Katya Sverdlov Blog

In a recent Australian case, Re Yu [2013] QSC 322, a digital Will was admitted to probate. Mr. Karter Yu, prior to committing suicide, drafted several documents on his I-phone, saying farewell to his family and friends. One of these documents was his stated Will, appointing his brother as an Executor. The court, after pain-staking analysis, admitted this electronic document to Probate. The court did this despite the fact that the legal requirements of the execution were not met.

In New York, which is very strict about observing all legal formalities, this bending of the rules would not have been permitted and Mr. Yu would have been considered to have died “intestate” – without a Will. There are several requirements for a Will to be valid in New York:

1. A Will must be in writing

2. A Will must be signed at the end by the Testator

3. The Testator must sign the Will in the presence of at least two Witnesses

4. The Testator must declare to the Witnesses that the document that he is about to sign is his Willwhile

5. The two witnesses must attest to the Testator’s signature and must sign the document themselves.

The only exceptions that are permitted to the punctilious execution of these formalities are for members of the armed forces of the United States while in the actual military or naval service during a war or other armed conflict, a person who serves with or accompanies an armed force engaged in actual military or naval service during a war, or a mariner while at sea. Upon an expiration of one year from a discharge from armed forces, or upon an expiration of three years from the time the mariner returned from the sea, such a Will becomes invalid.

As a result, if one wants to have a proper Will in New York State, ALL legal requirements as stated above must be observed.

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.

The bill would allow doctors to prescribe lethal medication to terminally ill patients. The bill already passed the State Senate in June, but faced strong opposition in the Assembly, due to a large number of Catholic legislators.

The legislation was inspired by Brittany Maynard, who, after being diagnosed with terminal brain cancer, moved to Oregon in order to have an option to end her own life in a dignified manner. Before she died, Maynard left a video asking the California lawmakers to amend the state laws to allow others to have the same dignity.

The bill has support of nearly 70% of state residents. The bill contains a lot of regulations to protect against fraudulent prescription of lethal medicine and it does not allow the patients to end their own life (the doctor has to administer the medication).

Currently, 4 states in the country have laws permitting a legal method of ending one’s life. New York State Senator Diane Savino introduced a Death with Dignity bill in Albany in February 2015. The bill would permit prescription of lethal medication to terminally ill patients. Terminally ill is defined as an incurable illness that is expected to result in death within 6 months.  The bill is currently being discussed in the State Senate.

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.

In 2015, a US citizen may gift during life or bequeath at death as much as $5.43MM without paying federal estate taxes. A foreign national, however, has an estate tax exemption of only $60,000. If a foreign national owns a $2MM house in US that they want to pass upon their death to heirs, the heirs will end up paying federal estate tax of $740,000 (plus additional state estate taxes).

To reduce the taxes, a foreign national can utilize the annual gift tax exemption of $14,000. This number is similar to the US citizens and the gift can be given to an unlimited number of beneficiaries, therefore Crummey trusts are very appropriate.

In addition, a foreign national can make gifts to a spouse. However, unlike a US citizen who can gift or bequeath an unlimited amount of money to a spouse without triggering an estate tax, a foreign national is limited to $147,000 of lifetime gifts to a spouse. Any amount greater will trigger a gift or an estate tax.

Canadians, however, benefit from a treaty that allows them the same exemption as US citizens.

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.

Google has recently made much needed updates to the options available to gain access to the deceased account. Family or estate administrators may now upload death certificates, which Google will review, to determine whether to allow someone the access. Some of the options that fiduciaries now have, include:

1. Close the account of a deceased user.

2. Submit a request for funds from the deceased user

3. Obtain data from a deceased user’s account

4. Notify Google that user is deceased

5. Resolve a potential hijacking of a deceased user’s account

In addition, Google added an option for living users to determine what will happen to their account after death.    These are similar to the recently added “legacy” options by Facebook.

https://support.google.com/accounts/contact/deceased?hl=en

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.

When Arthur Mondella committed suicide in February 2015, he thought that his three daughters and his sister will inherit his $8MM fortune. Mr. Mondella committed suicide when his illegal marijuana growing business was discovered under the floor of his maraschino cherry factory. The factory was started by his grandfather and father in 1948, and the business appears to be legitimate. However, at this point, given how hard it is to tell which of the assets that he owned were from legal activities and which were from illegal ones, the amount that Mr. Mondella’s family will receive remains in doubt.

