■Will the heirs receive equal or unequal shares?

■At what age should your heirs receive their share or should it be paid in two or three installments at different ages?

■Should specific property be left to certain heirs?

■Do you intend to disinherit or omit any heirs?

■What to do in cases where you marry someone who has a separate estate, which you want your new spouse to benefit from but also want the remainder of the estate to go to your heirs and not to your new spouse’s heirs?

■What if you have a child with reckless spending habits or substance abuse problems, and you fear that this child will quickly misuse his or her inheritance?

■How to deal with mentally or physically disabled heirs?

■How to assure that heirs will use their share to pay for schooling and do so prudently?

■What if an heir dies before you do? 

 In order to understand Estate Planning it is necessary to start from the beginning. There are two important words and definitions which you must know. The first word is “Estate”. The word Estate includes the total property owned by an individual prior to the distribution of that property under the terms of a will, trust or inheritance laws of your State. An individual’s Estate includes all assets and liabilities.  The second word you must know is the word “Property”. Property is described as either real or personal. Real property is real estate,(i.e. houses, buildings, land) and personal property is everything else. Personal property includes physical assets such as automobiles, equipment, household items, and also includes financial property such as securities, notes or loans, receivables, bank accounts, cash and insurance policies.

 WHY SHOULD YOU PLAN?

There is a simple answer. If you do not have a plan for the distribution or passing of your estate and you die, you are said to have died “Intestate”. This means that you died without creating any type of document (i.e. Will or Trust) which provides instructions for the passing of your estate onto your loved ones. Dying Intestate is like taking your property and attempting to throw it to your loved ones on the other side of a ravine which is filled with hazards. These hazards may include probate, creditors, con-artists, lawsuits, judgments, lawyers and death taxes.    

Whether you know it or not you have already done some estate planning for the distribution of your estate to your loved ones. If you die intestate, the laws of intestacy of your state will determine how your property will pass to your loved ones. If you do not have heirs that fit the State’s formula, then all your hard earned wealth will be taken by the State. Usually the State’s formula and rules for passing assets to your loved ones will not be what you would have chosen if you had an estate plan.

One of the best ways to avoid the hazards is to build a “bridge” across the ravine to your loved ones to provide for your estate to be taken safely avoiding and/or minimizing the hazards. In order to understand how important planning is, it is extremely important to understand the hazards. If you die with any property that is titled in your personal name, there must be a probate process for that property to pass to your loved ones. “Probate” is the legal procedure for handling two major functions of your estate. The first is identifying the proper and rightful heirs to your estate and the share size that each heir will receive. The second is getting the legal title of the property out of your name and into the name of the heirs.

A Will can take care of the first function. If you don’t have a Will the State shall use its own formula for determining who your heirs are and their share. Even with a Will, the re-titling of your property still must be handled through the Probate process. When someone dies, the only way that property can be re-titled in the names of their loved ones or heirs is by a court order.

What you want to do is avoid probate because it is time consuming and can become very expensive. On a national average, probate costs run from 6% to 10% of the value of the estate. What does this mean? This means that an estate worth only $200,000 could cost $12,000 to $20,000 to probate. These costs are based upon the fair market value of the property and not on just the net worth or equity. Probate can end up dragging on for years, and can lead to family battles and may result in your wishes being ignored. Lastly, probate is a public proceeding resulting in the loss of privacy.

 JOINT TENANCY

You may be thinking, “Everything I own, I own as a joint tenant with my spouse or significant other”. Many married couples and parent-child arrangements own property both real and personal as joint tenants with rights of survivorship. This means that when one of the two should die, the surviving owner will automatically receive the interest of the one who died without going through the probate process. This is one way to avoid probate but it also comes with several problems. Property held as joint tenants means that the whole amount of the estate is subject to all of the liabilities of all joint owners. In other words, if one owner gets a judgment, tax lien etc., the lien holder can take the entire property to satisfy the judgment. There may be some exceptions where personal residences are involved, but the exceptions do not apply if the asset is later sold or when both owners die. Moreover, if a parent holds title to a home as a joint tenant with a child, and that child gets a divorce, the divorcing spouse of the child can potentially take the whole house in the divorce settlement.

