New York Estate Planning Lawyer Blog

February 11, 2016

UNDERSTANDING CELEBRITY BONDS

DAVID BOWIE BONDS

As the world learned, David Bowie passed away on January 10, 2016. Mr. Bowie was always on the leading edge of creativity, an advocate for meaningful social change and a musical genius to boot. He started his musical career at the same time as the Beatles, Rolling Stones and the Who and remained just as socially relevant, if not more so, compared to his contemporaries. As well as being a singer and songwriter, Mr. Bowie was also an accomplished actor and painter. More pertinent to the topic of estate planning, Mr. Bowie was a trailblazer in financial or investment products. In 1997, Mr. Bowie issued Bowie bonds, the first of any celebrity bonds. Since their initial offering, many credit agencies downgraded Bowie bonds status to just one level above junk bond status. True to form, Mr. Bowie was a first, with many other talented artists following suit.

BACKGROUND TO MR. BOWIE’S FORTUNE

February 9, 2016

DEAD IN ABSENTIA LAWS

by Ettinger Law Firm

LEGALLY DEAD BUT STILL ALIVE

New York like every other state in the nation has a law to deal with people who go missing and are presumed dead. Most states follow the common law time of seven years, although New York has a three year requirement for which it will wait to declare someone deceased. It is not unheard of for a Court to issue a death certificate only for the dead person to show up and show themselves to be very much alive. In Ohio the law prohibits a Court from vacating a death certificate three years following its issuance. Of course there was a case, very recently, in 2013 wherein a man was declared deceased in absentia, passed the three year statute of limitations to vacate or modify the death certificate and appeared in Court to request that the Court nullify the death certificate so he could get a driver’s license.

Another recent case out of Pennsylvania was in the news where a mother of two kids simply disappeared one day in 2002, declared legally dead in absentia and the resurfaced after 11 years, in 2013. Perhaps the strangest case was the case of Ben Holmes, who disappeared in 1980, declared deceased after eight years by his wife and then tried to reconnect with his wife in the 1990s. When he learned she was in a relationship with another man he confronted her and she shot him. He never tried to nullify the death in absentia although he did collect a personal injury settlement from his wife.

February 6, 2016

FEDERAL COURT EXCEPTION TO PROBATE JURISDICTION

by Ettinger Law Firm

FEDERAL COURTS ARE COURTS OF LIMITED JURISDICTION

There is little question that Federal Courts are courts of limited jurisdiction. If there is neither original jurisdiction, meaning a question of federal law or rights that arise as a result of federal legislation nor complete diversity of the parties, meaning that all of the defendants domicile in a different jurisdiction from the plaintiffs home state, then there is no jurisdiction for a federal Court to preside over a case. In all matters of diversity jurisdiction, the matter has to involve at least $75,000 in property or damages. Certainly at least some probate cases fit into the requirements of diversity jurisdiction. Yet, there is generally a federal Court hands off approach to dealing with probate cases, known as the probate exception to federal jurisdiction.

A famous case from 1946 in the United States Supreme Court held that a federal Court can adjudicate various suits against a decedents estate, so long as they do not assume general jurisdiction over the probate proceeding itself or assume control over the property that is properly in the hands of the state probate Court. Markham v. Allen, 326 U.S. 490, 494 (1946). The meets and bounds of this holding have caused volumes of case law and law journal articles. It was not until 2006 with the celebrity, Anna Nicole Smith case that came before the United States Supreme Court that the Court expounded on the federal probate exception in any meaningful regards. Specifically the Supreme Court held that when one court is adjudicating a claim over a specific piece of property (or in the case of an estate, a bundle of property rights) a second court will not assume jurisdiction over the same property.

February 3, 2016

ARBITRATION CLAUSES IN WILL OR TRUST

by Ettinger Law Firm

NEW YORK RULE ON ARBITRATION FOR PROBATE DISPUTES

The idea of using quasijudicial means to settle disputes is as old as the country itself. More specifically arbitration is a method that parties utilize that is usually cheaper, quicker and often with much less formality, yet still adheres to principles of fundamental fairness. George Washington famously included a proviso in his will that outlined a method to arbitrate certain disputes in the execution of his will. Certainly this was no minor matter, as President Washington was perhaps the wealthiest landowner in Virginia and by extension maybe the wealthiest American at the time.