Under the civil forfeiture proceeding, the District Attorney office may seek forfeiture of funds obtained through criminal acts. The heirs cannot claim an “innocent owner” defense, because at the time the criminal acts were committed, they were not the owners of the factory.

The rules governing the civil forfeiture are arcane – the statute was adopted in 1881 and has not been updated since. The rationale for the statute is to seize money obtained illegally and to fund the NYPD to enable it to continue fighting the crime. However, it is very difficult to determine what amount of money was obtained illegally and what amount was earned through legitimate work. The incentive for the city, of course, is to claim that the largest amount of money possible came from illegal profits. Last year, NYC was projected to receive $5.3MM through civil forfeiture. The addition of $8MM from Mr. Mondella’s estate would be a nice increase to the NYC’s budget.

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.

Family Trustees: Very often, the Trustee of a Trust is a family member. There are many reasons to create a Trust, but most often all transactions are kept within a family. In those circumstances, the family member Trustee will often get paid nothing, or a nominal amount. The work is done out of love and affection.

Corporate Trustees: In other circumstances, however, there are no family members to act as Trustees. Alternatively, the entire point of the Trust may be to take the asset management and distribution out of the family’s discretion. In those circumstances, a corporate trustee may be the only solution.  

Minimum Balance: This solution, however, is not appropriate for every trust. Certain banks and some financial management companies provide Trustee services. Most banks, however, have a minimum balance below which they are not willing to manage the Trust. Chase, reportedly, has a $2MM dollar minimum trust balance. Other institutions may get involve with lower amounts (such as $500,000 trusts).

Fees: Annual trust management fees can range between 1-2% of the trust balance assets (this fee will cover administration, record keeping, and disbursements). In addition, the institution may charge a separate fee for the asset management services.

The information in this blog was adapted from

http://online.barrons.com/news/articles/SB51367578116875004693704580486391945783842

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.

When is it Necessary: Having a Power of Attorney and a Health Care Proxy are the best ways of ensuring that your wishes are honored by a person that you trust. Sometimes, however, an individual loses capacity and has not executed these advanced directives.  Without a Power of Attorney, NO ONE has the right to go into your bank account and withdraw assets to pay your own bills. NO ONE has a right to sell your house and move you into a more appropriate environment. And without a Health Care Proxy, NO ONE has a right to your health care records.

 In those cases, it may become necessary to apply to court to appoint a person who will be able to take care of the individual and effect his wishes. That person is called a Guardian. The process of appointing a Guardian is long, expensive and entails a complete loss of privacy.

 Judicial Standard: In order for a guardian to be appointed, there must be a judicial determination, based on a clear and convincing standard, that (1) the individual is unable to meet his daily needs for hygiene, food, clothing, medical care, financial affairs and personal safety, and (2) the individual is unable to comprehend his own inability to manage his own affairs.  

Both of the above prongs are necessary: if a person is simply eccentric and prefers to live in a squalid environment, no guardian will be appointed. Similarly, if a person is wheelchair bound, but retains his mental facilities and is able to arrange for his own care, no guardian will be appointed.

Guardianship Proceeding: 

1. Petition: A petition must be filed with the Court. Amongst other things:

              a.  The petition will provide a detailed description of the alleged incapacitated person’s (“AIP”) functional level and his understanding of his inability to manage activities of daily living.

              b.  The petition will list all the powers being sought by the guardian over the AIP.

              c.   The petition will list all the person’s assets, income, and debts.

2.   Appointees: If the petition is deemed not to be frivolous, the court will appoint:

             A. Court Evaluator. This is an independent person who will investigate the Petition. This person will interview the AIP, the AIP’s relatives, the AIP’s neighbors, the AIP’s doctors, the person who filed the petition, and anyone else who has any knowledge of the AIP. The Court Evaluator will provide a report to the judge, with this recommendation.

            B. Attorney for the AIP. This person will represent the wishes of the AIP. Very often, the AIP does not want a guardian to be appointed over him – after all, who wants to lose his autonomy?

3.     Hearing: A hearing is required before a guardian is appointed. During a hearing, the petitioner will present evidence about the AIP’s incapacity and need for a guardian. Petitioner and the AIP may both put witnesses on the stand and cross examine them. The Court Evaluator presents his report. The hearing is public, so anyone can attend.

4.     Decision: At the end of the hearing, and taking into account all the evidence presented, the judge makes the decision about the necessity of the appointment. If a specific person sought to be appointed as a guardian (i.e. a daughter sought these powers over the mother), then she may receive it. If Adult Protective Services sought the guardianship, because no family is available, then a non-profit organization will be assigned as a Guardian.

