Finance & Law

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Linda Toga, Esq.

By Linda Toga, Esq.

THE FACTS: For months now I have been meaning to schedule an appointment with an estate planning attorney to discuss my wishes with respect to a will, healthcare proxy and power of attorney. I have a lot of questions and really need some guidance as to what I should do and how I can best ensure that my wishes will be honored. Since the onset of the coronavirus crisis, I have been losing sleep over the fact that I do not have an estate plan in place. 

THE QUESTION: Now that law offices are closed and social distancing is a reality, is there anything I can do to move my estate planning process along? 

THE ANSWER: While estate planning is extremely important, at this point in time it is more important that you do your part to avoid the spread of the virus. I urge you to stay at home to the extent possible and, if you do leave the house, to be sure to wipe down frequently used surfaces, wash your hands often and follow the guidelines set by the government for social distancing. 

That being said, while you are at home, you can certainly give some thought to your estate plan and gather the information that will be needed in order for your estate planning documents to be prepared. Although I am not in my office on a regular basis, I am continuing to work with both current and new clients by phone and email. 

While personal contact may not be an option at this time, a great deal can be accomplished remotely and I welcome the opportunity to discuss with you your concerns and wishes. Also, it should be noted that the legislators in Albany and the New York State Bar Association are considering changes to the law that would allow for remote execution and witnessing of estate planning documents during this crisis. 

In the meantime, you should give some thought to who you want to name as your agent or agents in your advanced directives such as your power of attorney and healthcare proxy. It is a good idea to ask the people you are thinking of naming as your agents whether they are comfortable with acting in that capacity. Some people may not want to or may not feel they are capable of taking on the responsibility of handling your affairs or making end of life decisions on your behalf. 

While it is important for any agent that you name to know what your wishes are, it is absolutely critical that the person you name as your healthcare proxy be fully aware of the circumstances, if any, under which you may want certain types of treatments and/or procedures to be withheld.

Once you’ve decided on who you want to name as your agents and have discussed with those people your wishes, you should be sure you have the information such as the agents’ phone numbers and addresses that will be needed to prepare your advanced directives. 

In terms of your will, you should give some thought to what assets you have and what assets will pass under your will. Only assets owned by you individually as opposed to assets that are owned jointly, held in trust or subject to a beneficiary designation form will pass pursuant to your will. These assets are called probate assets. 

Once you have a handle on what assets are probate assets and what assets will pass outside your will, you can think about who the beneficiaries of your estate will be and if and how you want the assets divided. You should consider what will happen if a beneficiary predeceases you and whether you want assets to be distributed upon your death or held in trust for future distribution. In addition to how your probate assets will be distributed, think about who will handle your estate. At a minimum, you need to name an executor and a successor executor.

Although making decisions about who will serve as your agents and executor, what your wishes are with respect to end of life care and how your assets will be distributed may seem overwhelming, as I mentioned before, I am available by phone and via email to discuss with you the estate planning process and your unique circumstances. 

Once we have developed a plan, I will send you drafts of your estate planning documents for review. Hopefully by then a procedure will have been worked out for the remote execution and witnessing of your estate planning documents. If not, at least you will be ready to execute your documents in the presence of witnesses as soon as the restrictions that are currently in place are lifted.

In the meantime, I hope that the coronavirus crisis does not cause you or your loved ones undue stress or inconvenience and that you stay well. I look forward to hearing from you. 

Linda M. Toga, Esq provides legal services in the areas of estate planning and administration, real estate, small business services and litigation. She is available for email and phone consultations. Call 631-444-5605 or email Ms. Toga at Linda@LMTOGALAW.com. She will respond to messages and emails as quickly as possible. 

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By Leah Chiappino

One of the most trying aspects of COVID-19 is the financial turmoil it has brought on both national and local business sectors. Financial adviser Michael Christodoulou of Edward Jones Investments in Stony Brook answered some commonly asked questions about how to secure investments and resources for small businesses, and the types of financial assistance offered through the recent stimulus package.

