Trusts and Estates

November 16, 2010

Proper Planning Can Avoid Theft, Other Estate Settlement Issues in New York

The widow of a former New York City transit worker left her estate to four beneficiaries when she died in 2007. Unfortunately, three of them never collected on their inheritance and the fourth sits in a Florida jail cell charged with robbing the estate, the St. Petersburg Times reported.

A New York City probate lawyer can minimize such risks through proper estate planning and administration. In some cases problems still arise and can result from abusing a power of attorney or a breach of fiduciary duty.

By consulting an experienced estate attorney in New York at the earliest signs of problems, you can help minimize the risk that an estate will be violated.

In this case, the 49-year-old niece of the deceased was charged with grand theft and contempt of court after not responding to a probate judge’s order to repay tens of thousands of dollars and then missing a court date.

The 78-year-old deceased lived in New York City most of her life. Her husband worked for the transit authority and she did a variety of odd jobs, including working at the Bronx Zoo. Upon her death in 2007, court records indicate the defendant petitioned to be the estate’s representative. She allegedly failed to deposit $107,000 into a trust account after selling the decedent’s home and subsequently refused to show up for court.

November 11, 2010

New York Kinship Proceedings Can Involve Deposit of Estate Funds With New York State Comptroller

by Jules M. Haas

A New York Administration Proceeding is typically required when a person dies intestate without leaving a Last Will and Testament. New York Estates, Powers and Trusts Law Section 4-1.1 provides the statutory guide for the intestate distribution of estate assets beginning with the decedent’s spouse and issue (i.e. children and their decedents). If no spouse or child survives then the property goes to the next class of living heirs such as parents, siblings and so on.

In many Administration proceedings, the identity and whereabouts of a decedent’s next of kin or distributees are unknown or only partially identifiable. This situation is more prevelant where the decedent never married or never had any children. So-called “cousin cases”, i.e: where the next of kin are cousins or even more distant heirs, usually require a kinship proceeding whereby the Surrogate’s Court can be satisfied as to the proper individuals to receive the decedent’s estate. New York Public Administrators are typically appointed to handle the estate administration in these cases. Generally, a kinship proceeding is the Court process whereby evidence in the form of documents, such as birth and death records, and the testimony of the decedent’s family and acquaintances is submitted to show relationship to the decedent. Very often professional genealogists are needed to testify as to the nature and extent of diligent searches that have been performed, sometimes in many different countries, to eliminate the possibility that unknown heirs exist. Kinship proceedings are complex and involve numerous rules of evidence and presumptions in law. For example, a person who would have been more than 100 years old when the decedent died is presumed to have predeceased the decedent.

There are also technical procedural requirements. When kinship cannot be proved to the Court’s satisfaction, the estate property is paid to the state comptroller. New York Surrogate’s Court Procedure Act (SCPA) Section 2222. However, pursuant to SCPA Section 2225, when three (3) years have passed after the decedent’s death, an application can be made to the Court to withdraw the estate funds from the state and have them paid to the known distributees by demonstrating that a diligent and exhausting search was made for all unknown heirs.

November 2, 2010

New York Last Wills Must Be Signed By Two Attesting Witnesses

by Jules M. Haas

A New York Last Will and Testament is subject to many requirements provided by both statutes and Court decisions. These rules determine various aspects of a Will such as its validity and effect or interpretation.

The starting point regarding the proper form for a Will is New York Estates, Powers and Trusts Law Section 3-2.1 which is entitled “Execution and attestation of Wills; formal requirements.” Among this statute’s numerous provisions is a requirement that “there shall be at least two attesting witnesses …” EPTL Sec. 3-2.1(a)(4). The statute also states that “The signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses…” EPTL 3-2.1(a)(4). The statute also states that “The signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses…” EPTL 3-2.1(a)(2).

While the EPTL mandates “at least two” witnesses, there is no prohibition against having more than the minimum two. In fact, it is a common practice to use three attesting witnesses to insure that at least two of the witnesses may be available if their testimony is needed years after the Will is signed in connection with a probate proceeding.

