Finance & Law

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Married couples often share everything. They can have joint assets including real estate, checking and savings accounts and brokerage accounts. However, there are assets that cannot be held in joint names. 

While a retirement account or life insurance policy can name the spouse as beneficiary, the owner is usually just one person. Therefore, if the nonowner spouse needs to contact the institution that holds the policy or account on behalf of their spouse, they will run into a roadblock if they do not have any legal authorization to do so. The mere fact that you are a spouse does not give you access to this information. 

It is for these types of assets that one spouse will need a power of attorney for another. This document states exactly what powers one person, the “principal,” is allowing another, the “agent,” to have over their affairs. If the power is not specifically included in the document, the agent cannot act on it. If the spouse is named as agent, it is often advisable to name a second and/or third person to act as successor agent if your spouse is unable to act. 

Beyond accessing certain assets, the power of attorney document can allow the agent to step into the shoes of the principal and act on his behalf in other instances. If the powers are properly granted, the agent can create and fund a trust for the principal, sign contracts, access safe deposit boxes, give charitable gifts, engage in Medicaid planning and so on.  

While signing a power of attorney in the presence of a lawyer is not a requirement, it is a good idea. The power of attorney document gives the option of attaching a contemporaneously signed statutory gifts rider. The document itself says that the preparation of the rider should be supervised by an attorney. In the rider, the principal is giving the agent authority to transfer assets out of the principal’s name. Any such transfers must be in the best interest of the principal.

The power of attorney is a complicated document that can have an extreme impact on your life as it is giving another person the ability to access your accounts and confidential information. This is an important document to have in the toolbox as one ages but only if you understand and feel comfortable with the powers being granted. For this reason, it is advisable to seek the counsel of an experienced elder law or estate planning attorney to explore the different scenarios in which your spouse may need to have power of attorney over your affairs.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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Linda Toga, Esq.

THE FACTS: My grandson Frank is disabled and will likely need medical and financial assistance as an adult. I would like to name Frank and my other grandchildren as beneficiaries in my will, but I am concerned that doing so may make Frank ineligible for government assistance programs. 

THE QUESTION: How can I leave Frank money without interfering with whatever government benefits he may be receiving at the time of my death? 

THE ANSWER: The best way to provide financial support to Frank without making him ineligible for needs-based government benefits like Medicaid and Section 8 housing assistance is to direct your executor to put Frank’s bequest in a supplement needs trust, (SNT). 

An SNT is designed so that the trustee can use trust assets to supplement the government benefits that the disabled beneficiary may be receiving. Trust assets can be used to enhance the life and well-being of the beneficiary. They cannot, however, be used to pay for goods and/or services provided to the beneficiary by the government. 

For example, the trustee may pay for a disabled beneficiary’s cellphone, car or vacation but cannot pay for medical treatment if the beneficiary is receiving Medicaid. Similarly, if the beneficiary’s housing costs are covered by a needs-based government program, the trustee can use the trust asset to furnish an apartment but cannot pay the rent. 

As mentioned above, in your will you can direct your executor to fund a testamentary SNT that will be administered by a trustee of your choosing. In the alternative, you can create and fund an SNT for Frank during your lifetime. One advantage of this approach is that other family members can then contribute to the SNT either directly or by a bequest in their own wills. In either case, Frank will benefit from your generosity because rather than his inheritance being used for necessities, the trust assets can be used for things that will enhance his life, make him more comfortable and make each day more enjoyable. 

To create an SNT, you should contact an attorney who has prepared trusts in the past and who has experience working with clients concerned about the future of their disabled beneficiaries. 

Linda M. Toga, Esq. provides legal services in the areas of estate planning and administration, real estate, small business services and litigation from her East Setauket office. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

If you are the beneficiary of an estate or trust and you think that the fiduciary or person in charge is not meeting their obligations, there are procedures in which they can be removed. Surrogate’s Court Procedure Act SCPA §719 lists several grounds upon which a fiduciary can be removed. The grounds are straightforward and include when the fiduciary refused to obey a court order, the fiduciary is a convicted felon, the fiduciary declared an incapacitated person or the fiduciary deposits assets in an account other than as fiduciary of the estate or trust. 

However, many situations are not as straightforward as the grounds listed in SCPA §719. While you may be working with a fiduciary that does not act in the manner that you wish, oftentimes, the conduct does not rise to the standard that would warrant their removal. 