Q: What is your advice for people, especially those that are retired or nearing retirement, regarding their stocks and 401(k) plans?

A: For one thing, ask yourself this: When do you really need the money from your investment accounts, such as your IRA and your 401(k) or similar employer-sponsored plan? These are retirement accounts, so, depending on your age, you may not need to tap into them for 20, 30 or even 40 years. If so, your losses may be “paper” ones only for now and aren’t subjecting you to imminent financial jeopardy. This isn’t to minimize the effect this downturn will have on you, of course — it always takes time to recover lost ground, and there are no guarantees with investing. However, although past performance does not guarantee future results, it is useful to note that, over its long history, the U.S. stock market has typically trended in one direction — up — despite serious and sometimes lengthy declines such as we saw in the Great Depression and, to a lesser extent, the bursting of the dot.com bubble of the early 2000s and the financial crisis of 2008-09.

Nonetheless, you may have shorter-term goals — a wedding, down payment on a home, overseas trip, etc. — for which you need to save. For these goals, though, you wouldn’t want to touch your IRA or 401(k), anyway, as you’d likely face taxes and penalties. Instead, you’ll want your money invested in liquid, low-risk accounts that will be minimally affected, if at all, by declines in the financial markets. These vehicles might include Certificates of Deposit (CDs), money market accounts and even good old-fashioned U.S. savings bonds, all of which offer the protection of principal and can pay higher rates than traditional bank savings accounts.

Q: Should people stop contributing to retirement during this time?

A: Every investor has a different time horizon and risk tolerance. Depending on their time horizon and risk tolerance there may be a number of different recommendations.

For example, if a client has a longer-time horizon until retirement it may make sense to continue investing periodically in their retirement plan. But for someone who is looking to retire relatively soon, they might want to stop contributions or start saving those assets in low-risk accounts.

I highly recommend they work with their financial adviser in order to have a personalized strategy designed based on their goals for retirement.

Q: How would you advise small businesses go about applying for governmental assistance, especially through the federal stimulus bill?

A: Small businesses should work with their tax professionals/CPA and financial adviser in order to review their individual situation. I recommend they start by logging onto www.sba.gov/disaster. During this time, they should also be very cautious about scams. 

Q: The economic effects of this virus are already enormous, and will get exponentially worse. How do you think people can financially cope if this crisis continues?

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) offers help for investors and small businesses. As we go through the coronavirus crisis, we are all, first and foremost, concerned about the health of our loved ones and communities. But the economic implications of the virus have also weighed heavily on our minds. However, if you’re an investor or a business owner, you just got some help from Washington, and it could make a big difference, at least in the short term, for your financial future. Specifically, the passage of the $2 trillion CARES Act offers, among other provisions, the following:

