Estate Planning

January 8, 2013

New York Guardianship Laws Can Provide a Safety Net for Elderly Individuals

New York Guardianship Laws are contained in Article 81 of the Mental Hygiene Law (MHL). These statutory provisions are utilized in many situations where a person in need is Alleged to be Incapacitated. Quite often the Alleged Incapacitated Person (“AIP”) is elderly and is suffering from the effects of a sudden medical condition such as a stroke or cardiac arrest or the long term deterioration of mental capacity due to dementia.

Whatever the circumstances may be, the family or friends of an elderly individual who loses the ability to attend to Activities of Daily Living, can follow the procedures outlined in Article 81 and attempt to have a Guardian appointed. New York Guardianship attorneys provide guidance to their clients who want to petition the Court for the appointment of a Guardian of the Person or Guardian for Property Management.

The Guardianship law provides a sort of safety net for persons lacking capacity, particularly in the case of the elderly. MHL Section 81.06 entitled “Who may commence a proceeding”, allows a Guardianship Petition to be commenced by just about anyone who has a concern about the AIP including anyone who resides with the AIP and “a person otherwise concerned with the welfare of the person. . . .” While petitions for Guardianship are usually commenced by family members, the proceedings are sometimes started by a hospital, a nursing home or a governmental agency such as the New York City Department of Social Services where Adult Protective Services provides community intervention. By having an expansive list of individuals and entities that can intercede on behalf of an AIP, there is a greater possibility that an AIP can receive Court intervention and protection particularly where no family member exists or the AIP’s family will not become involved.

A recent article in FoxNews.com published on December 28, 2012 describes the situation of the elderly in China where the national legislature amended its laws to require that adult children visit their elderly parents “often” or run the risk of being sued by the parent. According to the article, the law was instituted due to a number of factors including increased elderly population in China where the social safety net is lacking and there is a limit on family size which creates a large financial burden for elderly care on just a single child.

One can only imagine the plethora of lawsuits that would deluge the Courts if such a law was enacted in New York. While Guardianship proceedings in New York may be formalistic by requiring Court papers and hearings in front of a Judge, the proceedings do provide a process to protect elderly persons from harm due to incapacity. Of course, Estate Planning prior to incapacity in the form of a Health Care Proxy, Living Will, Living Trust and Last Will is always the best course to follow in order to avoid the need for a Guardianship.

December 19, 2012

New York Inheritance Laws Do Not Protect Step-Children

by Jules M. Haas

The various rights afforded to persons by the New York estate laws generally require that a person be related by blood to a decedent. New York Estates, Powers and Trusts Law (EPTL) Section 4-1.1 provides the relationship of individuals who can inherit an estate of a decedent who died without a Last Will. The priority established in this statute begins with a surviving spouse and issue and continues through the family tree to great-grandchildren of grandparents. Section (b) of the law provides that the “decedent’s relatives of the half blood shall be treated as if they were relatives of the whole blood.” Thus, half sisters and half brothers, for example, achieve inheritance rights. The statute further recognizes rights of adopted persons. Such familial relationships also afford a person certain rights to contest a Last Will.

However, absent an adoption, a child of a natural parent who has remarried has no rights with regard to the estate of the step-parent. This situation can present many problems, particularly in the case where the child is young. For example, if the child’s natural parent dies, the deceased parent’s estate or a large portion of it may pass to the surviving spouse if there is no Last Will or the Last Will does not provide for the child. Once the surviving spouse has received the estate property, the surviving child has no rights or expectation regarding the estate of the step-parent since there is no blood-relation between them. If the step-parent dies without a Last Will all of the step-parent’s estate, which includes the assets derived from the step-child’s deceased natural parent, may go to the step-parent’s blood relatives. Unfortunately, the step-child would be excluded under the law from participating as a distributee or next of kin of the step-parent.

