Frequently Asked Questions

Estates greater than 1 million dollars ($1,000,000) must pay an estate tax in New York. In 2012 the Federal limit is $5,000,000. This law has been extended and is increased yearly to keep pace with inflation.

There are many ways to avoid an estate tax. They include:

• Yearly Gifts of $13,000 to an unlimited number of people can be made without paying a gift tax.
• Education or Charitable gifts can be made.
• Credit Shelter Trusts/Qualified Terminable Interest Program (QTIP)
• Life Insurance Trusts
• Qualified Personal Residence Trusts (QPRT)
• Family Limited Partnerships (FLPs)

A living or “revocable trust” is a legal entity that an individual can create to achieve estate planning goals. A Trustee (generally also the person who set up the trust) controls the trust assets.

Not everyone “needs” a trust. It is really a question of what is important to you. The following are some reasons to create a trust:

• Do you want to avoid probate to ensure that your heirs inherit your property quickly and without hassle?
• Are you disinheriting an heir? or creating a disproportionate distribution scheme?
• Are your assets in excess of 1 million dollars? If so, a trust could help limit the estate taxes that would be owed on your estate upon your passing
• Are you in a second Marriage? A trust can help ensure that your spouse can benefit from your estate while stipulating that your children ultimately receive their inheritance?

The cost of a trust is not much more than the cost of a Will. The benefits you can achieve by creating a trust include minimizing legal fees for probate and limiting an estate tax (In New York, an estate valued at 2 million dollars may be taxed approximately $100,000).

Yes. When you create a trust you must then transfer assets to the trustee. You may forget or not get around to transferring all of your assets and if you pass away, a will would be used in probate. The will would stipulate that all assets should pass through the trust (This is called a Pour-Over Will). If you do not have a will, then the laws of New York will dictate who inherits your remaining assets.

A simple trust does not help reduce estate taxes. However, a Revocable Trust with Credit Shelter or QTIP provisions will reduce the amount of taxes owed because you can take advantage of each spouses deduction – whatever the law may be at the time of death.

Probate is the legal process of proving the validity of an individual’s Last Will & Testament in Surrogates Court. During this process, the Judge appoints the executor. The Executor is then responsible for the following:

• distributing the assets per terms of the Will
• settling any debts of the estate
• filing State and Federal estate tax returns, if necessary

No. Property jointly owned with another passes to the survivor automatically upon the death of the first. Also, bank accounts with a named beneficiary or “In Trust for” another do not pass through probate. Finally, any asset owned by a Trust does not pass through probate.

The executor is responsible for the probate process. If an individual did not have a WIll and did not name an executor, or the named executor pre-deceased the individual, the Court will appoint an Administrator to administer the affairs of the estate.

If you don’t make a will or use some other legal method to transfer your property when you die, state law will determine what happens to your property. Generally, it will go to your spouse and children or, if you have neither, to your other closest relatives. If no relatives can be found to inherit your property, it will go to the state.

In addition, in the absence of a will, a court will determine who will care for your young children and their property if the other parent is unavailable or unfit.

If you are part of an unmarried same-sex couple, your surviving partner will not inherit anything unless you live in one of the few states (New York is not one of them) that allows registered domestic partners to inherit like spouses.

In New York, the Will must be witnessed by two disinterested individuals and the Testator (individual signing the Will) must sign and date the Will.

The Will should also include an affidavit of subscribing witness. The helps the court prove the validity of the will when you pass away without the need to locate the witnesses at that time. This document also needs to be notarized.

Many people first do a will when they have children. In the WIll you can appoint a “guardian” to be responsible for your children. You can also name an individual (can be same or different as guardian) to mange money for the children. This individual is called a Trustee. The Trust can be set up to provide that the Trustee can use the money for Health, Maintenance, Education and support, without the principal of the money going to the children until they reach pre-determined age milestones.

In New York, you cannot completely disinherit your spouse, unless agreed upon in a Pre-nuptial or post Nuptial agreement. Unless agreed upon, your spouse is entitled to 1/3 of your estate. You can, however, disinherit your children. You can either leave their names out of the document or make a statement in the Will that you specifically have made no provisions for that child.

Many people choose to disinherit children who receive benefits due to a disability. This is not always the best planning strategy. If you have a disabled child, you should speak with an attorney about special needs planning.

If your Will needs to be admitted to probate upon your passing, any interested party can object. Interested parties include closest family members. If you are married with children, your spouse and children are the interested parties. If you do not have a spouse, children or grandchildren, then your parents, siblings and their issue can become interested in your estate.

The cost of care can be extremely expensive. Nursing homes in the New York area can cost between $10,000 -$15,000 per month. Home Health Aides can cost $1,000-$5,000 per month. Assisted living facilities can cost $3,000-$5,000 per month. With proper planning, government benefits can assist with these costs.

Medicare pays for a limited amount of the costs when in short term rehab or the cost of a home health aide for a limited period of time. When these benefits expire, you will need to pay privately or seek other alternatives, such as Medicaid.

Medicaid is a joint federal and state program that pays for a home health aide or nursing home for qualifying individuals. Many believe that they cannot qualify for Medicaid. However, this is a very common misconception.

When applying for Medicaid, the local Department of Social Services considers three factors:

• The need of the applicant to receive the care they are seeking.
• The income of the applicant and their spouse, including Social Security, pension, distributions from retirement accounts, rental and investment income.
• The resources or assets of the applicant and their spouse, including but not limited to the value of their house, investments, savings and cash value of insurance policies.

You can execute a Health Care Proxy, a document where you appoint another to make decisions for you, as would have made them yourself,

Document that expresses your desires for end of life care. Without a Living Will, your family may make decisions contrary to your beliefs. The absence of a Living Will can also create issues between family members who have different beliefs.

Legal document wherein you appoint a trusted family member or friend to act on your behalf if you are unable to act for yourself. The document should allow this individual the authority to handle all of your financial matters, including, but not limited to real estate, banking, insurance, litigation, government benefits and the power to gift assets.

Without executing these important documents, your loved ones may be required to petition Supreme Court to become your guardian in an Article 81 Guardianship Proceeding. This is a difficult and time consuming process that no one wants to endure.