  • Expanded unemployment benefits: The CARES Act provides $250 billion for extended unemployment insurance, expands eligibility and provides workers with an additional $600 per week for four months, in addition to what state programs pay. The package will also cover the self-employed, independent contractors and “gig economy” workers. Obviously, if your employment has been affected, these benefits can be a lifeline. Furthermore, the benefits could help you avoid liquidating some long-term investments you’ve earmarked for retirement just to meet your daily cash flow needs.
  • Direct payments: Individuals will receive a one-time payment of up to $1,200, although this amount is reduced for incomes over $75,000 and eliminated altogether at $99,000. Joint filers will receive up to $2,400, which will be reduced for incomes over $150,000 and eliminated at $198,000 for joint filers with no children. Plus, taxpayers with children will receive an extra $500 for each dependent child under the age of 17. If you don’t need this money for an immediate need, you might consider putting it into a low-risk, liquid account as part of an emergency fund.
  • No penalty on early withdrawals: Typically, you’d have to pay a 10 percent penalty on early withdrawals from IRAs, 401(k)s and similar retirement accounts. Under the CARES Act, this penalty will be waived for individuals who qualify for COVID-19 relief and/or in plans that allow COVID-19 distributions. Withdrawals will still be taxable, but the taxes can be spread out over three years. Still, you might want to avoid taking early withdrawals, as you’ll want to keep your retirement accounts intact as long as possible.
  • Suspension of required withdrawals: Once you turn 72, you’ll be required to take withdrawals from your traditional IRA and 401(k). The CARES Act waives these required minimum distributions for 2020. If you’re in this age group, but you don’t need the money, you can let your retirement accounts continue growing on a tax-deferred basis.
  • Increase of retirement plan loan limit: Retirement plan investors who qualify for COVID-19 relief can now borrow up to $100,000 from their accounts, up from $50,000, provided their plan allows loans. We recommend that you explore other options, such as the direct payments, to bridge the gap on current expenses and if you choose to take a plan loan work with your financial adviser to develop strategies to pay back these funds over time to reduce any long-term impact to your retirement goals.
  • Small business loans: The CARES Act provides $349 billion to help small businesses — those with fewer than 500 employees — retain workers and avoid closing up shop. A significant part of this small business relief is the Paycheck Protection Program. This initiative provides federally guaranteed loans to small businesses who maintain payroll during this emergency. Significantly, these loans may be forgiven if borrowers use the loans for payroll and other essential business expenses, such as mortgage interest, rent and utilities, and maintain their payroll during the crisis. Please visit sba.gov/disaster for more information.

We’ll be in a challenging economic environment for some time, but the CARES Act should give us a positive jolt — and brighten our outlook.

Q: Do you have any information on how residents will know the exact number on their stimulus check for those above the $75,000 income threshold?

A: I would advise individuals to contact their tax professional/CPA. They will be able to give more accurate guidance based on their clients’ taxable situation and possible qualifications for the CARES Act direct payment program.

Q: What is your advice for those that have recently lost jobs and need to prioritize their loans? How can people cut back, and are there any specific loans that should be paid over others?

A: In the unfortunate event that you or a family member loses your job there are some easy steps to follow to help you better prepare yourself for this event. The federal government has taken a big step in protecting renters by issuing a 120-day moratorium on evictions from federally subsidized housing and property with federally backed mortgage loans. Some states have barred evictions for a few weeks. Please check with your landlord and or mortgage company.

Q: With stocks dipping, is now a good time to buy?

A: Before investing we recommend that investors understand their time horizon with the asset they are thinking about investing. What will that money be used for in the future? At what point in the future will you need the money?

For investors with a long-term outlook and time horizon, we remain confident that a rebound will take shape. It may take a while longer to materialize, but we think it will be robust and fueled by a return of confidence in the post-virus outlook. Long-term investors don’t need to capitalize on the pullback all at once but should consider opportunities to benefit from this decline. Consider:

  1. Rebalancing: Trimming overweight allocations and filling gaps in underrepresented asset classes and sectors.
  2. Systematic investing: Taking advantage of the ongoing volatility by systematically investing at regular intervals, reducing the “timing” aspect as the selloff plays out.
  3. Look for good buying opportunities, because they are certainly out there. A well-managed company with a solid business plan that produces quality products and services is going to be that same company after the coronavirus and oil price panics subside and, right now, that company’s stock shares may literally be “on sale.”

We recommend you consult with a financial adviser in order to make sure you completely understand your level of risk and time horizon.

Q: Do you have any recommendations for a set amount people should have in savings in case of an emergency? What is the best way to do so?

A:  I believe everyone should have an emergency fund. Unfortunately, there isn’t a universal dollar amount that applies for everyone.

If you don’t already have an emergency fund, take these first steps to prepare:

  1. Detail your current financial situation including your income, expenses, assets and debts and any money previously set aside for unexpected expenses.
  2. Create a detailed budget in order to figure out what your monthly and annual living expenses add up to.
  3. Consider saving between three and six months of living expenses if you are still working; 12 months or more if you are retired.