This problem was recently recognized in Australia where laws have been changed to protect the interests of step-children. An article by Amanda Banks appearing in the West Australian dated December 3, 2012, entitled “Stepchildren get will rights” discusses this topic.

The best remedy for disinheritance of a step-child is for the child’s natural parent to prepare a comprehensive estate plan which includes a Last Will, Living Will, Health Care Proxy and even a Living Trust. The provisions of these documents can provide for estate assets to go to a child and also that the child be appointed as an Executor or Health Care Agent. If the child is a minor, a trust can be created with an independent trustee to protect the property that is given to the child. While disinheriting a child is allowed under New York, the unintended disinheritance of a child in a second marriage situation can have devastating life-long financial consequences.

Many individuals believe that estate planning is only for those that are wealthy and want to limit estate tax liability. In fact, there are many family situations where there are second marriages, adopted children, unknown heirs or other family concerns unassociated with tax issues which require extensive estate planning and foresight.

November 28, 2012

New York Gift Planning Requires Many Considerations

by Jules M. Haas

New York Estate Planning Lawyers are often asked by their clients about making gifts to family members or friends or charities. When considering a gift there are a number of items that should be part of a list of basic considerations.

1. It is important to identify the person to whom the gift is to be made. While this seems rather basic, it is not always easy to provide a gift to the person to whom you want to benefit. For example, if you desire to make a gift to a grandchild or other person who is a minor, some alternative method such as a trust or a Uniform Gift to Minors Act account may be needed since the minor cannot receive the asset in his or her own right. It may be that the donor of the gift may not want to make a gift that is in a trust or a restricted account and may feel comfortable just providing funds outright to a minor’s parent with the confidence that the parent will use the gift solely for the minor’s benefit.

A similar situation may arise where an individual desires to gift assets to a person who is disabled or incapacitated. Such situations may require the establishment of a Supplemental Needs Trust to protect the governmental benefits received by the intended donee.

2. Another consideration is the financial effect that the gift may have on the donor and the donee. Thought should be given as to whether the donor can afford to make the gift and whether the loss of the asset will affect the donor’s standard of living or future retirement planning. As to the donee, it should be determined whether receipt of the asset might increase the donee’s income tax bracket or create complications regarding the donee’s estate plan by exceeding federal or state exemptions. Additionally, the donee’s physical condition may be a factor since it would not be beneficial to provide assets to a person whose medical costs may skyrocket, especially where those costs might be paid by government programs such as Medicaid.

3. Of course, the gift tax impact of any gift is always important. This is especially true at present since the current Federal tax laws allow a combined estate and gift tax exemption of just over $5,000,000. In view of the uncertainty of the future of this exemption after December 31, 2012, many high net worth individuals are looking to use up their exemption by gifting assets having a value of up to $5,000,000 before the end of the year.

While such a planning step appears to be beneficial, there are certain circumstances where the gifting of assets can be troublesome. A recent article in Forbes on November 19, 2012 by Peter J. Reilly, “IRS Position on Wandry Decision Makes 2012 Gifting More Difficult“, provides an excellent discussion of some mine-fields. As reported in the article, the IRS has announced its non-acquiesence to a Tax Court memorandum opinion which essentially allowed a donor, through a formula clause, to modify his gift percentage interests of a family LLC after the IRS had revalued same.

In the event the IRS revalues a gift after an audit, the possibility exists that the $5,000,000 exemption gift is determined to really be a $7,000,000 gift resulting in thousands of dollars of unintended gift taxes being due.

As in all estate and trust and estate planning contexts, it is necessary to consider both the practical and tax implications of asset transfers and the manner in which such dispositions are made, whether by a gift, a Last Will and Testament and a Trust. Discussions with other family members and advisors such estate planning lawyers and accountants is the best method to avoid unintended results.

