New York & Long Island Elder Law

Settling Estate Requires Person to be Deceased, But What if They are Not Dead Yet?

 

After a 17-year absence, the court declared Mr. Evans dead. When at last he showed up, he was shot and killed after killing two police officers. He was better off dead the first time around.

Most state laws are quite thorough regarding requirements for declaring a person legally dead. In Pennsylvania, the language of the law is a little vague.

To complete the process, the York Daily Record's article "He was declared dead, then killed two deputies. How?" says that three things must occur:

• The person must be missing for at least seven years;
• Their absence must be deemed unexplained; and
• A judge must rule that an attempt has been made to find the individual.

The bottom line is that the family has to convince the judge they've done all that they can. A judge needs to be confident that the family made a thorough effort to find the individual. Pennsylvania law states that the petitioner must make a "diligent inquiry" into a family member's disappearance; however, it doesn't define exactly what a "diligent inquiry" is.

The family of David Brian Evans, age 68, filed a petition in County Court in 2014 to declare him legally dead. The court granted it. However, Evans appeared just last month at a Maryland restaurant where he shot and killed two deputies. Police subsequently shot and killed Evans.

It's rare that someone would be declared dead by the court but then later reappear. The most frequent reason for declaring someone dead is a legal formality in order to settle an estate.

For this particular family, sister Diane Gentry was trying to settle her father's estate after he passed in 2011, which required that her father's assets be divided among the survivors. She hired an online investigative service and then a private investigation firm to try to track down her brother, with no success. She initiated the process of having David Evans declared dead, and the court agreed with her.

Reference: York Daily Record (March 1, 2016) "He was declared dead, then killed two deputies. How?"

Good News: A Long Lost Relative Left You Money. Bad News: You Have to Pay Taxes

 

Depending on where the decedent lived, a surprise inheritance may come with another surprise: taxes that must be paid. Don't let a windfall become an expense.

Whether an inheritance comes out of the blue or is expected, in most cases there is an inheritance tax and, often, an estate tax that must be calculated and paid, according to NJ 101.5 in "What taxes apply when someone passes away?"

The amount of tax depends on the transfer amount, or "taxable estate," and who is receiving the transferred amount. The transfer amount is in essence the fair market value of the deceased's assets plus any life insurance proceeds. There are both federal and state estate tax laws to look at when evaluating a deceased's estate. The state where Grandma resided at the time of her death is important, rather than where the heirs live. If Grandma was a New Jersey resident at the time of her death, estate taxes could apply when assets are left to anyone other than her spouse.

The federal estate exemption amount is currently $5.45 million per person. You are only taxed if more than the exemption amount is transferred at death. However, if any lifetime taxable gifts were made by the deceased, it's possible the estate could be subject to estate tax even if the estate is less than the exemption amount. That's because a taxable gift is a gift in excess of the annual gift tax exclusion amount of $14,000 per person.

But if Grandma's taxable estate is less than the exemption amount—after adjusting for any lifetime taxable gifts—there would be no federal estate taxes due. New Jersey has a state estate tax exemption of only $675,000. As a result, many state residents will be subject to state estate taxes. But again, if Grandma's taxable estate is less than $675,000, there's no New Jersey estate tax due.

There's also the issue of state inheritance tax. The taxable estate for New Jersey inheritance tax purposes has two important adjustments: gifts made within three years of death are generally added back, and life insurance proceeds are exempt if paid to a named beneficiary (but not if they were paid to the estate of the deceased).

The good news is that you only have to pay the greater of the New Jersey estate tax or the inheritance tax, but not both. Also, immediate family members—including the spouse, grandparent, child, or grandchild—are exempt from the inheritance tax.

It is important to speak with an estate planning attorney who practices in the state where the deceased person lived about matters concerning estate and inheritance taxes. The laws vary from state to state, and they change over time, so the attorney needs to be a current and active practitioner in that state.

Reference: NJ 101.5 (March 1, 2016) "What taxes apply when someone passes away?"

