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Law

By Linda M. Toga, Esq.

The Facts: I am named executor in my brother’s will. He died recently and his assets include a bank account and a house. Someone told me that since I am the named executor, I can close the account and sell his house simply by presenting the will.

The Question: Is that true?

The Answer: Absolutely not! Although you are named in your brother’s will as the executor of his estate, the surrogate’s court in the county in which your brother resided at the time of his death must admit the will to probate and issue letters testamentary to you before you can take any action with respect to your brother’s assets.

In other words, you must establish to the court’s satisfaction that the will is valid before you are able to act as executor. You cannot assume the responsibilities of executor without the court’s explicit approval.

The complexity, cost and time involved in having a will admitted to probate will vary with the number of beneficiaries named in the will, as well as the number of heirs to the estate, the ease with which your attorney can locate the beneficiaries and heirs, how cooperative those people may be with the attorney in moving forward, the value of the estate and whether anyone contests the admission of the will to probate, among other factors.

While the probate process can be straightforward and relatively inexpensive, there are numerous issues that can arise in the probate process that are best handled by an experienced estate attorney. Some of the most common issues with probate are not being able to locate individuals who are entitled to notice and dealing with individuals who contest the validity of the will.

Fortunately, the percentage of cases where a will is contested and ultimately not admitted to probate is small but, if there are objections filed to the probate of a will, the process can drag on for quite some time, significantly increasing the expenses of the estate.

Assuming the probate process goes smoothly and your brother’s will is ultimately admitted to probate, you will be issued letters testamentary by the court. Only then will you be in a position to marshal your brother’s assets, pay any legitimate outstanding debts your brother may have had, and make distributions in accordance with the wishes set forth in your brother’s will.

Once you have located and distributed your brother’s assets, you will be required to file with the court an inventory of your brother’s assets and releases from the beneficiaries stating that they received the bequests to which they were entitled under the will.

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

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By Jonathan S. Kuttin

A surprise payday isn’t as much of a long shot as many may think. It can come in a number of forms — a larger bonus than you were expecting, an inheritance, selling a business, a legal settlement, or maybe even the lottery. While you can’t count on a sudden windfall, there are dozens of scenarios that could result in a life-changing influx of money. Here are five tips for making the most of your good fortune:

Don’t make any sudden moves. Your mind may be spinning with all the things you could buy with your new-found wealth. You might even entertain thoughts about quitting your job. But one of the biggest mistakes you can make is to act impulsively or carelessly, and squander a financial blessing. Take it slow and savor the sensation of financial freedom. Give yourself the benefit of thinking through the implications of your unexpected windfall from every angle.

Talk to a tax professional. Consulting with an accountant is an opportunity to manage tax concerns on your windfall and make sure you pay what you need to. You’ll gain peace of mind knowing what you owe and writing a check to take care of it. A visit with tax professional also will give you a better grasp of how much you’ll have left over for your own use.

Retire your debt. If you carry a large credit card balance or have outstanding loans, you’re throwing away money on interest each month. Paying down or paying off these obligations will help you save in the long run and remove a bill or two from your monthly budget. You may not want to pay off your house, however, since there can be significant advantage from the mortgage tax deduction. Be sure to consult with your tax advisor before you make the decision.

Save, spend, share. With moderation as your guide, consider how you will divide your riches across these three possibilities. That is, save some so you can strengthen your financial foundation. Spend some, as long as you refrain from anything too outlandish. And share some to support the people and things you care about most—because you can.

Reevaluate your financial goal. An unexpected windfall may provide you with an opportunity to take additional steps toward your financial or investment goals. You could use it to boost your retirement accounts or add to an education savings plan for your kids. Perhaps there’s a certain charity that you’re passionate about and want to give to. Whatever the situation, an extraordinary financial windfall may change your financial goals completely.

Meet with a financial advisor. An experienced financial professional can help you step back and look at the big financial picture. With this insight, you can decide how to manage your windfall in ways that help you meet your specific goals and dreams.

Jonathan S. Kuttin, CRPC, AAMS, RFC, CRPS, CAS, AWMA, CMFC, is a private wealth advisor specializing in fee-based financial planning and asset management strategies, and has been in practice for 19 years.

By Nancy Burner, Esq.

