The Journal of The nassau CounTy Bar assoCiaTion
www.nassaubar.org
February 2012
Barry C. Scheck to be Medallion Recipient
Follow us on facebook
By Dede S. Unger
OF NOTE
NCBA Member Benefit – I.D. Card Photo
Obtain your photo for court identification
cards at NCBA Tech Center. Cost $10.
February 28, 29 & March 1 • 9 a.m.-4 p.m.
EVENTS
WE CARE Children’s Holiday Party
Thurs., Feb. 23, 2012 at Domus
Hon. Elaine Jackson Stack
Moot Court Competition
Tues., March 20 – Preliminary Rounds
Wed., March 21– Finals at 7 p.m.
at Domus
WE CARE “Dressed to a Tea”
Thurs., March 22, 2012
5:30 p.m. at Domus
See insert
Barry C. Scheck will be honored as the
sixty-ninth recipient of the Association’s
Distinguished Service Medallion, to be presented at the One Hundred and Thirteenth
Annual Dinner Dance on Saturday, May
12, 2012. The Distinguished Service
Medallion is awarded to an individual,
either attorney or non-attorney, for service
which has enhanced the reputation and
dignity of the legal profession. Mr. Scheck,
co-founder of the Innocence Project, is
being recognized for the work he has done
advancing the use of forensic DNA evidence in criminal cases as well as pursuing
civil rights claims on behalf of victims.
A graduate of Yale University and the
Boalt Hall School of Law at U.C. Berkeley,
Mr. Scheck was admitted to practice in
1975. For the past 33 years he has been a
Professor of Law at Benjamin N. Cardozo
School of Law. Prior to that, he was a staff
innocenceproject.org.
attorney at New York City’s
The Annual Dinner Dance is the
Legal Aid Society. He is
crowning event of the “social calencurrently a partner in the
dar” of the Nassau County Bar
New York law firm of
Association, and this year will be
Neufeld, Scheck & Brustin,
held at the Long Island Marriott,
LLP, specializing in civil
Uniondale, New York, on Saturrights and constitutional
day, May 12, 2012. In addition to
litigation.
the Distinguished Service MedalIn 1992, Barry C. Scheck
lion, those of our members who
and his colleague, Peter
have been admitted to the Bar for
Neufeld, co-founded the
fifty, sixty and seventy years will
Innocence
Project,
an
be honored as well. Please join our
organization which utilizes
celebration. For more information
DNA evidence to clear the
or to offer congratulations or greetwrongly convicted. Through
Barry C. Scheck
ings in the Dinner Dance Journal,
their tireless work, nearly
contact Mindy SantaMaria or
300 individuals in the
United States have been exonerated due Stephanie Pagano at (516) 747-4070, or
email events@nassaubar.org.
to post-conviction DNA testing.
The nonprofit Innocence Project also
works to bring about reform in many areas Dede S. Unger is a Special Events Coordinator
of the criminal justice system. Learn more and Director of Membership at the Nassau
about the Innocence Project at www. County Bar Association.
McGrath Honored with NYS Bar’s
Top Award for Professionalism
Women’s History
Month
Fri., March 23, 2012
at 6 p.m.
Melville Marriott
Details to follow
Freedom of Information
vs. Individual Privacy
An Off-the-Record Discussion March 19
By Valerie Zurblis
Law Day
Tuesday Evening
May 1, 2012 at Domus
Details to follow
There is often a conflict between the courts, the bar, and the
press concerning information released to the public. Each has different agendas, goals, and ethical considerations. To better
understand these sometimes competing objectives, the NCBA
Community Relations and Public Education Committee and the
Nassau Academy of Law are sponsoring a unique symposium,
“Law and the Media: Freedom of Information vs. Individual
Privacy” on Monday, March 19, 2012, 6-8:30 p.m. This promises
to be a fascinating off-the-record discussion between judges,
attorneys and the press.
Hon. Anthony Marano, the Administrative Judge for the
courts in Nassau will open the symposium, and then attendees
See SYMPOSIUM, Page 6
113th Annual Dinner Dance
Sat., May 12, 2012
Long Island Marriott, Uniondale
Dinner Dance Journal Ads
See insert
WHAT’S INSIDE
FOCUS:
TRUSTS & ESTATES/ELDER LAW
Putting Money in a Roth IRA –
Why And How
Page 3
Conflict Resolution Alternatives Page 3
Quirks and Quagmires of the
NY Estate Tax
Vol. 61, No. 6
Page 3
From Greiff to Campbell and Berk –
The Judicial Evolution Of Spousal
Protection Under Estates Law Page 5
Veterans Benefit & Medicaid Planning
Page 7
Christopher T. McGrath is presented with the New York State Bar
Association’s top honor, the Award for Professionalism, by NYSBA
President Vincent Doyle at the NYSBA’s annual meeting in January.
(Photo by Jacques Cornell)
For more details see President’s Column, page 4.
Estate Tax Portability: Do We Still Need
Page 7
Credit Shelter Trusts?
Renunciations: A Second Opportunity at
Page 9
Aligning Your Estate Plan
New York Medicaid Estate Recovery –
Page 9
Are Your Assets Protected?
UPCOMING PUBLICATIONS COMMITTEE MEETINGS
Thurs., Feb. 9, 2012
l
Thurs., March 8, 2012 – 12:45 at Domus
The Lawyer Assistance Program provides confidential help to lawyers
and judges for alcoholism, drug abuse and mental health problems.
Call 1-888-408-6222. Calls are completely confidential.
2
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February 2012
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Nassau Lawyer
Antique Maps on Display at Domus
A gift to the Nassau County Bar Association courtesy of Brian M. Seltzer, Esq.
Please stop by the Lecture Room at Domus to view a piece of history.
!TTORNEY!DVERTISING
If You Value Your Reputation When
Referring Tax Certiorari Counsel
To Your Clients, Give Us A Call.
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Nassau Lawyer
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Trusts & Estates/Elder Law
Putting Money in a Roth IRA – Why and How
tributions (as there are at age 70½ in a
traditional IRA or Roth account in a
A Roth IRA is a savings vehicle that retirement plan), until the IRA owner
offers tax and financial planning advan- dies, allowing more time for tax-free
tages over a traditional IRA and other growth of funds;2
l Unlike a traditional IRA, direct conmeans of savings. The primary advantage for investing in a Roth IRA is that tributions can be made even after the
the money held in the Roth IRA may be IRA owner reaches age 70½;3
l Roth IRAs can be inherited, meaning
invested and grow tax-free, and purthat wealth can be transferred
suant to the following condiwithout going through probate
tions, may be withdrawn taxcourt;
free: (1) the IRA owner is at
l If
the Roth IRA owner
least age 59½, has died or has
dies, and his or her spouse is
become disabled; and, (2) the
the sole beneficiary, the
withdrawal is made after the
spouse can: (i) delay distribuclose of the five-tax-year peritions until the IRA owner
od beginning with the first tax
would have reached age 70½,
year for which a contribution
(ii) treat the Roth IRA as his
(direct, conversion or rollover,
or her own (so distribution
each of which is described
need not start, and tax-free
below) was made to the Roth
growth of funds can continue)
IRA (the “Tax-Free Condior (iii) combine the decedent’s
tions”).1 Most savings vehiStanley Baum
Roth IRA with the spouse’s
cles, including traditional
IRAs, do not couple tax-free growth of own, and treat the resulting single Roth
funds being held with a tax-free with- IRA as the spouse’s own (so, again, disdrawal. If a withdrawal is made from the tribution need not start);4
l Direct contributions (as opposed to
Roth IRA and one or both of Tax-Free
Conditions are not met, then (except as earnings) can always be withdrawn taxdiscussed below), the earnings included free and without penalty (they have
in the withdrawal are taxable to the already been taxed, in that they were not
recipient (including a beneficiary if the tax deductible, and the amounts withIRA owner has died), while the contribu- drawn from a Roth IRA come first from
tions included are not. The 10% penalty direct contributions);
l The IRA owner can recognize a loss
on early withdrawals under section 72(t)
of the Internal Revenue Code (the on his or her Roth IRA investments, so
“Code”) (the 10% Penalty”) would apply long as all funds in the Roth IRA have
to the taxable amount, unless an excep- been paid out, and the payments were
less than unrecovered basis (with basis
tion applies.
The other tax and financial planning generally equal to the aggregate amount
advantages of putting money in a Roth of direct contributions and gross income
IRA (as opposed to all or some of the recognized on conversions and rollovers);5
l Up to $10,000 can be withdrawn taxother retirement vehicles) include:
l There are no minimum required disfree to purchase a principal residence, so
Advantages of the Roth IRA
long as the IRA owner has not owned a
home for the preceding 24 months, and
condition (2) of the Tax-Free Conditions
is met;6 and
l The nontaxable amounts withdrawn
are not taken into account when determining if Social Security benefits are
taxable.7
Putting In Money
How can an individual put money into
the Roth IRA? There are three ways:
direct contribution, conversion of a traditional IRA (including a SIMPLE IRA
after amounts have been held for two
years and a SEP IRA), and rollover from
a retirement plan. Through the end of
2009, the Code had placed certain
restrictions on conversions and rollovers
to Roth IRAs (generally, the individual’s
modified adjusted gross income (“AGI”)
could not exceed $100,000, and if he/she
were married, a joint return was
required to be filed). Starting in 2010,
these restrictions no long apply, so anyone can do a conversion or rollover.
Direct Contribution
New Practice Opportunities for
Trust and Estate Practitioners
By Harriette M. Steinberg
The front page of the December 27,
2011 N.Y. Law Journal announced the
funding of a $3 million dollar medical
malpractice ‘early-settlement’ program
for New York courts. Private mediation
services as well as Court mandated
mediation programs in the commercial
and matrimonial divisions and the introduction of collaborative practice as the
newest conflict resolution process in the
matrimonial law area (as well as other
civil practice areas) confirm the conclusion that alternative forms of conflict
resolution are beginning to proliferate
and become a recognized part of contemporary legal services.
One may make a direct contribution
each year to a Roth IRA. Unlike contributions to a traditional IRA, direct contributions to a Roth IRA are never tax
deductible, and do not reduce adjusted
gross income (making it harder to be
below thresholds for qualifying for certain tax deductions and credits, such
medical expenses, certain job expenses
and the earned income credit). Those
restrictions are the primary drawbacks
of the Roth IRA.8 For 2012, one may contribute up to $5,000 to the Roth IRA
($6,000 if if the individual is at least age
50 at year end).9 The $5,000 dollar limit
See IRA, Page 16
Quirks and Quagmires of the NY Estate Tax
Almost as frustrating as having to pay New York estate tax
is attempting to understand and apply it. The New York estate
tax law contains numerous quirks and quagmires. This article
will focus on a few of these peculiar applications and deceptive
concepts:
l an estate under $1 million could still have a New York
estate tax liability due to lifetime gifting, despite the fact that
lifetime gifts are not subject to New York estate tax;
l the availability of a New York-only Qualified
Terminal Interest Property (QTIP) deduction, even
though there is no statute authorizing such a deduction; and
l whether administration expenses can be deducted for New York estate tax purposes only, so that
such expenses would be available deductions on the
Federal fiduciary income tax returns.
Conflict
Resolution
Alternatives
of $10,000 being owed on the $500,000 of assets held at death
(not on the combined total of the gross estate and the prior
gifts). This example assumes no deductions, debts, administration expenses or other offsets to the value of the gross
estate.
Take the same example, but assume the prior gifts were
$450,000 instead of $5 million. When you add the $450,000 of
lifetime gifts to the $500,000 of assets held at death,
the combined total is under $1 million. In the second
example, there will be no New York estate tax.
In both examples, the assets held at death were
$500,000. However, in one estate there is New York
estate tax and in the other there is no New York
estate tax liability. Quirky, but what isn’t in the
world of New York estate taxation? Note that the
amount of lifetime gifts ($5 million in one example
and $450,000 in the other example) is never subjectLifetime Gifts
ed to New York estate tax.
Gifts made prior to death are not subject to New
The effect of lifetime gifting is that, even though
York estate tax.1 However, if the lifetime gifts and
the gifts are not taxed in New York for estate tax or
Susan M.
the value of the assets held at death total over $1
gift tax purposes (New York repealed its gift tax
Bacigalupo
million, there will be a New York estate tax
effective January 1, 2000),2 the amount of the gifts
imposed, but only based on the value of the assets
may subject the estate to a New York estate tax liaheld at death. This results from the method of computing the bility if the combined total of the lifetime gifts and the assets
New York estate tax, which is illustrated on page 3 of the New held at death exceed $1 million. However, an individual genYork Estate Tax Return (Form ET–706).
erally will pay less New York estate tax if he or she gifts their
For example, assume a New York State resident made $5 assets because the amounts gifted will not be taxed at death
million of lifetime gifts and died with remaining assets of for New York estate tax purposes.
$500,000. Since the total of assets held at death and lifetime
Gifts are treated differently for Federal estate tax purposes.
gifts exceeds $1 million, this will result in New York estate tax
See ESTATE TAX, Page 17
Our legal community is facing a growing demand for new processes that
embrace ‘settlement’ rather than ‘litigation’. This may be related to concerns
about litigation costs or changing norms
in personal values, or it may be the result
of the increased ease of access to information which has become a tool for self-help
and self-empowerment and which seems
to be replacing traditional deference to
professional advisors, or a combination of
all of these factors. Trust and Estate practitioners should now become part of this
emerging change and begin to adopt new
settlement processes into their practices
in order to participate in this au-courant
shifting of professional services.
Consider the situation of a probate
contest between caretaking and out-oftown children. Most practitioners recognize that these disputes are generally
the final ‘chapters’ of a family’s saga. The
‘back story’ often involves one part of a
family becoming totally involved in their
parent’s aging process while the other
part, the out-of-town members, become
non-participants in the senior’s daily
care routines. Resentments (often fueled
by spouses and other peripheral family
members) build and go unaddressed.
Often the situation will include a rewriting of the parent’s will or some other
redirection of resources with the new tesSee ALTERNATIVES, Page 18
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February 2012
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Nassau Lawyer
CIVILITY MATTERS
Just like E.F. Hutton in the financial world, when Christopher
The word “civility,” in its early use, stood for the status of
being a citizen; hence, its meaning good citizenship or orderly T. McGrath talks, people in the legal community listen, and are
behavior. To me, as your president, a 32- plus year court employ- moved to action by his sincere, straightforward, and well-reaee and as a veteran attorney, civility means courtesy and polite- soned rhetoric. The vast spectrum of his sphere of influence has
ness in behavior and speech in the practice of law and the admin- served us all well. The high regard in which he is held by his colleagues has often earned him the role of intermediary between
istration of justice. Civility matters.
The New York State Unified Court System has published the bar and the bench, with productive results. Chris’s reputaStandards of Civility. They set forth the duties of lawyers, judges tion for being fair-minded and his keen sense of justice were
and court personnel to each other, litigants and witnesses. As invaluable throughout his eight years of service on the State
stated in the preamble, these standards are neither intended as Grievance Committee, and his countless hours as a member of
enforceable rules themselves nor as supplemental to applicable the NCBA Judiciary Committee.
When the Nassau County Supreme Court was called upon to
codes of professional responsibility and/or disciplinary rules.
Rather, these Standards are guidelines “to confirm the legal pro- develop a program whereby personal injury cases would be mediated by attorneys and no resources were available to
fession’s rightful status as an honorable and respectsupport such a project, Chris McGrath rallied his
ed profession where courtesy and civility are observed
peers and established a pro bono panel to serve as
as a matter of course.”
volunteer mediators which has not only survived,
Civility matters. It matters so much that stanbut has actually thrived over the past ten years. His
dards of civility based upon those noted above are –
leadership ability and legal insight are widely recogand have always been – prominently included in the
nized far beyond our Association, as is evidenced by
materials for, and are key in the execution of the
his repeated appointments to numerous, varied local
statewide mock trial tournament administered by the
and state commissions seeking to improve and
Law, Youth & Citizenship Committee of the New
enhance our justice system.
York State Bar Association (NYSBA). Our Nassau
Attorney McGrath tenaciously defends his clients
County Bar Association (NCBA) has actively supwith the utmost respect for every member of the
ported and participated in that program for approxicourt. Clients, colleagues and adversaries alike commately 30 years, providing volunteer attorney coachment on his remarkable skills as a trial lawyer,
es and judges as ambassadors of civility to those
while noting that he constantly maintains the
future lawyers of America.
demeanor of a gentleman, no matter how zealous his
We have always prided ourselves on setting the
advocacy. As one Supreme Court Justice observed,
highest example of civility and professionalism as
“Mr. McGrath has consistently been able to strike
legal advocates, particularly when it comes to our
Susan Katz Richman the difficult balance between effective advocacy and
youth – from the children we visit in the classroom
the utmost of ethics, wholly fulfilling the spirit and
and mentor in elementary schools, to the law stuintent of the legal profession’s obligations to itself and the comdents we guide in moot court competition and externships.
There are many such role models among us, but only one who munity.”
Chris McGrath’s name is also synonymous with sensitivity
has just received the New York State Bar Association’s Attorney
Professionalism Award for 2012 – Christopher T. McGrath. The and dedication in his quest to improve the quality of life for those
award is presented to an NYSBA member who consistently less fortunate. He has served as Co-Chair of our WE CARE, helpdemonstrates the “highest standards of professionalism, commit- ing to raise, fund and deliver goods and services to those in need
ment to promoting respect for the legal system, outstanding eth- of assistance in our community – especially children and the eldical conduct, competence, good judgment, integrity and civility.” erly. Chris has also served as Kiwanis President, and continues
That’s why we at the NCBA nominated Chris – because civility to work tirelessly on many charitable endeavors.
Christopher T. McGrath considers it a privilege to be an attormatters.
Christopher T. McGrath has been been an active member of ney. We consider it an honor to have been able to successfully
both the NYSBA and NCBA basically throughout his entire nominate Chris for the NYSBA’s top award for professionalism.
career of almost 30 years. He has served our Nassau Bar Why? Because civility matters, and it always will!
Association in a myriad of leadership capacities, most signifi- Congratulations, Chris! You earned it !!
In closing, I am pleased to announce that this May, our NCBA
cantly, as our President from 2005 - 2006. Chris has earned the
admiration of colleagues – whether as partners or adversaries, Judicial Section, co-chaired by the Hon. Tricia Ferrell and the
the respect of numerous members of the state and federal bench- Hon. Timothy Driscoll, will be hosting a joint venture with the
es, the appreciation of all those clients in whose lives he has Theodore Roosevelt Inns of Court, of which the Hon. Steven M.
made a difference, and the gratitude of the citizens of Nassau Jaeger is President. This exciting program will be interactive,
County, who have been the beneficiaries of his time and talent in with audience participation and role-playing. Its title? “Civility
Matters”....because it does, to all of us!
many ways.
From the
PresideNt
Nassau
Lawyer
The Official Publication of the
Nassau County Bar Association
15th & West Streets
Mineola, N.Y. 11501
Phone: (516) 747-4070
Fax: (516) 747-4147
www.nassaubar.org
E-mail: info@nassaubar.org
NCBA Officers
President
Susan Katz Richman, Esq.
President-Elect
Marian C. Rice, Esq.
First Vice President
Peter J. Mancuso, Esq.
Second Vice President
John P. McEntee, Esq.
Treasurer
Steven J. Eisman, Esq.
Secretary
Martha Krisel, Esq.
Executive Director
Deena R. Ehrlich, Ph.D.
Co-Editors In Chief
Deanne M. Caputo, Esq.
Daniel W. Russo, Esq.
Editor/Production Manager
Mindy SantaMaria
Assistant Editor
Valerie Zurblis
Photographer
Hector Herrera
Focus Editor of the Month
Deborah S. Barcham
Trusts & Estates/Elder Law
Upcoming 2012 Focus Issues
March – Law Practice Management
April – General/OCA Issue
May – Matrimonial & Family Law
June – Criminal Law
Committee Editors
Deborah S. Barcham, Esq.
Gale D. Berg, Esq.
Richard D. Collins, Esq.
Christopher J. DelliCarpini, Esq.
James Fiorillo, Esq.
Andrew R. Fuchs, Esq.
Avrohom Gefen, Esq.
Nancy Gianakos, Esq.
Charles E. Holster III, Esq.
Paul Hyl, Esq.
Gail Jacobs, Esq.
George M. Kaplan, Esq.
Martha Krisel, Esq.
Kenneth J. Landau, Esq.
Douglas M. Lieberman, Esq.
Thomas McKevitt, Esq.
Daniel W. Russo, Esq.
Meryl D. Serotta, Esq.
Rita Sethi, Esq.
Allison Shields, Esq.
Andrij V.R. Szul, Esq.
Chris Wittstruck, Esq.
Published by Long Island Business News
(631) 737-1700; Fax: (631) 737-1890
President and Publisher
John L. Kominicki
Graphic Artist
Nancy Wright
The Nassau Lawyer welcomes articles that are written by the members of the Nassau County Bar Association, which would be of interest to New York State
lawyers. Views expressed in published articles or letters are those of the authors’ alone and are not to be attributed to the Nassau Lawyer, its editors, or NCBA,
unless expressly so stated. Article/letter authors are responsible for the correctness of all information, citations and quotations.