October 24, 2012

New York Estate Settlement and Estate Planning Involves Many Kinds of Issues

by Jules M. Haas

New York Estate Planning Lawyers encounter many different issues that can have an effect on an estate plan and a decedent’s estate. Post death concerns are often resolved in proceedings in the Manhattan Surrogate’s Court, Queens Surrogate’s Court or the Surrogate’s Court in New York’s many other counties. It is astounding, even to Long Island Estate attorneys and other probate lawyers, as to the many peculiar problems faced by estate fiduciaries.

For example, in a recent case decided by Manhattan Surrogate Nora Anderson on October 19, 2012 and reported in the New York Law Journal on October 16, 2012 entitled Matter of Ray, the Court was asked to declare a potential heir as deceased due to the heir’s long absence. New York Estates Powers and Trusts Law (EPTL) Section 2-1.7 allows a Court to provide a presumption that a person is deceased after a three year absence. Based upon the demonstration of a diligent search and the potential heir’s long absence and other evidence, the Court ruled that the potential heir was presumed to have died and the sole surviving heir was then able to administer the decedent’s estate.

In another recent case decided by Manhattan Surrogate Kristen Booth Glenn on October 18, 2012 and reported in the New York Law Journal on October 26, 2012, entitled Accounting by Matseoane, the Court dismissed objections to an Administrator’s accounting that were filed by a creditor of the decedent. The problem is this proceeding was that the creditor’s alleged claim against the decedent’s estate had been discharged by the decedent during her lifetime in a Chapter 7 bankruptcy. Not only did the Court dismiss the claim, it found that the creditor and the creditor’s attorney acted improperly and were subject to Court sanctions.

As a New York Trust and Estates attorney, I am aware that having a properly planned estate can avoid many of the problems that arise during estate administration. The fundamental implementation of a Last Will may avoid issues regarding intestate succession and proof of kinship. However, it is not surprising that the lack of attention to proper planning can result in problems regarding estate settlement. However, even individuals with large estates and the monetary resources to obtain counseling regarding probate and succession issues often fail to properly plan their post death dispositions. A recent article appearing in Forbes by Erik Carter on October 17, 2012 entitled “What We Can Learn From Celebrity Estate planning Gone Wrong”, chronicles some of the mistakes made by the rich and famous. For example, the article reports about the late classic folk and rock star Sonny Bono who failed to prepare a Last Will but fathered an out-of-wedlock child who claimed a share of his estate. Even the late former Supreme Court Justice Warren Berger cost his estate hundreds of thousands of dollars due to poor planning.

Estate Administration and Estate Planning requires time and thought and the assistance of professionals such as attorneys, accountants and financial advisors. An individual who neglects to create a proper plan with consideration for post death issues runs the risk that their family and beneficiaries will suffer the consequence of unnecessary cost and delay in wrapping up post-death affairs.

October 10, 2012

New York Estate Planning Can Include Pre-Nuptial Agreements and Testamentary Trusts

by Jules M. Haas

There have been numerous posts in the New York Probate Lawyer Blog discussing many aspects of the importance of good estate planning. First and foremost, preparing and signing a Last Will allows a person to provide specific direction as to the disposition of property upon death. Absent the execution of a valid Will, a person is deemed to have died intestate and all estate property that does not pass by operation of law (i.e. joint assets) is distributed to the decedent’s next of kin in accordance with State laws. Thus, long lost relatives with whom the decedent had little or no lifetime contact may become estate beneficiaries. For example, the Las Vegas Sun recently reported in a story by Cy Ryan on September 16, 2012 about a recluse who died leaving $7 million dollars worth of gold bars and coins stored in boxes in his house. It now appears that since the decedent did not have a Will, a first cousin who had not even talked to the decedent for a year, may inherit the estate.

