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Authors Posts by Nancy Burner Esq., CELA

Nancy Burner Esq., CELA

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By Nancy Burner, ESQ.

Nancy Burner, Esq.

Being hyperfocused on avoiding probate can be an estate planning disaster. First, what exactly is “probate”? Probate is the legal process whereby a last will and testament is determined by the court to be authentic and valid. The court will then “admit” the will to probate and issue “letters testamentary” to the executor so that the executor can carry out the decedent’s intentions in accordance with the last will and testament.

That usually involves paying all funeral bills, administrative expenses, debts, settling all claims, paying any specific bequests and paying out the balance to the named beneficiary or beneficiaries. Avoiding probate can be accomplished by creating a trust to hold your assets during your lifetime and then distributing the assets at your death in the same manner and sequence as an executor would if your assets passed through probate.

Typically, this would be accomplished by creating a revocable trust and transferring all nonretirement assets to the trust during your lifetime, thereby avoiding probate at your death. Retirement assets like 403Bs, IRAs and nonqualified annuities are not transferred to revocable trusts as they have their own rules and should transfer after death by virtue of a beneficiary designation.

Retirement assets should not be subject to probate. The designation of a beneficiary is vital to avoid costly income taxes if retirement assets name the estate or default to the estate. The takeaway here is that you should make sure that you have named primary and contingent beneficiaries on your retirement assets.

If you name a trust for an individual, you must discuss that with a competent professional that can advise you if the trust can accept retirement assets without causing adverse income tax consequences. Not all trusts are the same.

Avoiding probate can be a disaster if it is not done as part of a comprehensive plan, even for the smallest estate. For example, consider this case: Decedent dies with two bank accounts, each naming her grandchildren on the account. This is called a Totten trust account. Those accounts each have $25,000. She has a small IRA of $50,000 that also names the grandchildren as beneficiaries. She owns no real estate. Sounds simple, right?

The problem is that the grandchildren are not 18 years of age. The parents cannot collect the money for the children because they are not guardians of the property for their minor children. Before the money can be collected, the parents must commence a proceeding in Surrogates Court to be appointed guardians of the property for each child. After time, money and expenses, and assuming the parents are appointed, they can collect the money as guardian and open a bank account for each child, to be turned over to them at age 18. The IRA would have to be liquidated, it could not remain an IRA and the income taxes will have to be paid on the distribution.

I do not know of a worse scenario for most 18-year-old children to inherit $50,000 when they may be applying for college and seeking financial aid, or worse, when deciding not to go to college and are free to squander it however they want.

If the grandparent had created an estate plan that created trusts for the benefit of the grandchild, then the trusts could have been named as the beneficiaries of the accounts and the entire debacle could have been avoided. The point is that while there are cases where naming individuals as beneficiaries is entirely appropriate, there are also times that naming a trust as beneficiary is the less costly option, and neither should be done without a plan in mind.

When clients have a large amount of assets and large retirement plans, the result can be even more disastrous. Consider the case where a $500,000 IRA names a child as a direct beneficiary. If a properly drawn trust for the benefit of the child was named as beneficiary, there would be no guardianship proceeding and the entire IRA could be preserved and payments spread out over the child’s life expectancy, amounting to millions of dollars in benefits to that child over their lifetime. If payable directly to the child, there will be guardianship fees and the $500,000 will likely be cashed in, income taxes paid and the balance put in a bank account accruing little interest and payable on the 18th birthday of the beneficiary.

The concern is that individuals are encouraged to avoid probate by merely naming beneficiaries but with no understanding of the consequences. At a time when the largest growing segment of the population is over 90, it does not take long to figure out that the likely beneficiaries will be in their 60s, 70s or older when they inherit an asset.

Thought must be given to protecting those beneficiaries from creditors, divorcing spouses (one out of two marriages end in divorce) and the catastrophic costs of long-term care. Whether the estate is large or small, most decedents want to protect their heirs. A well-drafted beneficiary trust can accomplish that goal.

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

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By Nancy Burner, ESQ.

Nancy Burner, Esq.

As you may know, Medicare will pay for a patient to receive rehabilitation in a facility if they have a qualifying stay in a hospital: being admitted to the hospital for two nights. The first 20 days of rehabilitation are completely covered by Medicare. The 21st through the 100th day will have a co-payment of $161 per day. This co-payment may be covered by a Medicare supplemental plan.

