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Long Island Elder Law Blog

What decanting is and how it may help trust holders "fix" trusts

There was a time when someone in New York with significant assets that they wanted to pass along to their children in a controlled manner would likely be advised to set up an irrevocable trust. The problem is that such trusts are close to impossible to amend. This can present further issues for trust holders with adult children who not quite ready to responsibly handle regular disbursements.

There is a way that irrevocable trusts may be amended with a fairly new concept known as "decanting." Several states have enacted so-called decanting statutes to allow trust grantors to essentially have a do-over to address issues that didn't exist at the time the trust was drafted. This means grantors can transfer or "pour" assets from an existing irrevocable trust into a new one with more appropriate and relevant provisions.

Compelling reasons to have an estate plan at any stage of life

It's not necessary for anyone in New York weighing their estate-related options to have substantial assets to benefit from this type of proactive planning. Yet, according to the American Association of Retired Persons (AARP), more than half of all adults and millennials do not have basic documents like a will or living trust.

Some people justify putting such plans on the back burner by saying they're too young, or they don't have children. However, there are many compelling reasons to consider estate planning at any stage of life. For instance, a living or revocable trust allows a designated individual to make decisions on behalf of someone if he or she is incapacitated or unreachable. Such documents can also determine the distribution of property upon a person's death. Should an individual become physically or mentally disabled, a durable power of attorney can name a responsible party to make medical decisions on his or her behalf.

Why establish Medicaid trusts?

Many New Yorkers will need long-term care at some point in their lives. Unfortunately, it is prohibitively expensive for most people and can cost thousands of dollars per month. It is possible for some older adults to qualify for Medicaid to pay for the cost, however. One way that middle- and upper-income adults can potentially qualify for Medicaid for long-term care is through Medicaid trusts.

The rules for Medicaid eligibility vary from state to state. Eligibility is determined by reviewing the assets and income of the people who need long-term care. If they are over the threshold, they will not qualify for Medicaid. However, people can conduct Medicaid planning so that they can qualify for Medicaid when the time comes.

Estate planning basics for New York art collectors

Wealthy art collectors in New York are usually very passionate about their art, and art aficionados who can afford to amass impressive collections aren't too concerned about disposing of any of their prized possessions. This usually means that when an affluent art enthusiast passes away, they have a sizable stash of valuable works of art. Unfortunately, another thing that wealthy art collectors have in common is a lack of proper estate planning.

If estate planning wasn't a priority during an art collector's life, the first major issue for heirs will likely be significant estate taxes. There may also be an unfair division of art that results in squabbles among surviving family members or even lengthy and costly legal battles. With a well-structured estate plan, however, art can be left to designated loved ones or donated directly to charity or a specific museum in a way that's as tax-efficient as possible.

What to consider in estate planning

The end of the holiday season and transition into a new year is an ideal time to prepare an estate plan. New York residents should start by inventorying their assets both large and small. It is critical that a person doesn't forget to leave behind a list of online passwords or other instructions related to digital assets. It is also important to have a conversation with other family members to articulate that plan once it is made.

A family member or other trusted individual will ideally be granted a power of attorney. This allows that individual to pay bills, sell assets or otherwise manage a person's financial affairs while he or she is incapacitated. Generally speaking, a spouse can't access accounts or sell assets unless they are jointly owned. The use of a living trust can specify what happens to assets that don't have a beneficiary designation attached to them.

The estate planning benefits of life insurance

Those who are turning 55 in the near future may still be trying to find solutions to both current and long-term financial issues. However, New Yorkers who are attempting to create an estate plan may want to make a life insurance policy a part of that plan. Perhaps the most important benefit of a life insurance policy is that it can provide cash at the time of a person's death.

This can make it easier for surviving family members to pay final expenses such as for a funeral. The money a policy provides could also be helpful for paying medical or other outstanding debts at the time of a person's death. It is not uncommon for individuals to want to divide assets such as a business to multiple children upon their death. However, dividing the business may be tricky based on the needs and goals of the beneficiaries.

Methods for revoking a power of attorney

A power of attorney is one of the most useful and versatile estate planning tools available to New York residents. The document will appoint an agent, or attorney-in-fact, to act in the place of the principal with limited or broad powers. If it's a durable power of attorney, the powers will continue if the principal becomes disabled.

However, circumstances in life may change and the POA will need to be revoked. In some cases, the reason for the POA is no longer existent. In other times, the principal may want another agent or has lost trust of the previous agent. If the principal is not under a mental disability and has the faculties to understand the document, the POA can be revoked. There are several ways this can be accomplished.

Three mistakes to avoid when planning an estate

New York residents in the process of estate planning should remember three common pitfalls that may cause problems for their plans. In summary, these issues are a lack of information, beneficiary designations gone wrong and outdated plans. These snags can unravel estate plans and cause family feuds that may go all the way to court.

For example, lack of information can cause problems if the family does not have access to passwords used for digital assets by the deceased. Digital accounts such as homeowners insurance, brokerage accounts and bank accounts should be listed in a master roster that makes it easier for family members to gain access. This roster, which should be physical to prevent cyber-theft, could be kept in a safe deposit box or even at home.

Potential estate planning problems and tips for avoiding them

New York fans of comic book artist Stan Lee may know that he ran into some issues with his finances and his associates before his death. For example, earlier this year, he said that $1.4 million went missing from his account. In a dispute with his daughter, he signed a notarized document claiming she befriended men who wanted to take advantage of him among other accusations and then took it back. Furthermore, he has worked with several managers and attorneys throughout his career.

Although it has not yet been reported whether he had an estate plan, his daughter may have a lot of paperwork to get in order. This can be the case even when people do not have large, complex estates. There are also certain documents everyone needs as part of an estate plan including powers of attorney and a will or a trust.

About silent trusts

New York residents who are trustees of irrevocable trusts have certain duties regarding informing beneficiaries about the trust. Specifically, they have an affirmative duty to give some information about the trust to beneficiaries. In turn, beneficiaries are given the right to ask for certain information about the trust.

The rights of the beneficiaries and the responsibilities of the trustees are meant to make sure that the beneficiaries have the information they need to adequately protect their interests. The trust settler may be able to use the trust instrument to restrict or put aside the requirement in some states. In other jurisdictions, due to public policy, the requirement cannot be waived.