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You have worked hard to accumulate assets so that you may pass your legacy to your family. There is no better time to explore what you need to know about New York State gift and estate taxes.

A gift tax is a tax that is levied on assets transferred by a person to a beneficiary during a lifetime. An estate tax is a tax that is levied on assets transferred by a person to a beneficiary upon death. There are federal and state gift and estate taxes. However, these taxes only apply to gifts and estates over the applicable threshold amounts.

Does New York State Have a Gift Tax?

No, New York does not currently have a gift tax. Therefore, you may reduce the value of your estate subject to estate taxes by gifting assets to your beneficiaries during your lifetime. However, it is important to note that any gifts made within three years of death will be “clawed back” into your estate for valuation purposes and will be subject to estate tax. So, you cannot avoid estate tax by making a deathbed gift of all your assets. Also, the federal gift tax will apply to gifts with a value of more than $15,000, per person, per year. These gifts are known as annual exclusion gifts and are not subject to federal gift tax.

Does New York State Have an Inheritance Tax?

No, New York State does not have an inheritance tax. When your beneficiary inherits your assets, the beneficiary does not have to pay an inheritance tax to New York.

Does New York State Have an Estate Tax?

Yes, New York State has an estate tax if you die a resident of New York or own real property in New York. It is important to note that the New York estate tax is in addition to the federal estate tax.

Does New York State Have an Estate Tax for Married Couples?

No, there is no New York or federal estate tax for assets passing from the deceased spouse to the surviving spouse. This is known as the unlimited marital deduction.

What Is the New York State Estate Tax Rate?

The New York State estate tax rates are graduated. The lowest rate starts at 3.06% for the first $500,000 of assets. The highest rate is 16% and is applicable to estates valued above $10,100,000. The federal estate tax rates are also graduated and range between 18% and 40%.

Is There a Basic Exclusion Amount from New York State Estate Tax?

Yes, the New York State basic exclusion amount for 2020 is $5,850,000 and is indexed for inflation annually. This means that if you die in 2020 and the value of your estate is less than this threshold amount of $5,850,000, there would be no New York estate tax due. However, you must be aware of the impact of the New York State “estate tax cliff”. The federal estate tax exemption for 2020 is $11,580,000 and is portable between spouses meaning that the surviving spouse can timely elect to use both exemptions protecting $23,160,000 from federal estate tax.

What Is the New York State Estate Tax Cliff?

If you die in 2020 and the value of your estate exceeds the $5,850,000 basic exclusion amount by more than 5%, you will lose the benefit of the exclusion and your entire estate will be subject to New York estate tax starting at the first dollar. When the value of your estate is greater than 105% of the basic exclusion amount, you will “fall off the cliff”. Here is an example for 2020: 105% of $5,850,000 is $6,142,500. If your estate is valued between $5,850,000 and $6,142,500, you only pay New York estate tax on the amount exceeding the $5,850,000 threshold. So, if your estate is valued at $6,000,000, your taxable estate is only $150,000. However, if your estate is valued at $6,200,000, you fall off the cliff, the basic exclusion amount is zero, and your entire $6,200,000 estate is taxable and subject to New York estate tax.

Estate Planning Tips to Navigate the Potential Negative New York State Estate Tax Impact of Falling Off the Cliff

  1. Understand the value of your taxable estate and that it is comprised of both probate assets and non-probate assets which pass by operation of law to a designated beneficiary, a joint owner, or in trust;
  2. Review your estate plan to ascertain how it will operate considering the increased basic exclusion amount and to ensure that your estate plan meets with your testamentary desires;
  3. Instead of utilizing the unlimited marital deduction, implement the estate tax planning techniques of a post-mortem disclaimer of assets by the surviving spouse or the creation of a Credit Shelter Trust (also known as a Bypass Trust) funded upon the death of the first spouse in order to preserve the New York basic exclusion amount of the first spouse to die. Since the surviving spouse cannot elect portability for the New York basic exclusion amount (as can be done with the federal exemption), without a post-mortem disclaimer of assets or a Credit Shelter Trust, the New York basic exclusion amount would be lost;
  4. Consider making gifts during your lifetime to reduce the value of your taxable estate below the basic exclusion amount. However, remember that even though New York does not have a gift tax, you must outlive your gifts by three years otherwise the gifts will be “clawed back” into your estate and will be subject to estate tax. Although there is a federal gift tax, you can make gifts of up to the federal gift and estate tax exemption which is $11,580,000 for 2020, without any gift tax; and
  5. Consider making charitable bequests and/or including a “Santa Clause” provision in your Last Will and Testament or Trust to allow for a conditional charitable bequest of the amount exceeding the basic exclusion amount. The charitable bequest would be satisfied only if the excess amount is less than what the amount of the estate tax would be without the charitable bequest.

