Asset Protection ~ Facts & Fiction
Recently, I read a column that suggested asset protection strategies should be used by those with modest estates. While I appreciate the premise, I respectfully disagree. Asset protection strategies used by high-net worth or ultra-high net worth individuals require a substantial investment in resources – specifically time and money. Most families with modest estates don’t have $2-5 million in liquid assets, a mortgage free million dollar primary residence, a second vacation home, watercraft, and insurance to cover the value of all of these assets. Let’s be real, if: (1) Your family residence is still subject to a mortgage, you don’t actually own the asset to protect. (2) You own 1 or 2 multifamily income producing properties that are still subject to mortgage, you don’t actually own the asset to protect. You do, however, own the income, which is what umbrella insurance and LLCs are for. (3) You don’t have the funds readily available to replace your mortgage-free family home, the only way to protect that asset is with a robust homeowners insurance policy. Economic uncertainty is frightening. And ways exist for families with modest estates to protect what they have and undergird their wealth accumulation efforts. However, if you’re thinking about asset protection consider the above and think again: AFFORDABILITY. The legal fees alone are generally $10,000 or more, and they generally do not end because asset protection or wealth preservation is not a “set it and forget it” endeavor. CURRENT JURISDICTION. All states (or jurisdictions) don’t allow you to establish an asset protection plan or recognize asset protections trusts. IT TAKES A TEAM. Lawyers, tax professionals, appraisers, insurance professionals, and, even, security professionals depending on your other family members and the size of your estate. Experienced estate planning and wealth preservation professionals will do what they can within legal parameters to set you and your family up for success. But, it’s not like the movies and if a wealth preservation professional snaps their fingers and agrees with everything you say, run…fast…and far.
High-Wire Acts & Estate Planning
“If you look down, what you see may not be legally binding.” Like most people, I listen to podcasts on a regular basis. One episode heard lately had absolutely nothing to do with the law, but mentioned the issue of “informed consent.” That led me down the legal rabbit hole considering my duties as a lawyer with potential clients. Every time I or one of our associate attorneys meets with a potential client, we must obtain their informed consent to provide them with legal services. And what exactly is informed consent? Ensuring that our potential client has the requisite mental capacity to take the steps they want to take. For example, the capacity needed to establish a Last Will and Testament requires that a potential client knows what they have and its approximate value, who their heirs would be, what they want to do with their estate assets, and understands the consequences of the distribution scheme they have in mind. Next, they must have accurate knowledge related to the services they are seeking. Using the Will as an example again, a potential client must know that an estranged spouse, can, in Illinois reject the Will and take 1/3 of the Estate. Related to the two elements above, a potential client must then understand the implications of their actions, like establishing a Will that disinherits an estranged spouse or doesn’t mention an estranged spouse. Can you say probate? Oh,..and then we have to explain what that is. After all of the above, the potential client then must have the freedom to say “no thank you” to our pitch. If Junior is sitting next to Grandma whispering in her ear and Grandma says reluctantly, “Ok. Who do I make the check out to and give everything to Junior,” Houston, we could have a problem. Finally, Grandma must provide us with the authority to prepare the Will. If Grandma says, “sounds good,” I’ll talk to my family and walk away. Grandma hasn’t given us authority to do anything. Now… I’ve a few questions: (1) When you sign up for one of the online platforms, are you providing your informed consent? (2) And if so, to whom? (3) What AI program or online platform took and survived the bar exam? I love technology, but leaving issues involving family and money to something that is artificial and has no real world experience in probate courts is a high-wire act, to say the least. Need a Review Of Your High-Wire Estate Plan
We Were Surfing, Then a Shark Ate Her
What Happens if You Die Without a Will While On Vacation? It was going to be the best honeymoon ever. We met a couple of years post-divorce for both of us, and fell madly in love with each other and each other’s children. We were financially secure and each of us had our own wealth and intended to keep our assets separate. The water was beautiful and blue and the waves were amazing. We went out on our boards and out of nowhere appeared a grey fin, an ugly snout, and then menacing black eyes. She freaked out, fell off, that thing opened its snout, showed teeth, and the center half – 1/3 – of my new wife’s body disappeared. Then all hell broke loose. We had quickly prepared powers of attorney prepared before we left and were planning to have an estate plan prepared by an attorney once we returned. My wife was particular about how she wanted her remains disposed – she wanted to be buried in the most sustainable and economical way. At the hospital, researchers appeared and refused to release her body. Unlike our home state, in this state, doctors were the final decision-makers on dispositions of remains. So I had to leave her remains in a strange place. I’m also going to have to pay thousands of dollars to a healthcare system because we didn’t have traveller’s insurance. When I returned home, I learned that some of her accounts had no designated beneficiaries, so instead of everything going to her children, her children will have to split everything with me. When they found out about that, they began blowing up my cell phone asking me what I intended to do. Of course, I intend to give them the 100% of my share but one of them is a spendthrift – money burns holes through their pockets and my wife was adamant about being careful how much to give to this child on a regular basis. That has caused some friction between all my stepchildren. Also, since my wife had no Will or