New York Probate Lawyer Blog

January 25, 2011

Many Advantages To Avoiding Probate Court In New York

There can be many benefits to avoiding the probate court process in the settling of an estate, including more privacy. Contacting an estate planning lawyer in New York City is a good first step toward putting your affairs in order as we begin 2011.

This is the first of several posts to our New York Probate Lawyer Blog that will examine ways to avoid the probate court process and the possible benefits and consequences of doing so.In general, if a decedent has no Will, known as an intestate estate, or if his or her estate is governed by a Will, the estate will go through the probate court process for dispersal to named heirs or living relatives. Some small estates, valued at less than $30,000, may avoid the probate court process.

New York does not follow the uniform probate code, as is in place in some other states, which can make the process longer and more costly in some instances. Establishing a trust in New York or taking other steps to avoid probate, may be to your advantage in many instances.

Other common challenges inherent in the probate process include:

-Identifying and contacting relatives: In cases where spouse and children are present this is not much of an issue. But in cases where a decedent passes away with only distant relatives, tracking down relatives can be an unnecessary headache.

-Lack of privacy: Probate court is a public forum and a family’s private finances and other information will become public for all to see.

By creating trust funds and taking other steps to avoid the probate court process in New York, you can ensure that your heirs receive the inheritance privately, with as little cost, hassle and wait as possible. Probate court does a lot of things right — including ensuring the proper distribution of your assets to your chosen heirs — but the same may be accomplished in a private, expedited manner with a little forethought and some basic estate planning.

January 19, 2011

Life Insurance Can Provide Many Benefits To A New York Estate Plan

by Jules M. Haas

The New York Probate Lawyer Blog has previously discussed the need for estate planning documents including a Last Will, Health Care Proxy, Living Will and Power of Attorney. Life Insurance can also provide a valuable estate planning tool. In its most fundamental function, life insurance can add a tremendous amount of liquidity and value to an estate. The payment upon death of a life insurance policy with a cash value of say $500,000.00 most certainly would provide an immediate benefit to the named beneficiaries.

Life insurance products can be complex and can take various forms such as term life, whole life or universal life. Before purchasing life insurance, a person should fully research and understand the different aspects of each product and obtain advise from professionals including insurance brokers, attorneys and financial advisors.

Additionally, the selection and designation of the insurance beneficiaries must be considered and made so that the life insurance proceeds are paid in a manner that is part of an overall estate plan. Very often people take out life insurance and either forget to name beneficiaries or beneficiaries who were named are no longer alive or perhaps are no longer intended by the policy owner to be the preferred recipients.

While life insurance can provide a huge benefit upon a person’s death, there are also a number of potential advantages that arise during a person’s life. One very interesting advantage is that a policyholder may sell their interest in the policy to another during their life. The investor essentially pays a fee to the owner and invests in the prospect that the person whose life is insured will die sooner rather than later. The insurance proceeds are paid to the investor. This arrangement is called “Stranger-owned life insurance” (“SOLI” or “STOLI”) and was recently found not to violate New York Insurance Law by the New York State Court of Appeals in Kramer v. Phoenix Life Insurance Co., decided on November 17, 2010. Thus, a person can obtain an immediate pre-death benefit from insurance on his or her life by assigning the policy to an investor.

January 12, 2011

Safekeeping of A New York Last Will Is Vital To Protect Beneficiaries

by Jules M. Haas

The New York Probate Law Blog previously talked about the importance of maintaining a Last Will in a safe and secure location. After investing the time and effort to develop an estate plan and finalize a Will and other estate planning documents such as advance directives, it would be unfortunate if the Will could not be located after a person dies.

As previously pointed out, there are a number of alternatives available with regard to safeguarding a Will. The original can be left with an attorney or kept by the person himself. A Will can also be filed with the Surrogate’s Court. Keeping a Will in a safe deposit box can be problematic since a Court Order may be required to open the box after a person’s death, thus delaying estate settlement proceedings. Also, a legal presumption may arise that the Will was revoked if it is kept by the person himself or herself and the Will cannot be located after death. Attempting to probate a photocopy of a misplaced Will can be extremely difficult.

