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.

The last will and testament is an important document an individual creates to spell out his or her final wishes to pass on the assets of an estate to friends, family, and business partners. However, New York probate laws do put limits on the extent to which a person may exclude his or her surviving spouse spouse from a will. Just as in many states, New York does not allow spouses to be cut out of wills, not matter the language contained in the document.

In situations where a deceased person excludes his or her spouse from a will, the New York Surrogate’s Court hearing the case will step in to award a certain percentage of the estate to the surviving spouse. Just as in a divorce, the law gives certain property rights to spouses to assets like homes, cars, and bank accounts that cannot necessarily be undone by a written document.

Whether or not someone passes away with a last will and testament, the deceased’s heirs must be notified my the executor of the estate that a the estate has been entered into Surrogate’s Court. In order to pass the estate through probate, the executor will need each of the decedent’s heirs to sign a waiver giving up their individual rights to challenge the will and the estate. Although it is usually not an issue to have heirs sign the waiver and agree to the split of the estate, not every situation is harmonious.

In New York, not every estate needs to pass through the probate process in Surrogate’s Court. The law gives this exemption to so-called “small estates” valued under a certain number and provider the executor to the estate handles the process correctly. Although small estates are allowed to pass through a more simplified probate process, executors will still need to perform some of the same duties as if he or she were overseeing a larger estate.

Estates with real property valued less than $30,000 are considered small estates and can avoid the lengthy and expensive formal probate process for larger estates. Even though the asset threshold for small estates may appear quite low, there are still circumstances where even large estates could pass through the small estate probate process. This is because not all personal property needs to be counted towards the $30,000 small estate threshold, thus allowing the more simplified probate process.

Under New York probate laws, only property owned exclusively by the deceased counts towards the small estate probate threshold. What his means is that jointly owned assets like homes, vehicles, and family businesses in two people’s names will not count towards the $30,000 limit. Additionally, only real property like life insurance, an IRA and similar assets with a named beneficiary do not need to be counted as these pass automatically to a beneficiary upon the passing of the deceased policyholder.

One of the most important parts about planning your estate is appointing an executor to oversee an estate and carry out your final wishes which can include passing an estate through the probate court, settling estate debts, and ensuring heirs receive their inheritance. Often times, family members or close friends are asked to serve as executors to estates but in New York, there are only a few restrictions on who may act in this capacity.

Under N.Y. Surr. Ct. Proc. Act § § 103, 707, the basic rules for serving as an executor of an estate are:

  • The person is at least 18-years old

The Centers for Medicare and Medicaid Studies recently announced it has extended its grace period to remove or reduce financial penalties for those late to switching their insurance from plans on the Affordable Care Act (ACA) to Medicare. As a result of moving the deadline, seniors and those on disability now have until September 30, 2018 to switch over from their ACA marketplace insurance plans to Medicare without having to pay increased Medicare premiums or reimburse the federal government for ACA subsidies.

For most Americans, Medicare eligibility begins at age 65 and are automatically signed up if already receiving Social Security benefits but not if the individual is already receiving health insurance through their job or spouse’s employment. If neither of these scenarios apply, individuals need to enroll in  Medicare within six-months (three-months before or after) turning 65-years old.

Failing to enroll in Medicare in a timely manner can lead to very expensive penalties including increases to Medicare Part B premiums as much as 10 percent for each full 12-month period the individual should have been enrolled. The Medicare Rights Center (MRC), a nonprofit consumer service organization that works to ensure access to affordable health care for older adults, estimates that if someone turned 65 in 2010 and delayed signing up for Medicare until 2018, premiums would be $227, which is 70 percent higher than the base Part B premium of $134.

Starting later this year, the federal government will begin penalizing nursing homes accepting tax dollars for hospitalizations that regulators believe are preventable and end up costing the patient and health care system in the long run. The new rules are the other half of policies instituted by the Center for Medicare and Medicaid Studies (CMS) aimed at reducing patient readmissions by either rewarding or penalizing hospitals and now nursing homes based on their rates of Medicare rehospitalization rates.

According to the U.S. Department of Health and Human Services, one in four long term nursing home patients are hospitalized each year and these hospitalization rates are rising. One in five Medicare nursing home patients “boomerang” back into the hospital within 30-days of being released. The Department of Health and Human Services believes many of these hospitalizations are preventable and are costly to Medicare and, to a lesser extent, Medicaid.

