New York Probate Lawyer Blog

December 29, 2010

New York Estates Often Involve Issues Concerning The Transfer of Real Estate

A New York estate usually contains many different types of assets. These assets can include bank accounts, stocks and bonds, retirement accounts and real estate. A beneficiary’s interest in these assets is determined by the nature or manner in which these assets are owned or titled. For example, a bank account in the sole name of a decedent will be distributed according to the decedent’s Last Will or, if none, the laws of intestacy. However, a bank account held in the name of the decedent “in trust for” a named beneficiary will be distributed directly to the designee upon the decedent’s death regardless of the Last Will or intestacy laws.

Among all of these asset transfer variations, the disposition of real property often presents the most complexity. This is due to the many complex rules regarding the ownership and transfer of real estate.

The New York Probate Lawyer Blog provides a reference to New York issues and problems presented in decedent’s estates and estate settlement. A recent case that dealt with the disposition of a decedent’s real estate was Holder v. Smartt, Index No. 3384/08, Supreme Court Kings County, decided November 11, 2010 and reported in the New York Law Journal on November 29, 2010. In Holder, real property had been tranfered by the executor of an estate by an executor’s deed to “Arthur Holder and Shirley Holder a/k/a Shirley Stewart, his wife, …. and Lydia Smartt ….”

After Arthur Holder died, his surviving spouse Shirley, commenced a partition action against Lydia Smartt to have the real property sold and the proceeds of sale distributed between them. A partition action is a court proceeding whereby a co-owner of real property can have a Court direct the sale of the property and the distribution of the sales proceeds.

In enforcing its determination as to partition, the Honorable David I. Schmidt was asked to rule on the interest of an alleged son of Arthur Holder who claimed that as a distributee of Arthur’s estate, he had an interest in the real property. The Court found that under New York law, “when real property is conveyed to a husband and wife and a third party, the husband and wife have one moiety as tenants by the entirety, and the third person is a tenant in common with them of the other ….” Thus, since Arthur was married to Shirley when he died, his entire interest in the property passed to Shirley upon his death who then owned the property with Lydia Smartt. Since the son had no interest in the property, the Court directed that the sale of the property continue and the sales proceeds be distributed between Shirley and Lydia.

December 22, 2010

New York Individual Retirement Account Designations Must be Scrutinized To Avoid Beneficiary Conflict

by Jules M. Haas

On December 14, 2010, the New York Probate Lawyer Blog discussed the problems created when beneficiary designations are incomplete, confusing or ambiguous. These beneficiary designations can appear on many different types of assets such as annuities, life insurance, Individual Retirement Accounts, 401K benefit plans and other types of pension plans.

Designations that are confusing and changes made to the named beneficiaries, particularly changes made when a decedent is ill, incapacitated or shortly before death, create issues that can result in extensive and expensive estate litigation. In Mury v. Allen, Index No. 105439/2010 (Supreme Court, New York County) the Court was asked to determine a procedural issue regarding the standing or right of the plaintiff to challenge a beneficiary change made to an IRA account by a decedent shortly before his death.
In its decision dated November 22, 2010 and reported in the New York Law Journal on December 1, 2010, the Court found that the defendant failed to present sufficient facts to challenge the plaintiff’s standing. The details of the Mury case provide yet another insight into the need to provide clarity and diligence in preparing an estate plan that includes a Last Will and assets that pass directly to specifically named beneficiaries. In Mury, the decedent was an 86 year old widower at his death. He was survived by one daughter whom he disinherited in his Last Will in which he left his entire estate to his “former French mistress”.

The decedent had originally designated his wife as the beneficiary of his IRA. However, since his wife had predeceased him an issue arose as to who was the successor or alternate beneficiary of the IRA. Shortly after his death, a beneficiary change had been made to the IRA naming a home health aide who had been helping care for the decedent during the five (5) months prior to his death. Complicating matters further, was an issue as to the IRA contract terms and whether the decedent’s estate (i.e. his mistress) or his daughter would be deemed the IRA beneficiary if the beneficiary designation to the home health aide was voided by the Court.

