Long Island Law Firm: Martin Glass


Supreme Court Rules That Inherited IRAs Are Not Protected in Bankruptcy
  (Posted Aug 22, 2014)

If you follow my blog, you know that I'm not much on spouting case law. But every so often a case comes along in the estate planning arena that's worthy of passing along.

In a unanimous decision on June 12, 2014, the Supreme Court of the United States, in Clark v. Rameker (June 12, 2014, No. 13 299) 2014 US Lexis 4166, affirmed a Seventh Circuit decision and ruled that inherited IRAs are not retirement funds within the meaning of the Bankruptcy Code. For those legal geeks out there, the specific part of the Code is 11 USC §§ 522(b)(3)(C) and (d)(12).

This decision resolves a split among the Circuit courts about the status of IRAs that parents leave to their children. The courts have long held that typical IRAs are protected from creditors as they are set up specifically for retirement to the point that you're penalized if you take out funds early. In contrast, money in an account inherited from a parent can be withdrawn at any time. Justice Sotomayor, writing for the court, said that this crucial change in the status of the account makes it less like retirement savings and more like a pot of money available to pay off creditors. Otherwise, Sotomayor said, nothing would prevent someone who declares bankruptcy from using the entire balance of an inherited IRA "on a vacation home or a sports car immediately after her bankruptcy proceedings are complete."

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Protecting Your Assets - Part II
  (Posted Jun 23, 2014)

Last month I started a discussion about how to protect our assets so we actually have something to pass to our heirs upon our death. I mainly talked about how the government tries to reduce our estate by way of taxes. This month the discussion moves to the cost of long term care, and how to minimize that cost.

As previously stated, the cost of care in New York can run anywhere from $6,000 per month for home care to over $15,000 per month for nursing home care. That’s a lot of money to go through! Doing the math, that’s over $180,000 per year. With the average stay in a facility being two and a half years, the cost could climb to a half a million dollars when all is said and done.

So how do we stop that from happening? Keep in mind that the government has a very simple way of looking at this. If you have assets and need care, you need to spend your assets first. When you run out, then the government will take over in the form of Medicaid. In New York, “running out” means having less than $14,500 to your name. That includes savings, checking, money market, cds, stocks, bonds, brokerage accounts, etc. It even includes the cash value in any life insurance and (with some exceptions) your home. Basically, if it’s got your name on it, you need to spend it first.

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Protecting Your Assets
  (Posted May 27, 2014)

Over the course of my career, I’ve found that there are really two parts to being an estate planning attorney. The first part is to actually create and execute a plan for my clients. The plan usually consists of a Will or a trust, along with a Power of Attorney, Health Care Proxy and Living Will. This is to ensure that whatever is in your estate gets to pass to who you want, when you want and who gets to control this passing of assets.

The second part is what’s commonly referred to as asset protection. This simply means making sure that your estate plan actually has assets to pass. Otherwise it’s an exercise in futility.

But who are we protecting our assets from? There are two main entities that are trying to greatly reduce our estate. The first is the government in the form of taxes. The other is the cost of long term care. The latter, in New York, can cost anywhere from $6,000 per month for home care to $15,000 per month for nursing care.

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Everyone Needs a Will, But No One Wants to Do It
  (Posted Apr 27, 2014)

I think this is something that I’ve known even before I started practicing as an Estate Planning attorney. Matter of fact, it probably predates my practice by decades, if not centuries. What am I talking about? I’m talking about the tendency to hesitate (if not complete avoid) writing a Will. Both in my practice and my everyday life, I hear from people who recognize and admit that they should put a Will in place, but despite their best intentions, they simply don’t do it. Why is that? What keeps us from doing what we know we should do?

In my experience, a major driving factor which deters many people from preparing a Will is that they don’t want to face their own mortality. Or worse yet, I hear them say, “If I write a Will, I’m going to die.” Many people feel that if and when they do memorialize their last wishes, they’ll be tempting fate or inviting something terrible to happen. Personally, I believe that the day you’re going to die is already written somewhere. And whether you write a Will or not, that date is not going to change. While this tempting of fate is intellectually an irrational and unfounded fear, it’s hard to minimize the psychological effect it has on people and stops them cold from even pondering writing their Will.

To people with this mindset, there is no easy answer. Without diminishing the very real distress that many people face when forced to think about their last wishes, I would offer this bit of advice: Get over it. I hate saying that, and I certainly don’t intend to be rude, but you have no choice. You need only consider what’s at stake after you die to truly understand that reality. Do you really want the court to make decisions for you as far as who raises your children or where your assets go or even who gets to control them? Most likely the answer is no. I’m not saying it will be a comfortable conversation, and you might even disagree with your spouse (or children) about your final plans. But given the alternatives, a little bit of discomfort is really worth the potential chaos that you could leave your family in should you choose not to have that conversation and take action.

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Can You Revoke An Irrevocable Trust?
  (Posted Mar 27, 2014)

The simple, knee-jerk answer to that question should be no, as that’s the point of an irrevocable trust. But, believe it or not, if you said that, you’d be wrong. There are actually several different ways to revoke an irrevocable trust. It’s not a simple procedure, but there are certain times that it makes sense to get rid of it and start over.

One such time would be when a trust was set up 10 or 15 years before. Given the changes in the income and estate tax laws, the trust may be more trouble and expense than it’s worth. Worse, a trust set up to save taxes might even increase them.

