Articles Posted in Trusts

Supplemental Needs Trusts (also called Special Needs Trusts) have become fairly popular in recent years. These trusts are designed to protect a disabled person’s assets in order to ensure the greatest amount of funds available for care and support. In 1993, Congress passed legislation in 42 U.S.C. § 1396 et seq. that specifically allows a disabled person to exempt assets from public aid determinations. You can click here to read more about how the government treats these unique trusts. One look at the complex federal regulations that control these trusts should be reason enough to consult an experienced elder law attorney to find out if it is right for your situation.

How much money can a disabled person keep and still be eligible for public aid?

In general, for a person to qualify for Medicaid, he or she must be impoverished. This means having less than $2000 in personal assets. Previously, there were fairly strict provisions that made it difficult for a disabled person to keep assets and still qualify for Medicaid funding of long-term care. Nursing home and rehabilitation costs can be exceedingly expensive, and people are often concerned that a disabled family member could quickly spend all of their assets on care and support before qualifying for government assistance.

How does a Supplemental Needs Trust help protect assets?

While there are many complex laws that govern this area, as a general rule, the law allows 2 types of these trusts: “Self-settled” and “Third-party.”

1. Self-settled Supplemental Needs Trusts

A self-settled trust is one that is funded with the disabled person’s own assets. This is common where the disabled person perhaps receives a settlement in a lawsuit or had a sizable net worth prior to becoming disabled. In these cases, Medicaid may have certain limitations on how the funds are used, and generally upon the death of the disabled person, his or her estate will have to “pay back” Medicaid for any public aid paid on his or her behalf. Therefore, if years of care are provided, there may not be much left to distribute to heirs. The goal of these trusts is not to preserve an inheritance so much as it is to provide for the well being of the disabled person for life.

2. Third-party Supplemental Needs Trusts

A third-party trust is one that is funded with somebody else’s assets. This is common where a family member leaves an inheritance to the trust or places personal assets in the trust for the disabled person. There are many creative ways for an elder law attorney to arrange this. The greatest difference between this and a self-settled trust is that these are not readily available to the disabled person. Indeed, someone else is the primary beneficiary and acts as trustee, thereby giving someone else control over the use of the funds. Some parents of disabled adult children choose to establish these trusts and name another child to act as trustee. This way, following their death, they can be confident that their other children will have the necessary assets to take care of their disabled sibling, while permitting the disabled sibling to receive public benefits.

Despite these clever estate planning tools, there are many exceptions and limitations on the use of trust funds that require an attorney’s careful review. Naturally, no plan is 100 percent foolproof; all trusts come with their own unique pros and cons depending on your own circumstances.

Retirees are acutely aware of the future, and they have usually spent between thirty and forty years saving up for it. While many dream of beach living and travel, current numbers show that most retirees opt instead to continue living in their home. Historically, the biggest move that a retired person makes is from their home to a nursing facility when they are unable to care for themselves anymore, but new trends are coming up in moving after retirement that people should be made aware of.

Trends in Retirement Moving

More seniors today are moving after retirement than in the past. In fact, the likelihood of moving has tripled between the age groups of 1968-1984 and 1996-2011. Interestingly, another trend being noticed by experts is that the average age at the time of the move is considerably lower than it was before. More young, wealthy retirees are choosing to sell their home and move into a retirement community. This is drastically different than past generations, where wealth meant that a person could remain living in their own home significantly longer.

Other research has shown that seniors who move are often happier after the move than retirees that do not. Those who moved because they chose to, and not because they had to, were also happier with their choice. However, overall the seniors that made the decision to try somewhere new were almost always happier than retirees who chose to stay in their homes until forced otherwise.

New Focus on Retirement Living

One of the main causes of this shift in moving after retirement comes from a new set of priorities in this latest retirement generation. In the past, retirees found that they were less satisfied with retirement until they were forced to move to a retirement facility because of physical and mental limitations. Now, these communities are luring retirees there at a younger age with the promise of an improvement in lifestyle earlier on.

