Articles Posted in Probate

        The death of a loved one is an especially traumatic event. Lives can be upended and surviving family members and friends can be left feeling lost and confused about how to carry on. This is especially true when the death occurs suddenly or under tragic circumstances. Unfortunately, the law does not provide grief-stricken family and friends much time to mourn their loss before important work must be done. This important work involves admitting the deceased’s estate to probate and then administering that estate.

        In New York and elsewhere, an individual who dies with a will or similar document in place is said to die testate. If a person does not have such a document in place, the person dies intestate.

  •         Dying Testate: If the deceased left a will, the first step of administering the estate involves probating the will, or proving the will’s validity. Usually this involves simply introducing the will into the appropriate court. Once the will has been probated, the executor or administrator named in the will is tasked with carrying out the wishes of the deceased as expressed in the will, settling any lawful debts the deceased must pay, and providing an accounting or report to the court showing that the deceased’s assets were dispersed according to the terms of the will.
  •         Dying Intestate: If there is no will, the assets of the individual are brought under the supervision of the court by an interested party. The court will appoint an administrator to oversee the distribution of the person’s assets. Florida law provides direction and guidance as to how assets are to be distributed if there is no will.

This simple explanation of how a person’s estate is administered and his or her assets are distributed is overly simple. There can be any number of issues that arise that can complicate even a minor estate:

  •         A fight among the heirs regarding the validity of the will;
  •         Trusts that take certain property out of the probate process;
  •         Assets which do not go through probate.

Contact Legal Professionals

Our team at Ettinger Law Firm help you administer the estate of your loved one. Our probate administration attorneys are thoroughly familiar with New York’s probate laws and can help guide you through the process. This results in less anxiety for you during a time when you want as little stress as possible.

In 2010, John Armstrong killed his eighty year old mother, Joan Armstrong, by bashing her head in with a brick and then stabbing her body repeatedly to drain the body of blood. However, despite this gruesome crime his attorney is arguing that he should still get his part of his mother’s inheritance. He is one of five children of Ms. Armstrong, who enjoyed success as an artist before her death and included all of her children in her will. His attorney is challenging the state’s slayer rule based on mental illness and incompetence.

No one disputes that Mr. Armstrong killed his mother in 2010. On August 7, the Ocean Springs Police Department responded to a call from Ms. Armstrong friend who said that when he knocked on her door, Ms. Armstrong showed up at the door covered in blood. Ms. Armstrong was found on her back in the apartment with a large open wound to her forehead. John Armstrong told police that he killed his mother because he didn’t want her to leave and go to the pool in the complex. In his mind, he thought she was abandoning him by going to the pool.

A mental exam in 2012 found John “seriously and persistently mentally ill,” and the recommendation of the psychiatrist was that “it is not clear that, even with treatment with antipsychotic medications, Mr. Armstrong can be restored to competence to proceed legally.”

The Slayer Rule

Mississippi, like most of the other states in the nation, has what is known as a “slayer rule.” It states that a person cannot profit from an inheritance if they caused the death of the person that they are inheriting from. In essence, a killer is prohibited from inheriting any property from a person that the killer murdered. The courts treat the killer as though he predeceased the victim of the crime, thereby forfeiting any rights in property interests. However, this rule only applies if the killing was “knowing and intentional,” so a crime like involuntary manslaughter would not qualify under the doctrine.

Issues in this Case

The Mississippi Supreme Court will decide whether Mr. Armstrong should be allowed to inherit from his mother’s estate. The attorney for the estate says that he should not be given his portion of the inheritance. “The results of this case is that John is not prosecuted or punished for his unlawful act, but neither does John gain from causing the death of his mother . . . Though it hadn’t been mentioned, the decedent’s other beneficiaries, her children, have been deprived not only of the assets of her estate but also her love and companionship. It would be a perversion of law and justice to allow John to inherit from his mother’s estate to the detriment of his siblings.”

This case is different because the court has never had an issue where the killer has been deemed incompetent to stand trial. There have been other cases where the defendant has been found not guilty by reason of insanity, but this differs. Most likely, the decision will be rendered on the interpretation of the state’s language. In Mississippi, the state law uses the word “kill” and not “murder,” which could bar inheritance under the slayer rule.

