September 2011 Archives

Careful Consideration Required Before Selecting a Successor Trustee in Estate Plan

September 28, 2011,

Local residents usually take the time to craft a New York estate plan because they wish to prepare for disability, save estate taxes, and avoid the probate process. In most cases these goals are best met through the use of a living trust. The trend over the past several decades is for middle class families to craft trusts instead of wills for their inheritance planning. As our New York elder law estate planning attorney Bonnie Kraham explained in an article published this week in the Times Herald-Record, unlike wills, trusts are private documents that do not need to be filed with the Surrogate's Court. No costly, stressful, time-consuming probate process needs to be undertaken upon one's death when a trust is used.

Instead of court involvement, a trust is usually administered by a successor trustee. Upon the death of the original trustee (the individual who created the trust), the successor trustee must inform the beneficiaries of the situation, gather and invest the grantor's assets, notify creditors, pay taxes, and distribute assets per the trust provisions.

Attorney Kraham notes that the trustee who administers the trust has a variety of other obligations. They must remain loyal to all beneficiaries, including the contingent beneficiaries--acting impartially between them at all times. Also, the trustee must ensure that trust property produces income. Therefore it is incumbent upon the trustee not to keep large amounts in non-interest bearing accounts or allow a home to sit vacant. At the same time, all investments must be prudent, and a sound overall investment strategy must be employed. This typically requires diversification which balances both income production and investment safety. Other trustee duties include the filing of tax returns, distribution of trust income, handling of expenses, and the maintenance of proper records.

For many individual trustees, the requirements of the role are quite complex and time-consuming. In addition, the emotion involved in the death of a loved one often results in the reappearance of family conflicts at the very time when an estate must be settled. It is often difficult for individual trustees who are relatives or close personal friends to prevent the turmoil from affecting the proper administration of the trust. That is why professional trustees are often chosen; they are trained in these matters and can ensure that everything is handled properly. Banks, lawyers, and trust companies often serve in this role. For decades our New York estate planning lawyers have helped many local families in this very capacity.

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Many Challenges Face Estate Executors

Many Middle Class Families in New York Use Trusts in Estate Plan

Family Disagreement Over Special Needs Trust Leads to Court Battle

September 26, 2011,

A New York special needs trust is usually the premier method for local residents to provide a disabled child with financial assistance without disqualifying them from receiving government benefits like SSI and Medicaid. Our New York estate planning lawyers know that providing adequate resources for children with special needs is particularly important today because of the increasing life expectancy of disabled youth. The resources needed by these individuals are often substantial, necessitating very careful planning. All families in this situation must ensure that they seek out professional assistance to learn what legal arrangements are best for their unique situation. No two families are identical, and so specialized help is essential.

Failure to seek out experienced legal aid when dealing with these trusts often results in government benefit penalties, negative tax consequences, and damaging family turmoil. Earlier this month Special Needs Answers reported on developments in a complex legal case related to family disagreement over a special needs trust. The case stems from a trust that was set up in 2002 for an 18 year old high school student who suffered severe brain damage after suffering a heart attack. A lawsuit was filed and settled on his behalf against school officials who failed to take action which would have limited the brain damage. The settlement funds were placed in a special needs trust.

The young man died five years later without a will. Per the rules of intestate succession in the state, the trust funds--valued at $8 million at the time of the young man's death--were supposed to be split between his parents. The child had been estranged from his father for most of his life, but the victim's mother did not discuss her specific family situation when the trust was created. In order to avoid having her ex-husband share in the fund assets, the mother had a disclaimer drafted and convinced her ex-husband to sign it by claiming it was a document related to burial. The former spouse initiated a legal challenge when he eventually learned that he had signed away his share of $8 million. The ensuing legal battle lasted several years. It was only this year that a local court ruled that the mother acted wrongly in trying to deceive her ex-husband into signing the disclaimer. The estranged father will be allowed to collect half of the funds left in the trust.

