New York Estate Planning & Elder Law

Common Estate Planning Mistakes and How to Avoid Them / White Plains, NY & Greenwich, CT

“Even those with the best of intentions can fall into the trap of estate planning misinformation. Estate planning attorneys frequently hear rumors and ill advice disguised as facts.”

Every family has one: the brother-in-law or aunt who knows everything about, well, everything. If the information is wrong, expensive problems are created, especially when it comes to estate planning. Estate planning attorneys devote a good deal of time trying to educate their clients to help prevent unnecessary and costly mistakes, as described in the article “Misinformation, poor assumptions result in major planning mistakes” from The News-Enterprise.

The most common is the idea of a “simple” estate plan. What does “simple” mean? For most people, the idea of “simple” is appealing—they don’t want to deal with long and complicated documents with legal phrases they don’t understand. However, those complex phrases are necessary, if the estate plan is to effectively protect your interests and loved ones.

Another mistake is thinking an estate plan is a one-and-done affair. Just as people’s lives and fortunes change over time, so should their estate plan. An estate plan created for a young family with small children won’t work for a mature couple with grown children and significant savings.

Change also comes to family dynamics. The same cousin who was like a sister during your teen years may not be as close in values or geography, when you both have elementary school children. Do you still want her to be your child’s guardian? A beloved brother-in-law isn’t so beloved if he divorces your favorite sister. An updated estate plan takes into account the changing relationships within the family, as well as the changing members of the family. When families change, estate plans need to be updated.

Here is a huge mistake rarely articulated: if you don’t think about death or incapacity, then neither event will happen. We know that death is inevitable, and incapacity is statistically probable. Planning for both events in no way increases or decreases their likelihood of occurring. Instead, planning can provide peace of mind in knowing you have prepared for both events.

No one wants to be in a nursing home but telling loved ones you want to remain at home “no matter what happens” is not a plan for the future. It is devastating to move a loved one into a nursing home. However, people with medical needs need to be there to receive proper care and treatment. Planning for the possibility is better than a family forced to make such arrangements, financial and otherwise, on an emergency basis.

Do you remember that all-knowing family member described in the start of this article? Their advice, however well-intentioned, can be disastrous. Ill-advised alternatives to estate planning take many shapes: putting the house in an adult child’s name or adding an adult child’s name to a parent’s investment accounts. In either case, if the beneficiary has a future tax liability, debt issue or divorce, the parent’s assets are there for the taking.

A properly prepared estate plan, created with the guidance of an experienced estate planning attorney, will protect you, those you love, as well as the assets you’ve gained over a lifetime. Don’t fall for the idea of “simple” or back-door alternatives. Formalize your goals so your plans and wishes will be followed achieved.

Reference: The News-Enterprise (Aug. 24, 2021) “Misinformation, poor assumptions result in major planning mistakes”

For more information on asset preservation and estate planning, please visit my estate planning website.

Divorce, Death and Details: Missteps can Create Estate Planning Disasters / Greenwich, CT & New York, NY

“After the divorce, Mike logged onto the employer’s benefits system and tried, but failed, to delete Wendy as the beneficiary of his life insurance.”

This estate battle shows how small details can become huge headaches. Four courts and several years after this estate battle began, a family won a case that could have been easily prevented, as reported in The Dallas Morning News article “The way out of the ERISA trap: A tale of divorce, death and money.”

A couple married and then divorced. The divorce decree clearly stated that Mike was awarded all of his employee benefits, including his life insurance. However, when Mike logged into his employer’s benefits systems, it would not allow him to delete his ex-wife as the beneficiary of his life insurance. It may have been programmed that way. There are laws concerning removing spouses from employee benefits. Or it was a glitch. However, Mike did not pursue it.

When Mike died, he was survived by his parents, who claimed his estate, but the $377,000 life insurance policy was not part of his estate because his ex-wife was still the beneficiary.

His parents filed a claim with the insurance company for the proceeds of the insurance policy.

The first court they filed in was the probate court, so they could be properly recognized as Mike’s heirs. The probate court found in their favor and named Mike’s dad as the independent administrator of his estate.