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Nassau Lawyer
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Trusts & Estates/Elder Law
From Greiff to Campbell and Berk –
The Judicial Evolution of Spousal Protection Under Estates Law
A knee-jerk judicial application of
technical legal formalities, without a
fact-based evaluation of the surrounding
circumstances, is a thing of the past
when it comes to adjudicating the viability of the marital right of election under
EPTL 5-1.1-A. There has been
an evolution over the past 15
years that has served to protect the weaker spouse from
the stronger spouse who seeks
to take unfair advantage
through the use of contracts,
from pre and post nuptial
agreements to the marriage
contract itself.
essential holding is that whichever privately, in another room, with the erence articulated in its decision.
The judicial evolution continued in
spouse contests a prenuptial or postnup- attorney selected for her, who she had
tial agreement bears the burden to never met before, concerning the pro- 2002 in Matter of Holtzman, N.Y.L.J.,
establish a fact-based, particularized posed agreement. The wife testified that December 20, 2002, at 20, col. 6 (Surr.
inequality, but once that is established, she was unaware of the true purpose of Ct., NY County), in which the court
the burden shifts to the proponent to dis- the visit to her husband’s attorney’s invoked the Greiff case. The decedent’s
wife and his daughter by a
office until she arrived there.
prove fraud or overreaching.
previous marriage were vying
Without question, the facts She also testified that her husfor letters of administration.
in Greiff caught the Court’s band told her the purpose of
Three days before her marattention and appealed to its the agreement was to protect
riage, the widow, unrepresentinherent sensitivity to the his children from hers. By the
ed by counsel and not profimore egregious brand of agreement, each waived, inter
cient in English, had signed a
inequality that such agree- alia, the right to elect against
prenuptial agreement that
ments sometimes engender. the other’s estate. The wife
failed to reveal the decedent’s
The case emanated from had assets worth approxiassets. The court concluded
Kings’ County Surrogate’s mately $5,000 plus a Mitchell
that the Greiff criteria were
Court. There, the Surrogate’s Lama apartment. The husMatter of Greiff and
met. The burden of proof
Court struck down a prenup- band had assets valued at
its Progeny
shifted to the estate and the
tial agreement, finding that approximately $500,000.
John G.
Donald J.
widow prevailed.
The Court of Appeals, in
the husband was in a domiThe evolution began with
Farinacci
Farinacci
The
Nassau
County
the
Appellate
nant position and had exer- reversing
Matter of Greiff, 92 N.Y.2d
Surrogate’s Court adopted
cised bad faith, unfair and Division, made it abundantly
341; 680 N.Y.S2d 894, 703
N.E.2d 752 (1998) in which the Court of inequitable dealings. The Appellate clear that the legitimacy and enforceabil- and applied the rule in Greiff in Matter of
Appeals raised the question of whether Division reversed on the law, declaring ity of these type of agreements rests the Estate of Alfred D. Rappaport, 184
the special relationship between be- that the wife had failed to meet her bur- upon no “legalism or concept of presump- Misc.2d 660, 709 N.Y.S.2d 921 (2000).
trothed parties, when they execute a den of establishing fraud or overreaching. tiveness.” Instead said the Court “a parCampbell v. Thomas and
Herman Greiff was 77 and Helen ticularized and exceptional scrutiny
prenuptial agreement, can warrant a
Matter of Berk
obtains;”
and
it
will
be
up
to
the
trial
Greiff
was
65
when
they
married.
Each
shift of the burden of establishing the
validity of the agreement, including the had children by a prior marriage. The court in the first instance to scrutinize
The evolution has recently expanded
waiver in the agreement of the marital agreement was signed in the office of the the particular facts to determine into cases involving the formation of the
right of election, codified by Estates, husband’s lawyer, who, upon the arrival whether they rise to the level at which marriage. Entering into a marriage is
of the parties at his office, introduced the the burden shifts to the proponent of the itself a contract and it entitles each
Powers & Trusts Law section 5-1.1-A.
After reciting the traditional rule, wife to another lawyer who was to confer agreement to prove freedom from fraud, spouse to certain legal rights and protecarticulated in Matter of Sunshine, 40 with her and apparently represent her deception and undue influence. The tions, one of which is the spousal right of
N.Y.2d 875, 876, 389 N.Y.S.2d 344, that as to the proposed agreement. This attor- Court of Appeals remitted the case to the election. However, with increasing freit is the party seeking to vitiate a con- ney was a tenant in the husband’s attor- Appellate Division for further proceedSee SPOUSAL PROTECTION, Page 15
tract, including a prenuptial agreement, ney’s suite of offices. The wife conferred ings, in accordance with the frame of refmust demonstrate by a preponderance of
the evidence that the agreement was the
product of fraud or overreaching, the
Court announced a new rule by extending a doctrine, which had emerged from
contractual situations analogous to the
Greiff case. The doctrine was eloquently
stated in Matter of Gordon v. Bialystoker
Ctr. & Bikur Cholim, 15 N.Y.2d 692,
699-700, 412 N.Y.S.2d 593, 385 N.E.2d
285, and is quoted favorably and at
length by the Court of Appeals in Greiff,
as follows:
“Whenever ... the relations between
the contracting parties appear to be of
such a character as to render it certain
… either on the one side from superior
knowledge of the matter derived from
a fiduciary relation, or from an overmastering influence; or on the other
from weakness, dependence, or trust
justifiably reposed, unfair advantage
in a transaction is rendered probable,
… it is incumbent upon the stronger
party to show affirmatively that no
deception was practiced, no undue
This is what our Litigation & Valuation Consulting group is all about.
influence was used, and that all was
fair, open, voluntary and well understood (Gordon, at 698-699 [emphasis
superior
added], quoting Cowee v. Cornell, 75
thinking.
NY 91, 99-100).”
With over 2,500 matters and hundreds of court
Unmatched
The Court, in adopting the Gordon
integrity.
appointments and appearances, we are one of the
maxim in Greiff, imposed a fact-driven
test for determining when the burden of
largest and most experienced forensic accounting
proving lack of deception, undue influgroups in the New York metropolitan area.
ence and unfairness of a prenuptial
agreement shifts to the stronger party.
The significance of Greiff transcends
any one type of agreement, since it could
Business Fraud & Investigation
apply to any contract between individuJoel R. Podgor, CPA/CFF, CFE
White Collar Crime & Tax Fraud
als in a close relationship. The test that
212-697-6900; Podgor@hrrllp.com
the Greiff decision promulgates is factEconomic Damages
Holtz Rubenstein Reminick LLP
driven, because there is no question but
1430 Broadway, New York, NY 10018
Business Appraisal & Valuation
that the court eschewed any hard and
125 Baylis Road, Melville, NY 11747
fast rule for determining in which inwww.hrrllp.com
stances the burden shifts to the proponent of the agreement and in which
cases it remains with the objectant. Its
HelpingYou
BuildaBetterCase
6
n
February 2012
n
Nassau Lawyer
SYMPOSIUM ...
Continued From Page 1
will hear the viewpoints from three points
of view. The perspective of the attorney
will be discussed by Dean Lawrence
Raful, Professor of Law at Touro Law
School. Pat Dolan, News Director for
News 12 Long Island, will give the
media’s perspective, and Hon. John Kase,
Supervising Judge at Nassau County
Court, will shed light on the court’s perspective. A discussion will follow moderated by Michael Markowitz, chair of
NCBA’s Community Relations and Public
Education Committee.
Some of the topics to be discussed
include:
• Ethical considerations and obligations to a client
• Trying a case through the media
• When does a news organization
withhold a story
• What does “off-the-record” really
mean?
• Information vs. sensationalism
• Requirements imposed on judges
and officers of the court
The program is free and open to the
public. Optional 1 CLE credit in ethics is
available for NCBA members for $30,
and is free for all Domus Scholar Circle
members. Reservations are required by
calling NCBA 516-747-4070 or emailing
ckatz@nassaubar.org.
Any attorney who has to deal with
reporters involving clients or cases won’t
want to miss this program!
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(516) 489-8786 • FAX (516) 486-4933
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IRS Audit Support
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Welfare Benefit Plan Form 5500
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Nassau Lawyer
n
February 2012
n
7
Trusts & Estates/Elder Law
Veterans Benefit and Medicaid Planning
There are approximately 25 million services to veterans or family members
veterans alive today. However, only under certain circumstances. Lastly, the
about 7.2 million veterans are enrolled Veterans Benefits Administration
with the Department of Veterans Affairs (VBA) provides benefits to veterans,
(“VA”), and only 5.5 million receive their family and survivors including dishealth care services and 3.4 million ability compensation, pension, educareceive monetary benefits from the VA. tion, home loans, and life insurance.
Under the VBA, veterans may
Many veterans are unaware of
be eligible for “Compensation”
the vast benefits available to
which is a monthly income
them through the VA.
given to a veteran as a result
Benefits through the VA can
of sustaining a service-related
be a valuable substitute or
injury. Veterans without a
addition to any long-term care
service-related injury, or the
plan that an elderly veteran
surviving spouses of such vetshould consider. Many have
erans who have limited
heard of Aid and Attendance
income and assets, may be elias a possible option. However,
gible for “Pension” benefits.
Aid & Attendance is just a
Pension benefits start with a
small part of the benefits that
basic pension for low income
the VA can offer. The following
veterans, and for those who
article will provide a brief
Ronald A.
are eligible for “Housebound”
overview of VA benefits, the
Fatoullah
or “Aid & Attendance”, an
basic eligibility requirements
for the Aid & Attendance program, and additional allowance may be granted.
compare some of the differences in
Eligibility for Aid & Attendance
Medicaid and VA pension eligibility
Aid
& Attendance is a little known
rules.
benefit that can provide significant
Overview of VA Benefit Structure
income to frail veterans that require the
Veterans benefits are provided aid and attendance of another person.
through the three administrations of the The veteran must meet all of the followVA. First, the National Cemetery ing criteria to be eligible for the Aid &
Administration (NCA) provides veter- Attendance program:
ans and eligible family members with
A. Must be a wartime veteran. The
burial/cremation and funeral services. veteran must have served at least 90
The Veterans Health Administration days of continuous active duty service,
(VHA) is the largest health care system one day of which must be during the folin our country and provides health care lowing wartime periods:
den, in that his/her disability or disabilities requires that he/she remain in bed
apart from any prescribed course of convalescence or treatment, or,
l
Living in a nursing home: The
applicant is a patient in a nursing home
due to mental or physical incapacity, or,
l
Blind: The applicant is
blind, or so nearly blind as to
have corrected visual acuity of
5/200 or less in both eyes, or
concentric contraction of the
visual field to 5 degrees or
less.
E. Must have low income.
l Veteran with no dependents – Maximum income of
$20,447 per year ($1,703 per
B. Must have received a
month)
discharge that is other than
l Veteran with one dependdishonorable.
ent – Maximum income of
C. Must be 65 years of age
Yan Lian
or older OR permanently
Kuang-Maoga $24,239 per year ($2,019 per
month)
and totally disabled. The
l Widow(er) with no dependents –
applicant (veteran or a surviving
spouse) must be:
Maximum income of $13,138 per year
l 65 years of age or older, or
($1,094 per month)
l Is “permanently and totally disabled.”
Reduction of excess income: Most vetD. The veteran must meet any one erans have incomes that exceed the
above income limits. A veteran can
of the following conditions:
l
Aid of another: The applicant reduce his/her excess income by “unrerequires the aid of another person in imbursed medical expenses.” Unreimorder to perform personal functions bursed medical expenses include assistrequired in everyday living, such as ed living expenses, home attendance
bathing, feeding, dressing, toileting, services, doctor’s fees, dentist’s fees, preadjusting prosthetic devices, or protect- scription glasses, Medicare premium
ing himself/herself from the hazards of deductions and copayments, prescriphis/her daily environment, or,
l Bedridden: The applicant is bedridSee VETERANS, Page 19
Estate Tax Portability: Do We
Still Need Credit Shelter Trusts?
Our Business Valuation Team
Covers All Bases
Every U.S. citizen may gift during life pass to children and grandchildren free
and/or bequeath at death cash and/or of gift and/or estate tax. With the enactassets to persons who are not his or her ment of the Tax Reform Act of 2010 in
spouse (ex., children) free of estate or gift December, 2010, the Internal Revenue
tax up to an aggregate amount (the “basic Code now permits the executor of the
exclusion amount”). This is in addition to first deceased spouse’s estate to “give”
annual exclusion gifts, currently $13,000 any unused basic exclusion amount to
per year to any number of individuals. In the surviving spouse, but only for dece2010 and 2011, the basic excludent’s dying in 2011 and 2012.
sion amount was $5 million,
This is known as “portability.”
and in 2012 it is $5,120,000.
Internal Revenue Code
Prior to 2011, if one spouse
(“IRC”) § 2010(c), as amended
died without having used some
by the 2010 Tax Reform Act,
or all of his or her basic excluchanged the definition of the
sion amount during life (had
Estate Tax Applicable Exclumade no lifetime gifts to nonsion Amount to provide that it
spouse people, other than
includes: (1) the “basic excluannual exclusion gifts) and did
sion amount” ($5 million in
not use his or her remaining
2011 and $5,120,000 in 2012)
basic exclusion amount at
PLUS; (2) for a surviving
death (ex., by making bequests
spouse, the “deceased spousal
Patricia C.
to children and/or grandchilunused exclusion amount” (the
dren), any unused basic exclu“DSUEA”). The DSUEA has its
Marcin
sion amount was lost.
own definition as the lesser of
To protect against the loss of unused (1) the basic exclusion amount, or (2) the
basic exclusion amount, a standard basic exclusion amount of the surviving
estate planning tool is to draft a will spouse’s last deceased spouse LESS the
which includes a credit shelter trust for combined amount of the deceased
the benefit of one’s spouse and children spouse’s taxable estate plus adjusted tax(which does not qualify for the marital able gifts. In essence, the DSUEA is the
deduction) in an amount equal to one’s basic exclusion amount that was not used
unused basic exclusion amount. While by the last deceased spouse.
the funds in the trust are still available
As just mentioned, only the DSUEA of
for the benefit of the surviving spouse, the most recent deceased spouse can be
the assets in the trust (and any appreci- used by the surviving spouse. This
ation thereon) are not included in the applies even if the last deceased spouse
surviving spouse’s estate and can pass to has no unused basic exclusion amount,
children and grandchildren free of estate and even if the last deceased spouse’s
tax. This permits the surviving spouse to Executor failed to make the portability
use his or her own basic exclusion election (i.e., the surviving spouse can’t
amount on additional assets that can
See PORTABILITY, Page 18
l World War I: April 6, 1917, through
November 11, 1918
l World War II: December 7, 1941,
through December 31, 1946
l Korean War: June 27, 1950, through
January 31, 1955
l
Vietnam War: August 5, 1964
(February 28, 1961, for veterans who served in Vietnam
before August 5, 1964),
through May 7, 1975
l Persian Gulf War: August
2, 1990, through the present
time. A Presidential Proclamation or a law will be required to
set the end date for this
wartime period.
There are a number of reasons to know the value of a business, estate or someone’s assets.
Whether it’s for litigation, to negotiate a sale or merger, secure credit, settle a dispute,
determine tax liability, or a host of other reasons — our valuator’s mission is always the
same...to use professionally accepted methods to arrive at a well-reasoned and defensible
estimate of value. So if your accountant doesn’t know fair value from fair market value,
give us a call. Isn’t it time you made Israeloff, Trattner & Co., part of your team?
BUSINESS, PROFESSIONAL PRACTICE & LICENSE VALUATIONS
M A R I T A L D I S P U T E S / E N H A N C E D E A R N I N G S C A PA C I T Y
FORENSIC ACCOUNTING/EXPERT TESTIMONY
B U S I N E S S L O S S / D A M A G E A N A LY S I S
EMBEZZLEMENT & FRAUD AUDITS
BANKRUPTCY & REORGANIZATION
N E W YO R K CIT Y
GA R D EN CIT Y
212.239.33OO 516.24O.33OO
Visit us on the web at www.israeloff.com
8
n
February 2012
n
Nassau Lawyer
in BRief
Robert C. Angelillo, a member of
Meyer, Suozzi, English & Klein, P.C,
Debra L. Rubin, senior partner at was recently honored by the Long Island
Melville-based Rubin & Rosenblum, Arts Council at Freeport at its inaugural
PLLC, has been selected for inclusion in “Top 25 Advocates for the Arts”
the 2011 edition of Super Lawyers. Ms. Reception Benefit. The award recognizes
Rubin was recently named one of the individuals who have demonstrated an
Top 10 Family and Matrimonoutstanding commitment to
ial Lawyers Under the Age
the arts on Long Island. Mr.
of 45 by the Ten Leaders
Angelillo concentrates his
Program. She is also a member
practice in the area of general
of the New York Family Law
commercial litigation. He is a
American Inn of Court as well
member of the Theodore
as the Matrimonial Law ComRoosevelt American Inns of
mittees of both the Nassau
Court and has conducted semand Suffolk County Bar
inars on construction law at
Associations.
the New York State Chapter of
Phil Rizzuto, a member of
the National Association of
Philip J. Rizzuto, P.C., has
Minority Contractors and the
been elected President of the
Jamaica Business Resource
Columbian Lawyers of Nas- Hon. Stephen L. Center. Mr. Angelillo is also a
sau County, Inc. The Colformer law clerk to the
Ukeiley
umbian Lawyers Association
Honorable Arlene R. Lindsay,
is a not-for-profit, nonsectariUnited States Magistrate
an legal and professional organization Judge for the Eastern District of New
that seeks the enhancement and aware- York. He earned his Juris Doctor from
ness of Italian American culture as Brooklyn Law School.
applied to the development of law and
Elder law and estate planning attorfurtherance of justice and equality. Mr. ney Stephen J. Silverberg has been
Rizzuto, who earned his Juris Doctor installed as the President of the New
from St. John’s University School of York State Chapter of the National
Law, concentrates his practice on nurs- Academy of Elder Law Attorneys
ing home neglect, construction accidents, (NAELA). Mr. Silverberg, who was
medical malpractice, and personal injury among the founders of the New York
cases. He is also the Immediate Past State chapter and is a former NAELA
President of the New York State National President, has been named a
Plaintiff's Nursing Home Litigation Super Lawyer for five consecutive years.
Group, was the Vice President of the He is past president of the NAELA
Little League of the Three Villages and National and was awarded the credencurrently sits on the Executive Board of tial of NAELA Fellow, the highest honor
Directors of Selden Centereach/Three bestowed by NAELA. Mr. Silverberg
Village Little League. Mr. Rizzuto has holds the designation of a Certified Elder
appeared on the Fox News Channel.
Law Attorney awarded by the National
Member Activities
We encourage you to contact our
We
Corporate Partners* for
special Members-Only off
ffers
Elder Law Foundation. He is also a past
President of the Pension Council of Long
Island and a frequent guest speaker
and author of scholarly articles. Mr.
Silverberg earned his Juris Doctor from
Brooklyn Law School.
New Partners, Of Counsel
and Associates
Marianne Monroy has been named
a partner at Garfunkel Wild, P.C. Ms.
Monroy, who joined the firm in 2001, is a
member of the firm’s Litigation &
Arbitration Practice Group. She concentrates her practice in employment law
and commercial matters. Ms. Monroy
was recently selected for the Long Island
Business News’ “40 Under 40” Award.
She earned her Juris Doctor from Pace
University School of Law.
June D. Reiter has been promoted to
partner at Catalano Gallardo &
Petropoulos, LLP. Ms. Reiter, who
earned her Juris Doctor from Hofstra
University School of Law, concentrates
her practice in the areas of construction
law and institutional professional liability defense.
Renato Matos has been named a
partner at Capell Barnett Matalon &
Schoenfeld LLP. Mr. Matos concentrates
his practice in the areas of Corporate,
Tax and Real Estate. He earned his
Juris Doctor, magna cum laude, from the
Hofstra University School of Law where
he was the Editor-in-Chief of the Law
Review.
The Honorable Stephen L. Ukeiley is a Suffolk
County District Court Judge and author of
The Bench Guide to Landlord & Tenant
Disputes in New York.©
PLEASE E-MAIL YOUR SUBMISSIONS TO
Nassau Lawyer: nassaulawyer@nassaubar.org
with subject line: IN BRIEF
Committee RepoRts
Elder Law, Social Services &
Health Advocacy
Military Law
Meeting Date: 1/17/12
Daniel T. Campbell, Chair
Meeting Date: 1/17/12
Lisa M. Petrocelli and
Josephine A. Loizzo, Co-Chairs
Discussions held regarding the training attorneys to handle VA benefits
appeals, as well as updating the
Veteran Guide, having a legal
clinic for veterans and setting
up a Dean’s Hour for May 15,
2012. Upcoming meeting scheduled for February 21, 2012.
Featured guest lecturers
were from the Town of North
Hempstead Department Of
Services for the Aging:
Evelyn Roth, Commissioner,
and Paula Uhl, Deputy
Commissioner. The commitWomen in the Law
tee focused on “Project
Meeting Date: 1/20/12
Independence,” a groundbreaking and expansive proAimee Kaplan and Kathleen Wright,
gram for residents of the
Co-Chairs
Town of North Hempstead
Deborah Kaminetsky, Esq.,
aged 60 and over to assist
with aging in place in Michael J. Langer delivered presentations to the
committee entitled “Going to the
the community. Upcoming
meeting scheduled for March 6, 2012 at Mat: Lessons From A Solo Female
Practitioner” and “Divorce Law.”
6 p.m.
Michael J. Langer, an associate in the Law Offices of Kenneth J. Weinstein, is a former law
clerk in the United States Court of Appeals for the Second Circuit, and a former Deputy County
Attorney in the Office of the Nassau County Attorney. Mr. Langer's practice focuses on matrimonial and family law, criminal defense and general civil litigation.
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Trusts & Estates/Elder Law
Renunciations: A Second
Opportunity at Aligning
Your Estate Plan
It is not uncommon, despite our best tion. Although the law provides for an
efforts as legal advisors, for a client’s unlimited marital deduction for the first
estate plan to veer from its intended estate, which allows all of the assets to
effect as time passes. Post-mortem plan- pass to the surviving spouse free of estate
ning by use of a renunciation can be a taxes, the assets can end up getting
valuable strategy to fix an estate plan stacked in the estate of the second spouse
gone awry. This article examines some to die. If those assets exceed the applicacommon scenarios where an estate plan ble estate tax exemption available for the
year of death available in the
may be thrown off by improper
second estate, the second
asset titling, how a renunciaestate could end up paying subtion can be utilized to remedy
stantial estate taxes that could
this problem, and what, if anyhave been, and were intended
thing, can be done if the nineto be, avoided.
month period to renounce has
This misalignment of assets
passed.
with the original estate plan
A common situation is
can be avoided where the client
where a married client exeremains keenly aware of her
cutes a Last Will and
estate plan and regularly
Testament containing a credit
adjust her assets accordingly.
shelter trust and subsequentIn reality this is not so comly, not on advice of counsel,
converts
an
inordinate
Alan Schmidlin mon. Fortunately, the law provides a second opportunity to
amount of assets from probate
assets into non-probate assets. This can align the estate plan by allowing for post
result in an underutilization of the avail- mortem estate planning in such situaable estate tax credit if the client prede- tions. In the previous example, the surceases her spouse. For instance, the viving spouse can reject the funds passclient may set up a large joint bank ing directly to him under a joint bank
account with her husband or a retire- account by operation of law or by a benement account with her husband as desig- ficiary designation on a retirement
nated beneficiary. As a result there may account. This rejection, which can be parbe insufficient assets passing through the tial or total, is known as a disclaimer
Will upon death to fully utilize the avail- under Federal law, or a “renunciation” of
able unified estate and gift tax exempSee RENUNCIATIONS, Page 13
Nassau Lawyer
n
February 2012
NEW MEMBER
ORIENTATION
AN IMPORTANTT MEEMBERRSS-ONLY BENEFFITT:
If you
you’ve rrecentl
ecentlly joined
joineed tthe
he Association, or haavve nevver
er been ttoo Domus,
Domus
want
about
ut yyour
our beautiful home, andd w
ant ttoo know morree abou
our Bar Association,
please join us
u at an Orrient
ienttation Cocckt
kttail
a Par
Parrty on
Included tthat
hat evvening:
ening:
• Tour
Tour of our trraditional
aditioonal T
Tudor
udor brric
icck building
• Intrroductions
oductions ttoo mem
member
emberrss of tthe
he Exxecutiv
ecutivve Committ
Comm
mitttee,
ee, Boarrdd of Dirrect
ecttorrs,
Association Member
berrship
ship Committtee
ee and NCB
BA SSttafff
• Opporrtunity
tunity ttoo netw
worrk witthh atttor
orrneyys new ttoo tthe
he Association,
as w
well
ell as tthose
hose wit
wiitthh many year
yearrs of NCB
BA exper
expperrience
• Cocckt
kttails and horrss d’’oeuvr
oeuvrres prroovided by our own Quarrtz
tz Catter
errerrs
There is no charge for this event, which is open to NCBA
A Members only.
Reservations are required.
Contact events@nassaubar
nassaubar.org to RSVP
P or for more information.
NY Medicaid Estate Recovery
Are Your Assets Protected?
The 2011-2012 Budget Bill passed by mentary assets such as joint bank
the New York State legislature and accounts, pay-on-death accounts, jointly
signed into law by Governor Cuomo in owned securities, life estate interests and
April 2011 made changes to the
possibly retirement accounts,
state Medicaid system, some of
are subject to recovery by
which will have a significant
Medicaid following the benefiimpact on Medicaid planning
ciary’s death. The regulations
for seniors.
state that Medicaid may seek
One such change involves
recovery from a Medicaid recipMedicaid’s authority to seek
ient’s expanded estate, which is
recovery of amounts paid on
defined as follows:
behalf of a Medicaid recipient.
“(1) Estate means: (i) all of a
Until the passage of the recent
decedent’s real and personal
budget bill, Medicaid had only
property and other assets
been permitted to look to assets,
passing under the terms of a
if any, passing through the
valid will or by intestacy; and
Stuart H.
Medicaid recipient’s probate
(ii) any other real and personSchoenfeld
estate on death. Assets passing
al property and other assets
automatically to a beneficiary
in which the decedent had
at the death of the Medicaid recipient (and
any legal title or interest at the time of
not requiring the assistance of the Court)
death, including such assets conveyed
were safe from claims by Medicaid. As a
to a survivor, heir, or assign of the deceresult, seniors planning for
dent through joint tenancy,
their Medicaid communitytenancy in common, survivorbased care services or nursing
ship, life estate, living trust or
home care services had comother arrangement, to the
monly used planning techextent of the decedent’s interniques such as transferring title
est in the property immedito their home while reserving a
ately prior to death”
life estate in order to establish
Medicaid eligibility and to proWith the expanded definition
tect their assets from claims by
of “estate,” Medicaid is now able
Medicaid upon their death.
to file claims and liens against
The new law expands
assets owned by the deceased
Medicaid’s ability to recover the Marissa Daidone Medicaid recipient or the
cost of care provided to a
Medicaid recipient’s spouse if
Medicaid recipient. Under the new regula- either retained any interest in the asset
tions that were passed in September of
See MEDICAID, Page 13
this year (18 NYCRR 360-7.11), non-testa-
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February 2012
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Nassau Lawyer
NASSAU ACADEMY OF LAW
Nassau Lawyer
FEBRUARY 2012
Nassau Academy of Law ORDER FORM
n
February 2012
n
11
12
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February 2012
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Nassau Lawyer
Reserve An Ad In
These Future Issues
PRO BONO ATTORNEY OF THE MONTH
MARCH
Frederic A. Wool
Law Practice Management
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Matrimonial & Family Law
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By NANCY ZUKOWSKI
This month we are pleased to shine a light on attorney Frederic Wool, who provides an example of how Pro
Bono work can be integrated in such a way as to
enhance both one’s professional and personal life while
making a very meaningful contribution to the lives of
the underserved in our community. Mr. Wool actively
participates in the Volunteer Lawyers Project, Attorney
of the Day Program in the Landlord/Tenant Court in
Hempstead on a regular basis, usually one morning per
month. Along with Nassau Suffolk Law Services staff
attorney, Roberta Scoll, and other pro bono attorneys,
he advocates for clients who are in danger of losing their
housing through eviction.
Wool was recruited into the Volunteer Lawyers
Project several years ago when he was serving as counsel to a landlord whose tenant was represented by a Pro
Bono attorney from Nassau Suffolk Law Services.
In addition to his expertise in adoption law, he also
represents Mercedes-Benz USA in litigation, and various cooperatives and condominium boards. His firm also
handles real estate, estate, and personal injury matters.
Mr. Wool was admitted to the New York State Bar in
1975 after earning his J.D. from St. John’s University
School of Law and his B.A. from Hobart & William
Smith Colleges.
In explaining what he finds most enjoyable about
working in the Landlord/Tenant Court he says, “You feel
better after having done this type of work. In my regu-
lar work I’m representing a large company or non-adversarial adoptions. There is an extra sense of satisfaction
in knowing that I have helped people keep their homes.
One recent case was especially rewarding because we
were able to turn the tables on a landlord who was suing
a tenant, who was a lovely woman just trying to get by.
As it turned out, the landlord actually owed the tenant
money. Cases like this help me to better appreciate that
there are good people who are working hard but being
hurt by the economy.” He also explains that while landlord/tenant practice has not changed much since he
started practicing law, the economy has changed. He
observes that while working in this environment, the
reality of poverty on Long Island “hits you smack in the
face, and forces you not to complain about the little
problems in your own life when you see these people
concerned about a place to live.”
For his dedication to the Landlord/Tenant Project,
the families of Long Island, and for exemplifying the Pro
Bono ideal, it is our privilege to honor Frederic A. Wool
as Pro Bono Attorney of the Month.
Nancy Zukowski is a volunteer paralegal at Nassau Suffolk Law
Services with a paralegal certificate from Suffolk Community
College. Ms. Zukowski is also a freelance writer and human rights
advocate with extensive professional experience in health insurance claims and health law and has also interned at Nassau Suffolk
Law Services, Queens Housing Court, and at private law offices in
Suffolk. She is also a member of the Self Advocacy Association of
New York.
Edwin J. Mulhern, Esq.
COUNSEL TO THE PROFESSION
AV RATED LAW FIRM ESTABLISHED IN 1954
Representing Clients In The Areas Of:
GRIEVANCE COMPLAINTS
GRIEVANCE PROCEEDINGS
Edwin J. Mulhern, Esq.
Former Chairman of Nassau County Bar Assn. Grievance Committee
Former Member of the Grievance Committee For The 10th Judicial District
Past President Criminal Courts Bar Assn. of Nassau County
One Old Country Rd. • Carle Place • New York 11514 • 516-294-8000
Nassau Lawyer
RENUNCIATIONS ...
Continued From Page 9
property interest under New York law.
Property that is disclaimed is treated as
if the disclaiming party predeceased the
decedent1 and the disposition therefore
never vests in the disclaiming party and
is therefore not considered a gift by the
disclaiming party. Using the same example as above, if a renunciation was done,
the retirement account would be treated
as if the surviving spouse predeceased
the decedent, and the asset would pass to
the contingent beneficiary, if any, and if
none, to the estate of the decedent, where
the asset would pass through the decedent’s Will to the testamentary credit
shelter trust, maximizing the use of the
available estate tax exemption and providing the surviving spouse with a beneficial interest in the trust for life. With
the joint account, if owned with rights of
survivorship, the renunciation would
cause the decedent’s renounced one half
interest in the account to pass to the joint
owner, unless the parties changed the
ownership to tenants in common, in
which case, one half of the joint account
would become part of the decedent’s
estate and likewise pass through the
decedent’s Will to the testamentary credit shelter trust, maximizing the use of the
available estate tax exemption.
Tax savings is one of two primary
motivations behind the use of disclaimers. The other is creditor avoidance – where the recipient of the bequest,
devise, or other disposition is subject to
losing all or part of it to creditors and
would rather see it pass to the next person in line (the person who would receive
it if the disclaiming party had predeceased the decedent – many times a child
of the disclaimant) or, even better, to a
trust set up for the disclaimant’s benefit.
MEDICAID ...
Continued From Page 9
prior to death. It is expected that Medicaid
will aggressively pursue these claims. To
make matters worse, the new legislation is
retroactive. Seniors who transferred their
homes to their children subject to a
retained life estate prior to the enactment
of this legislation are subject to the expanded estate recovery provisions of the law.
Reserving a life estate as part of a deed
transfer has been a common Medicaid
planning tool used by elder lawyers to protect assets from Medicaid while keeping
the asset in the Medicaid recipient’s taxable estate at death. Planning in this
manner has enabled seniors to continue
benefiting from available real estate tax
exemptions and to receive favorable tax
treatment upon the sale of the house. The
asset would also be eligible for a step up in
the tax basis upon the death of the senior.
In the wake of this new legislation, seniors
who have transferred their home subject
to a reserved life estate are strongly
encouraged to consult with an attorney
and to update their estate plan. In most
cases, viable planning techniques remain
available that will allow for the preservation of these tax benefits.
With regard to irrevocable trusts, it
appears that the legislation continues to
protect assets held in the trust, with the
exception of any income or principal that
is required, pursuant to the terms of the
trust, to be distributed to the Medicaid
recipient prior to his or her death.
Typically, Medicaid qualifying trusts have
included language that reserves the
Settlor’s right to live on the property for
the rest of his or her life (i.e., a life estate).
The provisions of the legislation are
unclear as to whether Medicaid will be
The requirements for exercising a valid
renunciation of a property interest can be
found in E.P.T.L. 2-1.11, which has both a
notice and filing requirement. Beware, the
renunciation must be filed within nine
months after the effective date of the disposition (often the date of death of the decedent, but beware in the case of inter-vivos
trusts), and if the disclaimant has exercised
dominion and control over the property, a
disclaimer can generally not be utilized. What, then, if the
recipient of the
property misses
the nine month
deadline
to
renounce? Happily,
the time to file and
serve the renunciation may be extended, in the discretion of
the court, on a petition
showing reasonable cause.
What constitutes reasonable cause?
There are no set criteria. Interestingly, the
motivation behind the petition is considered to be irrelevant. A renunciation will
be honored even where its purpose is to
keep a bequest beyond the reach of creditors of the renouncing party,2 presumably
on the rationale that since the beneficiary
has no legal right to the gift the creditor
should not have advanced the credit in
reliance upon such gift.3 Even if the motivation in requesting an extension of time
to renounce was purely whimsical, this
alone would not be a sufficient reason to
reject the renunciation.4 However, where
one petitioner asked the court for such
extension of time so that he could present
an ultimatum to his creditor to either
accept partial payment or get nothing as a
result of a renunciation, the court refused
to allow the extension of time.5
In Matter of Sittler,6 the petitioner lost
her parents within six weeks of each other.
The court found her “grief and shock” to be
able to access trust principal when trusts
include a reserved life estate. It is likely
that New York courts will adjudicate this
issue in the coming months.
It is important to note that this legislation defers estate recovery at a time when
the deceased Medicaid recipient is survived by a spouse, minor child, or disabled
child of any age. However, if and when
the spouse or disabled child passes away
(or the minor child comes to age), the
Medicaid recipient’s assets will then be
subject to recovery. In addition, Medicaid
may, but is not required to, defer recovery
at a time when a child of the deceased
Medicaid recipient is living in the
Medicaid recipient’s home and is unwilling to sell, or when the recipient’s heir
cannot pay the claim unless the asset is
liquidated. The legislation also includes a
provision for a waiver of the claim for
“undue hardship,” which may be found to
exist in exceptional situations such as
when the deceased Medicaid recipient’s
asset is the sole income-producing asset of
the beneficiaries.
In summary, the new legislation is not
a new law to pass off lightly – seniors who
have executed estate plans in the past, as
well as seniors who have pushed off the
idea of Medicaid planning for too long, are
strongly encouraged to see their elder care
lawyers. It is clear that unless the
Medicaid recipient’s assets are properly
protected, Medicaid will vigorously pursue
recovery against any interest in assets
retained by a Medicaid recipient and his
or her spouse.
Stuart H. Schoenfeld is a Partner at Capell
Barnett Matalon & Schoenfeld LLP in Jericho,
New York, where he heads the Elder Care and
Medicaid Planning Department.
Marissa Daidone is an associate of the firm
and is active in the Elder Care and Medicaid
Planning Department.
reasonable cause to extend the deadline to
effect a renunciation. In Estate of
Konstam,7 the decedent died intestate
with no assets. His mother received limited letters of administration for the purpose of bringing a medical malpractice
action on the decedent’s behalf. She failed
to file a renunciation of her interest in the
estate within nine months of the decedent’s death. When the
malpractice action was
concluded some 10
years later, the mother petitioned for an
extension of time to
file a renunciation,
arguing that during
the statutory period
her interest was valueless,
and without a valid renunciation
her distributive share of the proceeds of the malpractice action
would jeopardize certain housing subsidies she was receiving. The court found
reasonable cause to extend the deadline
under those circumstances.
Unfortunately, however, even where
the court accepts a renunciation for late
filing purposes, Federal law does not permit such an extension of time for Federal
tax purposes. The requirements for a qualified disclaimer under Federal law can be
found in Section 2518(b) of the Internal
Revenue Code, which also provides for a
nine-month period within which to serve
notice of the disclaimer.
A petition for an extension of the deadline to file a renunciation need not be made
prior to the expiration of the statutory period.8 However, despite what may be found
in some form books, there is a long line of
New York cases holding that leave to file
and serve a late renunciation cannot be
granted nunc pro tunc, so that where the
court accepts the instrument for late filing,
the renunciation will still be effective under
state law only as of the date of filing.9
n
February 2012
n
13
Despite the inability to have a “qualified” disclaimer for Federal tax purposes
by obtaining leave to file a late renunciation, can the disclaiming party make it
effective for New York tax purposes by
obtaining such extension? An explicit
answer is not readily found in the case
law. However, New York State’s position
on this issue can be found in a recent
Technical Memorandum of the Department of Taxation of Finance, which provides that “to constitute a qualified disclaimer for New York purposes, the disclaimer must be made within nine
months of the date of death, unless the
court having jurisdiction over the will or
trust extends the time to file”
The potential value of the disclaimer/renunciation in revitalizing the estate
plan and the importance of recognizing an
opportunity for its use cannot be overstated. The practitioner needs to be vigilant in
observing the Federal and state deadlines,
but must also be cognizant of the possibility of, and limitations of, obtaining a time
extension under New York law.
Alan Schmidlin is an attorney at Robert J.
Kurre & Associates, P.C., in Great Neck, where
he concentrates his practice in elder law and
trusts and estates matters.
1. E.P.T.L. 2-1.11(e).
2. See Matter of Molloy, 214 A.D.2d 171, 174 (2d
Dept. 1995).
3. Estate of Ford, 2002 N.Y. Slip. Op. 50026(U)
(Sur. Ct., Bronx Co. 2002).
4. See Estate of Gilbert, 156 Misc. 2d 379, 381 (Sur.
Ct., N.Y. Co. 1992).
5. Estate of Ford, 2002 WL 879565, 2002 N.Y. Slip
Op. 50026(U)(Sur. Ct., Bronx Co. 2002).
6. Matter of Sittler, N.Y.L.J., July 24, 2008, at 38,
c. 5 (Sur. Ct., Suffolk Co.).
7. Estate of Konstam, N.Y.L.J, December 5, 1995,
at 29, c. 4 (Sur. Ct.).
8. Matter of Palmeri, 75 Misc. 2d 639, aff’d, 45 A.D.2d
726 (2d Dept. 1974), aff’d, 36 N.Y.2d 895 (1975).
9. Matter of Lee, 155 Misc. 2d 689, (Sur. Ct., N.Y.
Co. 1992); see also Matter of Eversley, 8 Misc. 3d
1003(A) (Sur. Ct., Nassau Co. 2005).
10. TSB-M-11(9)M, Estate and GenerationSkipping Transfer Taxes, July 29, 2011.
14
n
February 2012
n
Nassau Lawyer
WE CARE
We Acknowledge, with Thanks,
Contributions to the WE CARE Fund
Donors
In Honor Of
Kenneth L. Marten
Kathleen Wright
Jim March’s 60th Birthday
Birth of Great Grandsons of Hon. Elaine Jackson Stack,
Apollo Freed and Phineas Freed Marker
Chris McGrath’s receipt of the New York State Bar Association’s
Attorney Professionalism Award
Mary Campbell & Sharon Levy
Donors
In Memory Of
Marilyn K. Genoa, Esq.
Marilyn K. Genoa
Evelyn Kalenscher
Courtney Voses
Jack Piniat
Amey Harrison
Pat Friedman
Edward P. Bracken Jr.
In Honor of Linda Nanos’ Birthday Celebration
Mary Calandrino
David Glass
Nancy Glass
Arnold & Verna Herman
Robert, Julie & Jeff Kalter
Robert Lepley & Martha Chamberlain
Garry & Nancy Rothbaum
Katie & Mike Weatherspoon
Janet G. Rose
General
Holtz Rubenstein Reminick
Paragon Group
Palm Bay Importers
Contributions may be sent to: NCBA, Attn: WE CARE, 15th & West Streets,
Mineola, NY 11501 or at: www.nassaubar.org
Nassau Lawyer
SPOUSAL PROTECTION ...
Thus, unless a final judgment of
annulment had been obtained before
death, a spouse could not be disqualified
from asserting her right of election. The
courts had rigidly applied the statute
regardless of the facts of a case so that no
matter how the marriage was procured,
if it had not been undone as of the date of
death, the right of election was set in
stone. That changed in 2010 with two
simultaneously decided cases by the
Appellate Division, Second Department
in Campbell v. Thomas, 897 N.Y.S.2d
460 (2d Dept. 2010), and Matter of Berk,
71 A.D.3d 883; 897 N.Y.S.2d 475 (2nd
Dept. 2010).
In Campbell, the decedent was suffering from dementia. While the decedent’s
primary caretaker was away on vacation, the defendant secretly married the
decedent and thereafter proceeded to
transfer the decedent’s assets to herself
individually and jointly with decedent.
After the decedent’s death, the beneficiaries of his estate commenced an action
in the Supreme Court, Putnam County,
seeking to have the marriage declared
null and void and the disqualification of
the alleged wrongdoing spouse from
receiving her elective share because the
decedent lacked the capacity to enter
into the marriage contract.