This is just a starting point. Depending on your age, your list may look considerably different. Your financial adviser can help you put together your cash flow analysis related to your financial goals and help you calculate how much cash you may need for your next unexpected event.

Q: How do you think people should go about negotiating with credit card companies and banks if they need relief?

A: If someone is facing some financial hardship, they should contact their credit card company or bank directly. In most cases these companies can provide guidance and options so the individual understands their options and can make a decision based on all the information provided to them.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Many people use irrevocable trusts as part of their estate plan for tax savings, asset protection and Medicaid planning. In all these types of trusts, the grantor (creator) of the trust is going to be limited to their access of the principal of the trust in order to ensure that their planning needs are met. This means that their ability to use trust assets as collateral for a loan is going to be limited. 

A concern that should be discussed before transferring real estate to an irrevocable trust, is whether or not you 1.) have an existing mortgage and plan to refinance in the near future and 2.) whether you think you may need to get a new mortgage or line of credit in the near future?

It is common, particularly in Medicaid planning, to transfer real estate to your irrevocable trust because Medicaid trusts typically provide that the grantor can reside in the property and shall maintain all tax exemptions formerly afforded to them. This makes the home an easy asset to protect since the transfer does not affect everyday use of the property. The biggest exception is the Grantor’s ability to refinance or secure new mortgage products once the property is in a trust since many banks will not lend to properties owned by an irrevocable trust.

While most irrevocable trusts do not expressly prohibit the Trustee from securing a mortgage with a trust asset, the loan industry’s underwriting guidelines typically do not allow it. 

Luckily, some banks are catching up with the times and have special products which can be secured against properties in irrevocable trusts. However, you should expect to pay higher interest rates.

If your preferred lending institution will not work with your property in the trust, then it may be possible to revoke the trust with the consent of the grantor and beneficiaries. However, once a trust is revoked, it will no longer afford you the planning goals it once did.
In other words, if your house was in a Medicaid Trust for 7 years and you revoke it to avail yourself to the low interest rates now available for mortgages, it will no longer be protected. The home would have to be placed in another Medicaid trust for an additional 5 years before it would be protected again should you require nursing home care and ask that the Medicaid program pay for said care. 

Always speak to your attorney before taking any asset out of an irrevocable trust. While everyone wants to pay the lowest interest rate possible, the protection you are getting by keeping the assets in the trust may outweigh the cost savings. If beneficiaries will not consent, or cannot consent due to death, disability or minority, the Trustee may be able to “decant” the irrevocable trust assets to a new trust with different terms which the bank may find more favorable. Decanting requires a Trustee who is not an interested party, so if the current Trustee is also a beneficiary, a new Trustee will need to be appointed. 

Decanting has become popular in recent years not only for amending trusts to please the lenders, but to fix a myriad of issues that older trusts may present. This is a specialized area of the law and you should seek counsel that is familiar with sophisticated trust and estate principles before transferring any asset from one trust to another.

In sum, transferring your property to an irrevocable trust will likely limit your choices for refinancing or mortgaging the property in the future. If this is something you are considering, speak to your attorney about obtaining financing before you transfer your house to the trust to avoid the hassle later.

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

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By Linda Toga, Esq.

Linda Toga

THE FACTS: Just before my husband died we adopted a puppy we named Morris. Morris is a great source of comfort and joy and I cannot imagine being without him. My concern is that something may happen to me that makes it difficult or impossible for me to care for Morris. Although my children live close by, I cannot depend on them to care for Morris because of allergies and their living arrangements. My friends told me that I should include a pet trust in my will so that Morris’s needs will be met but, I understand that the provisions in my will will have no bearing on Morris’ care until I die and my will is admitted to probate.

THE QUESTION: What can I do to make sure Morris will be cared for in the event I am disabled or simply cannot take care of him any longer? 