The second court was federal court. That’s because employee benefits are governed by a federal law ERISA—the Employee Retirement Income Security Act—that controls employee benefits, including employer-provided life insurance. These matters can only be dealt with by a federal court.

The federal court ruled that because Mike’s ex was on the beneficiary form, she was the rightful owner.

However, Wendy had waived her rights to the insurance benefits when she signed off on the divorce decree. Mike’s parents were determined to win this battle.

Their legal team took the argument next to court three—the original divorce court. Mike’s dad, in the position of the estate administrator, argued that while Wendy did have a right to receive the money under ERISA, she did not have a right under state law to keep it. She had waived that right in the divorce decree. The divorce court agreed and found that Mike’s estate owned the proceeds. The money was to be turned over to Mike’s parents.

Court number four came when Wendy petitioned the state appellate court to overturn the award. She lost.

What were the factors that allowed Mike’s parents to win this case? The divorce decree contained clear language regarding the life insurance policy. If it had been poorly drafted, the results could have been different. Mike’s parents went through all the correct procedural courts—establishing heirship, then probate, then divorce enforcement case.

One step could have been added: a restraining order so that the ex could not squander the money between the time that she received the proceeds and when the final judgment was rendered.

Reference: The Dallas Morning News (Jan. 24, 2021) “The way out of the ERISA trap: A tale of divorce, death and money”

For more information on asset preservation and estate planning, please visit my estate planning website.

Some States Have No Estate or Inheritance Taxes / Greenwich, CT & White Plains, NY

“As states address budget woes due to the pandemic, one place they may turn to for revenue as they have in past economic crises is death taxes.”

The District of Columbia already moved to reduce its exemption from $5.67 million in 2020 to $4 million for individuals who die on or after Jan. 1, 2021. A resident with a taxable estate of $10 million living in the District of Columbia will owe nearly $1 million in state estate tax, says the article “State Death Tax Hikes Loom: Where Not To Die In 2021” from Forbes. It won’t be the last change in state death taxes.

Seventeen states and D.C. levy their own inheritance or estate taxes in addition to the federal estate tax, which as of this writing is so high that it effects very few Americans. In 2021, the federal estate tax exemption is $11.7 million per person. In 2026, it will drop back to $5 million per person, with adjustments for inflation. However, that is only if nothing changes.

President Joseph Biden has already called for the federal estate tax to return to the 2009 level of $3.5 million per person. The increased tax revenue purportedly would be used to pay for the costs of fighting the “pandemic” and the “infrastructure improvements” he plans, but many believe such a move would potentially destroy family businesses, farms and ranches that drive and feed the economy in the first place. If that were not troubling enough, President Biden has threatened to eliminate the step up in basis on appreciated assets at death.

This change at the federal level is likely to push changes at the state level. States that don’t have a death tax may look at adding one as a means of increasing revenue, meaning that tax planning as a part of estate planning will become even more important in the near future.

States with high estate tax exemptions could reduce their state exemptions to the federal exemption, adding to the state’s income and making things simpler. Right now, there is a disconnect between the federal and the state tax exemptions, which leads to considerable confusion.

Five states have made changes in 2021, in a variety of forms. Vermont has increased the estate tax exemption from $4.25 million in 2020 to $5 million in 2021, after sitting at $2.75 million from 2011 to 2019.

Connecticut’s estate tax exemption had been $2 million for more than ten years, but in 2021 it will be $7.1 million. Connecticut has many millionaires that the state does not wish to scare away, so the Nutmeg state is keeping a $15 million cap, which would be the tax due on an estate of about $129 million.

Three states increased their exemptions because of inflation. Maine has slightly increased its exemption because of inflation to $5.9 million, up from $5.8 million in 2020. Rhode Island is at $1,595.156 in 2021, up from $1,579,922 in 2020. In New York, the exemption amount increased to $5.93 million in 2021, from $5.85 million in 2020.

The overall trend in the recent past had been towards reducing or eliminating state estate taxes. In 2018, New Jersey dropped the estate tax, but kept an inheritance tax. In 2019, Maryland added a portability provision to its estate tax, so a surviving spouse may carry over the unused predeceased spouse’s exemption amount. Most states do not have a portability provision.