In today’s dollars, President Washington would be worth an estimated half a billion dollars, succeeded by perhaps only President John F. Kennedy’s wealth. By the time of President Washington’s passing in 1799, arbitration was already well established in the United States. New York no longer permits arbitration in the context of a dispute over a last will and testament, as it would unconstitutionally interfere with the power of the Surrogate’s Court to adjudicate disputes involving the disposition and transfer of property of decedents, the administration of estates and probate of wills. Matter of Jacobovitz, 58 Misc. 2d 330 (Nassau County, 1968). The same cannot be said of arbitration clauses in trust documents. There is much diversity of treatment of arbitration clauses found in trust documents, with New York taking a middle of the road approach to interpretation and enforcement of arbitration clauses in trust documents. That principle, however, only applies to the application of the transfer of property via an individual’s last will and testament. It does not apply to the mediation and adjudication of disputes in trust documents controlled by New York law.

February 1, 2016

PLANNING FOR MARRIED MEDICAID APPLICANT’S COMMUNITY SPOUSE – COMMUNITY SPOUSE INCOME

by Ettinger Law Firm

When a married person applies for Medicaid, the government looks at the collected, or, pooled, resources of the two to determine if one of the two spouses is eligible for Medicaid. If the combined income of the two spouses is above the income threshold set by law, the balance must be paid to the nursing home of the dependent spouse. But what income provisions are allowed for the spouse who remains in the community? What do the get to keep? Is the community spouse allowed to tap into the income of the dependent spouse if his/her income is not enough?

The legal, financial benefits that allow for the community spouse to keep a certain amount of income has the terrible name of spousal impoverishment standards. This contains an amount of money, known as the minimum monthly maintenance needs allowance (commonly known as or referred to as the MMMNA). The figure from July 1, 2015 to June 30, 2016 is $1,991.25 per month. Starting on January 1, 2016 the maximum monthly maintenance needs allowance is set at $2,980.50 per month. This is the maximum the community spouse may keep before being required to contribute to the medical needs of the dependent spouse (NOT minimum, so not to be confused with the MMMNA).

WHAT IF THIS IS NOT ENOUGH?

January 26, 2016

BACK TO BASICS: WRAP AROUND PLAN FOR ALL CONTINGENCIES – ADVANCED MEDICAL DIRECTIVES

by Ettinger Law Firm

As the new year opens it is a good time to review all of your legal estate planning decisions and tweak any previous documents that you think need to be modified. This requires us to get back to the basics of estate planning . For those scenarios that deal with what happens to you in an emergency situation, you have an advanced medical directive, with some level of specificity but not too much. The term advanced medical directive is an umbrella term that encompasses several types of legally significant documents. One of them is a living will. Your living will tells the medical professionals who are treating you, what your wishes are in advance for any number of medical situations.

HEALTH CARE PROXY

Underneath the umbrella term of advanced medical directive, there is also the health care proxy. The health care proxy allows for you to appoint a trusted person to act as a decision maker for those scenarios that are not contemplated in your living will and if you are unable to make any medical decisions by yourself. Medical conditions change, different doctors have varying opinions as to the best course of treatment or even over the correct diagnosis. Having a health care proxy will have someone stand in for you to make the best decision under the circumstances. You can limit the authority that you give to the person or only permit the health care proxy go into effect after certain conditions or triggers occur.

January 20, 2016

SINGLE PARENT ESTATE PLANNING – STANDBY GUARDIANSHIP SUBSTITUTE FOR CUSTODY ORDER

by Ettinger Law Firm

In today’s society it is common, to say the least, to have a single parent household. Most of the time the parents are divorced or simply not together and one of the parents is less hands on than the other. Perhaps this is a because of distance, as the other parent may live quite some distance away or perhaps due to work obligations and can only physically parent a month or two out of the year. Then there are truly single parents insofar as the other parent has passed away or perhaps the other parent is just not in the picture for any number of reasons or there is a history of domestic violence and the other parent’s custodial rights are extremely curtailed.

For this population, their will serves not only to memorialize how they want their possessions and property to be disposed of, it also allows for them to indicate who they want to take custody of their children. To be sure, if the other parent is named as the father/mother to the child and the primary custodian passes away, the other parent has the legal authority to take custody, absent good cause. There are, however, other ways of addressing these concerns outside of the four corners of the primary custodians will. Enter the standby guardianship which was specifically designed in response to such situations.