Not only does preparing a Will allow a person to specifically name beneficiaries, a complete estate plan that includes a pre-nuptial agreement and a trust can fine tune the manner by which the decedent’s property is disposed of. A good example of such planning was seen recently with the death of actor, Dennis Hopper. As reported at TMZ.com on September 17, 2012, Mr. Hopper had entered into a pre-nuptial agreement that prevented his estranged wife from receiving any benefits under his Will. As discussed in my prior Blog posts, ordinarily in New York a spouse cannot be disinherited and New York Estates, Powers and Trusts Law section 5-1.1-A provides that a spouse can elect to receive a share of an estate. However, a valid pre-nuptial agreement can provide that a spouse waives the right to receive the statutory share and instead elect to receive only the amounts provided for in the agreement.

The TMZ article also reports that Mr. Hopper left his 9 year old daughter $2.25 million in a trust and that his wife had no control over the trust. It is very common for parents to leave their minor children assets in a testamentary trust, which is a trust created inside of their Will. The trustees that are also named in the Will can be anyone the testator selects, whether a relative, a friend or even a bank or trust company. The trustee does not need to be the child’s other parent. The surviving parent or legal guardian of the child has no authority to control the named trustee.

New York Estate Planning attorneys work closely with their clients to understand their needs and intentions and to develop an estate plan that can reflect their wishes. Mr. Hopper’s advisors apparently were successful in creating a plan whereby his estranged wife was excluded from obtaining or controlling any part of his estate or the manner in which it would be administered for the benefit of his young daughter.

September 20, 2012

Estate Tax Changes Can Effect New York Estate Planning

by Jules M. Haas

As 2012 is coming to an end, so are the many provisions of the tax laws that are set to expire on December 31, 2012. Among the laws that will change in 2013 is the Federal Estate Tax. At present, a New York Estate Attorney is aware that the federal estate tax exclusion is $5,000,000. When the estate tax laws change in a few months, only $1,000,000 will be protected from taxation.

The impending dramatic change in federal estate tax protection has created uncertainty and confusion for individuals and estate planners. This is especially so since neither Congress or the President have shown any indication that a definitive new law is being seriously considered.

For example, a Manhattan Estate Lawyer or Brooklyn Trust and Estates Attorney can prepare a Last Will for a client with precise provisions regarding the disposition of assets such as real estate, bank accounts, brokerage accounts and retirement funds. The Will can be probated in the Surrogate’s Court according to set procedures and requirements. However, the provisions in the Last Will dealing with estate tax planning must be flexible enough to accommodate the uncertainty in the tax laws that are going to change but in an unknown manner.

The variations in recent years in estate taxes due to the changing tax code and the failure of the government to provide long term certainty has resulted in unwanted and unexpected estate settlement and estate administration problems. For example a recent article in Business Financial News by Amy Feldman on July 31, 2012 recounted how a tax savings clause in a Will resulted in litigation to prevent an apparent aberration in the decedent’s estate plan. Essentially, a formula tax savings clause that was intended when drafted in 2008 to provide a sum of money to the decedent’s children of only about $2,000,000 would have given the children all of their mother’s $100 million dollar estate in 2010 when the estate tax had been eliminated. The problem was that the decedent’s husband would not have received any portion of the estate. When the Will was originally written it was not expected that there would be no estate tax in 2010 resulting in an unlimited bequest to the children.

The New York State estate tax law currently provides for a $1,000,000 exclusion. Because of the uncertainty surrounding the Federal Estate tax exclusion during the past years and in the coming months, questions continue to be raised regarding the need for the tax. An article appearing in The Daily Caller on September 4, 2012 discussed a report by the congressional Joint Economic Committee that the cost to enforce the estate tax is greater than the benefits it produces.

As a New York Trusts and Estates Lawyer, I am involved with potential estate tax issues with regard to Will preparation, estate planning and probate and estate administration. The initial concern is whether or not a person’s estate is subject to possible taxation based upon its value. If so, other issues such as the use of deductions, credits and gifts must be considered to minimize the impact of the tax. These considerations can be quite complex and require the cooperative efforts of the client and his or her tax advisors.