Another way to grab revenue is targeting the richest estate with rate hikes, which is what Hawaii did. As of January 1, 2020, Hawaii boosted its state estate tax on estates valued at more than $10 million to 20%.

If you live in or plan to move to a state where there are state death taxes, talk with your estate planner to create a flexible estate plan that will address the current and future changes in the federal or state exemptions. Some strategies could include the use of disclaimer trusts or other estate planning techniques. While you’re at it, keep an eye on the state’s legislature for what they’re planning.

Reference: Forbes (Jan. 15, 2021) “State Death Tax Hikes Loom: Where Not To Die In 2021”

For more information on asset preservation and estate planning, please visit my estate planning website.

What States Make You Pay an Inheritance Tax? / New York, NY & Greenwich, CT

“As if losing a loved one weren’t hard enough, you might also have to add ‘death tax’ on the property that you receive from the estate—depending on where you live—in addition to all the other costs of death.”

Let’s start with defining “inheritance tax.” The answer depends on the laws of each state, so you’ll need to speak with an estate planning attorney to learn exactly how your inheritance will be taxed, says the article “States with Inheritance Tax” from yahoo! finance. There are six states that still have inheritance taxes: Iowa, Kentucky, Nebraska, New Jersey, Maryland and Pennsylvania.

In Iowa, you’ll need to pay an inheritance tax within nine months after the person dies, and the amount will depend upon how you are related to the decedent.

In Kentucky, spouses, parents, children, siblings and half-siblings do not have to pay inheritance taxes. Others need to act within 18 months after death but may be eligible for a 5% discount if they make the payment within 9 months.

Timeframes are different county-by-county in Maryland, and the Registrar of Wills of the county where the decedent lived or owned property determines when the taxes are due.

Only a spouse is exempt from inheritance taxes in Nebraska, and it must be paid within a year of the decedent’s passing.

New Jersey gets very complicated with a large number of people being exempted as well as qualified religious institutions and charitable organizations.

In Pennsylvania, rates range from 4.5% to 15% depending upon the relationship to the decedent. There’s a 5% discount if the tax is paid within three months of the death, otherwise the tax must be paid within nine months of the death.

As you can tell, there are many variations from who is exempt to how much is paid. Pennsylvania exempts transfers to spouses and charities, but also to children under 21 years old. If one sibling is 20 and the other is 22, the older sibling would have to pay inheritance tax, but the younger sibling does not.

There’s also a difference as to which property is subject to inheritance taxes. In Nebraska, the first $40,000 inherited is exempt. Pennsylvania exempts certain transfers of farmland and agricultural property. All six exempt life insurance proceeds when they are paid to a named beneficiary, but if the policies are paid to the estate in Iowa, the proceeds are subject to inheritance tax.

Note that an inheritance tax is different than an estate tax. Both taxes are paid upon death, but the difference is in who pays the tax. For an inheritance tax, the tax is paid by heirs and the tax rate is determined by the beneficiary’s relationship to the deceased.

Estate tax is paid by the estate itself before any assets are distributed to beneficiaries. Estate taxes are the same, regardless of who the heirs are.

There are twelve states and the District of Columbia (Washington D.C.) that have their own estate taxes (in addition to the federal estate tax). Note that Maryland has inheritance, state and federal estate taxes. The rest of the states with an estate tax are Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Washington and Vermont.

The large variations on estate and inheritance taxes are another reason why it is so important to work with an experienced estate planning lawyer who knows the estate laws in your state.

Reference: yahoo! finance (Jan. 6, 2021) “States with Inheritance Tax”

For more information on elder law and estate planning, please visit my estate planning website.

Can an Executor be Replaced? / New York, NY & White Plains, NY

“Drafting a last will and testament can help to ensure that your assets are distributed according to your wishes after you pass away. You can also use your will to name a legal guardian for minor children or choose an executor for your estate.”

The executor of a last will and testament is the person responsible for carrying out the instructions in a will. Giving a person this role is giving them the authority to handle many tasks concerning an estate, as explained in the article “How to Change the Executor of a Will” from KAKE.com. The person you name can be anyone you wish, from a spouse to a trusted family member, an adult child or even an estate planning attorney. Minor children may not serve as executors and some states do not permit convicted felons from serving as executors.

