New York Probate Lawyer Blog

August 3, 2010

Title To Assets Plays An Important Role In New York Estate Planning, Estate Settlement And Guardianship Proceedings

Issues concerning the title and ownership of assets will appear time and again in the areas of estate planning, estate settlement and guardianship.

When evaluating and planning an estate or Last Will, it is essential not only to know the assets that an individual may own, but also the manner in which they are owned or titled. A Last Will essentially controls the disposition of assets that are held by a person in his or her name alone. However, there are numerous alternative types of ownership such as joint tenancies and “In Trust For” accounts also known as Totten Trusts. Other assets such as life insurance policies or retirement accounts (IRA’s, 401K’s) may have designated beneficiaries. These alternative ownership types of assets pass upon death to the other named owner or designated beneficiary. This alternative transfer is typically referred to as having the asset pass by “Operation of Law”. These assets are not controlled by the Last Will.

A person’s estate plan must reflect the actual ownership of the assets. If a provision in a Last Will provides for the disposition of an asset in a certain way and that asset is transferred in a different manner by operation of law, the decedent’s estate plan will be disrupted and estate settlement can be complicated by conflict and litigation. Such was the result in In Re Estate of Flaherty, a case decided by the 3rd Dept Appellate Division (883 NYS2d 812, 2009). In Flaherty, the decedent purchased property and had the deed recite that a one-half interest of the property was owned by one of her daughters and her son-in-law and the other one-half was in the name of the decedent, as joint tenants with rights of survivorship. Upon the death of the decedent the daughter and the son-in-law contended that the decedent’s half interest in the property passed to them by operation of law as the surviving joint tenant. The decedent’s estate contended that the decedent’s one-half interest was not jointly owned with the daughter and son-in-law, but passed separately to the decedent’s estate to be paid to a different beneficiary. Ultimately, the Court found that the property interests were joint and passed to the daughter and son-in-law and not under the decedent’s Last Will.

Property rights and interests are also an important consideration in Article 81 Guardianship Proceedings. A property management Guardian may be faced with issues such as the validity of a joint owner’s interest in property or a beneficiary designation on a life insurance policy or retirement plan. Additionally, in the event joint assets or other assets that would pass upon death by operation of law need to be liquidated during the Guardianship to pay debts or transferred for Medicaid planning purposes, the property interests of the joint owners or beneficiaries need to be considered and accounted for.

July 28, 2010

New York Estate Is Owner of Decedent’s Interest Under Lease

by Jules M. Haas

New York estates face many issues following the death of the decedent. These issues include a determination of the decedent’s assets as well as debts and liabilities. Executors and Administrators have a fiduciary duty to investigate and determine the decedent’s rights and obligations and protect the estate’s interests in this regard.

One example of an issue that may face a New York fiduciary relates to the estate’s right to maintain a decedent’s rental apartment following death. An estate’s interest in a rental apartment was presented recently in Renaissance Equity Holdings LLC v. Doe, New York City Civil Court, Kings County (New York Law Journal dated July 21, 2010 at page 26). In Renaissance, the landlord had commenced a summary holdover proceeding against the decedent’s daughter. The decedent was the tenant of a rent stabilized apartment. In dismissing the landlord’s petition, Judge Marc Finkelstein first recognized that the decedent’s lease did not end upon death and that his estate was entitled to remain in possession until the current lease term ended. Judge Finkelstein also found that the landlord failed to include the estate as a party to the eviction proceeding. Therefore, the Judge dismissed the eviction case without prejudice due to the failure of the landlord to include the estate as a party to the proceeding.

While Renaissance is not a landmark decision, it is a good example of the many types of problems encountered by fiduciaries in performing their job. As shown by this case, defending the estate’s interest in a landlord-tenant summary proceeding may be required.

July 27, 2010

Steinbrenner’s New York Estate faces Extensive Taxation Despite Estate Tax Hiatus

by Jules M. Haas

The Edmonton Sun just published an informative piece on the issue of estate taxes and the passing of Yankees owner George Steinbrenner.

