Articles Posted in Trusts and Estates

Preparing an estate plan and signing a Last Will and Testament, along with other papers such as a Health Care Proxy, Living Will and Power of Attorney, is important. It is also essential to maintain these documents in a safe and secure place after being signed, particularly a Last Will.

There are a number of options available with regard to safeguarding the original of a Last Will. The New York Surrogate’s Courts allow a Last Will to be filed with the Court for safekeeping. Alternatively, an individual may have his or her attorney retain the original. Of course, the original Last Will can be kept by the person themself.

When a person holds his or her own Last Will for safekeeping there are a number of things to consider. A Last Will should always be stored in a safe and secure place such as a fire-proof file cabinet or similar secure place in the home or office. A safe deposit box maintained at a bank or other facility is generally not a good location for a Last Will. This is because a Court Order may be needed to examine the safe deposit box following a person’s death. As a result, there may be a delay in obtaining the Last Will and beginning the probate process. Additionally, determining the existence of the safe deposit box and locating the box key may cause delay and expense.

Numerous issues may arise with regard to locating the original Last Will. For example, when a Will is known to have been in the possession of a decedent but cannot be located after death, New York law presumes that the person destroyed the Will with the intention to revoke it. Therefore, proof of the Will, even if there is a copy, may be very difficult. New York Surrogate’s Court Procedure Act §1407 provides strict rules regarding the proof of a lost or destroyed Will.

Regardless of the chosen location of the original Last Will, it is always a good idea to provide a copy of the Will to the named Executor or other family members along with information as to where the original is stored. Such precautions may avoid the complications associated with a search for the original Last Will after a person’s demise.

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Hiring a New York City probate attorney is an important consideration when executing the Last Will and Testament of a loved one.

Typically, a Will names an executor who is charged with winding up a decedent’s affairs. Usually this is a child, family member or trusted friend. Frequently, it is someone with little or no experience with the probate court process through which most estates must pass.

Acting as an executor means you will be charged with paying all taxes, debts and other claims, and distributing the net estate to heirs in accordance with a Will. There are many complexities involved that make consulting an experience attorney a very good idea. Just determining the various taxes to which the estate is exposed can require professional guidance.

In cases where no Will exists, an administrator will be appointed. An administrator is charged with distributing an estate in accordance with the laws of intestate succession. We wrote recently on our New York Probate Lawyer Blog about the need to have a Will and what happens to estates left without a Will, something known as Intestate Estates. Essentially these estates are passed to the closest known relatives in accordance with state law.

Whether acting as an executor, trustee or administrator, a person is acting as a fiduciary in the eyes of the court and is accountable for a range of responsibilities. Such responsibilities include ensuring that the assets are protected, a prohibition against self-dealing, and the duty to ensure proper accounting of assets and payments.

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New York estates face many issues following the death of the decedent. These issues include a determination of the decedent’s assets as well as debts and liabilities. Executors and Administrators have a fiduciary duty to investigate and determine the decedent’s rights and obligations and protect the estate’s interests in this regard.

One example of an issue that may face a New York fiduciary relates to the estate’s right to maintain a decedent’s rental apartment following death. An estate’s interest in a rental apartment was presented recently in Renaissance Equity Holdings LLC v. Doe, New York City Civil Court, Kings County (New York Law Journal dated July 21, 2010 at page 26). In Renaissance, the landlord had commenced a summary holdover proceeding against the decedent’s daughter. The decedent was the tenant of a rent stabilized apartment. In dismissing the landlord’s petition, Judge Marc Finkelstein first recognized that the decedent’s lease did not end upon death and that his estate was entitled to remain in possession until the current lease term ended. Judge Finkelstein also found that the landlord failed to include the estate as a party to the eviction proceeding. Therefore, the Judge dismissed the eviction case without prejudice due to the failure of the landlord to include the estate as a party to the proceeding.

While Renaissance is not a landmark decision, it is a good example of the many types of problems encountered by fiduciaries in performing their job. As shown by this case, defending the estate’s interest in a landlord-tenant summary proceeding may be required.

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The Edmonton Sun just published an informative piece on the issue of estate taxes and the passing of Yankees owner George Steinbrenner.

The article is both fun for its outside view of the United States: “(The Death Tax) is actually no big thing relative to the U.S. GDP or debt, probably garnering about $25 billion a year. Still, the U.S. is struggling to stay afloat these days $25 billion here, $25 billion there; soon you’re talking real money. Every little bit helps.”

