WHAT TO DO WHEN SOMEONE ABUSES A POWER OF ATTORNEY

Providing someone a power of attorney to act on your behalf is part of a good estate plan. Sometimes though, usually when you are elderly and need help handling your finances, or become incapacitated, the person you selected abuses the power. This can lead to dispute that may arise during your life or after your passing.

What is a Power of Attorney

A Power of Attorney is usually a statutory form wherein an individual can appoint a person or persons to act on the individual’s behalf to make financial decision during the lifetime of the individual. The person who has to power to act is sometimes called the “attorney-in-fact.” This person is not an attorney, but is permitted to act on behalf the individual for financial decisions outlined in the Power of Attorney. You would have to properly execute the Power of Attorney to be valid and most of the time requires either a notary or witnesses. Most importantly, you have to have the capacity to execute the power of attorney.

The Powers delineated in the Power of Attorney can be narrow or broad. The Power of Attorney can allow the attorney-in-fact to make banking decisions, real estate decisions and even gift making decisions. These powers have to be expressly allowed in the Power of Attorney especially pertaining to gift giving, which can require additional witnesses and signatures of the individual to make sure the individual knows she or he is giving this right to the attorney-in-fact.

Most of the time a Power of Attorney is durable, meaning that it is valid while the person is alive and well, and while the person is incapacitated. There are other power of attorneys, sometimes called a springing power of attorneys, which only takes effect when a person becomes incapacitated.

Where Disputes Arise

Where dispute mostly occur is when the attorney-in-fact acts outside what is permitted in the power of attorney. This almost invariably occurs when the attorney-in-fact is accused of self dealing (using the individual’s money for their own purposes rather than for the benefit of the individual). Other disputes arise when there is a claim that the individual lacked capacity to execute the power of attorney.

Who can Make a Claim Against An Attorney-In-Fact alleged to have abused the Power

During the lifetime of the individual, the individual who executed the Power of Attorney can revoke the power and/or make a claim against the attorney-in-fact if there is alleged an abuse of power. Unfortunately, what happens is the individual becomes incapacitated and cannot make the claim. Many family members want to make the claim on the individual’s behalf, but they do not have standing to do so (the right to do so) while the person is still alive. In order to receive standing, a family member would have to commence a guardianship proceeding to become the guardian or conservator of the individual.

If the individual who executed the power of attorney is deceased and family members believe that there was an abuse of power, then the personal representative of the estate can make a claim against the former attorney-in-fact. In many circumstances the attorney-in-fact is the same person as the personal representatives. In this case, other family members can motion the court to remove the personal representative arguing a conflict of interest and have the court appoint a successor personal representative.

Feel free to contact me for further discussion. dbosco@boscolegal.com; (212) 201-1908. Also feel free to connect with my on LinkedIn. https://www.linkedin.com/in/damienbosco

SEVEN REASONS WHY ESTATE ADMINISTRATION CAN BE ANNOYING

When a close relative dies, usually there is a period of mourning and loss followed by the need to handle the person’s estate. In most cases an estate administration proceeding is necessary to distribute the assets to beneficiaries or heirs of the decedent. Exception could be because of a low valued estate or because assets are held as non-probate assets (e.g., assets held in trust, or jointly with rights of survivorship, or with a beneficiary designation). In any event, when an estate proceeding is necessary, a petitioner has to seek administration of it.

When there is a Will, the named Executor in the Will should be the petitioner. When there is not a Will, then an heir has to petition the court to be the estate administrator of the estate.

Sometimes the petitioner attempts to handle the paperwork on their own because either it is a small estate or the petitioner wants to save on attorneys fees. Almost in all cases, the petitioner realizes what a pain it is to complete the forms and to petition the court to probate the Will or administer of the estate. It may at first seem to be very simple to do, but there can be many annoyances along the way when administrating the estate.