Settling Estate Requires Person to be Deceased, But What if They are Not Dead Yet?

 

After a 17-year absence, the court declared Mr. Evans dead. When at last he showed up, he was shot and killed after killing two police officers. He was better off dead the first time around.

Most state laws are quite thorough regarding requirements for declaring a person legally dead. In Pennsylvania, the language of the law is a little vague.

To complete the process, the York Daily Record's article "He was declared dead, then killed two deputies. How?" says that three things must occur:

• The person must be missing for at least seven years;
• Their absence must be deemed unexplained; and
• A judge must rule that an attempt has been made to find the individual.

The bottom line is that the family has to convince the judge they've done all that they can. A judge needs to be confident that the family made a thorough effort to find the individual. Pennsylvania law states that the petitioner must make a "diligent inquiry" into a family member's disappearance; however, it doesn't define exactly what a "diligent inquiry" is.

The family of David Brian Evans, age 68, filed a petition in County Court in 2014 to declare him legally dead. The court granted it. However, Evans appeared just last month at a Maryland restaurant where he shot and killed two deputies. Police subsequently shot and killed Evans.

It's rare that someone would be declared dead by the court but then later reappear. The most frequent reason for declaring someone dead is a legal formality in order to settle an estate.

For this particular family, sister Diane Gentry was trying to settle her father's estate after he passed in 2011, which required that her father's assets be divided among the survivors. She hired an online investigative service and then a private investigation firm to try to track down her brother, with no success. She initiated the process of having David Evans declared dead, and the court agreed with her.

Reference: York Daily Record (March 1, 2016) "He was declared dead, then killed two deputies. How?"

 

 

Answers about the Qualified Terminable Interest Property (QTIP) Trust

The facts of life include remarriage. Almost 42 million adults in the U.S. have been married more than once, up from 22 million in 1980, according to the Pew Research Center. For older Americans, remarriage can pose estate planning problems. Even for couples who share children, potential remarriage might be a concern. And even if remarriage isn't a concern, your surviving spouse may need help protecting assets from scam artists. So how can you provide for a surviving spouse yet still leave your wealth to children from a prior marriage?

Let’s say that Betty and Bob have kids and grandkids. Bob is worried that he'll die first and pass on his wealth to Betty, who might remarry and his kids would get nothing. Investor’s Business Daily explores this issue in “Cut Taxes, Send Assets To Loved Ones After Your Death.” One solution is to create a Qualified Terminable Interest Property, or QTIP trust, so that when the first spouse passes away, the assets pass to the trust.

A QTIP typically doesn’t have estate taxes. The surviving spouse must be a U.S. citizen and must be entitled to all of the trust income, which has to be paid out at least once a year during the survivor's lifetime. No one else can receive trust distributions during that time. At the same time, the trust creator can give the trustee some flexibility: the distributions of principal to the survivor might be allowed to pay living expenses and essential medical bills. However, the surviving spouse need not control the QTIP assets.

Here’s another example: What if Carl marries Ella and each has children from a prior marriage. Carl passes and leaves most of his wealth to a QTIP trust for Ella, so that she will have cash flow for life. She’s not allowed to name new beneficiaries who'll get the QTIP assets after she dies. The QTIP assets will pass to the beneficiaries that Carl named, and those assets will be taxed in Ella's estate. Both spouses can create QTIP trusts.

The trust creator has to authorize his or her executor to finalize your QTIP election after your death, and federal and state elections may have to be made to get full estate tax deferral. An estate planning attorney knows all about this. It’s important that your family understands the QTIP’s goals to alleviate conflict after your death. The QTIP allows your spouse to have lifetime distributions to maintain his or her lifestyle, and your children will inherit your wealth without having to worry that a stepparent will spend it all after your death.

