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Estate Planning

Monday, May 15, 2017

When to Involve Adult Children in the Estate Planning Process

Individuals who are beginning the estate planning process may assume it's best to have their adult child(ren) join them in the initial meeting with an estate planning attorney, but this may cause more harm than good.

This issue comes up often in the estate planning and elder law field, and it's a matter of client confidentiality. The attorney must determine who their client is- the individual looking to draft an estate plan or their adult children- and they owe confidentiality to that particular client.

The client is the person whose interests are most at stake. In this case, it is the parent. The attorney must be certain that they understand your wishes, goals and objectives. Having your child in the meeting could cause a problem if your child is joining in on the conversation, which may make it difficult for the attorney to determine if the wishes are those of your child, or are really your wishes.

Especially when representing elderly clients, there may be concerns that the wishes and desires of a child may be in conflict with the best interests of the parent. For example, in a Medicaid and long-term care estate planning context, the attorney may explain various options and one of those may involve transferring, or gifting, assets to children. The child's interest (purely from a financial aspect) would be to receive this gift. However, that may not be what the parent wants, or feels comfortable with. The parent may be reluctant to express those concerns to the attorney if the child is sitting right next to the parent in the meeting.

Also, the attorney will need to make a determination concerning the client's competency. Attorneys are usually able to assess a client's ability to make decisions during the initial meeting. Having a child in the room may make it more difficult for the attorney to determine competency because the child may be "guiding" the parent and finishing the parents thoughts in an attempt to help. 

The American Bar Association has published a pamphlet on these issues titled "Why Am I Left in the Waiting Room?" that may be helpful for you and your child to read prior to meeting with an attorney. 


Monday, April 24, 2017

What Does the Term "Funding the Trust" Mean in Estate Planning?

If you are about to begin the estate planning process, you have likely heard the term "funding the trust" thrown around a great deal. What does this mean? And what will happen if you fail to fund the trust?

The phrase, or term, "funding the trust" refers to the process of titling your assets into your revocable living trust. A revocable living trust is a common estate planning document and one which you may choose to incorporate into your own estate planning. Sometimes such a trust may be referred to as a "will substitute" because the dispositive terms of your estate plan will be contained within the trust instead of the will. A revocable living trust will allow you to have your affairs bypass the probate court upon your death, using a revocable living trust will help accomplish that goal.

Upon your death, only assets titled in your name alone will have to pass through the court probate process. Therefore, if you create a trust, and if you take the steps to title all of your assets in the name of the trust, there would be no need for a court probate because no assets would remain in your name. This step is generally referred to as "funding the trust" and is often overlooked. Many people create the trust but yet they fail to take the step of re-titling assets in the trust name. If you do not title your trust assets into the name of the trust, then your estate will still require a court probate.

A proper trust-based estate plan would still include a will that is sometimes referred to as a "pour-over" will. The will acts as a backstop to the trust so that any asset that is in your name upon your death (instead of the trust) will still get into the trust. The will names the trust as the beneficiary. It is not as efficient to do this because your estate will still require a probate, but all assets will then flow into the trust.

Another option: You can also name your trust as beneficiary of life insurance and retirement assets. However, retirement assets are special in that there is an "income" tax issue. Be sure to seek competent tax and legal advice before deciding who to name as beneficiary on those retirement assets.


Monday, April 10, 2017

Responsibilities and Obligations of the Executor/ Administrator

 

When a person dies with a will in place, an executor is named as the responsible individual for winding down the decedent's affairs. In situations in which a will has not been prepared, the probate court will appoint an administrator. Whether you have been named  as an executor or administrator, the role comes with certain responsibilities including taking charge of the decedent's assets, notifying beneficiaries and creditors, paying the estate's debts and distributing the property to the beneficiaries.

In some cases, an executor may also be a beneficiary of the will, however he or she must act fairly and in accordance with the provisions of the will. An executor is specifically responsible for:

  • Finding a copy of the will and filing it with the appropriate state court

  • Informing third parties, such as banks and other account holders, of the person’s death

  • Locating assets and identifying debts

  • Providing the court with an inventory of these assets and debts

  • Maintaining any assets until they are disposed of

  • Disposing of assets either through distribution or sale

  • Satisfying any debts

  • Appearing in court on behalf of the estate

Depending on the size of the estate and the way in which the decedent's assets were titled, the will may need to be probated. If the estate must go through s probate proceeding, the executor must file with the court to probate the will and be appointed as the estate's legal representative.

By doing so, the executor can then pay all of the decedent's outstanding debts and distribute the property to the beneficiaries according to the terms of the will. The executor is also is also responsible for filing all federal and state tax returns for the deceased person as well as estate taxes, if any. Lastly, an executor may be entitled to compensation for the time he or she served the estate. If the court names an administrator, this individual will have similar responsibilities.

