New York Probate Lawyer Blog

March 29, 2011

Baby Boomers to Inherit Trillions, Protect Your Share With New York Estate Planning

While we talk frequently about the need to plan your estate, rarely do we mention the need to protect an inheritance. Of course, that brings us back to planning your estate!
Baby boomers are about to hit the life lottery, receiving a combined $8.4 trillion, according to Business Insider.

Protecting your inheritance in New York is one of the keys to securing your financial future.New York estate planning lawyers understand how important it is to protect an inheritance. In some cases, it is the first time a client has dealt with a sizable sum of money. In all cases, the goal is to make that money last and, perhaps, pass it on to the next generation.

Forbes reports that baby boomers have already gotten an estimated $2.4 trillion in inheritances. This means that, on average, each inheriting household should be expecting nearly $300,000.

Forbes.com offers baby boomers these pointers to help plan for your future and maintain financial stability:

-Treat your inheritance as a gift passed on. It’s okay, and probably preferred, to become emotionally attached to it. This can help keep you from overspending and splurging.

-Don’t just blow it, and then regret it; think about it carefully.

-Use it to make an emergency fund if you don’t already have one equal to at least six months of necessary funds. It’s recommended that an emergency fund should be kept in safe and liquid investments.

-Pay off credit cards, car loans or your mortgage. Remember, though, to consider the tax angles. Mortgage interest is deductible for taxpayers who itemize. Just make sure these options work in your favor.

-“I encourage people to look at things in one great big bucket. These are assets to serve you. How are you going to invest them to serve you best and to accomplish what you want?” says Myra Salzer, author of the book Living Richly, a guide for inheritors who are living off generous inheritances.

Making an appointment to sit down and talk to an estate planner in New York could be the best money you spend. Tax savings, real estate transfer considerations, and your own plans for the ultimate distribution of your wealth are all issues you should discuss with a professional.

March 25, 2011

New Estate Tax Law Features Portability or Transfer of Exclusion Amount Between Spouses

by Jules M. Haas

Under the new federal estate tax law, the exclusion amount, or the value of an estate that can pass free of federal estate tax, is increased to $5,000,000. This $5,000,000 exemption will end, unless extended or modified by new legislation, on December 31, 2012. One of the most significant changes brought about by the new law with regard to preparing a Last Will or an estate plan, is the portability or transfer of the unused portion of the $5,000,000.00 exclusion between spouses.

In a simple example, say a husband dies in 2011 and leaves his entire $5,000,000 estate to his wife but does not use any part of this $5,000,000 exclusion for estate tax purposes. If the wife then dies in 2012, she can use both her own $5,000,000 exclusion and the $5,000,000 exclusion that was unused by her husband. Thus, the wife can pass on to others a $10,000,000 estate tax free. In the present law, the death of both spouses must occur between January 1, 2011 and December 31, 2012.

As with all new statutes, particularly involving taxes, novel questions always arise. Suppose a surviving spouse has survived not just one but two (2) predeceased spouses. Could the survivor’s exemption possibly reach $15,000,000 by adding the unused exclusions of both of the two pre-deceased spouses to that of the surviving spouse. The explanation accompanying the law provides that the surviving spouse can only use the exclusion of the last deceased spouse.

In order to utilize the unused exclusion of a deceased spouse, the executor of the first deceased spouse’s estate needs to timely file an estate tax return for the deceased spouse, compute the unused exclusion amount and elect that it can be utilized by the second spouse.

As is true with many aspects of estate settlement and administration, an Executor or estate fiduciary must be aware of his or her options and obligations to secure the maximum benefits for the estate and estate beneficiaries. Preparing and filing estate tax returns is just one of many areas that requires the assistance of a qualified probate lawyer.

March 23, 2011

New York Estate Planning can Reduce Couple’s Tax Exposure

by Jules M. Haas

Market Watch recently published some estate tax tips for married couples. New York City estate planning attorneys have been dealing with the changes to the estate tax and gift tax limits since they were implemented late last year.

As we reported in December on our New York Probate Lawyer Blog, Congress set the estate tax exclusion at $5 million and the lifetime gift-tax limit at $5 million. The tax exemption ends at the end of 2012. But for now, couples enjoy tax-free giving power and the vast majority of the nation’s estates may pass to heirs tax free.Unlimited Marital Deduction: For spouses who are U.S. citizens, there is no limit to the tax-free inheritance they can receive. However, it does not negate the need for estate planning in New York: Leaving your spouse a large estate could mean that he or she exceeds the limits, which would subject the estate to excessive taxation upon his or her death.