However, it is important to note that while there is a potential to receive 100 days of rehabilitation, it may be determined that rehabilitation is no longer needed and the discharge will be set up.

The facility is required to give written notice that they believe Medicare will no longer cover the patient. This comes as a “Notice of Medicare Non-Coverage.” This notice gives the patient the right to appeal the decision. In order to make an effective appeal, it is important to know the appropriate standard that the law requires the facility use in making a determination.

That standard was inconsistent with Medicare regulations. The true standard is whether the patient needs the rehabilitation to maintain activities of daily living.

In 2011, a federal court case was decided on this issue. In that case, Medicare skilled nursing service recipients challenged the failure to improve the standard. The settlement agreement by the parties rejected the failure to improve the standard and stipulates that the standard for terminating services is not whether the patient’s condition is likely to improve but rather whether the condition will worsen if services are terminated.

Therefore, skilled services should be continued so long as skilled therapies are needed to maintain the patient’s ability to perform routine activities of daily living or to prevent deterioration of the patient’s condition. This represents the current legal standard for denying skilled nursing coverage under Medicare.

Even though this issue was settled by the courts years ago, many patients are finding it is not being followed by facilities. It is important for the patient and their advocates to know the proper standard so they can make an appropriate appeal.

On Feb. 2, 2017, a new federal court decision stated that the standard is established but it is not being adhered to by facilities. The decision is forcing an educational campaign to be enacted so professionals at facilities and individual Medicare recipients are aware of the appropriate regulations. The plan will include a Centers for Medicare and Medicaid Services website dedicated to this issue and the explanation of the appropriate standard.

Receiving the maximum amount of rehabilitation days possible is the right of all Medicare recipients.

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

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By Nancy Burner, ESQ.

Nancy Burner, Esq.

For many, the question of how to best care for our aging loved ones becomes a reality sooner than we think. Most people, when given the option, would prefer to age in place, remain in their homes for as long as possible receiving the care services they need in a familiar setting surrounded by family. For many, the Community-Based Long-Term Care Program, commonly referred to as Community Medicaid, makes that an affordable and therefore viable option.

Oftentimes we meet with families who are under the impression that they will not qualify for these services through the Medicaid program due to their income and assets. In most cases, that is not the case. Although an applicant for Community Medicaid must meet the necessary income and assets levels, it is important to note that there is no “look back” for Community Medicaid. What this means is that for most people, with minimal planning, both the income and asset requirements can be met with a minimal waiting period, allowing families to mitigate the cost of caring for their loved ones at home.

An individual who is applying for Medicaid Home Care may have no more than $14,850 in nonretirement liquid assets. Retirement assets will not be counted as a resource so long as the applicant is receiving monthly distributions from the account. An irrevocable prepaid burial fund is also an exempt resource. The primary residence is an exempt asset during the lifetime of the Medicaid recipient; however, if the applicant owns a home, it is advisable to consider additional estate planning to ensure that the home will be protected once the Medicaid recipient passes away.

With respect to income, a single applicant for Medicaid is permitted to keep $825 per month in income plus a $20 disregard. However, if the applicant has income that exceeds that $845 threshold, a pooled income trust can be established to preserve the applicant’s excess income and direct it to a fund where it can be used to pay his or her household bills.

These pooled trusts are created by not-for-profit agencies and are a terrific way for persons to take advantage of the many services available through Medicaid Home Care while still preserving their income for use in meeting their monthly expenses.

Functionally, the way that these trusts work is that the applicant sends a check to the fund monthly for that amount that exceeds the allowable limit. Together with the check, the applicant submits household bills equal to the amount sent to the trust fund. The trust deducts a small monthly fee for servicing these payments and then, on behalf of the applicant, pays those household bills.

As you can see, this process allows the applicant to continue relying on his monthly income to pay his bills and, at the same time, reduce his countable income amount to the amount that is permitted under the Medicaid rules. An individual who is looking for coverage for the cost of a home health aide must be able to show that they require assistance with their activities of daily living. Some examples of activities of daily living include dressing, bathing, toileting, ambulating and feeding. In fact, where the need is established, the Medicaid program can provide care for up to 24 hours per day, seven days per week.

The Community-Based Medicaid Program is an invaluable program for many seniors who wish to age in place but are unable to do so without some level of assistance.

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

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By Nancy Burner, ESQ.