In the end, being name an executor or appointed as an administrator ultimately means supporting the overall goal of distributing the estate assets according to wishes of the deceased or state law. In either case, an experienced probate or estate planning attorney can help you carry out these duties.


Monday, March 20, 2017

Making Decisions About End of Life Medical Treatment

 

While advances in medicine allow people to live longer, questions are often raised about life-sustaining treatment terminally ill patients may or may not want to receive. Those who fail to formally declare these wishes in writing to family members and medical professionals run the risk of having the courts make these decisions.

For this reason, it is essential to put in place advance medical directives to ensure that an individual's preferences for end of life medical care are respected. There are two documents designed for these purposes, a Do Not Resuscitate Order (DNR) and a Physician Order for Life Sustaining Treatment (POLST).

What is a DNR?

A Do Not Resuscitate Oder alerts doctors, nurses and emergency personnel that cardiopulmonary resuscitation (CPR) should not be used to keep a person alive in case of a medical emergency. A DNR is frequently used along with other advance medical directives by those who are critically ill and prefer not to receive life sustaining treatment.

What is a Physician Order for Life Sustaining Treatment (POLST)?

A Physician Order for Life Sustaining Treatment is similar to a DNR,  however a POLST is prepared by a patient's doctor after discussing end of life treatment options. This is not a legal document prepared by an attorney, but rather a binding doctor's order that is kept with a patient's medical records. A POLST declares a patient's preference for receiving certain life sustaining treatments, as well as treatment options the patient does not want to receive or to be continued.

Examples of these treatments include, but are not limited to, artificial nutrition and hydration, intubation and antibiotic use. These decisions should be made when there is no medical crisis that can affect an individual's decision making, after various treatment options have been discussed with his or her doctor. In short, a POLST ensures that a patient will receive appropriate treatments, but not be subjected to life sustaining measures the patient does not want.

By having these advance medical directives in place, a person can have peace of mind knowing that he or she will receive end of life treatment according to his or her wishes, and loved ones will not be forced to go to court to obtain the right make these decisions.

 


Monday, February 27, 2017

What is a Pooled Income Trust and Do I Need One?

A Pooled Income Trust is a special type of trust that allows individuals of any age (typically over 65) to become financially eligible for public assistance benefits (such as Medicaid home care and Supplemental Security Income), while preserving their monthly income in trust for living expenses and supplemental needs. All income received by the beneficiary must be deposited into the Pooled Income Trust which is set up and managed by a not-for-profit organization.

In order to be eligible to deposit your income into a Pooled Income Trust, you must be disabled as defined by law. For purposes of the Trust, "disabled" typically includes age-related infirmities. The Trust may only be established by a parent, a grandparent, a legal guardian, the individual beneficiary (you), or by a court order.

Typical individuals who use a Pool Income Trust are: (a) elderly persons living at home who would like to protect their income while accessing Medicaid home care; (2) recipients of public benefit programs such as Supplemental Security Income (SSI) and Medicaid; (3) persons living in an Assisted Living Community under a Medicaid program who would like to protect their income while receiving Medicaid coverage.

Medicaid recipients who deposit their income into a Pool Income Trust will not be subject to the rules that normally apply to "excess income," meaning that the Trust income will not be considered as available income to be spent down each month. Supplemental payments for the benefit of the Medicaid recipient include: living expenses, including food and clothing; homeowner expenses including real estate taxes, utilities and insurance, rental expenses, supplemental home care services, geriatric care services, entertainment and travel expenses, medical procedures not provided through government assistance, attorney and guardian fees, and any other expense not provided by government assistance programs.

As with all long term care planning tools, it’s imperative that you consult a qualified estate planning attorney who can make sure that you are in compliance with all local and federal laws.


Monday, February 6, 2017

What Your Loved Ones Absolutely Need to Know About Your Estate Plan

The conversation about a person’s last wishes can be an awkward one for both the individual who is the topic of conversation and his or her loved ones. The end of someone’s life is not a topic anyone looks forward to discussing. It is, however, an important conversation that must be had so that the family understands  the testator’s final wishes before he or she passes away. If a significant sum is being left to someone or some entity outside of the family, an explanation of this action may go a long way to avoiding a contested will. In a similar vein, if one heir is receiving a larger share of the estate than the others, it is prudent to have this action explained. If funds are being placed in a trust instead of given directly to the heirs, it makes sense for the testator to advise his or her loved ones in advance.