SUPERIOR TO CUSTODY ORDER

January 18, 2016

INTENTIONALLY DEFECTIVE GRANTOR TRUSTS ARE ANYTHING BUT BUSTED OBJECTIVES OF THE TRUST

by Ettinger Law Firm

An intentionally defective grantor trust is an extremely effective tool that accomplishes multiple objectives. First, it helps to minimize gift or transfer tax liability that a person may have to pay if the asset passed through normal probate process or it were gifted to the intended recipient. Second, it helps to step up the cost basis, which can be extremely valuable if the asset grew in value and then stabilized. It is often an effective tool for a small business owner who seeks to pass his/her business on to children or grandchildren. It is even more fitting if the same small business grew in size but then stabilized in value.

But, the question has to be asked. What’s with the reference “defective” in its name? It certainly is not a name conducive to marketing its rather impressive abilities. The term does not refer to something being broken (or busted). The term defective has a simple explanation, it is defective as to income tax liability. To state it in the inverse may help to explain it better; the trust is effective for estate tax purposes. In other words, the trust does not eliminate all taxes in that the grantor still pays the income taxes generated by the asset that is the corpus of the trust, but it does eliminate estate tax liability. Furthermore, it is a “grantor trust”, as defined at 26 U.S.C. § 675, meaning that it satisfies the legal definition of a grantor trust.

WHAT ABOUT GIFT TAX LIABILITY?

January 15, 2016

DISINHERITED HEIRS NOT ALWAYS A SURPRISE

by Ettinger Law Firm

It happens often enough that a parent for many reasons decides to disinherit one, several or all of his/her children. At the same time, this is often not a controversial decision and is just as common both understandable and predicable. Perhaps a person promised their estate to a specific child, stepchild or niece or nephew for taking care of them instead of being required to be sent to a long term continuing care facility. Perhaps the parent provided financial largesse to his/her via college education, graduate school and even helped them purchase a house but had one child who had special needs who always lived at home and insured that child’s future by funding a trust during his/her lifetime and then disinherited all of his/her other children by putting the whole of the estate into the trust.

Mickey Rooney was a very well known and well paid actor that had a long career, with many children and many marriages and disinherited his children. He instead left his estate to his stepson and explained that his kids were better off than he was. By the time Mr. Rooney passed, his estate dwindled to just about $18,000, so there was little incentive for any of his kids to contest the will, although the same did not hold true for Mr. Rooney’s then current spouse. Unfortunately for some families, this can be a shock and there are sufficient incentives for the family to contest the will.

INVALIDATING THE WILL

January 13, 2016

EQUITABLE ADOPTION IN INTESTACY CASES ALL BUT THE ORDER SIGNED

by Ettinger Law Firm

Think about this, you were born to your mother and father. At a wee young age your mother and father separated and your mother raised you. Nothing unusual there. Say then your mother later married another man and he started to raise you as his own; while your stepfather may have always been known as a stepfather, he still loved you and treated you as his own without distinction as to his own biological children. Then at a certain point your stepfather moves to adopt you. Adoption can be a lengthy process, with a mandatory minimum three month waiting period. During that process your stepfather passes away intestate. You are not legally his child so there are no inheritance rights; so what do you do?

Perhaps you seek various government benefits that you would be entitled to if you were adopted, such as Social Security benefits if you are still a minor, benefits through the Veterans Administration, et cetera. This scenario is entirely plausible and actually happened in the case of Matter of Mazzeo, 466 N.Y.759 (A.D. 3rd Dept 1983). Mazzeo shows some of the problems that goes beyond what was outlined above, in that in Mazzeo after the necessary parties filed the adoption petition for an adult adoption, the stepmother (Rose Mazzeo, hereafter Mrs. Mazzeo) passed away intestate and her niece filed for letters of administration, claiming that under New York’s intestacy statute, Mrs. Mazzeo’s only surviving heirs were her five nieces. The stepson (Joseph Mazzeo, hereafter Mr. Mazzeo) opposed this move and claimed that he was equitably entitled to be considered the child of the deceased. The New York Appellate Court agreed with Mr. Mazzeo and found that under principles of equity, or, fundamental fairness, an adoption should be construed for purposes of considering Mr. Mazzeo as the heir to Mrs. Mazzeo.

COMMON TOOL