In terrorem is a term derived from Latin that translates to “in fear.” An in terrorem provision in a decedent’s last will and testament “threatens” that if a beneficiary challenges the will then the challenging beneficiary will be disinherited (or given a specified dollar amount) instead of inheriting the full gift provided for in the will.

Nancy Burner, ESQ
Nancy Burner, ESQ

An in terrorem clause is intended to discourage beneficiaries from contesting the will after the testator’s death. New York State law recognizes in terrorem clauses; however, they are strictly construed. An example of an in terrorem clause might read as follows: “If any person shall at any time commence a proceeding to have this will set aside or declared invalid or to contest any part or all of the provisions included in this will they shall forfeit any interest in my estate.”

There are, however, some limits on in terrorem clauses in the interest of preventing fraud, undue influence, or gross injustice. These statutory “safe harbor provisions” allow a beneficiary to inquire into the circumstances surrounding the drafting of a will without risking forfeiture of any bequest. Since, as discussed above, New York State courts strictly construe in terrorem clauses, these safe harbor challenges are a means by which a beneficiary can evaluate the risk of contesting the will. In relevant part, the statute provides for the preliminary examination of (i) the testator’s witnesses, (ii) the person who prepared the will, (iii) the nominated executors and (iv) the proponents in a probate proceeding.

These persons “may be examined as to all relevant matters which may be the basis of objections to the probate of the propounded instrument.” If the beneficiary challenges the will and the will is found to be invalid due to lack of mental capacity, undue influence or failure to have the will properly executed, then the in terrorem clause also fails. It is important to note that a beneficiary may present a petition to the court, prior to the will being admitted to probate and before formal objections have been filed, seeking a determination as to the construction or effect of the in terrorem clause of the will. The basic principle of construction is that the decedent’s intent, as expressed from a reading of the relevant provision of the will under the circumstances under which it was drawn, is to be given effect by the courts.

Keep in mind that simply having an in terrorem clause in your will may not be enough to dissuade beneficiaries from potentially challenging your will. Theoretically, however, for an in terrorem clause to have any weight at all, a beneficiary under a will must be left a substantial amount to incentivize their compliance with the will. An in terrorem clause may have no effect on a beneficiary who was not left anything under a will as they risk losing nothing by challenging the will. While in terrorem clauses may be effective in minimizing a will contest, for some it holds no power. It is important to discuss your estate plan and your wishes regarding the ultimate disposition of your assets with an experienced estate attorney to determine the proper provisions to include in your will.

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

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By Nancy Burner, ESQ.

Nancy Burner, Esq.
Nancy Burner, Esq.

While the best elder law and estate plan is to have a valid health care proxy naming agents and a valid durable power of attorney naming an agent to make financial decisions, not everyone has done the proper planning.

It is not uncommon for an elderly person to fall ill, be hospitalized and then need nursing home care with no time to plan. If there are no advance directives in place, a guardianship proceeding under Article 81 of the Mental Hygiene Law may be required.

In an Article 81 proceeding the court will making a finding that a person is in need of a guardian and has the ability to consent or the court will determine that the person lacks capacity to understand and consent. In either case, a guardian will be appointed to protect the person and/or property of the individual. It is in this context that we often request that the court will allow the guardian the opportunity to formulate a Medicaid plan to protect assets, if possible.

The court utilizes “the doctrine of substituted judgment” when permitting the guardian to create a Medicaid plan. There must be clear and convincing evidence that a competent, reasonable person in the position of the incapacitated person would adopt such a plan.

The approved Medicaid plan could include an exempt transfer of the family home to a spouse, minor, blind or disabled child, an adult sibling who resides in the home for at least one year and has an “ownership” interests in the property or a caretaker child that has lived with the parent for two or more years and has cared for the parent.

Assets, other than the homestead, could be transferred to a spouse or a disabled child. The court has also approved Medicaid plans where there are transfers of assets that create periods of ineligibility provided there is a promissory note transaction or other assets, like individual retirement accounts to pay for any period of ineligibility.

Of course, this type of emergency planning is done all the time by competent individuals or their duly appointed agents. In this case, the court would be giving the guardian the same powers if adequate proof is submitted on the application to approve a Medicaid plan. Typically, the court would not allow guardians to this type of Medicaid planning, until a challenge was brought alleging that among other things, incapacitated persons were not afforded the same rights as people without disabilities.