Nursing home residents are especially vulnerable to the risks that accompany repeat hospitalizations and transfers, including medication errors and hospital-acquired infections. This revolving door of patients returning to hospitals soon after discharge often occurs because of a lack of communication between treating physicians at hospitals and healthcare providers at the nursing homes once patient return.

Ranking Democratic member of the House Energy and Commerce Committee Frank Pallone, Jr. of New Jersey recently introduced a new proposal aimed at tackling the rising costs of long term health care insurance to give seniors a better life. Under the current system, Medicare only covers very limited long-term care and support for seniors until a senior eventually qualifies for the Medicaid program after they have depleted all of their financial resources.

If adopted, the The Medicare Long-Term Care Services and Supports Act would enact multiple measures to help seniors get the care they need without depleting their finances. Among other things, The Act would includes incentives for people to seek care at home and give much needed relief to overburdened family caregivers by compensating these individuals for lost income other retirement benefits, and career opportunities if they have to cut back on work hours or leave the workforce.

The Act would establish a standard cash benefit within Medicare for anyone who is eligible for Medicare and those under the age of 65-years old who meet certain disability thresholds and begin after a two-year waiting period that functions as a deductible. The proposed legislation would allow individuals to use their self-directed benefits towards all long-term services and supports, including nursing facility care, adult daycare programs, home health aide services, personal care services, transportation, and assistance provided by a family caregiver.

According to reports, celebrity chef Anthony Bourdain has left the bulk of his $1.2 million estate to his young daughter, which will be placed into a trust that will make two payouts over her lifetime. Bourdain’s estranged wife, on the other hand, was named executor to the estate will receive his personal effects including furniture, cars, books, and even his frequent flier miles which could be quite valuable given the deceased’s career as a professional traveller.

Documents filed with the Manhattan Surrogate’s Court indicate Bourdain’s estate was worth $1.21 million, including $425,000 in savings, $35,000 in brokerage money, $250,000 in personal property and $500,000 in “intangible property” which includes royalties. Media outlets report that Bourdain’s 11-year-old daughter is the primary beneficiary of his trust which will distribute assets when she is 25 and 30, and disperse the remaining balance when she turns 35 years old.

Establishing trusts for minors is a very common practice in estate planning as it is meant to these young persons do not become overwhelmed by receiving an inheritance all at once, which could lead to financial mismanagement. In the meantime, a guardian appointed by the Surrogate Court will safeguard the younger Bourdain’s estate until the final payouts are made. While all this may seem straightforward, experts reviewing Bourdain’s estate situation believe it may be subject to complications, including potential challengers by the spouse.

With President Trump’s recent immigration reforms impacting the domiciliary status of many New York residents, estate trust administrators are faced with changes to the taxable status of those asset transfers. New York Consolidated Laws, Estates, Powers and Trusts Law (EPTL) applies specific rules to asset transfer procedure when there is a change in domiciliary of a trust holder. The federal Internal Revenue Service (IRS) provides fiduciary income taxation rules for U.S. residents with foreign income (I.R.C. §§ 1, 61), estates, and generation skipping asset transfers (I.R.C. §§ 2001, 2031-2046, 2601). Non-U.S. residents are subject to U.S. income tax from income sourced solely in the country, and are subject to taxation of estate, gift and generation skipping transfer of U.S. situs assets.

New York Rules to Domiciliary

In New York, trust asset transfer falls under three (3) categories of domiciliary: 1) resident, 2) nonresident, and 3) exempt resident.

The primary benefit of trust and family foundation investment in stock funds, is the transferability of those vested assets to cash. Unlike real property, securities offer wealth enhancement features, as well as a ready source of liquidity. The Securities and Exchange Commission Act of 1934 (“The Exchange Act”) is the legislation binding securities transactions. The Act also applies to rules of securities investment and transfer of shares as part of fund interests or irrevocable trusts within federal and state estate and probate laws.  Section 16(b) amendment of the Act in 1999, improved estate planning benefits of transferable stock options,  no longer requiring stock options to be non-transferable for trust investors to take advantage of tax-exemption rules.

Still, there are qualifying rules for trust investors. A licensed attorney at law experienced at matters of estate planning and probate law can provide professional advice about securities investment and qualifying rules for trust investors.

Qualifying Rules for Trust Investors

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