In 2018 new legal reforms were implemented that will effectively protect estate trusts from retirement benefit plan asset seizure by creditors.

Reform of the Employee Retirement Income Security Act of 1974 (ERISA) in the past year extends protections to estate trusts, and their assets. The latest ERISA rules cover managed retirement plans and welfare benefit plans held by nearly fifty-four percent of retirement benefits, and fifty-nine percent of insurance benefits associated with those plans. With the new reform, trust assets will be at a lesser risk of court ordered attachment by creditors for the collection of a decedent’s outstanding debts due to fiduciary bonding agreements to nondisclosure.   

Prudential Measure, Fiduciary Reform

 Beginning Tax Year 2017, the U.S. federal Internal Revenue Service (IRS) will now require some taxation of cryptocurrency that may affect estate planners and executors. As of this tax season, capital gains and losses on property transactions involving cryptocurrency, for example, must now be reported to the IRS (Notice 2014-21). Before the current tax year, the IRS offered exemption for “like kind exchanges” of crypto assets allowing swaps of digital currency for other assets. With IRS rule changes, and latest insights into the fluctuation of cryptocurrency value, make those assets a bit less attractive to investors than in recent years.

Capital Gains, Estate Tax, ICOs  

If market analysts have advocated cryptocurrency as an estate asset in the past several years, the rule reform will impact investors seeking tax-exemption from Bitcoin, Ethereum and Litecoin earnings. Once considered property rather than fiat currency by the IRS, the rules of have changed. The rules now also distinguish between the tax-exempt proceeds of equity funded trades, and cryptocurrency Initial coin offerings (ICOs), requiring that proceeds from the latter be treated as taxable income. In the short-term, it is likely that investors, including those responsible for estate trusts, will continue to invest in tax-exempt ICOs offered by off-shore banking institutions.   

When an estate holder dies as result of a circumstance of intentional or unintentional negligence of another, the beneficiaries of the estate can file wrongful death or survival action in court for due compensation.  

“New York Consolidated Laws, Estates, Powers and Trusts Law – EPT § 5-4.1 Action by personal representative for wrongful act, neglect or default causing death of decedent” statutory code provides the duly appointed, personal representative of a decedent who is survived by beneficiaries or heirs of an estate, the authority to file an action to recover damages for a wrongful act. Wrongful acts include “neglect” or “default” omissions to act cited as cause-in-fact of the decedent’s death. Actions filed against a person alleged to be the liable party to the decedent prior to the act causing death, can be sued for reason of such wrongful conduct.  

Wrongful Death Actions

In New York, a court will decide if spousal maintenance (“alimony”) should be extended to a former spouse’s estate. Marital property part of a decedent’s estate is only considered an asset of the former spouse if no other heir or beneficiary is designated in a written will. Division of marital property and major assets are a considerable decision in the distribution of resources during a divorce proceeding. Court award of finance and other property assets during a divorce is the result of judicial review. A range of factors are considered before a court issues an order for spousal maintenance. Rules to Special controlling conditions to division of property and spousal maintenance stipulated in New York Consolidated Statutes, Art. 13 §236. The same rule applies to award of estate assets.

New York Estate Laws and Marital Property

The adoption of the Uniform Disposition of Community Property Rights at Death Act of 1971 in New York legislation, recognizes community property rules to addressing equitable distribution at time of one ex-spouses death  (Estates, Powers and Trusts Laws §§6-6.1, et seq.). The Act preserves community property ownership rights of spouses that have moved from a community property state to New York, a non-community property state.

Partnerships, or “limited partnerships” LP, established with individual member capital contributions of money and property in the interest of forming a business are potentially asset that can be a substantial factor in estate planning. The transfer of business and personal capital to legacy capital establishes a trust for grandchildren or other beneficiaries who will benefit from a decedent’s wealth long-term. One of the main challenges is protecting those former business assets from taxation.

“Pass-through” Partnership Tax Rules  

The legal treatment of a LP is one of discretionary liability where partners are concerned. This bodes well for estate planning, as there is little worry of another general partner influencing the actions of an estate. All U.S. states have adopted the Revised Uniform Partnership Act (RUPA) so that all laws are consistent with federal rules to partnership. Partnerships (IRC §761) comprised of two or more members are not considered taxable entities as result.

When a person dies without a will in New York, probate rules to intestate succession guide the distribution of asset to relative survivors. New York rules of intestate succession provide that the closest living family member surviving the deceased is entitled to transfer of assets from an estate. The law of intestate succession limits asset transfer to property that would customarily be assigned to beneficiaries by an estate during probate. This default provision allows for persons identified as family members such as spouses, followed by children, parents, and siblings to be justly enriched should no beneficiaries be named in a will.  