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Protecting Your Retirement Accounts
  (Posted Feb 27, 2014)

When discussing estate plans with my clients, I always make sure we discuss their retirement accounts (such as IRAs, 401ks, etc.). These are normally owned by only one person and have a beneficiary. Therefore they are not typically in a trust nor do they pass under a Will.

What I have been finding is that often times their retirement accounts have the greatest value of any property they own, including their house. Because these accounts defer payment of income tax, their balances can grow very quickly, and can easily become worth millions over the course of generations.

With this in mind, I tell every client that they need to be absolutely sure they named a beneficiary for each retirement account. The beneficiary is the person or persons they want to receive the retirement account when they die. Many of my clients think they did. Many of them find out that they didn’t. You should contact your plan administrator to make sure you did. Retirement plans sometimes provide for a default beneficiary in the event you did not name one. Many times, however, your account will be left to your estate when you die.

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A Letter To Your Family
  (Posted Jan 18, 2014)

So it’s the new year and you’ve promised yourself that you’re going to get your estate plan done. But having your documents in order is only part of a good estate plan.

What you need to do along with that is to prepare a letter that will help your family settle your affairs. You need to let them know what they need to do after you have died. Usually, what’s in this letter is more of a personal statement than actual written instructions and therefore not normally included in a legal document. But what you put in this letter should be consistent with the terms of your Will and/or other planning documents. This letter also becomes valuable if you become incapacitated, as it’s another method of making sure your wishes are known.

First and foremost, if you have made your own funeral arrangements or have special requests, make sure someone knows about them. It’s almost always too late if you put them in your Will. Make sure you communicate them clearly and provide the necessary details and documents. You could even include a pre-written eulogy. If nothing else, it may give your family some comic relief.

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Now That You Have A Will, Where Should You Put It?
  (Posted Dec 18, 2013)

Well, it's about that time for New Year's resolutions. Hopefully one of them is to do a Will. But once you do the Will, where do you put it? A safe deposit box seems like the perfectly logical place to store a Will and other estate planning documents. They are probably the most important documents you will ever have, so shouldn't they be kept in the safest place?

But is it a safety deposit box the best place? Or should you keep it in a fireproof safe in your home? With your lawyer? The court? Or somewhere else altogether?

One thing that I state now, and I'll state it again (because it's just that important): Whatever option you choose, make sure your executor knows what you did!

Although clients often instinctively want to put Wills in a safe deposit box, I personally prefer not to have my clients put their important estate planning documents there.

The problem arises with the fact that most banks seal a safe deposit box when informed of the death of the owner, and a court order must be issued to request that the box be opened to search for the Will. The banks will do this even if there's a joint owner on the box. Although probate courts will generally issue this order "immediately," in practice there is still a delay until the request is made to the court and the order is actually granted.

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The Most Important Part of an Estate Plan is the Memories
  (Posted Nov 23, 2013)

This month I completed the sale of my parents' co-op in Queens. This is the apartment that I grew up in. The process of emptying the apartment (which I discussed back over the summer) has finally been completed. Most people, when they design their estate plan, think primarily about the large financial assets: real property, bank accounts, investment accounts, family businesses, etc. But let me tell you from personal experience, the most heart-wrenching decisions are who gets the "stuff." I've found in my practice that family rifts and disputes are not over money, but over the little things that end up having little or no monetary value at all.

The family bible, the photo album, Mom and Dad's wedding bands, Grandma's heirloom hope-chest. These are the items that end up costing families more in harsh words, hurt feelings, and legal fees than any expensive property or valuable bank account. This is because these are the items that, although they may have a low financial value, have a high emotional value for families -- a fact that many parents or grandparents do not consider when they are making out their Wills or Trusts. Luckily for me, living in an apartment didn't give us the luxury of saving a lot of "memories." If it wasn't used, it didn't stay.

Even though the Executor may be in charge, typically the heirs get to decide among themselves (or more commonly: fight among themselves) after your death as to who gets the crystal vase, jewelry, dining room furniture and handmade artwork. Instead, consider talking to the kids and grandkids about these memorabilia and emotional heirlooms right now. Keep in mind that this might not be an easy conversation to initiate. Most kids are reluctant to talk about, or even think about, their parents' eventual passing. Believe it or not, many parents have found that they have to broach the subject more than once before their kids are willing to talk about it.

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Should You Talk to Your Heirs?
  (Posted Oct 26, 2013)

Last month I discussed how to avoid a Will contest. I noted that one way to at least minimize that risk is to talk to your heirs about your estate plan. It sounds simple, but the subject of inheritance is one that most people arduously avoid for a number of different reasons: superstition, fear, lack of knowledge, or a misguided desire for secrecy.

Many adults, such as my parents, were raised to believe that money was a private affair, and that talking about it was inappropriate. But beyond that, many people simply fear that if they talk about their estate plan with their heirs, they will meet with resistance, disagreement or, in a worst-case scenario, their heirs will try to counter the estate plan with legal action of their own. If that scenario exists, then a revocable trust should probably be part of your plan. But that's a topic for another time.

