New York Probate Lawyer Blog

March 8, 2011

Queens and Manhattan Guardianship As Well As Throughout New York Requires A Thorough Review Before Court Appointment

The appointment of a Guardian for an incapacitated person is provided by the guidelines enacted in Article 81 of the Mental Hygiene Law (MHL). The New York Probate Lawyer Blog has discussed many of the aspects involved in New York City Guardianship cases such as Guardianship powers and the petition that is filed with the Court requesting appointment.

A couple of recent Court decisions in which a Guardian was appointed are typical examples of the many factors and issues that are considered before an appointment is actually made.

In Matter of C.T., reported in the New York Law Journal on June 23, 2011, Justice Alexander W. Hunter of the Bronx Supreme Court issued a decision dated June 10, 2011, in which he appointed the sister of the alleged incapacitated person (“AIP”) as Guardian of his person and property. The Court noted at the outset of the decision that the AIP and other parties were properly served with the Order to Show Cause and petition. As referred to by the Court, section 81.07 of the MHL provides for very specific requirements regarding notice and the service of papers on interested parties. If these requirements are not complied with the Court would lack proper jurisdiction to conduct a hearing.

The AIP in Matter of C.T. had assets in excess of $2 million dollars. It appears that as part of the sister’s petition to the Court she requested that as Guardian she be allowed to provide for Medicaid planning. Such planning typically involves the transfer of the AIP’s assets to a family member so that the AIP can qualify for government benefits. Since the Court found that the plan presented by the sister for preserving the AIP’s assets was “vague”, the Court decided that such plan would require further Court approval before implementation. MHL section 81.21 provides for the granting of power to a Guardian to transfer assets. However, as was recognized by Judge Hunter, there is always a concern that notwithstanding benefits that may be obtained by a family by preserving assets through transfers, assets also need to be retained and used for the care and comfort of the AIP.

In a different case, there was an interesting issue regarding the potential conflict of interest between an AIP and the proposed Guardian. In Matter of A.M., a case reported in the New York Law Journal on May 12, 2011 and also decided by Judge Hunter on April 25, 2011, the petitioner was the brother of the AIP. It appears that the parents of the AIP left her over $1 million dollars in a testamentary trust and that the brother was the trustee. In the Guardianship proceeding, the brother was seeking only to be appointed as Guardian for his sister’s personal needs. The Court found that the brother was not eligible to be appointed pursuant to the requirements of MHL section 81.19 (“Eligibility as guardian”), because of the potential monetary conflict of interest. Among other problems, the Court was concerned that the potential of the Guardian selling the AIP’s house “creates financial gain” for the brother. Also, the Court stated that “Another motivation that cannot be ignored is that Mr. M [the brother] may no longer desire to directly care for his sister as he is currently doing. Placement in a facility and sale of the home will allow him to return to Florida where he lives. This also constitutes a conflict of interest in that Mr. M may choose his own well-being over that of his potential ward.”

As is shown by these recent Court decisions, Guardianship proceedings can be quite complex and involve issues of incapacity, transfers of assets and potential conflicts of interest that may impact on the appointment of a Guardian. Guidance from an experienced attorney is essential in these matters.

March 7, 2011

The New York Probate Process Involves Numerous Documents

by Jules M. Haas

The Probate of a Last Will in New York can appear to be a complicated and mysterious procedure. While the rules and procedures of the Surrogate’s Court are complex, certain fundamental requirements for Probate are fairly easy to set forth.

Among the essential aspects to a Probate proceeding is providing the parties interested in the proceeding with proper notice that the Court case has been commenced. In particular, the decedent’s “distributees” or closest next of kin are required to be served with a “Citation”. A “Citation” is like a summons in a regular civil action. The Citation will advise the parties who receive it as to the Court date and that they need to appear if they desire to object to the Probate of the Will. The necessity of having to serve a Citation and wait for a Court date, which may not be scheduled for a month or more after the Will is filed with the Court, results in a delay in the administration of the decedent’s estate.

In most estates where close family members, such as spouse or children, have no objection to the Probate of the Will, a form entitled “Waiver of Issuance and Service of Process and Consent to Probate” can be signed by the interested party. This form once signed and notarized, dispenses with the need to serve a Citation on such person. In fact, if all the necessary parties sign such a form, there is no need to serve a Citation at all and the Probate process and estate administration can be expedited.

Surrogate’s Court Procedure Act Section 401(4) provides, in part, that the Waiver Form “shall state the date of the will to which it relates and that a copy has been furnished or examined.”

In most instances when a client has requested that I represent them in Probate proceedings, efforts are made to obtain signed Waiver forms from all necessary parties as quickly as possible. While there are many aspects to and requirements for Probate, obtaining Waivers is always a first essential step, where possible.