Portable Estate Tax Exemption: This year and next (2011 and 2012), you may direct the executor of your estate to leave any unused federal estate tax exemption to your surviving spouse. This includes your $5 million exemption and means a spouse could have a $10 million exemption for estates distributed this year or next. Unless Congress acts, these portable exemptions are set to expire at the end of next year.

Donate to IRS-Approved Charities: Giving to IRS-approved charities as part of a comprehensive estate plan is a great way to get your estate down to the $5 million estate-tax cap — or $10 million for couples with both available exemptions.

Give Gifts to Relatives: The annual gift-tax exclusion is $13,000, which can be given without reducing your lifetime $5 million federal gift-tax exemption. If you had two children and four grandchildren, you and your spouse could each give $13,000 to each one, or $156,000 tax free for 2011. You could do the same thing next year and reduce your taxable estate by $312,0000.

Pay School Expenses or Medical Bills for Relatives: Aside from room and board, you can give unlimited amounts for these purposes,without reducing your gift-tax or estate-tax exemption. Payments must be made directly to the school or medical provider.

Give Away Appreciating Assets: Use your $5 million gift-tax limit to give away appreciating assets now — while they are worth less than they will be at the time of your passing.

Use an Irrevocable Life Insurance Trust: While life insurance proceeds are usually income-tax free, they are included in your estate for estate-tax purposes. Policies held in irrevocable trust are free from estate-tax exposure. This is particularly critical for single people — married people can pass the proceeds to a spouse tax free using the marital deduction privilege (though they may then face taxation upon the death of a spouse). Such trusts are a terrific way to cover estate taxes upon your death.

March 22, 2011

Transfer-on-Death Registration One Option for Planning New York Estate

by Jules M. Haas

As part of our ongoing series on the advantages and disadvantages of avoiding probate in New York, our New York City estate planning attorney publishes this post on naming beneficiaries for stocks and bonds.

Most recently we discussed on our New York Probate Lawyer Blog the importance of naming beneficiaries to retirement accounts. Unfortunately, it not unusual for complications to arise — including instances where the name of an ex-spouse is left on an account — particularly in cases of sudden death during middle age.Avoiding probate has its advantages — as we have discussed, keeping an estate settlement out of court can speed the process and keep it private. Whereas, a probated estate will be subjected to the court’s time frame and the public process inherent in most court cases. However, avoiding probate does not mean you will not need a probate attorney; indeed, an estate planning lawyer may be even more critical in cases where a person desires to structure an estate capable of bypassing the safeguards of the court process.

Like naming beneficiaries on retirement accounts, naming beneficiaries of stocks and bonds is another simple way to transfer assets outside of probate court. The advent of IRAs, 401(k) plans and self-directed brokerage accounts has given rise to laws in 48 states (Louisiana and Texas are the laggards) that deal with transfer-on-death registration. Much like the payable-on-death bank accounts we previously discussed, transfer-on-death registration permits you to own stocks in what is known as “beneficiary form,” which permits their transfer to a named beneficiary at the time of your death.

One potential drawback is that your broker may not permit you to name an alternate beneficiary. In other cases, your broker may not offer the service. Joint stock accounts can have T.O.D. benefits but the co-owner must have rights of survivorship. What that means is that the account will not transfer to the named beneficiary until both account holders are deceased.

There are also rights of spouses under state law, which cannot be bypassed using T.O.D. And complications apply to naming a child under 18 as beneficiary — a guardian and an adult money manager may be needed to be appointed to make sure a minor has sufficient assistance in managing the funds.

In cases where a beneficiary dies before you do, or there is otherwise an absence of named beneficiary, the stocks would typically be distributed under your Will’s “residuary clause,” which names a beneficiary to inherit everything not specifically mentioned in the Will.

Other challenges exist in using T.O.D. registration. And your estate planner is best suited to assist you in determining whether such a transfer is right for you. Instances in which a bond is not easily divisible, or the need exists to name more than one beneficiary, are examples of instances where other arrangements may best serve an estate.

March 21, 2011

New York Decedent’s Burial Can Be Complicated By Conflicts Between Family Members and Guardians

by Jules M. Haas

The New York Probate Lawyer Blog has previously discussed issues regarding the rights of relatives to make burial decisions regarding a decedent. New York Public Health Law Section 4201 entitled “Disposition of remains: responsibility therefore”, provides a framework for this decision-making by essentially giving priority to a decedent’s spouse and closest living relatives in descending order to determine disposal of the remains.