While in some families and circumstances these fears are justified, in most circumstances being silent about your estate plan can have more disastrous consequences. If nothing else, a refusal to talk about money or your estate plans with your children means that they will have a difficult time following your wishes in regards to your medical treatment or protection of your assets should disaster strike. Most adult children are actually eager to fulfill their parents' last wishes, regardless of how it may or may not impact their own inheritance, especially if they understand why their parents are doing what they're doing.

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Will Challenges and How to Avoid One
  (Posted Sept 22, 2013)

When beneficiaries or anyone interested in an estate question the validity of a Will, he or she may make a Will Challenge. A Will Challenge is made through the Surrogate's Court when the Will is offered for probate. The person questioning the validity of the Will must file a claim, or their objections, in court stating why they believe the Will is invalid. The person making the claim is the Objectant. The Objectant must have some evidence or will most likely lose the case.

There are only a certain number of ways that the Objectant can object to the Will. The first is if they are claiming that another Will is in existence that was created after the Will that is being offered for probate. Typically the new Will would revoke the prior Will, and therefore invalidate it.

The other ways is to attack the offered Will itself. There are three ways to do this. The first is to claim that the Will was not executed properly and therefore invalid. When the Will execution is supervised by an attorney, it is presumed to be executed validly and the Objectant must then rebut this presumption. This is an uphill battle. The second way is to claim that the testator, i.e., the person who executed the Will, did not have the prerequisite mental capacity to execute the Will. The third way to object to the Will is to claim that the testator was under undue influence and/or duress at the time the Will was signed.

An estate cannot be settled while a challenge to the Will is being heard in court. All the beneficiaries of the estate must wait to receive the inheritance being passed in the Will until the court decides whether the challenge is justified or the challenge is thrown out of court.

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Cleaning Out Your Parents' Home
  (Posted Aug 23, 2013)

Emptying out a house sounds easy until it's you who has to do it. Recently, my parents moved permanently to Florida after being snowbirds for many years. What that really meant is that, outside of clothes, they had two of everything and didn't really need (or want) to move anything. It was almost as if they had passed away since very little was actually going with them. I was told that I could take anything that I wanted.

We often hear older adults say "my children can have all this when I'm gone," without realizing that their styles and tastes are very different from ours. For the most part, we really don't have the desire (or storage space) to keep their household belongings. The duty to take care of all that "stuff" can be extremely overwhelming for their heirs. Perhaps they thought they were saving us from emotional or financial stress by not moving to a smaller home or retirement community, or not doing any of this themselves, when in reality it just delayed the inevitability of emptying the home of its contents.

The task of purging the home is much more manageable with helpful hands and a systematic approach. The first thing I learned was don't do it yourself. You need someone else there to help, both physically and emotionally. A technique I found helpful was to separate belongings by their next destination. Scan the home and separate according to the following categories:

Keepsakes -- things which have emotional value to you or another family member;
Resale -- items which have potential monetary value in resale or as scrap;
Donate -- items worthy of donation;
Trash -- items which have no ability to be re-purposed (i.e. everything else).

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The Demise of DOMA
  (Posted July 28, 2013)

Awhile back I wrote about the difficulties for same-sex couples with respect to their estate planning. Well, if you haven't heard by now, things have gotten easier for those in New York. I don't normally write about case law, but when the Supreme Court of the United States (SCOTUS) speaks, even I try to listen. In this instance the case was U.S. v. Windsor.

As a quick refresher, in 1996 President Bill Clinton signed into law the Defense of Marriage Act (DOMA). One of the things it said was that marriage is defined as being between a man and a woman. Thus all Federal statutes, rules and regulations were required to follow that concept.

In the Windsor case, Edith Windsor married Thea Spyer in New York. When Thea died, the federal government said that the estate could not use the unlimited marital deduction for federal estate taxes and had to pay over $360,000. Last month SCOTUS decreed that DOMA is unconstitutional as a deprivation of equal liberty and was in violation of the Fifth Amendment. As long as the couple were married in a state that legally recognizes such marriages, the federal government must also recognize the marriage. That now opens up over 1,100 federal benefits to those couples.

But here's the rub. They did not say that state laws not allowing gay marriages are unconstitutional or illegal. The Justices said only that the federal government could not make that distinction between the types of marriages.

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College Kids Are Adults
  (Posted Jun 23, 2013)

The summer before my oldest went off to college, we all went for an orientation weekend. While there, he went off and did his thing and my wife and I went off and did ours. In one of our parent orientation seminars we were reminded that, now that he is 18, he is officially an "adult" in the eyes of the law. We, as parents, would no longer have the automatic legal right to make his healthcare decisions, have access to his healthcare records in an emergency, or be included in any of his financial decisions. Who was paying their enormous bill was irrelevant. His life became private and confidential.

Amid the hustle and bustle of getting your kids off to college, it is easy to forget that you need to make sure they have signed a healthcare proxy and a HIPAA authorization form. (HIPAA is the federal law which prohibits physicians and hospitals from disclosing confidential medical records to anyone other than the patient, unless the patient has expressly authorized another person to have access to his records.) The consequences of forgetting these simple forms can be tragic. If something should happen to your child while at college (such as an injury or illness), you do not want to be told by some doctor or hospital employee in a far-off state that they cannot even talk with you about your child's medical status.

This is especially true when the potential harm is so easily prevented. With a healthcare proxy, your child signs a document appointing you as their healthcare agent, who will be authorized to make healthcare decisions for them if they ever become unable to make their own decisions. In addition, your child can leave a living will, in which they can specify what kind of end-of-life medical treatments they want (or do not want).