Now, some retirement and assisted living communities are actively trying to sell a certain lifestyle to retirees interested in moving. “Developers are offering more square footage, innovation in floor plan layouts that are more attractive, brownstone apartments with a more urban look, access to technology, and they’re bundling more health and wellness activities like swimming pools and fitness centers.” In addition, some communities are offering more environmentally friendly homes or an array of living styles in the same community so that they can transition over time without leaving the area.

Where Seniors are Moving and Why

A study by the Pulte Group found that sixty percent of seniors do not wish to leave the state if they move after retirement. However, certain factors are able to influence retirees to move across state lines if the community and environment fit their needs. States in the southwest and southeast offer a better climate for most seniors. In addition, states like Florida, Nevada, and Texas are offering no income taxes to those that move. Other states have low property taxes, or do not require that retirees pay taxes on their Social Security.

While parents make the vast majority of decisions for their children, it comes as a surprise to many that they cannot automatically make decisions regarding a trust or estate in their child’s name. Estate law protects the interests of the beneficiary above all others, even from the parents of a minor beneficiary. If a parent is not able to sign for their child’s trust or estate, a court appointed guardian is assigned that is also known as virtual representation.

Virtual Representation

The concept of virtual representation occurs when an adult is appointed to speak on behalf of a minor trust beneficiary. Many of the provisions regarding virtual representation are found in the Uniform Trust Code (UTC), Uniform Probate Code (UPC), and state laws. Essentially, virtual representation gives a minor beneficiary the power to speak through an adult that actually has legal capacity to make decisions. A virtual representative can be appointed for minors, incapacitated adults, unborn children, unascertained beneficiaries, and adult beneficiaries that cannot be found.

The main point of a virtual representative is that they make decisions that are in the best interest of the beneficiary and cannot have any conflict of interest with the trust or estate. In addition, a virtual representative can be given powers that are broader than given in the UTC or state law. If the virtual representative is assigned to a beneficiary through the UPC, probate administration can be made much simpler.

The Need for Virtual Representation

Without a virtual representative for minor beneficiaries, the handling of the minor’s accounts would be placed in the hands of a court-appointed guardian or conservator. All communications, notifications, accounting, and decision making are made by these appointed individuals. Every decision is binding on the minor beneficiary, regardless of whether the minor agrees. A guardian or conservator essentially eliminates the minor from the decision making process of their own assets and cannot be released from the situation without the court’s approval.

A virtual representative is there to explain and work with the minor or other beneficiary to determine the correct course of action. While the specifics of each virtual representation are different, they are all meant to keep the minor apprised of the decisions that are being made about their assets. In addition, a beneficiary can challenge the decisions of a virtual representative and does not necessarily need to get the approval of the court to terminate the relationship.

Gifts and Transfers to Minors

The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) were enacted to help with transfers or gifts made to a minor beneficiary through a trust or estate. These acts allow a virtual representative to hold funds for the minor’s benefit until the beneficiary reaches a certain age.

It allows for the virtual representative to handle the account instead of appointing yet another guardian or conservator just for the account. It not only simplifies the process, but it also saves on the costs of another administrator involved in the beneficiary’s affairs.

Bobbi Kristina Brown is the only heir to the estate of her mother, renowned singer and actress Whitney Houston, but since being placed in a medically induced coma questions have arisen about who is next in line to inherit her fortune. Whitney Houston’s estate was estimated to be around $20 million at the time of her death three years ago. Bobbi Kristina was found on January 31 unresponsive in her bathtub and has remained unresponsive in a coma.

Whitney Houston’s Estate

Since being discovered on January 31, Bobbi Kristina has yet to regain consciousness, and there are rumors that her organs have started to fail. With reports that Bobbi Kristina’s family is considering taking her off of life support, people are now looking to the terms of Whitney Houston’s will and estate planning documents. According to the terms in her will, if Bobbi Kristina dies, Whitney Houston’s mother, Cissy, and her two sons are next in line to inherit Ms. Houston’s estate. The estate includes full royalties from the singer’s music, likeness, and image that will continue to distribute revenue over time.