Since the Court allowed the mistress, plaintiff, to continue with her lawsuit, the dispute over the IRA account will be ongoing with the obvious cost and upset to all involved.

December 16, 2010

Estate Tax, Gift Tax, Other Changes, Make Visiting New York City Probate Lawyer a Must in 2011

by Jules M. Haas

Once Congress passes the tax bill being debated in Washington, those with estate plans in place, and those seeking to begin the new year by consulting a New York estate planner, should seek the advice of a qualified attorney to discuss how the changes will impact their estate.

In addition to a two-year window for large, tax-free gifts made under the gift-tax exemption, significant changes to the estate tax rates could impact the options for best distributing your estate after your passing. The estate tax disappeared this year as the result of a phase-out signed by George W. Bush in 2001. It is slated to return Jan. 1 with a top rate of 55 percent on estates valued at more than $1 million.

Many are unaware that a New York estate tax exists. State and federal estate taxes are only two considerations. Property taxes (and the loss of exemptions in some states), capital gains taxes and other taxes and fees can quickly drain an estate. This can be particularly devastating for family businesses, which are often liquidated to settle the tax debt. In some cases, a family may buy life insurance, which can present its own tax complications without proper planning.

Because of the federal deficit, Democrats would like to see the federal estate tax return next year with a top rate of 45 percent — after a $3.5 million per-person exemption. However, the current plan would raise the exemption to $5 million and lower the top rate to 35 percent.

Also of note is the “step up in basis” clause, which may benefit those who die in 2010, 2011 or 2012. What that means, is that the sale of an inherited asset will be taxed based on its value at time of inheritance — not its value when originally purchased by the decedent.

CNN Money reports that the beneficiaries of those who die this year (2010) will essentially have their choice of which rules to follow. Under current rules there is no estate tax, but limited step up rules.

Too often, someone who has worked a lifetime does not put the proper planning into optimizing the distribution of his or her estate and minimizing the tax obligations. The second-most-common problem is failure to keep up with changes in the law — or changes in life, such as divorce, marriage or significant asset purchase or liquidation –after an estate plan is established.

With all of the changes passing through Congress, a resolution to visit a trusted New York City probate attorney would be an excellent start to 2011.

December 16, 2010

New York Gift-Tax Cap could Increase to as much as $10 Million under Tax Proposal

by Jules M. Haas

The gift-tax cap could increase to $10 million — up from the current limit of $2 million — under the tax-cut bill Congress is debating this week, Bloomberg News reported.

Those worried about estate taxes should consult an experienced probate attorney to establish a comprehensive New York estate plan. One of the reasons such planning can be so crucial is the advantages of the gift-tax exemption, which can permit you to distribute thousands of dollars to your children and other heirs tax free. Such giving not only allows you to give loved ones a larger inheritance while saving thousands in taxes, it gives you an opportunity to see the difference your money is making during your lifetime. Making a promise to tackle your estate planning as part of your New Year’s resolutions can bring the peace of mind that comes with knowing your life’s work will benefit your children, not the government tax collectors.Under the proposal, a U.S. taxpayer’s lifetime gift-tax exclusion will jump to $5 million in 2011, up from the current $1 million. Each parent could donate to a child, moving as much as $10 million in cash, stocks or portions of a family business outside a couple’s estate. The window is only slated to last for two years, so those interested should begin planning as soon as possible by speaking with a qualified attorney.

The lifetime gift-tax limit has been $1 million since 2002. In addition to the new lifetime gift-tax exclusion of $5 million, couples can continue to give up to $26,000 a year tax free to each beneficiary ($13,000 for a single person).

December 14, 2010

New York Beneficiary Designations Can Avoid Estate Litigation

by Jules M. Haas

A significant distinction must always be recognized between assets of a decedent that are disposed of through estate administration and assets that pass to beneficiaries by operation of law. Estate administration assets are generally governed by the terms of a decedent’s Last Will or the laws of intestacy where no Will exists. Executors or Administrators control these dispositions.

