Authors Posts by Linda Toga, P.C.

Linda Toga, P.C.

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When a person dies without a will, the law determines who the heirs of the estate are. Stock photo

By Linda M. Toga, Esq.

Linda Toga

THE FACTS: After my mother’s death I was approached by a man I will refer to as Joe who claims that my mother was his biological mother as well. According to Joe, before she and my father married, my mother gave birth to Joe and immediately put him up for adoption. Although Joe admits that my mother rejected his attempts to develop a relationship with her during her lifetime, Joe now claims that since my mother died without a will, he is entitled to a share of my mother’s estate.

THE QUESTION: Is Joe correct? Will my siblings and I have to share our inheritance with him?

THE ANSWER: Fortunately for you, Joe is wrong.

HOW IT WORKS: Generally a child who is adopted out does not have the right to an inheritance from the estate of his birth mother. The order of adoption generally relieves the birth parents of all parental duties and of all responsibilities for the adopted child. At the same time, the order extinguishes all parental rights of the birth parent to the estate of a child who has been adopted, including the right to serve as administrator of that child’s estate and the right to inherit under the intestacy statutes.

Although Joe seems to be relying upon the fact that your mother died without a will and, therefore, did not explicitly disinherit him, his reliance is unwarranted. That is because the New York State intestacy statute and the domestic relations law govern how your mother’s estate should be distributed.

While the child of a decedent is generally entitled to a share of his parent’s estate if the parent dies without a will [Estates, Powers and Trusts Law §4-1.1 (a)(1) and (3)], the rights of an adopted child in the estate of a birth parent are governed by subsection (d) of the statute. It provides that the Domestic Relations Law, specifically Domestic Relations Law §117, controls.

Domestic Relations Law §117 (1)(a) and (b) provide that an order of adoption relieves the birth parent of all parental duties and responsibilities and extinguishes any rights the parent would otherwise have over the adoptive child’s property or estate. At the same time, the order terminates any rights of the adoptive child to an inheritance from the birth parent.

Although there are some exceptions to these laws, the logic behind terminating inheritance rights is to prevent people in Joe’s position from enjoying a windfall by inheriting from both his birth and adoptive parents and to prevent a birth mother from receiving an inheritance from a child that she did not support during her lifetime.

Under the circumstances, the only way Joe could inherit from your mother’s estate would be if she chose to name him as a beneficiary in a will or a trust or on a beneficiary designation form. If Joe decides to pursue a claim against your mother’s estate, you should be able to defeat the claim by providing the court with evidence that Joe was legally adopted as a child.

It would be wise to retain an attorney experienced in estate administration to assist you with this matter.

Linda M. Toga provides personalized service and peace of mind to her clients in the areas of elder law, estate administration and estate planning, real estate, marital agreements and litigation. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

There are a number of questions that must be answered before a determination can be made. Stock photo

By Linda M. Toga, Esq.

Linda Toga, Esq.

THE FACTS: Approximately five years ago, my father remarried and he and his second wife, Mary, purchased a house together. At the time my father told me that he alone paid for the house and that his plan was for the house to pass to me and my sister when he died. My father is now very ill and suffers from advanced Alzheimer’s. He never updated his will, which leaves his entire estate to me and my sister.

THE QUESTION: What is going to happen to the house when he dies? Will my sister and I inherit the house?

THE ANSWER: What happens to the house will depend on a number of factors, including how title is held and whether Mary waived her marital rights in your father’s estate.

HOW IT WORKS: Generally when a married couple buys real property, the property is held jointly as “tenants by the entirety” unless the deed states otherwise. That means that upon the death of the first spouse, the surviving spouse owns the entire property outright. There is no need to have a new deed prepared transferring the property into the name of the surviving spouse since the transfer is automatic “by operation of law.” The surviving spouse need not take any action for ownership of the property to be transferred.

If, however, the deed states that the parties own the property as “tenants in common” or states that the parties each own a specific percentage of the property, the surviving spouse only owns the percentage of the property set forth in the deed. If your father owned the property with Mary as tenants in common, the share of the property owned by your father will pass under his will.

