.

Charitable Gifting: If you anticipate your income decreasing next year, due to retirement or other factors, and you’ve been considering a gift to charity, now

At O’Connell and Aronowitz, the attorneys in our Tax Law Group would be happy to discuss any of these strategies with you.

How to Choose a Nursing Home for Your Loved One Learn About Ratings Systems and How They Work

Choosing a nursing home for a loved one can be a very daunting task. Thankfully, both the state and federal governments have nursing home rating systems available online.

The federal government rating system can be found at www. medicare.gov/nursinghomecompare/search.html - which rates approximately 15,000 nursing homes that are Medicare and Medicaid certified. The federal rating system is based on a one to five star ranking linked to three factors: health inspections, staffing, and quality measures.

At the federal government’s nursing home comparison site, you can search for nursing homes in your zip code, city, or state.

The search will yield all homes within that location, with their starred ranking.

New York State also offers an online nursing home ranking at http://nursinghomes.nyhealth.gov. The New York site can be searched by county or geographic region, i.e. the “Capital Region”.

The New York site includes four separate subject areas. The first subject area is an eighteen part quality measure survey addressing issues such as weight loss, infection control, and the proper administration of vaccines. The second subject area includes a complaint and incident summary report, which details

the number of complaints received regarding the facility, as compared to statewide averages. The third subject area contains details of the facility’s annual on-site inspection reports, as conducted by the Department of Health - which note the number and nature of any deficiencies found. The fourth subject area contains information regarding any enforcement actions that have been taken by the Department of Health against the facility.

Both the federal and state websites also give basic information about the facilities, such as address, contact information, and number of beds. Information regarding bed availability needs to be obtained directly from the facility.

While the federal and state resources are great starting points to learn about nursing home facilities in your area, there is no substitute for visiting the facility yourself and talking to the administrator and the staff. Most administrators are happy to arrange a tour and answer any questions that family members might have about their loved one’s prospective new home.

The experienced Elder Law attorneys at the O’Connell and Aronowitz office near you can provide assistance with the nursing home admission process, including the review of admissions agreements and facilitating applications for Medicaid coverage.

O’Connell & Aronowitz • Attorneys at Law Since 1925 • www.oalaw.com

Meet Pamela Nichols, Esq. Pamela Nichols is the managing partner at O’Connell & Aronowitz, and practices primarily in the firm’s personal injury litigation department.

Pam serves clients throughout Upstate New York who have suffered a personal injury or lost a family member because of the negligent, reckless or intentional acts of others. As managing partner of O’Connell and Aronowitz, she has played a critical role in the litigation department’s overall success.

She was the driving force in obtaining a $9 million settlement in a complex product liability case and played a critical role in obtaining an $11 million verdict in the case of negligent care and treatment of sexually abused children.

Pam’s legal acumen and personal drive to enhance the local community are exemplified in her selection to The Injury Board, a community of personal injury attorneys committed to making a difference by helping people avoid injury and helping those who are injured get the assistance they need. She has spearheaded our firm’s distracted driving awareness campaign that brought the message of EndDD.org and The Casey Feldman Foundation to 8,000+ teens across New York State.

Pam lives in Niskayuna with her husband and children.

O&A Events Throughout 2014: Attorneys at O’Connell and Aronowitz are in their third year of volunteering their time to visit high schools, libraries and other civic groups to discuss distracted driving. In conjunction with EndDD.org and The Casey Feldman Foundation, this free presentation, created with teenagers in mind, brings this important message to the forefront, and is helping make our communities safer. For more information, or to schedule a presentation, please contact Meg Frisoni at: mfrisoni@oalaw.com November 17, 2013: Congratulations to Matt Dorsey who completed the Philadelphia Marathon this past November. Matt completed the marathon with Sarah Van Buren , who celebrated her 33rd birthday on the day of the race!

Congratulations...

