I hear a lot of people talk about wanting to avoid probate, and they generally have different reasons for wanting to do so. Some of the reasons that I hear are:
- Concerns about the cost of probate, both filing fees and attorney’s fees
- Concerns about the time that it will take to distribute the assets
- Concerns about the public nature of probate
- Leaving different amounts to different beneficiaries
The most common way to avoid probate is through a trust. That is something that we can, and have prepared. And trusts serve many valuable purposes. However, there are other ways to avoid probate, at least for many assets.
- Transfer on Death provisions – Most brokerage houses and banks will allow you to designate a beneficiary to take over the account on your death. I sat down with a financial planner today who told me that this is probate-avoidance method is underused, and misunderstood.
- Joint accounts – While there are some risks to this (such as potential attachment from creditors of either account holder), if you want the beneficiary to enjoy the benefits of the money before death as well as after, you can name a joint account holder. As long as the account is created as joint, “with right of survivorship,” then on death, the beneficiary will get it.
- Named Beneficiaries – Some accounts, and most insurance policies, will allow you to name a beneficiary of the account. This works almost identically to a transfer on death designation, but will sometimes be used instead.
Both Transfer on Death and Named Beneficiary accounts can be changed at any time, joint accounts are permanent.
One other way that people ask us about is transferring the house as a gift while the resident is still alive. While there may be reasons to do it, in general, transferring property as a gift during life can be a bad idea for tax reasons. When you give a house (or anything else) as a gift, the recipient is credited with the house being worth the amount at the time that you bought it – just like you are. So when he tries to sell it, he will pay income tax on more profits. On the other hand, if he receives it at or after death, then the tax value of the house is increased to the value on the date of death.
While probate is not as difficult as it once was, and avoidance is not necessary in nearly as many cases now as it once was, when that is a goal, there are a few ways to do so. A trusted adviser can help you figure out what is best for you.
Most employers are aware that the Internal Revenue and the Departments of Labor (both federal and New York State) are reviewing companies and their determinations of whether individuals are Independent Contractors or Employees. Employers must also be aware that the Departments of Labor are also vigorously investigating wage/hour complaints, for failure to properly pay employees.
A “wage/hour” complaint can be two-fold. It can be for failure to pay for the hours worked and/or the failure to pay overtime. These investigations are generally started by a complaint by an employee (or ex-employee). An employee must be paid for all of the hours that he or she works. Issues can arise for “non work” hours, such as if the employee is required to be on call or getting ready for or cleaning up from work.
The general rule is that all hourly employees must be paid time and one-half for all hours worked over 40 in a pay week. The overtime issue generally arises when employees are paid a flat salary. This is fine for executive and professionals, but the issue lies with administrative employees. First, the employee must have a salary of at least $455 per week. This applies to all employees under the flat salary exemption. In addition “the employee’s primary duty (must) include the exercise of discretion and independent judgment with respect to matters of significance”. If the wage and “discretion and independent judgment” tests are not met, then the employee must receive overtime for hours worked over 40 during a pay period. You must review if the employee is a true “salaried” employee. If the employee is “docked” for hours or days not worked, they may not be a true flat salary employee. There are a number of other factors that need to be considered for employees to be exempted from the overtime requirement for the “salaried employee” classification.
The employee has the right to sue the employer directly and if the employee is awarded any money (even $1) for unpaid wages or overtime, the employer is responsible for paying the employee’s legal fees. This would be in addition to any penalties assessed by the Department of Labor.
Businesses should create a “policy” and procedures for its calculation of wages and overtime. In addition, it should review all employees to whom overtime is not paid to make sure that that determination is accurate.
I read an article from the Village Voice yesterday, that talked about a judge taking a stand against two trustees, an attorney and a bank, who were supposed to be serving the needs of an autistic child. Instead, they were allowing the trust to sit dormant, all the while, collecting fees. In fact, the attorney who had been hired as trustee by the child’s now-dead mother admitted that he had not even visited the child since the mother’s death, and only rarely before.
While some trusts are subject to judicial oversight, others are not. Those trusts can allow unscrupulous trustees to make money off of the investments and the size of the trust, without doing any work or ensuring that the money set aside is actually used for its intended purpose. It is important, therefore, to make sure that you are hiring the right trustee to handle things.
People creating trusts actually can appoint multiple trustees: one, such as a bank, might handle the money-management while an individual handles the personal care aspects of the trust, and makes sure that the small amounts of money that pay for quality-of-life purchases (new clothes, or a pizza) are taken care of. Interviewing potential trustees is also an important part of the process. Because these are people who will have control of your money and will be responsible for making sure that it goes to any beneficiaries that you name, you want to get to know them and make sure that they will follow your wishes and not just line their own pockets.
