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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 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 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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2017 New Year’s Resolutions

Many people start the New Year with different New Year’s resolutions.  Start eating healthier, stop procrastinating, and lose weight all see
m to be favorites for the New Year. One resolution that everyone should make is to put together an Estate Plan.

A proper Estate Plan covers who should make decisions for you if you were to become incapacitated and how your property would be distributed when you pass away. A very important component of an estate plan for parents with young children is to specify a guardian. Who would I like taking care of my children if my spouse and I were to pass away unexpectedly?

If 2016 taught us one thing, it is that unfortunately no one will live forever.  Prince, Muhammad Ali, George Michael, and Carrie Fisher are all reminders that we all have a limited time on this earth.  One resolution that can be easily kept and does not require many hours on the treadmill is to put your affairs in order and come up with an Estate Plan.

 

What Happens if I Die without a Will?

What happens if I die without a Will featuring Daredevil Dan

If a person dies without leaving a Last Will & Testament, that person has died intestate.  Intestacy is the default rules in New York has as to who would inherit your property if you did not have a Will.  It is codified in EPTL 4-1.1.  The relatives who are entitled to a share of the decedent’s estate are called distributees.

 

Daredevil Dan Example:

Daredevil Dan got caught up in this Pokémon Go craze.  While he was trying to catch a Pikachu in Bushwick, Brooklyn he accidentally stepped in front of the B52 bus and that was the end of Daredevil Dan.    Daredevil Dan never made it to Ira K. Miller & Associates for any estate planning and died without a Last Will & Testament.  The intestacy laws of New York would determine who inherited Daredevil Dan’s estate.

 

If Daredevil Dan had:
A spouse and no children Spouse inherits everything
children* but no spouse His children would inherit everything
spouse and children* His spouse would inherit the first $50,000 of Daredevil Dan’s estate plus half of the balance. His children* would inherit everything else.
parents but no spouse and no children* His parents would inherit everything
siblings (brothers or sisters) but no spouse, children*, or parents the siblings inherit everything
* If a child dies prior to Daredevil Dan and had children of their own, then Daredevil Dan would have grandchildren. Those grandchildren would step into the Daredevil Dan’s child’s place and inherit in place of the child.

Example 1:

Daredevil Dan was married to Brittany and they did not have any children.  Brittany would inherit Daredevil Dan’s entire estate

 

Example 2:

Daredevil Dan was not married but had three children, Anna, Betty, and Charlie.  Each child would be entitled to 1/3 of Daredevil Dan’s estate.

Example 3:

Daredevil Dan was not married but had three children, Anna, Betty, and Charlie. Betty passed away two years before Daredevil Dan and had two children, Devin and Emma (Daredevil Dan’s Grandchildren). Under this scenario Anna would inherit (1/3), Charlie would inherit (1/3) and Devin and Emma would inherit Betty’s 1/3 share.  Therefore, Devin would inherit 1/6 (.5 of the 1/3) of Daredevil Dan’s estate and Emma would inherit 1/6 of Daredevil Dan’s estate.

Example 4:

Daredevil Dan was married to Brittany and had three children, Anna, Betty and Charlie.  Daredevil Dan died with $170,000 in his bank account which he received from his stunt of swimming in the Gowanus Canal.

In this scenario Brittany would inherit the first $50,000 and would receive ½ of the remainder. The remainder = $120,000 (170,000-50,000=120,000) (1/2 of $120,000 is $60,000). Brittany would inherit $110,000 of Daredevil Dan’s estate.

Anna, Betty and Charlie would each receive $20,000 (1/3 of $60,000).

 

Example 5:

Daredevil Dan was married to Brittany and had three children, Anna, Betty and Charlie.  Betty passed away two years before Daredevil Dan and had two children, Devin and Emma (Daredevil Dan’s Grandchildren).  Daredevil Dan died with $170,000 in his bank account which he received from his stunt of swimming in the Gowanus Canal.

