Author: Tom

What Is a Living Will, and What Does It Mean to Me?

Posted on | by Tom

When an RLG team member sits down with a client to discuss designing their estate planning documents, we are often met with confusion when we bring up the topic of creating a  “Living Will.” Clients often have already completed a Living Will document at the hospital before going in for surgery or through AARP – in this document, you would specify “medical treatments you would want to be used and those you would not want to be used to keep you alive, as well as your preferences for other medical decisions, such as pain management or organ donation” (Mayo Clinic Staff).  However, in our office, we set up the Living Will so that this document seeks to address only one medical-related decision, which we will cover in the next paragraph. Clients also often think that the “Living Will” is the same as the “Last Will and Testament” because both documents share the word “Will” in the title. This article is intended to clarify the confusion about what a Living Will document is and what purpose it serves.

A Living Will is a legal document that is part of your “advance healthcare directives.” It contains a set of legal instructions laying out your wishes for the termination of artificial treatment if you are unable to make your own healthcare decisions (for example, if you are in a coma or vegetative state and there is no chance of meaningful recovery). The Living Will works in conjunction with another key advance healthcare directive document – the Healthcare Power of Attorney (HCPOA) document. The HCPOA document appoints one or more individuals to make healthcare decisions on your behalf if you cannot make them yourself. Although the HCPOA document is central to one’s advance healthcare directives, the Living Will is even more significant for some. But what is a Living Will?

Imagine that you are given a multiple-choice test that reads as follows:

In the event that I am terminally ill, with no chance of a meaningful recovery, whom do you want to make the final “end-of-life” decision?

  1. Two physicians
  2. The person whom I have appointed to make healthcare decisions on my behalf (aka my Healthcare Representative)

If you answered “A.” to the above question, you are saying that you want to execute a Living Will.  This document allows you to clearly state in no uncertain terms that in the event you are terminally ill with no possibility of recovery, and you cannot live without artificial support (i.e., if you are irreversibly brain dead and cannot breathe without a ventilator), you authorize two physicians to make the final “end-of-life” decision to terminate life support (it is important to stress that typically, physicians would only make this decision after consulting with the family, but they take away the burden of having a family member make this decision).

If you answered “B.”, you choose NOT to sign a Living Will – instead, the “end-of-life” decision will remain the responsibility of your Healthcare Representative. Simply put, if you want the end-of-life decision to be made by two physicians, you sign a Living Will. If you want the end-of-life decision made by the family member or friend you have appointed as your Healthcare Representative, you do not need to sign a Living Will.

Although the terms may be simple, the decision of whether or not to sign a Living Will is often very difficult. It is important to remember that there is no right or wrong answer – signing a Living Will is a completely subjective decision based on your personal feelings and values, as well as the personal feelings and values of your healthcare representatives. On the one hand, some people say, “I am going to sign a Living Will as I do not want my Healthcare Representatives to bear the emotional burden of making the end-of-life decision, even if they know that is what I want.” On the other hand, others may say, “ I am not going to sign a Living Will as I do not feel comfortable with two strangers making such an important decision that will impact my family and me.” Both points of view are equally valid. Whatever your decision may be, it is essential to have an open and honest discussion with those closest to you about your choices for end-of-life care.

 

Mayo Clinic Staff. Living wills and advance directives for medical decisions. Mayo Clinic, 2022,  https://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/living-wills/art-20046303

Why Pay for a Lawyer?

Posted on | by Tom

Why Pay for a Lawyer?

Legal services can be expensive. In estate planning, hiring a lawyer to design and draft an estate plan that includes a Will or a Trust and one or more Powers of Attorney can cost thousands of dollars.

What is it, exactly, that you are paying for? You know it’s possible to create your own Will using online software for a few hundred dollars. This option seems appealing when all you have to do is answer some questions, and the documents will be ready in minutes, while a law firm may take several weeks. Isn’t it just cheaper and faster to do it all yourself?

This is a common line of thinking for many people who want a will or trust, but experience “sticker shock” once they consult with a lawyer. However, most people who think this way don’t realize that what you are actually paying for is the lawyer’s expertise, which can save you time and money in the long run. If you don’t know what you don’t know, how can you be sure that the documents you create will achieve your goals? That’s where a specialized lawyer comes in.  Abraham Lincoln once said, “A lawyer’s time and advice are his stock in trade.”  Without a lawyer’s expertise, the documents you draft may create more issues for you or your beneficiaries in the future.

Here is one example:

Improperly Drafted General Durable Power of Attorney:

Dan is a widower with one adult son, Kevin. He wanted to create an estate plan, but the law firm he called quoted $2,500, which Dan thought was too expensive. Instead, Dan created his own documents online for $500.

Five years later, Dan is ill, and Kevin wants to move Dan into a facility where he can get the proper care. Unfortunately, the General Durable Power of Attorney Dan created did not give Kevin the authority he needed to sign a lease on Dan’s behalf, nor did it reference the critical New Jersey banking statute so Kevin could access Dan’s bank account to pay the rent.

If Dan still has the cognitive capacity, he can hire a specialized estate and elder law attorney to create the proper documents. But if Dan is incapacitated, Kevin will have to seek a guardianship, which is a lengthy and expensive court process.

In the end, trying to save a few thousand dollars on documents in the short term could cost Dan and Kevin much more overall. Our advice – If you don’t know what you don’t know, lean on the expertise and experience of the right lawyers who have spent hours researching the law and can guide you on achieving your goals.

