Estate Assets

What are non-probate assets and how to recover them?  

When a person passes away, their estate is often comprised of probate assets and non-probate assets.  Probate assets are assets that will be distributed according to the decedent’s Last Will & Testament.  These assets are titled solely in the decedent’s name.

Non-probate assets are sometimes called testamentary substitutes.  These assets have beneficiaries associated with the account or property.  The following are a list of testamentary substitutes:

  • Totten trust accounts, Payable on Death accounts (P.O.D.) or In Trust for Accounts (ITF)-  These accounts allow a person to control their funds and when they pass away the beneficiary listed on the account will receive the funds upon their passing. The beneficiary listed will have to show the bank or brokerage a death certificate to receive the funds.
  • Retirement Accounts- Retirement accounts should have beneficiaries attached to them.  They will pass outside the probate estate unless there is not a beneficiary listed.  To recover the retirement account the beneficiary listed should provide the retirement account company with a death certificate.
  • Life Insurance- Life insurance proceeds pass outside of the probate estate if there is a beneficiary listed. The beneficiary would need to file a claim form and a death certificate to receive the funds.
  • Jointly Held Property- Joint accounts pass automatically to the survivor of the account.
  • Real Property that is held as Joint Tenants with Rights of Survivorship or Tenants by the Entirety- These properties pass automatically to the survivor. The survivor should file a deed to clarify the chain of title. For more information on how real property can be titled, click here.
  • Trust Property- Property that is funded in a trust will follow the terms of the trust and pass outside the probate estate. The trustee must follow the terms of the trust.

 

Daredevil Dan Example:

Daredevil Dan went to the Bronx to watch the Yankees play.  He was too engrossed in his bucket of chicken fingers at the game and was struck by a foul ball, and that was the end of Daredevil Dan.  Daredevil Dan went to Ira K. Miller & Associates and executed a Last Will & Testament.

Daredevil Dan had a joint bank account with his wife, Brittany, with $25,000 in it.  He had a retirement account with $100,000 which had his wife designated as his beneficiary. He owned a property in Red Hook solely in his name. He owned a property in Park Slope with his wife titled as tenants by the entirety.  He owned a brokerage account worth $20,000 which was titled in trust for his son, Thomas and he owned a bank account with $40,000 in his name alone.

According to these facts, the non-probate assets that would go to Brittany would be the joint bank account for $25,000, the property in Park Slope, and the retirement account with $100,000.  Brittany should have the deed for the property in Park Slope changed solely to herself as surviving tenant by the entirety.

Thomas would be able to collect the $20,000 from the brokerage account by providing them with a death certificate.

The probate assets in Daredevil Dan’s estate would be the property in Red Hook and the bank account with $40,000 in Daredevil Dan’s name alone. The disposition of this property would be controlled by Daredevil Dan’s Last Will & Testament.

 

For questions about probate or estate planning contact  Ira K. Miller & Associates

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What is an Ancillary Probate or Ancillary Administration Proceeding?

When a person passes away with real property in multiple states, an ancillary proceeding may be necessary. The primary probate proceeding (if the person passed away with a Last Will & Testament) or primary administration proceeding (if the person passed away without a Last Will & Testament) is commenced in the State and County where the person was domiciled prior to passing away.  Once the Executor or Administrator is given legal authority from the court, that Executor or Administrator can start an Ancillary Probate or Administration proceeding in the State where the decedent owned real property but was not his primary residence.

Daredevil Dan Example:

Daredevil Dan owns a brownstone in Park Slope, Brooklyn and a house in Scottsdale, Arizona which he snowbirds to during the cold Brooklyn winters.  He is domiciled in Park Slope and he spends the majority of the year at his brownstone.  Daredevil Dan went to grab a candy bar from a vending machine, the candy bar got stuck and when Daredevil Dan shook the machine, the machine fell on him, and that was the end of Daredevil Dan.  Daredevil Dan went to Ira K. Miller & Associates and created a will that left everything equally to his two friends, Don and Meg.  He made Don the executor of his will.  Don would have to start a Probate proceeding in Kings County because that is where Daredevil Dan was domiciled.  Following the grant of Letters Testamentary by the Kings County Surrogates Court, Don would then have to start an ancillary probate proceeding in Arizona to gain authority to sell or transfer the Scottsdale home.

