New York Estate Planning & Elder Law Blog

Nowadays, almost all of us have some kind of social media account, online banking profile, or us a cloud-based system to store data and conduct various forms of business. Just like any other asset in our estate, we need to create a plan that allows a trusted friend or family member to take over these accounts after we pass away and ensure that our final wishes are carried out.

Fortunately, New York state laws understand the changing times and make estate planning for digital assets much easier than it was in years past. New York is one of several states which passed the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). As with the remainder of our estates, the law allows individuals to appoint an executor to manage digital assets upon the death of the testator.

Under the RUFADAA, electronic communications are considered digital assets that require strong privacy protections because they are often private correspondence between one persona and another. To give access to these sensitive communications, testators need to give explicit permission, even for seemingly harmless social media accounts like Facebook or Twitter.

From the 1980s forward, patrimony laws have impacted major museum institutions around the globe. As source countries filed lawsuits against the cultural agents of former colonial empires, requesting return of antiquities and other cultural property, the response to due diligence by those foreign jurisdictions continues to be uneven. Conflicts over the rightful ownership of cultural property can also affect estate planning and probate proceedings. Beneficiary cultural institutions responsible for the accession, preservation, and management of those rare cultural objects can also decide to deaccession those gifted assets after the death of an estate holder, further complicating a matter.

Legal Definition of “Cultural Property”

Cultural property is distinct from personal or other forms of property within federal law. The United States recognizes the cultural property of sovereign tribal or foreign nations based on legal claims of territory, identity, or moral right. Rights to the ownership of registered cultural assets is considered a “superior claim” within international law; and supersedes “good faith” monetary transactions by collectors or museums.

Although none of us expect that we might not be able to manage our affairs later on in life, it is still important to plan out a contingency just in case circumstances like old age, a catastrophic injury, or loss of mental capacity takes over our abilities to act for ourselves. One important piece of planning folks can engage in is making sure they have a power of attorney in place to allow a trusted individual to manage their finances for healthcare and lifestyle decisions to ensure they live our their golden years with dignity.

By creating a financial power of attorney, one can allow another person to act on his or her behalf in a number of different ways including making deposits or withdrawals at the bank, manage Medicare and other government benefits, and look after financial investments. Because income and finances are such an important part of our lives, these areas need constant oversight to make sure there are no disruptions that could negatively affect our standards of living.

Under New York law, competent individuals are allowed to act on behalf of someone else to help manage finances. While it is an added benefit that the person with financial power of attorney have legal or financial management experience, the law does not require these skills as a prerequisite and one need only choose a trusted individual to act on his or her behalf. Furthermore, the parameters of the power afforded to the person with the power of attorney will be entirely spelled out in the document granting such control.

The fiduciary responsibility to create an effective estate investment plan is something that some trustees and administrators find to be a challenge. Trust laws allow estate planning clients a fair amount of control and flexibility in asset diversification. If the goal is to generate income while minimizing taxes, and protecting assets for the purposes of family legacy, working with a licensed estate planning specialist who offers expert advice about trust investment, will assist a client in accomplishing the financial objectives of an estate.

Asset Diversification Strategies

Most high net worth estate planning clients require a diversified portfolio of equities, fixed-income securities, hedge funds, private equity, real estate, and natural resource funds. Since enactment of the Uniform Prudent Investor Act (UPIA) in 1994, all trustees in the United States must consider specific guidelines when formulating an investment strategy. In accordance with the legislation, a trust investment planner must consider the duration of the trust; the size of the portfolio; liquidity and distribution; tax consequences; expected total returns; individual investments; and the overall economic environment. Rules of UPIA fiduciary duty stipulate that trust assets are to be diversified, unless the purpose of the trust is solely for the targeted transfer of a family interest in a business, or to avoid capital gains. Trustee fiduciary liability is the premise of the legislation; also limiting client exposure to high-risk diversification strategies.

The recent Financial Industry Regulatory Authority (“FINRA”) announcement about federal enactment of a substantial piece of legislation that will likely delay close of some foreign direct investment (“FDI”) deals overseen by the Committee on Foreign Investment in the United States (“CFIUS”). The Act supports CFIUS regulatory response to the evolution in alternative trading system (“ATS”) transaction types. Under the new legislation, foreign investors will be responsible for filing mandatory “declarations” with description of transactions prior to close or transfer to an estate or trust; and payment of a filing fee of up to $300,000 per transaction.  

