Articles Posted in Asset Protection

When someone passes away without creating a last will and testament or trust, the individual passes away in intestate, meaning his or her assets will be distributed to heirs based on a line of succession under New York state probate laws. While most of us plan for the time after we pass away, not everyone goes through the process of creating a will or trust and this can create some complex legal issues when the estate passes through probate.

 

Unless a trust is created, every estate must pass through probate court in New York, even if the deceased created a clear and concise will. However, there are a few types of assets that will not need to pass through intestate sucession if the decedent pases away without a will. These include:

 

  • Life insurance payouts
  • IRA, 401(k), or other retirement account
  • Securities from a transfer-on-death account
  • Bank accounts set up as payable-on-death
  • Property owned with someone else in joint tenancy

 

These types of assets already have beneficiaries named to them and therefore do not need to pass through any type of probate. However, other assets like homes, vehicles, personal possessions, other bank accounts will likely be subject to intestate succession.

 

Who receives inheritance in New York

 

New York Estates, Powers, and Trusts Laws lay out a clear line of succession when individuals pass away intestate. Typically, surviving spouses and children are among the first in this line of asset distribution. This table shows the full line of succession:

 

 

Children and no spouse Entire estate
Spouse and no children Entire estate
Spouse and children Spouse inherits first $50,000 of estate property & 1/2 balance. Children inherit remaining balance
Surviving parents, no children and spouse Entire estate
Surviving siblings only Entire estate

When can the state seize and estate?

 

The state of New York can actually take possession of an estate without a last will and testament in very limited circumstances. For the state to seize the estate, the deceased must pass away without creating a trust or last will and testament and must not have any surviving relatives.

 

Other surviving relatives eligible to receive assets from an intestate include half-siblings, adopted children, children conceived posthumously. Foreign relatives are also to receive assets from an intestate decedent, regardless of immigration status in the country.

 

While many of these scenarios are unlikely for your beneficiaries to go through if you created a trust or estate, you may find yourself in a position to inherit assets from a relative who did not create his or her own last will and testament. By understanding intestates and lines of succession in New York, you can advocate for yourself as an interested party in probate court and recover duly owed assets.

Executing a will or estate through probate court can be a costly, time consuming process full of surprises and complex issues. On top of that, the probate process creates a public record of the proceedings that may reveal information individuals wish to keep private, including debts, real estate holdings, and prenuptial agreement agreements.

Fortunately, New York probate law gives individuals planning their estate options to avoid this burdensome process by creating living trusts, setting up joint ownership, and various transfer agreements. However, even these options come with various challenges that can complicate what is meant to be a less stressful process.

By thinking ahead, weighing options, and speaking to an experienced estate planning attorney, individuals and couples can tailor a plan that best suits their needs and ensures their final wishes are carried out with the greatest benefit to survivors. Here are some common ways to avoid probate court in New York.

How property and assets are distributed when you pass can be a sensitive topic that many people do not like to address, in fact, more than half of Americans die without a will every year. This failure to plan for the distribution of assets and property can leave many interested parties at odds and may not reflect what your last wishes were for your legacy. Depending on what you are leaving behind, there are some considerations that must be made regarding your assets.

Depending upon the state you reside in, your property may pass subject to probate or it may pass outside due to pre-documented rights of survivorship or trust language. If you live in a community property state, which means that all property acquired by you or your spouse during the marriage, regardless of who bought it is property of the marriage, then your property will pass subject to probate court. However, passing through probate may be avoided if you have left rights of survivorship language in your will or property ownership documentation. Property is then subject to the estate tax, which may not be the main concern of dissolution, depending on the assets involved.

Additionally, a trust can be set up that will either avoid probate or will continue to be includable in your estate. If you seek to avoid probate, you can form what is called an irrevocable trust, which allows you to put your assets and property in a  trust, to be held and owned by the trustee, who works to administer the trust under the governing trust and also make decisions in the best interest of the grantor and any potential beneficiaries. However, if you wish to form a trust but still seek to maintain control of your assets and property by amending or revoking the trust during your lifetime, you can form a revocable trust.

The Social Security Administration recently released a list of changes to take place in 2017, which included the cost of living adjustment that we discussed in a previous article, as well as a new earnings test limits for those older adults who continue to work but qualify for social security. While the cost of living adjustment came out to a roughly $50 a year increase, the other changes listed by the Administration have encouraged many of those who receive their monthly benefits.