Issues that arise concerning locating a decedent’s Will are evident from a recent lawsuit filed by the sibling’s of Mama Cass, who was a member of the 1960’s group The Mamas and The Papas. As reported in the New York Law Journal on January 11, 2011, from an article appearing in The National Law Journal by Leigh Jones, Mama Cass’ died in 1974. In their lawsuit, the siblings alleged that a law firm which recently located Mama Cass’ 1967 Will in their archives, had told them at the time of her death that a Will could not be found. Since Mama Cass had apparently died without a Will, her estate was distributed pursuant to California’s law of intestacy rather than in accordance with the terms of the just found Will. As a result, the siblings claim that they were damaged by not receiving a part of the estate. “The lawsuit claims malpractice, negligent misrepresentation and fraud.”

January 5, 2011

New York City Estate Leaves Popular Upper East Side Restaurant to Employees

by Jules M. Haas

The Huffington Post reports that the owner of a popular Upper East Side restaurant has left the business to its longtime manager.

New York estate lawyers frequently report here on our New York Probate Lawyer Blog about the challenge of leaving a business to heirs. Without proper estate planning, the results can be tragic. It is not unusual for heirs to be forced to sell a business to pay taxes and satisfy other obligations as a result of an inheritance.State and federal inheritance taxes, capital gains taxes and property taxes are just a few of the issues that can plague the transfer or sale of a family business. In some cases, life insurance is bought to assist with the cost but can have its own implications if not properly purchased and structured.

Business owners should do themselves and their heirs a favor and make visiting an estate planning attorney a resolution in 2011.

In this case, the New York Times reports that Elaine Kaufman’s death in December left many wondering what would become of “Elaine’s” the popular eatery on the Upper East Side. Turns out, the owner has left the restaurant to her longtime manager Diane Becker.

Kaufman also left much of her estate to Becker and to her longtime maitre d’hotel, Giovanni Adamo, known by regulars as Gianni.

The new owners promise to run the restaurant the way it has always run, saying “the only missing link is Elaine.”

January 3, 2011

Drafting New York Power of Attorney Best Left To Experienced Law Firm

by Jules M. Haas

Family gatherings around the holidays can make it clear that a loved one will need assistance to maintain his or her independence, or may even require an assisted living facility or a nursing home.

Frequently, a New York power of attorney will be granted to friend or family member who agrees to help with an aging loved one’s affairs. Too often, neither the grantor (known as the principal), nor the grantee (known as the agent) have a proper understanding of the requirements, limitations and consequences of a power of attorney.A power of attorney can be structured for a single purpose — such as disposing of a piece of property — or can grant broad powers to conduct business on a person’s behalf. It can also be limited to a specific time frame.

Additionally a Living Will is a document detailing a person’s desire as to whether or not to be maintained on life support. New York’s Health Care Proxy law provides a separate document that provides a health-care agent. And a durable power of attorney in New York will remain in effect if you become incapacitated.

In general, it is best to structure a power of attorney in such a way as to be limited beyond the scope of the desired task. Where problems frequently occur, is when a broad power of attorney is granted for a specific task, which can permit far greater uses than the principal intended.

In other cases, a power of attorney is not the best legal avenue to achieve the desired result. In all cases, the best course of action for protecting your rights is to contact a New York City probate attorney to discuss your individual needs and the available options.

December 29, 2010

New York Estates Often Involve Issues Concerning The Transfer of Real Estate

by Jules M. Haas

A New York estate usually contains many different types of assets. These assets can include bank accounts, stocks and bonds, retirement accounts and real estate. A beneficiary’s interest in these assets is determined by the nature or manner in which these assets are owned or titled. For example, a bank account in the sole name of a decedent will be distributed according to the decedent’s Last Will or, if none, the laws of intestacy. However, a bank account held in the name of the decedent “in trust for” a named beneficiary will be distributed directly to the designee upon the decedent’s death regardless of the Last Will or intestacy laws.

Among all of these asset transfer variations, the disposition of real property often presents the most complexity. This is due to the many complex rules regarding the ownership and transfer of real estate.

The New York Probate Lawyer Blog provides a reference to New York issues and problems presented in decedent’s estates and estate settlement. A recent case that dealt with the disposition of a decedent’s real estate was Holder v. Smartt, Index No. 3384/08, Supreme Court Kings County, decided November 11, 2010 and reported in the New York Law Journal on November 29, 2010. In Holder, real property had been tranfered by the executor of an estate by an executor’s deed to “Arthur Holder and Shirley Holder a/k/a Shirley Stewart, his wife, …. and Lydia Smartt ….”