The article is both fun for its outside view of the United States: “(The Death Tax) is actually no big thing relative to the U.S. GDP or debt, probably garnering about $25 billion a year. Still, the U.S. is struggling to stay afloat these days $25 billion here, $25 billion there; soon you’re talking real money. Every little bit helps.”

And informative for its dissection of the assertion that the Steinbrenner estate will pass to heirs without taxation since he passed away during the one-year hiatus of the death tax. As we recently reported on our New York Probate Lawyer Blog, the tax, which applied to estates valued at more than $3.5 million in 2009, was eliminated for 2010.

It is due back next year and could apply a rate of up to 55 percent on all estates valued at more than $1 million. Some studies have found the impact of the death tax is such that it can actually sway the death rate, with more people dying right before a scheduled increase and more people hanging on just before a scheduled drop in the taxation rate.

But lost in this debate is the fact that all estates –Steinbrenner’s included — are subject to all sorts of taxation, regardless of the status of the estate tax. Most importantly, Steinbrenner’s death will trigger capital gains taxes. While typically 15 percent — much less than the 55 percent death-tax rate — capital gains taxes alone will cost the Steinbrenner estate several hundred million dollars.

And Steinbrenner lived in Florida, a state where homestead and other property tax exemptions can save homeowners tens of thousands of dollars in property taxes each year. Florida law only permits property values to increase by three percent a year for taxation purposes, a tax-break called “Save our Homes,” that is meant to protect retired residents from the taxation that comes from rising property values in retirement paradise.

Transferring a home after death — especially a multi-million property, can increase property taxes from $8,000 to $10,000 a year, to $50,000 or more as the taxable value of the property returns to fair-market value.

But, as the article points out, the wealthy use trusts or other vehicles to protect themselves from excessive taxation. The estate tax frequently hits family businesses the hardest.

Consulting a New York estate and tax planning attorney is the best course of action to protect your estate from excessive taxation at the time of your death.

July 26, 2010

New York Intestate Estates Leave Families without a Voice in Settling your Estate

by Jules M. Haas

The New York Times reports that the number of people who are dying intestate — without a Will — is growing, possibly leaving counties to manage everything from house trailers to horse farms and sometimes putting estates at the mercy of government bureaucracy instead of in the hands of loved ones.

A New York City probate lawyer can assist residents with Wills or estate planning and can help ensure that a person’s estate is properly distributed at the time of their death. Leaving behind an unplanned estate can subject your assets to excessive taxation, a lengthy probate process, additional fees and other consequences. Also, your estate will be divided in accordance with New York law, regardless of your wishes.

Those who die without a Will, under New York law, will typically have their estate divided as follows:

-The first $50,000 to the spouse and one-half of the remainder. The balance will be split among the children.

-In the absence of a spouse, the estate will pass to the children.

-To the parents, if no surviving spouse or children.

-To siblings if no spouse, children or parents.

-In the absence of the above relatives, the estate would pass to grandparents, aunts or uncles, or other relatives in outward concentric circles.

Without proper planning, the estate may be administered by a government official called a Public Administrator. A kinship hearing may also be needed to determine the decedent’s heirs.

An estimated 65 percent of American adults do not have a Will. As one person in the Times article put it, “Baby boomers don’t think they’re going to die until they are 90.”

The truth of the matter is that dying without a Will, or without any sort of estate planning, can be a tremendous burden for surviving relatives. Conversely, many who take the time to consult with a New York City probate attorney experience tremendous relief at having their affairs in order. They can enjoy life with the security and peace of mind that comes with knowing that their affairs are in order.

July 19, 2010

New York Court Holds Agent Under Power of Attorney In Contempt For Failing To Return Decedent’s Funds

by Jules M. Haas

The New York Power of Attorney allows a person, known as the principal, to select an agent or agents and to give the agent authority to act on behalf of the principal. For example, one of the designated subjects in the Power of Attorney form provides that the agent may act with respect to “banking transactions”.