Regardless of whether you will be adversely impacted by the New York State estate tax cliff, now is the time to revisit your estate plan in light of the increase in the federal exemption and New York State estate tax basic exclusion amount. Russo Law Group, P.C. is available to assist you with your estate plan.

It is important when implementing estate planning to consult with and retain experienced attorneys. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you and provide you with peace of mind.

The COVID-19 Pandemic is a wake-up call for everyone to implement an estate plan, if you do not already have one, or to review your existing estate plan. As a result of the global health crisis, it is critical for you to be prepared in order to protect yourself and your family. The use of probate avoidance strategies is an integral part of your comprehensive estate plan. One of the most important benefits of avoiding probate is that your assets will automatically pass upon your death to your beneficiaries without the delay and costs involved with a probate proceeding in the Surrogate’s Court. This is a crucial advantage especially during the COVID-19 Pandemic because it allows a decedent’s beneficiaries to gain immediate access to assets for the payment of the decedent’s funeral and other expenses.

What is Probate?

Probate is the legal process of submitting the Last Will and Testament of someone who has died to the Surrogate’s Court for approval. The Last Will and Testament will only govern “Probate Assets” which are assets that were solely owned in the decedent’s name at the time of death. Assets that the decedent owned at death that have a right of survivorship, beneficiary designation, or are held in trust, will pass by operation of law outside of the Last Will and Testament. These assets are known as “Non-Probate Assets”.

How to Avoid Probate

If your goal is to avoid probate, we can advise you regarding which strategies make the most sense for your estate plan. The following are commonly used strategies to avoid probate:

  • Revocable Living Trust– a legal document which you establish as the Settlor and fund with assets to which legal title is held by the Trustee for the beneficiary and will pass upon the Settlor’s death;
  • Joint Tenants with Rights of Survivorship and Tenancy by the Entirety (for spouses only)– types of ownership for real property which will transfer upon the death of an owner or spouse to the surviving property owner or spouse;
  • Beneficiary Designations– naming the beneficiary for your retirement assets (IRA and 401(k)), life insurance, and annuities which will pass on the account owner’s death; and
  • Payable on Death (POD), Transfer on Death (TOD), Joint Tenants With Rights of Survivorship (JTWROS), and In Trust For (ITF)– assets (bank and brokerage accounts, stocks, and savings bonds) having these designations will pass to the named beneficiary or joint owner upon the account owner’s death.

If your goal is to avoid probate, you must make sure that you title all your assets properly to make each asset a “Non-Probate Asset” that will pass by operation of law upon your death. If you establish a Revocable Living Trust, you must make sure to fund your trust with the appropriate assets in order to avoid probate.

When to Seek Advice and Counsel of Experienced Attorneys

If you wish to avoid probate, you should seek the advice and counsel of an experienced attorney. We strongly recommend that you plan in advance and review the titles and beneficiary designations for all your assets. It is never too soon to be prepared. At Russo Law Group, P.C., we understand that observing social distancing can make the estate planning process more difficult. We can assist you through telephone and video conferences.

It is important when implementing estate planning to consult with and retain experienced attorneys. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.

The COVID-19 Pandemic is a wake-up call for everyone to implement an estate plan, if you do not already have one, or to review your existing estate plan. As a result of the global health crisis, it is critical for you to be prepared in order to protect yourself and your family. A Durable Power of Attorney is one of the documents that is essential for your comprehensive estate plan.

A Comprehensive Durable Power of Attorney

A Comprehensive Durable Power of Attorney is a legal document that allows you to appoint someone who you trust and grant the legal authority to that person to act on your behalf regarding your financial and property decisions. This person is known as your “Agent” or “Attorney-in-Fact”. For example, in the event that you are incapacitated, hospitalized, or quarantined, your  Agent/Attorney-in Fact is empowered to act to handle your financial and property affairs in accordance with your instructions, and if not possible, in your best interests.