But a QTIP trust may be a source of conflict, as the surviving spouse may want the trust fund to be invested for income, and the survivor can actually demand that the trustee sell assets that don't produce revenue. The children will likely want the QTIP assets invested for growth. You need to select a trustee who can negotiate peace among beneficiaries. Tax deferral may also mean inheritance deferral, because if your spouse lives a long time after your death, your children will have to wait for a QTIP payout. Consider making some assets available for immediate bequests to descendants, or to provide for them with life insurance that will pay at your death.

Reference: Investor’s Business Daily (September 4, 2015) “Cut Taxes, Send Assets To Loved Ones After Your Death”

Will You Still Friend Me or Tweet Me When I’m Gone?

If you participate in social media, store photos in the cloud or have a blog, you have digital assets. Just as you plan for distribution of property and assets in an estate plan, today it is wise to plan for your digital assets as well.

Today’s millennials understand that their digital assets, which include everything from family movies hosted in the cloud, to social media accounts, digital currencies like Bitcoin and domain names, have value that can be passed to others when they die. One young man created a will that listed all of his digital assets and used a password manager to gather all passwords in a central location. He gave the password manager to his brother, who is his estate executor. He also moved certain digital assets, particularly photos and movies, to a file sharing service so that other family members would have access to them in the event of his demise.

Many people neglect to include digital effects in their estate plans, which can be a huge mistake, as valuable assets may go unnoticed, or money and time might be spent attempting to find them.

There are some assets like digital currencies, video game characters, and Internet domain names that exist only in cyberspace. You can’t put these in a safety deposit box: they can be overlooked because they aren’t as tangible. These days, folks are acquiring more digital assets like Facebook photos or email addresses all the time. However, getting access to social media accounts can be difficult because laws governing digital assets vary by state. Online sites concerned with user privacy have drastically different terms and conditions that sometimes exclude executors.

Create an inventory of your online accounts and their passwords—but don’t include them in your will. Wills should not be changed as often as you change your online account information. Simply explain how you want each account handled if you die, with the terms and conditions for each site included. Save this inventory in an encrypted file, a safe, and with your estate planning attorney. You should also authorize your executor to obtain access to devices and online accounts and reset passwords.

Keep your photos on a computer or local storage device rather than an online site so they’re easier to retrieve. Better yet, save them on two storage devices in separate places, like a home safe and a lawyer’s office.

Some assets can’t be passed on to heirs. An iTunes library can’t be passed as digital music and e-book purchases are nontransferable because they’re licensed to the user. You can only leave these assets if a user agreement permits it.

The wise person will make this process as transparent and easy as possible for their heirs. As time goes on, more of our lives will be digital and this will become even more important.

Reference: New York Times (November 11, 2015) “Plan Your Digital Legacy, and Update Often”

An Update on the Ernie Banks Estate Battle

Reports on the latest in the battle over Ernie Banks’ estate can be found in The Chicago Tribune's recent article “Ernie Banks case: Two sides to try to settle dispute about Cub great's will”.

Elizabeth Banks, who was estranged from Ernie when he died, alleged in a recent court filing that her husband had been diagnosed with dementia days before Rice had him sign a will in October 2014. The new will cut out his family and left the whole ballgame to Rice. Rice said that Ernie entrusted her to execute the will and that he wanted to make sure his fourth wife didn't get any of his estate. Court records show that Ernie sent her a "cease and desist" letter in 2013 requiring her to stop claiming any right to his personal or business dealings.

Despite both sides pitching heated accusations, Rice’s attorney told the judge that she wanted to go ahead with a settlement conference due to the limited assets in the estate. The attorney said that it was in everyone's best interest to resolve the estate in "a peaceful manner."

Rice filed an inventory of Ernie’s personal property earlier this year. This consisted primarily of things from his rented condo and storage containers in Chicago and California. The list included Banks' original Negro League contract from 1950, a Rolex watch, his Hall of Fame ring, and the Presidential Medal of Freedom. There are also other assets in a private trust set up in Rice's name under the terms of the will.

Banks' twin sons, Joey and Jerry, were not present for the legal proceedings. The two publicly accused Rice of taking advantage of their father's frail condition and vowed to fight her in court when the will became public.