Advocates are using the case to remind all community members that it is vital to consider family dynamics when drafting a special needs trust. As one involved in the situation explained, "If you are thinking of setting up a trust for a loved one, make sure that you discuss your entire family history with your special needs planner. [...] Doing so could avoid this problem and lead to a more equitable outcome for everyone involved."

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Estate Planning for Disabled Heirs

Estate Planning is Particularly Important for Families with Autistic Children

Surviving Spouses Should Seek Help From Financial and Legal Professionals

September 22, 2011,

Few spouses are thinking clearly after they lose their partner. Yet, it is usually at that time when many major financial and legal decisions must be analyzed and made by the grieving widow or widower. Our New York estate planning lawyers know that families are able to provide much relief at this difficult time by preparing ahead. As a Wall Street Journal story this week explained, proper estate planning not only eases stress for the surviving spouse, but it also may prevent legal and financial mistakes being made by that spouse in the immediate aftermath of the death which could be impossible to undo down the road.

For example, some grieving widows and widowers believe that they have little need for insurance benefits following the tragedy. However, as one professional in the field explained, "if you have been living on income from two people, you should get an idea of what your monthly expenses are before you're magnanimous with the money you just received." In addition, many individuals make quick decisions about the sale of a home or the transfer of other valuable assets without fully considering the long-term effect of those actions.

Following a death in our area it is vital for families to contact a New York estate plan lawyer to receive assistance with the wide variety of tasks that must be completed. The estate transfer process can be time-consuming and stressful, especially if professionals are not consulted and mistakes are made. For example, pension plans need to be notified of the death. Those involved have to determine what debts of the deceased must be paid and which do not need to be paid. Survivors must also be cognizant of what funds they can use to pay for expenses after the death. Sometimes a spouse may have been using a power of attorney to write checks out of the deceased's account. That authority ends at death, which means that the survivor may not technically have the authority to access the funds.

The aftermath of a loved one's passing is always a wrenching time, and survivors should never try to sort through these financial and legal details on their own in the middle of that grieving process. Proper planning while both spouses are still alive can go a long way to ease the stress of this time. Not only that, but as the story notes, in the aftermath of the death, "just as crucial is the support of trusted family and friends, along with expert advisors and support groups." Trusted financial and legal professionals can help prevent the grieving family from making choices that they may regret down the road.

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Adult Children Often Remind Senior Parents of Estate Planning Importance

Many Challenges Face Estate Executors

September 20, 2011,

For decades our New York estate planning lawyers have helped local residents use living trusts instead of wills to plan their affairs. For many clients a will simply creates more problems than it solves. For example, yesterday the Wall Street Journal published a story exploring the myriad of issues faced by a will executor--the person named to manage the estate of a deceased individual in a will. It was explained how a wide variety of complex tasks are required of the executor, there are legal repercussions when mistakes are made, and many relationships are ruined in the process of settling the estate.

Executors are often siblings or other family members of the deceased. It is the executor's job to administer a will through the probate process by accounting for assets, paying debts, and distributing property. Red tape, complexity, tedium, and relationship conflicts are inherent in the process. Many professionals in the field report that there has been a steady increase in the number of "executorships gone bad." Some believe that recent economic troubles have led to more inheritance fights as of late, complicating the executor's job even further. When a will is challenged by an heir (a frequent occurrence), the executor is usually thrown into the middle of depositions, court appearances, and other legal situations that most would prefer to avoid.

Observers admit that the role of executor is generally not suited for amateurs. Often the individual is required to be aware of taxation rules, potential conflicts of interest, and even investment strategies like picking stocks and bonds. All of this comes with little pay, because state guidelines set the amount of money that an executor can receive.

To top it off, executors are often placed in the middle of contentious family discord. One college professor explained the nightmare scenario created when he was named the executor of his father's estate which was to be split between himself, his sister, and his stepmother. At the outset his stepmother challenged the will, feeling as if she were owed a larger share. After contentious disagreement in and out of the courtroom, a judge eventually upheld the original plan. However, the relationship damage was already complete. The man noted afterwards, "Let's just say that holiday gatherings became fewer and less cordial." For those in our area, the clear take-away lesson from the tribulations of executors is the benefit of avoiding the probate process altogether when crafting a New York estate plan.