Probate proceedings and ancillary probate proceedings can end up being very costly due to filing fees and attorney fees. Both a probate proceeding and ancillary probate proceeding can be avoided with the use of a revocable trust.

Daredevil Dan Trust Example:

The facts in the above Daredevil Dan Example are the same, however, instead of creating a will at Ira K. Miller & Associates, Daredevil Dan created a Revocable Living Trust.  He deeded both his property in Park Slope, Brooklyn and his property in Scottsdale, Arizona into the trust.  The trust terms had Daredevil Dan as the trustee of the trust and upon his passing his friend Don would take over as trustee. The trust terms stated that upon Daredevil Dan’s passing both properties in Arizona and New York would be sold and the proceeds split between Don and Meg. Following Daredevil Dan’s vending machine accident, Don would have legal authority to sell both properties as trustee and would avoid  probate in New York and ancillary probate in Arizona.

If you own real property in multiple states, a trust is a great way to avoid probate and ancillary probate. Contact Ira K. Miller & Associates for any questions you may have regarding trusts, probate, and ancillary probate.

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Joint Ownership of Real Property- Different Ways Real Property can be Titled

Title to real property can be held in three different ways; tenants by the entirety, tenants in common, and joint tenants with rights of survivorship.

Tenants by the entirety- the property is owned by a married couple.  The deed will usually state the parties as husband wife. For example the deed would say “John Doe and Jane Doe, husband and wife” or “John Doe and Jane Doe, his wife.” When one spouse passes away the property will pass automatically to the surviving spouse.

Daredevil Dan Example:

Daredevil Dan and his wife Brittany own property as tenants by the entirety in Park Slope, Brooklyn.  Daredevil Dan tried swimming from the Brooklyn Bridge to Governor’s Island.  He made it to Governor’s Island successfully but caught something swimming in the East River, and that was the end of Daredevil Dan.   The Park Slope property would pass automatically to Brittany.

 

Tenants in Common- the property is owned by more than one person in what could be various percentages. A person with a tenants in common interest can sell or transfer their interest without notifying the other owners. They can leave their interest to a person in their will or if they do not leave a will their interest would pass to their heirs at law.  A person with a tenants in common interest has the right to live in the property without paying rent.

Daredevil Dan Example:

Daredevil Dan, his brother Kenneth, and his friend Adam purchase a property in Bushwick, Brooklyn.  They each own one-third (1/3) of the property as tenants in common.  Daredevil Dan tried a stunt which involved jumping a shark, he failed, and that was the end of Daredevil Dan.  Daredevil Dan in his will left the Bushwick property to his friend, Christopher. Christopher would now be a one-third (1/3) owner of the property and would have the right to live in the property without paying rent.

 

Joint Tenants with Rights of Survivorship-  the property will pass automatically to the co-owner upon the first person to pass away. The deed must state joint tenants with rights of survivorship.  For example, the deed would say “John Doe and Mary Smith as joint tenants with rights of survivorship.”  A joint tenancy with rights of survivorship can be unilaterally severed to a tenants in common titling. The joint tenant would deed themselves their interest in the property from joint tenants with rights of survivorship to a tenants in common interest. For example the deed’s language would be “John Doe with a joint tenants with rights of survivorship interest as party in the first part to John Doe as tenant in common as party in the second part.”

Daredevil Dan Example:

Daredevil Dan and his friend Sophie own a property on the Upper East Side of Manhattan as joint tenants with rights of survivorship. Daredevil Dan was walking down the street when a piano fell on his head, and that was the end of Daredevil Dan.   Sophie would now own the property on the Upper East Side.

Do not transfer or re-title property without consulting an attorney.  For more information regarding the titling of real property, contact Ira K. Miller & Associates

 

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What is a Statutory Gifts Rider & Why is it Needed?

