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Tuesday, January 20, 2015

Supreme Court to Decide Whether States Can Prohibit Same-Sex Marriage

On Friday, the Supreme Court agreed to decide whether any of our 50 states can prohibit same-sex marriage. Currently, the number of states allowing same-sex marriage is 36 and the District of Columbia, and more than 70% of Americans now live in states where gay couples can marry.

A 2012 case United States v. Windsor struck down a part of the Defense of Marriage Act which barred federal benefits for same-sex couples. This decision was later used by lower courts to rule in favor of same-sex marriage, and recently the Fourth, Seventh and Tenth circuits have struck down same-sex marriage bans in many states.

In November 2014, a Sixth Circuit court upheld bans on same-sex marriage in four states (Michigan, Ohio, Kentucky and Tennessee). By upholding a marriage ban, the Sixth Circuit created a split among the federal appeals courts. A circuit split usually dramatically increases the chances of the Supreme Court review of the issue.

The Supreme Court agreed to hear petitions from plaintiffs challenging the marriage bans in these four states. The two issues in front of the Court are whether the Constitution requires states “to license a marriage between two people of the same sex” and whether states must “recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state”. A final ruling on these two issues is expected in June.

Both proponents and opponents of same sex marriage were happy that the issue is in front of the Supreme Court. Proponents of same sex marriage want to end the legal bans against same sex couples. Opponents want to uphold the states’ right to decide the issue, including the right to define marriage as the union of a man and a woman.

http://www.scotusblog.com/2015/01/court-will-rule-on-same-sex-marriage/


Friday, January 16, 2015

What is a Health Care Proxy?

Multiple problems may arise when an adult lacks capacity.  Do you remember Terri Schiavo and the 7 year court battle that her family had to endure to determine the proper course of her medical treatment? Much to the extreme surprise of relatives and close friends, unless certain documents were signed ahead of time, they are not entitled to make health care decisions for another individual. A Health Care Proxy is an effective tool to carry out a person’s wishes after incapacity. 

What is a Health Care Proxy? It is a document by means of which an adult individual appoints an Agent to make health care decisions for him if he is unable to do so. The Agent will act as a surrogate for the principal.

What is the Purpose of a Health Care Proxy? To insure that treatment and non-treatment decisions respect and honor the wishes of the principal.  Similar to the Power of Attorney, this document affords the principal a certain piece of mind.

Who Can Sign a Health Care Proxy? Any competent individual may appoint a health care agent.

How Long Does a Health Care Proxy Last? Unless there were any limitations inserted by the principal, a Health Care Proxy does not expire and lasts until the principal’s death.

Contents of a Health Care Proxy: the document contains the name of the principal, the designation of an agent and an alternate agent, statement of principal’s wishes and instructions regarding various types of treatment, and a statement of principal’s wishes regarding organ donation.

Who Can Be an Agent? Any competent individual over 18 years of age, as long as he is not the principal’s attending physician and not an employee of a hospital or a nursing home where the principal is a patient. Unlike a Power of Attorney, where multiple simultaneous agents can be appointed, only one Health Care Agent can be appointed. However, alternate agents can and should be named, in case the primary agent is not available.

You should ensure that your agent is 1. someone that you trust and 2. aware of your wishes regarding your treatment.

When Does an Agent’s Authority Begin? A Health Care Proxy becomes effective as soon as a physician determines that the individual is incapable of making health care decisions. As long as a person is competent, he is free to make his own decisions about his own treatment.


Wednesday, January 14, 2015

Celebrity Estates – the smart and the not-so-smart ways to leave the money.

Three beloved celebrities died in 2014 – Robin Williams, Phillip Seymour Hoffman and Joan Rivers. Both their deaths and their estate planning could not have been more different.

Robin Williams left behind 3 children from 2 separate marriages. During his life, Mr. Williams set up trusts for his children. The trusts are structured in such a way as to provide 3 separate payouts to the children – when they reach 21, 25, and 30.

This was a smart way to leave the money. Unlike a will, whose details are public, these trusts are private instruments, so the amount of money in the trusts and conditions of the payouts remain private.  Furthermore, the money is protected from the children’s mothers – whatever their eccentricities may be, and whoever their new spouses may be. The money is also protected from the children’s own immaturity – at least the hope is that a child at 30 is more mature than a child at 18. Finally, by taking the money out of his estate during his life, Mr. Williams may have avoided having his heirs pay an estate tax on their inheritance.

After his death, it was disclosed that Mr. Williams was diagnosed with Parksinson’s disease and Lewy Body Dementia. Had those trusts been established after his diagnoses, they would have been subject to potentially long and costly court battle. By establishing these trusts before he became ill, Mr. Williams saved his family a lot of money and pain.