When one owner dies and leaves assets to the survivor through joint tenancy, the surviving spouse has outright control over the assets. The problem arises when the surviving spouse finds a new spouse or lover, and gives away some or all of the assets away to that new spouse or lover, leaving the original heirs out of the picture.

Usually the surviving spouse does not do any formal estate planning, so even though probate is avoided on the death of the first spouse, it is not avoided on the death of the survivor. 

When property is owned either by one owner or jointly, and then one of the owners becomes mentally incapacitated, the property sits in legal limbo. This can prevent the property from being sold or even leased until an expensive and time consuming court procedure called “conservatorship” is completed wherein the court appoints someone to act in the name of the incapacitated owner.

 ASSETS WITH DESIGNATED BENEFICIARIES

You may also be thinking “all of my assets have designated beneficiaries”, such as insurance policies, pension plans, annuities, bank and investment accounts.” However, when the original owner dies, the remaining amounts will be paid to the named beneficiary or contingent (secondary) beneficiary if the primary beneficiary does not survive the original owner, all without probate. However, this too has potential problems.

Most Beneficiary arrangements do not have controlled or timed payouts to the beneficiaries. In other words, if the original owner dies and leaves young children, there can be no control over how much is paid out to the children outright or to the guardian of the children if one is appointed.  Another problem is that there are no provisions for beneficiaries who become incapable of handling their financial affairs. Distributions to designated beneficiaries can be attached by creditors, and can be the subject of lawsuits, liens, bankruptcies and divorce problems of the beneficiary. If the beneficiary dies before the original owner problems will arise such as money being paid to the spouse of the beneficiary rather than being held for the beneficiary’s children.

Aside from avoiding probate, proper planning will also help you reduce and possibly even avoid payment of death taxes on your estate. You may be thinking that death or estate taxes were abolished in 2001 by the Tax Act. Actually the 2001 Tax Act provides for federal estate or death taxes to stick around up through at least the year 2009 and then be replaced with some loss in step-up basis. The loss in step-up basis simply means that your heirs will not receive your assets with a basis which is equal to the fair market value of those assets at your death. Thus, when your heirs try to sell your assets on your death, they have to pay capital gains taxes on the profit made. The profit is the difference between what you paid for the assets and what your heirs sell them for. Prior to the 2001 Tax Act your heirs would have received a full stepped up basis (fair market value), and never had to pay a capital gains tax. Moreover, the 2001 Tax Act did not abolish death taxes at the state level and these too can be quite significant.

This may seem complicated but to put it in more simple terms, if you as an individual expect to be worth about $1 Million by the time of your death, or the year 2010 whichever comes first, (if you are married that it is upwards of $2 Million) then your estate faces death tax issues. If you did pre-2001 estate planning, your existing trust or other estate planning needs to be revisited and probably updated.

Even though the 2001 Tax Act provides for exemptions from federal death taxes upwards of $3.5 million by the year 2009, what if the exemption is not enough for your estate? Or what if your estate faces capital gains taxes due to the loss of basis step up? There could be problems with respect to the appreciation and growth that your estate will enjoy before your death, especially when you add in death benefits from life insurance and remainder amounts of your pension plan. Good estate planning can easily increase death tax exemptions by several million dollars for married couples, but some advanced planning is necessary for maximum reduction of death taxes. Neither a Will, beneficiary arrangement nor joint tenancy ownership of property are enough to take care of death taxation issues for either married or single estate owners.

WHAT CAN I DO TO ENSURE THAT MY ASSETS ARE DISTRIBUTED TO MY RIGHTFUL HEIRS?”

This brings me to the final part of this article, which will explain the different types of documents that can be used to solve your problems. One of the big benefits of pre-death estate planning is the ability to name your heirs, specify the share of your estate you want them to receive, and dictate or control the manner and timing at which point your heirs shall receive their share. Actually, this part of estate planning can be done with either a will or a trust. Although, a trust would be the ultimate document to avoid probate, protect the estate from judgments and liens and to minimize if not eliminate federal death taxes.