 Courts have held that the removal of a fiduciary pursuant to SCPA §719 is equivalent to a judicial nullification of the testator’s choice and can only be done when the grounds set forth in the statutes have been clearly established. The court may remove a fiduciary without a hearing only when the misconduct is established by undisputed facts or concessions, when the fiduciary’s in-court conduct causes such facts to be within the court’s knowledge or when facts warranting amendment of letters are presented to the court during a related evidentiary proceeding. 

Pursuant to SCPA §711 a person interested may petition the court to remove the fiduciary. Some of the grounds listed in the statute include: the fiduciary wasted or improvidently managed property; the fiduciary willfully refused or without good cause neglected to obey any lawful direction of the court; or the fiduciary does not possess the necessary qualifications by reason of substance abuse, dishonesty, improvidence, want of understanding or who is otherwise unfit for the execution of the office. Again, while there are many cases where fiduciaries have behaved badly, courts are generally hesitant to remove fiduciaries unless the assets of the estate/trust are put at risk. 

Even though you may be unhappy with the conduct of a fiduciary, not every breach of duty will result in the removal of the fiduciary. Many breaches can be addressed in an accounting proceeding either through surcharge or denial of commissions. While a fiduciary can be removed if conduct that violates SCPA §711 or §719 can be proven, it is often a lengthy and expensive process that involves the exercise of discretion by a court that is hesitant to remove a fiduciary chosen by the testator. 

A proceeding to remove a fiduciary should only be undertaken if it can be proven that the assets of the estate/trust are in danger under the fiduciary’s control. Mere speculation or distrust will not be enough to remove a fiduciary. If you believe that the fiduciary of an estate or trust is not managing the estate or trust properly, you should consult with an attorney experienced in estate administration matters that can review the facts and determine the best course of action. 

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office. 

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By Linda Toga, Esq.

Linda Toga, Esq.

THE FACTS: My brother Joe died recently. At the time of his death, Joe was living in a house that has been in the family for generations. When my father died, Joe inherited the house. It was understood that he would eventually pass it on to me, his only surviving sibling, or to his children so that it would remain in the family. Instead, Joe has left the house to a woman with whom he has been living for the past five years. She has no relationship with the family.

THE QUESTION: Can Joe’s children and I contest the will to prevent the house from passing to a nonfamily member?

THE ANSWER: Whether a person can object to the probate of a will depends on two factors: whether the person has standing (the legal right to object to the probate of the will) and whether the person has a legal basis for objecting. 

A person has standing to object to a will only if the person would inherit from the estate if there was no will. That, in turn, depends on the relationship between the person and the decedent and whether there are people alive whose relationship with the decedent takes priority. 

The intestacy statute, which governs how an estate is distributed when a person dies without a will, sets forth the classes of people who are in line to inherit in their order of priority. Since Joe’s children are alive and have priority over you under the statute, they have standing to object to the probate of the will but you do not.

As for a basis for objecting to probate, there are three grounds for challenging the validity of a will. They are improper execution of the will, undue influence over the testator and lack of testamentary capacity. 

If the execution of the will was supervised by an attorney, there is a presumption that the required formalities were followed. However, if the will was not signed by the testator in the proper place in the presence of suitable witnesses who were advised that they were witnessing the execution of a will, that presumption can be rebutted. The issue of improper execution is more common when there is no supervising attorney present when the will is signed. 

Unlike improper execution, the other grounds for challenging the validity of a will, undue influence and lack of capacity, both address the mental fitness of the testator. Undue influence may exist when the testator is easily manipulated or persuaded by someone who pressures the testator to make certain bequests. 

Lack of testamentary capacity may be established with proof that the testator was notably confused about and/or unaware of what he owned, who his relatives might be and/or the consequences of the bequests made in his will. Both undue influence and incapacity are difficult to prove, especially if years have passed between when the will was executed and when it is offered for probate. 

If Joe’s children suspect that any of the grounds for a will contest that are discussed above exist, they should consult with an attorney with experience in estate litigation. The attorney should be able to evaluate the situation and give them some sense of whether they should proceed with a will contest. 

Linda M. Toga, Esq. provides legal services in the areas of estate planning and administration, real estate, small business services and litigation from her East Setauket office. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

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Nancy Burner, Esq.

By Nancy Burner, Esq.

Losing a spouse is an extremely difficult time in life and handling the administration of their estate can be a stressful experience. When you are ready, it is important to seek the advice of an estate planning and elder law attorney to discuss what needs to be done on behalf of your spouse’s estate and also what planning you need to do for your own estate.

