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Tuesday, April 14, 2015

Why the Money in a Joint Account May Not Be Distributed to the Survivor (or how uneducated plans go wrong)

Many people think that if they put their money in a joint account, the survivor will automatically inherit the funds and no further claims can be laid on that money. Unfortunately, as the survivors often discover to their great chagrin, it often does not work like this easily. The other heirs, including spouses and legatees under the will, as well as the IRS and other creditors of the estate, may all have higher priority claims to these funds.

Presumption: In general, if there is ‘survivorship language’ included in the joint bank account signature card, there is a presumption that the money should go to the surviving party upon the death of the first account holder. However, this presumption can easily be rebutted with direct proof that no joint tenancy was intended, or circumstantial proof that joint account had been opened for convenience only. If the court will determine that the account was for convenience purpose only, then the funds in the account will belong to the estate and may be used to first satisfy the estate’s debts and other bequests.

Testator’s Behavior: When determining the purpose for which the account was opened, the court will first examine the decedent’s behavior in regards to this account. The court will look at the testamentary plan – did the Will give the money to the joint account holder alone or did the testator provide for other people?  If the only remaining money is in the joint account, and there are explicit gifts given to other people, the court may infer that the account was joint only for convenience purposes. In that case, the funds are likely to be given back to the estate to satisfy the other bequests.

The court will also examine the signature requirement – whether or not both signatures were required in order to withdraw money. If both signatures were required, the court is likely to conclude that the account was for convenience purpose only. Similarly, the court will inquire about who had the control of the checks during the decedent’s lifetime. Full control of the withdrawals by the decedent will likely mean that the account was joint for convenience purposes only and the money should belong to the estate.

Survivor’s behavior: The court will also look at the behavior of the surviving account holder during the life of the decedent. The court will inquire whether or not the survivor ever withdrew from or deposited money into the account. The court will also inquire whether or not the survivor knew about the decedent’s testamentary plan. Lack of access to the funds or lack of knowledge about the plan will likely mean that the funds will be brought back into the estate.

Summary:  As you can see, placing money in a joint account is not an easy panacea that people often hope it will be. When creating a testamentary plan, it helps to talk to an attorney, to determine whether the distribution of your funds will be what you intend it to be.

 

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.


Saturday, April 11, 2015

Estate considerations for blended families

Second marriages bring additional estate planning considerations, especially when children from past relationships are involved. Here are some suggestions for addressing a blended family in estate planning:
  • If you are not married yet, write a prenuptual agreement, which specifies who owns which asset, the support arrangement in case of future separation, and asset distribution in case of death.  
  • If you are already married, communicate with the your new-spouse and any adult children regarding your current financial situation, and desires for distribution of those assets.
  • Set up a trust to make sure that the surviving spouse will be provided for.
  • Set up a trust to make sure that the children of each spouse get their assets.
  • Update power of attorney and advance health care directives.
  • Update any forms with beneficiary designations.
  • Prepare and share a list of personal and work contacts with your new spouse.

The information in this blog was adapted from

http://www.huffingtonpost.com/alexandra-smyser/estate-planning-for-blend_b_6754664.html

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.


Tuesday, April 7, 2015

The importance of Using the Proper Language When Setting up a Special Needs Trust

In a recent New York case, In re Paradiso, the court did not reform a father’s will which left money in a trust to a disabled daughter. In the Will, the father attempted to create a testamentary special needs trust, which would not have jeopardized the daughter’s government benefits (Medicaid and SSI). However, the language that was used to create a trust was not the statutory language!

There is a statute, EPTL 7-1.12, which requires that the supplemental needs trust language must clearly show that the intent of the deceased was “to supplement, not supplant, impair or diminish, government benefits”. If there is no such precise language, the intent of the testator is not clear, and the Trust will not be considered a Special Needs Trust.

As a result, the father’s money went in a regular Trust to a disabled daughter. Since the government will consider this money available to her, she is likely to lose her government benefits. These benefits can range from housing assistance and vocational training to home care and a stipend for basic food needs. 

This result could have been avoided by talking to a special needs attorney, who would have drafted a proper testamentary Special Needs Trust.  

 

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, April 2, 2015

New York's “Slayer Rule” gets extended!