New York recently enacted legislation that provided major changes to the Power of Attorney form. These changes became effective on September 1, 2009. One of the new provisions of law now requires that the Power of Attorney form be signed and acknowledged by both the principal and agent. A major impetus for the Power of Attorney revisions was to limit the possibility of abuse by a named agent. Financial abuse of the elderly and incapacitated persons often requires Court intervention to undo the agent’s wrongful conduct.

One recent brazen example of the breach of fiduciary duty by an agent under a Power of Attorney appears in the case of Estate of Frances E. Francis, decided by Westchester County Surrogate Anthony A. Scarpino, (New York Law Journal, Tuesday July 13, 2010 at page 27). In Estate of Frances, an individual named Donald Maloney arranged for Frances E. Frances, who was then 98 years old, to sign a Power of Attorney naming Maloney as agent. Maloney then used the Power of Attorney to transfer Ms. Frances’ assets for his own benefit in the sum of over $600,000.00. Following Ms. Frances death, the Administrator of her estate commenced a discovery proceeding to ascertain the whereabouts of the decedent’s assets and, to ultimately recover same. The Court voided the transfers to Maloney that were effectuated by use of the Power of Attorney and directed Maloney to file an accounting and return all of the funds to Ms. Frances’ estate.

Maloney, however, failed to abide by the Court’s decision which resulted in the Court finding Maloney in contempt of the Court’s directives. The Court also ordered the issuance of a warrant of commitment if Maloney continued to fail to comply.

Estate of Frances is a stark reminder that the execution of Power of Attorney and the selection of agents and other fiduciaries such as Executors and Trustees requires careful consideration. Not only did an unscrupulous agent abscond with an elderly person’s fortune, court intervention and directives appear not to have been enough to rectify the abuse.

A Power of Attorney can be an important part of an estate and elder plan and can provide a means to effectuate property transactions that greatly benefit the principal. Unfortunately, when fiduciary duties are ignored the results can be disastrous.

July 14, 2010

New York Surrogate’s Courts Require A Due Diligence Search For Distributees

by Jules M. Haas

In New York the persons who are entitled to share a decedent’s property are called distributees. These persons are more commonly known as heirs or next of kin.
A determination of distributees or kinship is essential in Surrogate’s Court proceedings and the Court rules and procedures require that due diligence be demonstrated in asserting the family tree. In probate proceedings, distributees must be identified so that they can receive notice of the probate proceedings and afforded the opportunity to review and contest the decedent’s Last Will. This notice is called a Citation which is similar to a summons.
Although the terms of a Last Will may be clear and unambiguous, the probate or validation of the Will cannot be accomplished without first identifying the distributees who are to be given notice of the proceedings. Many decedents are survived by only distant relatives such as great nieces, nephews, cousins or more distant next of kin who have had little or no contact with the decedent and whose whereabouts are unknown. A great deal of time and expense may be incurred in searching for these individuals who may be scattered around the globe. The services of a professional genealogist may be needed to reconstruct the family tree.
Similar kinship problems arise in Administration proceedings where the decedent died without leaving a Last Will. Again, the determination of the decedent’s next of kin is essential in order to identify the persons who are to receive notice of the Administration proceeding and, ultimately, a share of the decedent’s estate. Believe it or not, many persons die leaving no Last Will and little trace or information regarding their relatives who may have been estranged or who live in another state or country. In these cases, their assets may escheat to New York State.
The New York Surrogate’s Courts are very strict regarding kinship matters. The Court needs to be certain that proper proof such as birth and death records and affidavits documenting diligent searches are available so that estate assets are not distributed to non-family members or without proper notice.

July 11, 2010

New York City Estate Planning Vital To Peace Of Mind

by Jules M. Haas

The Times Herald-Record of Middletown, New York, recently published an informative piece about the need for comprehensive estate planning.