As I mentioned above, how title is held between spouses only addresses part of the question. What is going to happen to the house may also depend on whether Mary waived her marital rights and, if she did not, whether she chooses to exercise her right of election.

Mary may have signed a waiver stating that she was not going to enforce the rights she would have to handle your father’s estate and to receive a one-third share of that estate. Absent such a signed waiver, Mary may exercise her right of election and would be entitled to approximately one-third of your father’s entire estate, regardless of the terms of his will or the manner in which he held property.

For example, if your father owned the property in question jointly with you rather than Mary, and the property was valued at $300,000, Mary could demand that the estate satisfy her right of election by turning over to her assets with a value of $100,000.

Even if the property is held jointly with Mary so that she becomes the sole owner upon the death of your father, Mary can still demand other assets from your father’s estate if the value of the property passing to her by operation of law is not equal to one-third of your father’s total estate. Whether she makes such a demand will likely depend on her own financial health, the size of your father’s estate and her relationship with your father.

Even when there is no waiver, it is not unusual for a surviving spouse to honor the wishes of the decedent and decide against exercising her right of election.

Clearly, there are a number of questions that must be answered before a determination can be made about what will happen to the house when your father dies. Additional questions will arise if Mary decides to exercise her right of election. Under the circumstances, you should seek the expertise of an attorney with experience in estate administration to assist you when the time comes.

Linda M. Toga, Esq. provides legal services in the areas of estate planning and administration, wills and trusts, guardianship real estate, small business services and litigation from her East Setauket office.

The best way to defray the cost of a college education is to open a 529 plan.

By Linda M. Toga, Esq.

THE FACTS: I would like to help defray the cost of college for my grandson, Joe. My daughter and son-in-law are not in a position to pay full tuition, room and board. I don’t want them or Joe to borrow for his education.

THE QUESTION: What is the best way to help out without hurting Joe’s chances of receiving needs-based financial aid?

THE ANSWER: Although there are a number of ways to defray the cost of Joe’s education, including giving him money, giving money to your daughter and son-in-law or paying the college directly, for many people the best way to assist with college expenses is to set up a Section 529 College Savings Plan (a “529 plan”) with Joe as the beneficiary. Your various options are discussed below.

If you want to simply gift money to Joe for his education, you can give him up to $14,000 per year without incurring any gift tax. However, when the college reviews his financial aid application and determines how much Joe should contribute toward his education, they will take any gifts you have given him into consideration. Since students are expected to contribute approximately 20 percent of their savings to their education, the more you give to Joe directly, the less aid he will receive.

If you decide to give money for Joe’s college expenses directly to your daughter and son-in-law, you can gift each of them $14,000 for a total of $28,000 per year. Clearly you can make a larger annual contribution to Joe’s education this way; but, like the funds gifted to Joe, the funds you gift to your daughter and son-in-law will be taken into consideration when calculating any financial aid that may be awarded to Joe. The negative impact of gifting funds to his parents rather than to Joe will be less than the impact of gifts made directly to Joe because his parents are only expected to contribute about 6 percent of their assets to his education.

Paying the college Joe attends directly is an option that avoids any potential gift tax issues on gifts exceeding the $14,000 annual limit. Paying the college directly would allow you to make larger contributions annually to his education; but, this method is not recommended since the money paid directly to the college will be considered as income to Joe. Like gifts to Joe, payments to the college will adversely impact the amount of aid Joe may receive.

In my opinion, the best way to defray the cost of Joe’s college education is to open a 529 plan. Many states, including New York, offer such plans that allow for tax exempt growth on investments so long as distributions from the accounts are used to pay qualified college expenses. Contributions to a 529 plan are subject to gift tax; but, the law allows contributions up to $70,000 to be made in one year as long as the person funding the plan files a gift tax return and applies the contribution over a five-year period.