March 2, 2011

New York Article 81 Guardians Are Bound By The Court To Act Properly

by Jules M. Haas

The New York Probate Lawyer Blog has discussed the powers and obligations of a property management and personal needs Guardian. When a person is found to be incapacitated and a Guardian is appointed, the Court maintains scrutiny over the actions of the Guardian.

One of the safeguards provided by Article 81 of the Mental Hygiene Law (MHL) is that the Court may require the posting of a bond (MHL Sec. 81.25). A bond is essentially an insurance policy issued by a surety company that insures payment to creditors and others entitled to receive the incapacitated person’s funds in the event the Guardian misappropriates those funds. The Court will set the amount of the bond based upon the value of and income from the assets of the incapacitated person. Since the Court appointed Guardian must qualify for the bond, the surety will check the Guardian’s credit and financial history. A poor credit history may result in the denial of a bond and, thereby, prevent a person from qualifying as a Guardian.

It is a good practice, which I follow, to have the bonding company review a client’s credit before he or she files a petition for appointment as a Guardian so that we can be certain the client can qualify if appointed.

Another safeguard provided by the law is contained in MHL Section 81.31 which requires that the Guardian file an Annual Report with the Court every May. The Annual Report contains information concerning the Guardianship financial transactions that occurred during the prior year along with information regarding the incapacitated person’s physical and mental condition. This information is typically reviewed by a Court Examiner. In the event the Court Examiner finds information that shows improper conduct on the part of the Guardian, the findings will be reported to the Court.

A recent case where a Guardian’s actions were found to be improper was reported by Daniel Wise in the New York Law Journal on January 6, 2011. The Article entitled Guardian Must Return Funds Paid to Family For Ward’s Care, described a case where a lawyer-guardian was required by the Court to repay to the incapacitated person’s estate over $100,000.00 that the Guardian had paid to a company that provided care to the Incapacitated Person. It was found that the company was controlled by the Guardian’s spouse. Judge Charles J. Thomas also ruled that the Guardian had to forfeit commissions and legal fees.

Guardians are required to be diligent in the performance of their duties. Both Guardians and the families of the Incapacitated Person often require legal representation to fully understand and protect their interests.

February 24, 2011

Properly Naming Beneficiaries of Retirement Accounts Critical to New York Estate Planning

by Jules M. Haas

As part of our ongoing series on Avoiding Probate in New York, we examine the issue of retirement accounts and beneficiaries.

As always, we preface the discussion by saying that avoiding probate does not mean you do not need a New York City probate lawyer. In fact, investing in professional estate planning services in New York is the best way to ensure your assets are protected, and that your estate is distributed in accordance with your wishes after your passing.Previously on our New York Probate Lawyer Blog, we reported on why avoiding probate in New York might not be for you, as well as the complications that may arise from bypassing probate in New York.

One of the most common issues — and certainly the most easily corrected– is the failure of a decedent to properly name beneficiaries on retirement accounts. When we say easily corrected, we are of course speaking about corrections made prior to death. After death, the naming of an incorrect beneficiary on a retirement account is much more complicated. Still, ex-wives and ex-husbands routinely remain on retirement accounts, which are often the most valuable asset of a deceased. This is particularly true in cases of sudden death in middle age.

As a general rule, however, properly naming a beneficiary on a retirement account can bypass the probate process in many cases. Even after the market meltdown, 401 (k) plans and similar retirement vehicles held a total of $14 trillion in 2008. A potential complication of such inheritance is income tax, which may be due on withdraws made even after a person dies.

Properly naming the beneficiary is critical, particularly in divorce situations as we have already discussed. In cases where a current spouse inherits, he or she may have more flexibility (including leaving the money in the account) than in those instances where someone else is the named beneficiary. Typically, unless a spouse inherits, the beneficiary will be required to begin withdrawing money and will therefore incur the associated tax consequences.

Additional considerations should be made when naming a minor child. A large inheritance to a minor child could result in court supervision. Another common complication is the naming of more than one beneficiary, which can result in a spouse’s forfeiture of the ability to leave the money in the account and will result in mandatory withdraws based on the age of the oldest beneficiary.

We see there are many benefits to properly naming beneficiaries to a retirement account. And, of course, a few complications. But with a little diligence and planning, significant assets can be left to the beneficiary of a retirement account without the intrusion inherent in the probate court process.

February 22, 2011

Contested Will Results in Settlement after Undue Influence Alleged with Dementia Patient

by Jules M. Haas

The beneficiaries of the estate of a wealthy Connecticut woman have agreed to settle a dispute over changes made to her Will after she was diagnosed with dementia, Bloomberg News reported.