What does the executor do?

A beneficiary, a person who receives an inheritance from the estate, is permitted to serve as an executor, but the executor who is a beneficiary may not witness the will if they have a direct interest in it. The executor usually is in charge of:

• Getting death certificates
• Creating an inventory of the decedent’s assets, unless one exists already
• Contacting an attorney to begin the probate process
• Notifying financial institutions, including banks and investment firms of the person’s death
• Obtaining a tax ID number for the estate and opening an estate account
• Distributing assets to the persons named in the will.

The executor may not change the terms of the will, only carry out the instructions. They may collect a fee for their services, usually a percentage of the estate’s value and whether they collect their fee is an individual decision.

Can you change the name of the executor on your estate?

There are many reasons why you might wish to change the person you originally named as executor to your estate. This is an important task, and if there have been changes in your life, then your estate plan and will should reflect those changes. Some of the reasons for changing your executor:

• If the original executor dies, or becomes seriously ill and cannot fulfill their duties
• If your spouse was the executor, but is now your ex-spouse
• The person originally named as executor does not want the responsibility
• Your original executor now lives many miles away.

There are two different ways to change the executor of your will. It is recommended that you discuss with your estate planning attorney which of these two ways are better for your unique situation. Simple solutions often turn into estate planning nightmares.

How is a Codicil Used to Change the Executor?

A codicil is an amendment to a will that changes the terms, without changing the entire will. You specify the changes you want to make to your will, the name of the person who you now want to serve as executor from now on and the date the change needs to take effect. Estate laws are different in every state, so check with your estate planning attorney on the best way to do this. In some states, you’ll need at least two witnesses to be present when you sign and date the codicil. Remember that beneficiaries may not witness the codicil. Be careful to keep your original will and the  original codicil in a safe place.

Why Change the Entire Will to Change Only the Executor’s Name?

The reasons for your changing your executor’s name may have occurred in combination with other changes in your life that warrant a review of your entire estate plan. This should be done every three or four years, or every time there are big life changes or big changes to tax laws. If you don’t review your estate plan, you can miss out on new opportunities to protect more of your estate for your family.

What If I Don’t Name an Executor?

Not having an executor is similar to not having a will. If you do not have either, the court will assign an executor to be in charge of distributing your estate, according to the laws of your state. You may not like how the law distributes your assets, but you will have given up any control. It’s much better for all concerned for you to have a will and make certain to have an executor.

Reference: KAKE.com (Dec. 29, 2020) “How to Change the Executor of a Will”

For more information on asset preservation and estate planning, please visit my estate planning website.

Nothing is Certain but Death and Taxes / New York, NY & Greenwich, CT

“Most of us have heard the quote from Benjamin Franklin, ‘In this world, nothing is certain except death and taxes.’”

No one actually enjoys paying taxes, and few of us really want to think about our own death, but both require advance planning and careful consideration, advises Ohio’s Country Journal in the article “Death and Taxes.”

Think about how quickly the year has gone. Doesn’t it feel like only yesterday you were making New Year’s resolutions? Then it was tax season, which for more people is worse than going to the dentist. While we all know we should see our dentist on a regular basis, we also like to forget that we need to tackle our estate plan.

Preparing for taxes and death: neither one is associated with warm, fuzzy feelings, but we still need to plan for it. This is to avoid burdening our families and loved ones. It’s hard enough to grapple with loss and grieving, but to be completely unprepared, makes matters worse for those who are left behind. Here are some suggestions to prepare for these certainties of life.

Have a last will and testament prepared. Work with an estate attorney who is licensed to practice in your state. It doesn’t matter if you have a simple life or a complicated one. You need a will.

Designate a power of attorney. Choose someone you trust to be able to sign important documents and take care of business, if you are unable. It does not have to be a family member. Sometimes a trusted advisor is the best candidate for a POA.

Have a Health Care Proxy. Again, choose someone you trust who will make the decisions you want. Talk with them about what you want and put your wishes in the document.