This case centered on a dispute over the administration of a family trust as well as the interpretation of trust documents. Despite appealing the ruling, the defendant in the case violated court orders and, and the plaintiff moved to dismiss the appeal based on the rules within the disentitlement doctrine.

Facts of the Case

In the case of Adam J. Blumberg v. Gloria M. Minthorne, Gloria and Ralph Minthorne created the Minthorne Family Living Trust in 2008, with Gloria named as the sole trustee. Both parties had children and assets from previous marriages. In regards to the division and distribution of the trust property, one clause stated that the trustee was allowed to transfer the entire estate to a survivor’s trust after the death of one spouse. Another clause left “all the rest, residue, and remainder of the trust estate, including the remainder one-half interest” in an apartment building to Ralph’s children and grandchildren.

Ralph Minthorne died in November 2008, and Gloria’s attorney informed Ralph’s grandchildren, including Adam Blumberg, that the apartment building was to be sold and distributed to the family members. The building went in escrow at $925,000 but Gloria’s attorney refused to give the grandchildren an accounting of the estate. Finally, in May 2009 Mr. Blumberg was informed that the price dropped to $800,000 and that the net proceeds were $313.000. Adam filed a petition in October 2010 to remove Gloria as trustee, recover trust property, compel an accounting, and appoint a successor trustee.

Ruling of the Court

The trial court found Gloria liable to Ralph’s children and grandchildren. She was replaced as trustee by Adam Blumberg and was ordered to hand over property to the trust. She was also ordered to file an accounting with the court. Gloria appealed the ruling in December, 2012. The day before a status hearing on the appeal, Gloria quitclaimed the property in question to her daughter, and after months of promising to do so she never filed an accounting with the court.

Her and her attorney failed to appear for multiple court hearings, and she never disclosed the quitclaim deed to Mr. Blumberg. When he finally learned of the quitclaim, Adam filed a motion to dismiss Gloria’s appeal. The appellate court agreed and based its decision on the disentitlement doctrine. This doctrine gives the court the right to dismiss an appeal if a party refuses to comply with a lower court’s order.

Under this doctrine, a party cannot “ask the aid and assistance of a court in hearing his demands while he stands in an attitude of contempt.” It is not seen as a punishment, but as a means to induce compliance with a valid order. In this case, Gloria disobeyed two court orders. First, she failed to submit an accounting of the trust and estate to the court. Second, she failed to quitclaim her property to Mr. Blumberg and in blatant disrespect of the court quitclaim the deed to her daughter. As a result, the disentitlement doctrine was properly applied, and Gloria’s appeal was dismissed.

When a person dies, someone else must step up and close the estate. If that responsibility falls to you, as an executor you must identify all of the estate’s assets, pay off creditors, and distribute what is left to the heirs. However, an added responsibility as the executor is that you must also file all of the tax paperwork for the estate, as well. There are four major tax considerations that you must complete as the executor of an estate.

Filing the Final 1040

The first thing that you must do as an executor is file the deceased’s personal tax return for the year that the person died. The standard 1040 form covers from January 1 of that year until the date of death. If there is a surviving spouse, you can fill out the 1040 as a joint return and is filed as though the deceased lived until the year’s end. A final joint 1040 includes the decedent’s income and deductions up until the time of death in addition to the surviving spouse’s income and deductions for the entire year.

Filing the Estate’s Income Tax Return

In addition to filing the individual income tax return, as the executor you must also file an income tax return for the estate. Once the person has died, any income generated by any holdings is income of the estate. The estate’s first year of income tax starts immediately after death and the end date can be the end of any month, so long as the time period for the return is twelve or less months. You must file a 1041 form with the federal government by the fifteenth day of the fourth month after the year-end date.

However, if the estate is less than $600, you do not have to file a 1041 on behalf of the estate. In addition, you do not need to file this form if all the decedent’s income-producing assets bypass probate and go straight to the surviving spouse or other heirs by contract or operation of law. Examples of this include joint tenancy in property, retirement accounts, IRAs, and other beneficiary designated income.