The New York “slayer rule”, a common law principle, provides that no one should benefit financially from one’s own crime. As a result, a killer is not entitled to the proceeds from his victim’s estate.

In a recent case, Matter of Edwards, the court extended this rule. In this case, a husband killed his mother-in-law. His wife was the sole distributee of her mother’s estate. While the husband’s criminal case was pending, the wife died intestate (without a will). Since the couple had no children, by operation of law, the husband became his wife’s sole distributee. 10 months later the husband pleaded guilty to manslaughter in the first degree for the death of his mother-in-law.

The husband’s attorney argued that the husband should be able to inherit the money, because the money was coming from the wife, not the mother-in-law. The court, however, held that under the principle of the ‘slayer rule’, one should not benefit from one’s wrongdoing, especially when there is such a “clear causal link between the wrongdoing and the benefits sought”. As a result, the husband did not inherit any of his mother-in-law’s money.


Tuesday, March 31, 2015

Planning for Children with Special Needs

There are many considerations when planning for your children. There are even more issues to consider when planning for your child with Special Needs. Regardless of the child’s age, the need for special care will continue.

  1. Advanced Directives. You need to have a trusted family member or a friend to make financial decisions and health care decisions on your behalf, if you are not able to do so. The documents needed are Power of Attorney and a Health Care Proxy. Having these documents will ensure that someone has access to your money and will be able to support your children even if you are incapacitated. .

  2. Will. You can only name a guardian of your children through a Will. If you are named as a guardian of your special needs child, you can either specify an alternate guardian through the guardianship paperwork or do it through your will. You can also set up a Supplemental Needs Trust through a Will.  

  3. Guardianship. Once the child turns 18, your authority to make decisions for him will end. Prior to this age, you may want to commence a 17A guardianship, which will permit you to continue making financial and health care decisions on the child’s behalf.

  4. Supplemental Needs Trusts. These trusts provide funds for the enhancement of life for special needs children and adults, without jeopardizing their receipt of government benefits.

    1. These trusts can either be set up during life or through a Will.

    2. There are two types of Supplemental Needs Trusts:

      1. Payback Trusts: set up using the individual’s own money, need to have a Payback provision to the State

      2. Third Party Trusts – set up with other people’s money, there is no need for a payback provision.

  5. Government Services. There are many government benefits available to special needs children and adults. You need to review the various options available and plan accordingly.  

    1. Supplemental Security Income (SSI): provides a monthly stipend to a child once he or she is eligible. Funds are used to meet basic needs.

      1. Typically a child qualifies at 18 (when he is deemed to be cut off from parents’ income and assets

      2. SSI has a 3 year look back period for transfers of applicant’s own funds – so planning must start early

      3. Eligibility is based on resources (maximum of $2,000)

    2. Medicaid and Medicaid Waiver Programs: provide for home and community care, prevocational services, supported employment, respite care, vehicle modification.

      1. Some programs are resource based, others are not

 


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.

 


Sunday, March 29, 2015

The battle for the estate of an elderly heiress and the wrong lessons for estate planning

A book (and soon to be a movie) Empty Mansions tells a story about Huguette Clark, a reclusive heiress to a copper mining fortune. Ms. Clark’s father, W.A. Clark, was the founder of Las Vegas and the copper king. His daughter spent the last 20 years of her life in a hospital, even though she was healthy.

During the last years of her life, she made large gifts to the people who were taking care of her – nurses, doctors, lawyers, accountants, etc. After her death, even though she wrote a Will and made it abundantly clear that she did not want her relatives to inherit any of her money, a long estate battle ensued. A lot of her charitable wishes cannot be carried out now because of the millions of dollars that went to lawyers, the unanticipated money that went to relatives, and the millions that had to be paid to the IRS.

There are many lessons from her (botched) estate planning that any good estate planning attorney will explain to a client:

  1. Consider creating a trust and place assets in it during the creator’s life. Trusts are harder to challenge and the information in them is private.

  2. Do not leave bequests to your accountant and your attorney in the will.

  3. Get an independent doctor’s opinion about the competency of the person making the bequest.

  4. Hire a competent accountant and a lawyer who understand the complexities and interplay of estate taxes, basis step up rules and charitable bequests. Estate planning is a very specialized area. A generalist attorney is unlikely to understand all the implications of one’s actions.