THE ANSWER: To insure that Morris is cared for despite your inability to take care of him yourself, you should create an intervivos pet trust. An intervivos pet trust becomes effective as soon as it is executed and funded in contrast to a pet trust that is included in your will. The latter will not address Morris’s needs during your lifetime. 

In the pet trust you need to name the pet or pets that you want to benefit from the terms of the trust. If Morris is your only pet and you do not have plans to get another pet, you can name Morris as the sole beneficiary of the trust. People who have more than one pet or who expect to have other pets during their lifetime may want to identify the beneficiaries of the trust as “any and all pets” they may have at the time the provisions of the trust are triggered. Generally, the terms of a pet trust are triggered when the pet owner’s health deteriorates to the point that the caregiver must assume responsibility for the pet’s care. Triggering events may include your illness, disability (either permanent or temporary) and your death.  

In addition to naming the pets who are to benefit from the provisions of the trust and the events that will result in Morris’s care being taken over by the caregiver, you need to name the person or persons who will be Morris’ caregiver. Be sure to name a successor caregiver in case the caregiver you name is unable to deal with Morris when the need arises. Before naming a caregiver, you should ask each potential caregiver if she is willing to take on the responsibility of caring for Morris. It is important to discuss with all potential caregivers whether their living arrangements can accommodate your pet, whether they or the people they live with have any health issues that may be adversely impacted by the presence of your pet and whether caring for Morris will be an undue burden, financially or otherwise. 

You should plan on funding the pet trust with enough money to cover Morris’s anticipated expenses for the rest of his life. Doing so will alleviate any financial burden on the caregiver However, money will not necessarily alleviate the burden created by the time and effort needed to feed and walk Morris and to get to him the vet and/or groomer as needed. Make sure the caregiver you chose understands exactly what is involved in caring for Morris. You should not assume that everyone will be willing and/or able to give Morris the care and attention he has grown accustomed to. 

Your pet trust should address what will be done in the event you are temporarily unable to care for Morris, as well as what will be done if your health deteriorates to the point that you can no longer care for him at all. Obviously, the trust should also provide guidance as to Morris’s care after your death and your wishes with respect to Morris’s burial or cremation. 

In the trust you should set forth any special needs that Morris may have in terms of diet, grooming or medication. You should also provide the names and contact information for the people who have been treating and grooming Morris. If you want Morris to be groomed monthly, state that in the trust. If you want Morris to be fed a special diet, state as much in the trust. The more information you can provide the caregiver, the more likely it is that Morris will be taken care of in accordance with your wishes. 

With respect to how much money to put into the trust for Morris’s care, you need to consider his age and current physical condition, as well as what you have historically paid for his care. Although you don’t want to set aside too much money, the trust should be funded with sufficient assets to cover routine expenses as well as expenses that will arise when Morris dies. You can indicate in the trust what will happen to the funds that may remain in the trust once Morris is gone. Many people have those assets pass to the caregiver in recognition of their service but, some people opt to have the funds pass to a charity that provides services to abandoned pets. 

There are clearly a lot that goes into the creation of a pet trust for a beloved pet like Morris. It is, therefore, important to seek the expertise of an attorney with experience in creating pet trusts since they are in the best position to insure that all of the important issues that should be addressed in the trust are, in fact, addressed. 

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.

While the beginning of the year is typically tax season, it is important to remember that property tax exemptions can be applied for at this time. There are different programs that homeowners should be aware of in order to potentially save with respect to property taxes. 

Most individuals are familiar with the STAR program, which is the New York State School Tax Relief Program. Another program that people may not be as familiar with is the exemption for persons with disabilities. New York State offers local governments and school districts the ability to opt into a grant reduction on the amount of property taxes paid by qualifying persons with disabilities.