Here is a list of seven annoyances:

1. The numerous forms to complete can be confusing or a mistake is easily made;
2. The clerks who approve the paperwork may have different opinions or knowledge levels;
3. Service on heirs of a citation to appear in court may be difficult when heirs are unknown or their addresses are unknown;
4. Disputes arise for among other reasons because there is an objection to the will or to the one handling the estate;
5. Collecting assets may be difficult because they may not be easily locatable among various jurisdictions;
6. Distributing assets is difficult because it is hard to sell something (i.e., can’t get a good price or the market is down) or can’t agree on an appraised value of something or someone is objecting to an account.
7. An estate is left open because some loose end that cannot be resolved easily.

Even the most proficient of persons handling these matters have to deal with these issues. That is why an executor or an administrator usually hires an attorney because of the attorney having experience in dealing with these issues on an ongoing basis on other estate matters. Further, it is not all about the paper work. Even when using a paralegal who is helpful and valuable for the paperwork, to argue a motion in court on your own without an attorney is quite difficult to do. The Judge may be patient with a pro se litigant but that does not mean a Judge will rule in the pro se litigant”s favor.

So, from the start, even with relatively small estates, there may be aspects of the administration process that can cause delays and frustrations. Sometimes people would rather give this burden to something with more knowledge about how to handle the matter rather than suffering the annoyances themselves.

Feel free to connect with me on LinkedIn or contact me to discuss further issues. DBosco@boscolegal.com; or (212) 201-1908

AVOIDING PROBATE WHEN TRANSFERRING REAL PROPERTY

When someone dies owning real property, a transfer occurs upon the death of the decedent, sometimes immediate upon operation of law (without the need for an estate proceeding); or sometimes through the estate administration process. It depends on the ownership of the property. The personal representative of the estate has to review the deed to determine who owns the property and in what form. Depending on the type of ownership, you may be able to avoid probate of the real property.

Generally forms of Ownership

Various ways to own real property include:

– sole owner (i.e., own it alone),

– joint owners with rights of survivorship (i.e., own it with another person and either party inherits the other party’s share),

– tenants in common (i.e, own it with another person but the heirs of each party inherits their own share), or

– tenancy by the entirety (i.e., own it as a married couple passing it to the surviving spouse).

Other ways to own real estate are through an entity such as a corporation, LLC or partnership (ex: a commercial building), or through a trust.

Avoiding Probate

The most common way to avoid probate is when spouses owning the property as tenants by the entirety. By owning the property together, the real property passes to the surviving spouse outside of the probate process, avoiding delays and hassle. Another way to avoid probate is for two individuals to own the real property jointly with rights of survivorship. When one owner dies, the other owner inherits. You must be careful that this meets your wishes because you may not want the other owner to inherit your share of the property when considering the total value of your estate.

A revocable trust is another way to own real property that allows for the avoidance of probate. The benefit of the trust holding title to the real estate is that you can have the trust document specifically address who will inherit the property without having the need to probate the property. One hurdle you will have to address is when the property has a mortgage. If so, you must review the mortgage agreement and in most cases get pre-approval of the transfer of property to the trust. Generally, mortgage companies permit the transfer to a revocable trust. Also, you must make sure you file forms and pay fees to your local governmental entity to effectuate the transfer and record the new deed.

There is a tradeoff for creating a revocable trust for the transfer of real property. There are legal costs, but ultimately, the legal cost to use this estate planning technique is less than the cost of probate. Hence the reason why people want to use a revocable trust, not only because of cut in costs, but sometimes to keep things private. Probate is public and the use of the trust can sometimes be more private.

Using ownership techniques to limit liability

Some owners of real property want to avoid personal liability, especially if the property is commercial property or a rental property. These owners typically create a corporation or a limited liability company to own the real property. At the time of death, these shares or membership interest pass through the individual’s estate through the probate process (or again, with advance planning techniques, you may be able to hold the shares in a trust). In the individual’s will or trust, you can designate who will inherit the share of the corporation.

Holding title as a sole owner or tenants in common without the use of a trust may have the property go through probate. Holding title to property in these way sometimes results in contention between the other owner of the real property and the persons who will inherent your share. It is best to discuss these issues with the other owner and the heirs to help alleviate any tension that may occur with new ownership of the real property.