Your attorney will want to review all assets held by your spouse, whether individually or jointly with you, and all assets in your name. It is also important to review any previous estate planning documents you may have in place, such as last will and testaments, trusts, powers of attorney and health care directives. A thorough review of the assets and estate planning documents will help your attorney advise you on what additional planning, if any, needs to be done.

If your spouse was the owner of an IRA or other tax deferred retirement account, you are likely named as the primary beneficiary on the account. You will want to ensure that you roll over this account into an IRA account in your name. It will also be necessary for you to put your sole name on any accounts that are held jointly with you and your spouse or that name you as transfer on death beneficiary.

Furthermore, it is important you update the beneficiaries under these accounts where appropriate, especially if your spouse was previously listed as your primary beneficiary. 

You will need to go through a court process to gain control of assets held in your spouse’s sole name without a beneficiary.  The court proceeding is called “probate” if your spouse had a last will and testament or “administration” if your spouse died without a last will and testament. New York State law provides a scheme for the distribution of assets in the case of a person that did not execute a last will and testament.

If your spouse had children, you and the children will share in the assets of the administration estate. There are also certain rights that a surviving spouse has to assets of the estate about which your attorney can advise you.

Lastly, a review of your current estate planning documents will help determine if updates to your plan are required. For example, you will likely need to change your agents listed under your power of attorney and health care proxy if each document listed your spouse as agent.

Additional changes to your will and/or trust may be required if there are changes to the tax law, your family structure or personal health status, such as a need for long-term care.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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Linda Toga, Esq.

THE FACTS: I have been estranged from my family for many years. I want to be sure that family members are not able to inherit from my estate

THE QUESTION: Is that possible?

THE ANSWER: While you cannot disinherit your spouse, you can certainly take steps to prevent your siblings, children, cousins and other blood relatives from getting a share of your estate. However, keep in mind that even if they are not successful in inheriting from your estate, certain relatives can try to recover against your estate if you do not plan properly. Defeating claims against your estate could be time consuming and costly.

HOW IT WORKS:

You did not mention whether you were married and, if so, whether you were estranged from your spouse as well as from other family members. If you do have a spouse, she will be entitled to a share of your estate upon your death regardless of what you may do with your assets.

Spouses have a statutory right of election that entitles the surviving spouse to one-third of most of their deceased spouses’ assets, even if those assets are jointly held or are in a trust. Getting a divorce or getting your spouse to waive her spousal rights are the only options you have for defeating any claim she may make against your estate.

As for other family members, you can ensure that they do not get a share of your estate if you transfer all of our assets into a trust. Unlike a will that is subject to court oversight upon your death, a trust is generally free of such oversight. In most cases, people who are not named as beneficiaries in the trust are not even required to be given notice of the grantor’s death. That means that trust assets can be distributed without notice to your family.

If you do not want to transfer assets into a trust, you can execute a will that explicitly states that you do not want the family members identified in the will to share in your estate.

While some people believe leaving a nominal amount of money to the people they do not want to inherit will convince them not to contest their will, that strategy rarely works. If someone would be entitled to $50,000 if a will was denied probate, it is unlikely that they will accept $10 to simply walk away.

It is important to note that only certain family members have the right to contest a will. If you have children, for example, they could contest your will because, if you died without a will, they would be in line to inherit.

In that case, your siblings could not contest your will because your children have priority. Your siblings could only contest your will if you die without a spouse, parents or children. When deciding how to proceed with your estate plan, it will be helpful to understand the circumstances under which certain family members can try to recover against your estate.

If you are serious about protecting your estate from your family, you should consult with an experienced estate planning attorney. Working with an attorney who regularly deals with the issue of estranged family members is the best way to ensure that your estate plan will meet your needs.

Linda M. Toga, Esq. provides legal services in the areas of estate planning, real estate, small business services and litigation from her East Setauket office. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

When planning for the differently abled, the use of supplemental needs trusts as part of your estate planning will ensure that you have provided protections for those with special needs and disabilities.

When considering your estate planning, it is important to consider any beneficiaries who may have special needs or disabilities. Receiving an outright inheritance could negatively affect these individuals, as oftentimes they are entitled to, and receive, need-based government benefits such as SSI, Medicaid and Group Housing, to name a few, which either supplement or fully cover the living and medical expenses of the individual.

Safeguarding these benefits by using supplemental needs trusts rather than an outright distribution can ensure that you can leave funds to a loved one who has special needs without the risk of interfering with their government benefits.

Supplemental needs trusts can be established as “first-party” or “third-party trusts.” This article highlights third-party supplemental needs trusts which are, simply stated, trusts funded with the assets of a third-party, anyone other than the differently abled individual.