Filing the Estate’s Estate Tax Return

You must also file the estate’s estate tax return, otherwise known as Form 706. This form is only applicable if the deceased’s estate is worth over the federal exemption level, which is $5.43 million for 2015. However, the form is required if that person gave a sizable gift over the annual gift amount of $14,000 sometime within 2013-2015. If a sizable gift was made, it is added back to the estate for tax purposes to see if the estate would be over the federal exemption limit. If it is, there is a 40% tax on the excess amount.

The deadline for Form 706 is nine months after death, but a six month extension is allowed. It is also important to note that while life insurance proceeds are given income tax free, they are usually included in the decedent’s estate for estate tax purposes. An exception to this is if the beneficiary is the surviving spouse.

Miscellaneous Tax Details

There are smaller other details that are necessary for filling out an estate’s tax responsibilities. If you need to fill out a 1041 or Form 706, you must get the estate a federal employer identification number (EIN). This requires filling out another document, Form SS-4. You should also file a Form 56 that notifies the IRS that you will be handling the tax issues for the estate. Finally, these forms apply to the federal government, but do not forget to check and see if the state requires tax returns, as well.

Last week we discussed the recently unearthed will of former Sopranos star James Gandolfini. The document was filed with a Manhattan court late last month, with the actor’s assets being left to a wide range of people including his two children, wife, sisters, and several friends. Those earlier reports noted that Gandolfini’s assets including life insurance, real estate in Italy, and more. All told he allegedly had more than $70 million in assets.

With fortunes of that size, estate taxes are obviously an immediate concern. There are both federal and state taxes that apply to inheritances. The rates for each are different and they take effect at different income levels. Federal estate taxes apply to non-exempt assets over $5.25 million with a top rate of 40%. Alternatively, New York’s separate tax kicks in at assets over $1 million with rates between 5% and 16%.

Considering there are two levels of taxation and rates that are not trivial, it is critical to account for these potential taxes in an estate plans. Attorneys working on these issues for local residents must be intimately aware of all legal options to guard against the largest tax bills.

Unfortunately, it now appears that Gandolfini’s plan may not have been all that tailored, exposing the estate to a significant tax burden. Literally tens of millions of dollars will likely be lost as a result of what some have dubbed an “estate planning disaster.”

According to a recent report in the NY Daily News, more than $30 million of the $70 million total may not go to family members–but to the government. That is because specialized legal tools to prevent the estate from tax exposure were not used. As much as 80% of the total estate was apparently open to taxation. With both state and federal taxes applied, nearly 55% of the exposed estate will be lost to the the government.

Sadly, this means that the family will likely be required to sell assets to pay the tax bill. Few individuals in these cases have enough actual cash available to pay the bill with funds not tied up in real or personal property. There will not be a huge amount of time to sell the assets and pay the bill, with much coming due in six to nine months.

The sad situation is a vivid reminder of the consequences of not taking full advantages of the available ways to save on estate taxes. Even if your family’s fortune is below the exemption levels, estate planning is critical to streamlining the processes and ensuring your wishes are actually carried out in as efficient a way as possible.

Estate planning attorneys work with families before a death to ensure the legal pieces are all in place for a smooth transition of assets free of conflict, tax savings, and the carrying out of one’s specific wishes. Sadly, many New York families will lose a loved one without having conducted any planning; they are thrown into a confusing administrative situation in the midst of grief. In fact, even when one has a plan in place, there may be confusion about exactly what to do in the aftermath of a passing.

For that reason it is worthwhile to discuss the “nuts and bolts” issues following a passing. A Huffington Post article recently touched on the basic question: “What to Do When a Loved One Dies.”

For starters, immediately upon discovering the passing, the authorities must be notified. This task may fall to a family member depending on the situation. Is the death occurs at the hospital or nursing home, employees there may handle it. However, if one dies at home, the first call should be 911. Don’t forget, timing matters in this regard. For example, if the individual is an organ donor, then waiting too long may make the organs unable to be used. Of course, having conversations with family members ahead of time about organ donation wishes is imperative.