Trust, her estate must go through probate. In this state, because I’m the surviving spouse, I have preference in acting as an administrator for her estate. This issue also created discord between me and my stepchildren. That frickin’ shark! I think what I’m going to do is use part of my half to create a trust for the spendthrift child to shelter at least part of their share of the estate, and they are not going to like that, but I know it’s what my wife would have wanted. She would have been very upset with the fact that this kid, who she actually suspected as being a functional addict, is going to obtain 1/6 of their share completely outright. I really hope the kids don’t blow through their inheritance; they are still young adults, just a few years out of college. Her estate was rather large, so I also must obtain insurance to cover the value of her estate, which cost the kids thousands of dollars. My wife was also working with a tax professional because she also had a significant tax liability that they were disputing with the IRS. That means I can’t distribute her estate to the kids (or anyone else) until that issue is resolved. How am I going to explain that to the kids? Maybe I can provide a partial distribution, but I still need to have some appraisals done – she owned a couple of rental properties and a small online business. I really miss her – she was fun but brilliant. This is a mess… And a fictional story…kinda
Navigating Florida\’s Perilous Spousal Estate Inheritance
Contributing Author: Nicole Page Florida law provides significant protection to surviving spouses who have been disinherited or left a small share by their deceased spouses. In Florida, a spouse cannot be disinherited by a will or a trust, which is different than Illinois, where a spouse can be disinherited by using a trust. Florida law gives spouses the option to choose to inherit what was left to them according to their deceased spouses will or the choice to elect to receive a percentage of the elective estate. A surviving spouse usually elects to take an elective share in situations where the deceased spouse attempts to disinherit them or leaves them less than they would receive if they took an elective share. The amount of the elective share is a case-by-case analysis, depending on the value of the estate. There is no fixed number, but rather a percentage – up to 30% of the deceased spouse’s estate. It’s also important to note that some assets that aren’t typically a part of an estate are considered to determine the surviving spouse’s elective share. This means that an attempt to circumvent the elective estate statute by distributing assets into a trust may still not be sufficient to disinherit a spouse. Florida does not discriminate by codifying what type of character the spouse had or the nature of the relationship between the spouses. This means that even if the spouses have been living separately for years, it does not infringe on the right to the elective share. As long as the spouse is a Florida resident and still married at the time of the death, they can claim the elective share. Barriers to claiming the elective share are: Executing a valid premarital or postmarital agreement. Required procedural protocols: The surviving spouse must file a written notice that they are invoking the elective share statute with the probate court within 6 months after the date of service of the notice of administration or 2 years after the date of the decedent’s death. Still, if you would prefer to provide for your children because you\’re in a second marriage, beware of what\’s lurking beneath…
Changes in New York\’s Power of Attorney
Author Gabrielle Wasenius Laws always evolve. Here at the Law Offices of Max Elliott, we stay current on estate planning, estate administration, and probate laws of the jurisdictions we serve. The laws related to the New York Power of Attorney (POA) underwent significant changes in 2021, bringing more flexibility for those preparing POAs and greater safeguards for those relying on them. One notable improvement is that the POA no longer requires an “exact wording” match but only wording that that “substantially conforms” to the statute. Previously, even minor typos or small mistakes could invalidate POAs. While the wording requirement changed, the fundamental rule that an agent’s powers are limited to those listed in the POA remains unchanged. However, the new law allows for more powers to be granted to agents, especially regarding gift-giving. Before the law changed, an agent could only make annual gifts of less than $500 unless the principal initialed a section of the POA to grant authority to the agent to make larger gifts and then also executed a separate Statutory Gifts Rider. The Statutory Gifts Rider had to be notarized and signed by 2 witnesses. These requirements were meant to combat fraud and abuse. But, requiring 2 forms created confusion. While POA forms properly executed under the law in effect at the time of their signing remain valid, the new POA law eliminates the Statutory Gifts Rider completely and allows for gifting provisions to be included in the POAs Modifications section. It also includes a standard provision allowing up to $5,000 in gifts per year, with the option to specify other amounts in the document itself, specifically in the Modifications section. This significantly simplifies the process. The new law also makes POAs easier to use. The law ensures that third parties like banks cannot reject a properly executed POA without good cause, and the statute provides a specific timeframe for them to do so. If they unreasonably refuse to recognize the agent\’s authority, they may be held responsible for damages and reasonable attorney fees and costs by a court. The law also protects those who rely on POAs. The safe harbor provision shields third parties from liability if they act in good faith, even if the POA turns out to be invalid. However, for this protection to apply, the POA must appear to be executed correctly, and the recipient must not have actual knowledge of forgery, voidness, or misuse of authority. This provision does not protect parties involved in fraudulent activities. These legal changes in the New York POA make it easier for agents, principals, and estate planning attorneys to work within the system. A well-prepared POA, along with other advanced directives, can provide valuable protection when needed. Don\’t wait until a crisis; start planning today for a more secure tomorrow.