There are situations where a will is the best choice and other situations where a trust is the best vehicle. Generally speaking, a will is sufficient where the estate is small enough that formal probate is not required or it is reasonably safe to leave all of the estate through beneficiary and/or joint tenancy arrangements AND there are no significant tax liabilities; there is no need to hold an heir’s share of the estate in some type of controlled payout; and your mental incapacitation is not likely to cause problems with financial and legal transactions. Even though a will is not required for assets which are held by beneficiary and/or joint tenancy arrangements, a general purpose Will should still be prepared. The will shall serve as a catch all in the event that there are assets you forgot about, or received after the will was prepared or there is a problem or mistake with a beneficiary or joint tenancy arrangement.

On the other hand, a trust is generally necessary where the estate cannot safely be transferred by beneficiary and joint tenancy arrangements, and exceeds approximately $75,000 to $100,000; or there is some possibility that an heir may challenge a particular transfer; where avoiding probate is an important objective; where the estate cannot be paid outright to one or more heirs either because they are minors or that the heirs should have controlled payments; where there are significant tax liabilities; when necessary to protect assets from legal difficulties or a divorce of a non-owner spouse or where the estate needs careful handling during any period of time where the estate owner becomes mentally incapacitated.

What is a trust? you ask, well, a trust is a legal device used to take care of property in special ways. A trust is a legal agreement or contract between two parties called a grantor and trustee. The Trust agreement is entered into for the benefit of a third party or for a beneficiary. Trusts are private documents and have tremendous amount of flexibility in what provisions you can include. The trust is recognized by laws and courts as an independent legal entity. Trusts are much like corporations. Through the trustee it may own property, it may file tax returns and pay taxes, it may own bank and investment accounts, earn income, distribute profits to the beneficiaries and conduct business activities.

The grantor is the one who owns the property which they wish to have managed, controlled, protected and transferred to heirs by a trust. Once the property is transferred into the trust the grantor no longer holds legal title to the property. However, the grantor may retain the exclusive rights to use the property or its income and usually has full control over the property. The trustee is the legal administrator of the trust and the legal title holder of the property. The relationship between the grantor and trustee is determined by whatever language is put into the trust document. The beneficiaries are the individuals or charities that receive benefits or income from the trust property and then eventually receive the property itself. When the grantor keeps for his lifetime the right to the income and use of the trust property, the beneficiary will receive the benefits after the grantor dies, or the trust agreement may provide where both the grantor and beneficiary receive the benefits or income from the trust simultaneously.

There are several different types of trusts including living trusts, revocable trusts, irrevocable trusts (also known as life insurance trusts), charitable remainder trusts, educational trusts and spendthrift trusts. These are estate planning vehicles which are outside the scope of this article and are more applicable to advanced estate planning. Depending on your situation and needs, these types of documents should be discussed in further detail with Mr. Masiakos. In addition to the vehicles discussed in this article, estate planning also includes preparing Powers of Attorney; Living Wills, Healthcare Proxies and even Designation of Guardians or Conservators. These documents are just as important as a Will or Trust since they govern what happens to you physically and what your wishes are should you become terminally ill. These documents should also be discussed in detail with Mr. Masiakos. The purpose of this article was to explain to you as simply as possible what estate planning is, why you should plan, and the basic vehicles you can use toward proper planning. Please remember that this article is for informational purposes only. Your needs will most certainly be different from someone else and you should always consult with an experienced estate planning lawyer such as myself. I offer a free one-hour consultation consisting of a complete evaluation and review of your current estate situation, and present estate plan, (if you have one). This is a $250 value with no obligations on your part. Do not wait for the inevitable to come. Plan now to ensure that your hard earned wealth is protected.

The foregoing content is not legal advice nor is it intended to serve as legal advice. It is for informational purposes only. You should consult with an experienced Estate Planning attorney to address your individual needs.

Survivorship policies can be less expensive than a life insurance policy that is purchased on a single individual. This is because the risk is spread over the life expectancy of two rather than one individual.  Two people may qualify for coverage even if one of them is medically “uninsurable” due to a pre-existing medical condition. This provides added security for both.

One of the most common reasons for purchasing a Survivorship policy is for payment of Estate taxes. Even though you may have wills, trusts and property ownership, if your assets exceed $7 million (for 2009) your estate may be subject to Federal Estate taxes for married individuals ($3.5 million for single individuals).  A simple example is where Bill and Jill are both 60 years of age and have three adult age children. There net assets total $7.5 million. They have prepared appropriate wills and/or trust documents and have redeeded their property to maximize their respective applicable exclusion amounts. There is a potential that based upon current tax law, only $7 million would pass to their heirs free and clear of estate taxes. The remaining $500,000 would be subject to Federal Estate taxes if they died this year (excluding other administrative and funeral costs).