Assets that pass by operation of law include property held in the form of joint tenancy or in the name of the decedent along with a named beneficiary such as a “totten trust” bank account. Designated beneficiaries that are named in life insurance policies, retirement plans or Individual Retirement Accounts also receive a decedent’s assets automatically after death. In these operation of law or automatic pay out situations it is imperative that careful attention be paid to the beneficiary designations. These designations should be carefully made so that a person’s estate plan is accurately and properly established. Additionally, incomplete, confusing or ambiguous beneficiary designations can result in costly and lengthy estate litigation the result of which may be that beneficiaries do not receive their intended gift.

The recent case of Li-Shan Wang v. Primerica Life Insurance Co., 09-CV-5522, which was before Judge Lawrence M. McKenna, Federal District Court, Southern District of New York, and reported in the New York Law Journal on November 17, 2010, is a perfect example of the complexities and convoluted issues that can be created by an unclear beneficiary designation. In a decision dated November 5, 2010 Judge McKenna was presented with procedural motions to dismiss and to amend the plaintiff’s complaint. As explained by the Court, the decedent, Salih Neftci, had obtained a life insurance policy with Primerica. This lawsuit was commenced by the plaintiff, Li-Shan Wang, the girlfriend of the decedent who claimed that the decedent intended to name her as the policy beneficiary. Opposing this assertion were the decedent’s children who claimed that the insurance proceeds were to be paid to them. Intermixed with these contentions was the affect of various letters sent by the decedent to the insurance company requesting changes to the beneficiary designation as well as the interpretation and legal meaning of certain language utilized by decedent. There was also the issue of the decedent’s capacity to make or change his beneficiary designation due to his illness.

In its decision the Court denied the children’s motion to dismiss the complaint and allowed the plaintiff to amend her complaint. Therefore, it appears that the lawsuit will continue until settled or ultimately disposed of by the Court.

This case illustrates how the lack of attention to detail and clarity when preparing estate planning documents, such as beneficiary designation forms, can transform a simple matter of the payment of life insurance proceeds into a complex estate contest which results in unnecessary expense and distress for the intended beneficiaries. A New York Probate Attorney can help avoid these problems and can also provide representation in Court to enforce the rights of beneficiaries where the payment of proceeds is contested.

December 9, 2010

Discussing Options with New York Attorney Best Bet When Establishing Advanced Directives

by Jules M. Haas

As we gather for the holidays, it may become apparent that an older loved one will need the help of an assisted living or nursing facility at some point in the not-too-distant. You may even be approached by an aging parent or guardian for advice, to become an estate administrator, or to make end-of-life decisions.

While some may consider it a morbid topic for the holidays, New York City probate lawyers urge you to take the obligation as an honor, and to assist in alleviating the burden from a loved one who is seeking to put their affairs in order. The truth of the matter is that discussing Will and estate issues, advanced directives, and other issues can relieve some of the stress from ultimately carrying out the end-of-life decisions of a loved one when the time comes.The New York Attorney General’s Office offers information on making health care decisions known in advance.

There are various types of advanced directives, including:

-Health care proxy: Allows you to appoint a health-care agent to make decisions in the event you are unable to do so.

-Living Will: Permits you to leave written instructions regarding your end-of-life care.

-A Do Not Resuscitate Order: Permits you to express your wish to forgo CPR to restart your heart or lungs should your breathing or heartbeat stop.

Each of these legal documents has a separate function. One of the most common mistakes is not executing each for its own purpose. Together, a health care proxy and a living will permit you to state your wishes and designate someone to see that they are carried out. A DNR does neither of those things but is a legal document making known your desire to avoid cardiopulmonary resuscitation.

Other complicating issues can be failure to specify an alternative health care agent in the event your first choice is unavailable, unwilling or unable to act on your behalf or in the event he or she is disqualified by the court.

