Last updated by at .

Revocable Living Trust

AARP agrees that utilizing a revocable living trust is the new thing! Revocable living trusts provide savings opportunities, save probate expenses, and provide other advantages over a will.

What is a revocable living trust?

It is a relationship established between three parties:

    1. The creator of the trust;
    2. The trustee who manages the property within the trust and distributes proceeds to beneficiaries; and
    3. The beneficiaries who receive the property according to the terms of the trust.

A revocable living trust allows assets within the trust as well as income generated by those assets to be managed and distributed by the trustee. The trust income and property are then distributed in accordance with the terms and conditions of the trust. This type of trust is referred to as a living trust because it is established during the life of the creator.

How does one benefit from a revocable living trust?

A revocable living trust provides numerous benefits to the creator. If the creator becomes incapacitated, the trustee is typically authorized to manage all of the assets within the trust as well as any obligations in accordance with the terms of the trust without court intervention. A revocable living trust will also provide financial assistance to family members if the creator becomes incapacitated. Upon the death of the creator, the trust transfers assets outside of the estate and outside of probating a Will. A living revocable trust can also be structured to minimize federal or state tax consequences. A revocable living trust also allows the creator to act as trustee, either with their spouse or without their spouse, or even revoke or modify the trust prior to death.

How does a revocable living trust compare to a will?

Both a revocable living trust and a will are tools that provide a method of passing property and other assets to family members and loved ones. However, a revocable living trust avoids the probate process, whereas a will does not. Unlike a will, a revocable living trust does not need to be administered by a probate court. By avoiding probate, an estate can essentially save numerous costs and assets will be distributed faster to family members and loved ones. In addition, a revocable living trust protects the privacy of the decedent as well as their finances. While court documents and the probate process are a matter of public record, a revocable living trust is handled outside of probate and is therefore kept private.

The attorneys at Hobson-Williams, P.C. are skilled in all aspects of elder law and are dedicated to representing clients with diligence and compassion during emotional times. Contact the experienced New York elder law attorneys at Hobson-Williams, P.C. for a consultation by calling them at 866-825-1LAW or vising them at www.thobsonwilliamslaw.com.

Keeping Your Will Updated and Naming Beneficiaries on Assets

A Last Will and Testament is an important estate planning document that contains provisions for assets and the distribution of property upon death. Unfortunately, many individuals fail to account for assets that do not pass directly under a Will. These assets may include life insurance policies, pensions, IRAs, and 401(k) or 403 plans. After the policyholder of these assets dies, the policies may distribute the benefits to their heirs at law if there is no beneficiary designation and no Last Will and Testament. Following major life events, such as marriage, divorce, change of employment, disability or death of a spouse, individuals should create or update their Last Will and Testament and their beneficiary designation forms on retirement benefits or other assets.

 

A life insurance policy is a financial instrument that pays out a sum of money either on the death of the policyholder or after a set time. A policyholder must designate a beneficiary of the policy proceeds when he or she passes away. If the individual fails to update their policy, especially following a major life event, an unintended party, such as a former spouse, may end up being the sole beneficiary. For this reason, it is best for policyholders to consistently amend and update polices to align with their wishes for the future. A policyholder may be able to name their estate as a beneficiary, to have the policy’s proceeds pass under a Last Will and Testament and divided amongst the individual’s designated beneficiaries. However, if the proceeds become part of the insured’s estate, they are not exempt from the estate’s creditors and are subject to probate.

 

Generally, if the deceased names a beneficiary for a pension, IRA or a qualified retirement plan such as a 401(k) or 403 plan, it will not be subject to probate and thus the terms of a Will do not control. Once an individual dies, the beneficiary named on the policy or IRA will be entitled to the funds remaining in the account. To access the funds, the beneficiary makes a claim and the IRA/Pension/Insurance policy makes a payment or a series of payments to that person.

 

However, complications arise when individuals fail to keep beneficiary designations up to date or fail to name a beneficiary at all. If an individual does not name a beneficiary, the funds will be payable to the estate and subject to probate for distribution. The probate process could result in delays, reducing the amount of funds received by the beneficiaries and limiting payout options. It is important that, if the individual gets married, has children, or gets divorced, he or she updates their beneficiary designations. If an individual dies without changing a plan’s designation from a former spouse, his or her ex-spouse will be entitled to its contents, even if the ex-spouses haven’t spoken in years or if the ex-spouse remarried. It is important to also update the retirement accounts if a beneficiary passes away. If a beneficiary dies before the account holder, it would be construed as if there were no beneficiary named and the account’s funds would most likely be payable to the estate and subject to probate.

