New York Probate Lawyer Blog

August 24, 2010

Clark Case May Be Subjected to Guardianship Oversight in New York

Update: MSNBC reports that New York City officials have begun welfare checks on the 104-year-old heiress and the Manhattan district attorney has launched a criminal investigation into the handling of her finances.

Where in the world is 104-year-old Huguette Clark? One only hopes that she has a world-class New York City estate lawyer who has her best interests at heart. Apparently, Ms. Clark has been confined to a hospital for many years.

She certainly has her choice of living accommodations, what with a $100 million Pacific Coast estate, a $24 million home in Connecticut that she apparently bought a half-century ago but never visited, and a $100 million apartment overlooking Central Park — rumored to be the largest residence on Fifth Avenue.

All are immaculately maintained and all have been unoccupied for decades. Clark has spent the last two decades in a hospital room — according to MSNBC.

With few family members — her father was in his 60s when she was born and was eligible for service in the Civil War — the lone heiress to a copper fortune is being looked after by an accountant with a criminal background and a 78-year-old attorney, MSNBC reported.

Clark has always been reclusive and fabulously wealthy — her father was a Senator from Montana at the turn of the century. She grew up in a 121-room mansion at 962 Fifth Avenue at 77th St.

It is unknown whether she has a living trust or other comprehensive estate planning. Elderly wealthy people are at risk of being victimized by fraud – particularly when no close relatives exist. Why she has spent more than 20 years in a hospital room has not come to light. Nor is it clear whether she is the subject of an Article 81 Guardianship Proceeding.

Such guardianship would permit a responsible adult to look after her finances. However, such a position of authority could be abused, despite court oversight. Since the story has come to light, more eyes are watching. The Manhattan District Attorney has started an investigation. Yet it has not been determined if Clark is under guardianship or if her vast estate is even subject to proper oversight.

Experienced New York City guardianship and probate attorneys have seen the best and worst of these types of situations. It is unusual to say the least to have as a client a 104-year-old eccentric woman who is fabulously wealthy who has spent two decades secluded in the hospital. We hope her caretakers come forward with a full accounting and that she is not victimized by fraud or abuse.

August 20, 2010

The New York Supplemental Needs Trust Is Useful To Protect Assets And Provide Added Benefits

by Jules M. Haas

There are many situations where a person who is disabled has assets available for his or her present use or may be in the position to receive assets at a later date such as a beneficiary under a Last Will or Trust.

While owning assets is usually beneficial, persons suffering from disabilities are often recipients of, or are qualified to receive, government benefits such as Medicaid or Supplemental Security Income. As a result, a conflict arises because the ownership of assets typically disqualifies a person from receiving the governmental benefits that would otherwise pay for the services that the private funds would be expended on.

In a perfect world a planner would want the disabled person to receive the maximum benefit from governmental resources and preserve or reserve the private and personal assets to spend on extras items and services that the government does not provide.

A Supplemental Needs Trust (SNT) can provide a mechanism whereby someone who is disabled can be the recipient of both government benefits and private assets. Truly the best of both worlds.

New York Estates, Powers and Trusts Law Section 7-1.12 provides the statutory requirements for the creation of these trust fund agreements. Paragraph (a)(5) of the statute defines a Supplemental Needs Trust as “a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability (the “beneficiary”) which conforms to” the statute’s guidelines.

The rules and intricacies for the establishment and use of a Supplemental Needs Trust can be complex. For example, the trust can be set up in the Last Will of a parent or other individual who wants to benefit the disabled person without interfering with the payment of governmental benefits. Another example of the use of a SNT is in a situation when the person who is disabled is the recipient of funds from a personal injury action or inheritance. A Court, in the context of the settlement of the action or within an Article 81 Guardianship Proceeding, may allow the establishment of the SNT so that the assets can be available during the person’s lifetime to provide added benefits and improve his or her quality of life and the activities of daily living. In these Court created trust situations, the assets remaining in the trust following the death of the disabled person may be subject to a lien to reimburse the government for benefits it had previously paid.

Depending upon your situation, a Supplemental Needs Trust can be very useful in any plan for the care and benefit of a person with disabilities. It is important to carefully examine each situation so as to avoid trust disputes at a later date such as government claims that the assets are not protected.

