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Transfers on Death

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Transfers on Death TRANSFERS ON DEATH NYSBA CLE December 4, 2015 Introduction to Estate Planning Cristine Cioffi, Esq. Wills as devices to transfer assets on death • See materials by Michael O’Connor, Esq. and Carl Baker, Esq. • See EPTL Art. 3 for substantive law of Wills • Consider a Will for each client, even if it is a “safety net” document • Wills are formal documents, proscribed by statute, but should be personalized for each client Elements of a ‘simple Will’ 1. Identifies the Testator by name and geographic location 2. Directs payment of debts, funeral & administration expenses, charitable pledges; may direct source of payments 3. Correct singular/plural or gender mistakes 4. Consider a simultaneous death clause 5. Perhaps a 30-day survivorship period for beneficiaries Elements, continued 6. Consider use of a ‘family statement’ to identify distributees, to explain exclusion of family member, to state the age of a beneficiary 7. A tax clause is essential. The default provision for payment of tax is “apportionment” - EPTL§2-1.8 8. Provisions for personal property distribution 9. Other pre-residuary gifts Elements, continued 10. Optionals provisions may include: • Charitable bequests – pay attention to detail! • Exercise/non-exercise of a power of appointment held by your client • Granting of a power of appointment by your client to another person 11. Residuary clause – an ESSENTIAL provision. Pass residue outright or in trust, but either way use percentages that add to 100% Elements, continued 12. Should an IRA or qualified plan pass through a Will? Take care in drafting 13. Consider including a power in trust for minor or disabled adult beneficiaries 14. Appointment of fiduciaries: guardians for infants, executor, trustee – include successors 15. Consider lifting bonding requirement 16. Powers of the fiduciaries, governed by EPTL §11-1.1, but supplemented by Will Wills for Unusual Circumstances • Nuncupative Wills (oral) – EPTL §3-2.2 • Holographic Wills (handwritten), not executed per EPTL §3-2.1 Execution of Wills • Governed by EPTL §3-2.1 • Must be signed by Testator at the end • Handwritten correction, addition, deletion can be done at the time of execution but prior to signing; initialed by Testator and both witnesses • Signed in the presence of 2 witnesses • Testator must publish (declare) document as his Will • Witnesses must attest within 30 days Unusual Executions • Blind Testator: read Will aloud, in presence of 2 witnesses who have copy to follow • Testator who cannot physically sign, but who can make a mark: use mark in lieu of signature • Testator cannot sign or make a mark: Will can be signed “in the name of the testator, by another person in his presence and by his direction….”. EPTL §3-2.1(a)(1)(C) – signer cannot be a witness • In any of the above cases, reflect the variation in the attestation clause Practice Suggestions • Have another attorney do a second read • Always use an attorney to supervise execution • Draft defensively • Retain original Wills • Testator to initial each page of Will • Use a self-proving affidavit at time of execution • Avoid use of Codicils Revocable Living Trusts • A contract between Grantor (Settlor) and Trustee • Effective upon signature by one Trustee • Often called “Will substitutes” • Language can be amended, so long as Grantor retains capacity • Assets can move in and out of RLT during Grantor’s lifetime Elements of a RLT • Titling the trust • Identifying Grantor and Trustee (can be the same person) • Dating the RLT • Statement of the basic agreement, that Grantor has turned certain assets over to Trustee and Trustee has agreed to manage them Elements, continued • Statement that the RLT is revocable; without it, EPTL §7- 1.16 requires that it is irrevocable • Options: to identify family members, ages if relevant, correction of plural/gender mistakes • Distribution provisions during Grantor’s lifetime • Post-death distributions may mirror what is typically contained in a Will Elements, continued • Need successor trustee; consider whether bond will be required; no court appointment needed, but successor must sign the RLT to accept the terms stated therein • For trusts of long duration, may want a stated process for a Committee named by the Grantor to select a Trustee in event of vacancy; may give Trustee ability to name successor Elements, continued • Powers clause to expand on EPTL §11-1.1 • Ability of Trustee to account to a Court • Consider choice of laws – NY? “laws of the State where the Trust is sited”? • Provision stating that Trustee “accepts the Trust herein created” • Schedule A lists assets funded into Trust Execution of RLT • Governed by EPTL §7-1.17(a) – acknowledgement of each signature required, or Grantor and one Trustee to sign in the presence of two witnesses, who must also sign • EPTL §7-1.17(b) - Amendment or revocation of RLT must be in writing and acknowledged or witnessed per (a). Written notice of amendment or revocation must be sent to at least one other Trustee (if Grantor not sole Trustee) within a reasonable time Transfers to Trust • Asset-by-asset process • Real property done by deed to Trustee (useful way to administer out-of-state real property) • Stocks and bonds can be consolidated into a statement account if they are paper certificates, and transferred into RLT • Personal property assigned into RLT • IRAs and qualified retirement accounts can be beneficiary-designated into RLT – USE CAUTION! • Motor vehicles – cumbersome asset to place in RLT Tax implications • Grantor may transfer assets to RLT without gift tax implications • No change in tax basis, when Grantor transfers asset to RLT • Assets in RLT are includible in Grantor’s taxable estate at death, and receive step-up for purposes of calculating beneficiary’s basis • RLT offers no estate tax protection as an entity, but tax planning can be drafted into RLT (Disclaimer Trust, CST, QTIP Trust), as with Will Pour-Over Will • EPTL §3-3.7 allows a testamentary disposition into a RLT • Allows all assets owned by decedent to be administered under one entity (RLT) • Requires probate • Captures newly-discovered or newly-acquired assets and places them in RLT • May include alternative recitation in Pour-Over Will if RLT is revoked prior to death Words of Wisdom BE CAREFUL OUT THERE!.
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