Bobbi Kristina was the beneficiary of a trust for Whitney Houston’s estate. She received ten percent of the estate, around $2 million, when she turned 21 years old. She is scheduled to get another fifteen percent when she turned 25 years old and the remainder of the estate when she turned thirty years old. The will stated that Cissy Houston and her two sons would inherit Whitney Houston’s estate if Bobbi Kristina dies before coming into the majority of the estate.

Other Potential Claimants

Bobbi Kristina’s father and Whitney Houston’s former spouse, Bobby Brown, does not stand to inherit anything from Ms. Houston’s estate, even if his daughter passes away. Bobby Brown was married to Whitney Houston for fourteen years and the couple divorced in 2007. According to experts, Bobby Brown’s opportunity to contest anything in the estate would have been when Whitney passed away. He has no claim purely by virtue of once being married to her.

It also seems unlikely that Bobbi Kristina’s partner, Nick Gordon, would inherit anything, as well. Mr. Gordon was taken in by Whitney Houston when he was twelve but never formally adopted, and he and Bobbi Kristina announced their engagement and marriage publicly. However, a representative of the family has stated that a formal ceremony of marriage never took place. Therefore, Mr. Gordon does not have a valid claim to the estate.

It was Mr. Gordon and a family friend that found Bobbi Kristina in the bathtub in their home in Roswell, Georgia where the couple lived. Authorities are also looking at possible foul play in the incident involving Bobbi Kristina because of injuries found on her face and mouth. Mr. Gordon is currently a target of the investigation, and the couple has a history of domestic abuse. In addition, one of the co-executors of Ms. Houston’s estate, Pat Houston, obtained a restraining order against Mr. Gordon for, among other things, making threatening comments towards her.

When a trust is created, most often the creator turns to a trusted friend, relative, or confidant to oversee it. This makes a lot of sense to most people because the purpose of a trust is often personal in nature, and the creator wants someone to run the trust that has been a part of their life for many years. However, things like friendship, family drama, and emotions can all complicate the decisions that a trustee makes for a family trust in regards to carrying out the terms of the trust.

Use of Non-professional Trustees

The use of non-professional trustee has been growing as more people set up trusts to operate during their own lifetimes. A lot of these creators do not believe that they need to hire a professional because they can keep an eye on the trust while they are still alive. People are creating lifetime trusts for a variety of reasons. Many are looking ahead at minimizing estate taxes if their assets are above the $5.43 million exemption limit ($10.86 million for a couple). Others are attempting to minimize the level of current state taxes on their assets or gain financial control of their legacy.

Benefits of a Professional Trustee

Hiring a professional trustee to run a family trust can provide a lot of benefits to the creator and beneficiaries. For one, professional trustees are experts at running trusts and knowing how complicated, long-term trusts work. This is particularly important if your family trust is designed to last for more than one generation.

Another benefit of a professional trustee is that the person is removed from any potential family drama or biases. When a trustee controls how much money a beneficiary is entitled to receive, conflicts inevitably arise. If a professional trustee is handling the decision, family prejudice, jealousy, and bias can be eliminated as potential sources of conflict.

Having a personal trustee can also alleviate certain legal issues, as well. For example, a professional trustee is more apt to pay attention to when changes need to be made or when distributions are supposed to be made to beneficiaries. When these things don’t occur, a lot of legal drama can result.

Potential Downsides of a Professional Trustee

There are also potential downsides to hiring a professional trustee to run the trust. First, professional trustees typically charge higher rates than a family member or friend would charge to manage the trust. It is not unusual for a professional trustee to charge as much as 0.25% per year to operate the family trust. In addition, there are sometimes concerns that a professional trustee is looking out more for the bank’s interests than those of the beneficiary.