Clients often ask how they can ensure the home in which they live or their vacation home can be protected against the cost of long-term care.  These assets are often worth much more to our clients than the cash value; they represent hard work to pay off the mortgage and are wrapped in memories.

Prior to the sophistication of trust law, many individuals would pass a residence to their beneficiaries by executing a deed with a life estate. For the owner, this would mean retaining the right to live in the home until death, but upon their demise, the property would be fully owned by the beneficiaries.

Because they retained a lifetime interest in the property, they would still be able to claim any exemptions with respect to the property. Moreover, when the owner died, the beneficiaries would get a “step-up” in basis, which eliminates or lessens capital gains tax due if they did sell the property.

The negative aspect to this kind of transfer is loss of control. Once the deed is transferred to the beneficiaries, they have the ownership interest. If the original owner wanted to sell the property or change who receives it upon their death, they would have to get the permission of those to whom they transferred the property. Another negative aspect is that if the individual is receiving Medicaid benefits and the house is sold, a share of the proceeds, the life estate interest, would be paid out to the individual and could put their Medicaid benefits in jeopardy.

A better option for protecting a residence is by executing an irrevocable Medicaid Qualifying Trust, which can transfer real property at death. Like the deed with a life estate, this trust grants all the tax benefits and exclusive occupancy during life, i.e., STAR exemption, veteran’s exemption, capital gains exemption.

This method is superior to the deed with a life estate because if the property is sold during your lifetime, the full amount of the proceeds are protected within the trust and will pass to your beneficiaries upon your death. The trust also gives the ability to change the beneficiaries at any time, leaving some control in the hands of the original owner of the property.

A person’s residence is their most treasured and often most monetarily valuable asset. It is important to meet with an experienced attorney to ensure protection of your home or vacation home.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Linda M. Toga, Esq.

The Facts: My daughter told me that I should have a health care proxy.

The Question: What is a health care proxy and should I have one?

The Answer: A health care proxy is a legal document recognized in New York  State by which competent adults appoint a person to make medical decisions for them in the event they are unable to make those decisions themselves.

Unlike a power of attorney that may be effective immediately upon signing, a health care proxy does not become effective unless and until you are no longer able to make health care decisions. Although only one person can act as your health care agent at a time, in your health care proxy you should name an alternate agent in case the first person you name is unavailable.

In a health care proxy you may give your agent unlimited authority or you may list the circumstances under which your agent can act. However, if you want your agent to be able to make decisions concerning artificial nutrition and hydration, you must specifically state in your health care proxy that your agent has the authority to make decisions about these life-prolonging treatments. You must also mention the Health Care Insurance Portability and Accountability Act, or HIPAA, in your proxy. Most health care proxies prepared prior to 2003 are no longer valid because they lack the required HIPPA language.

Most people assume that health care proxies are only used in cases where an elderly patient is unable to make end-of-life medical decisions. However, health care agents may also play an important role when a younger patient is temporarily unconscious. Since people of all ages may lose consciousness or even slip into a coma as a result of a serious illness or injury, I recommend that every adult sign a health care proxy to avoid conflict between family members and to ensure that their wishes are honored.

It is important to discuss your wishes with the agents you name in your health care proxy so that they know what types of treatments and procedures you find acceptable and which ones you may not want to receive.

Although New York State passed a statute in 2010 called the Family Health Care Decisions Act (the FHCA), which gives people the authority to make health care decisions for loved ones who did not sign a health care proxy, having a health care proxy is preferable because it gives you control over who will be making decisions on your behalf.

If your health care provider relies upon the FHCA to identify the person who will decide whether or not to provide life-sustaining treatments, the statutory decision maker may not know your wishes and may not be able to make the hard choices that are often faced by health care agents. In contrast, if you named a health care agent in a health care proxy and discussed with that agent your wishes, it will be easier for the agent to take the necessary steps to honor those wishes.

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

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By Linda M. Toga, Esq.

The Facts:  I am the owner of a family-operated business. My wife and my son John are employed by the business. My other son, Tony, has no interest in being involved with the business. When my wife and I die, I want John to inherit the business, which is my largest asset. However, I want Tony to inherit assets of equal value.

The Question: Are there specific issues I need to address when developing an estate plan?

The Answer: Absolutely. For starters, you need to take an objective look at your business and decide if the business can continue to operate without you.