After the authorities are involved it is time to notify other loved ones, begin the funeral arrangement process, and handle any immediate needs. Those immediate needs may include taking care of the individual’s pets, locking up their home, and similar matters. When it comes to the funeral, hopefully a will and other estate planning documents are available to outline the individual’s wishes. In most cases, when working with a funeral home, the employees at the facility will provide some guidance on common aspects–like creating an obituary.

Following the services, the legal and administrative chore truly begin. The executor will take charge at this time. Hopefully the executor is aware of their tasks and appointed well ahead of time–if not, the court will choose someone.

Settling the estate will involve contacting creditors, dealing with those in charge of financial documents, working with insurance companies, gaining access to bank accounts, cancelling various services, calling the Social Security Administration, handling DMV issues, begin mail forwarding with the U.S. Postal Service, and many other big and small tasks.

As this very brief overview makes clear, the process can very quickly get overwhelming. It is little wonder that more and more are relying on professionals to aid at these times.

When someone passes away, the basic principles of settling the estate seem straightforward: collect assets, pay off debts, and distribute what is remaining per the deceased’s wishes. While that cursory sketch appears easy enough, in practice, dealing with these matters can take years, have a significant cost, and result in prolonged disagreement, destroyed relationships, and even legal battles.

As always, a high-profile celebrity example offers a helpful look at how it plays out in the real world.

The Las Vegas Sun recently reported on the latest in the prolonged battle related to famed pop star Michael Jackson’s estate. The singer died over four year ago, but from most reports the matter is nowhere near being resolved. For one there, there is still pending litigation related to the billion-dollar tour production Jackson was set to complete just before his passing.

One positive sign is that it appears all of Jackson’s sizeable debts, nearly half a billion dollars at the time of his death, have now been paid. This marks an important step, and will hopefully signal a turning point leading to final resolution of all loose ends.

Prudent Estate Administration
Interestingly, many are pointing to the competent management of the estate as an example of the immense value one receives from professional support with these issues. The Sun articles notes that in the four years since his passing Jackson’s estate has made a staggering $1.1 billion as a result of savvy financial moves and business decisions related to using his high profile image and continued celebrity.

According to one report, Jackson’s estate made more money in the four years since his death than the entire time time that he was alive. He sold 50 million albums in that time and Michael Jackson shows have been licensed by many different groups.

While no else has a life or legacy like Michael Jackson, the principle of immense value from professional aid with settling an estate should be noted by all. When a loved one passes away there will not be a tidy list of debts, contact numbers to cancel accounts, instructions on filing taxes, or any other easy-to-follow guides to handling all of the administrative odds and ends. Instead, months of confusion, frustration, paperwork headaches and more can await a family trying to handle these affairs in the midst of grief.

Local residents are well advised to visit with estate planning lawyers ahead of time so that steps are already in place to handle these matters efficiently no matter what the future holds.

This week Forbes published an article that outlines the basics of how to fund an estate plan for spouses. The story is a helpful reiteration of many of the basic issues that are common for all New York couples thinking about their future and trying to create security no matter what the future holds.

Helpfully, the story explains how estate planning is not the creation of a stack of legal documents that are signed and then stored until needed. Instead, the process is far more comprehensive and involves examination of all of one’s assets, wishes, legacy interests, elder care goals, and more.

As a general matter, on the estate planning side, one of the main goals is avoiding probate at all costs. That means that something like a last will and testament is inefficient. Instead, for most New York couples it is best to create a series of revocable living trusts which are far superior, allowing property to be protected and passed to others without the need for court intervention. After the trust is created spouses transfer property directly into the trust.

What goes into the trust?

Virtually everything. This includes real property (like a house), bank accounts, mutual fund accounts, stocks and bonds, and even business interests.

But it is not necessarily as simple as moving everything you own into a trust. For example, the article discusses how couples may not want to move rental property into the trusts directly. Instead for liability purposes it is usually best for rental properties or other investment real property assets to first be conveyed to a limited liability business entity. The interest in that entity should then be transferred to the individual couple’s trust.