Creating an Irrevocable trust (IR) that purchases a survivorship life insurance policy is one way to effectively reduce the overall Federal Estate tax cost. The IR would be both the owner and beneficiary of the policy. This would allow the proceeds of the policy to pass to the trust beneficiaries (in the foregoing example that would be Bill’s and Jill’s adult children) estate tax free.  The proceeds of the policy would be used to pay any estate taxes and would not be paid out of the corpus of the trust itself. 

Moreover, if the trust is drafted properly, Bill and Jill could make a gift of the policy premiums to the trust by using their annual gift tax exclusions without incurring a gift tax. Individuals can gift up to $13,000.00 per year per donee to anyone they wish in 2009 or $26,000.00 per married couple.

Now, survivorship policies do not come cheap. This is why purchasing such a policy at a younger age would be more cost efficient than waiting until you and your spouse are in your 60′s or 70′s.  Additionally, you can set up the policy to provide an added cash value that builds and increases the potential death benefit that is paid on the death of the second individual insured.

Survivorship policies can result in a “win-win” situation for you, your spouse and your family.  This is true whether you have an estate tax problem or you wish to leverage the value of any gifts that you make to your children, grandchildren or favorite charity.  A survivorship policy can help provide the maximum benefit for a reasonable cost.

The foregoing should not be considered legal advice nor is it intended to serve as legal advice. You should consult with an experienced Estate Planning Attorney who can counsel you on your individual and unique situation.

 There are normally two options available for clients who obtain a settlement or an award from a jury depending on the amount of money involved. You may either receive a lump sum or a structured settlement. Every case is different, and each client’s needs are unique. What is right for one client’s situation may not be right for another, so it is extremely important that you examine your individual needs and options before accepting a lump sum or a structured settlement.

 Structured Settlements vs. Lump Sums

 For many clients who are awarded large verdicts or obtain large settlements a structured settlement is an ideal arrangement for receiving compensation. Structured settlements can be set up in many different ways but the most common we have seen is where they either pay out a sum of money in small increments over a period of time or they payout a lump sum of money after a certain period of time, which could be as little as 5 years to as long as 30 years. This lump sum of money can double or even triple the actual amount of the verdict or settlement depending on the length of time it remains in the structure.

 Monthly payments can help to cover continuing expenses related to your case and help you avoid the overspending and mismanagement that sometimes come with receiving a large sum of money all at once. All payments received via a structured settlement are exempt from taxes by both the state and the federal government, and a payment plan can be set up to anticipate future expenses.

 Structured settlements, however, do offer some disadvantages. Often a structured settlement is invested for you by a third company, usually an insurance company. In this situation you normally do not have the option to invest the money in the market of your choice. You are usually stuck with the company chosen by the insurance company paying the settlement or award.  Once you have accepted a structured settlement, you will usually be unable to adjust the payment plan to suit your changing needs. On the other hand, a lump sum received from a lawsuit is also tax free, and can be used to pay for large expenses or invested as you see fit. If you are set to receive a smaller settlement in your lawsuit, or if you have large medical bills or expenses that need to be paid immediately, a structured settlement may not be an ideal choice.

 Before choosing a lump sum or a structured settlement for compensation after a lawsuit it is important that you speak with your attorney and even a financial advisor to examine your personal needs and options.

When you speak to your insurer, do NOT begin a statement regarding a claim by saying “I think . . .” or “I guess . . .”.  If you aren’t sure, don’t guess. Don’t make up an answer just for the sake of answering.  It’s always better to say “I don’t know” if you are not sure how to answer a question.  Give them only the facts.

Do not use medical terminology when describing any damages or pain you may have. If you feel neck pain after an accident, don’t use the word “whiplash” or “sprain/strain”. Simply tell the insurer you have neck pain.

If you are filing a claim for water damage to your home or business, do not use the term or word “flood”. If the damage was due to a burst pipe and you know that is what caused it, then simply say ‘a pipe burst’. If you say ‘flood’ this infers an act of God or bad weather or an overflow from a nearby body of water. Most homeowner policies do not cover these types of claims unless you have flood insurance.