And informative for its dissection of the assertion that the Steinbrenner estate will pass to heirs without taxation since he passed away during the one-year hiatus of the death tax. As we recently reported on our New York Probate Lawyer Blog, the tax, which applied to estates valued at more than $3.5 million in 2009, was eliminated for 2010.

It is due back next year and could apply a rate of up to 55 percent on all estates valued at more than $1 million. Some studies have found the impact of the death tax is such that it can actually sway the death rate, with more people dying right before a scheduled increase and more people hanging on just before a scheduled drop in the taxation rate.

But lost in this debate is the fact that all estates –Steinbrenner’s included — are subject to all sorts of taxation, regardless of the status of the estate tax. Most importantly, Steinbrenner’s death will trigger capital gains taxes. While typically 15 percent — much less than the 55 percent death-tax rate — capital gains taxes alone will cost the Steinbrenner estate several hundred million dollars.

And Steinbrenner lived in Florida, a state where homestead and other property tax exemptions can save homeowners tens of thousands of dollars in property taxes each year. Florida law only permits property values to increase by three percent a year for taxation purposes, a tax-break called “Save our Homes,” that is meant to protect retired residents from the taxation that comes from rising property values in retirement paradise.

Transferring a home after death — especially a multi-million property, can increase property taxes from $8,000 to $10,000 a year, to $50,000 or more as the taxable value of the property returns to fair-market value.

But, as the article points out, the wealthy use trusts or other vehicles to protect themselves from excessive taxation. The estate tax frequently hits family businesses the hardest.

Consulting a New York estate and tax planning attorney is the best course of action to protect your estate from excessive taxation at the time of your death.

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The New York Power of Attorney allows a person, known as the principal, to select an agent or agents and to give the agent authority to act on behalf of the principal. For example, one of the designated subjects in the Power of Attorney form provides that the agent may act with respect to “banking transactions”.

New York recently enacted legislation that provided major changes to the Power of Attorney form. These changes became effective on September 1, 2009. One of the new provisions of law now requires that the Power of Attorney form be signed and acknowledged by both the principal and agent. A major impetus for the Power of Attorney revisions was to limit the possibility of abuse by a named agent. Financial abuse of the elderly and incapacitated persons often requires Court intervention to undo the agent’s wrongful conduct.

One recent brazen example of the breach of fiduciary duty by an agent under a Power of Attorney appears in the case of Estate of Frances E. Francis, decided by Westchester County Surrogate Anthony A. Scarpino, (New York Law Journal, Tuesday July 13, 2010 at page 27). In Estate of Frances, an individual named Donald Maloney arranged for Frances E. Frances, who was then 98 years old, to sign a Power of Attorney naming Maloney as agent. Maloney then used the Power of Attorney to transfer Ms. Frances’ assets for his own benefit in the sum of over $600,000.00. Following Ms. Frances death, the Administrator of her estate commenced a discovery proceeding to ascertain the whereabouts of the decedent’s assets and, to ultimately recover same. The Court voided the transfers to Maloney that were effectuated by use of the Power of Attorney and directed Maloney to file an accounting and return all of the funds to Ms. Frances’ estate.

Maloney, however, failed to abide by the Court’s decision which resulted in the Court finding Maloney in contempt of the Court’s directives. The Court also ordered the issuance of a warrant of commitment if Maloney continued to fail to comply.

Estate of Frances is a stark reminder that the execution of Power of Attorney and the selection of agents and other fiduciaries such as Executors and Trustees requires careful consideration. Not only did an unscrupulous agent abscond with an elderly person’s fortune, court intervention and directives appear not to have been enough to rectify the abuse.

A Power of Attorney can be an important part of an estate and elder plan and can provide a means to effectuate property transactions that greatly benefit the principal. Unfortunately, when fiduciary duties are ignored the results can be disastrous.