These documents should be executed by you and witnesses as required by statute or custom.

Powers-of-attorneys are another option and can include:

-Nondurable Power of Attorney: Allows for the appointment of an agent for a specific task or time period.

-Durable Power of Attorney: Permits an agent to act on your behalf from execution until revocation or death. Care should be taken here because such a document can give a person wide latitude and powers of discretion over your finances, which can lead to the risk of abuse.

December 7, 2010

New York Estate Fiduciary Accountings Involve Issues Regarding Estate Administration

by Jules M. Haas

New York Executors and Administrators are appointed by the Surrogate’s Court to administer a decedent’s estate. Typically, there are many aspects to estate settlement including the identification and collection of a decedent’s assets, the payment of debts and estate expenses and the payment of income and estate taxes. The final phase of estate administration requires the distribution of the decedent’s net estate to beneficiaries either according to the terms of the decedent’s Last Will or pursuant to the laws of intestacy.

In this final phase the estate fiduciary is required to provide an accounting of his or her activities so that the beneficiaries can see that the distributions to be made to them are accurate and are in accordance with the terms of the decedent’s Last Will and statutory rules. In estate accounting proceedings a beneficiary can examine and object to the conduct of the Executor or Administrator that occurred during the course of estate settlement. Beneficiaries can also dispute proposed distributions based upon differing interpretations or construction of the Last Will or statutory language.

A typical contested Accounting proceeding occurred in Matter of Marianne C. Gourary reported in the New York Law Journal on November 16, 2010. Matter of Gourary involved a 17 million dollar estate where the decedent’s wife, Marianne, was the executor and objections to her accounting were filed by their son, John. In deciding motions for summary judgment, Surrogate Kristin Booth Glen of the New York County Surrogate’s Court faced a number of issues.

One issue involved a dispute regarding the proper distribution of the decedent’s collection of rare books. The parties disputed which provision of the Last Will was intended to dispose of this book collection. The Court found that this dispute should be resolved after a trial.

Another issue involved John’s objection to Marianne’s use of estate funds for secretarial services. The Court found that Marianne’s payment for these services from estate funds was improper and required that she reimburse the estate from her executor’s commissions.

As can be seen from Matter of Gourary, Executor and Administrator accounting proceedings can be contentious and complex and can involve many diverse issues. The actual accountings are often lengthy and must be prepared in specific financial schedules as required by the New York Surrogate’s Court Procedure Act and Court guidelines.

December 3, 2010

Knox Saga Illustrates Importance of Choosing a Trustee For New York Trusts

by Jules M. Haas

In what is being described as possibly the largest probate court award in New York history, HSBC Bank USA has been ordered to pay more than $25 million to seven trusts of the Seymour Knox Family for “negligent and Imprudent” handling of the trust funds dating back to the mid-1990s.

The Buffalo News reported the suit was launched by the bank in 2006 when it requested to be discharged as manager of the Knox trusts.

This case illustrates the risks associated with institutional trust administration. A New York City probate lawyer can assist in establishing a trust, which can have many advantages, including tax benefits and privacy.

Choosing a Trustee for a New York trust is an important step, which can greatly impact the ability of a trust to protect an estate’s wealth for future generations. A New York trust lawyer can best advise you on establishing a proper system of checks and balances.

In this case, the bank may also be ordered to reimburse the family for stock trading commissions, attorney fees and court expenses. A guardian ad litem appointed to represent the Knox children said the award rights decades of wrongs and replenishes a trust that deteriorated over time as a result of the bank’s actions as a corporate trustee.

The Guardian blamed the trust’s deterioration on inattention and bad decision making on the part of the bank.

By law, the bank had to petition the court for approval to be relieved of its duties as a fiduciary. At that time, attorneys for the families reviewed the status of the trusts and found numerous red flags. The Knox family is a legendary business family in the Buffalo area, perhaps best known statewide for bringing the Buffalo Sabres into the National Hockey League.