Key Components of a Comprehensive Durable Power of Attorney

In order to ensure that you have the right and proper Power of Attorney, you should seek the advice and counsel of an experienced attorney. The following are the key components of a Comprehensive Durable Power of Attorney:

  • New York Statutory Form: Durable General Power of Attorney– to ensure it will be recognized as valid and followed by banks and financial institutions;
  • Durable– to ensure that it will continue to be effective upon your mental incapacity;
  • Successor Agents– to ensure you will have a person to act on your behalf in the event that you first Agent is unable or unavailable to act;
  • Expanded Power Provisions– to ensure that your Agent has the legal authority to make comprehensive financial decisions, including Medicaid Planning and Estate Tax Planning, which are not included in the New York Statutory Form; and
  • Special Provisions- to ensure your Intent to Return Home if you are in a hospital or nursing home (such a provision allows your home to be disregarded as a resource for purposes of Medicaid eligibility for nursing home care), to express your wishes as to whom should be appointed your legal guardian in the event of a guardianship proceeding, and to ensure the power over real property that you own in another state.

Consult With and Retain Experienced Attorneys

A Comprehensive Durable Power of Attorney is one of the most important legal documents in your estate plan because it allows you to protect yourself and your assets. Without one, a timely and costly court proceeding would be required to appoint a Guardian for you. If you do not have a Comprehensive Durable Power of Attorney, please contact us. At Russo Law Group, P.C., we understand that observing social distancing can make it more difficult to execute legal documents due to witness and notarization requirements. We can assist you with remote witnessing and remote notarization, in compliance with Governor Cuomo’s Executive Orders.

It is important when implementing estate planning to consult with and retain experienced attorneys. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you. We have also linked for your reference, the following article from The New York Times, Your Money: The One Document Americans Need Now- Power of Attorney, by Reuters.

The COVID-19 Pandemic is a wake-up call for everyone to implement an estate plan, if you do not already have one, or to review your existing estate plan. As a result of the global health crisis, it is critical for you to be prepared in order to protect yourself and your family. A Last Will and Testament is one of the documents that is essential for your comprehensive estate plan.

Last Will and Testament

A Last Will and Testament is a legal document that allows you to control who will inherit your assets upon your death and to appoint someone who you trust to serve as your Executor. Your Executor will administer and distribute your probate estate in accordance with your wishes as stated in the provisions of your Last Will and Testament.

Probate and Non-Probate Assets

It is important to note that the terms of your Last Will and Testament will only govern assets that were solely owned in your name at the time of your death. These assets are known as “Probate Assets”. Assets that you owned at death that have a right of survivorship, beneficiary designation, or are held in trust, will pass by operation of law outside of your Last Will and Testament. These assets are known as “Non-Probate Assets”.

Intestate

In the event that you die without a Last Will and Testament, you will have died “intestate” and the laws of the State of New York for intestate distribution will govern the assets that were solely owned in your name at the time of your death. Assets that you owned at death that have a right of survivorship, beneficiary designation, or are held in trust, will still pass by operation of law, and remain outside of your intestate estate. The laws of the State of New York will also determine who will serve as your Administrator, based upon an order of priority, for the administration and distribution of your intestate estate.

Seek Advice and Counsel

In order to ensure that you have a valid and enforceable Last Will and Testament, you should seek the advice and counsel of an experienced attorney. A Last Will and Testament is one of the most important legal documents in your estate plan because it allows you to control the distribution of your assets upon your death. By consulting with an estate planning attorney, you will have peace of mind knowing that your appointed Executor will distribute your assets to your desired loved ones.

If you do not have a Last Will and Testament, please contact us. At Russo Law Group, P.C., we understand that observing social distancing can make it more difficult to execute a Last Will and Testament and legal documents due to witness and notarization requirements. We can assist you with the remote execution of a Last Will and Testament, remote witnessing and remote notarization, in compliance with Governor Cuomo’s Executive Orders.

It is important when implementing estate planning to consult with and retain experienced attorneys. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you. We have also recommend for your reference the following article from The New York Times, What to Know About Making a Will in the Age of Coronavirus, by Susan B. Garland.

The “Setting Every Community Up for Retirement Enhancement Act” (the SECURE Act) is part of the spending bill legislation passed by Congress, which is now awaiting the President’s signature, effective January 1, 2020.

 

The SECURE Act significantly changes the Required Minimum Distribution (“RMD”) requirements for inherited retirement accounts by delaying the required beginning age. However, the biggest impact will affect your loved ones -your Designated Beneficiaries – who may be precluded from the wealth transfer technique, commonly known as the “Stretch IRA”.