In an important decision, the highest court in New York State, in the Matter of Shah, held that: “No agency of the government has any right to complain about the fact that middle class people confronted with desperate circumstances choose voluntarily to inflict poverty on themselves when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of costs of ruinously expensive, but absolutely essential, medical treatment.” As a result of this case, the guardianship judges in New York State started to approve Medicaid planning by guardians. This has been an important case for individuals who have failed to plan in advance of their incapacity.

There are also instances where an individual is in a nursing facility that could cost anywhere from $10,000 to $18,500 per month and they still have assets in excess of the permitted amount but are unable to make the transfers. Under a New York State Department of Health administrative directive, the incapacitated person would be immediately eligible for Medicaid as the assets would be deemed unavailable. The person would get Medicaid without any review of their assets, even though they have assets well in excess of the Medicaid limits. This often occurs when an individual is in a nursing home and receiving care and there is no one to access his or her funds. If the nursing home makes an application for a guardian to be appointed, the nursing home can immediately apply for Medicaid as well. This is a useful and necessary tool for nursing homes that frequently suffer the economic effects of residents that cannot pay and due to incapacity cannot cooperate in making an application to the Department of Social Services for Medicaid reimbursement.

While this option is available, it is far better for individuals to be prepared and take the time to execute a power of attorney and a health care proxy. Guardianship cases are legal proceedings that are expensive and can become contentious between family members. In addition, the individual is at the mercy of the court to determine what their wishes would have been using the doctrine of substituted judgment. It is far better to be proactive and choose your own plan and the agents to implement it.

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

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By Nancy Burner, Esq.

In December 2014 the federal government passed a law known as the Achieving a Better Life Experience Act, also known as the ABLE Act. This law allows family members of a disabled person to create an account that is exempt from federal income tax to be used for certain “qualified expenses” related to the person’s disability. This act is created under the same provisions of the tax code as 529 plans for college savings although they have different rules governing the plans.

Unlike the college savings plans, the beneficiary of the New York ABLE Act accounts must have been deemed disabled prior to 26 years old. If a beneficiary is entitled to Supplemental Security Income (SSI) or Social Security Disability Income (SSDI), they are automatically eligible. However, if they are not entitled to these sources of income, there are other methods of proving disability that will establish eligibility. The account can be created by any person, and the owner can be the beneficiary or their parent, legal guardian or representative of that beneficiary.

However, it is important to note that there is a maximum contribution of $14,000 annually, the federal gift tax exemption amount. Each beneficiary can only have one ABLE account created for their benefit. This could create an unintended tax liability if there is no coordination among the persons that wish to contribute to the account. ABLE accounts are meant to supplement the government benefits that a disabled person is receiving. In New York, ABLE account funds are not counted as a resource at all for Medicaid eligibility for the disable beneficiary of the account. For an individual who is receiving SSI, the account is not considered a resource as long as it is below $100,000.

The benefit of having an account like this is that the disabled individual can access the account on their own without requesting a distribution from a trustee as they would have to do with a supplemental needs trust. The accounts can be used to pay for “qualified expenses,” including but not limited to education, transportation, training, legal fees, etc. The expense must be one that is related to the person’s disability and provides them with a resource that will improve their health, independence or quality of life. If the funds are misappropriated to an expense that does not fall into this category, there is a 10 percent penalty and the full amount of the nonqualified expense will be deemed an available asset for Medicaid or SSI eligibility purposes.

Upon the death of the account beneficiary, there is a payback to the Medicaid program for services rendered. This payback includes services to the beneficiary starting on the date the account was created. If a beneficiary received services for 20 years before the account was created, there is no payback to Medicaid for the prior 20 years of services.

The ABLE Act provides a new and creative vehicle for disabled persons to have access to additional assets while maintaining their government benefits. However, these accounts are, in most cases, a supplement to traditional planning for persons with disabilities. If a beneficiary has multiple persons that wish to leave assets to them that may exceed $14,000 per year in contributions or $100,000 in total, a supplemental needs trust will be more beneficial than the ABLE account. Money that is contributed to a disabled person from a third party can go into a trust that does not require payback to the Medicaid program. If funds are given outright to the disabled person who subsequently places it into a trust, this is considered a first-party supplemental needs trust and it also requires a payback to Medicaid.

New York State signed the ABLE Act into law in December 2015. However, these accounts are not yet available to New York State residents. While the state says they may be available at the end of 2016, there is no set date for the program launch.