Notwithstanding the statute, a person may put into place his or her desires by pre-paying for a funeral or cremation, purchasing a burial plot or otherwise expressing in a Last Will certain desires or preferences.

Of course, situations constantly arise when survivors, whether relatives or fiduciaries such as guardians, have conflicting ideas as to the disposal of the decedent’s remains. Such was the situation in The Matter of Louis V.P., which was decided by New York State Supreme Court Justice Joel K. Asarch on February 22, 2011. In this case Louis V.P. was determined to be an incapacitated person under Article 81 of the New York Mental Hygiene Law. Guardians for his personal needs and property management were appointed. When Louis died at age 86, his sister, Vita, wanted Louis to be cremated. Vita was also a co-guardian of Louis’ property. However, Louis’ niece, Grace, who was Louis’ personal needs guardian, desired that Louis be buried in the cemetery burial plot that he had purchased approximately 35 years ago.

After considering all of the evidence, the Court noted that the desires of a decedent “regarding the disposition of his or her own remains are paramount….” The Court thus ruled that Louis was to be buried in the burial plot he had purchased since that was the method he apparently intended.

In another recent burial controversy reported in the New York Post on Thursday, March 17, 2011 by William J. Gorta, “Brooklyn heirs burned in cremation flap“, a Court ruled that a decedent’s third wife could not sue a funeral home and cemetery for having a decedent’s remains cremated at the direction of the decedent’s fourth wife. Apparently, the family was unaware of the fourth marriage.

Family conflicts can take many forms following a decedent’s death ranging from burial directions to Will contests and identification of distributees through kinship proceedings. I have represented clients in New York to help them resolve these issues and protect their family’s rights.

March 15, 2011

New York Executors Have Authority to Act on Behalf of the Estate

by Jules M. Haas

An Executor of a New York estate, or other fiduciary such as an Administrator, is the party empowered by law to act on behalf of the estate. The underlying purpose of a Surrogate’s Court probate or administration proceeding is to have the Court officially appoint a person or institution that has the legal authority to handle the decedent’s affairs. Similarly, a Trustee is empowered to represent a Trust.

There are many circumstances in which the authority of an Executor or other fiduciary may arise. The recent case of Friedman v. Clearview Gardens, concerned issues of an Executor’s powers and arose in a landlord-tenant eviction proceeding involving a cooperative apartment.

In Friedman, decided by the Hon. Charles Markey on February 3, 2011, (Supreme Court, Queens County), Ron Friedman (“Ron”) brought a lawsuit against the cooperative corporation essentially to stop an eviction proceeding and to have the cooperative corporation put the coop stock into his name. Although Ron had lived in the apartment for over 50 years, the coop stock ownership was in the name of Ron’s mother who had died in 2006. Ron’s brother, Daniel, was named as the Executor of the mother’s estate by the Queens County Surrogate’s Court.

The Court ruled that Daniel, as Executor, and not Ron, had the legal authority to sue the cooperative corporation. Moreover, the Court found that a power of attorney that Daniel had given to Ron was ineffective since an Executor is not allowed to delegate his or her authority.

The Friedman case demonstrates that a Court appointed fiduciary is necessary to control and oversee the assets and other affairs relating to the settlement of a decedent’s estate.

I have represented many Executors and other fiduciaries in various matters, including landlord-tenant proceedings, that involve a decedent’s interests. A decedent’s estate may need to evict a tenant from estate property if it must be sold or if the tenant is unwanted. Similarly, an estate or trust may require protection from an eviction to protect the decedent’s rights property.

March 10, 2011

Undue Influence In Changing Life Insurance Beneficiary Can Be Difficult to Prove

by Jules M. Haas

The New York Probate Lawyer Blog has previously discussed the naming of a beneficiary on a life insurance policy or other asset such as a pension or retirement account. Upon a person’s death, these assets are paid directly to the named beneficiary (assuming the beneficiary is surviving) and are not part of the probate or intestate administration.

It is of utmost importance that the beneficiary designation clause be completed properly and clearly so that the intended beneficiary can receive the asset proceeds following a death. These designations should be well thought out as part of an overall estate plan.

