Articles Posted in Estate Planning

A last will and testament is an important legal document that tells our loved ones and the government how we wish for our estate to be apportioned to heirs and friends upon passing away. Although New York trust and estates law give testators wide latitude to decide what parts of their estates go to whom, there are still certain restrictions on what types of property can be given away if there is a surviving spouse and circumstances in which a testator may be coerced into created an invalid law.

In cases where some portions of the last will and testament are invalide, the surrogate court probating the will must admit the document if the court is satisfied the will is genuine, the testator was of sound mind or not under any undue restraint, and was executed in accordance with statutory requirements. However, the court will have to throw out parts of the will that are otherwise invalid so long as it can separate without defeating the testator’s intent or destroying the overall testamentary scheme.

Courts can also strike portions of a last will and testament they deem to be invalid due to improper execution, such as additions made to the document after a witness affixed his or her mark on the will. This same action may be applied when courts deem that addendums to a will were made when the testator was incapacitated or otherwise coerced into adding a section to the document. Courts are well within their power to isolate these particular sections of the will and preserve the original intentions of the testator that were properly executed.

The Internal Revenue Service (IRS) recently announced the official estate and gift tax limits for 2019 will increase over the previous year from $11.18 million in 2018 to $11.4 million in 2019 which means married couples can now leave up to $22.8 million in assets to heirs without paying taxes. While the estate and gift tax has increased over last year, the annual gift exclusion amount (the amount in gifts that may be given each year without tax) remains at $15,000 for individuals and $30,000 for couples.

Recent tax reform legislation has not only decreased corporate and income taxes but also greatly expanded the estate and gift tax threshold from previously long-standing levels. For many years, the estate and gift tax limits held firm at a base of $5 million per individual with adjustments for inflation but the 2017 tax reforms passed effectively doubled that until 2024 when the provisions expire. As a result, the number of estates subject to such federal taxes has fallen to less than 2,000 in 2018 from almost 5,000 in 2013.

In order for married couples to take advantage of the full $22.8 million in estate and gift tax exemptions, they will need to utilize a concept called portability. Essentially, this allows one spouse to leave his or her unused estate tax exemption to the surviving spouse and to do you must elect it on the estate tax return of the first spouse to die, even when no tax is due. If the portability option is not exercised, the surviving spouse may be left with a hefty federal tax bill.

Every single person, regardless of how large or modest they may feel their assets are, needs to have a well thought out estate plan that covers three very basic planning instruments that will serve your best interests. Those three planning instruments include a durable power of attorney, a health care proxy, and a last will and testament. Each of these will cover an important aspect of our lives and our family’s lives after we pass away and should be taken very seriously, regardless of what you believe your financial or lifestyle limitations may be.

First, your estate plan will need a durable power of attorney allows you to designate another person to manage your property and/or finances during your life in the event your are unable to do so for yourself. This authority should be vested in a trusted individual you can trust and be sure will act solely in your best interest should the time come that you will need to rely on another for some type of guardianship.

Next you will need to create a health care proxy, which is essentially a form of a power of attorney that deals solely with health care decisions. This durable power of attorney allows you to appoint another person to direct your medical care and make important end of life decisions should you be incapacitated. In New York, this health care proxy should will need a medical directive (also known as an advance directive) providing guidance to your health care agent.

Creating an estate plan is an important process every single person needs to undertake in his or her lifetime to ensure their final wishes are carried out and estate assets are distributed properly upon death. Despite this importance, many ordinary people still make excuses with one reason or another why they do not need an estate plan, last will and testament, or set up a health care directive.

One of the most common excuses people make for not having an estate plan is thinking that their estate is simply too small or they do  not have assets that warrant that level of planning. Even if your estate is modest, you still need to create a living will or health care directive to help loved ones make health and financial decisions on your behalf in the instance you may be left incapacitated or otherwise unable to act for yourself.

Another common excuse is believing that having joint ownership of bank accounts with children is a proper mechanism to transfer wealth to upon passing away. The reality is that unless you are only leaving behind a single child, it is nearly impossible to separate accounts for more than one child equal. This can become even more difficult if you find yourself suddenly incapacitated or unable to manage these accounts yourself.

A recent report by Reuters suggests that many older adults are abstaining from taking their prescribed antidepressants or continuing to use them as directed by their doctors, that according to a Dutch study examined by the news outlet. If true, the study highlights mental health challenges facing millions of people around the world who may otherwise be willing to continue medication issued by a psychiatrist but balk at treatment from primary care doctors.