Want to discuss if RLG is the right fit for you? Contact us today!

What to do if Your Income is Too High for Medicaid

Posted on | by Tom

What to do if Your Income is Too High for Medicaid?

Ben is retired. He receives a pension and social security totaling $4,000 a month and uses this money to pay for all his expenses, including rent, food, transportation, etc. Other than his home, Ben has less than $1500 in savings.

In the past six months, Ben has had two falls; the second one caused him to go to the hospital. As such, Ben’s doctor recommended that he no longer live alone. Ben’s son, James, finds an assisted living facility nearby so Ben can still see his friends and James can take care of his father’s needs. Unfortunately, the facility is expensive, costing over $6,000 a month. If Ben does not receive some assistance, he will run out of money.

James wants to apply for Medicaid benefits for his father. However, he has heard from one of his friends that Medicaid will only accept you if your income is less than $2523 a month (which is the 2022 income cap limit) – even if all your other income is going towards paying the facility bill but the income is still insufficient to cover the total cost of care. What can James do to help his father get on Medicaid?

James can and should contact an elder law attorney for help because a qualified attorney can set up a Qualified Income Trust or a QIT. Sometimes, this is referred to as a Miller Trust.

A QIT is a special Trust that can help Medicaid applicants whose income exceeds the threshold amount to become financially eligible for Medicaid. The Trust can accept the excess income, but the Trustee will need to use all the money coming in to pay the facility. A qualified attorney can ensure that the trust is drafted correctly so that it not only gets accepted by Medicaid but also, the attorney can guide the Trustee on how to properly administer the trust after it receives the income each month so that the applicant becomes eligible for Medicaid and maintains their eligibility after being approved.

If you have further questions or need assistance with a QIT, don’t hesitate to get in touch with us today.

Which Bills Should You Pay First When Serving as the Executor or Administrator of an Estate?

Posted on | by Tom

The Executor (when there is a Will) or Administrator (when there is no Will) of an Estate has several responsibilities. One of them is to pay off the debts and expenses of the Estate.

But what happens in those situations where the estate has very few assets but a whole lot of debt (i.e. potential creditors of the estate who have valid claims against the Estate to get paid back for monies owed by the decedent during the decedent’s lifetime)?

In such situations, it is important to point out that not all creditors stand on equal footing. Some have higher priority than others, which means they should pay paid first. So, the first most important advice we can give you is to consult with an attorney immediately.[1]  This means, don’t feel the need to immediately write out checks to different companies or individuals whom you may think needs to get paid just because a bill came your way.  All parties know that an Executor/Admin needs time to (1) get appointed; (2) take care of funeral arrangements; (3) marshal up the assets and liabilities in the estate, including tax burden if any; and (4) finally start paying off the liabilities. If you start to pay the bills as you receive them, instead of in order of priority, you run the risk of running out of funds, and then being sued by a higher priority creditor because you mismanaged the Estate.

Each state has its own rules on what priority each creditor has. In New Jersey, our statute NJ Rev Stat § 3B:22-2 (2013) states that the order is as follows:

  1. Reasonable Funeral Expenses
  2. Costs of Estate Administration
  3. Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults
  4. Debts and taxes with preference under federal law or the laws of this State. Medicaid liens fall in this category as well[2]
  5. Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him or her
  6. Judgments entered against the decedent according to the priorities of their entries respectively
  7. All other claims

Sometimes, it is not obvious which creditor has the superior claim. For example, if the decedent owned a house, and the house had a mortgage, then the mortgage company would have a superior claim to the house than the Office of the Public Guardian, even though mortgages are not on the above list. Similarly see footnote 2.

Finally, not everyone seeking money from the Estate has a valid claim. Just because you are asked to pay does not mean that you should. If you are unsure if a debt is valid, you should request to see supporting documentation.

Conclusion: If you are the Executor/Administrator of an Estate, and you are having trouble determining which creditors have a valid claim or how to prioritize the claims you know to be valid, you should consult an attorney for assistance. Any payments made to the attorney/law firm should be covered under the Estate assets, so you do not have to use any of your personal funds to engage the attorney’s services.

 

[1] At this time, our office offers a 30 minute complimentary consultation with our team where you can present your issues, and we can guide you on whether or not you can handle matters on your own or if you need a professional to assist you in moving forward.

[2] But be very careful here, because certain Medicaid liens trump all others so, please consult with an Elder Law firm before paying debts of someone who was on Medicaid before he or she passed.

What to Know if You Are the Executor

Posted on | by Tom

The executor of an estate has an important job. He or she has been entrusted to follow the wishes of the deceased, and it is important that the executor understands the expectations set in the will, understands the law in the presiding state, and is able to adhere to both as much as possible.

The executor has eight main tasks:

  1. Introduce the will into court for probate
  2. Notify the next of kin and the beneficiaries
  3. Locate all assets
  4. Identify all debts and obligations
  5. Pay the obligations in the order of priority
  6. Filing income and/or estate tax returns, where applicable
  7. Distribute the remainder to the beneficiaries
  8. Close the estate

How to Introduce the Will

Every county has a procedure for introducing the will into the local surrogate’s court.

Typically, the executor must provide the original will, an official death certificate, the required information about the deceased, the names and address of the next of kin and the beneficiaries, and the required identification information about the executor.