Unfortunately, controversy and Court litigation often arises when beneficiary selections are changed while a person is elderly, or experiencing medical problems or when the change occurs shortly before death. Such changes are particularly dramatic when the new beneficiary is a person who has not been involved in the decedent’s life until recently such as a new friend, spouse or health aide. The initial reaction to such change, particularly from the now disinherited beneficiary – such as a child, long-time friend or other seemingly natural beneficiary selection – is that the change could only be the result of some kind of undue influence perpetrated upon the decedent at a time when he or she was vulnerable, weakened due to illness or old age or incapacitated.

However, despite the ready appearance of wrongdoing, actually demonstrating that the decedent did not intend the change and that the new designation should be voided is not an easy task. Such was the situation in a recent case entitled Metropolitan Life Insurance v. Felecia Bradway, decided in the Federal District Court, Southern District of New York, 10 Civ. 0254. As reported in the New York Law Journal by Mark Hamblett on February 28, 2011, the decedent, Bradway, had designated his daughter as the beneficiary of a $300,000 life insurance policy in 1998. However, in May, 2008 Bradway changed the beneficiary designation to a co-worker whom he married later that year. Bradway had been taking a narcotic pain medication and was diagnosed with liver cancer shortly before his wedding. Bradway then died in March 2009.

The disinherited daughter claimed that the new spouse, “who was 30 years younger than Mr. Bradway, influenced him by proposing marriage while he was ‘terminally ill’ , by attempting to isolate him from his family following his cancer diagnosis and by failing to provide him with proper medical care after the diagnosis.”

As reported in the article, notwithstanding the daughter’s allegations, the Court found that “there was not enough evidence for a ‘reasonable finder of fact’ to show Mr. Bradway’s mind was subverted when he made the May 27, 2008 designation of beneficiary.”

The Bradway case demonstrates that it is important to make clear beneficiary designations as part of an estate plan. Probate, Guardianship, and other Court proceedings provide avenues to attack designations that may seem particularly improper under the circumstances. Such attacks however, require the proper presentation of proof to succeed.

March 8, 2011

Queens and Manhattan Guardianship As Well As Throughout New York Requires A Thorough Review Before Court Appointment

by Jules M. Haas

The appointment of a Guardian for an incapacitated person is provided by the guidelines enacted in Article 81 of the Mental Hygiene Law (MHL). The New York Probate Lawyer Blog has discussed many of the aspects involved in New York City Guardianship cases such as Guardianship powers and the petition that is filed with the Court requesting appointment.

A couple of recent Court decisions in which a Guardian was appointed are typical examples of the many factors and issues that are considered before an appointment is actually made.

In Matter of C.T., reported in the New York Law Journal on June 23, 2011, Justice Alexander W. Hunter of the Bronx Supreme Court issued a decision dated June 10, 2011, in which he appointed the sister of the alleged incapacitated person (“AIP”) as Guardian of his person and property. The Court noted at the outset of the decision that the AIP and other parties were properly served with the Order to Show Cause and petition. As referred to by the Court, section 81.07 of the MHL provides for very specific requirements regarding notice and the service of papers on interested parties. If these requirements are not complied with the Court would lack proper jurisdiction to conduct a hearing.

The AIP in Matter of C.T. had assets in excess of $2 million dollars. It appears that as part of the sister’s petition to the Court she requested that as Guardian she be allowed to provide for Medicaid planning. Such planning typically involves the transfer of the AIP’s assets to a family member so that the AIP can qualify for government benefits. Since the Court found that the plan presented by the sister for preserving the AIP’s assets was “vague”, the Court decided that such plan would require further Court approval before implementation. MHL section 81.21 provides for the granting of power to a Guardian to transfer assets. However, as was recognized by Judge Hunter, there is always a concern that notwithstanding benefits that may be obtained by a family by preserving assets through transfers, assets also need to be retained and used for the care and comfort of the AIP.

In a different case, there was an interesting issue regarding the potential conflict of interest between an AIP and the proposed Guardian. In Matter of A.M., a case reported in the New York Law Journal on May 12, 2011 and also decided by Judge Hunter on April 25, 2011, the petitioner was the brother of the AIP. It appears that the parents of the AIP left her over $1 million dollars in a testamentary trust and that the brother was the trustee. In the Guardianship proceeding, the brother was seeking only to be appointed as Guardian for his sister’s personal needs. The Court found that the brother was not eligible to be appointed pursuant to the requirements of MHL section 81.19 (“Eligibility as guardian”), because of the potential monetary conflict of interest. Among other problems, the Court was concerned that the potential of the Guardian selling the AIP’s house “creates financial gain” for the brother. Also, the Court stated that “Another motivation that cannot be ignored is that Mr. M [the brother] may no longer desire to directly care for his sister as he is currently doing. Placement in a facility and sale of the home will allow him to return to Florida where he lives. This also constitutes a conflict of interest in that Mr. M may choose his own well-being over that of his potential ward.”

