Wills, Trusts and Estate Planning - Kiley, Kiley & Kiley, PLLC

Wills, Trusts & Estate Planning

Kiley, Kiley & Kiley, PLLC

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Ensuring that assets are protected and passed on to loved ones remains a vital objective in our ever changing economy and world. Kiley, Kiley & Kiley, PLLC assists clients in achieving these goals through its diversified trusts and estates practice, which handles all such matters, including: wills, trusts, elder law and Medicaid planning.

In The News

Kiley, Kiley & Kiley obtains 1.4 Million dollar estate litigation award for an heir who was written out of a will and living trust
Donald T. Kiley, Jr. obtained a 1.4 million dollar award for a Nassau woman who was disinherited from her father’s estate by the execution of a codicil to a living trust. Mr. Kiley successfully argued that the codicil was invalid as it was not properly executed and acknowledged pursuant to the New York’s Estates, Powers & Trusts Law.

Donald T. Kiley, Jr. and Kevin J. Kiley give estate planning seminar on behalf of the Catholic Brooklyn/Queens Dioceses
Donald T. Kiley, Jr. and Kevin J. Kiley gave a seminar on estate and elder law planning before a group people at Our Lady of the Blessed Sacrament Church, Bayside, New York. The event was sponsored by the Brooklyn/Queens Diocese. Topics of discussion included the fundamentals of preparing a basic estate plan including a Will and Health Care Proxy with discussion of the implication of the recent federal HIPAA legislation and its impact on Medicaid planning. Also discussed were the most recent changes to the Medicaid laws relating to gifts and the transfer of assets; a discussion of shelter credit and bypass trusts to mitigate federal and state estate tax liability and tools to address the preservation of real property and other assets, including life estates and irrevocable trusts.

Wills, Trusts, & Estate Planning – Part 1

Wills, Trusts, & Estate Planning – Part 2

Wills, Trusts, & Estate Planning – Part 3

Living Trusts – Part 1

Living Trusts – Part 2

Important Information About Wills and Trusts

Will Contests — Lack of Testamentary Capacity, Improper Execution, Bogus Will

You cannot contest a will simply because you don’t like the provisions, or because you received less than you felt you should have received, or because the provisions were, in your opinion, unfair. You must have legal grounds, which, if supported by the evidence, would cause the will to be rejected by the Probate Court.

Lack of Testamentary Capacity
As the question of testamentary capacity applies to wills and will contests, it is often very difficult to disprove. The court presumes that the testator was sane and competent, which means that if you feel the testator was incompetent at the time the will was signed, you have to prove it. This could be quite difficult if the will was signed several years ago, for instance, since it would mean that you would have to produce witnesses and other evidence relating to the specific time the testator signed his will. And remember that eccentricities are not necessarily indicative of incompetence or lack of understanding, and that persons who are suspected of being incompetent can have moments of lucidity, so that even credible evidence of weird behavior and occasional incompetence may not be enough to support a will contest based on lack of testamentary capacity. And if the will was signed in a lawyer’s office, you have an even slimmer chance of proving lack of capacity, because most attorneys are extremely careful in monitoring the signing of the will, which normally includes a brief discussion with the testator to satisfy the witnesses that he knows and understands what he is signing.

Improper Execution
Assuming there is some substance to the claim, this may not be quite as difficult to prove as lack of testamentary capacity, since it goes to the actual facts and circumstances surrounding the signing, as opposed to an evaluation of the state of mind of the deceased from a distance. If it can be shown that any of the necessary requirements was missing, the will may be declared invalid and the contest successful. As noted above, however, if the will was signed in a lawyer’s office, the chances of proving improper execution are slim. But many testators (to the delight of the many lawyers who are paid to contest wills) write their own wills and also arrange for the signing and witnessing. Such cases are the ones most likely to sidestep an important legal requirement.

Bogus Will
A bogus or inauthentic will generally involves fraud and, like certain other grounds for contest, overlaps with it. An illustration is a will that was rejected as not being the will of deceased. The same would apply, for instance, where the will was originally that of the deceased but someone made an unauthorized change to it, then offered it for probate. This method can be quite difficult to detect, since, in most cases, the will was properly signed by the testator and witnessed according to law. But as is often the case, those stealing from the dead are usually amateur thieves and don’t cover their tracks very well.