 

The following is a synopsis of four of the major changes to retirement planning upon the passage of the SECURE Act:

 

  1. Extending the Required Minimum Distribution beginning date to age 72Instead of a required beginning date of age 70 ½ for RMDs, the required beginning date has been increased to age 72, for those people who have not already reached age 70 ½ by December 31, 2019. So, the first RMD must occur by April 1st of the year after attaining age 72. This change will allow retirement savings to be tax-deferred for an additional one to two years lasting longer for retirement;

 

  1. Limiting the “Stretch” for post-death Required Minimum Distributions from inherited retirement accountsMost Designated Beneficiaries will need to take distributions from an inherited retirement account within a ten (10) year period, instead of stretching the distributions over their life expectancies. This tax-generating provision will accelerate the depletion of inherited retirement accounts.

However, there are exceptions to this rule for “Eligible Designated Beneficiaries”, such as surviving spouses, minor children, individuals with disabilities or chronic illnesses, and those who are less than ten (10) years younger than the deceased retirement account holder. Trusts for individuals with disabilities may qualify for the life expectancy method under the SECURE Act;

 

  1. Repealing the age limit for Traditional IRA contributionsPeople working past age 70 ½ are now allowed to continue contributing to Traditional IRAs, as is permitted with 401(k) plans and Roth IRAs; and

 

  1. Expanding access to annuities in retirement accounts In-plan annuities inside of a 401(k) plan are permitted which will allow more sources of retirement income.

 

Strategies and Opportunities

As part of retirement planning, it is important to analyze the projected RMDs and understand when to start and the best way to take the RMD in order to minimize income taxes. For example, Qualified Charitable Contributions from an IRA directly to a charity will satisfy the RMD requirement while avoiding income tax. Roth IRA conversions is another strategy that can be implemented to move taxable IRA funds into Roth IRAs which are not subject to RMDs at age 72, providing more control over income. Proper retirement and estate planning are critical due to the accelerated distributions of inherited retirement accounts under the SECURE Act.

 

For individuals with disabilities or chronic illnesses, this is an opportunity to have inherited IRAs paid out to a Supplemental Needs Trust; thus, allowing the individual to maintain government benefits and stretch the IRA over the individual’s lifetime.

 

Russo Law Group, P.C., is analyzing the Secure Act to understand its impact on retirement planning for our clients. It is important to consult with and retain experienced professionals. Russo Law Group, P.C., has knowledgeable attorneys who can provide retirement and estate planning legal services and advice.

For more information about this ALERT, or to review or update your retirement and estate plan, we invite you to contact us at (800) 680-1717, and to visit our comprehensive website at www.vjrussolaw.com.

 

If you have diligently searched through your deceased loved one’s financial records, tax returns, personal possessions, and safe deposit boxes, and you still cannot identify and locate your decease loved ones’ life insurance policies and annuity contracts, the National Association of Insurance Commissioners (NAIC) may be able to assist you.

Search Request Form

As a consumer, you can submit a search request form to the NAIC. There is no fee for this service from the NAIC. The form is rather simple and can be both completed and submitted on the NAIC website. The information that you need to know is your deceased loved one’s full legal name (and any prior legal names), last known address (and any prior addresses), date of birth, date of death, social security number, veteran status, and your relationship to the deceased loved one. Please note that since NAIC is a national service, your one search request will cover the entire United States. It will not cover just the state wherein your deceased loved one resided at the time of his or her death.

How the Process Works

Here is how the process works. Upon receipt of your search request, the NAIC will contact the participating life insurance and annuity companies with your inquiry. The participating life insurance and annuity companies will search their records to determine whether your deceased loved one owned any life insurance policies or annuity contracts with their companies. If the companies have information pertaining to any life insurance policies or annuity contracts, in the name of your deceased loved one, each individual company will contact you directly provided you are the designated beneficiary, Executor or Administrator, authorized to receive such information. Please note that the companies may request additional information and documents, such as a certified copy of the Certificate of Death and the Letters Testamentary or Letters of Administration appointing you as Executor or Administrator.

What Happens If You Don’t Receive a Response?

If you do not receive a response from any of the participating life insurance or annuity companies within ninety (90) business days of your search request submission to NAIC, it most likely means that you are not the designated beneficiary, are not authorized to receive the information, or that the participating companies did not locate any life insurance policies or annuity contracts in the name of your deceased loved.