Other items may not be transferred to a trust, like life insurance policies and retirement plan accounts. That is because these items already pass automatically outside of probate. Yet, it is critical that beneficiary designations are properly identified and updated down the road if necessary. Contingency beneficiaries should also be named as an extra precaution in case the primary beneficiary is unable to take the assets.

Depending on the specifics of these assets, there may be some added complexity. For example, figuring out how to divide and transfer business assets may be tricky. In addition, when transfers involving a business different tax implications need to be consider, including those related to valuation discounts.

For help on any number of elder law estate planning issues in New York, please contact our attorneys today.

Most lists of “common estate planning mistakes” include the frequent error of failure to properly update beneficiary designations. Yet, even that mistake is deceiving, because updating is just one thing to consider with these designations. Even if the names are evaluated on a consistent basis, it is still important to ensure that the person named as the beneficiary fits in with other aspects of an overall estate plan.

Fox Business recently published a story listing ten different ways that life insurance beneficiary designation decisions are made in error. The story is worth browsing to get a feel for some common issues.

For example, it is critical to name someone who can actually receive the funds. Parents may name their minor child as the beneficiary, but the insurance company will not dispense funds directly to a child. Without a trust or similar arrangements, then this designation will cause problems. A guardian must be appointed, leading to costly and timely court proceedings being necessary.

Similarly, if proceeds may go to a relative with special needs, careful consideration must be given to how the benefit will affect government support. While it may seem counter-intuitive, giving money to a child with special needs may cause more harm than good, disqualifying them from support, like Supplemental Security Income. This is a textbook example of why the designation needs to be considered only in light of an entire estate plan.

Besides the effect on government program eligibility, taxes must also be weighed when making designation decisions. Life insurance is usually tax-free, but not always. For example, if the policy owner, insured party, and beneficiary are three different people, then gift taxes may be implicated. This occurs when a parent takes out a policy on another parent with the child named as beneficiary,.

Another common error is failing to be specific. For example, it is one thing to say that you want the policy to pay out to your children. But what happens if one child is not around, should their share go to their own children (grandkids) or be added to the surviving children’s share? Also, who would count as a child? Are step-children included? Failing to be as specific as possible in these matters often results in confusion and legal challenges down the road.

Simply updating a designation and naming anyone is not the best way to handle these matters. Be sure that the designation does not cause more issues than it solves by fully integrating it with your other legal estate planning documents. A professional can provide tailored advice on these decisions.

The New York City Bar Association’s “Committee on Animal Law” recently released a helpful report on the many different legal issues to consider regarding the care of your pet in an uncertain future. The document offers a comprehensive examination of a wide range of issues which many fail to consider. It is worthwhile to review the whole thing if you are interested in some of the more detailed aspects of estate planning with pets in mind. A free .pdf copy of the report can be viewed online here.

The sad reality is that most pet owners give only cursory thought to what might happen to their furry friend in the event of a death or hospitalization. In most cases the extent of the planning is when an elderly individual or one with a serious illness considers another person to take ownership. Obviously that is a good first step, but it is important to ensure those wishes are actually guaranteed via legal documents. Also, identifying a new owner is just the beginning of effective planning for pets.

For example, many problems arise in the time period between an owner’s death and the admission of a Will to probate. Even if a Will includes specifics about new ownership and the providing of provisions, the intermediary time may be left open. This can cause serious problems, which provide immense stress on the animal as well as those working to handle affairs in the aftermath of the passing. Similarly, the provisions of a Will are of little use if an owner is hospitalized and alternative pet care needs to be arranged.

Solving these issues is not necessarily straightforward, and there is not a one-size-fits-all solution. The NYC Bar report, however, provides a helpful list of options to fill these estate planning gaps and ensure your pet’s care is not compromised. For example, the journal explores the ways to use shelters or charitable organizations if friends/relatives are not available. It also discusses the need for emergency instructions to provide short-term care in the event of hospitalization or illness.

The bottom line: There is much more to planning for one’s pets than talking to a friend casually or even including certain provisions in a Will. A more comprehensive plan may bring more peace of mind to many NY residents.

For assistance with any number of estate planning concerns in New York City or throughout the state, please contact our legal team today.

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