By Linda Toga, Esq.

The Facts: My uncle died without a will. He was never married and has no children. He owned a house and a car and likely died with significant debts. No one in the family wants to handle his estate because they are concerned that they will be personally responsible for paying that debt.

The Questions: Are their concerns valid? What happens if no one steps up to be named administrator?

The Answer: When someone dies without a will, the intestacy statute controls what happens to his or her estate. Generally, someone related to the decedent will petition the Surrogate’s Court in the county where the decedent lived to be named administrator of the estate.

In addition to filing a petition about the decedent, his family and his assets, the petitioner must provide the court with an original death certificate, signed waivers from other family members who are in line to inherit from the estate and, in many cases, a family tree. That family tree is needed to establish that all the relatives who are entitled to notice of the administration proceeding are, in fact, given notice.

Once appointed, the administrator is responsible for marshalling and liquidating the decedent’s assets and depositing the funds into an estate. In your uncle’s case, the administrator would close any bank or brokerage accounts your uncle may have had and arrange for the sale of his house and car. All proceeds would be deposited into an estate account.

The administrator then uses the funds in the account to pay the expenses of administering the estate and the legitimate debts of the decedent. Once those are paid, the administrator is responsible for distributing the balance in the estate account to the appropriate family members based upon the intestacy statute.

Since your uncle did not have a spouse or children, the assets remaining in the estate after the payment of expenses and debts would pass to his parents if they are alive. If they predeceased your uncle, the assets would be distributed to his siblings in equal shares. The administrator has no discretion with respect to distributions. She must follow the provisions of the statute.

The administrator is not personally obligated to pay any of the decedent’s creditors and is reimbursed from estate funds for any expenses she may incur in administering the estate. In addition, the administrator is entitled by law to receive commissions based upon the value of the estate. Since commissions are considered an administrative expense, they are paid before the decedent’s creditors and before distributions are made to family members.

If no one steps up to be named administrator, the county public administrator may be appointed to handle the estate. The Surrogate’s Court would appoint the public administrator who would then handle all aspects of estate administration set forth above. If no one in your family is willing to serve as administrator, any of your uncle’s creditors can petition the Surrogate’s Court to name the public administrator to handle your uncle’s estate. That way the creditors can be sure that they will be paid assuming there are adequate assets in the estate. 

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

By Linda M. Toga

The Facts:
I am an only child, widowed and have no children. I have very specific wishes relating to my funeral and burial.

The Question:
Since I have no parents, spouse, children or siblings, who will be in charge of my remains and responsible for arranging my funeral and burial?

How It Works:
Generally, a person’s parents, spouse or children have the authority to make funeral and burial arrangements for that person. However, since these people do not exist in your case, you should consider naming an agent to make these arrangements for you. 

In New York State there is a statute that allows you to do just that. You may appoint anyone you wish, including a friend, relative or clergy person, to make all the necessary funeral and burial arrangements.

Of course, before naming anyone as your agent for this purpose, you should discuss your wishes with that person to be sure he/she is willing to take on the responsibility of making sure your funeral and burial plans are implemented.

In order to legally appoint someone to control your remains and handle your funeral and burial, you must name your agent in a document titled “Appointment of Agent to Control Disposition of Remains.” I generally refer to the documents as a Disposition of Remains Statement or DRS. 

In the DRS, you not only identify the person who will actually be carrying out your wishes with respect to your funeral and burial, but you can also set forth exactly what those arrangements should be.

For example, you can identify the funeral home you want used, whether you want to be buried or cremated, what music should be played at your wake or if you want a religious grave-side service.

You can be as detailed as you wish, going so far as to set forth what food should be served at any post-burial luncheon  that may be arranged and what clothing and jewelry you want to have on when you are buried.

As an alternative to stating your wishes in the DRS and hoping that your agent is able to make the necessary arrangements, you can preplan your entire funeral and burial with the funeral home of your choice in advance.

If you preplan your funeral, you will have the option of prepaying for the arrangements as well.

That way your agent’s responsibilities will be limited to making arrangements for your remains to be brought to the funeral home and notifying the people who would likely be attending the funeral.