While having two witnesses sign the Last Will in the presence of the Testator appears to be a simple and straightforward requirement, there are may instances where this requirement has not occurred. For example, in In Re Postma, 895 NYS2d 778 (Surrogate’s Court, Westchester County 2009), the Court reviewed a Will which had been signed at the end by one witness and by a notary public. The Court denied the Will probate because it had only been signed by one attesting witness. The Court pointed out that EPTL 3-2.1 requires two attesting witnesses and that a person who signs a Will in the capacity of a Notary Public does not comply with the statutory requirement.

It is important to utilize the advise and direction of an attorney experienced with the requirements of the execution of a Will as well as the Probate procedure in the New York Surrogate’s Courts.

October 28, 2010

Estate Planning in New York requires Knowledge of State and Local Tax Obligations

by Jules M. Haas

The case of Billionaire Julian Robertson highlights an issue less frequently talked about when it comes to estate taxes: The presence of some state and even city taxes on the estate of a deceased and/or his or her income while still alive. In this case, Mr. Robertson recently won a tax case dealing with income while he is alive. But the decision might also impact any claim made that he owed New York income taxes upon his death.

We frequently report on our New York Probate Lawyer Blog regarding the ongoing saga of the federal estate tax — on hiatus this year but slated to return next year on estates valued at more than $1 million. But, as we discussed when Yankee’s owner George Steinbrenner died, estate planning in New York must take into account much more than just the federal estate tax when it comes to proper tax planning.

The New York State estate tax currently applies to estates valued at more than $1 million.

In other cases, it is equally important to protect your estate from undue taxation while you are alive.

In the case of billionaire hedge fund pioneer Julian H. Robertson Jr., it all boiled down to where he spent a pair of days. The divided three-member New York State Tax Appeals Tribunal upheld an administrative judge’s decision that Robertson was not a resident of New York City in 2000, saving him $27 million in taxes, according to Forbes magazine.

A dissenting opinion said the decision could create “confusion and mischief” in the future by placing the burden on tax authorities, who under the ruling were required to prove Robertson was in the city on certain days rather than requiring Robertson to demonstrate “by clear and convincing evidence” that he was not within the city.

Robertson was warned by his advisor not to spend more than 183 days a year in the city or he’d be taxed as a full-time city resident since he lived in the city more than half the time. His legal residence is a 10-acre estate in Locust Valley, Long Island. Becoming a resident of New York City would have subjected his worldwide income to the city’s 3.88 percent tax. Robertson assigned an executive assistant to track his days and let him know when he was nearing the limit.

He spent additional time in the city in 1998 and 1999 when is late wife Josephine was being treated for breast cancer — and he willingly paid the city taxes. But, while publicly supporting the estate tax, the 78-year-old did not want to pay additional taxes on income he felt were not legally owed.

In 2000, Mr. Robertson claimed that he did not exceed the 183 days and no additional taxes were owed. The city challenged his whereabouts on four days that would have put him over his limit and lost the argument on two of those days.

October 19, 2010

New York Non-Marital Children Can Inherit Under Estate Laws

by Jules M. Haas

New York estate attorneys are routinely faced with many different factual situations where clients seek to obtain an inheritance from a decedent’s estate. These situations include the probate of a Last Will or the Administration of an estate where the decedent died intestate or without a Will.

On occasion, a person seeking an inheritance may have the status of being a Non-Marital child of the decedent. Difficulties in obtaining an inheritance are commonly faced by a non-marital child in New York estate administration or intestate estates. Section 4-1.2 of the New York Estates Powers and Trusts Law provides specific guidelines regarding the rights of non-marital children. Paragraph (a)(1) of the statute states that “a non-marital child is the legitimate child of his mother…” Therefore, such an individual has the right to inherit from his mother and her next of kin.

However, inheritance by a non-marital child from his father is not as simple and the statute sets forth certain requirements that must be met before such inheritance will be allowed. Thus, under paragraph (a)(2)(A) a non-marital child can inherit from his father if there is a Court Order or parental acknowledgment of paternity that has been properly filed. Paragraph (a)(2)(B) provides for an acknowledgment of paternity signed by the father. Perhaps the most familiar and often used standard of proof is provided under paragraph (a)(2)(C) which provides that inheritance will be allowed where “paternity has been established by clear and convincing evidence.” In this regard paragraph (a)(2)(C) was recently amended so that a non-marital child can inherit from his or her father if:

Paternity has been established by clear and convincing evidence, which may include, but is not limited to: (i) evidence derived from a genetic marker test, or (ii) evidence that the father openly and notoriously acknowledged the child as his own.

