New York Estate Planning & Elder Law Blog

As our parents age, it may become necessary to take on a some type of guardianship role to help them live out their golden years in comfort and dignity. Even highly functioning seniors can use a little help in certain areas to ensure their best interests are served and avoid costly mistake that can leave elders in financial and medical dire straits.

Under New York law, mentally competent seniors may willfully yield control over certain aspects of their lives to trusted friends or family to act in certain ways on their behalf. This is often referred to by the courts as the “least restrictive form of intervention” since it only gives the guardian limited power to help compensate for any limitations faced by the elder.

To achieve this type of guardianship, both parties (the elder and prospective guardian) will need to file their paperwork in the probate court where the elder lives. As long as the elder agrees and can demonstrate to the court why it is in his or her best interest to appoint a guardian, courts are generally inclined to allow this limited guardianship. Depending on the powers granted, the guardian can help their elder manage decisions related to medical care, financial management, and paying taxes.

Fair market value of assets held by the estate is key for determining tax liability of an estate. In Estate of Eva  Kollsman v. Commissioner of Internal Revenue, taxation of the sale of two 17th-century Old Master paintings was contested in federal tax court. The federal U.S. Tax Court agreed to expert analysis of the IRS’s testimony and opposition to the Plaintiff’s valuation of the two paintings sold at auction as “unpersuasive” and “unreliable.”

Appraisal Below Fair Market Value

The two paintings, Village Kermesse, Dance Around the Maypole (“Maypole”) by Pieter Brueghel the Younger, and Orpheus Charming the Animals (“Orpheus”) by Jan Brueghel the Elder or the Younger were, according to the IRS, worth more than claimed by the estate in the case. “Maypole” was later sold by Sotheby’s New York, Auction Lot. 43 in 2009 for $2,100,000 hammer price. Following Eva Franzen’s death In September 2005, Vice President of Sotheby’s North America and South America, George Wachter appraised the value of the paintings at $500,000 for Maypole and $100,000 for Orpheus, respectively. In his testimony before the Tax Court, damage caused by the decedent’s smoking was reportedly the reason for lower than fair market valuation of the paintings in the estate’s 2005 IRS tax return.

The Surrogate’s Court will probate the Last Will and Testament of a decedent, or a copy in some circumstances if those original documents are missing. In New York, the attorney representative of an estate can petition the court to commence probate proceedings with a duplicate of a will. Petition to the Surrogate’s Court must be accompanied by clear and convincing proof that the dislocation of the Last Will and Testament is in error. If a decedent is found to have purposely destroyed the original documents of their own estate, the validity of the claim may be called into question by the court. A preponderance of evidence showing a copy of those documents should be demonstrated to verify that the interests of the decedent, and their estate are accurate.  

Rules of Intestacy Apply

When a court considers if a petition requesting probate of a copy of the Last Will and Testament of an estate, intestate succession laws apply. Rules of intestacy determine whether the parties claiming rights to distribution of a decedent’s assets are those designated as the rightful heirs and beneficiaries of an estate by law. New York rules of intestacy define the rights of surviving spouses, children, and other relatives to an estate’s assets in circumstances where no will exists.

While it might not be the most important things on peoples’ minds, the truth is that all of us need a last will and testament, regardless of whether or not we think our estates are large enough to need one. Without a last will and testament or some type of trust, the assets of our estate will enter into what is known as intestacy and be distributed according to a line of succession dictated by the law, rather than what our final wishes may have been.

In New York, any assets not placed into a trust will need to pass through probate court (known as Surrogate’s Court in the state). Even in cases where the deceased created a will and specifically dictated which assets go to which heirs, the court must still hear the matter to ensure the deceased’s wishes are carried out.

However, certain assets will not pass through probate with or without a will. These types of assets include homes that are jointly owned by spouses, life insurance payouts, retirement accounts with named beneficiaries, and bank accounts set up as payable-on-death. Without a will, any other assets like personal property and savings accounts will be passed along according to New York’s intestacy laws.

Will your credit card debt haunt you when you die? Outstanding debts can be attached to an estate or trust if a creditor files a lawsuit against a decedent in court. Protect your estate and your loved ones from creditor attachment by taking precautionary legal measures to restrict debt collectors from forcing your last will and testament into probate court.

Who is obliged to a decedent’s credit card debt?

Whether a surviving spouse or other loved one is liable for the credit card debt of a deceased family member depends on signatory of creditor agreement. If a spouse or co-signing family member is participatory in a credit agreement, they will be obligated to pay outstanding debts owed on the account after the other co-signing party dies. Joint credit card accounts are the most common example of this circumstance. Authorized users of a decedent’s credit card account, however, are not necessarily liable for paying off the balance after the debtor dies. Not considered the true owner of the account, and authorized user does not have a duty to fulfill the card agreement with payment insofar that they have ceased using the card at the time of the owner’s death.