Perhaps it is the discomfort often associated with contemplating our mortality, but far too many of us pass without ever leaving a basic Will. Far fewer of us take the time to engage in the kind of comprehensive estate planning that can help shield our assets from estate taxes and ensure our directions are carried out upon our death.

An experienced New York City estate planning lawyer can take the stress out of such planning. In retrospect, clients wonder why they waited so long. With a plan in place, they can enjoy their lives with the confidence that comes from knowing their affairs are in order. And loved ones will not be burdened with the hassle after their death. Kinship proceedings, contested Wills and a spousal right of election are just some of the circumstances that can turn a smooth administration of an estate into a complicated proceeding in the Surrogate’s Court.

A comprehensive estate plan is much more than a plan for death — it is a plan for life. An estate plan can provide for your care in the event that you become disabled or incapacitated.

Living trusts are one tool that can be utilized to ensure your estate is distributed in accordance with your wishes, without ever having to enter what can be a long, expensive and public probate court process. One example is a case in which someone leaves a Will but wishes to leave nothing to a child. The child must receive notice that the Will is being probated, which is frequently nothing more than an invitation to a courtroom fight.

A trust not only avoids the need for a public probate process, it bypasses the need to notify those left without an inheritance. Out-of-state property is another example of why trusts make sense. With a Will, such property would be subjected to probate proceedings in both states. The out-of-state proceeding is called an Ancillary Proceeding.

With a living trust, you move your assets into the trust, which you may control during your lifetime or you may name an independent or co-trustee. One word of caution: Living trusts that are not maintained, or are allowed to become dated, can complicate the distribution of assets after your death. For instance, if you have bought another home, and the property is not owned by the trust, it would have to go through the probate process at the time of your death.

Speaking with an experienced New York City estate planning attorney can be a wonderful step toward the security that comes with knowing you have prepared for whatever life brings your way.

July 7, 2010

New York Court Appoints A Guardian And Annuls Marriage And Voids Deed

by Jules M. Haas

New York Mental Hygiene Law Article 81 provides the guidelines and the procedure to appoint a Guardian for Personal Needs and Property Management for persons with incapacities. Provisions of the law also provide the Court with the power to modify, amend or revoke different types of transactions or documents entered into while a person was incapacitated such as a contract, power of attorney or health care proxy. New York Mental Hygiene Law Section 81.29(d).

In many instances the incapacitated person is elderly. The transfer of property by means of a power of attorney or the conveyance of real estate by deed where the power or deed was executed while the person was incapacitated may not reflect the incapacitated person’s estate plan. In fact, such transfers may result in giving assets to individuals that would otherwise not be beneficiaries of choice.

A recent example of a Court exercising its authority to void certain transactions entered into by an incapacitated person is found in Matter of Jerry M. v. Geraldine P., decided by Justice Wilma Guzman on June 15, 2010 (Bronx Supreme Court), as reported in The New York Law Journal on June 18, 2010, p. 18. In her decision, Judge Guzman found that Geraldine P. was incapacitated and appointed a Guardian for personal needs and property management. In addition, the Judge annulled a marriage that Geraldine P. had entered into and voided a deed she had signed transferring her home. The Court found that Geraldine did not understand the nature and consequences of either the marriage or the deed transfer.

Improper control over the affairs of an incapacitated person is often the setting for what later turns out to be a Will contest or estate dispute when assets intended to be bequeathed or otherwise transferred upon death to loved ones are directed to other parties prior to death. An interesting aspect of the Court’s powers relating to the revocation of documents concerns a person’s Last Will and Testament. In the past there had been occasions where the Guardianship Court invalidated a Last Will and Testament that the Court had found to be executed while a person was incapacitated. However, a recent amendment to Section 81.29 (d) of the New York Mental Hygiene Law prohibits the revocation or invalidation of a Last Will or Codicil during the lifetime of the incapacitated person. Thus, the validity of a Last Will must be challenged after the person’s death during the probate proceeding after the Will is filed in the Surrogate’s Court.