The following contact information will be useful to conduct your NAIC search request for life insurance policies and annuity contracts in the name of your deceased loved one:

National Association of Insurance Commissioners (NAIC)

Life Insurance Policy Locator Service

1100 Walnut Street

Suite 1500

Kansas City, MO 64106-2197

Service Desk

(816) 783-8500

8 a.m. to 4 p.m. (CT)

Monday – Friday

https://eapps.naic.org/life-policy-locator

We Can Help

At Russo Law Group, P.C., we understand how difficult it is to cope with the death of a loved one while trying to navigate the estate administration process. We can provide professional services to guide you through the estate administration process and also to ease the burdens of an Executor or Administrator. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.

If at the time of your death, you owned real property solely in your name and in more than one state, your Executor may be required to commence more than one probate proceeding. Ancillary probate may be required in order to transfer your out of state real property to your beneficiaries in accordance with the provisions of your Last Will and Testament.

New Yorkers are the perfect example! Many New Yorkers are snowbirds. It is quite common for New York residents to own real property, such as a vacation home, in a warmer state. While the original probate proceeding would be commenced in New York (the state where you were domiciled), an ancillary probate proceeding would be commenced for the real property located in the state where you did not reside (the state where your vacation home is situated).

Estate Planning Techniques to Help You Avoid Ancillary Probate

An ancillary probate proceeding will delay the process of the administration of the estate. This can cause additional estate administration expenses. You can avoid this by planning in advance. The following are a few of the estate planning techniques that you may implement during your lifetime. These will allow your out-of-state real property to pass by operation of the governing law, upon your death, to the intended beneficiary, avoiding an ancillary probate proceeding:

Revocable Living Trust

Establish a Revocable Living Trust. Fund it with a deed transferring the out-of-state real property to the Trustee of the Revocable Living Trust.

Transfer Property

Transfer the out of state real property so that the deed is in your name, as Joint Tenants with Rights of Survivorship with another person (JTWROS), or as Tenants by the Entirety (TBTE) with your spouse. These forms of ownership should not be confused with a deed in your name with another person, as Tenants in Common (TIC), which does not pass by operation of law, and will require an ancillary probate proceeding.

Transfer on Death Deed

Transfer the out-of-state real property with a revocable Transfer on Death Deed (TOD) to a designated beneficiary pursuant to the Uniform Real Property Transfer On Death Act (URPTODA). Unlike the JTWROS and TBTE deeds, the designated beneficiary of a TOD Deed, will have no interest in the real property during your lifetime. About one-half of the states and the District of Columbia have adopted URPTODA and allow Transfer on Death Deeds. These states include Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Notably, New York and Florida do not allow TOD Deeds. You only need to own real property in these states or the District of Columbia in order to use a TOD Deed, you are not required to reside in the state.

Important to Note

Ownership of your out-of-state real property via a Deed to the Trustee of your Revocable Living Trust, as JTWROS, as TBTE, or as TOD, will allow the out of state real property to pass by operation of law ensuring the avoidance of an ancillary probate proceeding. However, owning out of state real property via a TIC deed will not pass by operation of law avoiding an ancillary probate proceeding.

These estate planning techniques must be implemented during your lifetime in order to provide for the by operation of law transfer to your beneficiary. After your death, your Executor will not be able to employ these methods to avoid ancillary probate for your out of state real property.

It is important when implementing estate planning to consult with and retain experienced attorneys. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C., may assist you.

Losing a loved one is incredibly difficult. Emotions are high and the last thing you want to do is handle your loved one’s estate. Unfortunately, sometimes the probate can’t be avoided. So, what do you need to know about a probate proceeding?

FAQs

Q: What is a probate proceeding?

A: Probate is the legal process of submitting a person’s Last Will and Testament (after he or she has passed away), to the Surrogate’s Court. The court has to review the Will and authenticate its validity and proper execution. Once the Surrogate’s Court approves the Will, it will appoint the Executor nominated under that Will to be the fiduciary – the person authorized to handle the decedent’s affairs.

 

Q: When is a probate proceeding required?