If you open a 529 plan, you could decide how the funds in the account will be invested and to change the beneficiary in the event Joe decides not to attend college. You could also remove funds from the account for noncollege expenses although such a withdrawal will result in a penalty and tax liability.

Although the income on the investments in the plan will be considered Joe’s income, increasing the amount he will be expected to contribute to his education, it is only assessed at 50 percent as opposed to other income that is assessed at 100 percent so the negative impact is greatly reduced.

In some states you can avoid the negative impact of increasing Joe’s income if you transfer the 529 plan to your daughter before Joe applies for aid. Unfortunately, this option is not available in New York where transfers are prohibited unless the account owner dies or there is a court order. For this reason, it may make more sense if you simply contribute funds to a 529 plan opened by your daughter.

Regardless of the method you decide to use to defray the cost of Joe’s education, it is worth noting that gifts made to Joe or his parents after January of Joe’s junior year of college should not have any impact on his ability to get financial aid. That is because by then Joe will have already filed his aid application for his senior year.

Before you make a decision about how to help Joe and his parents pay for his college education, you should not only look at all the options available to you but you should discuss with an estate planning attorney how Joe’s college education should be addressed in your estate plan. You don’t want your estate plan to jeopardize whatever steps you may take during your lifetime to benefit Joe.

Linda M. Toga provides personalized service and peace of mind to her clients in the areas of estate planning and administration, real estate, marital agreements and litigation out of her Setauket office.

Many boomers plan on using their assets to make their golden years golden.

By Linda M. toga, Esq.

Linda M. Toga, Esq.

THE FACTS: My husband and I are in our sixties and have three grown children. All were given the same opportunities growing up, but they did not all take advantage of those opportunities or make wise decisions about their futures. Our two daughters are financially secure and doing very well. Our son, however, has struggled and we expect will continue to struggle to make ends meet his entire life.

My husband and I have accumulated significant assets over the years. We have been generous to our children and have made an effort to treat them all the same despite the differences in their financial well-being.

Despite this fact, my son seems to be under the impression that because he needs more, he is entitled to more. He has made comments on a number of occasions suggesting that since we have the means to make his life easier, we should do so. It is clear that he expects that we will be leaving him a sizable inheritance, perhaps even more than we leave our daughters.

We are bothered by these comments for a number of reasons, not the least of which is that my husband and I are planning on using our hard earned money to travel and, if needed, to cover our health care costs. While we fully expect that all of our children will inherit some money from us, I do not believe that we will be leaving any of them substantial assets.

THE QUESTION: How do we make this clear to our son who seems to think he will see a windfall when we die?

THE ANSWER: You and your husband are not alone in having accumulated significant assets that you hope to spend on yourselves. Many boomers benefited by parents who were conservative savers and cautious spenders. Consequently, these parents often accumulated more wealth than they spent and passed that wealth on to their boomer children.

The boomers, on the other hand, may not have been such conscientious savers. Even if they were, they are finding that they are living longer, may need more money for health care and often believe that they need not leave substantial assets to their children since they did so much for them during their lives.

Like you and your husband, many boomers plan on using their assets to make their golden years golden. That is your right. You earned it. You can spend it. However, if you do not want your son to be surprised or resentful when he does not inherit the kind of money he may expect will be coming his way, the best thing to do is to tell him outright.

Perhaps you can share with him the choices you made over the years that resulted in having a significant nest egg. Then tell him how you hope to spend your hard earned money on yourselves while you enjoy a long and healthy life.

You may discover that the comments he has made about a large inheritance were made in jest and that he isn’t really counting on a windfall. That would be the best scenario.

Even if he expresses disappointment and/or anger, you and your husband should feel better about the fact that you were open and honest with him. He can ignore what you say or he can use what you tell him to better plan for his future. In either case, having the conversation will ensure that when you and your husband pass away, he is not blindsided.

Linda M. Toga provides personalized service and peace of mind to her clients in the areas of elder law, estate administration and estate planning, real estate, marital agreements and litigation. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

A pet trust is effective immediately upon your death whereas a will can take months to execute.