If the court accepts all the documents, then it will issue the Letters Testamentary and the Executor Short Certificates. This documentation establishes that the executor can act on behalf of the estate, and it will be needed when interacting with different fiduciaries or institutions on behalf of the estate.

Notify the Next of Kin and the Beneficiaries

Once the court accepts the will into probate, the executor must notify the next of kin and the beneficiaries. The executor must also make a copy of the will available to them upon request.

New Jersey requires that notice be sent through certified mail. New Jersey also has a time limit for notifying beneficiaries. The clock starts once the will has been accepted into probate.

An attorney can help make sure that the executor meets any statutory deadlines. An attorney can also help if a beneficiary’s address is unknown or cannot be found.

Once the necessary parties have been noticed, the executor must turn over to the court proof that the beneficiaries received proper notice and that they received the notice in time.

Locate all Assets

The executor must find all assets that the decedent owned. If these are probate assets, the executor must get control of them so they can be used to pay off the decedent’s debts. The rest can be distributed in accordance with the will.

Unless the decedent had prepared his or her estate planning documents through a specialized estate planning firm that prepared a comprehensive asset spreadsheet as part of the estate plan, it is hard to know what the decedent owned or how to get control of it. Moreover, the decedent could have lived in different states or countries having different assets in different places. Sometimes, the custodian of the property is not cooperative. An attorney can be helpful if you are having trouble locating the decedent’s assets or getting estate assets released.

Identify All Debts and Obligations

New Jersey has specific rules about the order of priority when it comes to paying the decedent’s debts. It is important that the executor pays the bills in the correct order because if the funds run out, and the executor paid lower priority bills before higher priority bills, the creditor could sue the executor for its loss.  Additionally, the executor has to be aware of whether or not federal or state death taxes are due from the estate and must review the will to see who (the estate or the individual beneficiaries) are responsible for payment.

In New Jersey, the costs of the administration are one of the higher priority bills, which includes any attorney’s fees and the executor’s commission. New Jersey also regulates how much the executor is allowed to be paid based on the size of the estate. If the estate is large or difficult to manage, it may make sense to hire an attorney to help with the administration and ensure that the proper procedures are followed.

Filing Income Tax Returns, Where Applicable

Depending on how long the estate will be kept open, the executor has a duty to report all income earned by the estate during this time. The deadline for this filing is based on either a calendar year or a fiscal year and must be reported on a Form 1041. NJ no longer has an estate tax, but if the worldwide assets of a decedent are greater than the exemption, or if the decedent was a NY resident with significant assets, then a federal estate tax return or NY state estate tax return may be due. Finally, where the estate assets are below the threshold, there may still be a need to file an estate tax return to elect portability.[1] In these cases, it is extremely important that the executor review the will carefully to see who can pay the taxes—the individual beneficiaries or the estate out of the residue.

Distributing the Remainder to the Beneficiaries

Once the bills have been paid, the executor is to distribute the rest of the assets in accordance with the will. Not all gifts to beneficiaries have the same priority. There is a difference between an equal distribution of estate residue to the children of the decedent and giving specific assets/bequests to specific beneficiaries.

It is important that the executor understands the difference and correctly distributes the assets, or else he or she can be held personally liable for any mistakes.

This is especially important when the executor is one of the beneficiaries. The executor has the ability to make decisions on behalf of the estate including liquidating assets and distributing the cash, he or she must act in accordance with the will. The executor cannot use his or her position to unfairly distribute assets or disadvantage another beneficiary. An attorney representing the estate can also act as a check to make sure the executor is not exceeding his or her authority. New Jersey also requires paperwork be completed before the distributions to the beneficiaries. This involves securing releases from all beneficiaries to avoid personal liability for the executor for nonpayment of taxes or for making distributions to beneficiaries with outstanding child support obligation subject to wage garnishment. An attorney can help prepare all of the needed forms and make sure everything is properly accounted for and signed.

Closing the Estate

Once the bills have been paid and the assets have been distributed, the executor should file any outstanding estate or inheritance tax paperwork, where applicable, and then close the estate by filing a final court filing.

Closing the estate is important because if the estate is left open, then the executor is still personally liable should any new creditors emerge or if any beneficiaries complain after accepting his or her share.

Final Remarks

An estate administration will take at least nine months from the decedent’s death until the estate can be closed. In some cases, the administration can take much longer, potentially years depending on the size of the estate, the number of beneficiaries involved, the location of the assets, or any complications that arise along the way (for example. if there is confusion as to ownership of any assets or if any provisions in the will are unclear).

An attorney can help the executor by ensuring the proper procedures are filed, that the required paperwork is completed and submitted, and by acting as a buffer between the executor and the next of kin, beneficiaries, or the fiduciaries and institutions involved. All of this can ultimately help save the executor time and stress during what will be a difficult situation.

 

 

 

[1] Portability refers to the act of taking over a deceased spouse’s unused exemption which is to be added to the surviving spouse’s exemption.

Inheritance Planning: Stark Differences between U.S. Beneficiary & Indian Nominee Rights!