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When Considering Inheritances, Baby Boomers Fear Children's Financial Acumen

September 15, 2011,

Professional inheritance planning continues to rise in popularity among all classes of society as more and more seniors reach retirement age and come to appreciate the legal tools available to help in their planning efforts. Interestingly, a new poll discussed in Time magazine this month explains that many of the newest retirees from the Baby Boomer generation have doubts about their heirs' ability to manage an inheritance. This is a common concern, and our New York estate planning lawyers work with many clients in this area who are specifically tailoring their plans to account for it.

The new survey found that only 49% of millionaire Baby Boomers indicated that leaving money to their children was a priority in their estate planning. When analyzed closely it is clear that the polling figures do not indicate that these parents have stopped worrying about the well-being of their children. Instead, many of them have deep concerns about the effect that a large inheritance will have on their offspring. For example, one-fifth of survey respondents felt that their children would simply squander the inheritance and a quarter of these seniors thought that receiving too much money would only make their heirs lazy. Perhaps because of this, a majority of these retirees admit that they keep their children in the dark about their exact net worth so as to prevent expectations about what will be left behind.

Fear about the financial sense of children has long been a concern for local community members. For decades, attorneys at our New York elder law estate planning firm have worked with residents who were worried about a family member's ability to handle money. Fortunately, tailoring inheritance plans to account for spendthrift children is exactly a benefit one derives from seeking professional help in this area. A variety of trusts exist which allow parents to pass on the assets they feel appropriate to their heirs in a way that guards against their fears that the inheritance would be wasted, abused, or usurped by a non-relative.

For example, an inheritance could be distributed on a prolonged timeline with certain portions being given to the child at different ages. In this way a child may be given time to mature, eliminating the risk of an entire inheritance being wasted beforehand. More complex options are also available for parents with concerns about spendthrift children. A trust could be created that is managed by a third party so that the child benefits from but does not have direct access to the assets. In other cases a "sprinkling" trust might be a good option. It creates a separate legal entity that "sprinkles" benefits in either equal or unequal amounts to the named beneficiaries over a period of time--often the spendthrift child and his or her own children.

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Parents Grapple with Effect of Inheritances and the Meaning of Money

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Estate Planning for Disabled Heirs

September 14, 2011,

Last week the Wall Street Journal's "Family Values" blog discussed the often challenging estate planning issues faced by families who are providing for a disabled loved one. Our New York estate planning lawyers know that more families are in this situation than some might suspect. The latest U.S. Census data shows that roughly 12% of the population has a severe physical or mental disability. When planning for the future it is particularly important for these families to closely consider how they want to leave assets to their heirs because of the effect that the asset transfers may have on their disabled relative's access to public assistance.

Budget shortfalls are causing many state and local governments to cut support services to these residents. A common cost-cutting measure includes tightening income restrictions for those seeking to qualify for medical benefits and support services. As a result, it is vital that all families structure inheritances for disabled heirs so that they are not disqualified from the government help that they will likely need. Yet, research shows that two-thirds of parents and caregivers with disabled loved ones do not have plans in place to account for the long-term needs of these vulnerable heirs.

This is particularly unfortunate, because there are planning strategies that exist specifically to assist families in this situation. For example, a special needs trust can be used to leave assets to heirs with disabilities while ensuring that they keep government benefits like Medicaid and Supplemental Security Income (SSI). Before this trust was available parents were often forced to disinherit their disabled children lest they lose all their government support. Now, those who create a special needs trust can leave assets for the child's use beyond that which they will receive from the government. Families can set aside funds for clothing, education, entertainment, household goods, healthcare costs, and many other future wants and needs for their disabled relative.

However, it is vital that a professional be consulted to help with this work, because there are potential complications with the use of these trusts. Our New York elder law estate planning attorneys remind local residents that direct payments to a disabled child will reduce SSI payments. Therefore all distributions from a trust to the child should be "in kind" or paid directly to the provider of the goods or services. Various other nuances must also be taken into account to ensure that the overall planning accounts for all possible contingencies and maximizes the benefit for the disabled heir.