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

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By Nancy Burner, ESQ.

It is not unusual for a client to contact me and ask to review their estate plan. This may be precipitated by a recent diagnosis or simply by the passage of time. I have a checklist that I use when reviewing an estate plan if they have a taxable estate. Under federal law, a taxable estate in 2016 is any estate over $5.45 million and in New York State any estate over $4,187,500.

• The annual gift tax exclusion is $14,000, which means the client can make annual gifts of $14,000 to any individual. The gift must be completed before the donor dies; therefore, the check must not only be delivered but also cashed before the donor’s death. High basis assets such as cash are excellent lifetime gifts. The donee takes the tax basis of the lifetime gifted asset; but assets in the estate receive a “step-up” in basis. Therefore, it is best to leave the highly appreciated real estate or Apple stock in the estate.

• The client could also pay any medical or educational expenses for any individual. The payments must be made directly to the institution or the medical provider. The college or university will even allow the tuition to be prepaid for the entire four years. The payment must be irrevocable and made to a qualified educational organization.

• It may also be prudent to make taxable gifts before the client dies if the estate exceeds the federal gift tax exemption amount. While the gift tax on lifetime gifts is 40 percent and the estate tax is also 40 percent, a gift during life is tax exclusive while the estate tax is tax on the entire estate and is therefore tax inclusive.

For example, if a parent gives a child $1 million as a lifetime gift, using the 40 percent federal marginal tax rate, the gift tax would be $400,000 ($1,000,000 times 40 percent). The child receives $1 million and the parent pays gift tax of $400,000. It costs $400,000 to gift $1 million. If the parent does not make the lifetime gift, the estate tax on the $1 million gift would be $666,667 even though the rate is the same 40 percent. It costs $266,667 more to make the same gift because the entire estate is taxed before the $1 million goes to the child ($1,666,667 times 40 percent is $666,667 taxes and $1 million bequest). If the gift is made within 3 years of death, it comes back into the estate for estate tax purposes.

• The three-year rule is important with respect to New York State estate taxes as well. Any gifts made more than three years before the decedent’s death will not be included in the estate and will not reduce the New York State exemption amount available at death. So, for example, if a client had a $5,187,500 estate in 2013 and gifts $1 million to his beneficiary more than three years before his death, the $1 million gift would not reduce his New York State exemption of $4,187,500.

• New York also has a “cliff.” What this means is if a decedent’s estate exceeds the exemption by more than 5 percent, then the estate does not benefit from the exemption and the entire estate would be subject to New York State estate tax. The strategy would be to reduce the estate below that cliff so that the entire estate would not be subject to New York State estate tax. For example, if Mom dies on April 30, 2016, with a taxable estate of $4.3 million, the New York State estate tax would be $216,959. If she made a lifetime charitable gift of $112,500, the estate would have been reduced to $4,187,500 and the estate would save $216,959 in estate tax.

• In situations where the client has done sophisticated estate planning such as sales to defective grantor trusts, I advise the client to pay off the note prior to death. This makes the estate simpler and may avoid challenges by the IRS claiming that the sale and promissory note transaction was a transfer with a retained interest. Better to pay off the loan and avoid the challenge.

• Of course, whether there is a taxable estate or not, I always ask clients to review the named fiduciaries in the estate and make sure that they have chosen the best people for the job. Circumstances may have changed and it does not hurt to revisit their choices. • If the clients have revocable trusts, this is also a good time to make sure that the assets have been transferred to the trust and all retirement funds have named beneficiaries. Clients should make sure that they have copies of all beneficiary forms as the onus will be on the beneficiary to prove that they are a named designated beneficiary if the designation is somehow lost.

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

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By Nancy Burner, Esq.

In my practice as an elder law attorney, clients often inquire about the benefits of gifting to reduce taxes or to qualify for Medicaid. As a senior with the unexpected need for long-term care in the future, the consequences of gifting may have unexpected results.

It is a common myth that everyone should be gifting monies during their life to avoid taxation later. Currently, a person can give away during life or die with $5.45 million before any federal estate tax is due. For married couples, this means that so long as your estate is less than $10.9 million, federal estate taxes are not a problem. For New York State estate tax, the current exemption is $4.1875 million and is currently slated to reach the federal estate tax exemption by 2019.

