In our previous entry we discussed the various ways that we can give our property can pass to others outside the terms of a valid Will or even if there is no Will at all (intestacy).  Once understood, you can next consider your testamentary wishes and how to best give them effect.

You must first realize that a Will may be only one element of an estate plan.  It may be combined with a Health Care Proxy or Living Will, or it may be combined with a Power of Attorney, or it may be used in conjunction with a Living Trust.  Each of these topics merit close consideration.  For our purposes, we will limit ourselves to the basics.  A Health Care Proxy and a Living Will are separate documents with a single purpose – to tell medical providers what forms of life-sustaining treatments you or your delegate choose to endure.

A Power of Attorney is a very powerful, even dangerous, instrument.  It gives a third party the present authority to act in your place for your benefit.  It is dangerous because human nature may tempt an otherwise close friend or relative to abuse the power granted to him or her under the Power of Attorney.

We will deal with these instruments in later entries.  For now, let’s return to our topic at hand, do you need a Will?  If you want your wealth to pass to beneficiaries of your own choosing, beneficiaries who are not members of you immediate family, then you need a Will.  If the selection of a person to administer your estate is important to you, then yes you need a Will to select an executor or executors.  If you desire to select guardians for a minor or disabled child, then a Will is necessary but not controlling (the court always has the duty to act in the best interests of such a disabled individual even if that clashes with your choice). Keep in mind that the mere act of signing  a Will does not mean you are giving up those assets on the day you sign the document or that you can’t change your mind at a later time and execute a new Will.  The Will takes effect only when the testator dies and when the court approves it.

A frequent question arises when a person asks if he or she needs an attorney to do a Will. The simple answer is no, there are means by which a person may create and execute his or her own Will. Forms of simple Wills are readily available on the internet. But a word of caution is I order. The rules for creating a valid Will vary from state to state and it is entirely possible that the money you may save in not retaining an experienced attorney to draft your Will may  vanish when the Will you prepared on your own is defective or ambiguous. Then your executor and your beneficiaries will need the services of an attorney.

There are many ways of “avoiding probate” and we discussed several techniques in the earlier blog entry. But keep in mind that a disgruntled family member can make trouble for your desired beneficiaries whether the vehicle you choose to give your wealth to a loved is a Will, a trust, a jointly-owned asset, etc.

Finally, because this topic is so vast, see the attached preliminary checklist of the types of questions and considerations that you may have that will inform your choice of how to proceed with an estate plan.

Points to Ponder Before Beginning The Estate Planning Process

 

 

What is a lawyerly answer to this most basic of estate planning questions? Simple, “yes and no.”

Now that I hope to have amused you, allow me to explain the rationale behind the lawyerly answer of “yes and no.” All attorneys understand from experience that for every generalization he or she might make, there are exceptions to that generalization. Perhaps the best way to answer this common question of the “need” for a Will is to answer it in two parts. First, what happens to my property if I die without a Will?  Second, what does a Will do, how is one obtained, and is it necessary in my case? This is Part 1 of a two-part blog article. In it we will review the laws of intestacy (that is, dying without a Will) and the transfers of wealth without the use of Wills. In the second part of our discussion, in a later blog entry, we will consider the usefulness of a Will, when such an instrument is needed to carry out your wishes, and the advantages to having a Will even when one is not strictly necessary.

Some people fear that if they die without a Will their property will go to the state. This is mostly untrue, at least for New Yorkers. In some states, if a person dies without a Will and without any closely-related blood relatives, then the property can “escheat” (in other words, be transferred) to the state where the person lived. If a New Yorker dies without a Will and without known closely-related family members, then the assets of the estate may be deemed to be abandoned or are, by court order, deposited with the State and available for withdrawal should a family member come forward and prove his or her entitlement to the estate. Of course, with the passage of time, the likelihood of such a person coming forward diminishes to zero. In effect, the money enters New York’s general funds and used for state purposes even if there is a valid claim on the money. New York has collected a total of $16.5 billion in unclaimed funds over the years!

If a person dies without a Will, then the decedent’s assets that are titled in his or her name passes to the decedent’s next-of-kin, or “distributees” as they are called in New York.  There is a state-imposed order of inheritance called “intestacy.” A distributee is a close relative, either a surviving spouse or a close blood relative. In effect, the State of New York “writes” a Will for you if you do not have one in a statute called the Estates Powers and Trust Act Section 4-1.1. This law establishes the rules of intestacy and the priority of inheritance.  An easy way to summarize this law of “intestacy” (i.e., dying without a valid Will) is to state that a decedent’s spouse and the closest blood relatives take priority of inheritance.  Here are some of the most common examples of intestacy:

– A person dies with a surviving spouse and two children (either biological or adopted). The surviving spouse receives $50,000.00 plus one-half of what remains in the estate while the decedent’s children divide the rest equally between the two of them.  A variation: Suppose the person dies with the surviving spouse, two children, and both parents. The same result. The statute cuts off close blood relatives in accordance with its definition of what is a “distributee.” In this variation, the decedent’s parents are not distributees.

