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Elder Law

Friday, January 30, 2015

Top Ten Reasons Why You Might Want a Trust

The federal estate tax threshold for an individual is currently $5.43MM (and double that for most married couples). The New York State estate tax threshold is currently $2.06MM (and set to rise to the federal level by 2019). That all means that for the vast majority of New York residents, estate taxes are no longer an important reason to consider creating a trust.

Does that mean that no one needs a trust anymore? Not exactly. Below are the top 10 reasons why you might still want to create a trust:

  1. You want to avoid probate. If the assets are owned outright at the time of death and there is a will, then the family must go through probate. If the assets are owned outright at the time of death and there is no will, then the family must go through administration. Both probate and administration are costly, long-lasting, and often frustrating court processes. Placing assets in a trust avoids this hassle for your family.

  2. You favor privacy. The text of your will and the names and addresses of the people to whom you left money and property become part of the public record. A trust document, on the other hand, is completely private. If you have unusual family dynamics or a publicly recognized name you might want to keep the distribution of your assets private.

  3. You want to make it easier for your family to get control of your assets. If you place assets in a revocable trust, you can name yourself as a trustee while you are capable of acting. You name a successor trustee (a family member or an institution) to take over in case of you lose capacity or death. The transition is orderly.

  4. You have real estate in more than 1 state. If you have real estate property in more than one state, the family will have to go through the probate process in each state. Each state has its own rules and complications, and attorneys will have to be hired in each of these states.

  5. You have children who are professionals (doctors, lawyers, accountants, real estate owners). By placing assets in a trust, you can protect your children’s inheritance from creditors and malpractice claims. You can also protect your children’s inheritance from divorce proceedings.

  6. You have children or grandchildren who are minor. In a trust, you can specify when and under what circumstances your beneficiaries will receive the money. However, you will still need a will in order to specify who will be the guardian of your minor children.

  7. You have a family member who is not good with money or who has a drug / alcohol / gambling problem. You might want some kind of outside management for that beneficiary’s share of your estate.

  8. You have a child, a grandchild or a relative with a disability. If they are receiving public benefits like Supplemental Security Income (SSI) or Medicaid, you will want to create a special needs trust for any share of the inheritance that they will receive.

  9. You may want to change your mind. A trust often has the language that permits the Grantor to change the disposition of the assets amongst the various beneficiaries of the trust. Thus, if for now your trust beneficiaries are your son and your daughter equally, and later you want to give only 25% to your son, you do not need to create a new trust in order to accomplish that. You can simply write a letter stating your new preferences, and sign it in front of a notary.

  10. It is harder to challenge a trust. To submit the probate or administration petition to court, an agreement from all your potential distributees is required. If one of the children wants to cause problems, the probate process and litigation may take years and cost thousands. A trust, on the other hand, does not require a sign off from the beneficiaries in order for the assets to be distributed.

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, 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.


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.


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