Creating a trust is one of the most common ways people use to pass on the assets without having to pass the estate through probate and deal with courts, judges, and create a public record of what the individual has accrued over his or her lifetime. Just like there are many ways to pass on an estate to heirs, there are also different types of trusts that people can use to accomplish these goals.

Picking the right type of trust for one’s estate depends on many things including the type of assets in one’s estate, the individual’s goals, and whether some of the assets might go to minor children that will be unable to manage finances for themselves. Whichever type of trust you choose to go with, it should be based on careful analysis and attention to detail to ensure that your final wishes are carried and heirs receive their due inheritance.

Inter vivos trusts

Creditor attachment of an estate to satisfy outstanding debt may subsequently involve those assets in a bankruptcy. Depending if debts are attached to estate property that is involved in a Chapter 7 (personal) or Chapter 11 (business) related bankruptcy, the court will appoint a trustee to oversee and administer the process.

The Bankruptcy Trustee’s role and responsibilities.

Before a bankruptcy petition is submitted to federal court, the bankruptcy trustee is responsible for the documented accuracy of liquidation transactions to meet court requirements for debt dilution (11 U.S. Code § 704 – Duties of trustee). Trustees receive a percentage of assets sold, as well as a fee for service for performing those transactions. Petition for Chapter 7 or Chapter 11 bankruptcy must be accompanied by the estate transaction record. The bankruptcy trustee must review all records involving an estate’s assets, including market value appraisals, and income tax returns. After the record substantiating the bankruptcy petition has been verified by the trustee, court filing may proceed.

The U.S. federal Securities and Exchange Commission (“SEC”) offers guidelines to Unit Investment Trusts (“UITs”). A fixed portfolio of securities with specific expiry, UITs are a trust vehicle for high wealth investors looking for estate portfolio diversification. The composition of UITs, generally a portfolio of bonds, stocks, and other securities, remains the same for the duration of the trust. Similar with primary market, closed-end fund products and open-ended mutual funds, UITs require a collective of investors.

The “Right Blend”of Diversification

For investors looking for diversification, UITs offer a unique investment model for stable financial planning. Both bond trusts and stock trusts can be formed as unit investment trusts. Bond UITs offer consistent income at a lower risk rate. Payments from bond UITs continue until date of maturity, at which time the full asset is paid out to investors. Stock UITs “issue a fixed number of units (like closed-end funds)” at initial public offering (“IPO”) during a period. IPO unit purchases offer “unitholder” investors a net cost basis in a trust.

A last will and testament is an incredibly important document that needs to be kept safe and help ensure that when your estate passes through probate, New York courts will allow your executor to carry your final wishes and disperse assets to your heirs. After taking all of the important steps like consulting with family members, working with a trust and estate attorney, and finally drafting the last will and testament, great care needs to be taken in storing the original copy of the will to make sure the estate can pass through probate courts as quickly as possibly and make the job of the executor that much easier.

To preserve the original copy of their last will and testament, testators (the person creating the will) have a number of options to preserve the original copy of their executed will. Many people elect to keep their executed will in a safe deposit box at a bank or other secured facility. It is important to note that no matter where the document is kept safe, the executor must know the location of the last will and testament to pass the estate through probate.

New York probate law holds that if the original executed copy of the last will and testament is lost, the probate court will presume the testator meant to revoke the document and proving anything to the contrary can be a difficult, time consuming, and expensive endeavor. Even if a bona fide copy can be produced, New York probate courts will likely not accept the document and enter it as a copy of the will.

Legalized marijuana is having important legal impact on state property rules, and estate law is no exception. In “pot legal” states, estate planning attorneys are faced with questions about the transferability of cannabis assets to an estate or trust, and existing rules affecting distribution to beneficiaries. If an estate planning client owns a marijuana business, the option of estate transfer of cannabis assets will depend on both federal and state statute to ensure a client’s intent is carried out within the limits of the law.  

Cannabis Assets

Estate distribution of cannabis-linked assets at death is an issue that has received differential treatment under state and federal law. In some states, a will may be seized, and a beneficiary held criminally liable for an estate’s possession of illegal cannabis products and materials intended for distribution. There is also the potential that courts will not permit an executor to administer a will which contains cannabis assets. If those assets are part of a state-legal medical treatment program, there will be issues associated with an executor’s capacity to administer distributions from an estate or trust.