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I Left a Child Out of My Will. Now What?
  (Posted May 28, 2013)

Is this a tragic scenario? Probably not, but it certainly represents what is an entirely avoidable estate planning consequence. Here's the dilemma. Assume after having your first child, you do the smart, responsible thing -- you draft a Last Will and Testament which sets forth your final wishes with regard to the distribution of your estate. Fast forward a couple years and say that your first child now has a sibling and that you unintentionally failed to accommodate for in your Will. OK, one last fast forward in time. Twenty-five years later, despite your best intentions and the daily grind always seemingly getting in the way, you find that you never quite got around to updating your Will to reflect your wishes regarding that later born child before you pass away. So much for the best laid plans.

Even though you love your children equally and probably want them to similarly share in your estate, will that actually happen? Will that later born child you omitted from your Will be disinherited because of your planning error, or will the law accommodate her somehow? These are scary questions. It's my hope to not only calm your fears, but prompt you to action in order to avoid any unwanted estate planning consequences down the road.

If it's not already abundantly clear, today I'm writing about the inheritance rights of children in New York, and specifically those that are left out of a parent's estate plan (sometimes referred to pretermitted heirs). For better or worse, it's more common than you might think that children are left out of a parent's Will. The good news is that New York State recognizes that drafters sometimes make unintentional planning errors. The legislature has set in place certain rules to ensure that pretermitted children are not precluded from inheriting.

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Estate Planning: Does Your 18-Year-Old Need It?
  (Posted Apr 19, 2013)

The quick answer to that question is "yes." When your child turns 18 years of age, he is considered a legal adult. As such, he should have an estate plan. This includes a health proxy, power of attorney, and even a will or trust. While it is difficult for parents to think about this as being necessary, failure to take these measures can have unexpected or severe consequences.

When your child reaches the age of maturity, HIPAA (Health Insurance Portability and Accountability Act) prevents even you, his parents, from obtaining confidential medical information. He needs to have communicated that he wishes for you to still be involved through HIPAA release documents. Additionally, if your child is unable to communicate his desires for his own medical care (or decisions regarding life support) you would need to be appointed as his health care proxy to make these decisions on his behalf. Otherwise, it could require years of litigation before you can make those types of decisions.

While it may be difficult to do, it is important that you discuss with your young adult their end-of-life wishes. You should know whether or not she wishes to be kept alive by heroic measures, even if it means she would not have a meaningful quality of life. As hard as it may be, you should even discuss with her other issues such as burial preferences, organ donations and cremation. Other important decisions, such as who may receive her important tangible property (her "stuff") and her financial assets need to be worked out and documented as well.

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Planning for one!
  (Posted Mar 19, 2013)

In some ways, estate planning for a single person can be more challenging for an estate planning attorney than planning for a couple. When a couple puts together an estate plan, the easiest and most natural thing to do is to entrust one another with all of the fiduciary responsibilities in the event of one spouse's disability or death. Among these responsibilities are the execution of each other's health care proxy, power of attorney, access to medical records in end-of-life scenarios and the administration of the estate.

The ease in dealing with these issues for couples is that the surviving spouse is most often the closest emotionally and geographically to the deceased and their assets. Spouses are uniquely qualified to speak for each other, because over the years they hopefully have had discussions concerning end-of-life scenarios with each other. Moreover, the surviving spouse is more likely to have been included in the financial decision making throughout the marriage, making the surviving spouse the best person to continue making the financial decisions beyond the marriage.

Those who never married and those who have been widowed do not have the luxury of entrusting emergency or end-of-life responsibilities to their spouse. These responsibilities typically fall to other members of the immediate family, such as children or siblings. In my experience, if there are children, the burden of these responsibilities tends to fall on the daughter. If not her, then the child in closest physical proximity to the surviving parent. Hopefully that child has had discussions with both parents and knows their wishes, no matter which one ends up the surviving parent.

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Estate Planning: Do "DIY" Wills work?
  (Posted Feb 18, 2013)

In today's world of electronics and the Internet, people are turning to their computer for answers to even the most complex questions. Estate planning websites are all over the place. They all claim to help you prepare a valid will at an extremely low price. Personally, I'm a big believer in "you get what you pay for." Is it worth it to save a few hundred dollars and risk putting your entire estate at risk?

Online legal document services offer an enticing bargain. Most people realize that they need an estate plan to manage their affairs if something happens to them. But, estate planning attorneys can be expensive. That's why many potential clients are now questioning whether it's possible to skip the attorney fees and use a low-cost Web site to prepare estate planning documents. The short answer is that, yes, it is possible. The longer answer, in my humble opinion, is that it's not recommended. You could save a few bucks now, but end up creating an expensive and frustrating mess for your family.

Hiring an estate planning attorney may seem overwhelming to you and you may wonder if it is really worth it. Let's look at this on a basic level. An attorney is a live person, professionally trained in a specific area of the law, who will listen to your particular needs and goals. A computer program cannot take into account all the particulars of your circumstances and help you make strategic decisions to meet the needs of your loved ones. A Web site cannot anticipate what you may need in the future, like the appointment of a guardian or a healthcare directive or your plans to move to Florida in three years.