In order to alleviate these issues, some family trusts are now using a combination of non-professional and professional trustees to run the trust. Co-trustees are designated to both remain impartial in the management of the trust while still being attuned to the individual needs and backgrounds of the beneficiaries. Regardless of what type of trustee is chosen, experts agree that all trusts should include the proper documentation to remove and replace a trustee if the arrangement is not working out.

Estate planning is not many couples’ idea of fun, but it is necessary to ensure that your loved ones are cared for after you are gone. An experienced estate planning attorney can handle drafting the proper documents and explaining the law behind estate planning; however, there are three important questions that you should address with your spouse or significant other regarding an estate plan.

How well does my spouse know my estate planning attorney?

If you are the one in charge of the estate planning process and the finances of the family, it is possible that your spouse has never met, or only met once, your estate planning attorney. Perhaps they met to briefly sign some papers, but the client/advisor relationship is not very strong.

If you are the first to pass away, your spouse would be relying on a person that they barely know during the most difficult time in their life. Since your estate planning attorney will know about every asset, final wish, and plan for the estate it is important that your spouse form a strong relationship with your estate planning attorney.

Does my significant other know where all of the accounts are located and how to access them?

The surviving spouse or significant other will need to access money immediately in order to pay for funeral expenses. Even if an insurance policy covers funeral expenses the reimbursement does not come until weeks or months later. Hospital bills and the daily expenditures of everyday life also need to be taken care of. Your spouse will not have time to search everywhere trying to figure out what accounts exist and how to access them.

You need to ensure that your significant other is aware of all financial accounts and how to access them after you pass away. It is helpful to make a list (or two) and leave them for your spouse that includes:

· Password lists for all online accounts and memberships · Names of all accounts and memberships, online and offline, along with any necessary instructions · Location of all estate planning documents · Names, addresses, and phone numbers of all lawyers, financial planners, accountants, and others who helped create the estate plan
Are all of our estate planning documents and beneficiary designations up to date?

Life events such as births, deaths, marriages, divorces, and job changes can all necessitate an update to your estate plan. This applies to the will, estate planning documents, and any beneficiary designations. Be sure to check:

· Retirement plans (401K plans and IRAs)
· Life insurance · Annuities · Taxable investment accounts
…and other assets that require a beneficiary designation.

By talking with your spouse or significant other about these important aspects of your estate plan you can minimize the stress and confusion of the entire process. If your spouse has a good relationship with your estate planning attorney, is knowledgeable about your accounts, and has worked with you to update the estate plan and beneficiaries you can be assured that your loved ones will be properly cared after you are gone.

“Not for ourselves alone are we born; our country, our friends, have a share in us” is a famous phrase by the Roman philosopher Cicero. While the phrase is several thousand years old, it still has great applicability to estate planning today, because many people are still seeking to leave a legacy of good for their community and friends after they pass on.

Leaving A Legacy Of Good

Americans are generous people. In the United States, charitable contributions by individuals make up a vast majority (72%) of all charitable donations to nonprofit organizations. In fact, the State of New York ranks fifth in overall charitable contributions, with individual donors making an average charitable contribution of $5,150 annually. In addition, these same charitable donors also make will bequests that are, on average, almost triple the amount of their lifetime donations.

Legacy considerations and estate planning are relevant for everyone, regardless of their economic status, marital status, or age. Estate planning is not just for the wealthy, and it is not just for married people with children. In fact, many people come to realize they feel strongly about the idea of leaving a legacy after they experience a life changing event such as a divorce, spousal death, retirement, new job, change in economic circumstances, or health crisis.

Philosophical Questions

While many people are interested or intrigued by the idea of creating a legacy, they often do not know where to begin the process.