A: A probate proceeding is needed when the deceased person had “probate assets”. A person’s gross estate is comprised of two types of assets – probate assets and non-probate assets. Probate assets are assets that were just owned by the person who passed away. Because these assets were solely owned by the decedent, the nominated Executor is required to go to the Surrogate’s Court to have the Will probated and the Executor appointed in order to access the probate assets. The other type of assets is non-probate assets. These are assets that the decedent owned but states in the title of the asset what should happen to the asset upon death. These non-probate assets do not need to go through the probate process because they pass by operation of law upon the person’s passing.

 

Q: What is the process for an Executor or an Administrator to be appointed?

A: Both an Executor and Administrator are appointed by the Surrogate’s Court. An Executor is someone nominated in the decedent’s Will. An Administrator is appointed when a person dies without a Will. The process begins with a petition to the Surrogate’s Court, obtaining Waivers and Consents from the closest living blood relatives, and preparing other appropriate documents. Upon submission of all required documents, the Surrogate’s Court will appoint the Executor or Administrator. The Surrogate’s Court will issue a legal document to the Executor known as Letters Testamentary or a legal document to the Administrator known as Letters of Administration. This certificate authorizes the Executor or Administrator to deal with all matters, including the finances, of the decedent.

 

Q: How can you avoid a probate proceeding?

A: There is a common misconception that probate is bad, but there are certain situations where a probate proceeding is of benefit. However, if your goal is to avoid probate, then when you’re planning, you have to make sure that you title all of your assets properly so that each asset will pass by operation of law, as non-probate assets upon your death. You can also establish a living trust funded with your assets in order to avoid probate.

Planning Ahead

We strongly recommend that you plan ahead and review the titles and beneficiary designations for all of your assets – this is something that needs to happen on an ongoing basis. It’s never too early to be prepared. Now is the time to think about your Last Will and Testament and plan for your future.

  • … My spouse died, and I am the surviving tenant by the entirety of our house?
  • … My parent died, and I am the surviving joint tenant of our house?
  • … I inherited a house from a relative and now reside in it, and have been making the monthly mortgage payments?
  • … I transferred my house to a living trust for Medicaid planning and/or to avoid probate?

The answer to all four of these questions is an astounding: NO!

 However, sometimes banks and mortgage lenders will still try to enforce a “due on sale” clause on an existing loan or mortgage. Due on sale clauses allow lenders to accelerate or “call in” the loan or mortgage and demand payment of the entire balance upon the transfer of the title to the property securing the loan.

The Garn-St. Germain Depository Institutions Act of 1982 is a federal statute which governs the enforceability of “due on sale” clauses in loan and mortgage contracts. Notwithstanding, certain transfers of property, subject to an existing mortgage (other than a reverse mortgage), are exceptions prohibiting a lender from enforcing a due on sale clause.

For example, a lender is prohibited from exercising its option to enforce a due on sale clause upon a “transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety” (when the surviving joint tenant/tenant by the entirety takes title to the property after a joint tenant/tenant by the entirety dies), a “transfer to a relative resulting from the death of a borrower” (when a relative takes title to the property via inheritance and then resides in the property), and a “transfer into a inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property” (when title to the property is transferred into a living trust such as a Medicaid Asset Protection Trust).

It is important to note the significance of the last exception for property owners transferring a house with an existing loan or mortgage (other than a reverse mortgage) into a Medicaid Asset Protection Trust for Medicaid planning and/or the avoidance of probate. A Medicaid Asset Protection Trust is an inter vivos living trust wherein the grantor, who is the loan or mortgage borrower, retains the right to occupy the property and is a beneficiary of the trust.

In all of the above situations, pursuant to the Garn-St. Germain Act, the lender is barred from calling in the loan or mortgage.

The Garn-St. Germain Act provides certain rights and protections to a surviving spouse, a surviving joint tenant, a surviving tenant by the entirety, and a relative who inherits, when property with an existing loan or mortgage (other than a reverse mortgage) is transferred. The death of a loved one is an emotional time, never mind having to worry about a lender calling in the balance due. The Garn-St. Germain Act also recognizes that a property owner may engage in estate planning and transfer property with an existing loan or mortgage (other than a reverse mortgage) to a living trust during life.

We understand the rights and protection you are afforded under the Garn-St. Germain Act. It is important when transferring the title to a house subject to an existing loan or mortgage (other than a reverse mortgage), whether upon death or during life, to consult with and retain attorneys experienced with the transfer of property. Russo Law Group, P.C., has knowledgeable attorneys who can provide professional services and advise you.

We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.