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Looking Over the Cliff
  (Posted Jan 21, 2013)

Well, happy new year to all. At the 11th hour Congress decided not to let us fall off the Fiscal Cliff by passing the American Taxpayer Relief Act of 2012. But what does that mean in the world of estate planning? There are a number of things that happened (or didn't happen). So let's go through each one.

First, the federal exemption for gift and estate taxes was fixed permanently at $5 Million indexed by inflation, instead of reverting back to $1 Million. As of January 2013, that amount became $5.25 Million. This means that you can transfer the first $5.25 Million tax free, whether it was by gifting to people during your lifetime or to your loved ones upon your death. Of course 'permanent' just means until Congress changes it.

What about transfers between spouses? The IRS still looks at this as a special type of transfer. They still have what's called an unlimited marital deduction, meaning you can transfer all of your estate to your spouse tax free, regardless how large it is! Just remember that now the surviving spouse has all of the assets and will be taxed for anything over the exempted amount when he or she dies. Also remember that this marital deduction is only available to spouses who are U.S. citizens.

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Choosing a Guardian
  (Posted Dec 16, 2012)

For the past couple of months I've been talking about the different fiduciaries that are typically named in a Will or a Trust. There's one that's more specifically for younger people and it specifically goes in your Last Will and Testament. That's the choosing of a guardian over your children.

This is a very difficult conversation to have with clients. Can you imagine a young couple contemplating a future for their child in which those same parents don't play a central role? Almost as much as parents pray that their children will outlive them, parents likewise hope that they will be around to help guide and shape their children's lives long into their adulthood. As a parent of young adults, it has given me a great deal of pride to watch my children grow and mature.

While an uncomfortable conversation to have, it is necessary for parents to consider what will happen to their children in the unlikely event that they don't see their children into adulthood. While no parent wants to think about it, there is possibly no more important a choice that parents can make than deciding who will raise their children if something were to keep them from doing so themselves. Most people would prefer to control how their assets are distributed at the time of death rather than leave the decision to the courts. How could the decision of who raises your children be of any less import?

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Tips for Trustees
  (Posted Nov 20, 2012)

In the last blog post, I talked about different fiduciary roles (executor, trustee and guardian) but being a trustee typically has long-term implications. Naming someone as trustee, whether it's for your living trust or for a testamentary trust in your Will, is quite possibly one of the most difficult decisions you'll ever make. This trust could be revocable or irrevocable, depending on the purpose of the trust and could exist for many years. The trustee is involved in just about every aspect of the administration of a trust; and although it is considered a great honor, it can also be a great responsibility.

Most people choose someone close to them to serve as trustee, such as a child, sibling or best friend. Choosing someone who knows you and your family to serve in this role can be beneficial in many ways, but if that person doesn't have a financial or legal background the responsibilities can be overwhelming. It is important that the person you nominate as trustee knows not only what is expected of trustees in general, but also knows what you expect of them as a trustee. Here are some tips and discussion points for you to go over with the trustees you have nominated.

  1. Make sure you, as trustee, read and understand the entire trust document. If you don't have a legal background, it is okay (preferable, in fact) to ask for help from an attorney.
  2. Always remember that the beneficiaries of the trust are your first priority and responsibility. Once you become a trustee you have what is called a "fiduciary duty" to always act in their best interests, not yours.
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Designate People You Trust in Your Will
  (Posted Oct 23, 2012)

One very important aspect of a Last Will and Testament is the designation of specific people to take care of your minor children and future financial affairs. Designating people you trust to care for your estate and your loved ones is essential for giving you some peace of mind. By using your Will to select trustees and guardians, you can maintain some control of the future of your children. If you do not designate someone to physically care for your children and to manage their finances, the court will appoint someone to do it. The court-appointed trustee or guardian may not be someone you would have chosen.

A Guardian for Minor Children
Your Will should designate someone to care for your minor children. You should give careful consideration to choosing someone your children can love and respect and someone you would trust to care for your most valuable asset. Once this person (or people) is appointed by the Court, they have the power and authority to make all decisions concerning your children's health and well-being until the child turns 18, so choose carefully. It's also good to have a back up person named in your Will in case that person cannot, or chooses not to become the guardian of your children. It is a hefty responsibility and not everybody is up to it.

Your Will should also designate someone to serve as your executor. As silly as it sounds, your executor executes the provisions in your Will. He or she notifies beneficiaries, probates the Will, gathers assets, pays the expenses and taxes of the estate and eventually distributes the estate to the beneficiaries. The duties of the executor usually last a few months but can last to up to two or three years for very large, complex estates with multiple beneficiaries.

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Passing on your Religious Beliefs
  (Posted Sept 20, 2012)

For many people, estate planning isn't just about financial assets and other practical concerns. It's also about honoring your religious beliefs and passing those values on to family members.

Being a person of a mixed marriage, I can tell you first-hand that this can be very tricky ground.

Religious beliefs can affect a wide range of decisions, from end-of-life health care and organ donations, to funeral, burial or cremation arrangements, to the distribution of assets among heirs and charitable bequests.

Any of those issues can be a source of passionate disagreement within a family, especially one with varying degrees of religious devotion. So, as hard as it is, addressing them ahead of time, with legal documentation, can help quiet disputes down the road.