Create a master file and tell someone where important papers can be found. The documents include insurance policies, mortgages, wills, trusts, POA, health care proxy, information about bank accounts, investment accounts, retirement plans. Don’t leave out contact information for your estate planning attorney, CPA, financial advisor or healthcare providers.

Plan your funeral service. Describe what you would like to happen, in as much detail as you can manage. This will help your family immeasurably, so they won’t be left wondering what you’d want or wouldn’t want. If you plan on being buried, purchase a plot. If you want to be buried with your spouse, purchase two adjoining plots.  Consider pre-paying for your funeral by purchasing an irrevocable or revocable pre-need agreement.

Don’t forget digital assets. Make a list of all your digital accounts, usernames and passwords. If possible, name a person to handle your online accounts. Some digital platforms allow you to designate a person to manage your accounts, access your data and close your accounts. Others do not. If you have valuable data online, from business records to family photos, make sure you’ve planned for these assets.

All these items can be updated, as needed. In fact, every three or four years, you should update your estate plan, so that it is current with changing laws and doesn’t miss any opportunities. The same goes for large events in life, including births, deaths, marriage and divorce. Speak with an experienced estate planning attorney to make sure you are ready for the sure thing.

Reference: Ohio’s Country Journal (August 26, 2019) “Death and Taxes”

For more information on asset preservation and estate planning, please visit my estate planning website.

A Good Death Is Rarely Achieved / New York, NY & White Plains, NY

Passing away quietly at home without pain, is not a common occurrence.

Increasing the chances of achieving a peaceful death requires some careful planning as well as conversations with loved ones, according to The Wall Street Journal in “Preparing For a Good End Of Life.” You will want to make sure your loved ones are prepared to carry out your wishes, even when they may not be ready to bid you farewell.

We hope to die in our own beds, at home, surrounded by those we love, relatively pain free and able to say our goodbyes with dignity. However, this is rarely achieved. Pain is a major barrier to death and nearly half of Americans die without the medication that could ease their pain. More than a quarter of Medicare members cycle through an ICU (Intensive Care Unit) in their final month. That is where a fifth of Americans pass away.

Of the hundreds of people who were interviewed for the article, as well as experts in end-of-life medicine, many offered steps that individuals and their loved ones can take in an effort to die in peace.

What does a good death look like to you? Most people worry about having their families burdened by the financial weight of prolonging their life, or by having to make tough medical decisions. Living as long as possible is at the bottom of most people’s preferences. Imagine what you would want to happen and then plan backwards. Advanced medicine is geared toward technology and prolonging life. The first choice of doctors and hospitals will be to do whatever can be done to maintain life, so you’ll have to be very clear with your family and your estate planning attorney about what you want. Put this in an advance directive. Select someone who has nerves of steel and can advocate for you when the time comes. This person may not necessarily be a family member — they may be too emotional in a crisis to follow your wishes.

Take charge of your death. Your doctor should be curious about what you want and be willing to listen. If that’s not how your doctor works, you may want to find another one. One woman was told to undergo a series of severe treatments for a stage four cancer that would not have cured her. She made the decision not to continue with that doctor but found one that asked her, simply, “What do you want to accomplish?” In the past eight years, she has lived her life on her terms, relies on a daily pill and a one-time radiation treatment to eliminate pain from the cells that have moved into her spine. She focused on her quality of life.

Understand the path of your diagnosis. Ask your doctor to create an illustration of how you might feel and function during your illness and treatments. A visual will often give you more information than a series of numbers. A sketch may help you understand the start of a precarious health stage, when care moves from curing to caring and comfort.

Two of the best deaths studied involved people with little savings, and some of the worst were experienced by people with endless assets and connections. There are government programs for low income people and programs for home care to relieve family caregivers.

Find your tribe and arrange for caregivers. Dying at home takes work. Hospices may provide visits from nurses and other professionals. However, friends, relatives and hired aides will be the ones undertaking the difficult tasks. This doesn’t take training — it takes emotional strength and a willing spirit. One person will be needed to take charge, with a group of part-timers — as many as can be gathered. Having a deep bench of committed friends and family members spreads the care, so no one person is overwhelmed.