Diverse Family Legacies
Not only is it PRIDE month, but it\’s also our anniversary! As we reflect on our 12 years of service, we look fondly on plans we\’ve created for families who the law once ignored and persons who are currently under attack by laws in certain states. Yes, marriage equality is the law of the land, but if you\’re a transgender person, you and your marriage has a target on its back. Additionally, diverse families are also under attack. The Law Offices of Max Elliott wholeheartedly agrees with the travel advisory… Diverse families include LGBTQ+ families; blended families with step-children, adopted children, or godchildren treated like children; non-married couples with adult children; and more. Your families (like ours) require carefully crafted solutions to ensure that your legacy is fulfilled, and this planning for beautifully diverse families and persons is what we\’ve been doing ever since our doors opened on the day that Illinois passed the Civil Union Act. #LGBTQ+rights #estateplanning #protectingtodaysfamilies
Zen and the Art of Sibling Rivalry
(Or more aptly titled, \”Probate War Stories That Will Scare You Into Estate Planning…I hope\”) My sister predeceased me. During our childhood, as the older sibling, I did what most older siblings did – tortured her because my parents tortured me. Okay. Torture is a misnomer, but childhood psychologists say that my actions seeking to control my younger sibling, were natural for the stage of our relationship. And in my evolving yet immature brain, it was only fair: There were only 2 of us, and I was the oldest. But it ended when I stayed small for my age and my younger sister grew large for her age, and she showed me who was really boss. After that, my sister and I rarely had a row. Maybe we had strong differences of opinions three times during the entire 46 years we were together. She was no saint (and neither was I), but there were lines we just didn’t cross. And maybe we were just lucky that way, or maybe I’m just dreaming because of the 4 in our tiny family, my sister was the first one to die. However, I would prefer to think that we were just lucky that way, like our cousins who were also sisters with parents who predeceased them. Because O-M-G… Siblings who will drain an estate dry because of control issues and parents who just knew the kids would get along fine. Death and money changes everything… Sibling POAs who absconded with the bulk of the fortune while a POA, leaving other siblings to wonder if the medical bills were that high. Pending death and money changes everything… Siblings who changed the Last Will and Testament in the hospital room, after the morphine drip increased and other siblings were taking care of the house. Like I said, pending death… Siblings who saw the Last Will and Testament before the other siblings, didn’t like what they saw, decided to keep the Will in a safe place, and upon death, when asked, “What will? There is no will.” Secret knowledge of disproportionate gifting changes everything… I recently listened to a panel of estate planning attorneys discuss the importance of transparency in gifting. I agree and disagree. Parents generally love their children and, before the parents die or become incapacitated, they rarely see the sibling ghoul that lurks within. So, being transparent about estate planning is an exercise in futility. However, disproportionate gifting, making only one a POA over financial matters, and the rationale behind these actions should be discussed with everyone in the room and…probably a Zen Master. Now, not all siblings are evil-doers. In my practice, I’ve witnessed wonderfully loving acts of generosity between siblings. But, the wars… Namu Myōhō Renge Kyō
DEI and Estate Planning: The Economic, Non-Business Case, Imperative
National Estate Planning Awareness Week has come and gone. But it was busy! I presented LGBTQ+ estate planning tips and a helpful loophole to members of the Dramatists Guild. Next, esteemed panelists and I shared thoughts about diversity and inclusion and the wealth gap in the context of the estate planning profession. Then, there was the usual stuff, non-stop. Estate planning loophole, you ask? Yes, there is for unmarried couples of certain ages with retirement assets. Contact us to learn more. Diversity & Inclusion and the wealth gap in estate planning, you ask? Yes, for me and our firm, diversity’s moral imperative is a given. Yet, there’s an economic imperative beyond the business case: To be successful in the U.S., one must be financially successful, which means be gainfully employed so that you can enjoy a comfortable living. Appropriate DEI initiatives in the estate planning profession, a profession traditionally dominated by old, white guys, address not just the mythical pipeline issue but compensation and retention issues, which ultimately address the wealth gap. Thus, it’s an economic imperative for estate planning firms to be authentically diverse and equitable and inclusive. (Read: Diversity is not just on our website or in support but front and center in our firm\’s planning professionals and we\’ve been this way since day one.) Mythical pipeline issue, you ask? Yes, but we’ll save that discussion for another day.