To understand the difference, first-party trusts are funded with the assets or income of the differently abled person and are often used to safeguard benefits after the individual receives an inheritance or some other windfall. First-party supplemental needs trusts are also often used to protect money that was in the name of the individual at the onset of a disability. 

First-party supplemental needs trusts are available to persons under the age of 65, and thanks to recent legislation, can be created by the individual him or herself, a parent, guardian or through the court. Although a terrific planning tool, when possible it is preferable to address these planning needs ahead of time to ensure no interruption of benefits and a maximum preservation of assets. 

The first-party trust requires a payback provision which dictates that any monies that remain in the trust at the time of the individual’s death must be paid to the state in an amount equal to the medical assistance paid on behalf of the individual. 

Third-party supplemental needs trusts can either stand alone or be incorporated into your estate planning. These trusts can be created by anyone for the benefit of the disabled individual. They can be funded upon creation or can be prepared with the idea of funding at the time of the death of the creator.

The assets in the trust can be used to provide the individual with comforts they would otherwise not be able to afford. Because these trusts are set up with the fund of a third party, unlike the first-party supplemental needs trusts, they do not have a payback provision.

Upon the death of the original beneficiary of the trust, whatever assets remain in the trust can be distributed in accordance with the grantor’s wishes. By leaving assets in a supplemental needs trust, you would be able to provide for your loved one and ensure the continuation of imperative benefit on which he or she relies.

It is important to note that funds between a first-party trust and a third-party trust should never be co-mingled. Specifically, if monies which originated with the disabled individual go into a third-party trust, the protections afforded to third-party trusts (i.e., no payback provision) may extinguish and a payback could be required. 

Overall, supplemental needs trusts are invaluable for planning for those differently abled. The trusts can enhance the quality of life for the person and supplement the benefits he or she is already receiving.

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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By Linda Toga, Esq.

Linda Toga, Esq.

THE FACTS: When I was 3, my parents adopted a baby and named her Mary. My mother died seven years later and my father remarried. My father and his second wife had two children together. My father recently died without a will. My half-siblings insist that since Mary is not my father’s biological child, she is not entitled to a share of his estate. 

THE QUESTION: Are they correct? 

THE ANSWER: Fortunately for Mary, your half-siblings are wrong. 

HOW IT WORKS: If your father legally adopted Mary, she has the same right to a share of your father’s estate as you and your father’s other biological children. The law in New York is quite clear on that point. 

Section 7(c) of the New York intestacy statute governs how an estate is distributed when someone dies without a will. It states that “the right of an adopted child to take a distributive share … continue[s] as provided in the domestic relations law.” 

Domestic Relations Law Section 117 explicitly states that “[t]he adoptive parents or parent and the adoptive child shall sustain toward each other the legal relation of parent and child and shall have all the rights and be subject to all the duties of that relation including the rights of inheritance from and through each other …”

In other words, the relationship between Mary and your father is legally the same as the relationship between you and your father and the relationship between your half-siblings and your father. As such, she is entitled to the same percentage of his estate as any of his biological children. 

In addition, if Mary had predeceased your father and had children of her own, her children would be entitled to share the inheritance that would have otherwise passed to Mary. 

It is worth noting that Domestic Relations Law Section 117 not only sets forth the rights of the adoptive child but also the rights of the adoptive parent. If Mary had predeceased your father without a spouse or children of her own, your father, as her adoptive parent, would be entitled to her entire estate. 

If you are going to be petitioning the Surrogate’s Court for letters of administration so you can handle your father’s estate, you should consult with an experienced estate attorney to ensure that the administration process is handled properly and proceeds smoothly despite the position taken by your half-siblings.   

Linda M. Toga, Esq. provides legal services in the areas of estate planning, real estate, small business services and litigation from her East Setauket office. Visit her website at www.lmtogalaw.com or call 631-444-5605 to schedule a free consultation.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Commonly, clients will create a trust to protect certain assets in case they need to apply for government benefits as they get older and require assistance with their daily activities. While certain provisions of this type of trust will be consistent from client to client, not all trusts are the same. Understanding your trust is the first step to successfully achieving your estate planning goals. 

The drafting process of the trust document is vital because it outlines the rules of the trust. Without understanding these rules, the creator of the trust or the trustee may be in jeopardy of making the trust assets available when they are assessed for Medicaid eligibility.  

The irrevocable trust for Medicaid purposes will state who the creator of the trust is and who is appointed by that person to serve as trustee of the trust. The document should also include a provision stating that the creator of the trust will not have access to any trust principal. 