On appeal, the Second Department
did not blindly apply the statute without
looking to the facts. The court found that
the record provided ample support for a
finding that the defendant procured the
marriage through overreaching and
undue influence and that decedent
lacked capacity to marry.
Instead of disregarding those facts
February 2012
n
15
wrongdoing. The court declined to apply
the doctrine stating that there was no
authority to do so.
The Second Department, citing
Campbell v. Thomas, which was decided
the same day, found a triable issue of
fact existed as to whether the petitioner
forfeited the statutory right of election.
In so holding the court stated that if the
trier of fact found that the surviving
spouse knowingly took unfair advantage
of a person who was incapable of consenting to a marriage, for the purpose of
obtaining pecuniary benefits as a surviving spouse, equity will intervene to prevent the petitioner from becoming
unjustly enriched from her wrongdoing.
The court held the petitioner was not
entitled to summary judgment, and the
counter-claims should not have been dismissed. The case was remanded and is
still pending.
Continued From Page 5
quency, particularly as the elder population has grown, the marriage contract is
being unlawfully induced through the
exercise of undue influence, duress and
by the exploitation of incapacitated individuals, solely for financial gain.
For several years there had been an
increasing number of cases in the
guardianship context in which the marriage was discovered and annulled as
part of a Mental Hygiene Law, Article
81 proceeding during the lifetime of the
exploited individual. See, e.g., In re
A.S., 15 Misc.3d 1126A (Sup. Ct. 2007)
and Matter of Joseph S., 25 A.D.3d.
804, 808 N.Y.S.2d 426 (2d Dept. 2006).
However, as the marriage is usually
procured and solemnized surreptitiously, it is frequently not discovered until
after the exploited “spouse” has died or
is near death. As such, those cases do
not make it into the courthouse until it
is too late.
While New York is one of the few
states that allows for after-death challenges of a marriage under Domestic
Relations Law (“DRL”) §140, whether a
marriage can be annulled or not after
death has absolutely no effect on
whether the “spouse” can be disqualified
from taking an elective share (or taking
in intestacy) which is governed solely by
EPTL 5-1.2.
EPTL 5-1.2 provides that a spouse
can become disqualified from asserting
his or her right of election (or receiving
his or her intestate share) under certain
limited circumstances. EPTL 5-1.2 provides in relevant part that a spouse can
be disqualified where:
A final decree or judgment of divorce,
of annulment or declaring the nullity
of a marriage or dissolving such marriage on the grounds of absence, recognized as valid under the laws of this
state, was in effect when the deceased
died. (emphasis added).
n
Conclusion
and rigidly applying the statute, the
court looked to equity and cited the wellestablished principle that “no one shall
be permitted to profit by his own fraud,
or to take advantage of his own wrong or
to found any claim upon his own iniquity, or to acquire property by his own
crime.” Id. at 469-470. The court thus
held the literal terms of the statute
should not be “rigidly applied if to do so
‘would be to ordain the statute as an
instrument for the protection of fraud.’”
Id. at 469. The court made clear that the
statute fixes rights and it was not purporting to alter those rights, however,
when equity is applied, the result is that
the wrongdoer is deemed to have forfeited the benefit that would flow from said
rights.
Based on the foregoing, the court concluded that the Supreme Court properly
directed the entry of a judgment declaring that the defendant had no legal
rights and can claim no legal interest as
a spouse.
Matter of Berk was a right of election
case emanating from the Kings County
Surrogate’s Court. There, the decedent’s
executors, who were his sons, maintained that the petitioner had served as
their elderly father’s caretaker for the
last ten years of his life and secretly
married him one year before he died at
the age of 100, at a time in which he
lacked the capacity to marry. The petitioner filed a petition seeking a decree
determining that she was entitled to
take her elective share against the
estate. The executors filed a verified
answer alleging various affirmative
defenses and counter-claims, including
equitable defenses and counter-claims
seeking to have the marriage between
the decedent and the petitioner declared
void ab initio, to annul the marriage
nunc pro tunc based upon the decedent’s
mental incapacity, and otherwise to dismiss the petition and vacate the Notice
of Election. Alternatively, the executors
counter-claimed seeking a finding that if
the decedent was not disqualified as a
surviving spouse, an award of compensatory damages equal to the elective
share should be granted to the estate for
the loss from petitioner’s fraudulent conduct in procuring and concealing the
marriage. Petitioner promptly moved for
summary judgment on her entitlement
to take an elective share as a matter of
law before any discovery had taken
place relying on EPTL 5-1.2.
The Surrogate’s Court followed a
strict application of the statute and
stated that it was established law that a
voidable marriage is only void from the
time its nullity is declared by a court.
Thus, even if the marriage were
annulled, it would be declared a nullity
as of the date of the annulment, and the
decedent and the petitioner would have
been deemed married at the time the
decedent died. The executors submitted
numerous affidavits from witnesses,
including a doctor who examined the
decedent near the time of the marriage,
to support their claims of incapacity
and fraudulent concealment of the marriage. The executors argued that the
doctrine of equitable estoppel applies on
the facts of the case to prevent petitioner from benefiting from her alleged
It would seem that all the cases from
Greiff to Berk manifest a judicial trend
toward eschewing rigid contractual and
other formal precepts of law where a factual imbalance of power and wealth open
the door to the possibility of undue influence, fraud and coercion. The courts are
more disposed to seek fact-driven resolutions rooted in equity in the more egregious situations.
Donald J. Farinacci is the Wills, Trusts &
Estates partner of Bee Ready Fishbein Hatter
& Donovan, LLP and a Fellow of the American
College of Trust and Estate Counsel.
John G. Farinacci is a Trusts and Estates partner with Ruskin Moscou Faltischek, P.C. and
Co-Chair of the Nassau County Bar
Association, Surrogate’s Court.
NCBA
Sustaining Members
2011 - 2012
Martin P. Abruzzo
Mark E. Alter
Ernest T. Bartol
Jack A. Bennardo
Hon. James D. Bennett
Hon. Robert A. Bruno
Neil R. Cahn
Henry J. Cernitz
Alan W. Clark
Richard D. Collins
Laura M. Dilimetin
John P. DiMascio
Jerome H. Ehrlich
Steven J. Eisman
Marc C. Gann
John J. Giuffré
Douglas J. Good
Hon. Frank A. Gulotta Jr.
Saundra M. Gumerove
Richard A. Gurfein
Warren S. Hoffman
Elena Karabatos
Harold Karmiol
Hon. John L. Kase
Hon. Susan T. Kluewer
Martha Krisel
Donald F. Leistman
Jonathan C. Lerner
Peter J. Mancuso
Robert A. McDonald
John P. McEntee
Christopher T. McGrath
Jeffrey A. Miller
Katharine E. O’Dette
Hon. Michael L. Orenstein
Henry W. Pearson
Marian C. Rice
Hon. Susan Katz Richman
Joan Lensky Robert
Edward T. Robinson III
Mary B. Samenga
Hon. Marie G. Santagata
William M. Savino
Stephen W. Schlissel
Hon. Peter B. Skelos
Ira S. Slavit
Arthur D. Spatt
M. David Tell
Seymour Trager
Owen B. Walsh
Alfred Wolkenberg
16
n
February 2012
n
Nassau Lawyer
IRA ...
Continued From Page 3
may be increased after 2012 for inflation.
The maximum amount of the direct
contributions that may be made to a
Roth IRA by or on behalf of any individual in any year is subject to the following
reductions and limitations:
l The maximum amount is reduced
dollar for dollar by any contributions
made by or on behalf of that individual to
a traditional IRA for that year.10
l The maximum amount is limited to
the individual’s compensation, minus
traditional IRA contributions, for that
year. If the individual is married, files
jointly and has less compensation than
his or her spouse, then this limitation is
applied by increasing the individual’s
compensation, as so reduced, by the
excess of the spouse’s compensation over
the spouse’s traditional and Roth IRA
contributions for the year.11
l The maximum amount for the year
is phased out for certain levels of modified adjusted gross income (“AGI”). More
specifically, the maximum is reduced,
and finally reaches $0, over the following
ranges of modified AGI in effect for 2012:
for married individuals filing a joint tax
return and qualifying widow(er)s,
$173,000 to $183,000; for married individuals filing single tax returns (but living with spouse), $0 to $10,000; and for
singles, head of households and married
individuals filing separately (and not living with spouse), $110,000 to $125,000.
These dollar amounts may be increased
after 2012 for inflation.12
The maximum amount is not reduced
due to that individual, or his/her
spouse’s, participation in any retirement
plan, or by any contributions to a SIMPLE IRA or SEP IRA. Note that one can
elect to contribute significantly higher
amounts (specifically, $17,000, or
$22,500 if the individual is at least age
50) to a designated Roth account in a
retirement plan, but this type of account
and plan has to be made available to the
individual by his/her employer. The
direct contributions to the Roth IRA for a
year may be made during the year, and
after the end of that year up to the due
date of the individual’s tax return for
that year (not including extensions, so
the due date is April 15).13
Conversion
There are three ways to effect a conversion. First, one may take a distribution from a traditional IRA, and roll it
over (that is, deposit it) in a Roth IRA
within 60 days after receiving the distribution. Second, one can instruct the
trustee of the traditional IRA to transfer
an amount from the traditional IRA
directly to the trustee of the Roth IRA
(this is called a “trustee-to-trustee transfer”). Third, if the trustee is not changing, one can instruct the trustee of the
traditional IRA to redesignate it as a
Roth IRA.14 Note that the one year wait
for certain rollovers from an IRA does
not apply to a conversion.
Regardless of the method of conversion, the individual’s gross income in the
year of the conversion would include the
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celebrating 20 years!
Meet the President of the
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UBA
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Bank
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All or a part of an “eligible rollover
distribution” from any of the following
retirement plans may be rolled over to a
Roth IRA: (1) a qualified pension, profitsharing or stock bonus plan (including a
401(k) plan); (2) a 403(a) annuity plan;
(3) a tax-sheltered annuity plan (that is,
a 403(b) plan); and (4) a governmental
deferred compensation plan (that is, a
457(b) plan).16
The rollover may be accomplished in
one of two ways. First, one may receive a
distribution from the retirement plan,
and roll it over to (again, deposit it) in a
Roth IRA within 60 days after the day of
the distribution. Since the distribution is
paid to the individual, the payer must
withhold 20% of the taxable portion of
the distribution for federal income tax
purposes. Second, the retirement plan
must give the individual the option of
having any part of the distribution paid
directly to a Roth IRA (this is called a
“direct rollover”). The payer need not
withhold any amount from the part of
the distribution directly rolled over.17
Similar to the conversions, the gross
income must include, in the year of the
rollover, the amount that would have
been includible in gross income had the
amount rolled over been paid to (and
retained by) the IRA owner. The portion
of that amount consisting of after tax
contributions or other tax basis is not
includible in gross income. The 10%
penalty does not apply to the amount
rolled over. Also, as an exception, no
amounts rolled over from a designated
Roth account in a retirement plan to a
Roth IRA,whether attributable to contributions or earnings, is includible in gross
income.18 One may wish to roll over
amounts from a designated Roth account
in a retirement plan to avoid having to
make minimum required distributions
from that account at age 70½.