By Linda Toga

Linda Toga, Esq.

THE FACTS: My mother has a dog, Fido, who means the world to her. When it comes to Fido, money is no object. She is very concerned about what will happen to Fido when she dies. Not only does she worry about who will care for Fido but also about who will pay for Fido’s care.

THE QUESTION: Should these issues be addressed in her will?

THE ANSWER: While the long-term care of Fido can be addressed in her will, your mother needs to make arrangements for Fido’s care for the period immediately following her death because the provisions of her will are not effective until the will is probated. That could take some time.

I always suggest that pet owners arrange in advance for someone to take care of their pet in the event they are unable to do so either because of disability or death. It is important that a caregiver is identified and is ready and willing to take the pet on relatively short notice. These temporary arrangements need not be in writing unless the owner feels that people are going to fight over who will care for the pet.

For example, if you and your siblings agree with your mother that Mary will take care of Fido, there is no need to put the arrangement in writing. However, if all of you want to take care of Fido, your mother should put her wishes in writing to avoid conflicts.

As for the long-term care of Fido after your mother’s passing and the cost of that care, I suggest that your mother include in her will a pet trust. When thinking about the provisions to include in the pet trust, your mother should not only consider who will care for Fido for the rest of his life but also whether the appointed caregiver has the resources to cover the costs associated with pet ownership.

Even if money is not an issue for the caregiver, your mother should confirm in advance that the caregiver’s living arrangements are suitable for Fido. Some apartment buildings and residential communities do not permit residents to own pets. If the caregiver of choice lives in such a community, or lives in a setting that is not large enough for Fido, your mother should consider naming someone else to adopt Fido after her death.

Once she has settled on a caregiver, your mother should think about the types of care she wants Fido to receive after she is gone. For example, does she want Fido groomed once a month or to have his teeth cleaned three times a year? Does she want Fido to be fed certain types of food? Does Fido suffer from any ailments that require medication or close monitoring? If so, these things should be addressed in the pet trust. If your mother has been using the same groomer and vet for years, she may want the caregiver to continue using the same providers. This is particularly important if Fido is receiving any specialized care or treatment. If this information is not included in the pet trust itself, your mother definitely should provide this information to the caregiver in a letter.

While the reason for including a pet trust in her will is to ensure that Fido will be cared for after she dies, it can also serve as a vehicle for providing the caregiver with instructions with respect to the handling of Fido’s remains after he dies. This information is important and useful to the caregiver who will certainly want to honor your mother’s wishes.

In addition to setting forth in the pet trust the name of the caregiver and the type of care she wants Fido to receive, both during his lifetime and upon death, your mother will need to allocate a certain amount of money to the trustee of the pet trust.

The job of the trustee is to distribute the funds in the trust to the caregiver as needed to be used for Fido’s benefit. The money will be used to pay for Fido’s food and care, but your mother can also allocate some of the money in the trust directly to the caregiver in recognition of the time, effort and responsibility he/she assumed by caring for Fido. If she wants, your mother can name the caregiver as trustee of the pet trust. She need not name two different people for these roles.

A final decision that your mother will have to make in connection with the pet trust is what happens to any of the funds left in the trust after Fido dies. Many people who have a pet trust direct that any money left in the trust after the death of their pet goes to the caregiver. Another popular arrangement is for the money to be donated to an organization that cares for abandoned and/or abused animals. Of course, your mother can also have the funds left in the pet trust divided between you and your siblings. Regardless of how she wants the funds distributed, it is important to include her wishes in the pet trust.

In light of the number of issues, your mother should discuss if she wants to create a pet trust, and the fact that it will be part of her will, with an experienced estate planning attorney. That is the best way to ensure that Fido will be cared for in accordance with her wishes.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

A credit shelter trust is a marital trust that allows you to a voice having the same property taxed twice.