Paragraph 4-1.2 (a)(2)(D) was entirely eliminated.

It is not uncommon for a non-marital child to have a long and close relationship with his or her father only to be confronted with the necessity of proving paternity after the father has died intestate. Good estate planning, including the preparation of a Last Will and maybe a Living Trust, can avoid such unintended and unwelcomed after death paternity proceedings.

October 14, 2010

Helmsley Charitable Trust Shows Benefits of Trust Formation and Estate Planning in New York

by Jules M. Haas

The 40-acre Greenwich estate of Leona Helmsley sold for $35 million recently. The property was marked down from an original asking price of $125 million but was still among the most expensive homes ever sold in the affluent New York suburb, the Wall Street Journal reported.

The home was sold by the Leona M. and Harry B. Helmsley Charitable Trust. She left the majority of her real estate and other holdings to the trust, thought to be worth billions of dollars. She also famously left $12 million to her dog, Trouble. A court later reduced the Maltese’s inheritance to $2 million.

A New York City probate lawyer can assist in the establishment of a trust as part of a comprehensive estate plan. Estates that are dispersed by trust may avoid going through the probate court process, where your assets and their distribution will become public record.

From a legal standpoint, a trust is considered to be a separate legal entity, like a person, and can pay taxes, enter into contracts and be sued. We recently spoke of the benefits of a special needs trust, which can hold assets for a child with special needs without impacting his or her ability to collect government assistance. A life insurance trust may also be used to deal with the tax consequences of an estate settlement.

In this case, the trust also holds a substantial ownership interest in the Empire State Building. It has been selling off property lately, including the Carlton Hotel in Manhattan, which it sold earlier this year.

The Helmsley estate, known as Dunnellen Hall, is one of the town’s older homes and is likely in need of extensive renovations. The 28-room mansion has an 86-foot-long gallery, a wine cellar and a tasting room. The Helmsleys bought the place for $11 million in 1983 and put about $8 million into it, including a $1 million dance floor.

October 7, 2010

New York City Estate Planners can assist Clients in Making Distributions via Gift Tax to Avoid Looming Estate Tax Rates

by Jules M. Haas

Those focused on what the government might do with the estate tax next year are forgetting about the likelihood of an increase in the gift tax.

Estate planning attorneys in New York City and elsewhere are helping clients disperse portions of their estate this year to take advantage of the historically low 35 percent gift-tax rate, Bloomberg News reports. As we reported recently on our New York Probate Lawyer Blog, the estate tax hiatus will last through the end of the year but could return next year with a rate as high as 55 percent on estates valued at more than $1 million.

Changes to the gift tax could come as lawmakers debate tinkering with the estate tax; more plans than can be counted are currently floating through Congress.

In response, some estate planners are assisting clients with making gifts while they are still alive. Bloomberg News uses the example of an 84-year-old widow who gathered her children at her lawyer’s office and told them she was distributing $20 million as a Christmas gift.

The woman said she didn’t want anyone wishing she were dead; and the historically low 35 percent gift tax is lower than the 55 percent estate tax rate that could return as soon as January.

New York Times columnist Paul Krugman has called the Dec. 31 deadline the “Throw Mamma from the Train” law as black humor abounds about wealthy parents having accidents before the estate tax returns with the new year. Taking advantage of the current gift tax rate is a viable alternative to such drastic and unlikely measures.

Historically, the gift tax has been matched to the estate tax to keep the wealthy from giving their money away to avoid the Internal Revenue Service. This year, you can gift up to $13,000 without tax consequences, up to a $1 million lifetime maximum. After that, the current 35 percent gift rate applies.

October 6, 2010

New York Law Concerns Disposition of a Decedent’s Remains

by Jules M. Haas

There are many considerations and activities relating to the settlement of a decedent’s estate. These items include the location and safekeeping of a decedent’s Last Will, the filing with the Surrogate’s Court of a Probate or Administration proceeding, the determination of next of kin, locating and collecting a decedent’s assets and the ultimate accounting and distribution of the estate to beneficiaries. However, before any of these activities take place, the decedent’s remains must be cared for and disposed of.