Doctors v. Family — Who Decides Treatment When You Can’t
By Melissa Aristizabal An unfortunate reality in living through a pandemic is being forced to think about what directives you have in place if you cannot make decisions for yourself. A common instrument that you may have heard of in all those evening medical sitcoms (looking at you #GreysAnatomy) is a DNR or “Do Not Resuscitate Order.” So what are your options IRL (in real life)? As previously discussed, a Power of Attorney (POA) is an instrument used to appoint another individual, your “Agent,” to make legal decisions for you, the “Principal.” But, unlike in Illinois, in New York, the instrument used to make healthcare decisions on your behalf is referred to as a “Health Care Proxy.” Health Care Proxy. A Health Care Proxy gives you, the Principal, the power to appoint a competent adult as your Agent to make healthcare decisions in your best interest and in accordance with your religious preferences or moral beliefs. Your Agent only makes healthcare decisions for you when a physician determines that you are no longer able to do so, that is, you lack the mental capacity to “understand and appreciate the nature and consequences of health care decisions” or make an informed decision weighing the benefits, risks, or alternatives of the proposed treatment. When is capacity determined? An attending physician or attending nurse practitioner makes the determination and it is summarized in a writing included in the Principal’s medical records that details their opinion on what caused the Principal’s incapacity and its possible extent and duration. The Principal’s capacity is re-evaluated at the time health care decisions are taken and – if the decision to stop life-saving measures is made – another attending physician or attending nurse practitioner must also determine that the Principal lacks capacity before life-sustaining treatment is ended. But, if the Principal regains capacity at any time, the Agent’s authority to make healthcare decisions automatically ends. Benefits. Having a detailed Health Care Proxy takes the guess work out of, for instance, what risky procedures or treatment you wish to undergo or if you would like medical professionals to take heroic efforts to keep you alive. This can also keep the family discord to a minimum. Undoubtedly, stress will be high and it’s likely that there could be a disagreement among family members on what life saving measures should be taken. Be Prepared. Though it’s never fun discussing end-of-life topics, now is the best time to do so with an attorney. Thinking through what we want in a situation we hope to never encounter puts everyone in the best position to ensure our wishes are followed. Contact a New York estate planning attorney to start your planning today.
Springing into power? Deciding the Right POA in New York
Written by Melissa Aristizabal We sprang forward into spring on March 8th but have been diligently cooped up #stayhome dreaming of brighter days to come. Planning for the future (well, further out than this public health crisis, of course) often includes having a plan in place so that another person — someone you trust – may legally act on your behalf. This is especially important if you’re unable to do so. This grant of legal rights is known as a Power of Attorney (POA). A POA is a legal document that, under New York law, allows you, the ”Principal,” to appoint an another individual as your “Agent” to act and make legal decisions on your behalf. The authority granted to the Agent can cover multiple areas or can be narrowed to one such as real estate transactions. You, the Principal decides this agency scope. So when can the Agent begin acting on your behalf? Either immediately or on the happening of a specific event or date. Simple enough, right? Not so fast. This determination can have drastic consequences. Durable Power of Attorney. A durable POA is one that grants rights immediately to the agent which will survive even if the principal becomes incapacitated—meaning when you no longer have the ability to physically or mentally make legal, financial, or personal decisions for yourself. A Durable POA will last until the principal revokes it or passes away. If the principal decides to revoke a durable POA, the principal must notify any third parties in writing that the agent cannot act on their behalf. So what’s the main issue here? This type of POA is indefinite. Springing Power of Attorney. On the other hand, a springing POA comes into play when a specific event or a specific date occurs. To create a springing POA, an event or a date must be spelled out in the POA at the time of signing. An issue that arises here is that, if the event never occurs or the Principal loses capacity before the specific date, then the POA is of no use and the Agent cannot act on behalf of the Principal. The Agent cannot act on behalf of the Principal and the Principal does not have the capacity to enter into a new durable POA unless and until the event or date occurs. However, this does not ring true for springing POA’s where the event is in fact a determination of incapacity – then the POA becomes a durable POA. Worried about abuse of power? New York state law allows you to appoint a watchdog to keep tabs on your Agent. Your monitor can – under Section 5-1509 of the General Obligations Code – request receipts and records of all transactions made by the Agent and on your behalf. The monitor can also request a copy of the POA. This helps to ensure that the Agent is acting with your best interests and within the power given under the POA. Now, It\’s Up to you. As the Principal, it is ultimately your decision on the type and scope of your POA . Thinking about obtaining a POA? Good. Just be sure to contact your New York estate planning attorney to help you work out the specifics.