By Linda Toga

Linda Toga

THE FACTS: I had my will prepared years ago. The estate tax exclusion amount at the time was considerably less than it is now, so my will contains a provision that directs my executor to create a credit shelter trust to avoid estate taxes. The trust provision mandates that the credit shelter trust be funded with assets equal in value to the estate tax exemption amount in effect at the time of my death.

THE QUESTION: A friend told me the credit shelter trust language that is currently included in my will could result in only a small part of my estate, if any, passing directly to my wife. Is he correct?

THE ANSWER: Without knowing the size of your estate, it is impossible to say how much of your estate might pass directly to your spouse upon your death. That being said, your friend is correct.

Credit shelter trusts are designed to avoid estate tax, but tax avoidance is generally not an issue when the first spouse dies because the surviving spouse is most often the beneficiary of the deceased spouse’s estate.

Regardless of the value of the assets that pass to a surviving spouse as sole beneficiary, there will be no estate tax liability on the first death because both the federal and New York State tax codes include an unlimited marital deduction. That means the assets passing to the surviving spouse pass estate tax free.

In contrast, the value of assets passing to a nonspouse may trigger estate tax. That is why estate tax can become a problem when the surviving spouse dies. If the value of the surviving spouse’s estate exceeds the applicable estate tax exemption amount then in effect, estate tax will be due. This year the federal estate tax exemption is currently at $5.49 million and the New York State exclusion amount is currently at $5.25 million.

If your will directs that assets equal in value to the current estate tax exemption amount go into the credit shelter trust, over $5.2 million of your probate estate must be used to fund the trust. The actual dollar amount will depend on whether your will references the federal or the New York State exemption/exclusion amount. If the value of your assets does not exceed the exemption amount, the only assets passing directly to your spouse will be jointly held assets and assets on which she is a named beneficiary. Assets that are used to fund the trust will be available to your spouse under certain conditions. She will not have unfettered access to those funds.

Credit shelter trusts were very popular with my clients when the estate tax exclusion amounts were significantly smaller. In 2008, for example, when the federal estate tax exemption was $2 million, clients with estates valued at $3 to $4 million felt comfortable funding a credit shelter trust since the surviving spouse would still receive $1 to $2 million outright. However, since the exclusion amount has increased at a much faster rate than the value of most people’s estates, the language in many credit shelter trusts has become a problem.

One way to address the problem is to have a new will prepared that does not direct your executor to create a credit shelter trust. However, if you are concerned about estate tax liability, another option is to have a new will prepared that includes language limiting the value of the assets that must be used to fund a credit shelter trust. That way you can be sure that there are sufficient assets passing to your spouse outright.

A third option is to include a discretionary marital trust in your will, rather than a credit shelter trust. A disclaimer trust, for example, can be used by married couples to avoid estate taxes and has the advantage of allowing the surviving spouse to decide how much money will go into the trust. If the surviving spouse feels comfortable doing so, she can have the trust funded with assets equal in value to the applicable exclusion amount. However, she can also decide to fund the trust with a lesser amount or to not to fund the trust at all.

The surviving spouse has nine months to decide whether it makes sense taxwise to fund the trust. Because of the flexibility offered by disclaimer trusts, and the ability to essentially do post-mortem planning, many people whose estates are valued at over the exclusion amount find disclaimer trusts a good option. To figure out what would be best for you, you should discuss your situation with an experienced estate planning attorney.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

Make sure your attorney includes a 'common disaster' provision in your will.

By Linda Toga

THE FACTS: My father and sister perished in a plane crash under circumstances making it impossible to determine the order of death. My sister is survived by her spouse, Joe, and two children. My father’s will leaves his entire estate in equal shares to me and my sister, per stirpes. He was under the impression that his assets would pass to his grandchildren if anything happened to my sister. He was quite adamant that he did not want his assets to pass to Joe. My father’s will also includes a provision stating that if he and a beneficiary die in a common disaster, he would be deemed to have predeceased the beneficiary. My sister’s will leaves everything to Joe.

THE QUESTION: Joe claims that one-half of my father’s estate now passes to him through my sister’s estate and not to my sister’s children because my sister is deemed to have survived my father. Is that correct?