If you are considering using your wealth for good after you pass on, sometimes the best place to begin the estate planning process by considering your core values and asking yourself what general type or types of charities or causes you wish to support. Possible charitable classifications and causes include:

-Animals- including animal rights, animal welfare and services, wildlife conservation, zoos and aquariums -Arts, Culture and Humanities- including libraries, historical societies, landmark preservation, museums, performing arts, public broadcasting and media -Education- including universities, graduate schools, technology institutes, private elementary and secondary schools, other educational programs and services -Environmental- including environmental protection and conservation, botanical gardens, parks, and nature centers -Health- including diseases, treatment and prevention services, and medical research -Human Services- including children’s and family services, youth development, shelters, crisis prevention services, and food pantries -International- including relief services, humanitarian relief, and international peace and security -Public Benefit- including advocacy and civil rights, fundraising organizations, community foundations, and community and housing development -Religion- including religious activities, religious media and broadcasting
Ways Of Leaving A Legacy

There are several gifting strategies and wealth transfer tools that can help an individual to leave a legacy for his or her family, friends and community, including the following:

1. Including specific bequests in a will– a will provides a simple plan for distributing personal and real property. A bequest can specify a particular piece of real or personal property, or it can be general in nature, such as cash.
2. Establishing a trust– there are several types of trusts which can be used depending on a donor’s intentions and goals. Three of the most common are life insurance trusts, revocable living trusts, and irrevocable gift trusts. Trusts are often useful for avoiding probate, as well as reducing estate taxes.
3. Designating a beneficiary designations on life insurance policies, IRAs, retirement plans, and annuities- these assets are automatically distributed upon your death, which generally allows them to avoid probate.
4. Setting up a donor-advised fund with a community foundation- community foundations provide grants and scholarships to nonprofit organizations in a designated area. A donor-advised fund gives some control over distribution of funds while sharing administrative costs with other funds held by the foundation.

Creating a legacy plan is an important reason to embrace the idea of estate planning. Your donations can give lasting meaning to your life and make a significant difference in the lives of others. Please contact Ettinger Law Firm at (800) 500-2525 ext. 100 if we can help you with your estate planning needs.

While many New York residents familiar with and have an existing will in place in the event of their death, most people do not realize that estate planning documents extend far beyond a last will and testament. The world of estate planning documents includes not only living wills and advanced medical directives, but also trusts. Trusts offer several benefits associated with them, and come in two forms: revocable and irrevocable.

Benefits of Having a Trust
Trusts can not only provide for loved ones upon death, but they can provide for the person who created the trust during their lifetime. This is important in cases where the creator has a health issue, a mental disability or incapacitation, and other scenarios. Trusts can be administered without the need to involve a probate court, and can therefore protect privacy as to the contents of the trust. Trusts also serve as protection of assets for trust beneficiaries, and offer a wide variety of options in creating them to suit different needs.

Revocable Trusts
Revocable trusts are a type of trust that can be changed at any time. The creator of the trust could simply modify the terms of the trust through an amendment. Or, if they want to revoke the trust in its entirety, they can do that as well. In revocable trusts, the assets contained within the trust are considered the creator’s assets and will be treated as such for tax purposes and if creditors exist.

Irrevocable Trusts
As one may expect from its name, an irrevocable trust is not able to be changed once it is signed by the creator of the trust. These trusts are often complex and require a special degree of care in drafting them in order to meet the creator’s needs and desires for his or her estate. It is imperative to consult with an experienced estate planning attorney when setting up an irrevocable trust in order to ensure your estate is properly protected, and any concerns you have about being unable to change the terms of such a trust are addressed and handled appropriately.

That being said, irrevocable trusts have a number of specific benefits associated with them. Often times, estate taxes are significantly lessened or even eliminated through the creation of an irrevocable trust. Irrevocable trusts also offer a high degree of asset protection for the creator of the trust and the trust’s beneficiaries. Both of these advantages are possible with irrevocable trusts because once the assets are placed into an irrevocable trust, the creator gives up his or her control and ownership of the trust assets.

NY Estate Planning Attorney
If you are interested in securing estate planning documents or are interested in further discussing the benefits of trusts and how they apply to you, the experienced estate planning attorneys can help you.