The eligibility requirements for this exemption is based on the individual’s disability, income, residency and ownership. For the disability component, the individual must demonstrate a physical or mental impairment that substantially limits the person’s ability to engage in one or more major life activity (e.g., walking, hearing, breathing, working). The applicant must submit proof of disability via an award letter from the Social Security Administration, an award letter from the Railroad Retirement Board, a certificate from the State Commission for the Blind and Visually Handicapped, an award letter from the U.S. Postal Service or an award letter from the U.S. Department of Veterans Affairs. 

If the disability is not permanent, the applicant will be required to certify the disability each year. For the residency requirement, the property must be the “legal residence” of the disabled person and currently occupied by the disabled person. There is an exception for absence due to medical treatment. For the ownership requirement, all property owners must be disabled. The only two exceptions are for spouse- or sibling-owned property. In those cases, only one owner needs to be disabled.

With respect to the income eligibility, the basic exemption is a 50 percent reduction in the assessed value of the legal residence. New York State allows each county, city, town, village or school district to set the maximum annual income limit at any figure between $3,000.00 and $29,000.00. If the disabled person makes between $29,000.00 and $37,399.99, the localities can give a less than 50 percent exemption based on a sliding scale. Proof of income of the most recent tax year is required to be submitted with the application. 

All income sources are countable except Social Security Income (SSI), Foster Grandparent Program Grant monies, welfare payments, inheritances, return of capital and reparation payments received by Holocaust survivors. Certain medical expenses can be used to offset gross income. For example, medical and prescription drug expenses that are not reimbursed or paid by insurance may be deducted from total income. 

Additionally, if the owner is an inpatient in a residential health care facility, the monies paid by the owner, spouse or co-owner will not be considered income in determining the exemption eligibility. Each municipality may be more generous with the exception than others.

Finally, even if all requirements are met, if there are children living in the home and attending public school, the disabled owner is typically not eligible for the exemption. This can be waived by the school district under specific circumstances.

New York State sets out broad eligibility requirements that each municipality can narrow down. It is important to find out the exact requirements for your specific municipality to determine if you qualify for the exemption. The exemption for persons with disability can offer a substantial relief for those who qualify.

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

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By Nancer Burner, Esq.

Nancy Burner, Esq.

The new Setting Every Community Up for Retirement Enhancement (SECURE) Act, effective Jan. 1, 2020, is the broadest piece of retirement legislation passed in 13 years. The law focuses on retirement planning in three areas: modifying required minimum distribution (RMD) rules for retirement plans, expanding retirement plan access and increasing lifetime income options in retirement plans. This article will focus on the modifications to the RMD rules and their effects on inherited individual retirement accounts. 

Before the SECURE Act, if you had money in a traditional IRA and were retired, you were required to start making withdrawals at age 70½. But for people who have not reached age 70½ by the end of 2019, the SECURE Act pushes RMD start date to age 72. By delaying the RMD start date, the SECURE Act gives your IRAs and 401(k)s additional time to grow without required distributions and the resulting income taxes.

Since RMDs will not start until age 72, the new law will give you an additional two years to do what are known as Roth IRA conversions without having to worry about the impact of required distributions. With a Roth IRA, unlike a traditional IRA, withdrawals are income tax-free if you meet certain requirements and there are no RMDs during your lifetime. The general goal of a Roth conversion is to convert taxable money in an IRA into a Roth IRA at lower tax rates today than you expect to pay in the future.

The SECURE Act also removed the so-called “stretch” provisions for beneficiaries of IRAs. In the past, if an IRA was left to a beneficiary, that person could stretch out the RMDs over his or her life expectancy, essentially “stretching” out the tax benefits of the retirement account. But with the SECURE Act, most IRA beneficiaries will now have to distribute their entire IRA account within 10 years of the year of death of the owner. 

There are, however, exceptions to the 10-year rule for the following beneficiaries: surviving spouse, children under the age of majority, disabled, chronically ill and an individual not more than 10 years younger than employee. 