As is shown by these recent Court decisions, Guardianship proceedings can be quite complex and involve issues of incapacity, transfers of assets and potential conflicts of interest that may impact on the appointment of a Guardian. Guidance from an experienced attorney is essential in these matters.

March 7, 2011

The New York Probate Process Involves Numerous Documents

by Jules M. Haas

The Probate of a Last Will in New York can appear to be a complicated and mysterious procedure. While the rules and procedures of the Surrogate’s Court are complex, certain fundamental requirements for Probate are fairly easy to set forth.

Among the essential aspects to a Probate proceeding is providing the parties interested in the proceeding with proper notice that the Court case has been commenced. In particular, the decedent’s “distributees” or closest next of kin are required to be served with a “Citation”. A “Citation” is like a summons in a regular civil action. The Citation will advise the parties who receive it as to the Court date and that they need to appear if they desire to object to the Probate of the Will. The necessity of having to serve a Citation and wait for a Court date, which may not be scheduled for a month or more after the Will is filed with the Court, results in a delay in the administration of the decedent’s estate.

In most estates where close family members, such as spouse or children, have no objection to the Probate of the Will, a form entitled “Waiver of Issuance and Service of Process and Consent to Probate” can be signed by the interested party. This form once signed and notarized, dispenses with the need to serve a Citation on such person. In fact, if all the necessary parties sign such a form, there is no need to serve a Citation at all and the Probate process and estate administration can be expedited.

Surrogate’s Court Procedure Act Section 401(4) provides, in part, that the Waiver Form “shall state the date of the will to which it relates and that a copy has been furnished or examined.”

In most instances when a client has requested that I represent them in Probate proceedings, efforts are made to obtain signed Waiver forms from all necessary parties as quickly as possible. While there are many aspects to and requirements for Probate, obtaining Waivers is always a first essential step, where possible.

March 2, 2011

New York Article 81 Guardians Are Bound By The Court To Act Properly

by Jules M. Haas

The New York Probate Lawyer Blog has discussed the powers and obligations of a property management and personal needs Guardian. When a person is found to be incapacitated and a Guardian is appointed, the Court maintains scrutiny over the actions of the Guardian.

One of the safeguards provided by Article 81 of the Mental Hygiene Law (MHL) is that the Court may require the posting of a bond (MHL Sec. 81.25). A bond is essentially an insurance policy issued by a surety company that insures payment to creditors and others entitled to receive the incapacitated person’s funds in the event the Guardian misappropriates those funds. The Court will set the amount of the bond based upon the value of and income from the assets of the incapacitated person. Since the Court appointed Guardian must qualify for the bond, the surety will check the Guardian’s credit and financial history. A poor credit history may result in the denial of a bond and, thereby, prevent a person from qualifying as a Guardian.

It is a good practice, which I follow, to have the bonding company review a client’s credit before he or she files a petition for appointment as a Guardian so that we can be certain the client can qualify if appointed.

Another safeguard provided by the law is contained in MHL Section 81.31 which requires that the Guardian file an Annual Report with the Court every May. The Annual Report contains information concerning the Guardianship financial transactions that occurred during the prior year along with information regarding the incapacitated person’s physical and mental condition. This information is typically reviewed by a Court Examiner. In the event the Court Examiner finds information that shows improper conduct on the part of the Guardian, the findings will be reported to the Court.

A recent case where a Guardian’s actions were found to be improper was reported by Daniel Wise in the New York Law Journal on January 6, 2011. The Article entitled Guardian Must Return Funds Paid to Family For Ward’s Care, described a case where a lawyer-guardian was required by the Court to repay to the incapacitated person’s estate over $100,000.00 that the Guardian had paid to a company that provided care to the Incapacitated Person. It was found that the company was controlled by the Guardian’s spouse. Judge Charles J. Thomas also ruled that the Guardian had to forfeit commissions and legal fees.

Guardians are required to be diligent in the performance of their duties. Both Guardians and the families of the Incapacitated Person often require legal representation to fully understand and protect their interests.