The Statutory Gifts Rider or SGR, is a modification to a power of attorney that allows the agent to give gifts.  Without the Statutory Gifts Rider the agent under a power of attorney is only allowed to give gifts totaling $500 for the year for personal and family maintenance. The Statutory Gifts Rider may be used by an agent for both Medicaid and Estate tax planning purposes. Your agent must act at the instruction of the principal or act in the principal’s best interest. Due to the financial impact a Statutory Gifts Rider can have, it needs to be witnessed by two disinterested witnesses.

The Different Parts of the Statutory Gifts Rider (SGR)

Part A of the Statutory Gifts Rider allows the agent to give gifts up to the federal gift tax exclusion ($14,000) to the principal’s spouse, children, more remote descendants, and parents.   Double the gift tax exclusion ($28,000) can be given as gifts if a spouse agrees to the split gift treatment.

Part B is a modifications section to the SGR.  It allows for the principal to specify if they would allow gifts to be larger or small than the gifts tax exclusion.  In the SGR that Ira K. Miller & Associates prepares, we often give the agent discretion to make gifts for the purpose of gift, estate tax, or Medicaid planning for the principal.

Part C of the SGR allows for the agent to give gifts to himself or herself and specifies what gifts may be given.

Part D is acceptance by third parties and Part E is the signature of the Principal and Acknowledgement.

Daredevil Dan Example

Daredevil Dan over the course of his daredevil career experienced many concussions. Due to this, he has become forgetful and can no longer take care of his finances. He also has begun wandering the neighborhood at night and can no longer find his way home. His son, Joseph, has lived with Daredevil Dan in his house for the last 3 years and helps his father get to doctors appointments and helps him with all aspects of daily living. Eventually it becomes too hard for Joseph and Joseph decides to put Daredevil Dan in a nursing home.

Daredevil Dan owns a home in his name alone and bank accounts less than the Medicaid limit.  Joseph is the agent under Daredevil Dan’s power of attorney. Daredevil Dan receives Medicaid while in the nursing home. What can be done to preserve Daredevil Dan’s home from a Medicaid lien being placed on it?

Example 1-  There is a Statutory Gifts Rider to the Power of Attorney

Joseph will be able to gift himself the house as caretaker child. No lien would be placed on the house and the transfer would be considered a Medicaid Exempt transfer and Daredevil Dan would continue on Medicaid.

Example 2- There is No Statutory Gifts Rider

Joseph could not gift the house to himself. He does not have authority under the power of attorney as the house is a gift of more than $500. In order to transfer the house to himself as caretaker child, a costly guardianship proceeding would need to be commenced.

Example 3- Joseph does nothing

If Joseph does nothing a Medicaid lien will be placed on the home. When the house is sold Medicaid will recover from the sale of the house the money they expended on behalf of Daredevil Dan.

To learn more powers of attorney, statutory gifts rider, or Medicaid planning contact Ira K. Miller & Associates.

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What is a Testamentary Trust?

Simply put, a testamentary trust is a trust that is written into a Last Will & Testament.  The trust does not come into existence until the Will is probated. Testamentary trusts can be created for a variety of reasons.  Here are a few reasons a person might want to set up a testamentary trust in their will:

 

  • The beneficiary receives public entitlements and receiving the funds would disqualify them from these public entitlements. This type of trust is called a supplemental or special needs trust.
  • The beneficiary is a young child and the parent does not want their child receiving a substantial sum of money at the age of 18 or 21. Instead the trust can specify that the child shall receive the money at a later age like 30 or 35 years old.
  • The beneficiary is not financially savvy. The trust would specify a trustee who would help ensure the money was not spent immediately on frivolous items.
  • The beneficiary has many creditors. The trust would prevent creditors from reaching the property or cash in the trust.  This type of trust is called a spendthrift trust.

 Daredevil Dan Example:

Daredevil Dan has a 17 year old son named Charlie.  Charlie loves luxury sports cars. All he talks about are Lamborghini’s, Ferraris, and McLaren’s.   While paragliding in Patagonia, Daredevil Dan flew right into a mountain and that was the end of Daredevil Dan.