Charity is an important part of an estate plan for New York families. Many residents have important causes that symbolize their own values and morals, including social, political, economic and religious non-profit groups. Donating funds via a will or trust is common for estates of all sizes–this is not just for the wealthy. Even relatively small donations can have a significant impact. In addition, giving funds to valued causes is a key way to pass on a final lesson to future generations.

There are many different ways to give assets to a charity at death. In the simplest form, funds can be given for the charity to use in any way it chooses. However, many donors have more specific wishes, often wanting to direct funds for very specific uses.

Understanding Donor Intent
“Donor intent” is the term used when delineating exactly what was intended by the giver of a gift to a charity. Unfortunately, disagreement often breaks out regarding whether the funds were actually used by the charity in the manner the donor intended. These disputes can arise for many different reasons:

***What if the charity is no longer doing the specific work delineated by the donor?

***What if the organization is in desperate need of operating funds to continue general business, even though the donor specifically wanted to funds to go to sub-set program?

***What if the donated funds are not large enough to actually accomplish the intended purpose? Or if there are extra funds remaining after the purpose is met?

Another layer of complexity is that the actual donor intent itself may not be clear. When written generally (and without proper legal help) there may be many interpretations. After a passing, the donor is not around to clarify his or her wishes and so the stage is often set for contentious disagreement between surviving family members, advisors, the charity, and other interested parties.

Casebooks are filled with drawn-out legal battles related to these issues. Ideally, planning itself should be done to limit ambiguity and prevent conflict before it arises. A legal professional can help by clarifying the specific goals of the donor and ensuring that only an appropriate level of flexibility is included in legal documents. In addition, there are various ways to actually structure a gift–it can be more than just cutting a check–and a lawyer can explain what option makes the most sense in your case.

Experienced Legal Guidance
The complexity of this issue is one reason why it is critical to have the help of an experienced estate planning attorney when crafting these arrangements. Even details that seem straightforward at first–like donating money to charity–can come with unique challenges. It is always prudent to take the time to draft inheritance documents carefully to avoid future disagreements and feuds.

For help on these and similar matters throughout New York, please contact the legal professionals at our firm today.

We often discuss the importance for local families to account for the New York estate tax. Far more media coverage is given to the federal tax, and some local residents are under the mistaken assumption that the state law mirrors the federal. It currently does not. Even families who do not have asset to trigger the federal tax may still need to plan appropriately for the New York tax on estates.

However, if current plans are carried out, in a few years .there may be much more congruence between the state and federal rules. That is because earlier this month New York changed exemption levels for the estate tax. Previously, assets over $1 million were exposed to the tax at a 16% top rate. Now, however, the exemption level is raised to slightly more than $2 million ($2,062,500). Not only that, but that level is set to steadily increase or five years until, in 2019, the exemption level matches the federal exemption amount at that time (projected to be $5.9 million).

Important Provisions in the Estate Tax Law
There are other aspects to the new state rules that must be understood by local residents seeking to minimize their obligations and legally save on taxes. Some items to keep in mind:

***There is no “portability” as there is with the federal tax. This means that surviving spouses cannot use unused portions of their partner’s exemption amount to lower their burden.

***Under the law, all gifts made within a three year window will likely be included in the estate to calculate the tax burden (at least for gifts made starting this April and extending to 2019). Naturally, this means that one must act early to move assets in ways that take them out of the estate and lower its value.

***There is a risk of falling of the estate tax “cliff” during the phase-in which could mean those with assets just slightly over the exemption amount may face a tax on the full value of their estate. This issue is complex, but in a helpful comment letter the New York State Society of CPAs provides a more detailed analysis of how this may come about.

***The new law repeals the state’s generation-skipping transfer tax while also providing more relief for some surviving non-citizen spouses.

Contact our NY estate planning lawyers today for tailored guidance on how these rule changes affect your financial future.

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