Take control of the room. You can’t have candles when oxygen is in use, but there’s a lot that can be done to transform a room to make it more comforting. Turn a window shelf into an altar for flowers, have family photos or religious objects in eyesight. Use electric LED candles to create a sense of a sacred space. If technology isn’t necessary, ask for the removal of machines that beep and tweet.

Remember the role of death. Culturally, we have pushed death away for the last century. However, our ancestors relied on rituals and customs to ease the pain for survivors and those who were passing away. Don’t reduce the end of life to a series of medical processes. Those who contemplate their own mortality and aging often live better lives and experience better deaths than those who don’t.

Reference: The Wall Street Journal (Feb. 9, 2019) “Preparing For a Good End Of Life”

For more information on elder law, retirement planning and estate planning, please visit my estate planning website.

How Do You Fill Void when Caregiver Role Ends? / Greenwich, CT & White Plains, NY

What happens to the caregiver when your loved one is gone?

Providing care for another adult can be difficult, because the caregiver often puts their life on hold.  They may find themselves facing a new challenge later, according to the AARP Bulletin in “What Happens When Caregiving Ends?”

The article concerns a 65-year old woman who devoted two years of full-time caretaking for her mother. When her mother died, she was left with the process of grieving and a big void in her life.

When their duties as caregivers end, it takes a while to adjust. Some say it takes from six months to a year to start feeling like themselves again. Here are some lessons learned from caregivers:

Stay busy and don’t let yourself become isolated. If you loved to travel before becoming a caregiver, return to that passion. You can travel with friends, or colleagues—best to go with friends. Others find comfort in passions like writing, which can be soothing after years of coping with constant emergencies.

Expect unexpected emotions. Caregiving is an emotional process as well as a mental and physical one. A range of emotions, from sadness and grief to anger and frustration, often emerge when your daily existence includes free time. There’s also a lot of guilt, which is very normal. Years, months or weeks of not sleeping, giving up your own interests and enjoyment in life, can lead to frustration. Then, when the person dies, you feel terribly guilty about the relief you may feel.

Don’t expect the strong and often conflicting feelings to go away overnight. It often takes years for people to work through all of the emotions surrounding the loss of a loved one. That is especially true, if they were the primary caregiver. We tend to think in terms of one-year anniversaries, but for many people the first year is wrapped up on settling estates, distributing possessions and dealing with the business end of someone’s life. In the second year, when those tasks are done, or less time-consuming, the emotions can start flooding in. You might expect yourself to be “over it,” but you can’t force yourself to recover. It takes a very long time.

Delay any big decisions. If you’ve been putting off big decisions until after caregiving ends, give yourself permission to continue to delay them. You’re still in a fragile state and need to move slowly. Selling a house, getting a divorce or remarrying is best done when you are healed. Patience is not easy, especially when you want to make a fresh start, or move away from a home with painful memories. However, going slowly will provide you with time to heal, and to gain perspective that will allow for better decisions.

Give yourself permission to move on. When the time is right, you’ll be ready to move on. 

Reference: AARP Bulletin (November 2018) “What Happens When Caregiving Ends”

For more information on elder law and estate planning, please visit my estate planning website.

Condolences Help Them through Tough Times / Greenwich, CT & White Plains, NY

Helping a family during a time of mourning is often as simple as a sincere statement of sympathy.

During a time of mourning, we can often help the family members with an effort that does not require a lot of time or investment, according to the Wills, Trusts & Estates Prof Blog in "How Condolences Alleviate Grief."

The easiest and one of the best ways to help people mourning for a loved one is to let them know we care and to offer our condolences. This does not require a grand gesture. It only requires a sincere statement of sympathy.

Sending a card or flowers is another way to offer condolences. Charitable donations in the name of the deceased are another small thing that can let grieving people know that you care.

This is important. Knowing that other people really do care helps those who are grieving.

It does not fix everything. It does not bring anyone back to life. Nevertheless, it does help people move on and makes it easier for them to handle other things that need to be done when a loved one passes away, such as making funeral arrangements and dealing with the estate.

Reference: Wills, Trusts & Estates Prof Blog (March 20, 2017) "How Condolences Alleviate Grief."

For more information on asset preservation and estate planning, please visit my estate planning website.