Inheritance Without Planning Means No Adding to the Default Plan

When a person dies intestate (without making and leaving a will), each state provides a default plan (usually known as the statute of descent and distribution), under which his or her net estate is disposed. When a person dies intestate, there is no adding to the default plan. The default plan is the only plan. This article discusses the disadvantages of descent and distribution related to the inability to add to the default plan.

Who Inherits
Under descent and distribution, a person who wants to plan the disposition of his or her estate cannot transfer his or her property to persons or entities who are not the ”natural objects of one’s bounty.” The types of persons and entities who are not the “natural objects of one’s bounty” include friends, strangers, businesses, charities, governmental organizations, political organizations, religious organizations, and schools.

Transfer to persons or entities who are not the “natural objects of one’s bounty” is necessary where there are no “natural objects of one’s bounty.” Escheat (transfer of an intestate’s property to the government as a last resort, because no legal beneficiary exists to take the intestate’s net estate) can be avoided only outside of the normal sequence of descent and distribution.

Under descent and distribution, a person who wants to plan the disposition of his or her estate cannot assure expectant heirs that, if they survive the person making the plan, they will inherit. Such a person cannot anticipate the existence of a posthumous child or anticipate the existence of other afterborn heirs. Such a person cannot assure transfer of his or her property to adopted children or adoptive parents, or to other persons related as the result of an adoption. Such a person cannot assure transfer of his or her property to illegitimate children or illegitimate parents, or to other persons related as the result of an illegitimate relationship.

How They Inherit
Under descent and distribution, a person who wants to plan the disposition of his or her estate cannot arrange to have his or her property transferred in steps or stages, rather than all at once. Such a person cannot put conditions on the transfer of his or her property.

Under descent and distribution, a person who wants to plan the disposition of his or her estate cannot specify, in each transfer of his or her property to a group, whether per capita or per stirpes will apply.

Some of the Advantages of Making a Will
All of the disadvantages of descent and distribution related to the inability to add to the default plan can be overcome by making a will. To overcome the disadvantages of descent and distribution, have your lawyer prepare a will (and any other estate planning documents) for you.

Trust Elements – Trustee

A trust has five main elements. First, a settlor transfers some or all of his or her property. Second, the property transferred by the settlor is designated trust property. Third, the trust property designated by the settlor is transferred with the settlor’s intent that it be managed by another. Fourth, the trust property designated by the settlor is transferred for management by a trustee. Fifth, the trust property designated by the settlor is managed by a trustee for the benefit of a beneficiary. This article discusses some aspects of the element of a trustee.

Competent Trustee
A trust is managed by a competent trustee. A competent trustee may be an adult capable of managing his or her own property. A competent trustee may also be a legal entity with the power to serve as a trustee (typically, a bank or trust company). In many states, the trustee must be a resident of the state in which the trust will be administered.

More than one person may be trustee. Such persons are known as co-trustees. One trustee may be followed by another person serving as trustee. A trustee serving after the named or original trustee is known as a successor-trustee.

No Named Trustee or Notification Required
A settlor is not required to name a particular person or legal entity as trustee. If the settlor has manifested the intention to create a trust, a trustee may be appointed by a court. If the named trustee cannot serve as trustee, a trustee may be appointed by a court.

In order to create a trust, the named trustee need not be notified. If the named trustee refuses to serve, a trustee may be appointed by a court.

Legal Relationship
The trustee holds the legal title to property transferred to the trust. The trustee is entitled to the ownership documents for the trust property and has the power to transfer trust property.

A trustee can engage in those acts permitted by the wording of the trust, and in those acts implied by those words and the existence of the trust. Indeed, a trustee is a trusted personal legal representative, a fiduciary, of the trust. As a fiduciary, the trustee has special duties and responsibilities. A trustee may be required to post a bond to reimburse any interested person damaged by any failure of the trustee to perform his or her duties faithfully.

After accepting the duties of a trustee, a trustee generally cannot resign without court permission, unless the trust provides otherwise. A trustee is entitled to reasonable compensation for his or her services to the trust.

Precatory Language, Ademption, and Abatement

One of the main purposes for making and leaving a will is to guide the administration of the estate of the testator–the person who made the will. A will should be written in language that is clear and indisputable. Alas, the language in a will may be unclear or vague. This article discusses the will interpretation and construction issues of precatory language, ademption, and abatement.