If you die without a Last Will and Testament or a Trust, the New York State laws of intestacy will govern the disposition of your property to your “distributees”, your closest living blood relatives (in priority order). However, if you execute a Last Will and Testament or a Trust, you can control the disposition of your property. For this very reason, it is important to seek counsel from an estate planning attorney who can draft a Last Will and Testament or a Trust to fulfill your intentions.

There are three ways to distribute your property to your beneficiaries upon your demise: “Per Stirpes”, “By Representation”, and “Per Capita”. So, what do they mean?

  • Per Stirpes is derived from the Latin term meaning “By the Root” or “Down the Line”. It means inheriting property by a right of a deceased ancestor. For example, if your children are your beneficiaries, and a child predeceases you, then the deceased child’s children (your grandchildren), would equally inherit the share of your predeceased child (their respective parent). However, in the event that more than one child predeceases you leaving children (your grandchildren from more than one child), all of your grandchildren, as a generation, would not receive an equal inheritance.
  • By Representation means “By Generation”. For example, if your children are your beneficiaries, and a child predeceases you, then the deceased child’s children (your grandchildren), would equally inherit the share of your predeceased child (their respective parent).  However, in the event that more than one child predeceases you leaving children (your grandchildren from more than one child), all of your grandchildren, as a generation, would receive an equal inheritance. The shares of all of your predeceased children would be combined and divided equally among the next generation — all of their children (all of your grandchildren) — not just their respective children.
  • Per Capita is derived from the Latin term meaning “Per Head”. For example, if your children are your beneficiaries, and a child predeceases you, then your surviving children and the deceased child’s children (your grandchildren) would all receive an equal inheritance.

Let’s look at a hypothetical that demonstrates the different dispositions which can result from a Last Will and Testament or a  Trust which provides for “my children, per stirpes”, “my children, by representation”, or “my children, per capita”. In this case scenario you have fo,ur (4) children, Child A, Child B, Child C, and Child D, who are each one-fourth (1/4) beneficiaries. You are survived by Child B and Child D. However, Child A and Child C have predeceased you. Child A is survived by two (2) children (A1 and A2) and Child C is survived by three (3) children (C1, C2, and C3). So, you have a total of five (5) grandchildren.

“my children, per stirpes”: 

  • Child A’s two (2) children equally share Child A’s one-fourth (1/4) share, and each receive a one-eighth (1/8) share.
  • Child C’s three (3) children equally share Child C’s one-fourth (1/4) share, and each receive a one-twelfth (1/12) share.
  • Child B and Child D each receive a one-fourth (1/4) share.

Pursuant to a disposition to “my children, per stirpes”, the children receive an equal inheritance, but the grandchildren do not receive an equal inheritance.

“my children, by representation”: 

  • Child A’s two (2) children and Child C’s three (3) children equally share the combined total shares of Child A and Child C (one-half (1/2)), and each receive a one-tenth (1/10) share.
  • Child B and Child D each receive a one-fourth (1/4) share.

Pursuant to a disposition to “my children, by representation”, the children, as a generation, receive an equal inheritance, and the grandchildren, as a generation,  receive an equal inheritance.

“my children, per capita”: 

  • Child A’s two (2) children and Child C’s three (3) children and Child B and Child D equally share the combined total shares of all children A, B, C, and D, and each receive a one-seventh (1/7) share.

Pursuant to a disposition to “my children, per capita”, all of the children and grandchildren receive an equal inheritance.

As you can see, the ultimate distribution of your property to your children and grandchildren can vary significantly depending upon the whether the disposition is “per stirpes”, “by representation”, or “per capita”. So, if you do not want your property to be subject to intestate distribution and you do want to control how your property passes (especially in the event that a beneficiary of your Last Will and Testament or your Trust predeceases you), you should retain an estate planning attorney to draft a Last Will and Testament or a Trust that clearly states your intentions. On the other hand, if you are a beneficiary of a Last Will and Testament or a Trust, it is important that you retain a Trusts and Estates attorney to represent your interests as a beneficiary and to insure that you receive your proper inheritance.

Russo Law Group, P.C. has attorneys experienced with estate planning and beneficiary representation. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.

When advising clients regarding Medicaid asset protection planning, it is common to recommend the transfer of their residence (and other properties they may own) to a Medicaid Asset Protection Trust (“MAPT”). After five years, the trust assets would not be considered an available resource for purposes of determining Medicaid eligibility.