THE ANSWER: Unfortunately with respect to your father’s wishes, the answer is “yes.” As much as your father may have wanted his assets to pass to his grandchildren, as a result of the inclusion of the common disaster provision in his will, Joe will effectively inherit half of your father’s estate along with any assets your sister owned at the time of her death.

HOW IT WORKS: The provision in your father’s will concerning dying in a common disaster with a beneficiary controls here even though it appears to undermine your father’s wishes. Pursuant to that provision, your sister is deemed to have survived your father. That means that half of his assets will pass to your sister’s estate as if she were alive. The assets will then be distributed in accordance with her will. Since your sister’s will leaves everything to Joe, Joe will, in fact, be the beneficiary of the assets passing from your father’s estate to your sister’s estate.

The common disaster provision is one that is often ignored or misunderstood by clients. However, not giving the possible impact of the provision serious consideration when engaging in estate planning is a mistake that can clearly lead to unintended consequences.

If your father wanted to be sure that his assets would not end up in Joe’s hands, the order of death set forth in the common disaster provision of his will should have been reversed. In other words, the common disaster provision in his will should have stated that in the event he died along with a beneficiary under circumstances that made it impossible to determine the order of death, he would be deemed to have survived the beneficiary.

Under that scenario, your sister would be deemed to have predeceased your father. This, in turn, would trigger the per stirpes language in the will that basically provides that if a named beneficiary predeceases the testator, the share of the estate allocated to the predeceased beneficiary will pass to that beneficiary’s children.

The end result of having your father survive your sister would be that the share of your father’s estate allocated to your sister would not be distributed to her estate but would have passed directly to her children.

Since your father’s assets would not have been included in your sister’s estate, they would not be distributed to Joe. Your sister’s wishes as to the distribution of her estate to Joe would be honored since he would still inherit the assets that were owned by your sister at the time of her death. At the same time, your father’s wish that his grandchildren be the beneficiaries of his estate would have been fulfilled.

Issues like the one created by the competing provisions in your father’s will highlight the need to work with an experienced estate planning attorney and illustrate the importance of asking questions to ensure that you understand fully the implications and consequences of every provision in your will.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

By Linda Toga

THE FACTS: My elderly aunt never married and is living alone. During my recent visits with her, it has become evident that she cannot continue to live independently. She is not bathing regularly, there does not appear to be much food in the house, some of the food is past its prime and the mail is piling up. The last time I was there, my aunt told me that she “helped” out one of my cousins who had called saying he was in jail and needed money to make bail. Apparently my aunt was the target of a scam. Clearly she needs someone to handle her finances. Unfortunately, there are no family members in a position to take care of my aunt and she never signed a power of attorney or health care proxy.

THE QUESTIONS: Is commencing a guardianship proceeding a good idea? What happens if there are no family members or friends who can serve as guardian?

THE ANSWER: Although every situation is different, from what you have told me, commencing a guardianship proceeding is not only a good idea but the best way to proceed. Generally the appointment of a guardian is appropriate when it appears that a person is likely to suffer harm because she cannot provide for her personal and property needs and cannot understand and appreciate the nature of her functional limitations. Your aunt will likely suffer harm if she continues to ignore her personal needs. The fact that she was an easy target for a scam artist and that she is not dealing with her mail suggest strongly that she does not understand her own limitations.

HOW IT WORKS: Although not all people who need a guardian need assistance with personal care and property management, it appears that your aunt does need a guardian of her person and her property. A guardian of her person may have the authority to make decisions about your aunt’s living arrangements, medical treatment and procedures and day-to-day decisions about her care. A guardian of her property may make decisions about her assets, may handle her finances and may, with court approval, apply for government benefits or engage in estate planning on your aunt’s behalf.

A guardianship proceeding is commenced by filing a petition with the court seeking the appointment of the guardian. The petition is filed along with an Order to Show Cause (OSC) that essentially advises your aunt, as well as other interested parties, that a hearing will take place before a judge to determine if your aunt lacks the capacity such that the appointment of a guardian is appropriate.