O’Connell and Aronowitz is pleased to announce our newest shareholders, Michael McDermott and Kelly Mikullitz. Mr. McDermott, previously Of Counsel with the firm, is an integral part of our Criminal Defense practice area and serves as trial attorney for Environmental Injury and Lead Poisoning litigation. Kelly Mikullitz supervises our Environmental Injury and Lead Poisoning practice area.

Mike joined the firm in 2007 and has gained recognition for his criminal defense work in some of the Capital District’s most prominent criminal cases in addition to his role in litigating plaintiff’s personal injury cases with emphasis on representing children who suffered brain injuries as a result of lead poisoning. He previously served with the District Attorney’s office in Rensselaer and Albany Counties and remains a court-appointed special prosecutor in homicide cases. In addition, Mike is also an adjunct professor at Siena College and Southern Vermont College and has also lectured on varied legal issues for bar associations and several educational institutions. He is a graduate of Siena College and Albany Law School.

Kelly joined O’Connell and Aronowitz in 2005 and will manage our Lead Poisoning and Environmental Injury practice area in her new role as shareholder. She is a trusted legal advisor to families who have been impacted by the damages of lead poisoning and advocates for brain injury victims through her commitment to the Brian Injury Association of New York State.

Kelly is a cum laude graduate of Skidmore College and Albany Law School. She is a member of New York State Trial Lawyers Association, Brain Injury Association of New York State and the Albany County, Rensselaer County and Capital District Women’s Bar Associations.

O’Connell & Aronowitz has been providing a broad range of legal services since 1925, with offices now in Albany, Saratoga Springs, and Plattsburgh. This newsletter is intended to provide general information about our firm and its services in the area of trusts, estates, and elder law. This newsletter is not legal advice and does not create an attorney client relationship with the reader or any other person. Legal advice may be rendered by the attorneys of O’Connell & Aronowitz after consultation and the retaining of our firm. Prior results do not guarantee a similar outcome.

Trusts, Estates, and Elder Law Update

Inside This Issue: • A Primer on the Use of Reverse Mortgages.

• Year End Tax Tips.

Attorney Advertising

Albany Office: 54 State Street Albany, NY 12207 518.462.5601 Fax: 518.462.2670

www.oalaw.com

Ask the Lawyer: Q&A on Reverse Mortgages Will reverse mortgage income affect my governmental benefits? Yes and No. Income from a reverse mortgage will not affect your Social Security or Medicare eligibility. However, if you receive a lump sum payment on your reverse mortgage, it will count as a resource for Medicaid eligibility purposes the month after you receive it, if you still have the money in your bank account.

Are mortgage payments that I elect to make tax deductible? Yes. You will be able to deduct that portion of the payment that you make which is allocated to mortgage interest.

Do I need to make any mortgage payments when I have a reverse mortgage? No. The roles are reversed and the lender pays you money. You do, however, have to continue to pay your homeowner’s insurance, property taxes, and home maintenance costs.

proceeds after the reverse mortgage is satisfied.

Are there limitations on what I can do with my reverse mortgage funds? No. You can use the funds you receive from a reverse mortgage for whatever purpose you like, i.e. paying off credit card debt, making necessary repairs, or taking Who owns my home when the reverse mortgage is in a vacation. place? You continue to own your home when the reverse What happens when I die and leave my house to my heirs? mortgage is in place, just as you would with a conventional Your heirs take your house subject to the reverse mortgage. mortgage. Your ownership, however, is subject to the lien After you pass away, your heirs can keep the house and pay off created by the reverse mortgage. the reverse mortgage or sell the house and keep the net sale How is interest charged on a reverse mortgage? You pay interest on the money you receive from your reverse mortgage.

Depending on the type of reverse mortgage you choose, fixed and/or variable interest rates are available. Rates are typically Can I pay down what’s owed on my reverse mortgage? tied to an index like the one-year Treasury Bill rate and include Yes. Although you don’t have to make payments on your an additional one to three percentage points. reverse mortgage, you can do so if you want to reduce the The attorneys at O’Connell and Aronowitz are available to overall amount of the mortgage owed. assist you to determine if a reverse mortgage should be part of your estate plan. Feel free to contact us at the office nearest to you.