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In New York the persons who are entitled to share a decedent’s property are called distributees. These persons are more commonly known as heirs or next of kin.
A determination of distributees or kinship is essential in Surrogate’s Court proceedings and the Court rules and procedures require that due diligence be demonstrated in asserting the family tree. In probate proceedings, distributees must be identified so that they can receive notice of the probate proceedings and afforded the opportunity to review and contest the decedent’s Last Will. This notice is called a Citation which is similar to a summons.
Although the terms of a Last Will may be clear and unambiguous, the probate or validation of the Will cannot be accomplished without first identifying the distributees who are to be given notice of the proceedings. Many decedents are survived by only distant relatives such as great nieces, nephews, cousins or more distant next of kin who have had little or no contact with the decedent and whose whereabouts are unknown. A great deal of time and expense may be incurred in searching for these individuals who may be scattered around the globe. The services of a professional genealogist may be needed to reconstruct the family tree.
Similar kinship problems arise in Administration proceedings where the decedent died without leaving a Last Will. Again, the determination of the decedent’s next of kin is essential in order to identify the persons who are to receive notice of the Administration proceeding and, ultimately, a share of the decedent’s estate. Believe it or not, many persons die leaving no Last Will and little trace or information regarding their relatives who may have been estranged or who live in another state or country. In these cases, their assets may escheat to New York State.
The New York Surrogate’s Courts are very strict regarding kinship matters. The Court needs to be certain that proper proof such as birth and death records and affidavits documenting diligent searches are available so that estate assets are not distributed to non-family members or without proper notice.

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The Times Herald-Record of Middletown, New York, recently published an informative piece about the need for comprehensive estate planning.

Perhaps it is the discomfort often associated with contemplating our mortality, but far too many of us pass without ever leaving a basic Will. Far fewer of us take the time to engage in the kind of comprehensive estate planning that can help shield our assets from estate taxes and ensure our directions are carried out upon our death.

An experienced New York City estate planning lawyer can take the stress out of such planning. In retrospect, clients wonder why they waited so long. With a plan in place, they can enjoy their lives with the confidence that comes from knowing their affairs are in order. And loved ones will not be burdened with the hassle after their death. Kinship proceedings, contested Wills and a spousal right of election are just some of the circumstances that can turn a smooth administration of an estate into a complicated proceeding in the Surrogate’s Court.

A comprehensive estate plan is much more than a plan for death — it is a plan for life. An estate plan can provide for your care in the event that you become disabled or incapacitated.

Living trusts are one tool that can be utilized to ensure your estate is distributed in accordance with your wishes, without ever having to enter what can be a long, expensive and public probate court process. One example is a case in which someone leaves a Will but wishes to leave nothing to a child. The child must receive notice that the Will is being probated, which is frequently nothing more than an invitation to a courtroom fight.

A trust not only avoids the need for a public probate process, it bypasses the need to notify those left without an inheritance. Out-of-state property is another example of why trusts make sense. With a Will, such property would be subjected to probate proceedings in both states. The out-of-state proceeding is called an Ancillary Proceeding.

With a living trust, you move your assets into the trust, which you may control during your lifetime or you may name an independent or co-trustee. One word of caution: Living trusts that are not maintained, or are allowed to become dated, can complicate the distribution of assets after your death. For instance, if you have bought another home, and the property is not owned by the trust, it would have to go through the probate process at the time of your death.

Speaking with an experienced New York City estate planning attorney can be a wonderful step toward the security that comes with knowing you have prepared for whatever life brings your way.

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The number of estates subjected to federal estate taxes will skyrocket next year to an estimated 44,200, compared to just 5,500 estates that were subjected to the estate tax in 2009, The New York Times reported.

The estate tax can have an enormous impact and can even force the sale of a farm or family business. Some studies have even suggested that substantial changes to the estate tax can impact death rates — increasing the number of deaths that occur right before an increase and decreasing deaths in the weeks leading up to the enactment of a tax break.

The federal estate tax — or death tax as it is sometimes called — was eliminated for 2010. It returns next year with a tax rate of up to 55 percent on estates worth more than $1 million. It applied only to estates valued at more than $3.5 million in 2009 and the maximum rate was 45 percent. Hiring a New York City estate planning attorney is critical to minimizing your exposure to estate tax while ensuring that your estate is distributed to heirs in accordance with your wishes.

The Wall Street Journal reports that a new proposal on the table would hit wealthy taxpayers harder than anything yet suggested. It would return the exemption threshold to $3.5 million, or as much as $7 million per couple, while reducing the maximum tax rate to 45 percent. But estates valued at between $10 and $50 million would be taxed at a rate of 50 percent. Estates valued at more than $50 million would pay 55 percent and those worth more than $500 million would pay 65 percent.

One thing might be as certain as death and taxes and that is that Congress will never be done playing with the estate tax rate. But, with proper estate planning, you can focus on minimizing your exposure to estate taxes, at whatever rate happens to be in place at the time of your death.

With advanced planning, many families can legally shelter significant portions of an estate from taxation. Living trusts, tax advantages associated with passing gifts to your heirs while you are alive, and other tax and estate-planning options can help protect a family business from taxation and will ensure that more of your estate passes to your chosen heirs.

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