Even though your wife and son are employed by the business, if you are the person with the knowledge, expertise and contacts upon which the business depends, there may not be much value to the business after your death. In that case, having John inherit the business may result in him actually being short changed with respect to your estate.

If the business cannot thrive without you, instead of inheriting a valuable asset, John could find himself struggling to keep the business afloat and possibly be faced with winding down the business and looking for a new job.

If you determine that the future success of the business is not dependent upon your involvement, you need to determine the best method for calculating the value of the business upon your death. The valuation should take into consideration how John’s involvement with the business may have increased its value over the years.

If, for example, John worked without pay or at a reduced salary, or if he worked more hours than nonfamily employees because it was understood that he would one day inherit the business, then the value of the business should be adjusted down to reflect that fact. If it is not adjusted, John will inherit a business whose value was in part created by him, and Tony will inherit equally valuable assets without having contributed to their value.

Once you have determined how the value of the business will be calculated, you need to consider the value of all of your other assets. If the business is your most valuable asset but the combined value of your other assets is comparable to the value of the business, you can simply leave the business to John and the rest of your estate to Tony.

However, if there is little else in your estate other than your business, such a distribution will not result in equal shares passing to your sons. To address this problem, you can buy a life insurance policy and name Tony as the beneficiary. If you buy a policy with a death benefit that is comparable to the value of your business, when you pass Tony will receive funds equal in value to the business that you leave to John.

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

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By Nancy Burner

Retirement can be an exciting new chapter in someone’s life, but it can also be stressful. The change of lifestyle and income source can lead to anxiety for many individuals reaching retirement. There may be a fear that there is not sufficient income to meet monthly needs or sufficient resources to last the remainder of his or her life.

The reality is that people are living longer and require stable income to meet their daily expenses. A person can maximize benefits and income while preserving assets for the next generation provided that the proper planning has been put into place.

One key strategy in planning for retirement income is maximizing your benefit under the Social Security system. Social Security income will play a major role in monthly income for many retired seniors and should not be overlooked or ignored. Knowing the appropriate time to start taking the benefit will impact the amount of income a person will receive.  “Full retirement age” will depend on when the individual was born.

For those born in 1954 or before, the full retirement age is 66 years old. For those born after 1954 but prior to 1960, the full retirement age gradually rises a few months at a time. For example, someone born in 1957 has a full retirement age of 66 years and 6 months. Anyone born in 1960 and later has a full retirement age of 67 years old.

Taking Social Security prior to the “full retirement age” can result in reduction penalties that could potentially cost the individual almost half of what might have been earned if the individual had waited. Once a person reaches “full retirement age,” it may be advantageous to wait a few years longer until 70 years old to begin collecting Social Security. Unfortunately, the only way to determine if waiting until age 70 is beneficial would be to know how long you are going to live.

Social Security Administration determines your benefit based on the average life expectancy. If the person outlives the average life expectancy, then it was a better choice to wait until 70 to begin the benefit. Nevertheless, no one knows how long they will live, but the reality is that people are living longer and it is essential to make sure you have sufficient income to support your daily needs regardless of how long you live.

It may be much easier said than done to wait to take Social Security. In a perfect world, everyone could wait until the perfect age to start taking Social Security in order to maximize their benefit. The reality may be that income is needed sooner than the ideal age. In this circumstance, there are several tactics that can be used in order to get income, but preserve your Social Security income and allow it to grow until you reach 70 years old.

It is essential to understand that a person may be entitled to Social Security benefits based on a spouse, ex-spouse, deceased spouse or deceased ex-spouse’s earning record. Once a person reaches “full retirement age,” but has not reached age 70, it may be advantageous to use a restricted application and apply only to claim a spousal (or ex-spousal) benefit and wait until 70 to collect your own benefit. This would enable you to start getting Social Security income, but preserve your benefit to allow for the possibility of a higher income. It is important to consult a professional in your area regarding different tactics that can be used to maximize your retirement benefits.

Retirement should be the time in your life where you can relax. The stress of not having enough income to meet necessary daily expenses can be avoided with having the proper plan in place to meet your income needs and give you peace of mind.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Linda M. Toga

The Facts: I recently listed my house for sale with a real estate agent and signed a brokerage agreement. Someone offered the full asking price for the house. My attorney forwarded a contract of sale to the potential buyer’s attorney.