Precatory Language
A will may use language that expresses a hope or wish, but which does not state that the testator directs anything in particular, if at all. Such language is known as precatory language. Precatory language is usually interpreted as an advisory message and not as a mandatory message.

Suppose that a will states: “I give my niece $50,000 so she can go to private school.” Many courts would rule that the niece does not have to attend private school, or any school, to collect the $50,000. The precatory language will not be deemed to be a condition on the gift.

Ademption
It often happens that a gift in a will fails because the property that the will claims to give away is not in the testator’s estate when the testator dies. This occurrence is known as ademption.

There are two kinds of ademption. Ademption by extinction means the property is not in the testator’s estate because it was transferred, substantially changed, or destroyed before the testator’s death. In other words, ademption by extinction means that the testator’s estate does not have it.

Ademption by satisfaction means that the property is not in the testator’s estate because it was already intentionally transferred by the testator to the beneficiary. In other words, ademption by satisfaction means that the beneficiary already has it.

Abatement
It often happens that a gift in a will fails in whole or in part because there is not sufficient property in the testator’s estate to give the beneficiary the full amount. In other words, there is not enough property in the testator’s estate to make all the gifts in the will. This occurrence is known as abatement. Traditionally, where abatement is necessary, residuary gifts are first reduced or eliminated, then general legacies are reduced or eliminated, and finally specific bequests. Most states provide an order of abatement indicating which kinds of gifts fail until there is sufficient property in the testator’s estate to make the remaining gifts.

Trusts, Public and Private – II

An express trust is either public or private. A public trust, also known as a charitable trust, is an express trust created for a charitable purpose. If an express trust is not a charitable trust, it is deemed to be a private trust. A private trust is an express trust created to benefit a few persons. This article discusses some aspects of public and private trusts.

Stated Charitable Purpose
The requirements of public and private trusts are similar, with a few exceptions. The most important difference between a public trust and a private trust is that a public trust must state a charitable purpose.

Cy Pres
Sometimes the stated purpose of a public trust is impossible or impractical to carry out. For example, the local high school cannot be renovated when it already has been renovated since that purpose was stated in the trust.

When the stated purpose of a public trust is impossible or impractical to carry out, a court may invoke the doctrine of cy pres (“as near as”). Under the doctrine of cy pres, where the stated purpose of a public trust is impossible or impractical to carry out, a court can order the trust property to be applied to another charitable purpose similar to the stated charitable purpose. For example, the court may order the local middle school to be renovated rather than the local high school.

A court does not need the consent of the settlor or the trustee in order to apply the doctrine of cy pres. If, however, a trust states that it is for a specific charitable purpose and the trust is to terminate if that specific charitable purpose fails, the trust fails.

Definite Beneficiaries
A private trust must have definite beneficiaries. Unlike a private trust, a public trust may have indefinite beneficiaries with a defined class (e.g., the homeless persons aided by Catholic Charities). A public trust may have indefinite beneficiaries with a defined class, as long as there are indefinite beneficiaries within the defined class who actually receive the benefit of the trust (e.g., homeless persons are aided by Catholic Charities).

A public trust may also simply leave trust property “to charity.” When trust property is simply left “to charity,” the selection of the particular charitable purpose is left to the discretion of the trustee.

Per Capita and Per Stirpes

Suppose that an intestate is survived by three children and no grandchildren. Who inherits the intestate’s net estate? How much does each person get? For most people, the answer is easy and obvious. Each child takes one-third of the intestate’s net estate.

Now suppose that an intestate is survived by two grandchildren who are children of the eldest child, who has not survived, and by the two younger children of the intestate. Who inherits the intestate’s net estate? How much does each person get? The answer is no longer easy and obvious.

One view is that because the eldest child has not survived, the two grandchildren should take nothing, and that the two younger children should each take one-half of the intestate’s net estate. Another view is that the two grandchildren should take by representation the one-third share of the intestate’s net estate that the eldest child would have taken if the eldest child had survived. Under this view, the two younger children should each take one-third of the intestate’s net estate, and the two grandchildren should each take one-sixth of the intestate’s net estate. The first view is an example of per capita. The second view is an example of per stirpes (pronounced: per-STIR-peas).

Per Capita
Per capita is a Latin phrase that means “by the heads” or equally. With per capita, property is divided in equal shares among those who are in an equal degree of consanguinity (relationship by blood) to the intestate. Originally, most descent and distribution was per capita.