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.

What happens if a person dies without direct relatives and without a Will? The result is a long and expensive process for the heirs, that could last years and cost thousands of dollars.

What happens if a person dies without a will? New York State has an administration process under which the assets are distributed to the heirs at law (spouse, children, siblings, more distant relatives). Before the assets are distributed, however, the heirs must prove that (1) they are related to the decedent and (2) there are no other relatives that are entitled to the inheritance. With a spouse, the process is usually easy – a marriage certificate is sufficient proof. With children, the proof is also easy – a birth certificate is sufficient.

Proof of relationship: The process becomes more complicated when there are more distant relatives. You can understand why the Surrogate Court will want to see proof of the relationship – otherwise anyone could walk in and claim to be a relative of the decedent. However, establishing this more distant relationship becomes difficult. For example, how to prove that your uncle is actually your uncle? You can potentially get a letter from a un-related party who will swear that he knows your entire family well and that you are related. But what if there is no such person?

Proof that no other relatives with claims similar to yours exist. In addition, the Surrogate Court wants to ensure that ALL relatives get their fair share. Thus, if your grandfather died without a will, and there are no surviving children, but there are grandchildren, the Court will want to ensure that ALL grandchildren receive their equal share.  At that point, you will have to prove to the court that 1) all the grandfather’s children have died (a death certificate is preferable) and 2) that all the grandchildren are accounted for.

What happens if some of the grandchildren cannot be located, and you are not aware if they are alive or dead? You may have to hire an investigator and search for them. You may also have to publish announcements in local newspapers. And what if these relatives are likely to be in another country? You have to go through the same process, but internationally. The court may even assign a Guardian Ad Litem for these ‘unknown heirs’. Now imagine if the same process has to be repeated for your aunt. Or your cousin. The length of time it will take to locate all the relatives, and to prove that there are no other ones remaining is arbitrary.

There are ways of eliminating this administration process. All of them, however, involve planning prior to the person’s death. Thus, if you know that the family relationship is complicated and it may take years for the heirs to get access to the money, it helps to talk to an estate planning attorney, to evaluate your options.

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.

I frequently see clients with global ties. New York community is home to many multinational technology, finance, consulting, and other companies.  Frequently, skilled employees of these businesses have family ties overseas, or have worked for their companies in other countries. Workers often bring their families with them, to live and to study and to work in New York. Families like this, which are increasingly common in today’s world, require careful estate planning services, often from an international team of experts.

Hypothetical Family:

Imagine our hypothetical family owns a half-million dollar apartment in Moscow, a half-million dollar house in Queens and a half-million dollars worth of stocks in US brokerage accounts.  The family has lived in the US for two years.  All family members are dual Russian-US citizens.  Every summer the family goes back to Moscow for a month for the children to visit their grandparents, but spends the rest of the year in New York.  The family may one day return to the Russia or live in a third country, depending on where the company sends them next.

The Local Component

Because the family is living in New York, it is extremely important that the parents work with an estate planning attorney licensed to practice law in New York.  If either or both parents became disabled or die, a New York power of attorney (in the event of disability) or a well-drafted trust (in the event of disability or death) would help ensure the family is properly cared for.   Many families with this level of assets also plan ahead to avoid the difficulties of probate, typically through the use of a living trust.  Perhaps most importantly, the family should name guardians for their children in the event of their deaths, as a New York judge would ultimately decide who should serve as guardians.  Without instructions from parents, a judge may pick someone the parents would not have chosen.

So far, the family’s discussion with a New York attorney is similar to the discussion any typical New York family might have with their attorney.  However, the family’s ties to Russia add a layer of complexity.

Russian Estate Plans

Only a lawyer licensed to practice law in Russia is qualified to give advice about an estate plan in that country.  The ideal time for a family to create an estate plan for its overseas property is at the same time as when dealing with US property.

If the US and Russian lawyer are working on their respective pieces of the estate plan at the same time, the family would be wise to ask the two lawyers to coordinate.  Some potential reasons:

-Probate is aggravating, expensive, and time consuming enough in one country.  It would be unfortunate if the family ultimately had to go through the process in two countries, due to a lack of planning.  A conservative estimate would be $6,000 in legal fees per probate estate, per country. 

-Local counsel in Russia can properly advise on the formalities of Russian will execution.

 -If the family has overseas relatives, there is a chance it will inherit further overseas property    after drafting its estate plan.  This could exacerbate foreign estate tax and probate problems.     Planning ahead with Russian counsel would be wise.

