Guardianship

Who may commence a Guardianship Proceeding?  

If you are concerned that a loved one or family member can no longer take care of their finances or are unable to make safe medical decisions for themselves, a guardianship proceeding may need to be commenced.   Who has the authority to commence a Guardianship proceeding? M.H.L. §81.06 lists specifically who may commence a guardianship proceeding.   §81.06 sets out some specific people who have authority to start a guardianship proceeding such as any distributee (meaning any person who would be entitled to the AIP’s estate according the NY laws of intestacy EPTL §4-1.1), an executor of an estate where the alleged incapacitated person is or may be the beneficiary of the estate, the trustee of a trust when the alleged incapacitated person is or may be the grantor or a beneficiary of that trust, or a person whom the person alleged to be incapacitated resides.

There is a catch all provision to §81.06. Under 81.06(a)(6) “ a person otherwise concerned with the welfare of the person alleged to be incapacitated,” can commence a guardianship by filing a petition.

In other words, anyone concerned for an alleged incapacitated person (AIP) can commence a guardianship proceeding.  This includes friends, significant others, neighbors, even the mailman.

 

Daredevil Dan Example:

Daredevil Dan has been living in an apartment in Fort Greene, Brooklyn.  His mind has been beginning to fail him and he has been wandering around his apartment complex unable to find his apartment. Daredevil Dan’s friend, Jeremy, sees Daredevil Dan struggling and decides to commence a Guardianship proceeding.

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Key Parties to a Trust

key-01   This article will focus on some of the key parties to a trust.  There are generally three parties to a trust; the grantor, trustee, and beneficiaries.

The Grantor or Settlor is the person that creates the trust.  This person will discuss with their attorney their wishes for the trust and the terms that will be drafted into the trust. This is the person that executes the trust.

The Trustee is the person who will receive the property of the trust and accepts the obligation to follow the terms of the trust.  The trustee must be prudent with the property in the trust and is obligated to administer the trust for the benefit of the beneficiaries. A trustee can be an individual or corporation.

The Beneficiary or Beneficiaries are the people who will benefit from the trust property. They have a right to enforce the terms of the trust.

In a typical revocable trust meant to avoid probate, the grantor is usually all three parties.

Daredevil Dan Example:

Daredevil Dan walks into Ira K. Miller & Associates and asks Ira K. Miller & Associates to draft a revocable trust for him to avoid probate.  After his passing, Daredevil Dan wants to leave 50% of the trust to his son Brian, and 50% of the trust to his daughter, Angela.  He only wants Brian and Angela to have access to their money when they are 30 years old. He makes himself the primary trustee and makes his friend Charlie the successor trustee of the trust.

In this trust Daredevil Dan is the Settlor because he is creating the trust, the trustee, because he will manage the trust during his lifetime, and the beneficiary of the trust as the trust says that the trustee shall pay the income to Daredevil Dan during his lifetime and may use the principal of the trust for Daredevil Dan’s health, education, maintenance and support.

Daredevil Dan was lying on a beach in Hawaii when a coconut fell from a tree above him and hit him on the head, and that was the end of Daredevil Dan. When Daredevil Dan passed, Brian was 25 years old and Angela was 21 years old.   Upon Daredevil Dan’s passing, the successor trustee, Charlie will act as trustee of Daredevil Dan’s trust.  He will follow the terms of the trust and hold the money in trust for Brian and Angela until they reach the age of 30.  At that point he will distribute the money outright to Brian and Angela.
Contact Ira K. Miller & Associates for any questions you have regarding trusts.

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What is a Step-Up in Basis?

Step Up image  One of biggest gifts given to estate planners is given to us through the Internal Revenue code.   IRC §1014 is the rule that says a beneficiary receives the basis of the decedent at the time of their death.  Step up in basis is best explained through an example.