Posted on | by Tom

Certain persons of Indian descent, their progeny and spouses could qualify to register as Overseas Citizens of India giving them permanent residence rights among other things.  Similarly in the United States, qualified individuals may acquire lawful permanent status in many ways including via employment or through family connections.  Lawful permanent residents are popularly known as green card holders.  Inheritance laws apply equally to citizens and permanent residents in these two countries.  Recently, a few of us (accounting and legal professionals) from both India and the US, were researching inheritance planning issues related to “Overseas Citizens of India” and discovered significant differences in the United States and India when it comes to the succession of bank accounts from a deceased account holder to his or her ultimate beneficiaries.  We will discuss these differences in this article as they apply to citizens and permanent residents.

On the US side:

Probate vs. Non-probate accounts: In the US, an account can be a probate asset or a non-probate asset, depending on how it is set up.

A probate account is an account owned in the sole name of the individual account holder, with no beneficiary designation(s) attached to it. Upon death, the probate account goes through the probate process, which is the legal route by which these accounts make their way through the Last Will & Testament (“Will”) of the deceased account holder (“decedent”) over to the beneficiaries named in the Will. Where there is no Will, the account has to pass through the intestacy laws of the State in which the decedent resided and the beneficiaries (or heirs) of the decedent are determined by State law. In either case, the probate process involves court supervision or oversight.

By contrast, if the account is non-probate, then it does not go through the same channels and instead the account passes directly to the beneficiary or beneficiaries by operation of law, by contract or by trust. Joint accounts, or accounts with a “Transfer on Death or TOD” beneficiary or a “Payable on Death or POD” beneficiary[1], life insurance policies or retirement accounts with beneficiary designations or assets inside of a Revocable or Irrevocable trust, are all considered non-probate assets.  Except in limited circumstances (typically in matters of public policy, state law etc.), once an individual is named as a beneficiary of an account or is joint account holder with another, this individual becomes the legal owner of the account and inherits the account automatically – outside of the court system.

Therefore, in the US, upon on the death of an individual, things are relatively straightforward (especially if there is a Will in place).  All probate assets in the name of the decedent pass into an estate account that is set up by the Executor named in the Will. To open the estate account, the Executor will need to appear at his or her bank of choice armed with a Death Certificate, photo ID, a Tax Identification Number or TIN# (in lieu of the decedent’s Social Security Number for taxes), and a Letters Testamentary (or Appointment Letter) procured from the Court.  Similarly, if there was no Will, the same process is followed except that the individual stepping forward to serve – now called the Administrator – has to post a bond to secure the estate assets (as an insurance for the ultimate beneficiaries) before he or she can obtain the Letters of Administration from the Court.

It is pertinent to note that in either case, Courts as well as the banks do not proceed without first obtaining proper documentation from the individual stepping forward to serve and banks will likely be subject to liability if they fail to obtain the necessary documentation.  More importantly, it is unheard of for banks and other institutions to transfer probate assets of a decedent directly to an account belonging to the Executor/Administrator.  These accounts must be transferred to the estate account of the decedent and held there until the estate administration formalities are completed, including payment of any taxes/debts or other obligations of the estate, before money passes to the beneficiaries.

On the India side:

A bank/financial account can be held individually or jointly.  Joint accounts can be held: ‘either or survivor’, ‘anyone or survivor’ or ‘former or survivor.’  Account holders are also often referred to as First Holder and Second Holder where if the first holder dies, the second holder automatically receives the beneficial interest in the account.  However, all accounts (including those that are individually owned) can have nominee designations.  Unlike the US where a nominee designation would be treated as a beneficiary designation, the person named as the nominee receives payment from the bank only “as a trustee of the legal heirs of the deceased depositor, i.e. such payment to him shall not affect the right or claim which any person may have against the survivor(s)/nominee to whom the payment is made.” [2]

So here is where things can get quite tricky, and often messy, when the nominee designations don’t match up to either the beneficiaries listed under the Will or, the account holder dies intestate i.e., where there is no Will, when the nominee designations do not reflect the lawful heirs of the estate.

Let’s start with what a bank is instructed to do –  in an effort to alleviate the “tortuous procedures …[that] caused considerable distress” to family members upon the death of a deceased account holder, the RBI or Reserve Bank of India issued a circular stating that where accounts have a valid nomination, the bank has to follow a 3-step protocol, before paying out the balance directly to the survivor(s)/nominee, with full discharge of any liability against the bank for making such payments.

The three steps outlined were that the bank:

  • exercise due care and caution as to the identity of the survivor(s)/nominee and valid proof of demise of the accountholder;
  • make sure that there was no court order restricting the Bank/institution from making such payment; and
  • makes it clear to survivor(s)/nominee that payment is being made to him or her only as a trustee of the funds and that valid beneficiaries to the funds could have a claim against the survivor(s)/nominee.

But interestingly, there is also some indication to suggest that if banks insists that the survivor(s)/nominee produce legal documentation like the succession certification, Letter of administration or probate etc., or ask for him or her to obtain a bond, that would actually “invite serious supervisory disapproval”[3].  Where there are no nominee designations, the bank is “advised to adopt a simplified procedure for prepayment to legal heir(s)…keeping in view the imperative need to avoid inconvenience and undue hardship to the common person.”[4]

It follows that if the nominee designation does not match the Will of the succession rights of the beneficiary, then the legal heir’s only option is to fight it out in court.  In an article on the subject, S.S, Rana & Company cite Supreme Court cases where the Court has held that the nominee is only a custodian of the account[5].  Moreover, Section 72 of the Companies Act, 2013, states that while the nominee shall become entitled to all the rights in the shares and debentures of the company immediately upon the death of the shareholder, the rightful ownership of shares remains with the legal heir and not the nominees[6]. Courts in India have time and again reiterated that the legal heir is the ultimate, rightful owner of the property of a deceased individual, a nominee (pursuant to a nomination given by the deceased during his / her lifetime) would act only as a trustee on behalf of the rightful legal heir(s), and hold such property until the matter of succession or inheritance is decided and implemented. Even in the case of a minor being a nominee and not a legal heir, the natural or legal guardian acting on behalf of such minor nominee has to act as Trustee on behalf of the legal heirs.