Feel free to contact me for further discussion. dbosco@boscolegal.com (212) 201-1908

PROTECTING AGAINST AN HEIR CONTESTING YOUR WILL

When you meet with your attorney to draft your will, you will discuss to whom you would like to distribute your assets. There may be a life circumstance where you do not want to distribute assets to a family member or relative whom would inherit from you if you did not have a will (called intestate distribution). There could be various reasons behind your decision: you already gave the heir financial support during your lifetime above and beyond other heirs; or you lost contact with the heir, or you are estranged. This could lead to a situation where the heir wants to contest the will when it is offered for probate in court.
You cannot necessarily prevent your heir from contesting your will, but you can provide an incentive not to do so. If there is likelihood that an heir will contest your will, you could consider a clause in your will to address this issue.
Courts will honor your wishes and intent as set forth in the will. However, a will contest could cloud what your true intent was with possibly a claim of unduly influence, or lack capacity, or fraud.
Therefore, if you decide to disinherit someone, a drafting technique would be to mention the person and state that you are not leaving the person an inheritance, stating the reason or stating something like “for reason know to her or him.” This allows the court to know (and the heir to know) that you did not “accidentally” leave out the heir but that you intended to disinherit the heir.
However, disinheriting someone outright does not provide an incentive to not contest the will. The heir has nothing to lose when you leave them nothing (except maybe attorneys fees). A good practice is to leave the person a relatively nominal amount so there is an incentive not to contest. For example, let’s say you have an estate worth $4 million. You have four children (your spouse predeceased you), but you have not heard from one of the children in years. No matter how many times you attempted to contact the child, the child refuses to speak with you. So, you decide to disinherit the child.
If you left the child $10,000 and included an ad terrorem clause in your will, then the child could be less likely to contest it. An ad terrorem clause would state that if any named beneficiary contests or seeks to invalidate this Will because of undue influence, lack of capacity or fraud (and loses), they would be disinherited. In this case, the child would lose the $110,000.
Note that an heir can always contest the will based on improper execution and lose without being disinherited. Usually an improper execution claim will fail when an attorney supervises the execution of the will. In any event, an heir can still contest based on undue influence or other claims previously mentioned. Therefore, proper estate planning is necessary.
There could be other ways to help protect against estate litigation, such as the use of trusts. Feel free to contact me for further discussion. dbosco@boscolegal.com (212) 201-1908.

WILL CONSTRUCTION: HANDLING AMBIGUITIES IN A WILL

Introduction

Sometimes terms of a will are ambiguous. This usually occurs when someone attempts to draft a will without using an attorney, either on their own or using an internet service provider that disclaims any liability. Or this can occur even with an attorney who is unfamiliar with estate planning and drafting.

When someone dies with a Will

When a personal representative (“PR”) obtains the original will from the decedent, the PR upon reading the will, must follow its terms. Sometimes the PR alone comes to realize that some terms of the will are ambiguous and other times, the heirs of the decedent or the beneficiaries listed in the will challenge the PR’s interpretation of the will.

When there is no resolution as to how to interpret certain terms of a will, the PR, heirs or beneficiaries, may seek court intervention. The court will look at the construction of the will and in most cases can look at the intent of the testator (the person who’s will it is).

Generally, a fiduciary or a person interested in obtaining a determination as to the validity, construction or effect of any provision of a will may petition the court in what is commonly known as a will construction proceeding wherein the court will make a decision on the particular portion of the will that is ambiguous.

Two types of ambiguities

There are two types of ambiguities that the Court could review: patent ambiguity and latent ambiguity.