The probate judge said the deadline for them to file the paperwork to be participants in the case was approaching. However, if the case settles before that time, Ernie’s sons wouldn’t be able to contest any award they were given. The judge also approved a spousal award of $20,000 for Elizabeth Banks, which is the minimum amount allowed under the state's probate law. Rice's attorneys objected because she hadn’t shown that she relied on Ernie for financial support at the time of his death, but the judge said the law was clear.

Estate contests are messy. You can help avoid them by getting quality estate planning advice and a sound strategy from an estate planning attorney.

Reference: Chicago Tribune (August 6, 2015) “Ernie Banks case: Two sides to try to settle dispute about Cub great's will”

If You Own Property Outside of the US, These New EU Rules Will Impact Estate Planning

In the past, if you had a will written and executed in one country, and you died in that country, the law of that country would govern the distribution of your estate. A new rule from the European Union that is currently in effect will give you the option to choose which country’s laws you want to apply to your will. The country you have chosen must be designated in your will.

Thus, for example, if a German is living in Italy, he or she can write a will to be used in Italy but that applies German law. This is not limited to nations in Europe. An American living in Europe could chose to apply US law. The Connexion reported on this new rule in "New EU inheritance rules now in force ."

This change could also impact Americans in another way.

Previously, if a US resident had property in a European Union country, then that property was dealt with under the laws of the European country. Now, it might be possible for the property to be handled under the laws of the person's state of residence. However, as with all rules and regulations, it remains to be seen how courts interpret and use this new rule.

Contact your estate planning attorney if you may be impacted by these developments.

Reference: The Connexion (August 17, 2015) "New EU inheritance rules now in force.”

Fundamentals of Preparing a Will

Fox Business reported on three important aspects of wills in a post “3 Things You Should Know Before Writing Your Will.”

1. A will doesn't actually cover all of your assets. If you own property in accounts that have beneficiary designations (IRAs, 401k’s, and life insurance policies), then the people you choose as beneficiaries will inherit those proceeds, regardless of what your will says. And if you own property in joint tenancy with rights of survivorship, your joint tenant will take full possession automatically at your death. Pay-on-death bank accounts likewise give the surviving account holder the rights to withdraw all of the money when you pass away. Also, property held in trust is handled outside of probate.

Make sure your beneficiary designations are consistent with your will. If you make changes to your will, you should review those beneficiary designations to see if similar changes are needed. If you fail to do this, your effort to update your estate planning could create major gaps that will wreck your plans for the distribution of assets after death.

2. Naming your will's executor takes some thought. The executor is the individual in charge of taking care of your affairs and ensuring that your will is executed as you stipulated. This is a big decision: the executor is responsible for several extremely important tasks. These include:

• Distributing assets as directed by the will.
• Paying bills and taxes on behalf of the estate.
• Appearing at legal proceedings for the estate.
• Maintaining property until the estate settles.

You need to choose the right person for this important job. Many people select their spouse, an adult child, or a trusted friend. But you can also name an attorney as executor. You also can name joint executors and alternates in case the executor you choose can’t serve or he passes away before you do.

Consider these thoughts when selecting an executor. It should be someone you trust to make the right decisions, and a person who is smart enough to ask for help from a qualified estate planning attorney when they need it. Naming several of your children as co-executors might be hazardous, as this could lead to arguments. Your executor doesn't need to be a financial guru, but should be a person you trust with good business and common sense.

3. Take extra care in writing your will if you have young children. In many instances, children can’t deal with the responsibility of inheriting property. Also, if your son or daughter inherits property outright when they're still a minor, the probate court will appoint an individual to be a property guardian if you don't. So it makes total sense to carefully consider whom you want managing your assets for your child after you pass. This is especially vital because a court-appointed guardian will hand over all the inherited property to your child on the day he or she turns 18.

Take some time and think about how you want to address these issues. Your estate planning attorney can help with planning.

Reference: Fox Business (August 9, 2015) “3 Things You Should Know Before Writing Your Will”