What is the Law of Intestacy?

In New York, the Law of Intestacy states that asset transfer from “the Decedent’s estate when there is no will” is accorded to “distributees” who are or surviving relatives. When surviving relatives include a spouse and children, New York Consolidated Laws, Estates, Powers, and Trusts Law mandates “the spouse inherits the first $50,000 plus half of the balance,” and “the children* inherit everything else” (EPTL § 4-1.1). If parents exist and no spouse or children, the parents retain 100% of the estate. Where siblings survive the deceased, and there are no spouse, children, or parents, probate law allocates the entire estate to the former.

Probate law demands that an executor must pay the debts and other financial obligations of an estate prior to distribution of assets to a Decedent’s beneficiaries. Although heirs and beneficiaries are not legally responsible for paying off estate debt, the total value of the estate can be greatly reduced as result of debt obligations.

Priority debt obligations.

Living trusts have little protection from creditors while a Decedent is alive. Revocable trusts enable an executor to coordinate debt payments in advance. Claims made against irrevocable trusts can also provide a creditor access to additional funds during the probate process after a Decedent has died. Insolvent estates without adequate liquidity to pay debts and obligations may still be subject to debt obligations after court filing fees, attorney’s fees, and executor costs to administer the estate have been paid. Other priority debt obligations include funeral and burial costs; federal and state taxes; medical bills; child support claims; dependent family support claims; judgments; followed by all other debt.

Under state and federal laws, nursing homes can only evict patients for a limited set of reasons and are supposed to face serious civil penalties if they break the law to force residents out on the street. However, these same caregivers have very intimate knowledge of the regulatory system and often interpret resident behavior in such a manner that would allow the facility to expel an individual who would otherwise would have remain with the care facility.

While there are many reasons why a nursing home or assisted living facility may choose to evict a resident from their care, one of the all too common reasons may come down to greed as some patients services transition from Medicare to Medicaid. As a result, federal regulators have begun to step up investigation and enforcement actions against unscrupulous facilities who choose the more lucrative yet essentially illegal business practices.

In December 2017, Centers for Medicare and Medicaid Services sent memos to state nursing home inspectors notifying these departments that federal agencies would begin examining the discharge records from the nation’s 15,000 nursing homes. In 2015 alone there were almost 10,000 complaints filed by nursing home residents alleging they were wrongfully evicted from their facility. However, some elder legal advocates believe these numbers may be underreported because many more elders do not contest their eviction.

Acting as the executor to an estate is an important duty with many responsibilities. While it may seem overwhelming and confusing at first, there are some very simple and basic first steps executors need to take that can help acclimate them to the process and help ensure that the deceased’s final wishes are carried out and all beneficiaries receive all the portions of the estate that they are due.

Most people generally advise their loved ones of their final wishes as it pertains to funeral arrangements. If this is the case, it may also be so that the deceased or his or her family has also made arrangements to pay for the funeral. If not, it will be up to the deceased’s surviving family members to make such arrangements, something the executor will not be expected to complete. However, it will be necessary for the executor of the estate to keep a financial record of all the burial costs paid out of the deceased’s estate as they may be deducted from any estate taxes.

Next, the executor will need to locate the deceased’s last will and testament and filed with the Surrogate Court in the county where the deceased resided or intended to reside if he or she lived out her final days outside of the county. Sometimes, the will may already be registered with the appropriate Surrogate Court, making this step easier.

A recent report by the Government Accountability Office (GAO) claims state and federal agencies tasked with evaluating experimental programs from the Centers for Medicare and Medicaid Studies (CMS) fail to properly evaluate the initiatives. According to the report, some states can take years to finish evaluations and complete reports on programs implemented to help save taxpayers money and improve patient care.

Furthermore, when reports do become available CMS often fails to give the public access in order for ordinary people to see for themselves what works and what does not for the working poor of America. While many experts studying the issue found the shortcomings to be troubling, many were not surprised at the way states and federal agencies go about evaluating what incremental changes to CMS programs could be worthwhile.

Some states do not even finish their evaluations and complete reports until after the federal government approves the experiments for a second time. Such moves often leave observers scratching their heads as to how states can continue to receive funding for experiments on CMS programs without even taking into account whether they have a positive impact on the health and wellness of state residents or the programs fiscal soundness.

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