When a loved one dies, people are often in a state of emotional turmoil. Each deals with grief differently and, often, unpredictably. Anger is a common reaction to loss, one of the five stages postulated to apply to everyone dealing with such a tragedy. Simply by talking to loved ones ahead of time, a testator can preempt any anger misdirected at the estate plan and avoid an unnecessary dispute, be it a small family tiff or a prolonged legal battle.

The executor of the estate must be privy to a significant amount of information before a testator passes on. It is helpful for the executor to know that he or she has been chosen for this role  and to have accepted the appointment in advance. The executor should know the location of the original will. Concerns of fraud mean that only the original copy of a will can be entered into probate. The executor should be aware of all bank accounts, assets, and debts in a testator’s name. This will avoid a tedious search for documents after the decedent passes on and will ensure that all assets are included as part of the estate. The executor of an estate should be aware of all memberships, because it will be the executor’s responsibility to cancel them. An up-to-date accounting of all assets and debts will simplify the settlement of the estate for an executor significantly.


Monday, January 9, 2017

Top Five Estate Planning Mistakes


In spite of the vast amount of financial information that is currently available in the media and via the internet, many people either do not understand estate planning or underestimate its importance. Here's a look at the top five estate planning mistakes that need to be avoided.

1. Not Having an Estate Plan

The most common mistake is not having an estate plan, particularly not creating a will - as many as 64 percent of Americans don't have a will. This basic estate planning tool establishes how an individual's assets will be distributed upon death, and who will receive them.
Read more . . .


Monday, December 19, 2016

Costs Associated with Dying Without a Will

When someone dies without a will, it is known as dying intestate.  In such cases, state law (of the state in which the person resides) governs how the person's estate is administered. In most states, the individual's assets are split -- with one third of the estate going to the spouse and all surviving children splitting the rest. For people who leave behind large estates, unless they have established trusts or other tax avoidance protections, there may be a tremendous tax liability, including both estate and inheritance tax.

For just about everyone, the cost of having a will prepared by a skilled and knowledgeable attorney is negligible when compared to the cost of dying intestate,  since there are a number of serious consequences involved in dying without a proper will in place.

Legal Consequences

The larger your estate, the more catastrophic the consequences of dying intestate will be. If you die without a will, the freedom to decide how your property will be divided will be taken from you and the state in which you reside will divide your assets.

Not only will you not be able to decide on the distribution of your property, but a stranger will be making personal, familial decisions. This may be divisive among your family members; instead of leaving your loved ones in peace, you may leave them engaged in bitter disputes over a family heirloom or even a simple memento. This can be especially true in situations where there are children from a previous marriage.

Tax Consequences

In addition to the legal and personal problems associated with dying intestate, the tax results can be severe as well. This is particularly true for clients who have not consulted with an estate planning attorney in order to protect themselves through tax avoidance methods. Both the state and federal governments can tax the transfer of property and an inheritance tax may be imposed on the property you have left to your heirs.

The most effective way to avoid all of these negative tax consequences is to create a will with a competent attorney. Your lawyer will help you to choose a proper executor (the person who will administer your estate, distribute your property and pay your debts), and will assist you in finding ways to limit your tax liability. There are several ways your attorney can help you to do this:

  • By gifting some of those you want to inherit before you die
  • By creating one or several trusts
  • By purchasing a life insurance policy
  • By buying investments in your loved one's name

These methods will ensure that your loved ones receive the assets you desire them to have, while simultaneously protecting them from possibly enormous tax burdens after you pass.

For those who have no family, dying without a will can be even more troublesome and costly, since their entire fortunes can be left to the state. If a genealogical search doesn't turn up any blood relatives, all of your assets will be claimed by the government. This means that any individual, group, organization or charity you wished to endow will receive nothing.

It is never easy to think of one's own mortality, but it is even more painful to contemplate leaving a messy, uncomfortable situation behind when you pass. By engaging the services of an excellent estate planning attorney, who will help you fashion a legally binding, precisely designed document,  you can make sure that your loved ones are well taken care of and that your final wishes are respected and implemented.


Monday, December 12, 2016

Common Types of Will Contests

The most basic estate planning tool is a will which establishes how an individual's property will be distributed and names beneficiaries to receive those assets. Unfortunately, there are circumstances when disputes arise among surviving family members that can lead to a will contest. This is a court proceeding in which the validity of the will is challenged.

In order to have standing to bring a will contest, a party must have a legitimate interest in the estate. Although the law in this regard varies from state to state, the proceeding can be brought by heirs, beneficiaries, and others who stand to inherit. While these disputes are often the result of changes to the distribution plan from a prior will, some common types of will contests are as follows.