 

Neglecting to update a Will, life insurance policy, and retirement accounts when major life events occur may lead to unwanted outcomes. It is important that individuals review these documents regularly to ensure that it reflects their current situation and wishes for the future. If you or a loved one needs assistance with reviewing a Will or another estate planning matter, look to the experienced New York estate planning lawyers at Hobson-Williams, P.C. The firm’s attorneys will help you establish an estate plan that is reflective of your current wishes and will help ensure your assets will pass as intended. For more information or to schedule a consultation, call contact our New York estate planning law firm at (718) 210-4744.

Increase in the New York Estate Tax Exclusion

As of April 1, 2017, the New York State estate tax exclusion increased to $5,250,000 from the $4,187,500 exclusion amount in effect since April 1, 2016.  As of January 1, 2017, the federal estate tax exclusion is $5,490,000. The New York State exclusion amount will remain in effect until December 31, 2018 and, as of January 1, 2019, this amount will be indexed for annual inflation.

In 2000, New York state repealed its gift tax. For New York State residents, this meant that gifts made to family and friends over the course of their lifetime would not be included in their gross estate. However, in 2014, a three-year look back period was enacted for gifts made between April 1, 2014 and January 1, 2019. This means that a three-year look back will take place upon a resident’s death and any gifts made within that time period would be included in the estate for the purpose of calculating the estate tax in New York. There are certain gifts that are excluded from the three-year look back period. They are as follows:

  • Gifts made when the decedent was not a New York State resident.
  • Gifts made before April 1, 2014.
  • Gifts made on or after January 1, 2019.
  • Gifts that are taxed under a federal estate tax law.

In 2017, for federal gift taxes, annual gifts in the amount of $14,000 per person are allowed without having to report these gifts on a tax return. This also applies to New York State. Federal estate tax law contains a portability provision. This provision allows unused estate tax exemptions of a married tax payer to transfer to a surviving spouse.  In New York State, there is no portability provision within the estate tax laws. Without this provision, the way in which a couple maintains title to their assets may affect the amount of estate tax that will be paid in New York State upon a spouse’s death.

Even though the estate tax exclusion amounts are increasing, estate planning is still often necessary and complex. If you are looking to make changes to an estate plan or gifting strategy, it is important to contact an experienced attorney that concentrates their practice in these matters. The lawyers at Hobson-Williams, P.C. are skilled in all aspects of Trusts, Estates and Elder Law and are dedicated to representing its clients with diligence and compassion. Contact the experienced New York attorneys at Hobson-Williams, P.C. for a consultation by calling (718) 210-4744 or by filling out our contact form.

Voluntary Administration Proceedings for Small Estates

When a parent dies without a Will and leaves behind money (example $10,000) in a sole checking account, a proceeding would be governed by the small estate process. Not all estates require a full probate or an administration proceeding. If the deceased passed away after January 1, 2009 and has $30,000 or less in personal property, they are entitled to a voluntary administration proceeding, which is a simplified Surrogate’s Court procedure.

The small estates procedure cannot be used if the individual who passed away owned real property when he or she died. The process can be utilized if the deceased died with or without a Will or if they conveyed their property into a trust.  To start the small estates process, an Affidavit of Voluntary Administration must be filed. By filing the Affidavit of Voluntary Administration, a person is asking to be appointed as a voluntary administrator of the estate.

This individual may be nominated in the deceased’s Last Will and Testament, if one was created, or, if a Will is not available, the deceased’s closest living relative would be chosen. The individual who files the Affidavit is asking the court to allow them to collect the deceased’s assets, pay any debts, and distribute their personal property to those who have a legal right to inherit them, either in accordance with a Last Will and Testament or under the laws of intestacy if the individual died without a Will.

A Voluntary Administration proceeding is less complex than a full probate of the Will or an administration proceeding. In a Voluntary Administration proceeding, consent does not have to be given by the beneficiaries of the deceased’s estate. This helps to avoid Last Will and Testament contest, which can be a long and expensive process. Additionally, a Voluntary Administration proceeding helps to avoid litigation over the appointment of a fiduciary in a full probate or administration proceeding.

Even though a Voluntary Administration proceeding may be less complex than a full probate or administration proceeding, it is important to consult an experienced attorney to assist you in the process. The experienced attorneys at Hobson-Williams, P.C. are available to assist you with any concerns relating to Elder Law, Trusts and Estates. For more information or to schedule a consultation, contact our knowledgeable New York Elder Law attorneys at (718) 210-4744.

Why Establishing a Durable Power of Attorney is Important

A power of attorney is an important estate planning document and can be an essential tool in ensuring that an individual’s wishes are carried out should he or she become mentally or physically incapacitated. A power of attorney is a standardized legal document that allows an individual, known as the principal, to designate a representative, known as the agent, to make financial decisions on their behalf if they become incapacitated or unable to act on their own behalf. A power of attorney specifies how much power an agent will have and can be created with limited powers, broad powers and can become effective upon the occurring of an event. Many individuals assume that regardless of whether it is limited or broad that the document will contain the same language and provisions. However, more often than not, this presumption is incorrect and may lead to issues in the future.