 

The information in this blog was adapted from

http://www.foxbusiness.com/personal-finance/2015/02/19/how-elderly-heiress-lost-her-300-million-fortune/

 

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, March 26, 2015

Asset Protection Planning for the Home

Medicaid Eligibility:

What is homestead: A “homestead” is the primary residence occupied by the Medicaid recipient or his spouse, minor or disabled child. A homestead is an exempt resource for the purpose of Medicaid eligibility.

Penalty Period: All transfers, including the transfer of your home, are subject to a ‘look back period’ from the time of the application for Medicaid nursing home benefits. Currently the ‘look back period” is 5 years. The period of ineligibility for nursing home services is calculated by dividing (i) the uncompensated value of the transferred resource by (ii) the average regional monthly cost of a nursing home to a private pay patient. The period of ineligibility begins only when the Medicaid recipient is in a nursing home and “otherwise eligible”. The maximum penalty period is 60 months.

There is currently no look back period and no penalty for uncompensated transfers for Medicaid home care benefits.

Exempt transfers: Some transfers are exempt and do not incur a penalty period. Those are transfers to a spouse, transfers to a minor or disabled child, transfers to an adult child who has resided with the parent for at least 2 years prior to the transfer and became a primary caregiver, and transfers to a brother or sister of the owner who has lived with the owner for at least one year prior to the transfer and who already owns an ‘equity interest’ in the home.

Why should the home be transferred if it is an exempt resource? Even though it is an exempt resource, Medicaid has a right to put a lien on the home for the services provided to the Medicaid recipient. Therefore, even though one will have a right to receive Medicaid and a right to live in one’s home, after the Medicaid recipient’s death, the heirs will likely have to sell the home to pay off the Medicaid lien.

Furthermore, if the Medicaid recipient has to go into a nursing home and there is no spouse or minor / disabled child living in the home, the homestead becomes an available resource. At that point, it will likely have to be sold and the proceeds will be used to pay for nursing home.

Various Types of Transfers That Need to be Considered When Protecting the Home

  1. Outright transfer to a spouse

  2. Outright transfer to children / relatives

  3. Outright transfer with a retained life estate

  4. Transfer to a revocable trust

  5. Transfer to an irrevocable trust with a retained life estate

  6. Transfer to an irrevocable trust

Each type of a transfer has its own Medicaid, legal, asset protection and tax implications. The effect on the Medicaid recipient during his lifetime, the effect on the beneficiaries during the Medicaid recipient’s lifetime, and the effect on the beneficiaries after the Medicaid recipient’s lifetime should be considered.

There is no one correct solution that applies to everyone. Each situation is unique, and the client’s health, family status, resources and goals must be considered. It helps to talk to an elder law attorney, to evaluate the different options, and to understand the implications of your actions.

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.


Monday, March 23, 2015

Consumers are buying less long term care coverage, most likely based on high premiums and uncertainty. However, different options with various benefits are available.

Less Policies Bought: The recent trend is for consumers to buy fewer long term care insurance policies. For those that are still buying them, the policies cover fewer years, provide less coverage, and do not have inflation riders.

Reason: Higher Premium and Uncertain Need. The reason for this decline is most likely the steep increase in premiums for long term care insurance policies. Premiums on existing policies may be rising as much as 25-50% per annum. Premiums for new policies may range anywhere between $2,000 - $6,000 per year. Since a lot of people are unsure that they will ever need long term care coverage, they are reluctant to pay these high premiums for uncertain benefits.

Different Options Available: There are policies available that combine the benefits of a regular life insurance policy with the benefits of long term care polices. In these policies, the money can be used EITHER for long term care, or, if long term care is not needed, the policy will pay out a death benefit to the beneficiaries.  This way, the insured should not feel that he is throwing out good money for something that he may never need, yet he can feels protected that he will have available long term care coverage.

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, March 19, 2015

What is Probate?

Probate is a process that proves to the court that a decedent’s will satisfies all the statutory formalities and reflects the decedent’s wishes. Only after the court is satisfied that the Will is valid, will it grant probate, allow fiduciaries to be appointed and let the directions of the Will be carried out.