– A person dies with three surviving children (either biological or adopted) but no spouse. Each of the children takes one-third of the estate. A variation: Suppose the person dies survived by the three children and both parents. The same result. The statute cuts off close blood relatives in accordance with its definition of what is a “distributee.” In this variation, the decedent’s parents are not distributees.

– A person dies with no surviving spouse, no children or grandchildren but is survived by both parents and two siblings. The two parents divide the estate equally. In this variation, the decedent’s siblings are not distributees.

There are many caveats to and variations of these examples of intestate distribution. The law can be made easier to understand if you refer to the attached two-page diagram that contains a family tree and different scenarios of inheritance under the rules of intestacy.

Aside from intestacy, there is another factor to consider. Much of our wealth today is located in assets that would not be subject to the rules of intestacy or even to disposition by a Will. It is entirely possible (and sometimes desirable from an estate planning perspective) to die with a large estate and yet still not need the intervention of the court to administer the estate or to distribute its assets, either under the rules of intestacy or under the terms of a probated Will. There are exceptions to most generalizations, but even so there are many kinds of assets that are usually immune from Wills and intestacy because they operate by their own terms or in accordance with different laws. Some of them are:

  • Individual Retirement Accounts (IRAs);
  • Living Trusts (either revocable or irrevocable);
  • Totten Trusts (bank accounts titled “A in trust for B”);
  • Real Property owned jointly with another or as spouses;
  • Joint bank accounts with rights of survivorship;
  • Life insurance with a designation of beneficiary; and
  • Retirement, pension benefits with designated beneficiaries.

Some examples:

– A person dies with bank account that is titled “John Doe in trust for Jane Doe.” Upon John’s death, Mary becomes the owner of the account and, usually, upon the presentation of a death certificate to the bank, will be given the proceeds of the account.

– A person dies owning a house with her spouse either as “tenants by the entirety” or as “joint tenants.” In either case, the surviving spouse now becomes the owner of the house automatically.

The lessons to draw from this brief review of the effect of dying without a valid Will are:

  1. How are your assets titled? Was the designation of a beneficiary made decades ago, for example, in your life insurance policy? Is this beneficiary still the person you want to receive the proceeds of the policy?
  2. Take an inventory of your assets, and based upon this discussion determine how they are titled and how they would be distributed at your death. Is this what you want to happen?
  3. If you cannot answer any of these questions easily, or if the answer is not to your liking, then you should consider consulting with an attorney experienced in these matters.

https://www.nytrustsandestatesblog.com/wp-content/uploads/sites/806/2020/07/2020-07-20-Family-Tree-JS.pdf

We all know that individuals who have passed age 70 ½ are required to receive Required Minimum Distribution payments each year from their IRAs and qualified plans.  Individuals who inherit any of those assets are also required to take yearly Required Minimum Distribution amounts from those assets as well.  It should be remembered however, that no Required Minimum Distribution payments are due from an individual’s own Roth IRA, while the individual is alive, but once the individual has died, each of their non-spouse beneficiaries are then required to receive yearly Required Minimum Distribution payments each year from that account.

How are those rules affected by the Covid 19 virus and its devastating effect on the nation’s economy?  As was done in the immediate aftermath of the 2008 financial crisis, Congress has once again passed legislation easing the requirements that individuals take yearly Required Minimum Distribution payments.

On March 27, 2020, Congress passed, and the President signed into law, the Coronavirus Aid, Relief and Economic Security Act (the “CARE Act”), which eliminates the requirement for most individuals to have to take any Required Minimum Distribution payments in 2020.  This relaxation of that rule applies not just to individuals who had been a participant in a qualified plan or the owner of an IRA, but also applies in 2020 to their beneficiaries as well, following the individual’s death.  The one exception to the change in this rule is applicable to participants in defined benefit plans, who are still required to take their 2020 Required Minimum Distribution payments.

The new rule is also effective for individuals who had turned age 70 ½ in 2019, but who had deferred their first Required Minimum Distribution payment until April 1, 2020.  In addition, the new rule also states that the 2020 Required Minimum Distribution payment which has been skipped, will not be required to be made up or taken in any subsequent year.

The question then becomes, what about someone who had already taken a portion or all of their Required Minimum Distribution amount for 2020?  Is there any relief for that individual?  The answer is yes.  The new rules allow that individual to rollover the distribution back into the retirement asset, as long as they can do it within the 60 day rollover period.  To further assist those individuals, the IRS has issued Notice 2020-23 , which automatically extends the 60 day rollover period to July 15, 2020, for those individuals who had received a distribution from their retirement asset between February 1, 2020 and May 16, 2020.

So if you were planning to take your Required Minimum Distribution payment in 2020, or had already taken that amount, you may want to reconsider and not make that payment, or if already made, reverse that payment.  However, nothing requires you to skip that Required Minimum Distribution payment.  So if you want to, you are entirely free to take that distribution in 2020, even though it is no longer required.