Sadly, theft from the elderly and other forms of estate fraud are an all-too-common occurrence. A New York City estate planning attorney can assist residents with making estate plans that minimize such risks. In some cases, a loved one may file for Article 81 Guardianship in New York to take over the affairs of a vulnerable or aging loved one.And safeguards in probate court may also offer some protection. In still other cases, contesting a Will in New York may be the best option.

In this case, a trial over the $3.6 million estate was set to begin this month in West Harford. However, the sides have reached an agreement. The 89-year-old art teacher’s fortune was left to several colleges and other beneficiaries. Her husband, an aviation executive, died in 1999 and their only child passed away in 1963.

The dispute centered around two people who were close to her at the time of her death; they were set to inherit about $1.3 million after changes were made to her Will in 2006. The settlement will largely restore the directives of a previous Will. The changes eliminated large donations to several colleges and other beneficiaries, which led to the probate court challenge.

The decedent left $1 million to the University of Hartford to establish a scholarship in her daughter’s name. Jeanne died of meningitis while a freshman at the university. The 2006 Will cut the donation to just $100,000. Other schools that were set to receive money until being cut from the 2006 Will were Columbia University’s Teachers College, New York University and Parsons.

The settlement calls for the University of Harford to get about $900,000 and for the three New York schools to get about $160,000 each. The 2006 Will was completed shortly after doctors diagnosed her with dementia. She was moved to an assisted living facility a month later.

February 17, 2011

New York Estate Fiduciaries and Guardians Must Consider Internet Information and Assets

by Jules M. Haas

New York Executors, Administrators and Guardians have the responsibility of ascertaining, protecting and collecting the assets, documents and other effects of the estate or incapacitated person they are appointed to oversee. The New York Probate Lawyer Blog has previously discussed fiduciary responsibility concerning asset determination and protection.

An interesting aspect in this area of responsibility concerns assets, information and accounts that are internet or web-based. A fairly basic question is what becomes of a website or Facebook account or other internet based information after a person dies or becomes incapacitated. An insightful article by Ken Strutin entitled What Happens to Your Digital Life When You Die? appeared in Law Technology News on January 26, 2011. As noted in the article “the majority of state laws make no specific provisions for information assets such as those stored in the cloud.”

An Article 81 Guardian or a New York Executor faces issues not only with collecting and preserving these internet items, but may need to be able to value them for tax purposes or possibly for disposal by sale. For the most part, the estate settlement process will be in unchartered waters when dealing with such matters. As a New York Guardianship and Probate attorney, I have assisted clients in resolving many different and complex issues regarding asset identification, collection and disposal. Fiduciaries that are appointed by the Court bear a lot of responsibility in resolving the diverse issues they encounter in administering an estate. It is important for them to consider all matters thoroughly and make decisions that avoid Court criticism.

February 15, 2011

Federal Estate Tax Changes Affect New York Estates

by Jules M. Haas

The Federal estate tax ceased to exist in the year 2010. At least for most of the year it seemed that the estate of a person who died in 2010 would not be subject to any Federal estate tax. However, since other provisions relating to the estate tax, particularly, “step-up” basis rules, also drastically changed with the disappearance of the tax, both confusion and potential hardship faced many 2010 estate administrators. In New York, the estate tax exemption remained at $1,000,000.00 which added even more complexity and uncertainty to planning and estate settlement in New York.

In late December 2010, Congress and the President finally passed legislation which provided at least some clarity to the void that had existed earlier in the year. Essentially, the new law reinstated the Federal estate tax for 2010 but raised the exemption to $5,000,000.00 for estates of decedent’s who died in 2010, 2011 and 2012. However, the $5,000,000.00 exemption for gifts does not apply until 2011.

Under the new law, the “step-up” basis rules again apply to estate assets. An estate is also given the option of opting-out of the 2010 estate tax and instead, accepting “carry-over” basis treatment for estate assets. Another interesting and beneficial feature of the new law allows portability of the $5,000,000.00 exemption between spouses. Thus, if one spouse dies in 2011 and does not use all of his or her exemption (say – $1,000,000), the unused portion can be transferred to and used by the surviving spouse thereby increasing his or her exemption above the $5,000,000.00 level.

The new Federal tax law does not change the New York estate tax exemption limit of $1,000,000.00. Therefore, the variance between the State and Federal tax laws and the unfamiliarity with the nuances of the just passed Federal legislation present challenges to planning a New York estate.

It should be remembered that the Federal and New York estate tax applies to a decedent’s gross estate. Generally, the gross estate includes all assets that pass through probate and are distributed according to a Last Will or by intestate administration as well as assets that pass by operation by law such as joint bank accounts or life insurance that has designated beneficiaries.