Although the potential buyer had the assets needed to purchase my house, he insisted that costly repairs be made to the house and he did not want to close on the transaction for six months. Since I refused to do the repairs and to wait to close, the deal fell through. The agent is now claiming she is owed the commission since she found a buyer who offered to pay me the full asking price for my house.

The Question: Does a real estate agent earn a commission simply by bringing in a potential buyer who agrees to pay the asking price?

The Answer: Although it is impossible to definitely answer your question without reviewing the brokerage agreement you signed, it would be very unusual if a commission was earned based solely on a potential buyer agreeing to the purchase price. When it comes to residential real estate, commissions are generally earned only when the agent produces a buyer who is “ready, willing and able” to purchase the property.

This standard requires that the seller and the buyer not only agree on the price to be paid, but also on other terms such as the condition of the property, what personal property or fixtures may be included in the sale, financing and the date of possession. A buyer may be ready and willing to purchase but, if he lacks the resources, he won’t be able to make the purchase, precluding the agent from earning a commission.

Similarly, a buyer may have sufficient funds and be able to make the purchase but, if he is not willing to accept the house in its present condition, the sale will not proceed and the agent generally would not have earned a commission under most brokerage agreements.

Even if the buyer and the seller agree on all of the terms and a contract of sale is signed, an agent may not earn a commission if, for reasons beyond the seller’s control, the deal falls through.

In difficult real estate markets where there are many obstacles to closing, experienced real estate attorneys are often able to negotiate and find creative solutions to those obstacles that turn potential buyers into buyers who are ready, willing and able to close on a purchase. When that happens, both the seller and the buyer, as well as the broker, reap the benefits of the sale.

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.

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By Nancy Burner

With tax planning becoming less of an issue for the average client, the focus in estate planning has shifted to asset protection for intended beneficiaries. As attorneys, we often hear our clients tell us that they plan to leave everything equally to their children but that they are concerned that one (or more than one!) has creditor issues or are going through a divorce. How can they ensure that whatever they leave to this child will not have to be spent on his or her debts or given to his or her soon-to-be ex-spouse? The answer is with the use of a descendant’s trust.

Whether an estate plan includes a traditional last will and testament or a trust, planners should direct that any asset left to a child with potential creditors or divorces be left in a descendant’s trust, also commonly referred to as an inheritor’s trust. This is a trust written into the last will and testament or trust document that does not come into effect until after the death of the creator, which will protect the child’s inheritance from outside invaders, including creditors or divorcing spouses. To the extent that assets are left in the trust, creditors do not have access, and the assets are considered separate and apart from the marital estate.

Typically, the descendant’s trust provides that any income generated from an asset in the trust shall be paid to the beneficiary, and principal distributions can be made for health, education, maintenance and support if the child is his or her own trustee or for any reason if there is an independent trustee. An independent trustee is a person not related by blood or marriage to the beneficiary and is not subordinate to the beneficiary, i.e., does not work for the beneficiary.  However, your lawyer can customize the language to provide for you and your beneficiaries’ specific circumstances.

While a beneficiary can be his or her own trustee, if there is a concern about the child’s “questionable spending habits,” a trust creator can consider naming someone else to be trustee for him or her or naming a co-trustee to act with the child. This could be a sibling or another trusted individual.

It is important to remember that many assets are disposed of by beneficiary designation, such as retirement accounts and life insurance. This means that once you draft the descendant’s trust in your estate plan, you must designate the trust created for their benefit as the beneficiary for their share of your assets. This will ensure that the asset passes to their trust and not to them directly.

However, be cautious when designating a trust as the beneficiary of retirement assets. When an individual inherits a retirement account, he or she must begin taking minimum distributions according to his or her life expectancy, but the principal of the retirement account continues to grow tax deferred. When a trust is designated as a beneficiary, the IRS forces the account to be paid out over a five-year period since there is no individual on whom to calculate a life expectancy. In order to ensure that a trust can still get the “stretch-out” over the child’s life expectancy, there must be certain provisions included so that the trust can accept the retirement account. Accordingly, be sure to discuss any beneficiary designations with your estate planning attorney before executing same.

Whether your estate plan includes a simple will or a complicated trust-based plan, incorporating descendants trusts is an excellent way to safeguard assets for your intended beneficiaries.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.