September 5, 2012

New York Estates are Controlled by Appropriate State Statutes

by Jules M. Haas

The Administration of the estate of a decedent requires the immediate determination as to the State law that controls estate settlement. Usually the domicile of a decedent determines which State laws (i.e., New York or New Jersey) will be applied to many of the issues concerning the estate. The determination of domicile can be a complicated matter that involves a review of which State the decedent considered to be his or her home and the contacts the decedent had with the State such as filing of tax returns or the issuance of a driver’s license.

Determining a decedent’s domicile and the proper State law to be applied can be important since the rules regarding Will execution, spousal rights, kinship, estate litigation and other substantive matters can vary from state to state. In this regard it is generally the rule that a Last Will can only be filed for probate in the State and locality where the decedent was domiciled at the time of death.

It should be noted that domicile may not only determine the proper State law to be applied in estate settlement but that it may be that a person’s domicile might be in a country other than the United States. In such cases, the laws of the country of domicile may need to be utilized to settle an estate.

New York Estate Lawyers are aware of the many issues that may arise where there is uncertainty or a potential conflict concerning the proper law to be used regarding an estate or beneficiary rights.

The New York Probate Lawyer Blog has had recent posts regarding disputes involving celebrity estates such as Adam Yauch of the Beastie Boys and the co-creator of the Superman character.

Celebrity estate problems can also arise regarding domicile and residence. With regard to domicile and the selection of appropriate State law, a United States Court of Appeals in California on August 30, 2012 ruled that heirs to the estate of Marilyn Monroe could not inherit rights to her publicity because she was domiciled in New York at the time of her death and such posthumous rights are not recognized by that State. As noted in an article in the Daily Report by Amanda Bronstad on September 5, 2012, the heirs unsuccessfully claimed that Marilyn Monroe was a resident of California.

The estate planning and probate and administration of a New York Estate requires that domicile and residency be reviewed very carefully. Individuals may have homes in many States or even countries. When a person dies, the Surrogate’s Court for Queens Probate, Manhattan Probate, Long Island Probate or Brooklyn Probate, as well as all other State counties, is going to review the decedent’s domicile and residency very carefully even before accepting any papers for filing. As can be seen from the Marilyn Monroe case, very significant rights can be affected by a determination of domicile.

Additionally, domicile can determine whether an estate is subject to State estate taxes. States such as New York impose an estate tax on local residents while other States do not have an estate tax. The cost to an estate for taxes alone is an important reason to investigate and determine a person’s domicile as part of the estate planning process.

August 22, 2012

Late Beastie Boy’s Will Offers Estate Planning Lessons for New York Public Figures

by Jules M. Haas

On May 4, 2012, Adam Yauch lost his battle with cancer at the young age of forty-seven. Sadly, this type of thing is not uncommon in New York, where cancer claims many lives each year. What makes this case more notable than most in an estate planning context is that Adam Yauch lived an alter ego for most of his life, where he was better known as “MCA,” a founding member of the Beastie Boys. The hip-hop trio sold millions of records over the years and amassed a small fortune from record royalties, tour proceeds, and other sources.

Adam Yauch had the foresight to consult an estate planning attorney about drafting a Will. Yauch named his wife, Dechen, as Executor, and the Will was filed in the Manhattan Surrogate’s Court earlier this month. The Will contained many standard provisions about how to distribute Yauch’s assets.

As reported by Deborah L. Jacobs in Forbes.com on August 13, 2012, Part of Beastie Boy Adam Yauch’s Will, Banning Use of Music in Ads, May Not Be Valid, Yauch’s Will differs from most ordinary Wills since it directed that his image or name could not be used for advertisements. Yauch added language by hand to the Will after it was signed to provide: “in no event may my image or name or any music or artistic property created by me be used for advertising purposes.” Celebrities and other public figures may want to prevent others from capitalizing on their fame after they die. Advertising professionals recognize that a public figure’s death often creates a resurgence in public interest surrounding the individual. A recent example is Michael Jackson’s estate which has made millions of dollars by promoting his image and music after his death. However, there are instances where fame can be exploited to the extreme. All else being equal, Yauch’s inclusion of the above provision appears intended to prevent any such behavior.