June 28, 2010

New York City Estate Planning can Minimize Exposure to Estate Tax

by Jules M. Haas

The number of estates subjected to federal estate taxes will skyrocket next year to an estimated 44,200, compared to just 5,500 estates that were subjected to the estate tax in 2009, The New York Times reported.

The estate tax can have an enormous impact and can even force the sale of a farm or family business. Some studies have even suggested that substantial changes to the estate tax can impact death rates — increasing the number of deaths that occur right before an increase and decreasing deaths in the weeks leading up to the enactment of a tax break.

The federal estate tax — or death tax as it is sometimes called — was eliminated for 2010. It returns next year with a tax rate of up to 55 percent on estates worth more than $1 million. It applied only to estates valued at more than $3.5 million in 2009 and the maximum rate was 45 percent. Hiring a New York City estate planning attorney is critical to minimizing your exposure to estate tax while ensuring that your estate is distributed to heirs in accordance with your wishes.

The Wall Street Journal reports that a new proposal on the table would hit wealthy taxpayers harder than anything yet suggested. It would return the exemption threshold to $3.5 million, or as much as $7 million per couple, while reducing the maximum tax rate to 45 percent. But estates valued at between $10 and $50 million would be taxed at a rate of 50 percent. Estates valued at more than $50 million would pay 55 percent and those worth more than $500 million would pay 65 percent.

One thing might be as certain as death and taxes and that is that Congress will never be done playing with the estate tax rate. But, with proper estate planning, you can focus on minimizing your exposure to estate taxes, at whatever rate happens to be in place at the time of your death.

With advanced planning, many families can legally shelter significant portions of an estate from taxation. Living trusts, tax advantages associated with passing gifts to your heirs while you are alive, and other tax and estate-planning options can help protect a family business from taxation and will ensure that more of your estate passes to your chosen heirs.

June 24, 2010

New York Article 81 Guardian Is Directed To Pay Fee Of Court Evaluator From Guardian’s Commission

by Jules M. Haas

In a New York Mental Hygiene Law Article 81 Guardianship proceeding, the Court typically appoints a Court Evaluator. The Court Evaluator performs an independent investigation and assists the Court in determining whether a person is incapacitated and who should be appointed as Guardian. The Court Evaluator’s fee is often paid from the funds of the Incapacitated Person, although the fee may be paid by the petitioner.

In a recent decision, Matter of A.M., dated 6/1/10 reported in the New York Law Journal, on Friday, June 11, 2010, p. 27, Justice Alexander W. Hunter, Jr. directed that a successor Guardian pay the fee of a Court Evaluator from funds the Guardian had collected on behalf of the Incapacitated Person. The Guardian had previously collected sufficient funds to pay the Court Evaluator’s fee but had spent the funds by making payments which included paying itself fees on account of the Guardian’s statutory commission. In effect, the Court ruled that the Court Evaluator’s court awarded fee took priority over the subsequently earned commission.

Judge Hunter’s decision shows that a Court Evaluator serves an important role in Guardianship proceedings. The information presented to the Court by the Court Evaluator is vital for a full determination.

The duties of the Court Evaluator include interviewing the Alleged Incapacitated Person, explaining the proceeding to the Alleged Incapacitated Person, determining whether the Alleged Incapacitated Person wants legal counsel, interviewing the petitioner and preparing a report and recommendations for the Court.

The Article 81 Guardianship statutes establish a procedure for the appointment of a property and/or personal needs Guardian that is beneficial and protective of the Incapacitated Person. These proceedings require a hearing in front of the Court and testimony from witnesses. Many times the hearings are contested and deal with disputes regarding incapacity, competing family members or others who desire to be appointed as Guardian, and issues concerning the misappropriation of the Alleged Incapacitated Person’s assets.