February 9, 2011

Complications May Arise From Estate Settlement Outside New York Probate

by Jules M. Haas

As we discuss the pros and cons of avoiding probate court that certainly does not mean you will not need the help of a probate lawyer in New York City.

As part of our ongoing series on estate settling options, we reported on our New York Probate Lawyer Blog that avoiding probate in New York is not for everyone. However, there are certain advantages to avoiding probate in New York.An article in The New York Times also tackled the issue.

Probate is the system used to determine the validity of a Will before an estate is distributed to heirs. It is a public process, and can be time consuming. Passing assets outside of probate keeps the process private.

Establishing a Living Trust in New York is the most common method of avoiding probate. A Living Trust holds assets for your use during your lifetime and then distributes them to your chosen heirs after you pass. However, such trusts only avoid probate to the extent assets are placed in the trust.

Non-trust assets must still go through the probate process. Other assets that will avoid probate include assets that have a named beneficiary such as retirement assets, life insurance, savings bonds and jointly held real estate or bank accounts. This can also cause problems — as in cases where one child is named in a joint account for the purposes of taking care of an aging parent. Money in that account will automatically pass to the surviving account holder, whether or not that was the intention.

Checking the beneficiaries on accounts and life insurance policies is an important consideration. Seeking the advice of a New York estate lawyer can be a great investment when it comes to ensuring that your affairs are in order. The peace of mind can be priceless.

February 7, 2011

Payable-on-Death Accounts one Option for Distributing Estate Funds in New York

by Jules M. Haas

Consulting a New York City probate attorney is always the best option when establishing estate plans, executing a Will or deciding upon the best course of action for distributing your estate after your passing.

For some, probate court is a good option. Others may choose estate planning options that permit them to bypass probate court. This is the third blog in our series. Recently we wrote avoiding probate court is not for everyone and about the many advantages to avoiding probate. Here we are going to look at some common issues with bank accounts. One option is to create a Totten Trust, tentative trust or informal trust. These are payable-on-death accounts. Adding a payable-on-death designation can be done for many types of accounts, including certificates of deposit, checking and savings. By listing the beneficiary on the signature card, you have established where the assets go at the time of your passing.

This is not the same as a joint account. A joint account frequently comes with “right of survivorship.” In these cases, a POD (Payable On Death) designation would only apply after the death of the second account holder.

Beneficiary issues for bank account inheritance in New York:

-Children: While you can name a minor child as POD beneficiary, you might want to explore appointing an adult to hold the money on a child’s behalf. Or make other arrangements to provide some restrictions and guidance. Appointing a guardian for the funds can be easily and inexpensively done through the Uniform Transfer to Minors Act. In New York, such custodianship would be good until a minor child turns 21.

-Multiple Beneficiaries: Can be designated on the appropriate bank documents. However, you cannot name an alternate payee.

-Your Spouse: May have rights to the funds in the account and a POD should not be used as an attempt to exclude them from collecting.

-Creditors: You can’t use a POD to empty an account and short-change creditors.

You may also run into issues by trying to use a Will to change a POD designation. In cases where you change your mind, you can simply close the account or you can go to the bank and change the paperwork.

And, like with most types of inheritance, you may owe New York estates taxes and federal estate taxes on the proceeds.

February 4, 2011

New York Guardianship Property Transfers Require Court Approval And Review

by Jules M. Haas

The New York Probate Lawyer Blog has previously discussed numerous aspects concerning the appointment and duties of an Article 81 personal needs and property management Guardian.

Very often the assets of the incapacitated person includes real property such as a home. It may become necessary for the Guardian to sell the home if the incapacitated person no longer can live in a community setting due to illness, or if the maintenance of the home is unaffordable or if the proceeds from the sale are needed for the person’s long term care.

Other considerations may be presented where the home might be transferred to a relative in conjunction with Medicaid or estate planning and thereby preserved for the incapacitated person, as well as family members, to live in.

An interesting situation involving such a transfer arose in the case of White v. Prister, 912 N.Y.S.2d 127 (2nd Dept. 2010). In White, a daughter had been appointed as guardian of the person and property of her mother, Lila. Following the appointment, the daughter moved into the mother’s house and after a few years asked the Court for permission to transfer the title to the house to the daughter/guardian “for Medicaid and estate planning purposes.” The Court approved the transfer and the deed to the house was placed in the daughter’s name.

After Lila died, her great granddaughter, on behalf of Lila’s estate, sought to set aside the deed. The Court refused to undo the transfer and dismissed the great granddaughter’s case finding that the daughter was allowed by the family to live in the house for many years after Lila’s death without any objection. Thus, the equitable concept of “laches” or undue delay prevented the voiding of the deed. The Court found that it would have been inequitable to force the daughter to give up the house at such late date.