The study examined roughly 1,500 people who were at least 60 years old and diagnosed with depression in 2012 by primary care providers finding about 14 percent of patients with depression failed to take their antidepressants within two-weeks. For those patients who did take their medication on time, 15 percent missed taking doses 20 percent of the time and 37 percent overall ceased taking their antidepressants altogether within one year.

The study also found that many patients in the study tended to be more consistent with taking medication when these individuals were already used to taking daily medications for a variety of other chronic health issues. Those patients already on other medications were 11 percent less likely to fail at beginning antidepressant regimens and 13 percent less likely to take these same drugs on an inconsistent basis.

When an elderly family member is diagnosed with Alzheimer’s related dementia, it is time to discuss the details of legacy, financial, and estate planning. While connecting a loved one with support services is the priority when their memory is beginning to fade from age, formation or modification of financial and estate planning to meet their needs during their last years is often a key family decision. No matter how well an elderly family member has planned for financial and estate distributions, review of those plans to accommodate the expense of residential treatment or other medically related support costs will ensure that an elder is taken care properly while alive; as well as cover memorial and funeral costs at time of death. A licensed attorney can assist with the formation of a combined financial, estate, and legacy plan to suit an elder’s needs.

Law of Diminished Capacity

Within U.S. federal law, the definition of “diminished capacity” applies to incapacitated parties no longer exhibiting full mental ability. If an elder lacks the ability to make routine decisions about complex matters, they may be suffering from memory loss or dementia related to the onset of Alzheimer’s disease. Patients diagnosed with dementia still have legal rights to their property and assets. Spouses of incapacitated parties are the primary decision makers under law. According to New York rules of intestate succession EPTL 4-1.1, If no living spouse or will exists, and another family member has not already been given power-of-attorney, rights to legacy, financial and estate planning on behalf of  an incapacitated party may be assigned to court appointed trustee.

In October 2018, new statutory legislation recommended by the Irish Law Reform Commission of the country’s cabinet considered a rule that would block those found guilty of killing their domestic partner or spouse from unjust enrichment attached to financial or estate proceeds. In the United States, spousal property is customarily subject to rules of intestate succession in a probate court proceeding, when one spouse is found to have been unlawfully killed by another. If not other legitimate heirs or beneficiaries are present, spousal property part of estate assets is escheat to state coffers. In states with Dead Man Statute provision, heirs or beneficiaries may contest the last will and testament of a decedent. New York Dead Man Statute protects a decedent from a spouse making false claims in court.

Irish Estate Law and Spousal Protections

The proposal comes at a time when an Irish citizen, Eamonn Lillis received distribution of a near 1.3m euros (£1.16m) from his spouse’s estate, despite being found connected to her manslaughter. Jailed for six years between 2010 and 2015 for assault and battery of Celine Cawley, his wife, Lillis maintains the responsible party was a trespasser on their property, who had broken into the home. The proposed legislation seeks additional protections for spouses harmed by their partners; prohibiting guilty parties from any financial benefit flowing from spousal property. The Irish government is also considering statutory provision concerning cases where a spouse has aided or abetted in the murder or manslaughter of their partner. To present, Irish law has not prohibited claimants who have commissioned unlawful killings of their spouse from inheriting joint assets (i.e.  co-owed property); as seen in the High Court decision in favor of Lillis’ claim.

New York State Department of Taxation and Finance (“DTF”) announcement that it will investigate President Donald Trump’s estate comes at a time when the federal Internal Revenue Service (“IRS”) is pursuant of accurate reporting information about the presidential family’s wealth. Trump’s lawyers cite the 3-year federal and New York state statute-of-limitations in response to recent allegations that the estate aggressively undervalued properties on state and federal tax record. Properties reported on a gift or estate tax return form to the IRS and the state, however, make it unlikely additional disclosure will be required, and not after the statute runs out.

The Presidential Audit

A New York Times report suggests Donald Trump gave Fred Trump a $15.5 million stake in a Trump Palace development in exchange for forgiveness of loans to his son – an amount subject the federal 55% gift tax rate. Fred Trump apparently never reported the gift at the individual-level, nor is it reflected on the estate tax return, and this has the potential to involve Donald Trump an investigation due to his role as an executor of the estate. In 2000, the Fred and Mary Trump estate was audited. The audit included gift tax returns that had been audited in the 1990s, making any further investigation impossible as those records could not be reopened.