The SECURE Act means it is now very important to review the beneficiary designations of your retirement accounts. You want to make sure they align with the new beneficiary rules. Prior to the SECURE Act, a spousal rollover was generally the best practice to preserve the IRA. For many with large retirement accounts, it may now be better to begin distributing the IRA earlier in order to minimize exposure to higher tax brackets. It may also be beneficial to name multiple beneficiaries on an IRA to spread the distributions to more taxpayers, so the 10-year rule has less of an impact on the beneficiary’s income tax bracket. 

Prior to the SECURE Act, many people used trusts as beneficiaries of retirement accounts with a “see-through” feature that let the beneficiary stretch out the tax benefits of the inherited IRA account. The benefit of the trust was to help manage the inherited IRA and to provide protection from creditors. 

However, many of these trusts provided the beneficiary with access to only the RMD. With the new rule that all money must be taken out within 10 years, these trusts no longer have the same effect and could be troublesome, requiring that significantly more money be distributed to the beneficiary annually than initially intended. In addition, the trust funds would likely be exhausted after 10 years rather than providing funds to the beneficiary over his or her remaining life expectancy. 

Anyone with a trust as the beneficiary of an IRA should immediately review the trust language with an experienced estate planning attorney to see if it still aligns with his or her intended goals. 

If you are not sure what the new SECURE Act means for your retirement account, you should also contact an experienced estate planning attorney to review your beneficiary designations. 

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 husband Joe and I own our house jointly. In addition to our joint checking account, Joe has a savings account with a balance of about $100,000. Joe suffers from advanced dementia and his health is failing. I do not know how much longer he will be able to live at home with me. I anticipate needing to apply for Medicaid down the road. I understand that Joe is more likely to be eligible for Medicaid if his assets are transferred to me. 

THE QUESTION: As his spouse, can I simply transfer Joe’s assets into my name?

THE ANSWER: Unfortunately, you do not have the authority to transfer Joe’s assets to yourself unless Joe has a power of attorney in which he names you as his agent and gives you authority to make gifts to yourself. Without the benefit of a power of attorney that includes a statutory gifts rider, you have no more authority to transfer Joe’s assets to yourself than a stranger would have.

Even though you and Joe own your home jointly, both you and Joe would need to sign a deed to transfer the property to you alone. If Joe’s dementia is advanced, there is a chance that he lacks the capacity to sign a deed. To find out if that is the case, you and Joe should talk to an experienced estate planning attorney. After speaking to Joe, the attorney should be able to tell you whether Joe has the requisite capacity to sign a deed. 

If the determination is that Joe lacks capacity, the only other option you have to transfer the property is to be appointed as Joe’s guardian in the context of a costly and time-consuming guardianship proceeding. 

Just as Joe’s interest in your house cannot be transferred to you without Joe taking action, the funds in his savings account cannot be removed without Joe’s active participation. Unless you are Joe’s agent pursuant to a valid, enforceable power of attorney or his legal guardian, Joe’s signature will be needed to close the account.

Fortunately, that is not the case when it comes to your joint account. You need not be Joe’s agent or his guardian to transfer the funds in the joint bank account to yourself. That is because joint account holders each have an ownership interest in the funds in a joint account. As such, any joint owner can either close that account or reduce the balance in the account to a negligible amount. If you close that account and put the funds in your name, the transfer will not be deemed a gift and the funds will be deemed not available to Joe in the context of his Medicaid application. 

Even if it is too late for Joe to sign a power of attorney giving you authority to handle his affairs and make gifts to yourself, it is not too late for you to delegate authority to an agent of your choice to handle your affairs down the road. To ensure that any power of attorney you sign is tailored to your needs, I urge you to retain an attorney who practices in the area of estate planning to explain in detail the current power of attorney and the various types of transaction and activities you may want to delegate, and to prepare for you a new power of attorney that reflects your wishes. 

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.

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.