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Estate Planning Tips For Providing One Child a Larger Share of Inheritance

September 12, 2011,

There is often a default assumption that local parents wish to provide all of their children with equal shares of an inheritance as part of their New York estate plan. However, no two families are identical, and there are a variety of reasons why some parents feel it necessary to provide different assets to each of their children upon their death. The ability to tailor an inheritance using rules different than the default to suit a family's specific desires is one of the main reasons why local families seek the assistance of New York estate planning lawyers. As one lawyer put it, "there's nothing so unequal as the equal treatment of unequals."

Most families take a variety of factors into account when deciding how to distribute their property. For example, one child may already be more financially successful, another may have a larger family of their own, and yet another may be estranged from the family. In other cases a parent may have already helped one child while alive--such as by providing down payment money on a house--and want that prior help to be reflected in the inheritance.

A Wall Street Journal story this weekend discussed how many families have questions about the best way to go about giving one child a larger share than another. Trusts are usually a more effective estate planning tool than a will. However, if a will is used, it is important that certain steps be taken to ensure that the uneven child distribution is capable of withstanding legal challenge. Part of that process involves being open and honest with family members about the inheritance so that children know about the terms while you are alive. This minimizes the surprise factor and may quell later suspicions. Having these conversations is often difficult, so as an alternative a video or instruction letter can be included with the estate planning documents to explain why a certain decision was made.

To minimize the risk of legal challenge to these documents, it is also helpful to take steps to prove that you are of sound mind and have the proper capacity at the time the plan is signed. In addition, local residents may be well served by considering alternatives to a will to distribute assets to their heirs. For example, property can be split unequally between children, with a set percentage of assets left in a trust to be used for all of the children's emergency needs. A variety of unique legal tools exist which may help a family tailor their plan to effectuate their specific wishes. Local residents can learn what options may be best in their situation by visiting a professional, like a New York estate planning attorney.

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New York Estate Planning Pitfalls to Avoid for Widows

September 8, 2011,

No matter what stage in life, all local residents have much to gain from conducting New York estate planning. However, proper financial preparation is particularly vital for those who have assets built up over a lifetime or who are nearing the age when long-term care planning is becoming more of a concern. One group which often faces unique planning needs are the recently widowed. As a New York Times article this weekend shared, these widows continue to be predominantly women and are often unfamiliar with issues like investing, taxes, insurance, and healthcare planning.

The article explains how one common problem faced by new widows is the myriad of individuals who may wish to take advantage of the situation. Many recently widowed have fallen victim to salespeople who make disingenuous promises while trying to sell investments, like annuities. Besides unscrupulous salespeople, some community members are also forced to deal with adult children who make requests that might not be in the individual's best interest. For example, one advocate noted how some relatives may seek an advance on an inheritance by using arguments like, "How can you deny me this when we're going through so much emotional pain already," or "Dad would have given me the down payment money if he was still around."

Dealing with these and similar demands can be particularly distressing for those already going through an incredibly difficult situation following the passing of a loved one. One advocate who now works as a counselor for the newly widowed explained that it is often best to let trusted financial assistants, like an estate planning attorney, help in those situations. She urges widows to "let that professional be the stingy one." One of the main benefits of having professional guidance with these financial affairs is the aid that can be provided with complex inheritance issues and dealing with those who make demands on funds.

Most family members will not seek to take advantage of a widow following the death of a spouse. However, these situations frequently create vulnerabilities that should always be guarded against. In addition, it is important to ensure that estate plans remain updated to account for all major life changes--like the passing of a life partner. Our New York estate plan lawyers work with many local residents who are seeking planning assistance after losing a spouse. The need for systematic reviewing of these plans is why we offer a Lifetime Elder Law Estate Planning Process that provides free monitoring to help residents keep their plan updated after changes to their family situation.