While it is true that there are gifting estate plans that can reduce estate taxes, any gift that exceeds the annual gift exclusion must be reported on a gift tax return during the decedent’s life and is deducted from their lifetime exemption. In 2016, that exclusion is $14,000. However, while gifting may be good if the goal is to reduce estate tax, it can be detrimental if the donor needs Medicaid to cover the cost of long-term care within five years of any gifts.

It is important to remember that the $14,000 only refers to the annual gift tax exclusion under the Internal Revenue Code. The Medicaid rules and regulations are different. In New York, Medicaid requires that all applicants and their spouses account for transfers made in the five years prior to applying for Institutional Medicaid. These gifts are totaled, and for each $12,633 that was gifted, one month of Medicaid ineligibility is imposed for Long Island applicants. It is also important to note that the ineligibility begins to run on the day that the applicant enters the nursing home and is “otherwise eligible for Medicaid” rather than on the day that the gift was made.

For example, if a grandfather gifted $100,000 over the course of five years to his grandchildren and then needed nursing home care, those gifts would be considered transfers and, if they cannot be returned, would create a period of ineligibility for Medicaid benefits for approximately eight months. What makes this even more difficult for some families is that an inability to give the money back or help the grandfather pay for his care is not taken into consideration, causing many families great hardship.

It would have been far better for the grandfather to have put assets into a Medicaid-qualified trust five years ago to start the period of ineligibility and allow the trustee to make the annual gifts. Another concern when gifting is considering to whom you are gifting? Once a gift is made to a person, it becomes subject to their creditors, legal status and can adversely affect their government benefits.

Accordingly, if you make a gift to a person who has creditors or who later gets a divorce, that gift could be lost to those debts. Consider creating a trust for the benefit of the debtor-beneficiary to ensure that their monies are protected. Another problem arises when making gifts to minors. Because a minor cannot hold property, if gifted substantial sums, someone would have to be appointed as the guardian of the property for that child before the funds could be used.

To avoid this problem, consider creating a trust for the minor beneficiary and designate a trustworthy trustee who will manage the money for the minor until they are old enough to manage it themselves.

Finally, if gifting to a disabled beneficiary, make sure to review what government benefits they may be receiving. If any of the benefits are “needs based,” even small gifts may disqualify them for their benefits. In order to maintain eligibility, a Supplemental Needs Trust could be created to preserve benefits for the disabled beneficiary.

A common phrase comes to mind “do not try this at home.” Before doing any kind of substantial gifting, or even if you have begun gifting, see an elder law attorney who concentrates their practice in Medicaid and estate planning to help optimize your chances of qualifying for Medicaid and/or reduce estate taxes, while still preserving the greatest amount of assets.

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

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By Nancy Burner, Esq.

Consider this scenario: An individual executes a will in 1995. The will leaves all of his personal property (household furnishings and other personal effects), to his friend who is also the named executor. The rest of his estate he leaves to his two sisters. When he died in 2012, his two sisters had predeceased him. There were no other individuals named as beneficiaries of the will.

The executor brought a petition requesting that the court construe the decedent’s will so that she would inherit the entire estate as the only living beneficiary in the will. The executor stated that the decedent intended to change his will to name her as the sole beneficiary, but he died before he signed the new will. There was also an unwitnessed handwritten will that left his entire estate to the executor.

The court held that the testator’s intent to give his residuary estate to his two sisters was unambiguous. Having failed to anticipate, at the time that the will was executed, that his two sisters would predecease him, the court was not allowed to find that the decedent intended a gift of the residuary estate to his friend, the executor.

The court held that there were limitations on its ability to rewrite the decedent’s will to accomplish the outcome sought by the executor. Since the executor was only named as the beneficiary of personal effects, she could not inherit the rest of his estate. This is because the sisters predeceased him and they had no children, the will failed to name a contingent beneficiary.

The result was that the individuals who would have inherited had he died without a will would inherit. In the case at hand he had a distant cousin (to whom he never intended to leave anything) who was entitled to inherit all of his residuary estate. If the decedent had no other known relatives, his residuary estate would have escheated to New York State at the conclusion of the administration of the estate.

What it is important to realize here is how crucial it is to review and update your estate planning documents regularly. This is especially true after experiencing a significant life event such as a birth, death, marriage and/or divorce. You want your documents to reflect your intentions as they are today, not as they were 20 or 30 years ago.