CIFIUS Oversight Expanded

Federal enactment of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) on August 13, 2018 expands the jurisdictional powers of CFIUS responsible for oversight of foreign direct investment (“FDI”) made by investors from abroad. FIRRMA establishes that ATS compliance with Securities and Exchange Commission (“SEC”) NMS Regulation, and Regulation SHO close out standards. The Act also stipulates ATS have the capability of identifying trading risks occurring in those systems to be compliant. Full implementation of the Act will come in effect after the adoption of near future ATS regulatory provisions required to impose compliance within the investment sector.

In New York, the law allows individuals to create what are known as “advanced directives” to help ensure that person’s end of life decisions are carried out in the event he or she is incapacitated or otherwise unable to make that choice. Advance directives are important for any individual, including young people, concerned about the medical state they may be left in following a serious accident, adverse medical event, or cognitive impairment brought on by alzheimer’s disease or dementia.

One of the three end of life directives legally recognized by New York law is the health care proxy which allows someone to appoint an agent to act on his or her behalf in cases where that person cannot make decisions for himself or herself. Health care proxies can be created using standard forms available from the New York State Department of Health and take effect when two doctors determine the testator is incapacitated.

Health care proxies can be either permanent or temporary, depending on the type of situation laid out in the documents. For example, a temporary health care proxy would ideal for someone going under general anesthesia and allow the proxy to make decisions quickly, if necessary. On the other hand, permanent health care proxies may be better suited for those facing long term risks due to dementia or alzheimer’s.

The intent to commission, conspire to commission, or commission of a criminal act through intimidation, coercion, or solicitation of another for “racketeering activity” as defined by the  Racketeer Influenced and Corrupt Organization (RICO) Act  is illegal in New York. The RICO Act prohibits enterprises, including family businesses, from fraudulent and criminal racketeering activities while conducting interstate trade or foreign commerce. The costs associated with a RICO criminal proceeding can lead to excessive fees and the loss of an enterprise, including estate or trust held assets of a family business and its proceeds.  

A Lost Inheritance?

August 14, 2018 a federal US Court of Appeals declined to exercise supplemental jurisdiction over a Connecticut Superior Court decision denying Virginia A. D’Addario damages for beneficiary rights to her mother’s estate inheritance coinciding with the conviction of her sibling, David D’Addario in a RICO violation case (D’Addario v. D’Addario, No. 17-1162 (2d Cir. 2018). The Second Circuit appellate court instead vacated and remanded the case, upholding her claim of legal expenses incurred in pursuance of complaint against her brother and the other RICO defendants; yet rested a claim for full distribution of estate assets under her name was not necessary as RICO losses were speculative; and the estate was not closed.  

The executor of an estate is an important individual vital to ensuring the deceased’s assets are accounted for, debts are settled, heirs are notified, and ultimately passing the estate through probate and dividing the estate. So long as the last will and testament was notarized and filed with the appropriate court and does not exclude any heirs in violation of New York probate laws, the estate must be divided in accordance with the deceased’s wishes.

While we generally expect the individual acting as the executor to fulfill her duties and responsibly carry our the deceased’s final wishes, it is not uncommon for executors to mismanage estates to the detriment of beneficiaries. The key duties the executor is expected to carry out include the following:

• Locating a copy of the last will and testament

If you have an estate with any number of assets, including a home, real estate, retirement benefits, and bank accounts, passing these along to your heirs can be quite a challenge for them if your will needs to go through probate. Furthermore, having your estate go through the probate courts, referred to as Surrogate’s Court in New York, creates a public record that others can look up and view, creating privacy concerns for your heirs which they may rather avoid.

The good news is that New York probate laws allow individuals numerous ways to pass along the assets of their estate to heirs that can also avoid the timely, and often times expensive, process of passing a will through probate courts. It is important to know that even these means to pass assets outside of a probate court have their own challenges that need to met in order to ensure an easier transfer of assets upon passing away.

One of the more common ways for individuals to transfer their assets upon death is to create a living trust (sometimes called an “inter vivos” or “revocable” trust) works by placing assets into a trust while still alive and then transferring to beneficiaries upon death. The benefit of a living trust is being able to maintain control of the assets during one’s lifetime and then allowing beneficiaries to assume control over the trust with the aid of a trustee.

As of 2018, cross-border families planning an estate will require an investment plan meeting relevant rules to domicile, succession, generation-skipping transfer, and gift tax laws in each country where distribution will occur at the time of a decedent’s death. International estate planners use investment techniques specific to cross-border transfers and enforceable transfer tax situs rules, domestic and foreign credits, and treaties where they may apply.

Recent Domestic Tax Reforms

U.S. federal Internal Revenue Service (“IRS”) tax law reforms in 2018, have modified estate and gift tax lifetime exclusion amounts for: