Al & Lore: A Story of Practical Estate Planning

Al & Lore a story of practical estate planning.

In December 2011, Al and his niece Lore undertook a sincere gesture of love and practical estate planning. Al is widowed with no children of his own, and he and his niece, Lore, have had a father-daughter bond since her birth.

Lore’s mother and biological father are both deceased, and Al wishes to honor her as his estate beneficiary. By Al adopting her under New Jersey’s Adult Adoption Statute, Lore will not be subject to inheritance tax of 15% as a Class “D” beneficiary. Rather, she is now a Class “A” beneficiary, exempt from inheritance tax, and her bond with Al as her true father figure is now solidified. On the day of the adoption, all the other cases on the docket were adoptions of children. Loud applause and cheers continuously came from the courtroom. As Al and Lore’s case was called, the judge joked and asked if she would have to give Lore a coloring book to get through the proceedings.

Everyone giggled, and Stacey Pilato replied that it would be nice, however, if she had a lollipop to give Lore at the end of the proceeding. The adoption was heard and very emotionally received. After Ms. Pilato handed the judgment drafts to the bailiff, she turned around to find Lore smiling and laughing with a gigantic chocolate lollipop, courtesy of the judge!

Al passed away in 2014, joining his late wife. His estate has been administered and the tax savings created by the adult adoption were significant. We were honored to know Al and participate in his loving gesture for Lore.

New Jersey’s Adult Adoption statute permits the adoption of one adult by another if, among other requirements, the elder is at least 10 years older and the adoptee requests the adoption. Upon entry of the judgment of adoption, unlike adoption of a minor, the adopted adult is not required to change his or her birth certificate and does not lose the right to inherit from his or her own biological family. But rather, the adoptee is inserted into the adopting parent’s lineage. Stacey has participated in several adult adoptions, most for the purpose of removing the inheritance tax burden of an intended beneficiary. She has also applied the statute in one unique matter, for the purpose of creating standing as a grandparent in the court for an elder who fulfills a hands-on grandparent role to the adoptee’s children. The judgment of adoption can serve to strengthen the adoptee’s custodial rights to prevent the children’s other parent from removing the children from an established family unit where the children’s best interests are met due to the involvement of the grandparent.

The most famous embattled estate involving adult adoption in New Jersey was that of tobacco heiress Doris Duke, who, in her mid-70s, adopted a 35-year old woman whom she believed was the reincarnation of her only child who died at birth. Duke disinherited her adopted child approximately six years later and attempted to negate the adoptee’s right to benefit from trusts Duke’s father established. Duke’s personal estate was for the most part left to charity. Of course, the disinherited adoptee sued. The estate, worth more than one billion dollars, ultimately settled the matter with the disinherited adoptee for $65 million.

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Mom took a fall and broke her hip. Now what do we do?

The Importance of Having a Comprehensive Financial Power of Attorney and Advance Directive for Healthcare in Place to Avoid the Necessity of a Guardianship Proceeding.

Many attorneys are familiar with this phone call from a client or a friend: Mom fell and broke a hip. Oh, and by the way, she was just diagnosed with the early stages of dementia. After surgery, your client was asked by the hospital social worker who mom’s Healthcare Agent is because someone has to provide a list of three rehabilitation facilities where mom will undergo rehabilitation, . . . now what??  Mom’s bouts of confusion since the fall have increased in frequency, and medical staff is beginning to question her mental capacity to make her own decisions. Navigating the elder care system and the limits of your ability to her decisions in this fragile state can be a confusing and uncertain time for both of you.

The estate and elder practitioner’s first question is: does Mom have a comprehensive General Durable Power of Attorney (“GDPOA”) and an Advance Directive for Healthcare? (commonly known as a “Living Will”)? Have the doctors determined her to be mentally incapable of making her own medical decisions? If the answer to both of these questions is “No,” time is of the essence to prepare these essential documents and visit mom to determine her ability to understand what a GDPOA and Advance Directive for Healthcare is, and who she wishes, and trusts, to handle her medical and financial affairs in the event she loses the ability to manage them herself. Without capacity, mom won’t be able to execute these documents and the family will need to resort to the court to be granted permission to handle mom’s affairs. The #1 reason we should be concerned about ourselves, our loved ones, our clients and our friends having these documents in place is, no offense to our brethren on the bench, to avoid a guardianship proceeding. In general, a guardianship proceeding, pursuant to N.J.S.A. 3B:12-24 et seq., is filed by summary proceeding with an OTSC and Verified Complaint asking the court to do two things: 1) Declare mom is incapacitated to govern herself or manage her affairs, either medically or financially or both; and 2) Appoint a general guardian to exercise all rights and powers of the incapacitated.  In critical situations or where imminent harm may occur, there are emergent guardianships which take a faster track to appoint a temporary guardian, but the underlying action must still proceed, and the system can be worrisome for those who have never had experience with the court system before.