Never state that you are just looking for cash when filing either a home or automobile claim. If you say, “I don’t care about the damage, I just need the money”, this will almost assuredly raise a red flag to the insurance company.

Always stick to and don’t exaggerate the truth when reporting your claim to your insurance company. Insurance companies have departments called SIU investigators whose job is solely dedicated to investigating potentially fraudulent claims. They WILL eventually find out the truth and if it contradicts what you told them, you can be sure your claim will be denied.

The foregoing is not legal advice nor is it intended to be construed as legal advice. It simply meant to provide general common sense information to help you make your particular claim process proceed smoothly.

Unless you are living on Mars, we all know that tomorrow is Halloween. It’s that time of year again when we’ll all be seeing Witches, Ghosts, and Goblins walking the streets in search of Tricks or Treats.  But I bet you did not know that Halloween has climbed to the top of many lists as one of the most dangerous nights for children to be out.  I have provided several common sense tips and guidelines to help create a safer environment for your Witches, Ghosts and Goblins. 

• Treats: Tell your kids not to eat any of the treats they get before returning home.  All treats should be carefully examined by an adult before children eat them. 
• Costumes: The costumes should be age-appropriate and should focus on visibility, easy movement, and flame resistance.  It doesn’t hurt to add reflective tape to any costume especially if your kids go out Trick O’ Treating at night.
• Flashlights: Give your kids a flashlight. This will help them see and be seen.
• Pedestrian Safety: Children, especially youngsters should be accompanied by an older responsible person, walk instead of run from house to house, use sidewalks when present, and avoid running between parked cars.
• Choose Safe Homes: Visit only homes that have welcoming outside lights. Better still, go to homes of people you know.

The Centers for Disease Control and Prevention (CDC) offers a great list of tips for Halloween Safety, which I have reproduced in its entirety below:

•    S      Swords, knives, and similar costume accessories should be short, soft, and flexible.
•    A      Avoid trick-or-treating alone. Walk in groups or with a trusted adult.
•    F      Fasten reflective tape to costumes and bags to help drivers see you.
•    E     Examine all treats for choking hazards and tampering before eating them. Limit the  amount of treats you eat.

•    H     Hold a flashlight while trick-or-treating to help you see and others see you.
•    A     Always test make-up in a small area first. Remove it before bedtime to prevent skin and eye irritation.
•    L     Look both ways before crossing the street. Use established crosswalks wherever possible.
•    L     Lower your risk for serious eye injury by not wearing decorative contact lenses.
•   O     Only walk on sidewalks or on the far edge of the road facing traffic to stay safe.
•   W    Wear well-fitting masks, costumes, and shoes to avoid blocked vision, trips, and falls.
•   E      Eat only factory-wrapped treats. Avoid eating homemade treats unless you know the cook well.
•   E     Enter homes only if you’re with a trusted adult. Otherwise, stay outside.
•   N   Never walk near lit candles or luminaries. Be sure to wear flame-resistant costumes.

A study conducted by the Centers for Disease Control and Prevention (CDC) showed that during 1975-1996, the number of deaths among young pedestrians was four times higher on Halloween evening when compared with the same time period during all other evenings of the year.  Keep safe this Halloween so you don’t become a statistic. 

The utmost importance during this time of year as well as all year round is making sure that you leave sufficient stopping distance as you drive behind other vehicles. Common sense dictates that It takes more distance to stop on wet roads then dry roads and even more distance while driving on wet leaves, snow and ice. An easy way to determine safe distances is to pick an object like a pole or sign up ahead. Once the rear of the vehicle ahead passes that object start counting “one mississippi, two mississippi” in your head until the front of your vehicle reaches that object. Ideally you should have counted at least “two mississippi” as you reach that object.

Check the tread depth on your tires. Using a penny, stick the penny with President Lincoln’s head down in different areas of the treads of your tires. if you can see the top of Lincoln’s head, its time to get new tires… And don’t just get one tire. Make sure that all tires are changed. This not only ensures better traction on wet and icy roads, it will save you money in the long run, and it will increase your MPG’s.