Freedom to dispose of assets: In New York, a testator of a Will has almost complete freedom to distribute his assets as he wants. There are, however, a few prohibitions. First, one cannot disinherit a Spouse (unless there was a valid prenuptial agreement or some extraordinary circumstances). One can, however, disinherit some or all of his children, siblings, and parents. Second, one cannot violate public policy through one’s bequests (such as promoting terrorism, encouraging divorce, encouraging racism, etc). Third, one cannot dispose of assets that pass through operation of law (such as jointly owned property).

Reasons for court to deny a will probate: The court can deny probate on the grounds of lack of testamentary capacity, failure of proper execution, fraud, and undue influence.

Finding the Will: If the proponent of a decedent’s will cannot locate it, there may have to be some preliminary steps. Sometimes the draftsman attorney keeps the Will in his office and executor has to contact the attorney. Sometimes, the Will is filed with the Surrogate’s Court. Sometimes the Will is kept in a Safe Deposit box: then a petition to search the deposit box must be filed with the cour, and the safe deposit box must be examined in the presence of a bank office. Sometimes, the Will is kept in the home of the decedent; then a petition to search the apartment must be obtained from the court and the apartment will be searched in the presence of a police officer.

Who can offer the Will for Probate? The proponent of a Will is most often the Executor listed in the Will. However, any person having an interest in the estate, including a legatee or a creditor, may offer the Will for probate.

What must the probate petition include?  

  1. The petition must describe the Will (give the date of the instrument and names of attesting witnesses)

  2. The petition must include the names of all the people who are entitled to receive money under the terms of the will and the names of all the people who would be entitled to receive money from the decedent under the law (if there was no will).  All these necessary parties must either consent to the probate petition, or they must be served with a citation.

  3. The petition must state the size of the estate.

  4. The petition must identify any extraordinary issues.

  5. The petition must prove that the decedent is dead (by attaching a death certificate).

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.

Monday, March 16, 2015

Does a lawyer use ‘cookie cutter’ documents when dealing with elder clients? What issues must be considered when formulating a plan of actions?

Someone asked me recently whether or not I use ‘boiler plate’ documents. Another person said “I need a trust”, without a real understanding of what a trust is and why it would be useful. There are many misconceptions about a work of an elder law lawyer, but under no circumstances should a lawyer use a ‘standard’ set of documents (even if such a thing existed). Below are only some of the issues that one must consider when formulating a plan of action:

  1. Is the elder law client married or single?

  2. Health circumstances of the client, and the spouse, if applicable.

  3. Is there an immediate need for a nursing home?

  4. Is the current living arrangement appropriate?

  5. All sources of income of the client and spouse.

  6. All resources of the client and spouse.

  7. Family dynamics. Are there children? Do any of the children or grandchildren have Special Needs? Do any of the children receive government programs? Do any of the children have creditor problems? Do any of the children contemplate a divorce in the near future?

  8. Is the client comfortable with relinquishing control in return for achieving tax or long term care savings?

  9. Veteran status.

  10. Does a client have long term care insurance?

There is no perfect solution that would be appropriate for everyone. That’s why I often do not recommend setting up trusts for my clients, if I do not see a necessity for having this unnecessary complication and if planning can be achieved through other means. On the other hand, a trust may be an absolute necessity in some circumstances. It helps to talk to an elder law attorney, to evaluate the different options, and to understand the implications of your actions.

 

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.


Friday, March 13, 2015

Self-settled trusts may not provide asset protection.

Another warning for anyone thinking of using self-settled trusts. A Utah court recently decided that Utah state law should apply to an asset protection trust, even though the stated choice of law in the trust was Nevada.

If the same logic will apply in New York, any local creators of self-settled trusts will be doomed, because New York has a strong policy against self-settled trusts. As a result, any transfer to such a trust my be considered void, and the money may be available for creditors!    As I wrote earlier, there are multiple considerations when choosing a type of asset protection trust to use. Talk to an experienced attorney if you are thinking about asset protection.

http://law.justia.com/cases/utah/supreme-court/2015/20100683.html


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