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Many Middle Class Families in New York Use Trusts in Estate Plan

September 6, 2011,

One of our New York estate planning attorneys, Bonnie Kraham, Esq., recently authored an article that shares information on the increasing use of trusts in the estate plan of many local middle class families. The story was published in this weekend's Times Herald-Record, and explains the various types of trusts that residents can use and the way that each holds and transfers property. Unfortunately, there remains a misconception among some local community members that creating a New York trust is a project only for the wealthy. That is not the case. As attorney Kraham notes, there has been a "living trust revolution" over the past few decades where many middle class families have discovered the ways in which these legal entities can be used to avoid probate, save taxes, and protect assets.

All trusts begin with a written agreement, and each includes at least three necessary parties. These include a "grantor" who creates the trust, "trustee" who manages the assets, and "beneficiaries" who use the trust assets. For example, the three roles may be filled when a senior couple creates a trust (grantors) to be managed by their lawyer (trustee) to provide for the couple's children (beneficiaries). The three roles need not be filled by different individuals, however. Often a grantor will also act as beneficiary, so that they can still use those assets while they are alive. Following the written agreement which establishes the trust, assets are transferred into the entity by way of "retitling." This involves changing the name on accounts, mutual funds, and stock certificates to the name of the trust, and transferring title to property to the trust.

The two main types of trusts are testamentary and living. Testamentary trusts are created only after an individual's death pursuant to their will, while living trusts are created while a grantor is still alive. Living trusts are an increasingly common way for many families to transfer assets at death. Among other benefits, a living trust can help families avoid probate, saving time and expense in closing the estate.

Usually these trusts are revocable, meaning that they can be dissolved at any time. However, a few special types of trusts are irrevocable. For example, when a local family wants to protect assets from future nursing home costs they may create a New York Medicaid Asset Protection Trust. These irrevocable trusts have special rules that apply to how trust property can be used and transferred. Some legislative changes have recently been proposed which may limit the effectiveness of these special trusts to save assets from long-term care costs. Therefore, it remains ever important to consult an experienced elder law estate planning attorney to understand what options are available and prudent in your particular case.

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Questions Remain Regarding Rights of Posthumously Conceived Children

September 1, 2011,

Last month we shared information on the unique estate planning issues related to the inheritance rights of children conceived posthumously. A growing number of community members are cryopreserving their gametes for use through in vitro fertilization. This is a particularly popular process for those diagnosed with cancer and undergoing chemotherapy and for those in the military who are leaving on a tour of duty. The Centers for Disease Control and Prevention report that assisted reproductive technology accounts for only 1% of yearly births in the country. However, the overall use of the technology is rising dramatically. The total number of these births doubled in the last ten years, rising to 60,190 in 2009.

The expanding use of cryopreservation has presented novel legal questions about the rights of children conceived after the death of one of their parents. The inheritance rights of these children remain unclear, particularly as they relate to government benefits and trust participation. Several high-profile legal battles have ensued in the last few years as parents fought with the U.S. Social Security Administration to have their children receive their former partner's benefits even though the child was conceived after the partner's passing. The Social Security Administration usually defers to state rules regarding parentage and inheritance rights. Currently, most states only grant inheritance rights to children born after the death of a parent if they are conceived naturally.

Yesterday, Fox News reported on an appellate court decision in one of those cases where the court found that an 8-year-old girl born two years after her father's death was not entitled to his Social Security benefits. This decision overruled a lower court ruling in the same case which had found otherwise. The appellate judges declared that the federal government's interpretation of the state law was reasonable, and therefore the denial of benefits was upheld. The resolution in this case and several others like it lead many observers to believe that the United State Supreme Court will be forced to decide the matter soon.

New York has yet to officially recognize the biological relationship between children conceived posthumously and their deceased parents. While cryopreservation is not a common practice, area residents who use these services must be acutely aware of the unique inheritance planning issues that they may face. This complex and unsettled legal matter makes it imperative that community members visit with a New York estate planning attorney to ensure that they are not unfairly surprised by the inheritance complications which may arise down the road.

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