Estate Planning

When drafting a testamentary or an estate plan, one always should always consider family dynamics in order to preserve family relationships.

Parents may have several concerns about their children: entitlements, sibling rivalry, children’s spouses, safeguard from malpractice actions, and safeguard from drug abuse.

Entitlements: for parents of younger or minor children, the parents may not know what the children are going to be like when they grow up. It is up to the parents to build in incentives into their estate plan, so that the child graduates college, gets a career, waits until a certain age to get married, etc. One must be careful of entitlements that are against ‘public policy’ as those may be found void by the courts. Explicitly racist bequests (i.e. no money if she marries a Chinese) will not be upheld.

Sibling rivalry: most parents should be concerned about sibling rivalry. Once the parent is gone, the glue that held the family together may be gone as well.  A typical parent usually names the older child as the trustee or an executor of the trust, despite the feeling of ill-will that this nomination may cause. One method to avoid the rivalry may be to name a third party executor or a trustee.  This way the children may actually unite against a common enemy, who is not distributing the assets fast enough (in their opinion).

If the parent has left different provisions to children, it is imperative that the parent have a conversation with the children about his plan prior to his own demise. It is unfair to all siblings involved, if the disinherited child will find out about his disinheritance from the other siblings. In addition to feelings of resentment against the parent, the disinherited child may also suspect the other siblings in coercing the parent into doing what was done, and may start litigating.

Spouses of the Children:  parents usually want to leave bequests to their children and grandchildren, but not necessarily to the spouses of their children. Bequests to spouses may either be specifically avoided, or restricted, such that if the spouse divorces the child, the bequest will terminate.

Protection from malpractice action: A lot of the trusts that are now set up are done to protect the beneficiaries from creditor actions. The trust can be structured in a way that permits the beneficiary to enjoy the assets but not to technically own them.

Protection from drug abuse: if the parent is concerned about a child who has a drug, alcohol or gambling problem, naming a third party trustee is almost a necessity. The trust may also permit a trustee to engage in periodic testing of the child, and to stop making any payments to the child, in full discretion of the trustee. The goal is to provide for the child’s basic needs (shelter, food, clothing), and potential rehabilitation, without supporting the problem.

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.

A lot of people think that if a Will was executed under a supervision of an attorney, then the Will is a rock solid instrument that cannot be challenged. However, that is not a case. A Will can be challenged on many grounds (incapacity, coercion, fraud, forgery and improper execution are some of the common ones).

A Brooklyn father executed a Will explicitly disowning his daughter, while leaving his son $500 a week for life, with the remainder of his $8MM fortune going to an animal charity. Both children have successfully challenged the Will. The case never got to trial. A psychiatrist that the daughter hired diagnosed her father (post mortem) with a diagnosis similar to narcissistic personality disorder. After the diagnosis became public, the interested parties negotiated a settlement, where the charity got less than 50% of the initial amount, while the daughter, the uncle and the son each got a significant amount of money.

Should a Will be challenged? There is no right answer to this question. Legal grounds, family harmony, amount of money at stake and specific language in the Will all need to be considered prior to any legal challenge being raised. It helps to talk to an experienced attorney to evaluate your options.

The information in this blog was adapted from

http://www.dnainfo.com/new-york/20150305/new-york-city/owner-of-brooklyn-hardware-store-hid-tens-of-millions-of-dollars-son-says

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.

There are several ways in which a Will can be challenged. The three main reasons for contesting the Will include:

1. Proper execution of a Will

2. Whether the decedent had testamentary capacity to execute a Will

3. Whether the Will was the product of undue influence or duress.

Whether or not the Will was the product of undue influence or duress is not easy to prove. The answer is usually determined at trial, and it is very fact specific.

In general, the objectant to the Will must establish a motive, an opportunity and actual exercise of undue influence (specific instances in which undue influence was actually exercised). Some of the issues that the court will examine include:

• Was there was a dependency upon and subjection to the control of the person supposed to have wielded the influence.