In the petition you will need to provide evidence of your aunt’s limitations and examples of things she has done or things she fails to do that could result in harm. The court needs to know about your aunt’s living situation, her medical conditions and medications she may be taking, her assets and income, among other things.

If there is someone who is willing to serve as guardian, the court should be provided with that person’s contact information and an explanation as to why he/she may be the right person to care for your aunt. If the petition does not identify a potential guardian, and the court determines that a guardian is needed, one will be appointed from a list of trained individuals.

Once the proper paperwork has been filed with the court and served upon all interested parties, the court will set the date for the hearing and will appoint a court evaluator who acts as the eyes and ears of the court. The court may also appoint an attorney to represent your aunt in the proceeding.

The court evaluator will meet with your aunt to evaluate her ability to make decisions about her personal care and financial affairs. The evaluator may also speak to you and other family members, health care providers and others in an effort to learn more about your aunt’s situation. The evaluator will then prepare a report for the court that includes the evaluator’s recommendation with respect to the appointment of a guardian and his/her opinion as to whether your aunt should be present for the hearing to be conducted by the court.

After hearing testimony from you, the court evaluator, your aunt and other interested parties with personal knowledge of your aunt’s situation, the court will decide if the appointment of a guardian is appropriate. If your aunt is found to be incapacitated and a guardian is appointed, the court will explicitly state what types of decisions can be made by the guardian. The guardian will be required to complete a guardian training course and, depending on the value of your aunt’s assets, may be required to post a bond. In addition to visiting your aunt at least four times a year and making decisions on your aunt’s behalf, the guardian will be required to file annual reports detailing all financial activity and updating the court on your aunt’s condition.

Although the time between filing the petition and the hearing is supposed to be about one month, delays are common and, even after the hearing is completed, there is considerable time and effort required before the appointed guardian is actually in place and authorized to serve.

In addition to the time and effort associated with a guardianship proceeding, there are significant costs involved in having a guardian appointed, including payment to the court evaluator and any court-appointed attorney. In your aunt’s case, these costs may have been avoided if your aunt had engaged in estate planning and had a properly drafted power of attorney and health care proxy and/or trust in place. If you decide to pursue the appointment of a guardian for your aunt, be sure to retain an attorney with experience in the guardianship part so that the process will be handled properly and expeditiously.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

By Linda Toga, Esq.

THE FACTS: After my mother’s death, my father met a woman, Mary, who was his partner for many years. They lived in my father’s house, which has a value in excess of $3 million. In his will my father left the house to Mary. He also named Mary as the beneficiary of his life insurance policy, which has a death benefit in excess of $2 million. He left his residuary estate to me and my sister. However, the will states that any estate taxes that may be owed are to come out of his residuary estate. My concern is that paying the estate taxes will likely deplete the residuary estate, leaving my sister and me with nothing.

THE QUESTION: Is there some way we can compel Mary to pay the estate tax from the funds she is receiving? It does not seem fair that we may be paying the taxes on the assets which she will be enjoying.

THE ANSWER: Since your father clearly intended for you and your sister to be beneficiaries of his estate, it appears that he may not have understood which of his assets would be considered in calculating his estate’s tax liability.

If, for example, your father and Mary were married at the time of his death, the value of the assets passing to Mary would be excluded from the value of the estate used to calculate the estate tax liability. That is because there is an unlimited marital deduction that applies when determining whether or not federal or New York state estate tax is due.

It is possible that your father believed the exclusion would apply based upon the fact that he and Mary were living together as husband and wife. Unfortunately for you and your sister, the taxing authorities do not see it that way.

Another possibility is that your father assumed that the death benefit from his life insurance policy would not be included in his gross estate for estate tax purposes. That is a common misconception that often leads to an unexpected tax liability.