Whatever route you decide to take, you should seek the assistance of an elder law attorney to be sure the DRS is properly prepared and executed.

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

By Linda M. Toga, ESQ.

The Facts: After my mother died, my father transferred his assets into a trust to avoid probate. He frequently told me how pleased he was that everything would pass to me and my sister without having to go to the Surrogate’s Court. After my father died last month, I discovered that he had a bank account that was in his own name. Apparently he did not transfer the funds in the account into a trust account.

The Question: What must I do in order to close the account?

The Answer:  The situation you are facing is very common since it is not at all unusual for people to set up a trust but not transfer all of their assets into the trust. Luckily for you and your sister, closing the account should not be too burdensome.

The steps you must take to close your father’s account depend on the value of the account. If the account has a balance of greater than $30,000, and your father did not have a will, someone must apply to the Surrogate’s Court for letters of administration. Both you and your sister have priority over other family members when it comes to who can serve as administrator.

The petition for letters of administration must include information about the person who is actually applying for the letters in addition to information about your father, your family and the assets over which you are seeking control. You may have to give some people notice that a petition for letters is being filed and you may need to obtain waivers from other people. The Surrogate’s Court also requires an original death certificate and a check to cover the filing fee.

If your father’s account has a balance of greater than $30,000, and he died with a will, the person named as executor in the will should petition the Surrogate’s Court for letters testamentary. Like the petition for letters of administration, the petition for letters testamentary must include information about the petitioner, information about your father and his family and the assets that will pass under the will. The original will and an original death certificate must be included with the petition, in addition to a filing fee.

Depending on who was named in the will, other documents may be needed and you will likely need to give notice of the petition to certain people and obtain waivers from others. If the account is the only asset in your father’s name, the filing fee payable to the Surrogate’s Court for processing the petition, whether it’s for letters of administration or letters testamentary, will depend on the value of the account.

If the value of the account is less than $30,000, you can obtain the Surrogate Court’s permission to close the account by filing with the court an Affidavit in Relation to Settlement of Estate Under Article 13. The filing fee is only $1 and the affidavit is quite straightforward. In completing the affidavit, you will need to provide the name and address of the bank where the account is located, the account number and the balance in the account.

If satisfied with the affidavit, the Surrogate will issue you letters giving you authority to close the account. If you find other assets in your father’s name after filing the affidavit, you will have to file a new affidavit since the authority granted by the court in connection with the filing of an Affidavit in Relation to Settlement of Estate Under Article 13 is limited to the assets described in that affidavit.

To save time and ensure that you are handling the account properly, it is advisable to contact an attorney experienced in estate administration. That way you can be certain that the proper documents will be prepared and filed on behalf of your father’s estate.

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

By Linda M. Toga

The Facts:    I want to leave a significant amount of money to my granddaughter in my will, but I am concerned that she is not particularly good with money.

The Question:  Is there a way I can leave her a bequest but be assured that the money will not be spent foolishly?

The Answer:  Yes, absolutely! Clients frequently express concern that bequests they make in their will may be squandered either because their beneficiaries lack the maturity to handle the funds in a responsible manner or suffer from some sort of substance abuse or addiction that clouds their judgment.

In such circumstances, it is best not to make an outright bequest to the beneficiary but to instead have the funds pass through a testamentary trust that you (the testator) create in your will.

In order to create such a trust in your will, you will need to identify the individuals who are going to be the beneficiaries of the trust, indicate which assets will be held in the trust and name a trustee who will administer the trust. You will also need to set forth the terms of the trust, i.e., how the trust funds are to be used, when distributions will be made to the beneficiaries, whether the trustee has the discretion to withhold or accelerate the distributions, whether distributions are contingent on the performance of the beneficiary and what will happen to the trust assets if the beneficiary dies before the trust terminates.

My clients who want to avoid a beneficiary receiving a large inheritance at an early age generally direct their trustee to distribute all of the trust assets by the time the beneficiary is 30. They sometimes have the trustee make a single distribution of the entire trust corpus at a specific age but, just as often, they spread the distributions out over time. In either case, it appears that the general consensus is that most people have learned to handle money responsibly by the time they reach the age of 30 since most of the testamentary trusts I draft terminate by the time the beneficiary turns 30.