A durable power of attorney gives an agent essentially the same powers as the principal. The term “durable” means that the power of attorney will still be effective even if the individual becomes incapacitated or subsequently disabled. A power of attorney goes into effect as soon as it is signed and notarized. The principal may specify that the agent cannot use the power of attorney unless he or she becomes incapacitated or unable to act for themselves. However, if this stipulation is not specified, the power of attorney may be able to utilize his or her power prior to those circumstances.

Some individuals seek to establish a power of attorney that is effective upon a triggering event, such as incapacitation. However, there are several unforeseen issues that may arise if this type of power of attorney is created. One issue that may arise is that the agent may need to show an affidavit that states that the triggering event has occurred prior to them utilizing the power of attorney. Another issue that may arise is that regardless of the law stating that the agent can make financial on behalf of the principal with the affidavit, banks and other institutions may be hesitant to grant the agent his or her power under this type of power of attorney.

Many individuals believe that by establishing a power of attorney his or her agent has broad gifting power. Usually, when someone establishes a statutory power of attorney that is not the case or, in some instances, it will not allow an agent to make a gift in excess of $14,000 per person, per year. When a power of attorney does not include a statutory gift, rider authorizing major gifting power, it may result in an agent being unable to transfer assets.  This may result in the Principal being unable to transfer funds to be eligible for Medicaid or to receive reductions in estate tax. Furthermore, a broadly drafted power of attorney with language permitting an agent to create a revocable or irrevocable trust on behalf of the creator can save a tremendous amount of money in the future, whether it is for estate planning or long-term care planning purposes.

In New York State, an agent is permitted to gift and transfer assets to themselves and others.  However, this is only allowed if the power of attorney clearly states that the agent can do so. This is referred to as a statutory gift rider, also known as a gifting clause. By establishing a power of attorney with a gifting clause, it allows an agent to make gifts or transfer assets for purposes such as long-term care planning or to meet estate and income tax needs.

A common question people ask regarding the establishment of a power of attorney is, will the principal lose control of his or her finances and assets after the legal document is established? The answer is “perhaps”. The principal still has the right to control his or her financial resources and properties. However, with the establishment of a power of attorney, the principal allows the agent access to their finances without permission. For this reason, it is important that individuals choose an agent they trust who will not be dishonest or unscrupulous with the assets.

For individuals seeking to establish a power of attorney, it is important that they consult an experienced estate planning lawyer who will draft the document to meet your current and future needs and wishes. The elder law and estate planning attorneys at Tanya Hobson-Williams, PC are skilled in all aspects of estate planning and are dedicated to representing its clients with diligence and compassion during emotional times. Contact the experienced New York estate planning and elder law attorneys at Tanya Hobson-Williams, PC for a consultation by calling (718) 210-4744 or by filling out our contact form

The Importance of a Last Will and Testament

Perhaps the most surprising fact reported following the death of musician Prince Rogers Nelson was that the celebrity died without a Last Will and Testament. As mentioned in a previous blog article, Prince’s sister Tyka Nelson filed an Emergency Petition in a Minnesota court seeking the appointment of a Special Administrator. The circumstances surrounding the celebrity’s death is not uncommon, as 55 percent of Americans do not have a will or an estate plan in place, according to LexisNexis.

Wills are an important part of estate planning to consider, even for young people. They protect the succession of assets and ensure that the intended beneficiaries are able to access those assets, according to the deceased’s wishes. To accurately reflect the wishes of an individual, a Will should be reviewed and re-drafted every decade or so or when personal circumstances change.

Some of the factors that may affect an individual’s decision to draft a Will may include a person’s medical condition and family medical history; participation in the armed forces; level of involvement in dangerous recreational activities such as alcohol and drug consumption; health and fitness habits; and desire for financial independence.

When it comes time to draft a Will, a person should list his or her assets and desired beneficiaries. It is just as important to include digital assets, such as access to photos/videos, documents and other files, passwords and sensitive accounts (such as a savings account), as it is to consider physical ones. When drafting a Will, it is important to take into consideration extenuating circumstances, such as the unexpected death of a beneficiary. An individual may name a contingent beneficiary if his or her primary beneficiary or beneficiaries predeceases him or her.

Without a Will, the fate of a person’s estate, stocks, savings and other holdings could be decided by the state. Without a Last Will and Testament to provide clear guidance for the division of estate and assets, a deceased’s loved ones may encounter stress and be forced to endure costly legal battles to settle the estate following the loss of their loved one.

When considering drafting a Last Will and Testament, it is important to contact an experienced estate lawyer who can guide you through the process and help you make informed decisions that affect both you and your loved ones. If you or a loved one needs a Last Will and Testament or other Advance Directives, contact the experienced attorneys at Hobson-Williams, P.C. at (718) 210-4744 to ensure that your property passes to those you choose and not according to the laws of intestacy.