The Earnings Test

In order to provide the most equal distribution based on need, the Social Security Administration has come up with a test in order to determine how much in benefits an individual should be allotted. The earnings test applies to those older adults who have not yet reached their full age of retirement, which is 66 years old, and who are still working. For those beneficiaries who attain full retirement age after 2017, they can claim exemption of earnings up to $16,920 a year, or roughly $1,410 a month.

Every trust document is different; the terms of a trust can vary greatly, giving the beneficiaries either a broad range of power or can limit a beneficiary’s power to only include specific rights. Some of the differing terms of trust include: how the income and principal investments are able to be distributed, when, and under what circumstances, if the objective of the trust is either for growth or to maintain balance, when a beneficiary receives a distribution and under what circumstances, such as age attainment or education attainment, as well as whether the beneficiaries have a right of withdrawal also known as 5 by 5 clause.

What is a 5 by 5 Clause?

A 5 by 5 clause, or right of withdrawal, must be specifically stated in the governing trust. The right occurs once a year generally, and will allow the beneficiary to take up to 5% of the value of the trust out to be included in their current tax year or to take $5,000, whichever is greater at the time. If the trust contains a right of withdrawal, the trustee must notify the beneficiary within a reasonable time of their ability that year to withdrawal and the beneficiary must indicate their wish to exercise the right in part or in total or whether they chose to forego taking the amount. In order for the beneficiary to qualify the income under present interest, and therefore exempt under the gift exemption that year, they must have a vested economic interest to the income and principal of the trust.

Prince & Tidal

After the death of a musician, we commonly hear about battles between the estate of deceased artists and various music companies, regarding the royalties to a deceased artist’s work, who now owns it, and who is entitled to receive royalties now that the artist is no longer alive. The Estate of music legend Prince has faced a number of legal issues while trying to determine inheritance as well as ownership of music and rights. The music streaming platform Tidal, started by rapper Jay-Z, had the exclusive rights to stream Prince’s last album, however, Tidal is now being sued by the estate for illegally streaming all of Prince’s albums on the platform streaming site. Shortly after Prince passed away, Tidal started streaming the entire catalogue of music, expanding it from the 90 day exclusivity clause it had for the one album.

Michael Jackson, Quincy Jones & Sony Productions

2017 Projected Increases

Those individuals receiving social security benefits can expect another disappointing increase in their benefits in 2017. While this increase is another record low over the past five years, some view it as a win since social security beneficiaries failed to see any increase in their benefits in 2016, although costs of living continued to rise. The projected increase, coming at .3%, or $4 a month, was assessed by the federal government in response to adjusted costs of living.

How this Affects Elders

Trustees serve a very important role in the effective administration of a trust. The maker of the trust document, the grantor, gives another neutral third party, the power to administer the terms of the trust throughout the lifetime of the grantor and after, if the terms of the trust provide so. The trustee is essentially in charge of managing all the assets of the trust, without taking an interest in them. While a trustee can also be the maker of the trust, many people elect another individual, or a corporate trustee to continue administering the trust upon their death.

There are some express terms that a trustee must follow, such as:

  • Keeping separate the investments and accounts of the trust,

Elder abuse has been an increasing trend over the past few decades, within roughly one in ten Americans over 60 years of age experiencing elder abuse, whether it be financial, harassment, sexual, physical, or passive abuse through neglect or deprivation. Of the elders subjected to abuse, over 90% of those Americans are abused by someone they know, either a family member, friend, acquaintance, medical staff employee, or caretaker.

Predators seek out opportunities with the elderly in order to become involved in their lives and then later exploit them in their most vulnerable state. Often times, an individual will claim to be helping the elder individual, either by assisting in caretaking or house keeping, and then will later bill them for an exorbitant amount of money or get ahold of their checking account to pay themselves.

Warning Signs

There are three main types of trusts for special or supplemental needs. Each has their own specific purpose and use, and will apply differently for every party.

First Party Special Needs Trusts

The first party special needs trust was developed to be funded with assets owned by the trust beneficiary in order to help them qualify for government benefits. This type of trust is usually established when the intended beneficiary is about to receive either a lawsuit settlement, inheritance from an estate, a large gift, or assets, that would disqualify him from receiving supplemental security income. Supplemental security income has a qualifying threshold that the beneficiary must meet; the individual cannot possess personal assets that equal over $2,000.

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