One of the most frequently asked questions regarding this planning technique is whether the house can be sold.  The answer to that question is “Yes”. However, there are a number of factors to be considered:

  • Who is selling the house?
  • Who gets the money from the sale?
  • Are there any capital gains taxes?

These are all good questions.  Let’s look at them in order –

Who is selling the house?” When property is in a MAPT, the trust is the seller and the Trustee is the person who has the authority to sell and sign the closing documents.

Who gets the money from the sale?” The proceeds of the sale of the house owned by a MAPT are payable to the trust.  This is important in order for the trust assets to remain protected, and not be considered an available resource for Medicaid purposes. The trustee would need to open a bank account and deposit the proceeds for further investment, or to use all or a part of the proceeds to buy a new house.

Finally, Are there any capital gains taxes?” Typically, a MAPT is established as a “grantor trust”.  For IRS purposes, this basically means that the person who set up the trust (you, the “Settlor”) is considered to be the “owner” for income tax purposes.  So, the trust would then benefit from utilizing the Settlor’s $250,000 capital gains tax exclusion, even though the trust is selling the property, and not the Settlor.  This, of course, assumes that the Settlor qualifies for the capital gains tax exclusion under the IRS regulations.

It is important when selling a house from a trust, especially a MAPT, to consult with and retain attorneys experienced with the sale of property from a trust and the Medicaid eligibility laws. Russo Law Group, P.C., has knowledgeable attorneys who can advise you and your Trustee.

Russo Law Group, P.C. can provide professional services to advise you of your spousal rights. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.

The Right of Election of a surviving spouse of a New York decedent has been in existence since September 1, 1930. Prior to the enactment of New York’s Right of Election law, a surviving spouse possessed dower and curtesy rights. Today, if a surviving spouse inherits less than one-third of the net estate, the surviving spouse has a Right of Election.

The following are five frequently asked questions regarding the Right of Election of a surviving spouse of a New York decedent:

1. What is New York’s Spousal Right of Election?

The surviving spouse of a New York decedent dying on or after September 1, 1992, has a personal Right of Election to the greater of $50,000, or one-third of the decedent’s net estate, calculated as of the decedent’s date of death. This pecuniary amount is known as the Elective Share.

The surviving spouse has the Right of Election unless the right is waived, is not timely asserted, or if the surviving spouse engaged in disqualifying conduct such as abandonment, failure to support, and divorce.

2. How is the Spousal Right of Election Exercised?

The surviving spouse must serve a Notice of Election upon the Executor or Administrator and record the original with the Surrogate’s Court. The Right of Election must be exercised within six months of the issuance of Letters Testamentary or Letters of Administration appointing an Executor or Administrator.

The court can extend the time to file the Notice of Election for six months and can grant further extensions upon reasonable cause, but not
beyond two years after the decedent’s death.

3. How is the Elective Share calculated?

The decedent’s Net Estate is calculated by including all probate assets (passing under a Last Will and Testament or via Intestacy), and certain non-probate assets (passing by operation of law), less debts, administration expenses, and funeral expenses. Estate taxes are not deducted. These non-probate assets are known as Testamentary Substitutes.

The surviving spouse is not entitled to interest on the Testamentary Substitutes during the course of the administration of the estate or to the specific property. The surviving spouse is entitled to receive money representing the date of death value of the property on a pro-rata basis from the beneficiaries.

4. What are Testamentary Substitutes?

a. Gifts made in contemplation of death (revocable gifts which are subject to surviving a stated contingency);
b. Outright gifts made in the last year of the decedent’s life (excluding annual exclusion gifts and gifts of direct tuition and medical payments);
c. Totten Trusts (“In Trust For” bank accounts);
d. Jointly owned property (including U.S. savings bonds and securities) to the extent of the decedent’s contribution:
e. Certain pension and retirement plans;
f. Certain lifetime trusts and contracts (including annuities, but excluding life insurance); and
g. General powers of appointment.

5. Which assets received by a surviving spouse will be credited toward the satisfaction of the Elective Share?

Only absolute dispositions of property passing from a decedent to a surviving spouse will be credited toward the satisfaction of the Elective Share. An example of an “interest passing other than absolutely” is property that does not consist of the decedent’s entire interest or an interest in a trust or a trust equivalent created by the decedent. An example of a trust equivalent is a legal life estate in real property.

Russo Law Group, P.C. can provide professional services to advise you of your spousal rights. We invite you to take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. may assist you.