• Was the person who was supposedly wielding the influence present at the time of the Will execution? Was that person involved in preparing the Will?

• Was there a prior Will? Did the new Will change the disposition of assets in unexpected and unexplained ways?

• Did the beneficiary have a confidential relationship with the decedent? A confidential relationship includes being a lawyer, an accountant, a financial advisor, or other person of trust, who assisted the decedent in managing his financial affairs.

The court is likely to review all evidence regarding the decedent, including mental capacity, physical capacity, relationships with the beneficiary and relationship with the remaining family before deciding whether or not a Will should be invalidated.

Estate litigation is expensive, time consuming and embarrassing. It is better to avoid it all together, if possible. Talking to an experienced attorney who will anticipate the issues that can arise in litigation and advise about the best methods of avoiding it may save your loved ones money and heartache.

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.

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.

• 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.

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.

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.

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).

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.

Do you have minor children? Planning for the children involves multiple considerations.

1. Who do you want to raise your children if you are gone?

You need to name a “guardian” who will take care of your children in the event of your demise. You should name an alternate guardian, in case your first choice (usually your spouse) is unable to become one. This designation can only be done through a will.

You don’t want your children or your family to go through a custody battle. Stating your wishes clearly in a Will eliminates the courtroom drama.

2. Who do you want to manage the children’s assets while they are minor?

You need to name someone who will take care of the child’s assets while they are minor and potentially afterwards. It can be the same person as the “guardian” but it can also be a different person.  It will be either a “custodian” or a “trustee”, depending on the method used to leave the money.

You can decide whether or not there will be only one custodian or several (depending on how much control you want one person to have). You should not name your spouse as the sole custodian of the minor children’s money.

3. How do you want to split the money between your spouse and your children?

A very common misconception is that when a spouse dies, 100% of his money goes to the surviving spouse. In New York State, this is simply not correct, if there are children involved. Without a will expressing wishes to the contrary, the first $50,000 belong to the surviving spouse, and the remaining assets are split 50 /50 between the spouse and the children.

Do you like this default distribution? If you do not, then you need to write a will, expressing your desires about the percentage of your assets going to the spouse and the percentage going to your children.

4. When do you want your children to receive the money?

Without a will expressing wishes to the contrary, the children will receive all of their money at the time they turn 18 years old. Do you like this default distribution? Some people think that 18 is too young to receive a large inheritance. If you agree, then you need to decide when they children should receive the money and who will manage their assets in the meantime.

You can create a trust for the benefit of your children. The trust will specify at what age and under what circumstances the money will be distributed. You can decide who will manage the money and determine the distribution. You can decide in what proportion the money will be distributed. This trust can be created either during your life or written into a Will, to come into effect only after your demise.

Do not think that you need to have to be rich to have a trust. A $100,000 inheritance placed into the hands of an 18 year old without any limitations or control may spell disaster. With proper estate planning, the same money managed by a responsible friend or a relative can be used to pay for college education or vocational training, establishing a child’s future.  

5. Will the children have sufficient money to live on if something happens to you?

Even if you establish a guardian for your children, consider whether or not that guardian will have sufficient funds to raise your family. Will there be sufficient money for college, summer camps, and extracurricular activities?

If you are unsure of the answer, consider buying life insurance. The proceeds will ensure that your children are provided for until they are old enough to support themselves.

6. Do you have a child with Special Needs? There are many steps you should take when planning for this child’s future.

• If the child has capacity to execute legal documents, then as soon as he turns 18, he should execute advance directives.  
• If the child does not have capacity, then prior to the child turning 18, you will need to initiate a guardianship proceeding.
• Depending on the disability, either an Article 17A or an Article 81 guardianship may be appropriate.
• Prior to the child turning 18, you need to register with OPWDD (New York State Office for People with Developmental Disabilities), in order to obtain continuing services, assistance with living and additional education after high school.
• You should consider establishing either a First Party Special Needs Trust or a Third Party Special Needs Trust, depending on your individual situation, in order not to jeopardize the child’s ability to receive government programs.

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.