Per Stirpes
Over time, many courts and legislatures have found that the result of per capita, in which orphaned children take nothing, too harsh. Those courts and legislatures have embraced per stirpes. Per stirpes is a Latin phrase that means “by roots or stocks” or by representation. With per stirpes, property is divided in equal shares among those who are in an equal degree of consanguinity to the intestate, with descendants of a deceased ancestor taking the ancestor’s share by representation, as if the ancestor had survived the intestate.

Per stirpes originally applied only to grandchildren taking a child’s share by representation. Today, many states apply per stirpes, however remote the nearest relative is to the intestate. The application of per stirpes to remote relatives is technically known as modified per stirpes.

How the Statute of Descent and Distribution is Interpreted in Your State
In some states, per capita applies in some circumstances and per stirpes applies in other circumstances. When an intestate dies, everything depends on the exact wording and interpretation of the statute of descent and distribution in your state. Your lawyer can advise you. Furthermore, when making a gift to a class of persons in a will or other estate plan, it is a good idea, for the sake of clarity, to specify whether you intend per capita or per stirpes.

Failing to Make and Leave a Will

Although estimates vary, it’s pretty safe to say that more than 50 percent of the people who could make and leave a will fail to do so.

The people who fail to make and leave a will include many people who, in theory, should know better. One lawyer who failed to make and leave a will was the 16th President of the United States, Abraham Lincoln.

In addition, among those people who have made plans for the future, some have made plans that are legally defective. There are so-called wills that are defective because they have not been prepared according to the required formalities. There are also wills prepared according to the required formalities that are so well hidden that they cannot be found. When people try to make a will without the assistance of a lawyer, they seem bound to make a mistake.

The Effect of Failing to Make and Leave a Will
A person who dies without leaving a will (or who leaves a will that cannot be found) is said to have died “intestate.” Each state provides a default plan under which the property of an intestate is disposed. The default plan is usually known as the state’s “statute of descent and distribution.” Those who follow in the ownership of an intestate’s property are said to take intestate’s property by “intestate succession.”

Traditionally, the word “descent” means the transfer of land after death to a person known as an “heir.” Traditionally, the word “distribution” means the transfer of property other than land after death to a person known as a “distributee.” Despite the traditional distinction between land and property other than land, it is correct to say that heirs and distributees “inherit” property. Both heirs and distributees take land and property other than land by “inheritance.”

You Can’t Be the Heir of a Living Person
One common error is using the word “heir” to refer to a someone whose potential benefactor has not yet died. Descent of a person’s property does not occur until that person has died. Simply put, you can’t be an heir of a living person. If you die first, you don’t inherit anything! Accordingly, a person who expects to inherit, but may not, is known as an “expectant heir.” A “prospective heir” is a person likely to inherit. Among prospective heirs, the person most likely (but not certain) to inherit after a potential benefactor’s death is known as the potential benefactor’s “heir apparent.”

How to Avoid Your State’s Default Plan for Your Property
The most common way to avoid your state’s default plan for your property after your death is to make and leave a “valid” (i.e., legally effective) will. A lawyer can help you make a valid will. A lawyer can also suggest, where appropriate, other ways of avoiding your state’s default plan.

Gifts During Life – II

An intentional transfer of property made from the generosity of the transferor is known as a gift. The person who makes a gift is known as the donor. The person who receives a gift is known as the donee.

There are three basic time periods during which a person can make a gift. First, a person can make a gift during life. Second, a person can make a gift at the moment of death (by a transfer conditioned on death). Third, a person can make a gift by will, after death.

This article discusses some aspects of gifts made during life or at the moment of death.

Some Reasons For Making Gifts During Life
There are many reasons for making gifts during life or at the moment of death, rather than by will, after death.

A person may make a gift during life, rather than by will, after death, in order to personally receive the recognition associated with giving the gift. The recognition may be private, where only a few people know about the gift, or the recognition may be public, as where a building is named after the donor.

College alumni often give money and other property to the college or school they attended. Athletic facilities, buildings, quads, and so on may be named after a major donor. Brown University, for example, was named after Nicholas Brown, because during a fund-raising drive during the early 19th century, he gave the largest gift to the college that now bears his name. If a person wants to personally receive the recognition associated with giving a gift, the person has to give the gift during life.