Beyond that, multiple decisions need to be made by the client, in consultation with their attorney. These decisions will include whether or not the creator will have access to income generated from the trust, who will be able to remove a trustee or appoint a successor trustee, if the creator can change the beneficiaries of the trust and other critical points for the operations of the trust during the creator’s lifetime and after death.  

Part of the rules of the trust will include the distribution at the death of the creator. The trust says who will receive the assets at that time and how they will receive those assets. The distributions may be outright or in a further trust to protect the beneficiary from creditors or from losing government benefits they are receiving.  

If there is real property owned by the trust, the document could also direct who may live there before and after death, who is responsible for the costs associated with the property and whether it should be sold upon the death of the creator.  

Once the document is signed by the creator and the trustee(s), the next important step is to fund the trust. This means changing the ownership or title of certain assets to the name of the trust. It will make sense for a financial adviser and accountant, if you have either, to be aware of your trust and which assets you have placed into it. These advisers can work with you and your attorney to determine which assets to transfer into the trust and which to keep in your individual name. 

Trusts are often funded with real property, bank accounts, investment accounts and savings bonds. All assets that are transferred into the trust are then managed by the named trustee. This trustee can sell the assets in the trust, collect rents or any other income and reinvest the assets in alternative ways. The precise powers that the trustee holds are dictated by the trust document.  

A trust is a live entity that owns property and assets. It should be reviewed regularly, at least every five years, to make sure the trust rules are being followed and the trust continues to achieve your estate planning goals. Your trusted estate planning and elder law adviser should review these documents with you.  

Nancy Burner, Esq. practices elder law and estate planning from her East Setauket office.

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Linda Toga, Esq.

By Linda M. Toga, Esq.

THE FACTS: I am a widow with modest assets and a small IRA. I have two grown children and two young grandchildren. My friends have been urging me to see an attorney about developing an estate plan.

THE QUESTION: Considering the size of my estate, is that really necessary? 

THE ANSWER: The short answer to your question is a resounding “Yes.” Estate planning is not just for the wealthy and is not limited to the preparation of a will. Estate planning touches on everything from wills, trusts and powers of attorney to health care proxies, living wills and spousal waivers. Even if you just want a will, there are countless issues that you should discuss with an experienced estate planning attorney to ensure that your will accurately reflects your wishes and takes into account your specific circumstances. 

The reason professional help is advisable is that, for the most part, people don’t know what they don’t know. In other words, a person can fill out a form will and sign it but, if she doesn’t know what questions to ask or what issues should be considered, she likely won’t know the adverse consequences of her uninformed choices. The end result is an estate plan that does not reflect the goals and wishes of the person, or worse, one that leads to protracted litigation. 

To avoid that, you should discuss with an attorney how your assets are titled and whether all of your assets will pass under your will. Assets that are jointly owned with someone else or that are subject to a beneficiary designation are nonprobate assets and will not pass under your will. How such assets are going to be distributed should be taken into consideration when developing an estate plan.  

You should also discuss with your attorney whether or not your probate assets will be passed in equal shares to your children. One question that needs to be addressed is whether you want your executor to take into consideration nonprobate assets that may pass to your children or loans that you may have given your children when determining the amount of their share. Another is how you want your estate to be divided in the event one of your children predeceases you. 

If you want the share allocated to a predeceased child to pass to his/her children, you should discuss with your attorney the option of including a trust in the will to protect the assets passing to the minor grandchildren.

Although both of your children would have equal rights to be named administrator of your estate if you were to die without a will, you should discuss with your attorney what is involved in the probate of your will and the administration of your estate. If your children do not both live locally, it may be burdensome to have them serve as co-executors. Or perhaps they don’t get along and naming a third party to handle your estate would be advantageous. Discussing these issues is an important part of developing even the most basic estate plan. 

As mentioned above, as part of your estate planning you should also discuss with an attorney the benefits of having a power of attorney, health care proxy and living will in place. Each of these documents plays an important role in an estate plan by either ensuring that your affairs are taken care of in the event you lack capacity or by making your wishes known with respect to medical treatment and end-of-life care.

Your attorney can advise you as to the duties and responsibilities of the agents named in a power of attorney and health care proxy. This will allow you to consider possible agents in light of the roles they would assume if named. Discussing this with your estate planning attorney will enable you to make informed choices. If you don’t engage in the process, you are essentially forfeiting the right to choose who will assist with the management of your assets while you are alive and who may be called upon to make life and death medical decisions on your behalf. When asked, most people admit that they want to be the one to choose. 

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