If you are an unmarried person, with no children, living parents or siblings and your only relatives are aunts, uncles and/or cousins with whom you do not have close relationships, you especially want to make sure you have estate planning documents in place to avoid intestacy and having these relatives inherit by default. With these family circumstances, you also want to consider avoiding probate all together with a revocable or irrevocable trust.

If you have missing relatives, the nominated executor would have the burden of finding your aunts, uncles and/or cousins wherever they may be located to obtain their consent to the probate of your will. This can be expensive in both time and money. If these relatives cannot be found, the court will require a citation to be issued to these unknown relatives and a guardian ad litem will be appointed to investigate the execution of the will on their behalf. This is another layer of added expense and delay to the probate process, and a good reason to avoid it.

Whether you have a will or a trust, you want to be sure to review and update it regularly to make sure that your designated beneficiaries are still living. In a situation such as the scenario above, you also want to pay special attention to your contingent beneficiaries. The contingent beneficiaries take precedence if a primary beneficiary has predeceased. If you are unsure about naming contingent beneficiaries at the time you execute your will or trust, you may want to consider choosing a charity or allowing your executor/trustee to choose a charity for a cause you care about as a contingent beneficiary. This way, no matter what happens, your estate does not escheat to New York State.

The takeaway from the scenario above is how crucial it is to regularly review and update your estate planning documents. You want to be sure that whoever you want to inherit at your death, actually inherits your property.

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

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By Nancy Burner, Esq.

While discussing an estate plan with a client, she stopped me and said “What is probate.” Sometimes we forget to explain the simplest concepts. Probate is the process by which a last will and testament is given effect. Under New York State Law, a will is admitted to probate after the executor files a Petition for Probate with the decedent’s will attached and gives proper notice to the individuals that would have inherited from the decedent had the decedent died without a will. The proceeding for the probate of a will takes place in the Surrogate’s Court in the county where the decedent resided at the time of his or her death. The probate proceeding gives the interested parties (distributees) the right and opportunity to object to the probate of the will.

Typically, we advise that a client that creates a will consider if there are any circumstances that will make the probate proceeding an expensive one. For instance, is any distributee being disinherited? If so, that disgruntled distributee may come to Surrogates Court and object to the will. The litigation objecting to a will can be long and drawn out — and expensive as well. Are there missing heirs that must be found before the will can be probated? If so, it could be very expensive and time-consuming to find all the individuals that are required to be given notice and an opportunity to object. Is there real property owned by the decedent in different states? If so, then the will would have to be probated in each state. If any of these circumstances exist, you may want to avoid probate altogether.

We also suggest avoiding probate if you are the surviving spouse and your spouse is or has received Medicaid benefits. Medicaid has a lien against the spouse’s estate for any Medicaid benefits paid for the other spouse within 10 years of the death of the surviving spouse.

Another reason to avoid probate is if you have a disabled beneficiary as the Surrogate’s Court may appoint a guardian ad litem to protect that person’s interest. That could be another delay and cost to the estate.

The next question to consider is how do you avoid probate? One way to avoid probate is to name beneficiaries on all your accounts. But I rarely, if ever, suggest that a client resort to this solution without first considering the consequences. First, it may not be possible to name beneficiaries on all your accounts. What if your beneficiaries are minor’s or disabled? If that is the case, the minor or disabled beneficiary would have to have a guardian appointed to collect the bequest. This is also timely.

For minor’s, the guardian would have to put the money in a bank account, earn little or no interest and turn the money over to the beneficiary when he or she turned 18. If the account was a retirement account, the result is even harsher. The IRA or other retirement account would have to be liquidated, all income taxes paid and then put into a custodial account at a bank, earn little interest and then be paid to the beneficiary at age 18.

Most clients, when given the choice, would rather protect their heirs from divorcing spouses, Medicaid liens, creditors and taxes than avoid probate. We can protect beneficiaries by having their assets paid to trusts. This can be done in a will (and probate) or by avoiding probate altogether by using a revocable trust.

The important point here is that it is a mistake to make the avoidance of probate the overriding consideration when embarking upon an estate plan. Not everyone needs a revocable trust, but some people will be well served by using a trust, if the circumstances make probate impractical.

One size does not fit all. A successful estate plan takes all factors into consideration. In a world where people are computer savvy and everything is available on the internet, it is easy to believe that you can just do it yourself. The fact is attorneys are called counselors at law for a reason. The documents are only part of the problem and solution. The fact is, there is no substitute for competent legal advice.

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

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