It is possible for a layperson to file a guardianship proceeding on their own, but for the most part, the attorney is consulted for a fee. Two doctors are consulted to prepare Certifications of Incapacity. Most physicians charge a nominal fee to prepare the Certification, and will require additional fees if they are actually called to testify. The court appoints an attorney for mom – the alleged incapacitated, who is also entitled to a fee. Even though your client may believe mom is definitely in need of a guardian, mom has the right to due process and to object in the event she wishes either to not have a guardian, or not have your client appointed as her guardian. Then there are the family members. Everyone who has an interest in mom’s estate must be given notice and the right to object, and possibly, contest who is going to be appointed as the guardian. Now the fees could really escalate if litigation ensues.

Many people are under the false impression that simply because you are a spouse or an adult child that you have the right to obtain medical information, make decisions and handle mom’s affairs. That is not the case. In order to obtain medical information, pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), 42 USC 1320d and 45 CFR 160-164, even a spouse must have been given authority, in writing, to obtain the information. “Why?” you ask . . . well, not to play “devil’s advocate,” but our matrimonial bar can certainly attest that not all married couples are content to allow their spouse to have their medical information, let alone make medical decisions for them. I like to use the hypothetical tale of the married man who’s been in a car accident, with his mistress of a generation younger. Both are undergoing emergency room surgery, and the children call mom to inform her. They’ve been contacted because the EMTs found a battered emergency contact card in his wallet that listed his three children. She arrives at the hospital and the doctor comes out of the examination room and asks who the man’s wife is. She volunteers that she is married to the patient. The unknowing doctor says, “Well, madame, we’ve got to make a decision here. He’s under anesthesia and can’t consent to surgery. Either we take the spleen or the gall bladder. Something’s got to be removed or he will surely die. Which do you consent to? The wife says, “Why, take the spleen, of course!” The surgery is a success. The man awakes in recovery and asks, “What happened?” The doctor tells him he was in a bad car accident that resulted in abdominal injury that required the removal of either his spleen or his gall bladder. The man asks, “You took my gall bladder, right doc? Less complications down the road, right?” The doctor responds, “Actually, your wife consented to us removing your spleen.” The man exclaims, “My wife?!” “I haven’t spoken to that woman in ten years!!! I’m going to sue your pants off, doc!” Now, that’s not the real history of the statute . . . but you get the picture of the importance of exactly why we have the right to select our own Healthcare Representative, don’t you?!

The medical profession is charged under HIPAA to protect all individuals’ rights to privacy. You may notice that every time you visit a new physician you are provided with a form of HIPAA notice, and a release for you to set forth whom you wish to have your medical information. The New Jersey Advance Directive for Health Care Act, set forth at N.J.S.A. 26:2H-53 et seq., gives every adult the right to sign (or direct another to sign at his or her direction) an Advance Healthcare Directive before two witnesses or a notary or attorney at law. Prior to every in- or outpatient procedure, you will be asked if you have an Advance Healthcare Directive. If you don’t, you will be provided with a form to fill out. But beware, that form is only valid during your treatment at that particular facility. The moment you step out the door, it becomes invalid. A comprehensive document prepared by an estate and elder attorney will provide you with much more certainty; it is valid until you revoke it, or is invalidated by a court of law for a reason.

On the financial front, do you know if mom has a supplemental health insurance policy, or “gap coverage,” to pick up where Medicare will leave off after twenty days of in-patient treatment? Does she have a long term care insurance policy that you will need to make a claim upon if it’s not possible for her to remain independent? Is she the widow of a veteran who may be eligible for aide and attendance benefits? Does she have assets that may be eligible for protection from nursing home claims or Medicaid estate recovery? If you don’t know the answers, you’ll need a comprehensive General Durable Power of Attorney to find out and manage the options – not the two-page form you can purchase at an office supply store, but a tailored form to mom’s particular circumstances and wishes pursuant to N.J.S.A. 46:2B-8.1. Does mom wish to continue a gifting plan for her grandchildren if she becomes mentally incapacitated? Will mom require a Medicaid waiver application upon her spending down her assets at the assisted living? What if mom’s required to file a tax return, or you wish to challenge an Explanation of Benefits statement? All of these powers must be set forth in a GDPOA. Without the GDPOA, or an incomplete or incorrect GDPOA, mom’s loved ones will need to resort to the court to gain authority as her Guardian.

Spending some quality time with your clients to tailor their documents, and explaining the enormous cost savings by investing in you a little to prepare the GDPOA and Advance Healthcare Directive documents while mom still has the capacity to do so (and dad, and your siblings, and you, and your 18 year-olds and up for that matter!) will give your clients peace of mind that when the crisis strikes, they will be able to weather the storm.

Article by: Stacey L. Pilato, Co-chair of the Elder, Estates and Trusts Practice Committee of the Somerset County Bar Association 2013-2014

Published in The Clarion, Vol. 5, Issue 4, March 2014

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Ripped From the Headlines: The Last Will & Testament of the Sopranos’ James Gandolfini

Ripped From the Headlines: The Last Will & Testament of the Sopranos’ James GandolfiniRipped From the Headlines: The Last Will & Testament of the Sopranos’ James Gandolfini

James Gandolfini, a.k.a. “Tony Soprano,” died suddenly at the age of 51 in June in Rome, Italy. The world collectively dropped its jaw in shock and sadness. When his Last Will & Testament, signed December 19, 2012, was revealed publicly in 2013, the estate planning world dropped its jaw in shock and sadness. The precise value of the Sopranos’ patriarch and mega-star has been speculated to be in excess of $70 million, and as minimal as set forth on the official probate application: between $1 million and $10 million. He may have an aggregate estate of the more astronomical figure, undisclosable to the public, which includes life insurance, retirement assets, trust assets, and other forms of assets not governed by a Last Will & Testament, but the probate estate will be liable for significant estate taxes and is already predicted to be headed to court over what the will does not provide. The Will infers he provided for his surviving wife and at least his 14-year-old son (born of his prior marriage) with life insurance proceeds in trust, but does not mention any such non-probate provision for his infant daughter, born two months before he signed his will. Instead, he leaves her 20% of his residuary estate, after $1.6 million is doled out in specific cash bequests to his sisters, nieces and nephew, godson and friends, and estate taxes, administration fees and debts are paid. Amongst other things, the Will makes other specific provision for his son to have an option to purchase his New York condo and parking space, and for his two children to receive his home in Italy.

For those “in the know” on estate and tax laws, Mr. Gandolfini’s Last Will & Testament makes our skin crawl. We are all screaming, “Why didn’t he have a revocable trust to protect his and his beneficiaries’ privacy?! Why isn’t there a “QTIP” trust to take advantage of the marital deduction and control the distribution of assets after the death of his surviving wife?! Didn’t he know his probate estate could be subject to up to 55% in collective state and federal estate taxes?! Why did he deal with the Italy property in the Will instead of with an Italian planning instrument – it’s governed by Italian law, not American! And, WHY ON EARTH would he let his daughter get her hands on the LUMP SUM of her trust when she turns 21?!” And after our very vocal disapproval of a host of other danger zones in the Will, we pause to acknowledge that at least he set forth guardianship for his minor children in the event the unthinkable were to happen to their mothers. Even if, hypothetically speaking, the residue is eaten away by estate taxes and the specific bequests, and, say, his daughter is left with $100,000, a number many in society are more familiar with, the child is less than a year old and the funds will be (hopefully) growing for the next 20+ years. Turned over to her back pocket when she’s 21 could very well subject her to creditors, “predators,” a failed young marriage, and the most obvious, spendthrifting.

Just about every maxim of sound estate planning for a very wealthy, twice-married father of two broods with foreign assets is ignored here. But is this really a circumstance of poor planning? Or is it the confirmation of “haste makes waste.” It is rumored that Gandolfini was getting on a plane. As the father of a newborn infant (who was two months old at the time of the Will), maybe he found the urgency to “get something on paper,” and deal with the details on tax implications later. Maybe he intended on executing a Will or trust in Italy, where he passed away six months later, to govern his home there. Maybe he utilized his lifetime gift exemption of $5.12 million just before the close of the year and he felt it unnecessary to do any other tax planning. Maybe he intended on coming home later to spend the time it takes to set up a revocable living trust transferring all of his probate assets thereto, a process that could be time-consuming if there are many assets and accounts. Maybe he just didn’t care about the tax and spendthrifting issues because the bulk of his estate will remain intact with trust and business planning. The lawyer who drafted the will is named as one of the three Executors. When lodged with the obvious questions, or rather, strong criticisms, about the soundness of the probate estate plan, his summarized response has been that “everyone is well provided for.”

Even if your clients’ estates don’t reach the $10 million or $70 million mark, in New Jersey, at least, prudent planning takes into consideration that your clients’ estates will owe taxes if in excess of $675,000. And unlike New York, New Jersey also has an inheritance tax that applies to certain bequests to non-spousal and non-lineal beneficiaries. More often than not, the inheritance tax exceeds the estate tax. Even more prevalent than wealth are second marriages and children from prior marriages. How to provide (or not provide) fairly for everyone is often a difficult decision. Who will control the family business? Who will receive the Jersey shore house? Are special needs grandchildren provided for with a supplemental needs trust? Are beneficiary designations, “POD” and “TOD” assets, powers of appointment and jointly-held assets down to the bank security deposit box all disclosed by the client? What can be learned from “In the Matter of the Estate of James Gandolfini” may be set forth in law school textbooks in the future, in the same vein as the J. Seward Johnson, Doris Duke and Imelda Marcos estates have shaped the thought process that resulted from planning pitfalls. Since the probate of this television and screen legend’s Will, the estate planning bar is thinking “how can I do it better?” And for that, a lesson has already been learned.

The Last Will & Testament of James Gandolfini can be viewed at:

http://www.scribd.com/doc/151472900/James-Gandolfini-Will

Article by: Stacey L. Pilato, Co-chair of the Elder, Estates and Trusts Practice Committee of the Somerset County Bar Association 2013-2014
Published in The Clarion, Vol. 5, Issue 1, September 2013

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Seeking the repeal of moot estate statutes

STATE OF NEW JERSEY 215th LEGISLATUREWhile representing the administrator of an intestate estate (parent passed away without a Last Will & Testament), I discovered a provision of the law governing the administration of intestate estates is moot, but the county Surrogate where the administration was granted required compliance with the moot statute. I contacted Senator Michael J. Doherty, NJ Dist. 23, and assisted with the drafting of S2594, repealing the moot section. It is currently in the Senate Judiciary Committee.

Click the following link to read SENATE Draft, No. 2594  STATE OF NEW JERSEY  215th LEGISLATURE  http://www.njleg.state.nj.us/2012/Bills/S3000/2594_I1.HTM

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

What’s in a name? Sometimes, everything.

Mike Van Riper a formal Change of Name proceedingA professional who held himself out as Mike, Myron is our estate planning client was often given legal documents in connection with his occupation and instructed to sign his “legal name.” Yet the pre-printed name on the document was “Michael,” because his common nickname is “Mike.” After years of explaining and multitudes of wasted paper to account for the error, he decided to make it official. Joe prepared the family’s estate plan, and Stacey filed a name change application with the court. Upon receiving his Final Judgment of Change of Name, Mike’s daughter was so happy for her dad, who is also a New York Mets fan, that she baked him a cake to say goodbye to “Myron,” for good!