However before deciding on not taking any Required Minimum Distribution payment in 2020, you may want to consider the New York State rule that exempts the first $20,000.00 in retirement distribution payments from New York State income taxation.  So any amount that you take from your retirement asset in 2020, up to the $20,000.000 amount, will not be subject to New York State income taxation.  And with the Federal standard deduction set at $27,400.00 for 2020 for a married couple filing jointly who are each over age 65, you may be able to exempt a significant portion of that plan or IRA distribution from Federal income taxation as well.  You therefore may want to discuss the decision to forego any 2020 Required Minimum Distribution payment with your accountant or other financial advisor, before committing yourself to any specific course of action.

 

In these troubled Covid-19 times, when we are all concerned with the physical and financial health of ourselves and of the members of our immediate family, many of the firm’s clients have been turning to the attorneys in its Trusts and Estates Department, to have their Wills and other estate planning documents reviewed and updated.  But in this era of social distancing and with many offices closed, is that even still possible?  The answer happily is yes.

Information regarding the terms of a client’s revised Will, Health Care Proxy form, Living Will  and Do Not Resuscitate Order form, Power of Attorney form, and Designation of Beneficiary forms can be communicated by the client to one of the firm’s estate planning attorneys, remotely by telephone, or through a Facetime, Zoom or Skype virtual meeting with them.

The proposed documents can then be prepared by the attorney, and then sent electronically to the client for his or her review.

Once the client has approved each of the documents that had been sent, they can then contact the attorney to arrange for each of the documents to executed.

In the past, the execution process usually meant obtaining the services of two or three witnesses to the execution of the client’s Will and other estate planning documents, and with a number of the signatures in each of those documents required to be notarized.  In the past, the Will was usually executed by the client in the presence of the attorney, who supervised the execution ceremony, with the witnesses and notary public also in attendance.

However, under new emergency protocols that were passed by Governor Cuomo within the last few months, the requirements that both the witnesses and notary be physically present when the documents have been signed by the client, have been substantially relaxed and modified.

Executive Order 202.7, which was signed by Governor Cuomo on March 19, 2020, permits for the first time, the remote notarization of all documents, including Wills and other estate planning documents, while Executive Order 202.14, which was signed by Governor Cuomo on April 7, 2020, permits for the first time, the remote witnessing of a client’s signature on their Will.

Accordingly, the signatures of both the witnesses and notary on a client’s Will, can now be done entirely remotely, with each of those individuals, acting as witness and notary, respectively, from the safety and comfort of their own home, while the client executes their Will in the comfort and security of their own home, and with each of the client’s other estate planning documents now capable of being remotely notarized by the notary public.

Even though the rules relaxing the requirements for the witnessing and notarization of the execution of Wills and other documents are relatively new, the estate planning attorneys in the firm’s Trusts and Estates Department, have already remotely supervised the execution of a number of their clients’ Wills and other estate planning documents.  In addition, in several recent cases, those same attorneys have met with the client in the client’s backyard or garage, to witness and/or notarize the execution of their Wills and other estate planning documents.

Accordingly, if you are interested in having your Will and other estate planning documents reviewed and updated, now is the best time to do it.  Please contact either Mindy K. Smolevitz or myself to have this work done.  Your family is depending on you, during these most trying times that we are living through, to ensure that your Will and other estate planning documents are current and up to date.

Today, as our country and the world try mightily to recover from the COVID-19 pandemic, which has affected so many people in so many ways, from tragically losing family members, friends and colleagues, to their own illness and the illness of their loved ones, to job loss and other economic losses, to profound changes in their day-to-day lives and isolation from their loved ones, it is more important than ever to maintain and concentrate upon personal interactions.  Today, these interactions often are relegated to Zoom, Skype, or FaceTime meetings, but it is imperative that we do not lose ourselves and our connections to others as some of us continue to self-quarantine and others return slowly to their pre-pandemic routines, altered as they may be at least for the foreseeable future.  Self-isolation can lead to depression, anxiety, and a weakened response by our immune system.  Staying connected is so important that Mitch Albom, the renowned author, has written a fictional, weekly series, entitled, The Human Touch.  In commenting about his recent work, Mr. Albom states, “It is my hope that the story will provide a welcome diversion in our suddenly shut-in world.”

So, too, it is important to establish a connection with professionals, who should not forget that there is a person at the other end of the telephone, the virtual meeting, or the conference room.  The Trusts and Estates attorneys at Jaspan Schlesinger LLP strive for and achieve a personalized relationship with each client.  This is true whether we are preparing your estate plan, helping you make important decisions about your children’s future, assisting you in becoming the legal guardian for a loved one whose deficits require your intervention, helping you navigate through the recent loss of a loved one whose estate must be administrated even during a time of sadness, or trying to settle an estate litigation when family members often lose sight of the goal to resolve the legal issues as expeditiously and cost-efficiently as possible and, hopefully, repair fractured family relationships.

At Jaspan Schlesinger, our Trusts and Estates attorneys pride themselves on providing our clients with a compassionate, hands-on approach to these difficult, yet vital, legal services.  We know there simply is no substitute for the “human touch.”