In contrast, clients who have me prepare testamentary trusts for beneficiaries who suffer from substance abuse or addiction often include a provision that directs the trustee to continue making distributions for the lifetime of the beneficiary. Such distributions may be made to the beneficiary directly but, more often than not, the trustee is directed to make payments to third parties on behalf of the beneficiary. For example, the trustee may be directed to pay the beneficiary’s rent or mortgage or to cover the cost of insurance or tuition.

Whether the beneficiary is simply young and inexperienced or dealing with an addiction, my clients generally give their trustee discretion to distribute trust assets to the beneficiary if they believe doing so is in the beneficiary’s best interest.

As mentioned above, a testamentary trust can provide that distributions are conditioned on the performance of the beneficiary. Some people liken this feature to giving the testator the ability to control from the grave.

While that might be true, it should be noted that there are limits to how much control can be maintained from the grave. For example, while a testator can certainly direct his trustee to only distribute the trust assets upon the beneficiary’s graduation from college, he cannot condition distributions on the beneficiary divorcing his/her spouse or only marrying within the faith. Such conditions are against public policy and are unenforceable.

Despite any limitations that might exist, testamentary trusts are incredibly flexible and allow for a great deal of creativity. They can not only protect a testator’s assets from being squandered after his death, but they can protect the beneficiary against his/her own foolishness or bad habits. As such, it would be worthwhile to discuss with an attorney experienced in estate planning whether a testamentary trust is right for you and your granddaughter.

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

By Linda M. Toga, Esq.

The Facts: I want to give my children and grandchildren significant cash gifts for the holidays, but I am confused about gift tax liability and about how gifting may impact my future eligibility for Medicaid in the event I need long-term care.

The Question:

Would you explain how gifts are treated for Medicaid and gift tax purposes?

The Answer: As they look ahead to the holidays, many clients call with questions about gifting and its consequences. There is a great deal of confusion surrounding gifts, and clients often assume that gifts that are exempt from gift tax are also exempt transfers under the Medicaid rules. Unfortunately, that is not the case.

When a person applies for Medicaid to cover the cost of care in a nursing home, social services looks at the applicant’s financial records going back five years. Significant gifts, also known as uncompensated transfers, made by the applicant during the five-year look-back period raise a red flag and can lead to a penalty period during which the applicant is denied benefits. While any gift is subject to scrutiny by social services, gifts of $2,000 or more, or a pattern of gifting in smaller amounts, are certain to prompt questions and likely to result in penalties under current Medicaid rules.

In contrast, annual gifts of up to $14,000 to any number of people are exempt from gift tax under the IRA code. Such gifts are essentially under the radar for tax purposes since they need not be reported and have no adverse gift tax consequences. A federal gift tax return only needs to be filed if a donor makes a gift in excess of $14,000 to any one individual in a calendar year.

For example, if someone gifts their son $20,000, the donor will have to report the $6,000 gift on a federal gift tax return that should be filed along with his/her personal income tax return next April. Even then, the donor will not incur any gift tax liability and no gift tax will be due unless and until the donor’s reportable lifetime gifts exceed the federal estate tax exclusion amount in effect at the time.

While the current exclusion amount is $3,125,000 and the figure is scheduled to increase annually for a number of years, it is important to note that the value of reportable lifetime gifts may be added to the value of your estate at the time of your death to determine if federal estate tax will be due. You cannot simply gift away your assets during your lifetime to avoid estate tax.

Based upon the facts set forth above, it is clear that a gift that does not adversely impact a donor’s taxes will likely result in denial of Medicaid benefits for a period of time if the donor applies for Medicaid within five years of making the gift. For this reason, it is important to carefully plan any gifting that you may be considering and to look at the impact that gift will have both on taxes and on your ability to obtain benefits should the need arise.

Linda M. Toga, Esq. provides legal services in the areas of litigation, estate planning and real estate from her East Setauket office. The opinions of columnists are their own. They do not speak for the paper.