Phillip Seymour Hoffman, on the other hand, left his entire estate of $35MM to his partner, the mother of his 3 children. He left nothing to his children directly.

This was not the smartest way of leaving the money. First, all the details of his estate are public, since everything passed through a will. This result could have been avoided by the use of a revocable trust. Second, Mr. Hoffman’s partner had to pay a $15MM tax on the inheritance: since they were not legally married, she could not take advantage of unlimited marriage deduction. This high amount could have been avoided by a marriage, or at least reduced by through the use of lifetime gifts. Third, this plan places a lot of trust into one person – the partner. She is now free to squander the money, leave it all to charity, or leave it to one of the children to the detriment of the others. She could also be sued (i.e. by an angry driver) and lose the money in a lawsuit. Overall, not a fair result to the children.

It is understood that Mr. Hoffman did not want his children to become ‘trust fund babies’. However, his desire could have been achieved by having a trust whose payout is contingent upon his children achieving certain results in life (graduating college, keeping a job, remaining drug free).

Joan Rivers’ estate was worth approximately $150 million. She wrote a will, where everything that she owned was left to a Trust (this is called a simple ‘pour over’ will). Reportedly, the trust language provides that she left her fortune to a combination of her daughter, grandson, friends and charity.  The executor and trustee is Ms. Rivers’ daughter. The charities that were important to Ms. Rivers were listed in the trust. The friends whom Ms. Rivers wanted to benefit were named in the trust. At the same time, the actual amounts given to each beneficiary remain private (because, unlike a will, the trust document does not need to be made public). Furthermore, there is a provision in the will that anyone who challenges either the trust or the will is going to be completely disinherited.

This was a clearly well thought out plan, put together while Ms. Rivers was in full command of her facilities.  Regardless of whether or not Ms. Rivers’ estate taxes were minimized, her wishes were fulfilled and the people and causes that she wanted to benefit will receive her money.

Sunday, January 11, 2015

Power of Attorney – an important document that every adult should have.

What is it? A Power of Attorney is a document that gives another person (your agent) the authority to make legal decisions and transactions on your behalf. 

Why do you need it? If an individual loses the capacity to act on his own behalf, then the agent can act for him. If there is no Power of Attorney signed, a Guardianship proceeding will need to be commenced with a Surrogate Court to have a legal guardian appointed – an extremely intrusive, time consuming, and expensive procedure. Every adult above 18 years of age should have this document signed.

Who should be named as my agent? Often, spouses name each other as their primary agents. If you have adult children, then one or more of the children can be named as successor agents. If there are no adult children, then a competent parent, relative or a friend can be named as the agent. You can name more than 1 person to be your simultaneous agents, and specify whether or not you want them to act together or separate. The most important consideration is to name someone that you can trust.

When does it become effective? A durable Power of Attorney becomes effective immediate upon signing. Often, since the document is done as part of the overall planning, the document is signed but retained by the principal. together with other estate planning document.  This way, only if the principal loses capacity, will his agent get the document and use it.

What kind of powers does my agent have over my affairs? You have the ability to control that issue. The statutory form has a list of powers that you may grant to your agent. A competent attorney will have a form that will have additional powers. The most effective Power of Attorney is the one that grants the broadest powers, because one cannot anticipate the future. However, if you are uncomfortable with granting your agent all of the powers, you can specify which ones you want to give (i.e. banking and real estate, but not trusts).  The Power of Attorney is a very important document, one that gives someone else the potential control over your financial life, that is why it is very important to sign it in front of a competent attorney who can explain the implications of various provisions.

What can the Power of Attorney NOT be used for? The Power of Attorney cannot be used to make health care Decisions on your behalf. In order to designate a health care agent, you need to sign a Health Care Proxy.

When does the Power of Attorney expire? There are 2 ways for the document to expire. First, you can revoke your Power of Attorney at any point in your life, as long as you have the mental capacity to do so. Second, the Power of Attorney expires immediately upon your death. Just like one cannot make legal transactions after death, your agent loses his capacity to act on your behalf as well.  

Is the document subject to abuse? Absolutely. By signing the document, you are giving someone else the access to your financial accounts and real estate. That is why your agent should be someone that you trust to act in your best interests.  

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Thursday, January 8, 2015

5 Reasons for Asset Protection

Some people think that asset protection is only relevant when you have a bankruptcy looming in the near future. Nothing could be further from the truth. Attempting to hide your assets when there are known creditors may be classified as ‘fraudulent conveyance’ and may not be effective.