Complexities increase where there is no testamentary instrument, and the personal law of the decedent provides a certain set of rules/guidelines for devolution of the estate on the legal heirs.  For example, in the case of a Hindu male, Class 1 heirs (mother, children, grandson of his predeceased son and so on) who get priority over his assets, leave out the father, who is not considered an immediate legal heir and therefore has no right to his son’s assets[7].

Some exceptions to the above are in the case of life insurance or Relief/Savings Bonds where the nominee is also considered the beneficial owner and therefore entitled to the proceeds of the policy or the bonds.

Solution for both countries –

It is imperative for anyone with assets located both in India and overseas to execute a well thought succession plan. One must aim at erasing confusion over the nominees and his/or legatees/beneficiaries. One must not only consider setting up a Will (in all countries where applicable) clearly delineating the various beneficiaries under the Will but also to methodically and systematically go through every single account and align nominee designations in accordance with the Will. Nomination and Will must be in harmony.

Those who are US citizens/residents should understand the contrasts that exist in the two countries where a beneficiary designation trumps the Will in almost every case in the United States whereas it follows a completely different treatment in India.  The easiest way to ensure a smooth and a seamless transition to your loved ones in India, is to ensure that the nominee designations mirror your intention, irrespective of a Will being made, listing the true and intended beneficiary of the account.

Our goal as planners and professional advisors is to guide families to pass on their wealth to the intended beneficiaries in a clear and hassle-free manner. This means keeping families out of the judicial system and not have legal heirs bring a court action to assert his or her lawful claim over the estate assets against an unscrupulous nominee.  Unfortunately, in its efforts to make things stress-free for grieving families, the Indian banking system may have inadvertently made it more difficult for lawful beneficiaries to claim what may have been theirs.

 

Contributing Authors:

Poorvi Chothani, Esq. is the founder and managing partner of LawQuest, an employment and immigration boutique law firm. Poorvi, a graduate of University of Pennsylvania, is admitted to the bar in India and the USA and is a registered and practicing solicitor, England and Wales.

Sujatha R. Krishnaswamy is a Chartered Accountant & MBA from Georgia Tech.  She is also the co-founder of Crestworth Management Partners Pvt. Ltd., management consultants & tax advisors, based in Bangalore, with a special focus on Indian and U.S. taxation for individuals.

Roopa P. Doraswamy, B.A., L.L.B (Hons), J.D., is a Co-Founder at Flywork Innovations Pvt. Ltd, a SaaS enabled marketplace for legal and compliance.  She is a graduate of National Law School of India University (NLSIU) Bangalore and Northeastern University School of Law, Boston

Sushma Nagaraj, B.A., L.L.B from Bangalore University, India is a qualified lawyer in India who manages an independent private law practice.  Her specialty is in the areas of estate, trust and property laws in India.

Rekha V. Rao, J.D. from the Elisabeth Haub School of Law at Pace University is the principal and founding member of Rao Legal Group, LLC.  She is licensed to practice in New York and New Jersey and has developed her firm’s niche in the areas of estate planning, estate & trust administration, elder law, guardianship, and special needs planning.

Priya Gidwani is the CFO and founding member of Rainmaker. As a CFO with emerging, growth and mid-market companies, Priya’s experience spans everything from helping to launch start-up enterprises to managing finance for mid-size companies. Priya also has significant experience of working in the US with companies like Siebel Systems Inc. and Providian Financial Corporation. Priya is a Chartered Accountant from India and holds a Master’s degree in Accounting from Illinois State University.

 

[1] Note that not all bank accounts have or offer a POD or TOD designation but if it does (part of the contract), then such accounts will pass directly to the named beneficiary or beneficiaries and bypass probate

[2] Settlement of Claims in respect of deceased depositors – Simplification of Procedure; RBI/2004-05/490, DBOD. No. Leg. BC. 95/09.07.005/2004-05, 2(A)(2.1)(c),

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2284&Mode=0#:~:text=Banks%20are%20advised%20to%20settle,(s)%2C%20to%20the%20bank’s [emphasis added]

[3]  Id. at 2(A)(2.2).

[4] Id. at 2(B)(2.3)

[5] In its article, Legal heir or Nominee? Who is the rightful owner?, some cases cited to are: Shalkti Yezdani v. Jayanand Janat Salgaonkar, Smt. Sarbati Devi and Anr. V. Smt. Usha Devi, Uma Sehgal and Ors. vs. Dwarka Dass Sehgal And Ors etc.,

https://s3.amazonaws.com/documents.lexology.com/6edb5a5b-1308-4947-bfac-5f69d1f58278.pdf?AWSAccessKeyId=AKIAVYILUYJ754JTDY6T&Expires=1650889871&Signature=dfN8XJOf4BRwSKqO3v4VdBueUbE%3D

[6] Id.