A will is patently ambiguous if it is ambiguous on its face. In other words, the ambiguity results from the language or wording in the instrument. With patent ambiguity, there is uncertainty, contradictions, or deficiencies of the language of an instrument, so that no outside evidence can be used to interpret the terms of the will without adding ideas that the words themselves cannot sustain. The trouble with patent ambiguities is that extrinsic evidence cannot remove the difficulty without putting new words into the mouth of the testator.
A patent ambiguity exists, for example when a testator list a beneficiaries to receive a specific gift in one part of the will, but then states in another part of the Will, that someone else is to receive the gift. Or the gift to one beneficiary is unclear. For example the will states that I bequeathed the sum of five dollars ($5,000) to my sister, Mary. In this case, what is the gift: a sum of five dollars or five thousand dollars? The gift could fail because the Will does not accurately identify which amount the testator intended to give Mary.
A latent ambiguity occurs when the language of the instrument is clear (i.e., the defect does not appear on its face); however, when coupled with some extrinsic fact or some extraneous evidence, there could be two or more possible meanings. In other words, a latent ambiguity arises when it is not clear how to apply certain words of the Will.
For example, a will may state that I leave all my belongings to Jack Jones. However, the testator may have two John Jones as cousins. In this case, extrinsic evidence would be need to determine what Jack Jones is to receive the bequest (e.g., the Jack Jones who took care of the testator before death; or a Jack Jones who has not spoken to the testator in years).
Speak with you attorney before drafting a will so you can avoid ambiguities in your will. Or if you are a personal representative, speak with your attorney about how to commence a will construction proceeding. Feel free to contact me for further discussion.

LIFE ESTATES – HOW TO USE THEM IN ESTATE PLANNING

Life estates are used in estate planning for various purposes. This article will discuss some of the ways. First, we will explain what a Life Estate is.

What is a Life Estate

A life estate is when a person has a right to live in a home or occupy real property during their lifetime. The person does not have a right to bequeath the real property upon death, but the right to live on the property. It lasts only for the life of the person. The life estate holder cannot leave the property or land to anyone in their will, because their interest in the land ceases to exist when they die.

The person with the life estate has a full right to possess the land or transfer their interest during their lifetime, but must refrain from engaging in waste or activity that would prevent the next person in line (usually called the remainderman) from putting the property to full use.

How a Life Estate is created

A person owning land can create a life estate in a deed that gives the land to a person “for life” and identifies what should happen to the property after that person dies.  For example, the deed could state that the property is transferred to Sam Doe do for life, and upon Sam’s death, is transferred to Jane Doe.  The owner of a life estate is called a “life tenant”.

Right of Life Tenant

The Life Tenant has certain right including income derived from rent or other uses of the property, during his or her possession. However, as mentioned, the life tenant cannot damage or devalue the land or cause the destruction of it. Sam could use the property during his lifetime, and possibly even sell or rent out his interest to a third party, but that third party would have to surrender the property to Jane upon Sam’s death.

Duties of the Life Tenant

Generally, the Life Tenant is responsible for the upkeep of the property, including the payment of property taxes, utilities and ongoing household expenses. The issue of expenses usually take a toll when there are necessary major renovations such as a roof repair, electrical or plumbing issues to be done. Case law shows that if the renovation is minor in nature then it is the responsibility of the Life Tenant, but if major in nature, may be responsible by the remainderman. For example, if there is a leak in the roof and it just needs patching, that would be the responsibility of the Life Tenant. If the whole roof needs replacing, this cost may be share or mostly funded by the remainderman. This is when disputes usually occur.

Major Uses of Life Estates

One of the major uses of a Life Estate is for couples in a second marriage to provide a life estate to the surviving spouse with the remainder to go to the first to die’s spouse’s children. For example, let’s say Jane owns a house, is widowed with three children. She meets Sam who lives in another house. They fall in love and get married. They agree for Sam to sell his house so he can live with Jane in her house. Because Sam gave up his house, he runs the risk of not being able to have a place to live if Jane dies first. So, Jane gives Sam a life estate in the him in her Will or Trust so that if she dies first, Sam gets to stay in the house during his lifetime. Also, this allows for Jane to give the house to her children upon the death of Sam.

Life Estate are used in the same matter if the couple wants the real property to go to charity upon the last surviver’s death. After passing to the surviving spouse, upon the surviving spouse’s death, the house is given to a charitable organization.

Life Estates are also used in Medicaid planning. For example, Jane can give a remainder interest in her house to her children, while retaining a life interest for herself. The transfer of the property with a retained life estate triggers Medicaid’s five year look-back period for nursing home care, which means the earlier she would transfer the home, the sooner she would be eligible for Medicaid nursing home care coverage. By retaining a life estate,l the penalty period will be much less than if she had transferred the property outright, since the penalty is based on the value of the transfer.

Another Medicaid planning strategy involves a parent purchasing a life estate in the home of a child. This takes some cash out of the estate of the parent. Medicaid allows this technique so long as the parent actually resides in the home for at least a year after the purchase.