Estate taxes are calculated based upon the value of all the assets owned or controlled by an individual at the time of death. Since your father could have changed the beneficiary listed on his life insurance policy up until the time of his death, he had “control” over the $2 million death benefit. For that reason, the value of the death benefit is included in his estate for purposes of calculating the estate tax owed.

It is noteworthy that some people actually buy life insurance so that the death benefit can be used to cover the estate taxes that may be assessed against their estates. By doing so, the decedent provides his beneficiaries with liquid assets that can be used to pay any estate taxes that are assessed against the estate. This, in turn, eliminates the possibility that the beneficiaries may need to sell estate assets just to pay the estate tax.

Even if your father was aware of how the estate tax would be calculated, he may not have realized that his will dictated that all of the taxes be paid from his residuary estate. If that fact had been explained to your father, he may have chosen to apportion the estate tax liability between all of the beneficiaries of his estate.

By apportioning the taxes that were due, Mary would be responsible for the taxes attributed to the value of the house, for example. That would have certainly decreased the amount of taxes being paid from the residuary estate earmarked for you and your sister.

In light of the fact that your father’s will does not provide for the apportionment of the estate, the full tax liability will be paid from the residuary estate unless Mary is willing to pay some or all of the estate tax assessed against your father’s estate. If she is not willing, there is nothing the executor of the estate can do but pay the taxes in accordance with the provisions of the will.

The amount of the estate tax due from your father’s estate will depend on when your father died since the exclusion amount on both the federal and New York state estate tax has been increasing annually for a number of years.

Since April, 2017, the exclusion amount for both federal and New York state estate tax exceeds $5.2 million. Even without apportionment, there is a chance that no estate tax will be due unless the value of your father’s estate exceeds the current exclusion amounts. If it does not, the full amount of the residuary estate will pass to you and your sister without any tax liability.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

By Linda Toga

THE FACTS: My house and most of my liquid assets are held in an irrevocable trust that I funded over five years ago. I am fortunate in that my income is sufficient to for me to live comfortably without using my savings.

THE QUESTION: If I do need to move into a nursing home down the road, how will Medicaid deal with my income when it comes to determining if I am eligible for benefits?

THE ANSWER: Since Medicaid is a needs-based program, your eligibility will be based on the value of your available assets, meaning assets that are not in your trust, and your income. Even if your assets are very limited, if your income is sufficient to cover the cost of a nursing home, you will not be eligible for assistance.

However, because there are some sources of income that are exempt under the Medicaid rules, determining eligibility is more involved than simply applying the same monthly income level across the board.

Medicaid looks at all of the income you receive, at the source of that income and at your medical expenses to determine your Net Available Monthly Income or NAMI. If your monthly medical expenses equal or exceed your NAMI, Medicaid will deem you “income eligible.”

In general, Medicaid will consider income from stocks and bonds, IRAs and other qualified plans, pensions and trusts when making a determination as to whether you are eligible to receive benefits.

Medicaid will not, however, include in your NAMI income from German and Austrian reparation plans, Nazi persecution funds, state crime victims’ assistance funds, Seneca Nation Settlement Act Funds, special payments to American Indians or payments from federal volunteer programs.

Medicaid also exempts funds received from a reverse mortgage as long as you use the funds during the month you receive them.

If you are single, you will be allowed to keep all the exempt income you may receive plus an additional $50/month in nonexempt income and funds to cover the cost of your supplemental medical insurance premiums.

If you are a veteran, you get to keep $90/month plus exempt income and the cost of supplemental medical insurance. NAMI in excess of $50 (or $90 for veterans) plus the cost of insurance premiums must be paid to the nursing home.

If you are married and your spouse is well and continues to live in the community (the “community spouse”), the amount of income you may keep is the same as for an unmarried individual. However, your spouse, as the community spouse, is allowed a monthly income of close to $3,000 to help cover living expenses. If your spouse’s income is too large, Medicaid will apply a percentage of his or her excess income to the cost of your care in the nursing home.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, probate, estate administration, litigation, wills, trusts, small business services and real estate from her East Setauket office.

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