[7] Wrong Nominee and right nominee for bank A/cs, FDs, mutual funds, financial assets by Pragati Kapoor & Preeti Motiani, ET Online (2021), https://economictimes.indiatimes.com/wealth/legal/will/wrong-nominee-and-right-nominee-for-bank-a/cs-fds-mutual-funds-financial-assets/articleshow/85396026.cms?from=mdr

New Jersey’s Intestate Share Title 3B:5-3: Intestate share of decedent’s surviving spouse or domestic partner

Posted on | by Tom

The intestate share of the surviving spouse or domestic partner is:

a) The entire intestate estate if:

  1. No descendant or parent of the decedent survives the decedent; or
  2. All of the decedent’s surviving descendants are also descendants of the surviving spouse or domestic partner, and there is no other descendant of the surviving spouse or domestic partner who survives the decedent.

b) The first 25% of the intestate estate, but not less than $50,000.00 nor more than $200,000.00, plus three-fourths of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent.

c) The first 25% of the intestate estate, but not less than $50,000.00 nor more than $200,000.00, plus one-half of the balance of the intestate estate:

  1. If all of the decedent’s surviving descendants are also descendants of the surviving spouse or domestic partner and the surviving spouse or domestic partner has one or more surviving descendants who are not descendants of the decedent; or
  2. If one or more of the decedent’s surviving descendants is not a descendant of the surviving spouse or domestic partner.

 

IN PLAIN ENGLISH

If your spouse or domestic partner dies without a Will, then

  • You, as the surviving spouse, can inherit the entire estate only if you and the decedent had children together, and these children were the only children from that marriage (and there were no other children from other marriages or relationships).
  • If you are the surviving spouse, and you and the decedent had NO CHILDREN together AND if the decedent’s PARENTS are still alive, then you are entitled to get the first 25% of the decedent’s estate up to the first $50K and 75% of the remaining balance. The decedent’s parents get the rest!
  • If you are the surviving spouse, and you and the decedent HAD CHILDREN/DESCENDANTS FROM OTHER MARRIAGES OR RELATIONSHIPS who are alive, then you are entitled to get the first 25% of the decedent’s estate up to the first $50K and 50% of the remaining balance. The other children get the rest!

 

TAKEAWAYS

  • Understand the difference between probate assets and non-probate assets (check out our website for our blog posts about that) and know that the intestate estate only deals with probate assets.
  • If you are (1) newly married; (2) do not have children; or (3) have a blended family, get yourself a Will now!!

What if something happens to both of us…!

Posted on | by Tom

We had just completed the signing of our Clients’ estate planning documents – Revocable Living Trusts, Pour Over Wills, Healthcare and Financial Powers of Attorney; we had a beautifully prepared asset spreadsheet listing out their assets along with our detailed recommendations on titling changes/beneficiary updates to align those with the ultimate dispositions reflected in their estate planning documents.  We had a ton of other useful information like flowcharts, funding instructions etc. when our clients ended the meeting with a very thoughtful question – “All of this is great but what is the first thing our children should do if something happens to both of us? How does the Will get “probated”?  Can our children follow your guidelines and take care of the estate themselves or do they need your help? Our kids will no clue as to where to begin!!”

That question got us thinking and has been the inspiration for this Consumer Guide which we hope will inform and educate clients both existing and potential on what exactly families should consider if both spouses die leaving behind children and/or other beneficiaries.

Important Disclaimer: while this guide is meant to provide general advice to all individuals (both single unmarried as well as married couples with or without children), this guide was not meant to be exhaustive, capturing every nuance that may be unique only to your particular situation.  Our hope is that for those of you whose situation does not fit squarely within the assumptions noted below, then you will give us a call so we can further discuss.  Below are the assumptions:

  • that some type of foundational plan is already in place (Will/Revocable Trust) etc[1].
  • that there are 2 parents leaving behind assets to their children
  • all individuals and their fiduciaries are United States’ citizens
  • if the children are minors, then the named fiduciaries have close ties to the family

Definitions:

Fiduciaries: these are your trusted individuals appointed to serve as Executor of the estate, Guardian of minor children or Trustee of any trust assets.  These individuals sole function is to ensure that any action taken is done in line with the best interests of the beneficiaries of the estate and/or minor children

  • Executor: we call this person the manager or representative of the estate. His or her job is to go through the court formalities to get appointed, then marshal up all of the assets in the estate, pay of debts & expenses if any, then distribute the assets pursuant to the Will
  • Trustee (or guardian of the property): this individual is appointed to serve as the guardian of property either for a limited duration or for the long haul (a/k/a lifetime trusts). They usually can appoint successors in case they cannot serve and they can also be removed by all the beneficiaries if they are not doing a good of managing the trust assets on behalf of the beneficiaries
  • Guardian (of the person): these individuals are normally close family members or friends who are willing to step in and take physical charge of the minor children and take care of their day-to-day needs. If the child(ren) lives in a dorm or boarding school, then the Guardian’s role becomes more like that of a Legal Representative for that child(ren) and one who can make legal, financial, social, and healthcare decisions on the child(ren)’s behalf.

Decedent or Deceased: the individual who has just passed away

Testator or Testatrix: the individual who has executed/signed his or her Last Will & Testament

Grantor: of a Revocable Living Trust who established this trust during his or her lifetime.