In our practice we find the circumstances requiring a formal Change of Name proceeding are recurring more and more often, most often prompted at an initial consultation when we ask our clients to set forth their “legal name” on their Confidential Estate Planning Questionnaire. With the passage of The Patriot Act and the NJ MVC’s “6 Points of Identification,” individuals are finding it more and more difficult to prove their identity if there has been a break in their history of proper name from birth to the present. A mailman who had one too many families of the same name on a mail route decided to drop the “s” off the last name of one family. When a daughter of that family grew up, married and divorced after the birth of a child, no longer did her birth certificate match any of her vital documents. Her marriage license, motor vehicle license, social security card, and passport all bore different names. The only solution to provide permanency was to file an action and obtain a judgment. There were so many different names on her vitals the judge actually required a court appearance for her to testify that she was not intentionally evading creditors. More often than not, a court appearance is not required. In another instance, a nurse incorrectly completed a birth certificate, but the family utilized the name they gave intended to give their daughter, which differed from mom’s name by one letter. This did not make things any less confusing! At driver license renewal time, she was no longer able to properly prove her identity. In another instance, an immigrant who was not given a middle name by birth but used one she liked throughout her life was not permitted residence at an assisted living without obtaining a New Jersey Identification Card. She could not obtain one because she could not prove the source of the middle name she made up. Stacey has successfully represented her clients in all of the above circumstances, bringing a relief and contentment to the client that they will no longer have to go to the ends of the earth to prove who they are.

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

Protecting wealth in a divorce proceeding: New Jersey Supreme Court validates irrevocable trust drafted by Joseph A. Lambariello, Esq.

Business Litigation attorney Warren NJJoseph A. Lambariello, Esq./LL.M drafted a discretionary support trust for asset protection and estate tax reduction for Wendy Tannen’s parents. Wendy’s parents were Joe’s estate planning clients. They transferred $1 million to the trust to utilize their lifetime gift exemption that was available at the time. The parents and Wendy were co-trustees. She did not have the right, as the lifetime beneficiary, to compel payments of income or principal from the trust. Her parents, as the independent co-trustees, had the discretion to pay her income or principal for her maintenance, education, support and health (“MESH” standard), after taking into consideration other assets that are available to her at the time. The trust paid for a multitude of things during Wendy’s 18 year marriage – including the nanny, real estate taxes, and an addition to her marital home. When the divorce happened, Wendy’s estranged husband requested the court to impute income upon her when calculating his alimony obligation because she is a proverbial “trust fund baby.” The New Jersey Appellate Division found the trust is impenetrable and cannot be forced to make income payments to Wendy that would decrease her husband’s alimony obligation. The court concluded Wendy does not have a present ownership interest because her parents can refuse her request for payment from the trust at any time. See Tannen v. Tannen, 416 N.J. Super. 248, 3 A.3d 1229 (N.J. Super., 2010). The New Jersey Supreme Court affirmed the Appellate Division without a written opinion.

According to Mr. Lambariello:

“We take our client’s desires for asset protection very seriously. We structure trusts to provide protection for beneficiaries who may encounter life circumstances that would expose a gift or inheritance to risk by third party invaders that could have otherwise been avoided, especially in a divorce context. We take steps to fix trusts that do not comply with the specific discretionary support provisions the court upheld. We so very often see trusts drafted by others that are defective and will not accomplish the client’s intent of keeping their assets preserved for their beneficiaries, removing the possibility of loss to their beneficiaries’ creditors, predators, in-laws and those who may become “out-laws,” as we saw in Tannen v. Tannen.

When a client comes to Lambariello & Pilato, LLC with a defective trust, it may be possible to correct it by establishing a new trust and doing a trustee-to-trustee transfer if the terms of the new trust substantially conform to the terms of the old trust. The biggest mistake we see in trust instruments purported to be asset protection vehicles is a provision setting forth that assets are “not subject to the beneficiaries’ creditors or judgments,” but within the same trust, another provision sets forth that the beneficiary has the right to request or demand payments from the trust. That is an avoidable error, and can be presumed by any attorney with complex trust knowledge that the drafter confused an “irrevocable” trust for asset protection with a “revocable” trust for asset management, which are two entirely different purposes. Too often, software packages utilized to construct planning documents like wills and trusts simply compute data and are not proof-read, or if they are, may not be understood by the drafter.  We pride ourselves in taking the time to understand clearly the client’s goals, and we engage in a holistic thought process to achieve their goals while complying with tax regulations and statutory requirements when we draft our documents.

Click here to read the New Jersey Appellate Division’s published opinion.

Click here to read the New Jersey Supreme Court decision affirming the Appellate Division.

Disclaimer:
The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Lambariello & Pilato LLC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.