After Arthur Holder died, his surviving spouse Shirley, commenced a partition action against Lydia Smartt to have the real property sold and the proceeds of sale distributed between them. A partition action is a court proceeding whereby a co-owner of real property can have a Court direct the sale of the property and the distribution of the sales proceeds.

In enforcing its determination as to partition, the Honorable David I. Schmidt was asked to rule on the interest of an alleged son of Arthur Holder who claimed that as a distributee of Arthur’s estate, he had an interest in the real property. The Court found that under New York law, “when real property is conveyed to a husband and wife and a third party, the husband and wife have one moiety as tenants by the entirety, and the third person is a tenant in common with them of the other ….” Thus, since Arthur was married to Shirley when he died, his entire interest in the property passed to Shirley upon his death who then owned the property with Lydia Smartt. Since the son had no interest in the property, the Court directed that the sale of the property continue and the sales proceeds be distributed between Shirley and Lydia.

December 22, 2010

New York Individual Retirement Account Designations Must be Scrutinized To Avoid Beneficiary Conflict

by Jules M. Haas

On December 14, 2010, the New York Probate Lawyer Blog discussed the problems created when beneficiary designations are incomplete, confusing or ambiguous. These beneficiary designations can appear on many different types of assets such as annuities, life insurance, Individual Retirement Accounts, 401K benefit plans and other types of pension plans.

Designations that are confusing and changes made to the named beneficiaries, particularly changes made when a decedent is ill, incapacitated or shortly before death, create issues that can result in extensive and expensive estate litigation. In Mury v. Allen, Index No. 105439/2010 (Supreme Court, New York County) the Court was asked to determine a procedural issue regarding the standing or right of the plaintiff to challenge a beneficiary change made to an IRA account by a decedent shortly before his death.
In its decision dated November 22, 2010 and reported in the New York Law Journal on December 1, 2010, the Court found that the defendant failed to present sufficient facts to challenge the plaintiff’s standing. The details of the Mury case provide yet another insight into the need to provide clarity and diligence in preparing an estate plan that includes a Last Will and assets that pass directly to specifically named beneficiaries. In Mury, the decedent was an 86 year old widower at his death. He was survived by one daughter whom he disinherited in his Last Will in which he left his entire estate to his “former French mistress”.

The decedent had originally designated his wife as the beneficiary of his IRA. However, since his wife had predeceased him an issue arose as to who was the successor or alternate beneficiary of the IRA. Shortly after his death, a beneficiary change had been made to the IRA naming a home health aide who had been helping care for the decedent during the five (5) months prior to his death. Complicating matters further, was an issue as to the IRA contract terms and whether the decedent’s estate (i.e. his mistress) or his daughter would be deemed the IRA beneficiary if the beneficiary designation to the home health aide was voided by the Court.

Since the Court allowed the mistress, plaintiff, to continue with her lawsuit, the dispute over the IRA account will be ongoing with the obvious cost and upset to all involved.

December 16, 2010

Estate Tax, Gift Tax, Other Changes, Make Visiting New York City Probate Lawyer a Must in 2011

by Jules M. Haas

Once Congress passes the tax bill being debated in Washington, those with estate plans in place, and those seeking to begin the new year by consulting a New York estate planner, should seek the advice of a qualified attorney to discuss how the changes will impact their estate.

In addition to a two-year window for large, tax-free gifts made under the gift-tax exemption, significant changes to the estate tax rates could impact the options for best distributing your estate after your passing. The estate tax disappeared this year as the result of a phase-out signed by George W. Bush in 2001. It is slated to return Jan. 1 with a top rate of 55 percent on estates valued at more than $1 million.

Many are unaware that a New York estate tax exists. State and federal estate taxes are only two considerations. Property taxes (and the loss of exemptions in some states), capital gains taxes and other taxes and fees can quickly drain an estate. This can be particularly devastating for family businesses, which are often liquidated to settle the tax debt. In some cases, a family may buy life insurance, which can present its own tax complications without proper planning.

Because of the federal deficit, Democrats would like to see the federal estate tax return next year with a top rate of 45 percent — after a $3.5 million per-person exemption. However, the current plan would raise the exemption to $5 million and lower the top rate to 35 percent.

Also of note is the “step up in basis” clause, which may benefit those who die in 2010, 2011 or 2012. What that means, is that the sale of an inherited asset will be taxed based on its value at time of inheritance — not its value when originally purchased by the decedent.

CNN Money reports that the beneficiaries of those who die this year (2010) will essentially have their choice of which rules to follow. Under current rules there is no estate tax, but limited step up rules.