In this scenario Brittany would inherit the first $50,000 and would receive ½ of the remainder. The remainder = $120,000 (170,000-50,000=120,000) (1/2 of $120,000 is $60,000). Brittany would inherit $110,000 of Daredevil Dan’s estate.

Anna and Charlie would each receive $20,000 (1/3 of $60,000).

Devin and Emma would each receive $10,000 (1/2 of the $20,000 that Betty would have received if she were living)

 

 

Do not let New York intestacy laws determine who inherits your money. For more information about different scenarios or Estate Planning, please contact Ira K. Miller & Associates

 

Seven Benefits of a Revocable Living Trust

 

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Many Americans simply leave a will to distribute their assets upon their passing.  However, the creation of a Revocable Living Trust creates several benefits unavailable to those simply leaving a will. Here are seven benefits to creating a Revocable Living Trust

1) Avoiding Probate- A great benefit of a living trust is that it avoids probate. Probate means the official proving of a will.  This official proving is done at the Surrogates Court in the county where the person was domiciled before their passing.  In order to probate a will, a copy of the will must be distributed to everyone who would inherit from the person’s estate if there were no will.  In some cases, locating these people who would inherit can be very difficult, costly, and time consuming.  By creating a trust, this issue can be avoided.

2) Privacy- Another key distinction between leaving a will and creating a living trust is the level of privacy. A living trust is not made public and upon death of the grantor, the distribution of an estate is done in private.  A will becomes a public document once it is probated and anyone can view how you left your estate upon your passing.

3) Quicker access to funds- Probating a will and having the Surrogates Court grant authority to the executor can take months. With a Revocable Living Trust, the successor trustee can gain access the person’s funds quickly and distribute them according to the terms of the trust.

4) Revocable- The trust can be changed, revoked, or amended at any point during the grantor’s life. Once the grantor dies, the trust becomes irrevocable.

5) Protect your beneficiaries from creditors- Terms can be placed in the trust to protect your beneficiaries from creditors. If a trust owns the beneficiaries funds, creditors cannot gain access to those funds.

6) Avoid Ancillary Probate- If a person has property in multiple states, they can deed or transfer all property into the trust. Upon the passing of the grantor, the property can be distributed according to the trust. If a person has a will and resides in New York and has property in Florida, a court proceeding for probate would have to be started in New York. Following the executor given legal authority under the will by the Surrogates Court of New York, a second proceeding for Ancillary Probate would have to be started in Florida in order for the executor to collect the property in that state.

7) More Specific Terms- A trust gives the grantor more options as to when a beneficiary receives an inheritance or what condition is necessary for the beneficiary to receive their inheritance.

A Revocable Living Trust is more complex and expensive than a simple will, however, there are many benefits associated with it.

The Power of the Power of Attorney

A power of attorney is a very interesting and possibly powerful document. The document gives a person you choose, your agent, the power to act for you.  The powers given to the agent can be incredibly broad or very specific. For instance, you can narrowly tailor an agent’s power to act only for real estate transactions. You can go as broad as to give an agent power to gift away all a person’s assets for Medicaid planning.   That person may even be given authority to make gifts to themselves.   Your agent should be a person that you trust implicitly.  A power of attorney is a very important estate planning tool and can possibly prevent the need for a guardianship.

Powers of attorney can be durable or springing. A durable power of attorney will continue through a person’s incapacity.  A springing power of attorney, ‘springs’, into action when a person becomes incapacitated.  The problem with a springing power of attorney is, who decides that you are incapacitated? Many springing power of attorneys require that two or more certified doctors declare you to be incapacitated. This can become an issue due to HIPAA violations and can result in costly court hearings.  A durable power of attorney is recommended.

Your agent is under a fiduciary responsibility to act in your best interest.  The agent should also keep records and receipts of all payments through the power of attorney and needs to keep the property separate and distinct from their own assets. Ira K. Miller & Associates has over 35 years of experience within estate planning & power of attorneys. For further questions or to request a consultation please feel free to give us a call at (718) 875-2191 or fill out an online contact form.