Daredevil Dan went to Ira K. Miller & Associates for estate planning.  He decided to set up a testamentary trust in his Will for his son, Charlie, so that Charlie would receive the money from his estate when he was 30.  He named his friend, Donald, the trustee of Charlie’s trust.  Instead of Charlie inheriting the money and immediately spending it on a luxury sports car, Donald now controls Charlie’s money. According to the terms of the trust Donald can spend the money on Charlie’s health, education, maintenance, or support. Donald spent the trust money on sending Charlie to college.

 

Contact Ira K. Miller & Associates for all your questions regarding Estate Planning and trusts.

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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.

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What does the New York Jets all time sack leader have to do with Elder Law?

Recently Mark Gastineau, the New York Jets all time sack leader, told the public that he was diagnosed with dementia, Alzheimer’s disease, and Parkinson’s disease. Alzheimer’s disease is an awful disease that affects the brain and destroys memories and other important mental functions.  He may not be able to recall family members or how to get dressed. It is an absolutely awful and debilitating disease.  Alzheimer’s disease is a progressive disease and will eventually render Mark Gastineau incapacitated. There are two ways of dealing with incapacity. First planning in advance through advanced directives and second through a guardianship.

Due to this incapacity, Mark will have trouble taking care of his financial affairs and issues giving the doctor direction as to his treatment.  With some basic estate planning, Mark could plan for this eventual incapacity.  By executing a power of attorney and health care proxy a full guardianship can be avoided. These documents are called advanced directives.  A power of attorney will allow an agent of your choice to take care of your financial matters.  A health care proxy allows an agent to make medical decisions for a person if they are unable to give a doctor direction.

If there are no advanced directives in place, a court hearing called a guardianship may need to be commenced to help Mark with his financial affairs and medical decisions.   A guardianship may be commenced by a loved one or a friend.  The person commencing the hearing is called the petitioner. The petitioner must prove by clear and convincing evidence that a person alleged to be incapacitated (AIP) has functional limitations and is in fact incapacitated and in need of a guardian.   To learn more about guardianships or have any questions, contact Ira K. Miller & Associates.

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Why Every Young Family Should Have an Estate Plan!

When people think of estate planning, they usually think of the elderly or people in white clothes playing tennis on their massive estates in the Hamptons. Both the elderly and the super wealthy need estate plans, but so does everyone, especially parents with young children.  Estate planning consists of planning for two events, death (morbid, I know) and incapacity.

A Last Will & Testament and Trust are documents used to specify your wishes upon your passing.  These documents can specify to whom your bank accounts, real estate, and personal belongings are left.  More importantly, a Last Will & Testament can specify who would be your child’s guardian if both you and your partner were to pass. Even if you do not have much in terms of funds, planning to make sure that your child is cared for by the right person or persons in the event of a catastrophe is very important.  A Last Will & Testament or Trust can also specify the age in which your child would receive money inherited.  If you do not specify, a child would inherit at the age of eighteen (18) and could spend all that money on a Ferrari instead of on college.

Planning for incapacity is very important and often overlooked.  A healthcare proxy allows an agent to make medical decisions if you are unable to give the doctor direction.  A power of attorney can be used by an agent to take care of financial matters if you are unable to.  By executing these documents, you specify who you would like handling your financial affairs and medical decisions.  Without these documents, fighting between family members can occur and a guardianship may need to be commenced in order to appoint a person to handle these affairs.

Daredevil Dan Example

Daredevil Dan and his wife Brittany left their child Charlie at home and traveled to Hawaii for a much need vacation. In a freak accident, both Daredevil Dan and Brittany were eaten by sharks while scuba diving, and that was the end of Daredevil Dan and Brittany.  Daredevil Dan and Brittany did not go to Ira K. Miller & Associates and did not have a Will specifying who would be Charlie’s guardian in the event they both passed away. After a contested guardianship, Charlie ended up living with crazy Uncle Steve instead of Daredevil Dan and Brittany’s choice, sane Aunt Nikki.  Had Daredevil Dan and Brittany gone to Ira K. Miller & Associates, Charlie could have been living and cared for by Aunt Nikki instead of crazy Uncle Steve.

 

Estate planning is very important for people of all ages. Contact Ira K. Miller & Associates for all your Estate Planning needs.