Too often, someone who has worked a lifetime does not put the proper planning into optimizing the distribution of his or her estate and minimizing the tax obligations. The second-most-common problem is failure to keep up with changes in the law — or changes in life, such as divorce, marriage or significant asset purchase or liquidation –after an estate plan is established.

With all of the changes passing through Congress, a resolution to visit a trusted New York City probate attorney would be an excellent start to 2011.

December 16, 2010

New York Gift-Tax Cap could Increase to as much as $10 Million under Tax Proposal

by Jules M. Haas

The gift-tax cap could increase to $10 million — up from the current limit of $2 million — under the tax-cut bill Congress is debating this week, Bloomberg News reported.

Those worried about estate taxes should consult an experienced probate attorney to establish a comprehensive New York estate plan. One of the reasons such planning can be so crucial is the advantages of the gift-tax exemption, which can permit you to distribute thousands of dollars to your children and other heirs tax free. Such giving not only allows you to give loved ones a larger inheritance while saving thousands in taxes, it gives you an opportunity to see the difference your money is making during your lifetime. Making a promise to tackle your estate planning as part of your New Year’s resolutions can bring the peace of mind that comes with knowing your life’s work will benefit your children, not the government tax collectors.Under the proposal, a U.S. taxpayer’s lifetime gift-tax exclusion will jump to $5 million in 2011, up from the current $1 million. Each parent could donate to a child, moving as much as $10 million in cash, stocks or portions of a family business outside a couple’s estate. The window is only slated to last for two years, so those interested should begin planning as soon as possible by speaking with a qualified attorney.

The lifetime gift-tax limit has been $1 million since 2002. In addition to the new lifetime gift-tax exclusion of $5 million, couples can continue to give up to $26,000 a year tax free to each beneficiary ($13,000 for a single person).

December 14, 2010

New York Beneficiary Designations Can Avoid Estate Litigation

by Jules M. Haas

A significant distinction must always be recognized between assets of a decedent that are disposed of through estate administration and assets that pass to beneficiaries by operation of law. Estate administration assets are generally governed by the terms of a decedent’s Last Will or the laws of intestacy where no Will exists. Executors or Administrators control these dispositions.

Assets that pass by operation of law include property held in the form of joint tenancy or in the name of the decedent along with a named beneficiary such as a “totten trust” bank account. Designated beneficiaries that are named in life insurance policies, retirement plans or Individual Retirement Accounts also receive a decedent’s assets automatically after death. In these operation of law or automatic pay out situations it is imperative that careful attention be paid to the beneficiary designations. These designations should be carefully made so that a person’s estate plan is accurately and properly established. Additionally, incomplete, confusing or ambiguous beneficiary designations can result in costly and lengthy estate litigation the result of which may be that beneficiaries do not receive their intended gift.

The recent case of Li-Shan Wang v. Primerica Life Insurance Co., 09-CV-5522, which was before Judge Lawrence M. McKenna, Federal District Court, Southern District of New York, and reported in the New York Law Journal on November 17, 2010, is a perfect example of the complexities and convoluted issues that can be created by an unclear beneficiary designation. In a decision dated November 5, 2010 Judge McKenna was presented with procedural motions to dismiss and to amend the plaintiff’s complaint. As explained by the Court, the decedent, Salih Neftci, had obtained a life insurance policy with Primerica. This lawsuit was commenced by the plaintiff, Li-Shan Wang, the girlfriend of the decedent who claimed that the decedent intended to name her as the policy beneficiary. Opposing this assertion were the decedent’s children who claimed that the insurance proceeds were to be paid to them. Intermixed with these contentions was the affect of various letters sent by the decedent to the insurance company requesting changes to the beneficiary designation as well as the interpretation and legal meaning of certain language utilized by decedent. There was also the issue of the decedent’s capacity to make or change his beneficiary designation due to his illness.

In its decision the Court denied the children’s motion to dismiss the complaint and allowed the plaintiff to amend her complaint. Therefore, it appears that the lawsuit will continue until settled or ultimately disposed of by the Court.

This case illustrates how the lack of attention to detail and clarity when preparing estate planning documents, such as beneficiary designation forms, can transform a simple matter of the payment of life insurance proceeds into a complex estate contest which results in unnecessary expense and distress for the intended beneficiaries. A New York Probate Attorney can help avoid these problems and can also provide representation in Court to enforce the rights of beneficiaries where the payment of proceeds is contested.