In most cases, family members, such as a spouse or children, work together to organize funeral and burial services. However, this is not always the case as was recently shown with respect to the dispute over the body of baseball legend Ted Williams whose remains were cryogenically frozen.

New York Public Health Law Section 4201 sets forth the priority of the persons who have the “right to control the disposition of the remains” of a decedent. This priority begins with a person designated by the decedent in a writing signed as provided for by the statute. The statute goes on to list in descending order the decedent’s surviving spouse, domestic partner, children, the decedent’s parents, the decedent’s siblings and additional specified persons such as a Court appointed Guardian. Additional provisions address directions made in a Last Will.

New York Law also recognizes that next of kin may be entitled to damages against persons who improperly interfere with their right of possession to a decedent’s remains or who improperly deal with the body. A recent case demonstrates how a fairly routine burial can turn into a distressing and bizarre incident. In Shipley v. City of New York, Index No. 101114/06, the Appellate Division, Second Department, was presented with a motion to dismiss a complaint brought by the parents of a 17 year old who was killed in an automobile accident. After an autopsy was performed by the Medical Examiner the decedent’s body was released to the parents for the funeral and burial. More than two months after the burial it was discovered that the decedent’s brain had been retained in the Medical Examiner’s office. The decedent’s brain was then returned to the family who performed a second funeral. The Court refused to dismiss the parent’s damage claim against the City finding that a cause of action existed.

September 30, 2010

Whether Guardianships or Trusts, Special Needs Children Require Comprehensive Estate Planning in New York

by Jules M. Haas

The Times Herald recently published an article on caring for a child with special needs after your death.

Parents or guardians of special-needs children, or adult children living at home, need to plan for the eventuality of the child’s care after their passing. A New York City probate lawyer or guardianship attorney can assist you by outlining the various options. Among the variables and factors for consideration are the size of the estate left behind and the person’s needs.

An Article 81 Guardianship can permit you or someone else to care for an adult with special needs and empower you to make the decisions necessary to assist with day-to-day life, including medical and health care needs.

Estate planning becomes particularly important, both to make sure that available assets are left to care for a loved one with special needs and to make sure the appropriate safeguards are in place for the management of those funds for the best interest of the child.

In many cases, you must also concern yourself with not making a person with special needs ineligible for federal medical care and other benefits. Failure to establish a Special Needs Trust or other vehicle for life insurance proceeds and other inheritance can have devastating consequences. A Special Needs Trust is a legal entity, which can manage and disburse money to a child with disabilities, without making the child ineligible for federal benefits, such as Medicaid.

September 28, 2010

Estate Tax Just One Reason to Consult a New York City Probate Lawyer for Estate Planning

by Jules M. Haas

The resurgence of the estate tax is expected to hit a lot of middle class families and others who fail to seek adequate estate planning in New York and elsewhere, according to MarketWatch.

Historically, it has been thought that the tax affects a small number of tax payers — less than half of 1 percent is the figure often cited. But that depends on the exemption limit. The tax disappeared this year after being in place on estates valued at more than $3.5 million in 2009. But it is due to return next year, and would hit most estates valued at more than $1 million with a tax rate of up to 55 percent.

This frequently devastates an estate, particularly those involving a family business or farm; often assets have to be liquidated just to satisfy the tax, thereby destroying wealth that it took a lifetime to build.

Tragically, as many as half off all estates are not even governed by a proper Will, let alone a comprehensive estate plan.

What exactly will happen with the estate tax remains unclear. One bipartisan effort has an exemption of $5 million and a 35 percent rate to be phased in over a decade. But, as we reported previously on our New York Probate Lawyer Blog, there are many tax concerns that come with settling an estate — regardless of the status of the so-called federal “death tax.”

Capital gains taxes on stock purchases and property appreciation are just a few commonly overlooked tax obligations. Having spent decades building an estate, it is tragic to see a lifetime of hard work and dedication given over to the tax man because of a lack of basic planning.

So many of our clients wonder why they waited so long to get started. Knowing that your affairs are in order is a huge burden lifted. Knowing that your loved ones will be taken care of after you are gone can allow you to go forth and enjoy life. If your estate is in disarray because of procrastination or outdated estate plans, please call my office for a free and confidential consultation to discuss your needs.