The problem with the particular provision in Yauch’s Will is that it is handwritten. New York frowns upon handwritten Will provisions because of the view that a handwritten Will provision is more likely to be forged, altered, or otherwise fraudulent. Yauch’s Will is made even more problematic by the fact that the majority of the document is properly typewritten and executed, while the above posthumous advertising provision was added in pen after the execution of the rest of the document. The validity of the handwritten provision may result in Estate Litigation that may prolong the probate of the Will. The estate law in New York provides that handwritten additions to a Will after it has been signed are invalid. Estates, Powers and Trusts Law Section 3-2.1 entitled “Execution and attestation of wills; formal requirements: “provides in paragraph (a)(1)(B) that “No effect shall be given to any matter, other than the attestation clause, which follows the signature of the testator, or to any matter preceeding such signature which was added subsequently to the execution of the will.”

Additionally, as pointed out in the Forbes article, the additional handwritten language created confusion in interpreting the extent of the restriction on advertising. In many cases where Will provisions are Contested, a proceeding for construction or interpretation of Will language is required. New York Estate and Trust attorneys are familiar with these proceedings but they may require extensive Court process.

The lesson to take away from the Yauch case is that New York and its boroughs are home to countless celebrities and other public figures, perhaps second only to Hollywood. As such, estate planning attorneys in New York’s boroughs are more accustomed than most to drafting special Will provisions designed to protect a person’s likeness, ideas, or other artistic property. The same attorneys know that the needs of their public figure clientele are constantly changing and intensely private, requiring the highest degree of confidentiality and legal skill.

Had Adam Yauch thought to investigate the integrity of his Will before his death, his Manhattan estate attorney may have discovered the dangers of including handwritten provisions and explained to Yauch that these provisions might end up having effects that he did not intend. If you are a public figure or celebrity who intends to have a Will executed in New York, or even if you are as far from the spotlight as possible, it is always a good idea to make sure your estate planning papers clearly reflect your intentions.

August 15, 2012

New York Wills and Trusts Require Careful Selection of Executors and Trustees

by Jules M. Haas

Executors, Trustees and Administrators in New York are commonly referred to as fiduciaries. Fiduciaries are the representatives of a trust or estate that are authorized by their appointment to act on behalf of the trust or estate.

The New York Probate Lawyer Blog has had many posts discussing actions of fiduciaries such as collecting assets, paying bills and taxes and making distributions of property. Whenever a Queens Executor or Manhattan Trustee or a fiduciary in any New York county performs his or her duties, they are required to follow and adhere to certain statutes and guidelines. New York Estates, Powers and Trusts Law (EPTL) Section 11-1.1 is entitled “Fiduciaries’ powers”. This statute sets forth many of the powers that are given to fiduciaries which include powers to: invest estate or trust property, manage or sell real estate, repair property and contest or settle claims. Generally, the powers provided by statute are quite extensive and a fiduciary is entrusted with using his or her judgment to exercise these powers in good faith. The statute also provides in paragraph (b) that the Court or the Will or Trust document can limit or provide contrary provisions to those stated in the statute.

As a New York Estate Lawyer, I have found that it is important for fiduciaries to fully understand and appreciate the responsibility that goes along with their appointment. Similarly, Estate Planning must include a thorough consideration of the qualifications of fiduciaries who are to be named by a Last Will, Living Trust or other document.

Acting as a fiduciary is not always easy and can involve the necessity of having to make difficult business decisions regarding an estate or trust asset. For example, issues may arise as to whether or not to sell shares of stock or real estate and at what price to sell. Investing assets, particularly in today’s volatile economic climate, is filled with uncertainty. The recent case of Matter of Boyer, decided by Surrogate James Pagones of the Dutchess County Surrogate’s Court on May 31, 2012 and reported in the New York Law Journal on June 26, 2012, shows some of the problems faced by fiduciaries.