A clever person may make a gift during life, rather than by will, after death, in order to observe the demeanor of the donee after receiving the gift. After giving the gift, the clever donor will watch carefully to see if the donee is grateful, thankful, and able to manage the gift, or if the donee is ungrateful, resentful, and unable to manage the gift. The clever donor will give a small gift during life, and from that small gift determine if the donee deserves a substantial gift, if any, after the donor’s death.

Finally, a person may make a gift during life or at the moment of death, rather than by will, after death, because the person knows that testamentary capacity is not required. A person may know that his or her testamentary capacity–knowledge of making a will, knowledge of one’s property, and ability to interrelate those factors–is going to be challenged, and that any will he or she makes is going to be contested. Such a person is often well-advised to give gifts of most of his or her property during life. It is more difficult to second-guess a person’s actions during life, when the person can defend himself or herself, than it is to second-guess the person’s actions after the person’s death.

The Natural Objects of One’s Bounty – I

The phrase “the natural objects of one’s bounty” means the closest surviving members of one’s family. It usually describes those to whom property of a dead person will go if the dead person did not make and leave a will. One advantage of making and leaving a will is that you can specify to whom you want your property to go after you die. Whether or not you make and leave will, it is useful to know the traditional names for the various members of one’s family.
This article is the first part of a three-part series describing the traditional names for the various members of one’s family.

Ancestors and Descendants
Traditionally, a male or female human being has a female mother and a male father. The mother and the father are each a parent of their child. Each child has two natural parents. A parent can have more than one child. Together, they are known as the parent’s children.

After a female child becomes an adult, she may become a mother. After a male child becomes an adult, he may become a father. For centuries, these patterns have repeated such that every human being has a line of parents and their parents before them. One’s parents and their parents are known as one’s ancestors or ascendants. Similarly, if a human being has a child or children, the human being may have a line of children and their children. One’s children and their children are known as one’s descendants.

Ancestors are described in terms of parent relationship. A grandparent is a parent of one’s parent. A great-grandparent is a parent of one’s grandparent, a great-great-grandparent (or double-great-grandparent) is a parent of one’s great-grandparent, and so on.

Descendants are described in terms of child relationship. A grandchild is a child of one’s child. A great-grandchild is a child of one’s grandchild, a great-great-grandchild (or double-great-grandchild) is a child of one’s great-grandchild, and so on.

Issue
Children are sometimes described as issue. Issue is one’s child or children, and sometimes one’s child or children and their children. The phrases “died without issue” and “failure of issue” are sometimes used to describe when one dies without having a child.

Lineal Relatives and Collateral Relatives.
Because one’s parents and their parents, and one’s child or children and their children, are related in a direct line of descent, they are known as one’s lineal relatives. A line of descent is all who have descended one from the other from a common ancestor, arranged in order of birth. Because parents can have more than one child, there can be different but related lines of descent. Children can be related through a common ancestor to persons in another line of descent. Collateral relatives are persons of common ancestry, but not in a common line of descent.

Trust Modification and Termination

Modification
A court will modify a trust where the trust’s leading purpose is frustrated by a specific directive made by the trustor. In such instances, the directive will be struck in order to accomplish the trustor’s primary intention.

When a trustor provides no power to invade the principal and the income generated by the trust is insufficient to support the beneficiary, a court may allow a distribution of income. Such distribution is allowed only if the beneficiary’s support or education is not sufficiently provided for and if the trust’s purpose cannot be attained without the distribution.

Termination
A trust ends automatically at the end of the time specified in the document that created it. If a trustor has reserved the power to revoke a living trust, he may do so at any time. If a living trust is not revocable, the trustor and all the beneficiaries have to consent to revocation. If any beneficiary is a minor or is incompetent, the trust cannot be revoked because minors and incompetents cannot, by law, give consent. Any revocation of a living trust must be in writing and signed, acknowledged, or witnessed in the same manner as was required to create the trust. Notice of the revocation should be delivered to the trustee in a reasonable time, but failure to deliver such notice does not affect the validity of the revocation.

Even if all the beneficiaries consent, a testamentary trust cannot be terminated if the termination would be in contrast to the purposes of the trustor. In those jurisdictions that automatically give limited spendthrift protection to all income interests, courts cannot terminate a testamentary trust upon application by the beneficiaries because to do so would frustrate the primary purpose of giving spendthrift protection to the beneficiaries. Testamentary trusts in which the beneficiaries are allowed to transfer their interest may be ended by them if no other material purpose of the trustor is to be served.