Speak to your attorney about the use of Life Estates in your estate plan.
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COMMON MISTAKES IN ESTATE PLANNING

Common Mistakes in Estate Planning

The following are typical mistakes people make when planning their estates:
• They have an outdated plan

• They have no will or an outdate will

• They rely on joint tenancy as a tool, especially children as joint tenants

• They incorrectly title an asset so an unintended beneficiary receives the asset

• They designate an inappropriate beneficiary for IRA accounts, insurance policies and retire benefits

• They fail to provide for a successor in interest if a primary beneficiary dies first or disclaims the gift

• They fail to provide for a guardian for themselves in the event of disability

• They rely on outdated or stale powers of attorney

• They do not properly coordinate their will and their trust or have no trust at all

• They fail to consider Medicaid planning

Medicaid and Annuities; How they work in Estate Planning

When someone married wants Medicaid to pay for a nursing home or an assisted living facility, but has too much money to qualify, they may consider the purchase of an annuity. Annuities can be use in Medicaid Planning. Immediate income annuities are the type of annuities that are most often used in Medicaid planning. An immediate annuity is a contract that is purchased from an insurance company with a single lump-sum payment and in exchange, pays a guaranteed income that starts almost immediately. The payments got to the spouse not in the facility.

There are some catches. Annuities would have to be irrevocable as a condition to be considered a “Medicaid annuity.” Also, most states require that it be non-assignable and non-transferable. In addition, annuity payments must be completed before life expectancy of the community spouse (the spouse not in the nursing home), determined using Social Security life expectancy tables.

How it works

Let’s say a couple has about a $100,000 in assets. They do not want to have to spend it down on medical bills so they decide to buy an annuity as part of Medicaid planning. The money is put in the name of the community spouse who then purchases an immediate annuity wherein the insurance company makes payments to the community spouse. This takes the money out of the Medicaid applicant resources, allowing for the applicant to receive Medicaid.

How to avoid Medicaid penalties

To avoid Medicaid penalties, the annuity must be:

a series of substantially equal monthly payments;
nonassignable and nontransferable;
irrevocable;
immediate;
purchased from a commercial insurance company;
paid within the life expectancy of the community spouse; and
must designate the state Medicaid agency as the primary beneficiary after the death of the community spouse.

Further, you must disclose you interest in the annuity.

An example of how the life expectancy requirement works would be if the community spouse’s life expectancy is 10 years according to the social security actuary tables; and you paid $120,000 for an annuity, you must receive annuity payments of at least $1,000 a month ($1,000 x 12 x10 = $100,000).

Also, if you purchased an annuity with a term certain (let’s say 8 years), it must be shorter than your life expectancy. If the community spouse dies with guaranteed payments remaining on the annuity, they remaining payments must be made to the state for reimbursement up to the amount of that Medicaid paid for either spouse.

In the application for Medicaid, which should be done when the person is entering the nursing home, the applicant must disclose that there is an annuity. If not disclosed, the agency may terminate coverage or deny coverage.

Note that an annuity works well for couples but not for single applicants. The reason is that the the applicant would have to make monthly payments from the income received to the nursing home; but in the case of a community spouse, the community spouse does not.

When determining whether to purchase an annuity for Medicaid purposes, it is important to speak with a professional advisory because the law is evolving and new restriction may pop up in the future. Speak with us about estate planning to get ahead of the process.

What to do when Loved Ones Abandon Property

Have you ever driven down a road, looked out the window to see a boarded up, decrepit, rickety, dilapidated property, and wondered what the story is behind it? Of course you have; we all have. Children (and some adults!) imagine that it is haunted, try to stay away but cannot resist attempting to go into it. Others think that it is an eye sore and wonder why it is allowed to stay in such a condition. Or, you wish you could buy it to fix it up and make it beautiful.

There can be many reasons why the property ended up and is allowed to stay is such a condition. Mostly, it is because the debts are so high that the owner cannot possibly pay them; or because the renovations are cost prohibitive or not worth the money. Possibly the taxes continue to be paid; and the municipality has not condemned the property. Or it is now owned by the mortgage company or the municipality who are not doing anything about it.