In Boyer there were 3 trustees of a trust created under a decedent’s Last Will. Two of the three trustees desired to sell the decedent’s real estate which consisted of a farm. The 2 trustees also desired to evict the decedent’s friend from the property. Rather than move forward with these plans on their own, the trustees petitioned the Surrogate’s Court pursuant to Surrogate’s Court Procedure Act (“SCPA”) Section 2107, for direction from the Court.

SCPA 2107 is entitled “Court may direct as to value, manner and time of sale of property and give advice and direction in extraordinary circumstances.” Court’s are typically reluctant to substitute the Court’s judgment for that of a duly appointed fiduciary. Therefore, the Court in Boyer declined to advise the trustees as to whether and at what price the property should be sold and, instead, found that it was the trustees’ duty to exercise their own business judgment in deciding these issues.

Selecting the proper fiduciaries that will protect trust and estate property and beneficiaries’ interests is an important goal in estate planning. Trust and estate attorneys in New York help their clients in the process of selecting fiduciaries as well as providing guidance for fiduciaries who face tough administrative and estate settlement decisions.

August 9, 2012

New Yorkers Have Options When Leaving Gifts to Minors

by Jules M. Haas

New York estate planning lawyers are routinely consulted for advice as to the best way to give property or substantial sums of money to minor children. The trouble with such a gift is that a minor child typically cannot fully enjoy it until he or she reaches the age of majority. In New York, as in many jurisdictions, that magic age is 18.

To say that a minor child cannot fully enjoy such a gift is to say, essentially, that the world was not designed for minor children to be in control of valuable property or substantial sums of money. For example, banks and investment brokerages usually will not allow minors to have the autonomy to administer account funds as they wish. Similarly, minors cannot enter into a real estate contract should they wish to sell a piece of real property left to them as a gift.

Most gifts to minors are subject to implicit limitations on access and use because they are accomplished by way of a trust. The problem with a trust in New York is that it is subject to oversight by the Surrogate’s Court. Additionally, a trust can create a number of tax, accounting, and legal side effects that may dissuade the gift donor from making the gift in the first place.

Fortunately, New Yorkers have options when they consult a Manhattan estate planning attorney. One such option is to make a gift under the Uniform Transfers to Minors Act (UTMA). The Act, codified in the New York Estates, Powers and Trusts Article §7-6.1 – 7-6.26, sets out a system in which the intending donor makes an irrevocable gift to a Custodian for the child. In practice, the custodianship arrangement is accomplished with language transferring property or money to any adult or trust company “as Custodian for” [the named minor] “under the New York Uniform Transfers to Minors Act.” The gift should spell out that language so as to distinguish the gift from the creation of a trust or any other type of arrangement, and also to direct all interested parties to the particular body of law that governs the arrangement.

Donors should take care to designate a prudent and responsible entity to carry out the custodial duties. Custodians under the Uniform Transfers to Minors Act are not merely guardians of the property or assets, but rather are active participants in managing and growing the gift assets for the benefit of the named minor child. Custodians may invest the liquid gift assets or decide to sell the real or personal property entrusted to them if the Custodian decides that doing so would be in the best interest of the minor. Custodians are held to a reasonable prudence standard; they must exercise a standard of care “as would be observed by a prudent person dealing with property of another.” Further, Custodians are entitled to reasonable compensation and reimbursement for expenses. They may be required to account for the gifted assets in court proceedings, and so the Custodian must keep accurate and detailed records of all transactions.

On its face, a donor’s gift to a Custodian for the benefit of a minor child may appear to have many of the same characteristics of a trust. However, a Bronx trusts and estates attorney can explain the fine nuances and help evaluate whether a gift under the Uniform Transfers to Minors Act is the best way to see that your property and assets are distributed to the persons you wish in the manner you wish.