August 18, 2010

The New York Court Evaluator Plays An Important Role In Article 81 Guardianship Proceedings

by Jules M. Haas

A New York Article 81 Guardianship Proceeding is commenced when a petition is filed with the Court. The general requirements of a petition were previously reviewed in a post dated August 16, 2010. Upon receipt of the petition the Court will then sign an Order to Show Cause in which Order the Court will set the date for the Court hearing and also appoint a Court Evaluator.

The job of the Court Evaluator is to make an independent investigation to assist the Court in determining whether the alleged incapacitated person is, indeed, incapacitated, and whom to select as the appropriate person to be appointed as Guardian. This investigation encompasses all other aspects surrounding the AIP such assets, the availability of advance directives such as powers of attorney and health care proxies and the future plan for the financial and personal welfare of the AIP.

Section 81.09 of the New York Mental Hygiene Law provides extensive guidelines for the Court Evaluator. For example, the statute identifies who can be appointed as a Court Evaluator which list includes an attorney-at-law, physician, social worker and the Mental Hygiene Legal Service.

The Court Evaluator will typically meet with all of the persons and witnesses involved with the proceeding, including the AIP, and review all of the papers and records that relate to the issues involved. The statute provides that the Court Evaluator may even apply to the Court for permission to review the AIP’s medical and psychological records. The Court Evaluator also has authority to take emergency action to protect the AIP’s property in the event the property may be misappropriated, wasted or lost before the Court hearing.

Following the investigation, the Court Evaluator will prepare a Report for the Court along with recommendations regarding issues such as the appointment of a Guardian, the appropriate person to act as Guardian and the powers of the Guardian. The Court Evaluator attends all Court proceedings and typically testifies as to the Report and recommendations. The Court relies a great deal upon the information presented by the Court Evaluator in making the final decision in a Guardianship proceeding.

August 16, 2010

Theft of Babe Ruth’s Will Highlights Public Court Process for Probated Estates in New York

by Jules M. Haas

It’s a fascinating story if you are a baseball fan or if you spend your career assisting clients with Wills and Estate Planning in New York. It’s also a cautionary tale for those who are concerned that their private affairs will become public through the probate court process after their death.

The Boston Herald reports that police are searching for a stolen Will that was signed by an old-time Boston Hall of Fame ball player; the investigation is part of a wider probe into black market memorabilia trafficking.

Police are trying to broker a deal with a Virginia baseball collector for the return of a Will signed by George Wright, a Hall of Famer from the 1870s who won six titles with the Red Stockings during baseball’s infancy. The document was among a batch of historic papers swiped from the Suffolk Probate Court in the late 1990s.

“I’d rather get it back in Probate Court where it belongs,” said Boston Detective Steven Blair. “If (the collector) doesn’t agree to give it back, we’ll pursue it criminally.”

While most of us will not have our Wills sought after as collector’s items, subjecting your estate to the probate court process in New York does mean your private affairs will be open to the public. This includes relatives interested in what others are receiving, nosy neighbors, and just about anyone else who takes an interest. Creating a living trust is one way to bypass the probate court process and there are a number of other options you can discuss with a New York City estate lawyer.

In this case, Wright’s signature had been cut out of the document and was up for sale for $6,500. Blair previously worked on a case involving the theft of dozen’s of ball players’ Wills and said investigators are still trying to recover documents from that heist.

The quest to recover Wright’s will is part of a larger probe being conducted by the Federal Bureau of Investigation into the theft of rare papers and photographs from libraries and courts in New York and Boston, including the theft of Babe Ruth’s 1948 Will. That Will recently turned up on an auction site for $95,000.

August 13, 2010

The Petition In A New York Article 81Guardianship Proceeding Sets The Tone

by Jules M. Haas

Every New York Article 81 Guardianship Proceeding involves its own unique set of facts and circumstances.

These variables encompass things such as the nature and extent of the alleged incapacity, the relationship between the Alleged Incapacitated Person (“AIP”) and his or her relatives, companions and friends; the assets and income available to the AIP; the existence, availability and use or abuse of Advance Directives such as a Power of Attorney; and emergency situations that may have an immediate impact on the AIP such as a medical crisis or legal proceeding in the form of a foreclosure or landlord-tenant summary eviction proceeding.