Of course, it isn't always that simple. I must caution you that being too restrictive in an estate plan in an effort to pass on religious values -- say, disinheriting children who marry outside the faith -- can create divisions within a family. It can even spark extended, costly legal battles, all while failing to have any impact on the heirs' beliefs. Hopefully there are better ways to leave a spiritual legacy.

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Planning is Not Just For People
  (Posted Aug 29, 2012)

Owning a pet -- any pet -- is a substantial investment of time and money.

Whether your pet is a rescue, adopted for nothing, or a purebred with a street value of many thousands, you can't put a price tag on what it's worth to you. So, you ought to take steps to provide for this family member after you are gone -- just as you would for any other. There are a couple of ways to do this, which can be used alone or in combination with each other.

Set up a trust
If you remember, Leona Helmsley set up a $12 million trust to benefit her dog, Trouble. After Helmsley died in 2007, two of her grandchildren, whom she had disinherited, challenged the trust. They convinced the court to reduce the trust to $2 million and ended up with $3 million apiece. The other $4 million went to a charitable trust that Helmsley and her husband Harry had set up. Trouble has since died.

Such trusts (usually funded with much smaller amounts) have become increasingly popular, and can be done here in New York. Creating and administering pet trusts involves many of the same issues that arise with other types of trusts, including how to fund the trust, whether it should take effect while you are still alive (for example, if you are no longer able to care for your pet) and whom to choose as trustee. You will also want to identify the caregiver (include alternates in case the person you have in mind cannot or doesn't want to do it). Ideally, it should be someone other than the trustee. You can even include care instructions, and indicate what should happen to the funds after your pet dies.

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What is a Trust?
  (Posted July 21, 2012)

Attorneys, especially estate planning attorneys, talk about trusts all the time. They talk about them as if everyone already understands exactly what a trust is. There is no doubt that trusts have long served as a valuable estate and financial planning tool, since they can meet a number of important planning needs.

Since people began using trusts centuries ago, they have mistakenly been regarded as tools for the super-wealthy to protect their fortune. That is certainly true to a degree, but a person doesn't have to be 'filthy rich' in order to benefit from the use of a trust.

Well then, what exactly is a trust? A trust may be defined as a "fiduciary relationship in which one person holds a property interest, subject to an equitable obligation to keep or use that interest for the benefit of another."

A trust, then, is a legal entity, recognized and regulated by the laws of the various states, that is established by the proper execution of a formal, written document (the trust document) in which the legal ownership of certain property (the trust corpus or trust principal) held within the trust is separated from the beneficial ownership of the property itself. The person or institution who is the legal owner of the trust assets and who is responsible to manage and invest those assets is known as the trustee. Those persons who receive the benefits from the trust and/or income generated from trust assets are known as trust beneficiaries. That's the attorney's way of defining a trust.

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Your Estate Plan Needs to be Updated After a Divorce
  (Posted Jun 12, 2012)

Divorce is never simple and is actually usually quite messy. That includes annulments and legal separations. Many things are not automatic or included in the official decree. Because of this, every person should have a new estate plan drafted following a divorce.

According to New York law, if you name your spouse in your Will and then divorce, that designation is revoked and it is as if he or she has pre-deceased you.

That's the good news. The bad news is that the divorce itself may not change the trustees, guardians, agents or others named in an estate plan. These people can still take control of financial accounts or other matters as designated in a Will, trust or other documents. It is not uncommon to name in-laws and family members as responsible parties for a testator's assets. Depending on the status of the relationship following a divorce, it may not make sense to have an ex-spouse, or ex-in-laws responsible for managing a home, financial accounts or minor children.

Similarly, it is common, and sometimes even required, for a spouse to be listed as the beneficiary of accounts, trusts, or insurance policies. A divorce will not change the beneficiary designation. If an ex-spouse no longer wishes to list the other ex-spouse as beneficiary he must complete required forms provided by the financial institution or insurance company.

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This is the Year to Gift
  (Posted Apr 27, 2012)

Tax changes that President Barack Obama and Congress hammered out in the final days of 2010 discouraged clients from seeking estate planning advice last year, even though estate lawyers insist that there are many planning opportunities that shouldn't be missed.

It seems that the $5 million estate tax exemption for 2011 and 2012 has all but eliminated "estate tax avoidance" as a motivating factor for clients. With the $5 million exemption, a lot of people breathed a sigh of relief because they said, "I don't have that much." It seemed to diminish the concern for estate planning as motivated by the estate tax. It probably took until September for advisers to realize that this really is a planning opportunity for high-net-worth families.

There is so much uncertainty at this time, it's difficult to give suggestions without saying that the benefits will vary based upon where estate and income tax rates, and estate and gift exemptions, wind up in 2013. Most of 2011 became a year for figuring out how to take advantage of the $5 million exemption before it disappears.

The very wealthy should be planning very aggressively and taking significant advantage of what may be a small window of opportunity. We don't know what tomorrow will bring. After a temporary suspension in 2010, the estate tax rate had been poised to jump to 55% with a $1 million exemption, or $2 million for couples. Instead, the rate was set at 35% for two years and applies only to estates worth more than $5 million, or $10 million for couples. This year, the president and Congress again will have to address the estate tax issue, as these parameters expire at the end of the year.

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Medication Wake-Up Call: It May be More Than an Accident
  (Posted Mar 18, 2012)

It can be extremely dangerous for aging parents to rely only on memory when it comes to taking medication. It's amazing how many aging folks have memory loss issues. A large percentage of those with memory problems go on to develop dementia.