Instead, asset protection is a legal method of arranging your assets in such a way as to make them impervious to a future creditor attack. It is most effective when done ahead of time, with the benefit of thought and planning. Below are 5 scenarios where asset protection would be appropriate:

  1. Protecting Money from Irresponsible Young Children. If a parent dies without a will, or leaves everything in his will directly to the children, then under the New York law, children will receive the money (including life insurance proceeds) at the age of 18. Some may think that this is too early, because lots of children are still irresponsible at that age. Wills and trusts can be written in such a way as to delay the receipt of money until either a specified age, or a specified time in a child's life (marriage, college graduation, etc).

  2. Medicaid Planning. An elderly person may need to receive long term care in the future (such as home care or nursing home care). In New York City, full time home care and nursing home care costs approximately $13,000 a month. Very few people have sufficient savings to be able to afford this cost for the needed time. As a result, asset transfers either to trusts or directly to children achieve the result of preserving the assets for the family, while making the parents eligible for long term care assistance from the government. To be most effective, these transfers should be done before the care becomes needed.

  3. Special Needs Planning. A child or a relative with special needs may require government assistance for the rest of his life. Yet government programs cover only the most basic needs and parents and relatives may want to enhance the life of the child. There are ways of providing money for a special needs relative in a way that preserves his eligibility for government programs.

  4. Protecting Money from Irresponsible Adults. Some families have members with problems – drug, alcohol, gambling, creditors, etc. Leaving money directly to that person is almost like throwing the money away. Trusts can be written in such a way as to control the distribution of money to a profligate family member, with the result that the money will be protected – both from the person and from his creditors.

  5. Protecting Money from Your Own Future Creditors and Financial Loss. If you are engaged in a business where there is a possibility of you getting sued, then you may want to shield as many of your assets as possible. Moving your assets after the creditor has already materialized may be considered fraudulent and will not be effective. There are many ways to shield your assets: irrevocable trusts, LLCs, corporations, family limited partnerships, trusts in other jurisdictions, etc. The key to protecting your assets is to do so before asset protection becomes a necessity.


Monday, January 5, 2015

You can now have a savings account for a disabled child! ABLE Accounts are a new savings vehicle that everyone with a disabled relative should know about.

What are the ABLE Accounts? Not many people are aware of it, but if you have a disabled relative, you can save money for their benefit, WITHOUT jeopardizing their receipt of Medicaid or SSI. In the past, a Supplemental Needs Trust was the only option.  Under the Achieving a Better Life Experience (ABLE) Act, family and friends may now contribute up to $14,000 a year to an ABLE account, without the cost of setting up a Trust.   

What can the money be used for? The money in the account can be used for the qualified disability expenses, which include beneficiary’s education, housing, transportation, employment support, financial management and wellness.  Similar to the money in the more familiar 529 Plan, all income in the account grows tax free and all withdrawals for the qualified  disability expenses are also tax free.

Impact on Government Assistance? Regardless of the amount of assets in the ABLE account, the beneficiary’s Medicaid eligibility will not be suspended. However, if the beneficiary is receiving Supplemental Security Income (SSI), no more than $100,000 is permitted to be kept in the ABLE account.  

Medicaid Payback Provision? In the event the beneficiary of the ABLE account dies (or ceases to be an individual with a disability) with remaining assets in the ABLE account, the remaining assets will be distributed to the New York Medicaid to repay the cost of the medical assistance provided to the beneficiary after the creation of the ABLE account.

When can you open an ABLE account? The legislation was passed by Congress at the end of 2014 and has been recently signed by President Obama. Now, individual states must pass the required legislation, to enable the individual accounts in each state.

Why a Supplemental Needs Trust may still be a better option.

  1. A Supplemental Needs Trust, set up by a relative for the benefit of a disabled beneficiary, does NOT need to have a Medicaid Payback Provision. As a result, any money left over after the death of a beneficiary will be able to be passed on to the remaining family members.

  2. A Supplemental Needs Trust can be set up at any point. The legislation to be able to do so in New York must  still be passed.

  3. A Supplemental Needs Trust does not have the multitude of restrictions that are contained in the ABLE legislation:

    1. A Supplemental Needs Trust may contain any amount of money, without a $100,000 limit for the purpose of SSI benefits.

    2. An ABLE account beneficiary must have been classified as ‘disabled’ by the time he turned 26.  There is no such restriction for the beneficiary of a Supplemental Needs Trust.

    3. A maximum contribution that an individual can make to an ABLE account is $14,000 per year. There is no maximum contribution limit for a Supplemental Needs Trust (although a gift tax return may need to be filed for higher amounts).


Tuesday, December 16, 2014

Why Single People Need Estate Planning

Generally, most estate planning literature focuses on married individuals. However, according to the Census Bureau, in 2013 almost half of Americans age 15 and older were single. If you are single and die intestate (without a will) your money will be distributed in ways you may not like.


Read more . . .


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