Most newer vehicles are equipped with an Anti-lock Braking System (ABS). If your vehicle is equipped with ABS and you hit a patch of wet leaves, ice or snow, you should apply firm pressure to the brake. Maintain that pressure. Do not remove your foot from the brake. The ABS system is designed to regulate the pressure you apply and will automatically brake your vehicle while allowing you to steer.
If you brake and the vehicle starts to skid or slide, your gut reaction will probably be to steer away from the direction of the skid. Don’t follow your gut. You should steer the vehicle in the same direction as the skid. This will allow you to recover the vehicle much quicker.

Another important point to remember is to make sure your tires are inflated to the proper pressure or PSI. This will also help in steering and traction.

Essentials to keep in the trunk of your vehicle during fall and winter driving months  include:  a small shovel; a blanket; jumper cables; a flashlight with extra batteries; 50lb bag of sand.  The added weight of the sand will help reduce fish tailing of the rear of your vehicle. You can also use the sand if you get stuck in snow or ice. Using the shovel, just place some sand under the tires of your car for added traction. You can use the blanket if you get stranded and must stay the night in your car. The flashlight can be used instead of the car’s battery which can drain very quickly in cold weather.

Don’t you just hate those drivers who just clear a small patch of ice on their windshield and leave the rest of their vehicle covered in snow and ice? I get so irritated when I see that so much so that I feel like getting out of my car and offering to clear the snow off of their vehicle. But sanity takes control of me and I just stay far away from those drivers. The last thing I want is a chunk of ice flying off the roof of their car and into my windshield. So just take the extra few minutes and clear your vehicle of as much snow and ice as may be possible. Don’t forget to clean your head lamps and tail lights as well.

Following these tips will not guaranty that you won’t have an accident but they will certainly arm you with the knowledge you can use to avoid them and how to survive the fall and winter driving months.

The foregoing does not and is not intended to serve as legal advice.

     Serious injury is defined in the Insurance Law in Section 5102 as one of the following: “Serious injury” means a personal injury which results in death; dismemberment; significant disfigurement; a fracture; loss of a fetus; permanent loss of use of a body organ, member, function or system; permanent consequential limitation of use of a body organ or member; significant limitation of use of a body function or system; or a medically determined injury that prevents the injured person from performing substantially all of the material acts which constitute such person’s usual and customary daily activities for not less than ninety days during the one hundred and eighty days immediately following the occurrence of the injury or impairment.

     There is so much case law in New York that discusses what type of injuries would qualify under the threshold requirements, so much so that it is beyond the scope of this newsletter.  Personal injury attorneys, defense attorneys and the Courts rely on these cases to evaluate an individual motor vehicle accident case and to see whether the particular injuries sustained by the victim would fit under the definition of “serious injury”.

     It is important to point out that overcoming the threshold requirements initially gets your case before a jury and to survive a summary dismissal of your lawsuit. It does not guarantee that the six jurors will believe your story or your doctors. It also does not guarantee that you will receive tons of money for your injuries. Once your case gets to a jury, the jury will determine whether you have met the threshold requirements, and only then will they make an award which amount is solely in their discretion.

     Lastly, it should be noted that this threshold requirement only applies to motor vehicle accident cases. It does not apply to the following:  motorcycle accidents, any type of premises liability accidents i.e. trip, slip and falls.

     In sum, having an accident does not automatically mean that you will recover anything let alone win the lottery. There is never a guarantee in these types of cases.

I am an attorney located in Mineola, New York.  The emphasis of our practice is limited to handling serious personal injury and accident cases, residential and commercial real estate transactions and estate planning matters where we help others prepare and plan for the future.

What Makes Us Different?

“When we take on a client’s case, we do not see ourselves as just their lawyer. We make the client’s legal problem our problem. We step into the client’s shoes and personalize their problem.  When this happens, we do not sit back, nor do we just argue a legal position, we advocate zealously with passion. We view ourselves as the client’s mouthpiece and as their one and only opportunity to present their case in the Courtroom, to a jury, to a judge or to a mediator.”

Visit our website at: http://www.masiakoslaw.com

Check back here often for free legal advice as this blog will be updated daily.

Contact information:

Jordan Masiakos, P.C. 

200 Willis Avenue

Mineola, NY 11501

Toll Free: 1-866-881-HURT

Tel: (516) 873-0795

Fax: (516) 873-6686

Email: masiakoslaw@optonline.net