Take this simple example of a senior couple. Both are in their mid 80s, but they're independent and dad still drives locally. They take care of themselves. Except, unbeknown to anybody, mom was forgetting to take her pills. Last month she had six left over at the end of the month, so she decided to take them all at once.

She ended up in the emergency room, but luckily she'll be OK. Hopefully the rest of the family just got a wake-up call that all is not OK. At this point dad or the children need to step in and take a closer look at what's going on. Oftentimes dad is in no position to take on the role due to his own age and limitations.

It's great that medical advances allow us to live longer than ever and to enjoy our lives, but it comes with a price. The price is that most of us will need medication to control various chronic conditions, such as heart disease or high blood pressure. Another price is that once we take one medication, it can have side effects, oftentimes requiring another medication to counter those side effects. This can easily add up to taking 6 or 7 pills multiple times a day, enough to confuse anyone.

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The Dangers of Your Digital Death
  (Posted Feb 12, 2012)

Ian Fleming once wrote in one of his James Bond novels that you only live twice. Well, it now seems that you die twice as well. The first is your paper death and the second is your digital death. Digital death is quite a new phenomenon, so most of us simply aren't prepared for it. But your digital death could be far more troublesome than the paper version.

You already know what to do about your good old-fashioned paper death. You write a Will, setting out which of your loved ones will inherit your property and other assets. Of course, half of us still don't bother to do a Will, which is ridiculous, but that's the topic for another day.

Unfortunately, even fewer of us are prepared for our digital death.

When we die, our body and soul aren't the only things that stop functioning; our online persona will also stop dead in its tracks. This is a big problem, now that we live such active online lives. We have net-based bank and savings accounts, pensions and investment portfolios, and personal effects such as music, movies, photographs, blogs and social media accounts.

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Special Care for Special Needs Children
  (Posted Jan 19, 2012)

"Special needs children" are those who need extra assistance. They may be disabled, have learning issues, Down Syndrome, Cerebral Palsy, ADD, autism, muscular dystrophy, depression, obsessive compulsive behavior, closed head injury, spinal cord injury, or any one of a host of other physical or mental challenges. Sometimes those problems are severe, other times children function normally only at a lower level. Special needs children usually need more emotional support, have higher expenses and need additional financial resources for a longer period of time. It is possible (if not probable) that a special needs child will require assistance throughout his or her adult life.

When a special needs child loses his or her parents (whether that special needs child is 8 years old or 50 years old), he loses his prime support network. It is important to understand the devastation of that loss and to try to put a support system in place -- just in case -- to cushion the blow. Issues change with age, but in general parents must think through who will monitor that child's welfare, help him apply for and continue to receive benefits, help him decide whether to continue working, how to get around, and fulfill supplemental needs like vacations or travel. Special care must be given to who the guardian, trustee and advocate will be, and it is especially important in this case to line up successors.

Many special needs children and adults pay for food, shelter and some medical costs with money from governmental programs funded by the Social Security Administration and Medicaid and some state sponsored programs. Even if a child is covered under a private health insurance plan, that may not be enough. Medicare and private insurance do not cover residential care or most medication expenses. Medicaid does cover those expenses and for most special needs children.

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Tax and Estate Planning for Same-Sex Marriages in New York
  (Posted Dec 20, 2011)

New York's Estates, Powers and Trusts Law ("EPTL") contains a number of provisions that give special rights to surviving spouses. For example, if an individual dies without a will, his or her surviving spouse is entitled to receive the deceased spouse's entire estate if there are no surviving issue or $50,000 and one-half of the remaining estate if there are surviving issue. A surviving spouse also has the right to elect to take one-third of the assets of his or her deceased spouse regardless of what the provisions of the deceased spouse's estate plan provide. The legislative intent above makes it clear that whether all the statutes in the EPTL governing these rights have been changed to gender-neutral or not, they are to be considered gender-neutral.

Before the Marriage Equality Act, there was some judicial precedent for extending the benefits of these provisions to the surviving spouses of same-sex marriages. The Act now provides a statutory basis for this extension. But make no mistake, whether it be a same-sex relation or a different-sex relation, these benefits do not extend to unmarried couples, no matter how long the relation existed.

The application of the New York tax rules to same-sex married couples becomes very complicated because of the fact that federal tax law does not recognize same-sex marriages. For most income and estate tax purposes, New York tax law follows federal tax law. Under the Defense of Marriage Act (DOMA), the federal law provides:
  • In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word "marriage" means only a legal union between one man and one woman (emphasis added) as husband and wife, and the word "spouse" refers only to a person of the opposite sex who is a husband or a wife.
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Do I Have to Leave It To The Children?
  (Posted Nov 6, 2011)

It's a question estate planning attorneys hear a lot. For whatever reason, a person desires not to leave any property to one or more of the natural objects of his or her affection. These could be a spouse, children, other family or even a partner.

The answer, with a couple of important exceptions, is no. You are free to leave (or not leave) any or all of your estate to anyone you want. The exceptions are for surviving spouses, minor children and, possibly what are known as pretermitted heirs. This shows how writing a will has just enough quirks to warrant an attorney's help.