Daredevil Dan Example #1:

Daredevil Dan purchased a rental property in Cobble Hill, Brooklyn in 1980.  He paid $100,000 for this property. The $100,000 spent for this property is called the basis.  In 2017, Daredevil Dan decided to go mountain biking in upstate New York, hit a tree, and that was the end of Daredevil Dan. When Daredevil Dan passed away the Cobble Hill property was worth $2,000,000.   According to his Last Will & Testament, Daredevil Dan’s Cobble Hill property is to pass to his son, Brian.  Brian’s basis in the Cobble Hill property will be “stepped up” to the value at the time of Daredevil Dan’s death. Therefore, Brian now owns the Cobble Hill property with a basis of $2,000,000.  If he were to sell it immediately he would owe no taxes. To calculate gains you take the amount realized, or the price sold and subtract it by the basis.  In this example it would be $2,000,000- $2,000,000 resulting in zero gains and zero taxes owed.

Daredevil Dan Example #2:

Daredevil Dan did not go to Ira K. Miller & Associates for estate planning advice. Daredevil Dan wanted to gift his Cobble Hill property to his son Brian and deeded the property to Brian in 2015, two years prior to his death. Brian would inherit the basis that Daredevil Dan paid for the property. Therefore, Brian now owns the property with a basis of $100,000. In 2017,  Brian goes to sell the property for $2,000,000.  Brian would have to pay capital gains taxes on $1,900,000.   ($2,000,000-$100,000= 1,900,000 capital gain on the property).  The capital gains tax would be between $285,000 and $380,000.    Had Daredevil Dan passed away with this property in his estate and left the property to Brian in his Will, he would have saved Brian over $250,000 in taxes.

To learn more about Estate Planning and the step-up in basis, contact Ira K. Miller & Associates.

 

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What documents should be part of a basic Estate Plan?

A basic estate plan involves planning for two things; a person’s demise and their incapacity.

A Person’s Demise

“In this world nothing can be said to be certain, except death and taxes.”- Benjamin Franklin.  Unfortunately, we all only have a limited time on this earth. Estate planning details how you would like your property to be distributed when you pass away.  At the most basic level, this can be done in two ways, through a Last Will & Testament or a Trust.

 Last Will & Testament- A Last Will & Testament is a document that details how property should be left when a person passes away. It states the wishes of the person creating it, known as the Testator. A will can be changed or revoked until the Testator passes away.  This document needs to be executed according to the statutory formalities listed in EPTL §3-2.1. A Last Will & Testament is not given legal effect until the person passes away and the will is probated in Surrogates court. To learn more about probate, click here.

Trust- A trust also plans for a person’s demise.  The person that creates the trust is called the Grantor or Settlor.  That person appoints a trustee to follow the terms of the trust and act as a fiduciary toward the Grantor.  In some instances the Grantor may also be the Trustee.  The trust terms will specify how the income and the principal of the trust are used during the Grantor’s lifetime. It will also specify how the trustee should distribute the principal of the trust upon the passing of the Grantor. A major benefit of a trust is that it avoids probate and the Surrogates court.

Incapacity

An often overlooked part of estate planning is planning for a person’s incapacity.   Who will make my medical decisions and financial decisions if I am no longer able to? Three documents plan for incapacity; a healthcare proxy, a living will, and a durable power of attorney.

 Healthcare Proxy- A Healthcare Proxy specifies who would make medical decisions if you were unable to. This person specified to make these decisions is known as the agent. The person creating their healthcare proxy should discuss their end of life decisions with their agent.

Living Will- A living will gives direction to the agent of the healthcare proxy. It will detail the medical care and life sustaining treatments you would like.

Durable Power of Attorney- A durable power of attorney is a powerful document that allows your agent to make financial decisions for you, even in the event of incapacity.  The agent in a power of attorney can be given very limited power or broad discretion.  In the event broad discretion is given to an agent, the agent can pay bills, transfer real property, plan for Medicaid, and even make gifts to themselves.

With the above documents, you will be well covered for all of life’s challenges. Contact Ira K. Miller & Associates for an Estate Planning consultation.