Another possibility is that it is the laziness or malfeasance of the personal representative of the estate. Someone dies and the person in charge fails to do anything about the home. The heirs, if any, do not have the resources to go to court to recover the property or cannot be found. The property for all intent and purposes could be labeled abandon. Another possibility is the person who owns it can not be found dead or alive.

In any of the above cases, an heir can take some steps to make sure they are heard in court in order to obtain their share of the property. Also, if you want to buy the property you can take certain steps to do so.

You would want to look at the county or town’s records (probably on line now) to see who is listed as the owner of the property. You would want to see if the property is still in the owner’s name or the estate’s name, or even a mortgage company or the municipality.

If in the estate’s name, then you know that an estate proceeding has taken place in the local probate court. You can check the court records to find the documents of the proceeding to determine what has happened. If you are an heir first in line for distribution of assets, you can make a petition to the court for an accounting of the proceeding and ask why the property is still in the estate’s name.

If the property is still in the name of the decedent, possibly there is no action in court yet. You could inquire with relatives why nothing has happened. Or you can take your own steps if you are an immediate heir to represent the estate.

There also may be some cases when a distant relative has left assets with no immediate heirs to distribute the asset to; or the heirs cannot be found. In that case the property could have escheat (be given to) the state. Escheated lands occur when the title fails from a defect of heirs, reverting, or escheating to the people (the state). If that happens, you may have to petition the court for the return of the land.

If you have an interest in land or know of a deceased relative who had owned land wherein you may have a claim, speak with us; we may be able to assist you in this situation.

IS A RELATIVE WHO ABANDONED ME ENTITLED TO MY ESTATE?

Let’s review a few scenario’s we may have unfortunately heard.

A husband leaves a wife with a few kids to be never heard from again. The wife doesn’t get a divorce for one reason or another. Forty or Fifty years later, the wife dies with no will. She did well for herself. Now the husband comes back and wants a share. Is he legally allowed to have his share?

Or the father or mother of a child left the home of the child. The child grows up with one parent or in a foster home. As a young adult, the child does well for himself, is about to be married and tragically dies in a car accident. He had not children. He had no will. Is the parent who left or parents who left (or parents whom he was taken away from), entitled to the assets of his estate?

Also, who has the right to petition the court to represent the estate? Do the children in the first case have a right to petition the estate to represent it? What about the second case when there are no children?

These are the complicated issues that can arise in an estate proceeding and it would certainly behoove an individual to retain an attorney to navigate the options and system.

In each case above, the spouse or parent can be prevented from receiving a share of the estate depending on the facts.

A spouse who willfully and without just cause abandons and refuses to live with the other spouse and is not living with the other spouse at the time of such spouse’s death would be considered abandonment in most states. Court will look at whether the abandonment continued until the time of death or if the surviving spouse had a duty to support the decedent and failed to do so. The abandonment must be unjustified and without consent.

There could be a case when a spouse leaving the home is not considered abandonment: if a spouse has a legitimate reason to leave the other spouse such as abuse; or if it was by mutual consent to live apart such as if the spouse has a drug addiction.

Abandonment also applies in a parent/child relationship, when a person has severed ties with and failed to provide support to the child or a ward that the parent was legally responsible to take care of.

In most states, any parent who has willfully abandoned the care and maintenance of his or her child would lose all right to intestate succession in any part of the child’s estate and all right to administer the estate of the child, except –

Where the abandoning parent resumed its care and maintenance at least one year (time various among states) prior to the death of the child and continued the same until its death; or
Where a parent has been deprived of the custody of his or her child under an order of a court of competent jurisdiction and the parent has substantially complied with all orders of the court requiring contribution to the support of the child.

Because the person who has the allegedly abandoned the decedent usually petitions the court for a share of the estate, the nearest heir in relation to the decedent can petition the court (or take other procedural steps) to disqualify the spouse as the administrator of the estate. There may be a standing issue (the right to submit a petition); but once the court gets an inkling that there is an abandonment issue, it will explore the allegation seriously.

Speak with us if you find yourself in this situation: (212) 201-1908