30 THE QUEENS COURIER • QUEENS BUSINESS • OCTOBER 8, 2020 FOR BREAKING NEWS VISIT WWW.QNS.COM
queens business
Admire world’s largest pumpkin spice latte at Queens County Farm
BY ALEX MITCHELL
editorial@qns.com
@QNS
Has the state of the world got you down? At times like
this everyone needs to take a day to step back and smell
the fl owers, or the largest fl orally arranged pumpkin spice
latte that’s topped off at the Queens County farm this
Friday.
Actually, that 12-foot-tall, pseudo-caff einated beverage
Elder Law Minute TM
Let’s Talk About Life Estates
BY RONALD A. FATOULLAH, ESQ.
AND DEBBY ROSENFELD, ESQ.
Transferring one’s home to another
person or persons, subject to a life estate,
has been a staple strategy of elder law
planning for a very long time. Medicaid
planning typically involves an individual
divesting himself/herself of assets in
order to become eligible for long term
care coverage via the Medicaid program
at some point in the future. Oft en, when
engaging in Medicaid planning, one is
faced with negative tax consequences
when transferring assets directly to others.
For example, in the context of real
estate, if a person transfers real property
to another without any strings attached,
the recipient will receive a carryover basis
in the property. (Th e term “basis” means
cost.) If Mr. Smith paid $50,000 for
his home, his basis is $50,000. One’s
basis in a home can be increased by the
cost of any capital improvements made
to the home. If the home is currently
worth $500,000 and Mr. Smith transfers
it to his daughter, her basis will now
be $50,000 (regardless of the current fair
market value). Th e reason this is signifi -
cant is because when Mr. Smith’s daughter
goes to sell the house, she will have
capital gains of $450,000 and this gain
will be subject to a 20 percent Federal
tax as well as an additional New York
State tax. If Mr. Smith had retained
the property and died with the property
in his name, his daughter would have
received a step up in basis, meaning her
basis would be the value of the property
at the time of Mr. Smith’s death rather
than what he paid for it. If the daughter
were to sell the property soon aft erward,
she would have zero capital gains taxes.
When we do planning, it is understandable
that there will sometimes be negative
side eff ects, but our goal is to minimize or
eliminate them.
One way to avoid the recipient getting
a carryover basis (which therefore
results in potentially onerous capital
gains tax consequences) is to add life
estate language to the deed transfer. So,
if Mr. Smith transfers his real estate to
his daughter but retains the legal right to
the enjoyment, use and possession of the
property, i.e., the property is transferred
to his daughter subject to a life estate,
she will get a step up in basis upon her
father’s death. As far as Medicaid planning
is involved, the result is the same.
Mr. Jones, during his lifetime, eff ectively
divested himself of his home – thereby
protecting it - by transferring it to his
daughter. But because he retained a life
estate, his daughter did not become the
true owner until aft er Mr. Smith’s demise,
resulting in a complete step up in basis
and zero capital gains taxes upon the ultimate
sale.
Many ancillary questions arise in connection
with transferring real property
subject to a life estate. In our example,
what if Mr. Smith’s daughter decides
to sell the property while he is still alive?
What if she wishes to transfer the property
to one of her siblings? If the daughter
wishes to transfer the property to someone
else, this will not aff ect Mr. Smith’s
Medicaid eligibility. Th e daughter will
have to include Mr. Smith’s life estate
interest in the deed transfer so that ultimately,
the property does not entirely vest
in the transferee until Mr. Smith’s demise.
Th e sale of property subject to a life
estate while the life estate holder is
still alive is more complicated. Firstly,
there will be negative capital gains taxes
because the only way the house can be
sold is if the life estate is extinguished.
In other words, Mr. Smith can no longer
have the right to reside in a house that is
being sold. Th erefore, for purposes of the
sale, the daughter’s basis will now be the
carryover basis and the daughter will be
taxed on any gain. Further, the sale of the
home will result in a portion of the proceeds
going back into Mr. Smith’s name.
In the context of the sale, the life estate
owned by Mr. Smith has a certain value
based upon his age. Accordingly, the
portion of the sales proceeds attributable
ELDER LAW
RONALD FATOULLAH
ESQ, CELA*
to Mr. Smith’s life estate will be payable
to him and this will not be helpful if Mr.
Smith is either on Medicaid or attempting
to become eligible.
Due to some of the complications that
may arise from the transfer of real estate
subject to a life estate, we oft en recommend
irrevocable trusts as a more fl exible
alternative. Th e specifi c facts of each situation
ultimately dictate the optimal way
to preserve and transfer one’s real estate.
Discussing these options with an experienced
estate planning elder law attorney
is highly advisable.
Ronald A. Fatoullah, Esq. is the founder
of Ronald Fatoullah & Associates, a law
fi rm that concentrates in elder law, estate
planning, Medicaid planning, guardianships,
estate administration, trusts, wills,
and real estate. Debby Rosenfeld, Esq.
is a senior staff attorney at the fi rm.
Th e law fi rm can be reached at 718-
261-1700, 516-466-4422, or toll free at
1-877-ELDER-LAW or 1-877-ESTATES.
Mr. Fatoullah is also a partner advisor
with Advice Period, a wealth management
fi rm that provides a continuum of
fi nancial and investment advice for individuals
and businesses, and he can be
reached at 424-256-7273.
which took a week to assemble is one of many newly
added attractions to stem up at the farm’s “Fall In Love”
socially distant pop-up garden.
Th ere’s also a masterfully made butterfl y where you can
spread your own wingspan into for the ideal fall photo.
Th at is, of course aft er wandering through the blooming
enchanted fall forest. Unlike the appetizer from Outback
Steakhouse, this bloomin’ forest does not contain onions.
Some other can’t miss walkthroughs in the 11 exhibit
garden are Ellie, the hedge-made elephant as well as a
beautifully arranged rainbow bouquet selfi e station and
a bright red rose barnyard, which are sure to make fi ne
additions to one’s Instagram.
Masks are required to be worn while in the fall escape
as social distancing protocols like reduced capacity are in
eff ect at all times during a visit.
Tickets must be purchased in advanced and be foundherealong
with additional info on the Queens County
Farm Museum and its other fall-themed activities such as
the amazing maize maze, hayride, pumpkin patch, friendly
farm critters, along with the tastiness of the farm’s food
alley and beer garden. Photo by Alex Mitchell
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