November 30, 2010

New York Incapacity Under Article 81 of the Mental Hygiene Law Does Not Void All Prior Contracts

by Jules M. Haas

A New York Court can appoint a Guardian of the person or property for an individual who is found to be incapacitated. As previously discussed in the New York Probate Lawyer Blog, Mental Hygiene Law Section 81.29(d) provides, in part, that “the Court may modify, amend, or revoke any previously executed. . . contract, conveyance, or disposition during lifetime or to take effect upon death, made by the incapacitated person prior to the appointment of the guardian . . . .”

While the Court has the power to undo agreements that were unfairly entered into while a person was incapacitated, such power will be exercised by a Court only after a thorough examination of the facts and circumstances in each instance. In JPMorgan v. CV Haedrich, reported in the New York Law Journal on November 3, 2010, the Court had appointed a Guardian for the person and property of Oden and Marie Haedrich in or about 2005. Prior to such appointment in or about 1999 and 2003, the Haedrich’s had taken mortgage loans. Beginning in or about 2008, payments on the mortgage loans stopped and a foreclosure action was commenced. The Guardian then asked the Court to void the mortgage foreclosure on the ground that the Haedrich’s did not have the capacity to enter into these loans.

The Court, however, refused to vacate the foreclosure. Essentially, the Court found that the loans were taken many years prior to the 2005 determination of incapacity. No credible evidence was presented by the Guardian that either Mr. or Mrs. Haedrich were incapacitated when the transactions occurred or that the lender knew of or was notified of any such incapacity.

As shown by the Court in the Haedrich decision, the mere determination of incapacity does not in and of itself overturn or void all past transactions by the incapacitated person. Specific demonstration of incapacity and/or notice at the time of the occurrence that a party is incapacitated is essential for a Court to revoke a transaction.

November 24, 2010

Thanksgiving May Offer Families Time to Discuss Estate Planning Issues

by Jules M. Haas

By some measure, more than half of all adults will die without a will. In some cases, the consequences for those left behind can be quite severe. Proper planning can ensure your estate goes to your loved ones, that you are protected from excess taxation, and that you can enjoy life with the peace of mind that comes with knowing your affairs are in order.

New York City Probate Attorney Jules Martin Haas and the staff at his law office wish each of you a safe and enjoyable Thanksgiving weekend with friends and family. These gatherings may be the perfect opportunity to open a general dialogue with relatives about such planning.These conversations do not have to be morbid. Nor do they need to be prying or invasive. By starting a conversation that includes younger relatives, our older loved ones will feel more comfortable and may be more apt to share. It will become apparent rather quickly whether they have done the proper planning, and whether the issue has been on their mind in a way that such a conversation provides the necessary outlet and relief.

At the very least, it can help put a loved one’s wishes on the record in front of the whole family. And it may be the catalyst necessary to prompt more thorough and proper estate planning. Here are some basic issues and talking points.

Intestate Estate: This is what happens to an estate without a will. It is distributed by probate court in accordance with state law, which means your estate will pass to your spouse and/or other close relatives in outward concentric circles (children, parents, siblings, etc.) The drawbacks are many and include an inability to choose heirs or to divide your estate in a manner of your choosing. Those omitted from an estate typically include step-children, former spouses, friends or domestic partners.

Trusts and Living Trusts: Trusts are not just for the rich and famous. Establishing a trust may allow your estate to bypass the probate court process. If your Will is probated it will become a public record for all to see. Establishing a trust may also have certain tax advantages.

Powers of Attorney: Powers of Attorney can serve a purpose but can also be ripe for abuse and are best narrowly tailored for a specific circumstance.

Living Will: Advanced Directives, Health Care Proxies and other similar documents allow you to make your wishes known and designate a person to carry them out in the event that you become incapacitated.

Guardianship: May be established to assist a person with managing their personal and/or financial affairs.

Special Needs Trust: Can be established to care for a loved one with special needs after your passing. Establishing such a trust can be critical to ensuring that an inheritance does not disqualify them from receiving government health care or other assistance to which they are entitled.