I have worked with trustees before and most are good people with good intentions. But a few bad apples can spoil the bunch and you want to work now to keep from finding those few bad apples. Once the trust is in full effect, it may be too late to do anything.
A lot of the news recently has focused on the announcement by the Obama Administration that one prong of the Affordable Care Act, the requirement that medium and large businesses provide coverage for all full-time employees (the employer mandate), which was set to take effect on January 1, 2014, has been postponed by a year, until January 1, 2015. Beyond all of the political punditry, this decision is good for businesses that are still trying to figure out how to classify employees, what types of insurance plans to offer, and how to handle the law.
However, so far, the ACA’s provisions requiring individuals to carry insurance have not been postponed – the requirement, still set to take effect on January 1, 2014, has not been postponed. This set of provisions, otherwise known as the individual mandate, will affect companies just as much. Companies whose policies do not comply with the ACA will be setting their employees up to incur penalties, or be forced to switch from employer-provided insurance to private-pay insurance.
Employers who wish to continue providing insurance for employees should plan to offer ACA-compliant policies as of their next renewal cycle, regardless of the status of the employer mandate. This will ensure that employees are able to stay on the policy and not have to worry about penalties.
It is also worth noting that with this postponement, there has been a call for the administration to delay the individual mandate as well. As of now, that delay has not been implemented. The postponement also does not change the requirement that by October 1, 2013, employers provide all employees with a Notice of Coverage Options. We will post on this form more in the coming months.
I hope that everyone had a safe and enjoyable holiday weekend, with a safe amount of eating and drinking and physical activity (or lack thereof) in the hot weather. It was also a time to look at the events of the day and realize how short life can be, no matter what age or physical condition we are in. The deaths of 19 firefighters in Arizona, all young, in excellent physical condition and many with young families, and the plane crash in San Francisco, which could have had a much worse outcome, make us realize that even though the world (and U.S. in particular) is a very safe place, situations beyond our control can take us away from our loved ones in a blink of an eye.
For years I have been standing on my “soap box” preaching the need for everyone to have a Last Will and Testament and related documents. It is not a question of wealth or assets, for parents with minor children need these documents every bit as much (if not more) as a 90 year old in frail health. The Last Will and Testament for parents with minor children should include provisions for Guardians to take care of the children and Trustees to handle their finances, if both parents pass away. The Last Will and Testament for the 90 year old is more concerned with making sure his or her assets are distributed as they want.
Properly prepared documents will also provide the documentation needed if you are injured and unable to make your own decisions (medical and/or financial). An Advanced Medical Directive will appoint someone to make medical decisions is you are incapable and advise that individual your wishes as to being kept alive or dying with dignity. The Power of Attorney provides a means for your financial affairs to be carried out, even if you are not able to act. Even married couples need this, as a spouse has no automatic right to sign documents for the other spouse. The documents should also include information to assist your loved ones in locating your assets and who to contact for information and assistance. All of these documents are important and should be reviewed on a regular basis.
I know that summertime is not the time when you want to think about this and to review what documents you currently have (or don’t have); but let’s face it, there is no time when you will want to think about this. But expending a small amount of effort now you can alleviate a large amount of stress and anxiety at a time when there will be enough stress and anxiety in your loved ones lives.
From all of us at Meyer and Associates, have a happy and safe Fourth of July weekend.
In the June Issue of the Suffolk Lawyer, an article that I wrote on digital assets was published. The article dealt with the fate of digital assets, including ITunes libraries, ebooks, and email. A link to the article is below.
The article, written in April, covers some approaches to handling these assets. However, after it was written, but before it was published, there were several developments worth noting. A bill was introduced in the New York State Senate and Assembly to grant control of digital assets to fiduciaries (agents under a Power of Attorney, or executors under a Last Will and Testament). The bill was introduced late in the session and never got out of committee. Hopefully it will be taken up again.
The second development was a loss in court for Yahoo. Yahoo takes the position that when you open an account with them, it belongs to Yahoo, and you have a right to use it. They state that upon your death, they have the right to delete your entire e-mail inbox. Because so much is done via e-mail, this is a problem. In Massachusetts, the Terms of Service were challenged; in particular, the choice of law and venue provision – Yahoo stated that all cases against it must be filed in California. The court found that, because this was not agreed to by the users (in fact, it was not even communicated to the users of the service, it was a change made without notice) it was unenforceable and the Massachusetts Probate Court had jurisdiction over the matter. Furthermore, because of the wording of the Terms of Service, the court found that the co-Executors of the estate were not bound by it.
While this case is not binding in any state other than Massachusetts, it is important to keep in mind. Some service providers will fight turning your information over after you are gone. Some service providers will resist turning it over to your next of kin, or to fiduciaries of your estate. It is important that you discuss your digital accounts and assets with your estate planning attorney – in order to ensure that you have language that will help your fiduciaries take control over these assets if need be.
Justin SCBA June Article