Lack of testamentary capacity

The testator, that is the person making the will, must have the mental capacity and be of sound mind at the time the will is executed , modified or revoked. Further, being of sound mind means that the testator knows what property he or she owns and understands the effect of executing the will. Although these are considered to be low standards, claims that the deceased lacked the mental capacity when the will was executed are common.

Undue influence

If the deceased was coerced into executing the will, it may be considered invalid. In order to ensure that the testator is not subjected to undue influence, the will should be prepared by an attorney. Moreover, heirs and beneficiaries should not take part in meetings and discussions between the testator and his or her attorney.

Will improperly executed

There are certain formalities that must be followed in order for a will to be considered validly executed. While some states require a notarized signature, others insist on a certain number of witnesses being present when the will is executed. If these formalities are not strictly followed, the will may be found to be improperly executed.

Fraud

A will can also be considered invalid if a person is intentionally deceived when preparing and executing the document.

The Takeaway

If a will is successfully contested, it can be declared invalid by the court. This means that the assets will be distributed either according to the terms of a prior will or if no such will exists, the state's intestacy rules. Ultimately, engaging the services of an experienced estate planning an attorney can minimize the risk of a will contest.


Monday, November 28, 2016

The Revocable Living Trust

There are many benefits to a revocable living trust that are not available in a will.  An individual can choose to have one or both, and an attorney can best clarify the advantages of each.  If the person engaged in planning his or her estate wants to retain the ability to change or rescind the document, the living trust is probably the best option since it is revocable. 

The document is called a “living” trust because it is applicable throughout one's lifetime.  Another individual or entity, such as a bank, can be appointed as trustee to manage and protect assets and to distribute assets to beneficiaries upon one's death. 

A living trust will also protect assets if and when a person becomes sick or disabled.  The designated trustee will hold “legal title” of the assets in the trust.  If an individual wants to maintain full control over his or her property, he or she may also choose to remain the holder of the title as trustee. 

It should be noted, however, that the revocable power that comes with the trust may involve taxation. Usually, a trust is considered a part of the decedent’s estate, and therefore, an estate tax applies.  One cannot escape liability via a trust because the assets are still subject to debts upon death.  On the upside, the trust may not need to go through probate, which could save months of time and attorneys' fees. 

The revocable living trust is contrary to the irrevocable living trust, in that the latter cannot be rescinded or altered during one's lifetime.  It does, however, avoid the tax consequences of a revocable trust.  An attorney can explain the intricacies of other protections an irrevocable living trust provides. 

Anyone who wants to keep certain information or assets private, will likely want to create a living trust.  A trust is not normally made public, whereas a will is put into the public record once it passes through probate.   Consulting with an attorney can help determine the best methods to ensure protection of assets in individual cases.   


Monday, November 7, 2016

Disinheritance

Inheritance laws involve legal rights to property after a death and such laws differ from state-to-state.   Heirs usually consist of close family members and exclude estranged relatives.  Depending on the wording of a will, an individual can be intentionally, or even unintentionally, disinherited.

In most cases, spouses may not be legally disinherited.  Certain contracts, however, allow for a legitimate disinheritance, such as prenuptial agreements or postnuptial agreements.  These contracts are typically valid methods of disinheritance because the presumed-to-be inheriting spouse has agreed to the arrangement by signing the document.  

If there is no prenuptial arrangement, then the state’s elective share statute or “equitable distribution” laws protect the surviving spouse.  Pursuant to the elective share statute, he or she may collect a certain percentage of the estate. 

In states that follow “community property” or “common law” rules, however, the outcome may be different.   An attorney should be consulted for clarification of the differences in the law.  Divorces affect spousal inheritance rights.  Post-divorce, it is prudent to consult an attorney to draft a fresh will, in order to prevent confusion and unintentional dissemination of assets.

If the will is unambiguous, it is usually possible for a child to be disinherited.   It should be noted, however, that it is highly likely that close relatives will challenge or contest a will in which they have been disinherited.  Fighting such a lawsuit may put a great financial strain on the estate's assets.  Depending on how time-consuming and expensive it is to defend the will, less money may be available for distribution to the intended beneficiaries. 

There are ways to protect estate assets from such problems, for example through trusts.  It is essential for an individual to receive the counsel of a licensed lawyer in order to effectively protect his or her estate as inexpensively as possible.


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Lawrence M. Gordon, Attorney at Law, P.C. has offices in Garden City, NY and assists clients throughout Long Island, including: the north shore of Long Island, The Town Of Oyster Bay, The Town Of North Hempstead, The Town Of Hempstead, The Town Of Huntington, Nassau & Suffolk Counties & throughout the Five Boroughs of The City Of New York.



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