EXECUTORSHIP/TRUSTEESHIP

The successor trustee of a living trust ensures that its terms are carried out after the death or disability of the settlor (the person who created the trust).  Typically this means distributing funds, maintaining accounts, ensuring children are financially cared for, etc.  Similarly, the executor of a will closes out the estate in probate, if probate is necessary.

In New York, an executor may be anyone who has attained the age of 18 years, is a resident of the United States, is not of unsound mind, is not an adjudged disabled person and has not been convicted of a felony. So for the family in question, it is important the executor appointed in any Will be a US resident, not a relative in Russia.

For different reasons, all successor trustees of a living trust should ideally be US residents.  Under IRS regulations, allowing a non-US resident to serve as trustee will cause the trust to be classified as a “foreign trust” and incur much more burdensome tax reporting obligations. 

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.

If you have a loved one with a disability, their life can be significantly improved with additional funds (think of non-generic medicine, vacation, additional home care, specially outfitted car, etc).   Supplemental Needs Trusts are set up for people with disabilities. The purpose of this type of a Trust is to supplement, not to supplant the government benefits to which the beneficiary may be entitled. If drafted properly, the assets and income of these trusts are treated as “exempt” by the agencies providing means tested benefits.  

There are two main types of Supplemental Needs Trusts.

First Party Supplemental Needs Trust holds the property of the person with disability (usually the funds come from an inheritance or a personal injury settlement). There are very specific criteria about the creation and administration of this type of a Trust. The assets must come from a beneficiary who is under the age of 65. The beneficiary must be disabled, as defined in the Social Security Law. The Trust must be established by a parent, grandparent, legal guardian or court order. Finally, the Trust must contain a ‘payback’ provision: upon the beneficiary’s death, all remaining assets must be used to repay the state Medicaid program for any assistance provided.

Third Party Supplemental Needs Trust holds the property of a ‘third party’ – a parent, a grandparent, a relative or a friend of the disabled beneficiary. There are fewer restrictions about the creation of this Trust. The beneficiary must be disabled. However, there is no ‘payback’ requirement: upon the beneficiary’s death the remaining assets may be distributed to another person. In addition, just like with the First Party Supplemental Needs Trust, the drafting language must remain very precise. Many Supplemental Needs Trusts have been disqualified, and the assets were considered available to the beneficiary, because of the imprecise language used by the attorneys. See my previous post about a trust that was not considered a proper Special Needs Trust by a court. http://sverdlovlaw.com/lawyer/2015/04/07/Children/The-importance-of-Using-the-Proper-Language-When-Setting-up-a-Special-Needs-Trust_bl18479.htm

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.

In the past, when the federal estate tax threshold was $1MM, most estate planners concentrated on reducing or eliminating the estate taxes. The goal was to transfer out of the estate as soon as possible.

Today’s estate tax threshold: Today, the individual federal estate tax threshold is $5.4MM. The New York State estate threshold is $3MM (and set to rise until 2019, when it will reach the federal threshold). For a couple, no federal estate taxes are anticipated until the estate reaches $10.8MM. As a result, for the vast majority of people, the focus has shifted to reducing income taxes.

Maximizing step up: In order to reduce income taxes, a plan has to be devised which maximizes the step up in basis (and avoids a step-down in basis). An outright transfer to an irrevocable trust takes out an asset from the estate (thus eliminating the future estate taxes), but at the same time this transfer may prevent an income tax benefit upon death.  The dilemma is whether to transfer the asset outright, to transfer it to a trust while retaining some indicia of ownership (thus retaining the asset in the estate), or to keep the asset in one’s name outright.

Example: Suppose you bought a building 10 years ago for $200,000. The building is currently worth $1.5MM. At the time of your demise, the building will likely be worth $3MM.

• If the building will be retained in your estate, there will likely not be any estate taxes or capital gains taxes for your heirs.

• If the building is transferred out of your estate during your life and later sold for $3MM by your heirs, they will likely have to pay federal capital gains taxes at 20% of $560,000.  Furthermore, New York State has a capital gains tax as well, with the maximum rate of 8.82%, for an additional tax of $246,960. Thus, the total taxes that will need to be paid by the heirs in New York on this property will be approximately $806,960!

There are methods of modifying trusts under the New York State law, even if the trusts are irrevocable. Your trust may need to be modified or decanted, in order to take advantage of the favorable income tax treatment achieved through the step up in basis.

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.