Spouses: unless there's a premarital agreement, in New York, a surviving spouse can elect a statutory share of a deceased spouse's estate. Similarly, New York state laws account for children in the intestate distribution. Finally, a forgotten, unknown or unmentioned child may also have a claim to part of the estate.

Usually, spouses leave their estate or the largest part of their estate to each other. That seems simple enough, but sometimes the spouse in question is not easily identified. In order to be certain, the spouse is usually specifically identified by language like "I leave my estate to my wife, Mary Jane." This way there is no confusion as to who the decedent was talking about.

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Talking to Your Parents
  (Posted Oct 2, 2011)

As an estate planning attorney, I know how common it is for each generation to avoid planning for their death. I have heard many adult children speak to me about how hard it has been to get mom and dad to even talk about it. Few people are eager to spend time thinking about their own mortality, especially the parents that raised and cared for us. Unfortunately, not spending a little time with an attorney can end up costing more than just a little time.

Let's face it, most people don't wake up in the morning and decide that they are going to call an attorney to do an estate plan. Most of them call because either something has happened to them directly (they were appointed as an executor and found out firsthand the difficulties in probating an estate and they didn't want their family to have to deal with that) or something happened indirectly (a family friend died leaving behind minor children and they didn't have a plan in place).

Discussing estate planning with your parents can be difficult and uncomfortable for everyone. Neither of you wants to think about the fact that they will one day pass away. You may also be thinking that your parents are looking at you as the greedy, uncaring child. The way to approach this topic with parents may be to first help them understand that you have their best interest at heart and that you are coming from a place of compassion and love.

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Tax Deadlines for 2010 Deaths? IRS Finally Issues Guidance
  (Posted Sept 7, 2011)

On August 5, 2011, the IRS finally published some guidance for executors of estates of people who died in 2010. Notice 2011-66 explains how these executors can opt-out of the estate tax, and Revenue Procedure 2011-41 explains the special tax rules that apply to assets when executors opt-out of the estate tax.

The estate tax and the Generation-Skipping Transfer (GST) tax were repealed on January 1, 2010; but on December 17, 2010, President Obama signed a law that reinstated them retroactive to January 1, 2010.

This law gave people who died in 2010 a special tax break: executors of 2010 decedents can opt-out of the default estate tax rules. Under the new law, the estate tax rate in 2010 was set at 35% and the exemption was $5 million. This is the same as it now is for 2011 and 2012. This second method of estate tax has one main benefit: assets received from a decedent are generally stepped-up to fair market value under Internal Revenue Code §1014 whereas if the executor chooses to opt-out, there is generally no step-up in basis.

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Understanding the Rules of Inherited IRAs
  (Posted July 20, 2011)

Do you want to hand your heirs big tax problems? Would you like to hand the IRS a sizable chunk of your inheritance? Probably not. But if you misunderstand the rules when it comes to inherited IRAs, you just might. Here are some mistakes that IRA owners and IRA heirs often make.

  1. Many clients think that a will or a trust can facilitate the transfer of IRA assets.
    IRAs don't pass to heirs through wills or trusts (a few rare exceptions aside). The beneficiary form takes precedence. This is a form the IRA owner filled out and signed when opening the account.

    Problems arise when:
    • •  The IRA owner dies without designating a beneficiary;
    • •  The designated beneficiary has passed away before the IRA owner; or
    • •  No one can find the beneficiary form (not even the IRA custodian,
            i.e., the financial institution that hosts the IRA).
    In these circumstances, IRA heirs commonly end up playing by the IRA custodian's rules.
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Estate and Gift Taxes Explained
  (Posted June 5, 2011)

Estate and gift taxes are used to tax large transfers of wealth between individuals. Gift taxes are imposed on transfers made during an individual's lifetime, and estate taxes are imposed on transfers made at the time of death. If you are married, and your spouse is a citizen of the United States, there is no limit on the value of the gift that you may give your spouse. But other than your spouse, there are limits on the amount of money you can pass on before you are taxed on the transfer. Once an individual reaches that exempt amount, everything above that is subject to a transfer tax.

As of January 1, 2011, there has been a substantial change in the federal estate tax. But in order to understand and fully appreciate the change, we need to go through a quick history first and see how we got here.

In 2001, President Bush signed into law the Economic Growth and Tax Relief Reconciliation Act, which slowly raised the federal estate tax exemption from $625,000 to $3,500,000 in 2009 and then completely eliminated the estate tax for 2010. The gift tax exemption went up and locked in at $1,000,000. Unfortunately, there was a sunset provision in the Act that had the estate tax revert back to $1,000,000 as of January 2011.

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Intro to the Wonderful World of Wills, Trusts & Estates
  (Posted Apr 1, 2011)

In case you didn't know, this is my first foray into the world of blogging. That being the case, I thought that I'd spend this month just explaining some of the more general concepts of Elder Law and Estate Planning; a general introduction to begin. Although they are pretty basic (at least to me), I've found that there are a large percentage of people that don't know anything about these primary ideas.

The first concept is "What are Elder Law, Estate Planning, and Trusts and Estates?" Unlike tax law or criminal law or motor vehicle law, there is no one body of law that we (as attorneys) can go to. Instead, it's a mixture of Social Security, Medicare, Medicaid, Tax, Estates, Trusts, Mental Hygiene and even torts (personal injury) and Penal Law (criminal). The idea is that we look at all these types of law and see how they apply to our clients.

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