When a Guardianship proceeding is started, the first document that is prepared and presented to the Court is the Petition. New York Mental Hygiene Law Section 81.08 provides details as to the information that is required to be provided in the Petition. These items include basic data such as the name, age, address and telephone number of the AIP, as well as similar information regarding the Petitioner, any persons with whom the AIP resides, and the AIP’s next of kin.

Most importantly, the Petition also sets forth more substantive information dealing with a description of the AIP’s functional level, ability to manage activities of daily living and the powers that the Guardian is seeking.

Essentially, the Petition provides the means by which the Petitioner can tell the story about the AIP and why the AIP needs a Guardian and why the Court should appoint the Petitioner to be the Guardian. All of the relevant information regarding the Guardianship case as initially presented by the Petitioner should be set forth clearly and succintly. The Petition is the first document which the Court and all the parties involved in the proceeding will receive and read. Thus, the Petition sets the tone for the proceeding and the groundwork for the appointment of a Guardian.

Additionally, in the event that the AIP’s assets are being improperly handled or misappropriated or the AIP is in danger of being evicted from his or her home, the Petition can request temporary and immediate relief in the form of a Temporary Guardian, the freezing of assets or a Court Ordered injunction.

August 9, 2010

Safekeeping Of A New York Last Will Is Important

by Jules M. Haas

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.

August 6, 2010

Executors and Administrators of New York Estates Can Benefit from Experienced Legal Guidance

by Jules M. Haas

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.

August 3, 2010

Title To Assets Plays An Important Role In New York Estate Planning, Estate Settlement And Guardianship Proceedings

by Jules M. Haas

Issues concerning the title and ownership of assets will appear time and again in the areas of estate planning, estate settlement and guardianship.

When evaluating and planning an estate or Last Will, it is essential not only to know the assets that an individual may own, but also the manner in which they are owned or titled. A Last Will essentially controls the disposition of assets that are held by a person in his or her name alone. However, there are numerous alternative types of ownership such as joint tenancies and “In Trust For” accounts also known as Totten Trusts. Other assets such as life insurance policies or retirement accounts (IRA’s, 401K’s) may have designated beneficiaries. These alternative ownership types of assets pass upon death to the other named owner or designated beneficiary. This alternative transfer is typically referred to as having the asset pass by “Operation of Law”. These assets are not controlled by the Last Will.

A person’s estate plan must reflect the actual ownership of the assets. If a provision in a Last Will provides for the disposition of an asset in a certain way and that asset is transferred in a different manner by operation of law, the decedent’s estate plan will be disrupted and estate settlement can be complicated by conflict and litigation. Such was the result in In Re Estate of Flaherty, a case decided by the 3rd Dept Appellate Division (883 NYS2d 812, 2009). In Flaherty, the decedent purchased property and had the deed recite that a one-half interest of the property was owned by one of her daughters and her son-in-law and the other one-half was in the name of the decedent, as joint tenants with rights of survivorship. Upon the death of the decedent the daughter and the son-in-law contended that the decedent’s half interest in the property passed to them by operation of law as the surviving joint tenant. The decedent’s estate contended that the decedent’s one-half interest was not jointly owned with the daughter and son-in-law, but passed separately to the decedent’s estate to be paid to a different beneficiary. Ultimately, the Court found that the property interests were joint and passed to the daughter and son-in-law and not under the decedent’s Last Will.

Property rights and interests are also an important consideration in Article 81 Guardianship Proceedings. A property management Guardian may be faced with issues such as the validity of a joint owner’s interest in property or a beneficiary designation on a life insurance policy or retirement plan. Additionally, in the event joint assets or other assets that would pass upon death by operation of law need to be liquidated during the Guardianship to pay debts or transferred for Medicaid planning purposes, the property interests of the joint owners or beneficiaries need to be considered and accounted for.

July 28, 2010

New York Estate Is Owner of Decedent’s Interest Under Lease

by Jules M. Haas

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.

July 27, 2010

Steinbrenner’s New York Estate faces Extensive Taxation Despite Estate Tax Hiatus

by Jules M. Haas

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.