Probate: the process of admitting the Will to probate so that there is court oversight from start to finish

  • Probate Assets – are assets that are part of the decedent’s estate and therefore disposed of by Will ex. If the deed to the family home was titled in parents’ joint names, then upon simultaneous death, the home becomes a probate asset

Non-probate: assets that pass outside of the Will either directly to a joint owner or via a beneficiary designation (including “Payable/Transfer on Death” or POD/TOD designations)

So let’s begin:

Let’s presume this was yesterday, and your children have just been dealt with the news that both parents are no more.  What is the first thing that needs to be done?  Well, nothing … at least for the next ten days as New Jersey law requires everyone to give grieving families a 10-day period during which time no one is expected to do anything with regards to the Will.  The public policy rationale behind this is to give families a chance to grieve and mourn and not have to worry about attending to the legal affairs of the estate.

Once that 10-day period is over, then here are some recommended steps for beneficiaries that may be followed:

Step 1:  Information Gathering

  1. Look for the estate planning documents

The first thing you want to look for is the original Will. Did your parents tell you whether they had their estate planning documents prepared?  More importantly, did they tell you where the originals were kept? In our office, on signing day, we always instruct our clients that we will be giving them back all original signed documents in a binder so it is important for them to (1) inform their fiduciaries about who we are  (note: our business card is included within in the binder); (2) to let them know where they are planning to keep our binder (ex. locked filing cabinet in home office or vault in basement etc.); and if kept locked, then where can they find the key or combination/password.

  1. Review the Will. Notify those who are serving as the appointed Executor (Guardian or Trustee) where applicable

Once you have located the original Will, you will want to review it to see who has been appointed for the various positions.  If the Will appoints someone other than you, contact them and let them know what the Will/Trust says.  In our office, we provide something called the Confirmation of Names and Fiduciaries Summary that lists all of the people appointed for the various roles along with their current address and phone number.  During the signing, we encourage our clients to share this document with these individuals right away, so they know exactly what role they are serving and when they might possibly be called in.

  1. Review the Assets in the Estate. What assets are in the estate of the deceased person?

Next, look for all asset information. If you have not completed your estate plan with us, then you will want to go through all of the places your parents may have saved their financial documents.  In this digital era when a lot of account statements are generated online, it may very important to know a list of institutions and banks where your parents have accounts.  In our office, our Asset Integration Worksheet or AIW is a revered document.  This is where list out a snapshot of our clients assets (from across the globe) and gear the document towards estate administration.  We empower our clients to keep the document updated each year or, for a nominal fee, help them keep it updated.  This way, if the unfortunate happens, beneficiaries have one document to reference to know exactly what their parents left behind.  Once you have this information, you can figure out the extent of the complexity and decide for yourselves whether or not  you need to engage the services of an estate administration attorney. See Step 3

Step 2: How do you order death certificates?

Your funeral home director will not only help you get the death certificates (DC).  The DCs generally arrive 1-3 weeks after death.  Once you get this, make sure to look at it carefully for any errors and if any, make sure to inform the director immediately – this will help avoid running into various problems later.

Step 3: Who needs to be contacted?

  • Social Security and pension: The funeral home typically informs the Social Security Administration on your behalf. Note that typically social security benefits terminate at the death of the surviving spouse unless there are minor children or adult children with disabilities. If your family situation happens to fall into this category, then be sure to call up the SSA office on your own to establish ongoing payments. Same as true for pension benefits except you will need to contact the relevant department within the company/organization to reinstate pension where applicable
  • Banks & Institutions: Depending on the complexity of the estate assets, you may require our help in contacting these institutions and helping you release the accounts over to the estate and/or trusts established for the beneficiaries. This is where it will be important to call our office as soon as possible to schedule a call to discuss next steps and to find out whether any inheritance or estate taxes may be due or if any estate income tax considerations need to be taken onto account for that year, if waivers need to be filed with the State Tax Branch and/or if trusts need to be set up

Step 4: What’s the time commitment your fiduciaries are looking at to administer an estate? Normal time frames could range anywhere from 4 to 6 months to several years (especially if there is a business involved or if the matter becomes contested) with the probate of a Will.  Revocable Living Trusts avoid probate but there may be some aspects to trust administration (like set up of further testamentary trusts or estate tax filings) that may be necessary. However, both probate costs and time delays due to waivers are significantly reduced when Grantors of Revocable Living Trusts pass away.

Step 5: Common mistakes or traps to avoid

  • Schedule the initial consultation with the law firm post death – don’t make the mistake of foregoing this call since there may be aspects of your plan (disclaimer trust planning; portability elections) that are time sensitive.
  • Taking out the RMD for the year – which could avoid up a 50% penalty imposed by the IRS
  • Account for foreign assets – every US green card holder and US citizen is subject to death taxes based on his or her worldwide assets so its important to consider everything that the decedents owned when thinking about estate taxation. Also important is to see if the decedents have a foreign Will.  In our office we guide and counsel several clients with international assets and have always recommended that they set up another Will in the overseas jurisdiction
  • Avoid consulting only a CPA and not also an estate administration attorney with the probate of the estate. There are aspects to estate planning that may catch an unwary CPA who is not familiar with estates & trusts off guard and as a result end up giving the wrong advice.

We hope you found this helpful.  We would love to hear from you to let us know what you think and if there are other questions that we can address to improve this Consumer Guide.   At some point, we plan to include a Frequently Asked Questions Section to this blog so we can consistently inform and educate our clients.

 

[1] For any prospective clients reading this Consumer Guide, note that the estate becomes significantly more difficult to probate when no estate planning documents are in place so it is always better to have something than nothing at all. But we strongly encourage you to use a specialized estate planning attorney for even the simplest of Wills as you just ‘don’t know what you don’t know’.

Earning back your trust & respect for the legal profession!

Posted on | by Tom

I recently traveled to India for a quick trip to visit my parents who both celebrated 3 milestone events in 2021 – my mother turned 80, my father turned 90 and they celebrated their 60th wedding anniversary.

Although not a lawyer himself, my father has always been interested in the law as he comes from a family of lawyers.  His father, my grandfather (who had passed away even before I was born) was the dean of the first law college in Bangalore, India, the city where I grew up.  So, this trip, my father recounted a few of his favorite childhood memories watching his father practice out of his tiny home office when he was in private practice.  Grandpa was poor but brilliant.  He could hardly afford the clothes on his back, yet people came from far and wide to have him try their cases.  On one occasion when a rich client had a scheduled appointment with my grandfather, my father remembers telling him to put on some better clothes to make a good impression.  To that, my grandfather had replied “this client is coming to see me for my brains and not for my outfit”.

Back in those days, lawyers, doctors, and teachers were part of a noble profession where “service” was the name of the game and not how much revenue or profits one made.  The concept of a lawyer’s fee was based on a client’s ability to pay – and lawyers of that era (including my grandfather), never asked their clients for an upfront fee.  Instead, they would take on each matter based on their individual ability to handle the workload.  It is said that apparently these lawyers had pouches on their backs atop their black overcoats.  When a case was tried and won, their clients would just put as much money into that pouch that the clients could afford.  The lawyer would never know which client paid what amount.  Such was the nobility of the profession!  Can one ever imagine that happening in today?  Too many of us are caught up in our flat fee or fixed fee billing models and never stop to think whether we have really and truly have earned the respect of our clients. Do we truly “serve” our clients in the way we should?

So, in this 2022, almost 8 decades since the death of my grandfather, I want to honor him by having us at Rao Legal Group do something different and hopefully something out of the ordinary for a small law firm.  At some undisclosed time of the year, we are going to “place our pouches on our backs” for a month to allow financially strapped families pay us only what they are able to pay for their estate plans – no questions asked.  We want to earn back the trust and respect of our clients and show them that law can still be a noble profession.

Do Your Children Know Where Your Assets Are? The Importance of proper Estate Planning!

Posted on | by Tom

There are several reasons why it is important to have an estate plan. However, by far, one of the overarching reasons people have told us why they want an estate plan in place is because they want to see their loved ones inherit the full benefit of their hard-earned assets, in a smooth hassle-free manner.

When you pass away, it is the job of the Executor (after he or she gets appointed by the Court) to marshal up all of the assets in the estate, pay off all debts and expenses before distributing the remaining assets in accordance with your Will. To do this, the Executor needs to know what assets you owned at the time of your death.

A good estate plan will include a separate list of assets which the Executor can then refer to and use to make sure the beneficiaries receive what is due and owing to them. If your estate plan does not have such a list, you run the risk of certain assets going unclaimed and subsequently escheated over to the State.

Example, John dies in 2017 and his brother Bill is the named Executor. Bill starts searching through all of John’s desks, drawers and filing cabinets to see what, if any, documentation he can find about John’s assets.  During his search, he uncovers bank account statements from Wells Fargo, so he contacts Wells Fargo to inform them of his brother’s death and has the accounts turned over to an Estate account.  From this account, Bill uses to pay for John’s funeral and other expenses/debts before distributing the rest of the money to John’s children.

What Bill did not know, however, is that John also had an account with Bank of America that was worth $25,000. John had requested these statements to be sent to him online so there was no record of this account among John’s paperwork.  Moreover, John had last used the account in 2015, so in 2018, after three years of inactivity, Bank of America, per its internal policies and state rules, turned over the account to the state.

Once the state has unclaimed property, the owner has a limited amount of time to claim the property before the state can claim the property for itself. Each state has its own rules as to how long owners have to reclaim his or her property.  According to the New Jersey Department of Treasury, approximately 1 in every 10 individuals, has unclaimed property.[1]  Common examples include unpaid life insurance benefits, forgotten bank accounts, utility deposits and unused rebate cards.

In this case, if Bill never learns of the Bank of America account (or if he does not learn of it in time to claim the money for the Estate), then John’s children will be out of luck.

A good estate planning firm should offer as part of their fee, an asset list that incorporates every single asset/account you own along with recommendations on how to retitle ownership into trusts (should you decide to establish one or more) as well as how to properly update your beneficiary designations. These firms would also be mindful of overseas assets that are particularly susceptible to escaping the notice of an otherwise diligent Executor.  Not all estate planning law firms offer detailed spreadsheets prepared in conjunction with the estate plan. Therefore, it is extremely important when choosing a law firm to assist with your estate plan to not only pick one that specializes in estate planning but can also offer these important (yet hidden) value-adds as a normal and commonplace part of its overall fee package. Ultimately, a good law firm’s objectives must be aligned with your own and which can help set up a proper estate plan for you to ensure your loved ones inherit the full benefit of your hard-earned assets.

 

[1] As a fun exercise, check out this link to see if you or a loved one may have unclaimed property right now that may have escheated to New Jersey State: https://unclaimedfunds.nj.gov/app/claim-search