After the gross income inclusion, the
converted or rolled over amounts can
always be withdrawn from the Roth IRA
reserved
J U LY
Rollover
Note the Following on
Conversions and Rollovers
the power to
impose monet
1. The Hono
ary sanctions and conclu
rable Jose
1. 28 U.S.C. §
Cabranes
A.
636(b)(1)(A) (2002).
tions “very strongded that all indica2. See, e.g., Alpern
In his Opinio
v. Lieb, 1993 U.S.
LEXIS 3229
clusion that the ly support” the conDist.
(N.D.
was persuaded n, Judge Cabranes
Act empowers
F2 Am., Inc., 902 Ill. 1993); Maisonville v.
by the decisio
trate judges
magisreasoning of
ns and
to impos e sancti
DiPonio Constru F.2d 746 (9th Cir. 1990);
the
except in the
ction Co., Inc.,
ons,
of Bricklayers,
Circuits, which Sixth and Seventh
v. Int’l Union
form of sanctio
2010 U.S. Dist.
have held that
dispose of a claim
ns that
* (E.D. Mich.
LEXIS 62047,
SSA
sions on Rule
deciJune 23, 2010);
or defense. 19
W.NA
11
W
McGuffin v.
motion
Baumha
While
W
s
ft,
are
2010 U.S. Dist.
I
Judge
tive of a claim
disposiLEXIS 59497
Mich. June 16,
O. 1
and are therefo
Judge Cabranes Leval agreed with
(E.D.
2010).
0 I N
properly resolve
re not
3. Kiobel v. Millson
that
L. 6
sanctio
O
V
are case dispos
ns that
I
et al., 592 F.3d
2010).
magistrate judge.d12 by an order of a
010
78 (2d Cir.
itive require
ER 2
review, he stated
de novo
4. See Kiobel v.
EMB
In reaching his
that a Rule 11
Royal Dutch Petroleu
SEPT
F. Supp. 2d 457
tion does not dismis
conclusion, Judge
sancm Co., 456
Cabranes reason
(S.D.N.Y. 2006).
s a suit or preven
5. See Kiobel v.
ed first that a
a claim or
Royal Dutch Petroleu
t
motion for sanctio
Rule
defens e from
U.S. Dist. LEXIS
m Co., 2004
advanced.20 As
ns, which gives 11
28812 *29, 43
being
h
to proceedings
6. Kiobel, 592
(S.D.N.Y. 2004).
such,
rise
oug
Judge
F.3d
at 80.
separate and
Leval con]lth
cluded that
7. Id.
from the under
distinct
a
ause “[a d the
authorized by magistrate judge is
8. Kiobel, 2004
ent becl overstate
involves parties lying action s and
U.S. Dist. LEXIS
law to impose
the
statem
34.
28812, at 32distinct from
by way of
Order, Rule 11
third ants’ counse t to benefitover- the underl
those in
sanctions withou
9. Id. at *34.
ief
sen
ying action, is
consent of the
t the
defend t of money ount of the
the functiona.4 Ch ’
not al equiva
10. See Id. at
parties.21
Nigeri
iffs
*37.
3. The Honor
amoun es, the am all…and did the claim.13 lent of an indepe ndent
11. Kiobel, 592
ent in erred plaint caable Chief Judge
of
ess
F.3d 78.
As
elopm
ref
tifi
Dennis Jacob
12. Id. at 85; see
[w]itn ent was sm the nature
n mines whethsuch, when a court deterand dev ba Wood for class cer
s
also Bennett v.
er a monetary
tem
ge Pitma nge
General Caster
nry B.
Service of N. Gordon
gisChief
sta
ge Kim motion
Jud
cha
He
ma
Judge
y
,
award
te
approp
Jud
one
Jacobs decline
Co., 976 F.2d
tra
is
iall 9
riate, the “claim
c)
Judge
nda(6th Cir. 1992)
995, 998
the opinion of
d to join
intiffs
Magis
mater
rt system in the
g
” has been dis(“nothing in the
Rule 23( Magistrate and recommetrate
either Judge
ent.”
ly vests magistr
Act expressard pla fees arisin posed of and nothing
eral coucritical role
l
tem
aw
fed
Cabra
to
or
gis
era
ate
sta
r,
ort
Judge
but
judges with jurisdict
nes
Leval and
rep
eve
eys’
tion
to enter orders
e Fed
4, Ma t the
ya
In our
l Rulejudgment, or its functio the entry of a
ion
imposing Rule
n for a rch 31, 200
the issue – wheth instead stated that
ges pla justice. Th 28 U.S.C.
did, how their attorn successfu
nal equivalent,
d tha
tions”); Alpern
11 sancPitma
’
remains. 14 Second
of
,
of
lly
v.
trate jud
On Ma recommende pla int iffs
(“Act”)
have the author er magistrate judges
third
Cir. 1994) (“the Lieb, 38 F.3d 933, 936 (7th
, Judge
partia
stration
ges to:
ed
n
tion.
power to award
their 10
ed that a narrow Cabranes
admini te Judge Actgistrate jud
app eal reason
den y
Pitma
like the power
sanctions,
sanctions thems ity to order Rule 11
from
tra
on
to
Judge t Co urt
statut ory
iniexcept
orn eys
tion.
trial
izes ma
ion – allowi
Magis
the hands of the award damages, belongs in
5
ed to
11 mo dan ts’ att man’s “Op urt
a recommendatielves, or only to make
.
district judge.”)
author
ng magis trate
any pre rt,
Dis tric motion.
obj ect
13. Kiobel, 592
Pit
ort
fen
on of Rule 11
§ 636,
cou
to
t Co judges
ge
De
summ
ermine
F.3d
Rep
iffs
at
tric
arily
86-87.
the
Jud
tions
det
int
osancpunish acts of
14. Id. at 87.
to the distric
Dis
err
Pla
ore
man’s
and
ief,
crimin
trate
n, and
te Pit
Magis der ” to the al “clearly rd of al conduct that occur
[H]ear pending bef nctive rel
15. See 28 U.S.C.
that divides the t court – is an issue
gistra
ndatio
magist
inju
an
nti
§
in
r
Or
636(e)(2
Ma
me
distric
the
nda
rate’s
for
ere
tte
);
Kiobel, 592 F.3d
t courts within
87-88.
presence –
com
and
def
ma
” sta
the Second Circui
),
file d
pleadat
a motion
princip
ecing a trary to law 636(b)(1)(A
and Reant s
16. Kiobel, 592
le that magist to the general
t and the Circui
Apply
except gment on the judgse obj
Courts thems
F.3d at 89.
rate judges may
trate
.C. §
t
or con
not
17. Id. at 91 (the
def end
to tho pos itio n,
elves. 22 Chief
mary
neous under 28 U.S rmed Magis dispose of claims when
sh
for jud
Act “broadly empowe
ition
Jacobs went on
Judge
trate judges to
for sum
acting
or qua areferral alread
affi
Oppos In the Op stated:
to state that he
‘hear and determi rs magisreview
ings, to dismiss
Wood er.
y exists and there by
defer the issue
fter
pretrial matter
ne’ any
d
orneys
inform
Judge
reabasis
tio ns.
to Congress. 23 would
designated to
was
theno
to expand this
Chief
n’s Ord
ment, ictment or endant,
ants’ att
e learne
them by the
district court,
exception by
orneys
Pitma
with
’ Orderl action.15
defend w we hav ain tiff s’]
fied list of matters the exception of a speciJudge dants’ att ge Woodsjudicia
an ind de by the defce in a
ge
Significance
. As for the matters
(1) “No en of [plses are
Judgea Cabranes
Defen Chief Jud
falling within
trate Jud
tion ma ss eviden miss or
sev
gis
this excepted
It
t
nes
conclu
ue
follows
Ma
oed
pre
ded
iss
list,
wit
tha
of the magistr
from
ingly that a
accord
tim
appeal grounds: (1) horized to
ate judge’s powers the extent
to sup l case, to disnce of a
fied
er
magis trate judge decision in Kiobelthe Second Circuit’s
their tes
evidence and
no
is to take
ide nti
an Ordized by
submit
that there is
on two was not aut such asauthor
crimina maintena
paid for re can be
law only to recomm is
bindin g preced
ent
the district court…[ recommendations to
no
miss for
n
mit
are
being
not abs
and] such addition
ision,
ns,
impose
end,
“[T]he
Pitma
to per
, to dis im upon
duties as are
nesses
Circuit as to ent in the Second
al
not
itive decle 11 sanctio sent
(2) the , sanctions absent the conaction
ny;” (2) t the wit t [plainwhether a Magist
Constitution and inconsistent with the
the
dispos
class to state a cla granted,
s; and of
tha
onparties.16
tha
Judge has the
ng Ru
partie
doubt
ctio
to be
(citing 28 U.S.C. laws of the United States”)
power under the rate
timony
2. ns fied
imposi sent of the
failure ief can be dismiss
§ 636[b][1][B]).
impose sanctio
11 san ideThe
ing tes nsel knows tha t
rel
18. See Federal
nti Honorable Pierre Leval
ns. Consequently Act to
s Judge
Courts Improve
the con n of Rule
which involuntarily
C. Cole giv
cou
Leval found
kn ow
ned
such time as
ment Act of
2000, Pub. L.
tement
tio
tiffs’]
that the Act
sustai
empow
106-518 § 202
Kathryn
Congress or the , until
“[W ]e 4 and April
imposi is of the sta not be
and to
ers
1
magist
(2000)
(3)
ing
.
“Magistrate Judge
States Suprem
(addressrate judges to
United
ed
ion
ing
ce sup
and
29, 200
and
den
Contempt
e
hear
determ
the bas iffs could
l] wir
an act
e a wide
Authority”).
ses dur
fal se; ” February
issue or resolve Court addresses this
11 Thine
ord evi
int
counse for the
on, lap have led
range
rec
pla
gs.
s’
19.
ters,
en
asi
of
Kiobel,
s
ma
matby
ent saveJud
the Act’s inhere
592 F.3d at 98.
forgethose matter
betwe 4, [plaintiff Republic
On occ al phase
ambig uity, the
e of the sta tem
ns by
the
nt
20. Id. at 97-98;
s
in
except
se
le of
Chief
becaus
-tri
sanctio
analys is of
see also Lawrenc
edsec
within
ond the Act.17 expressly
2, 200 to the Ben nesses.”6 On iffs
Cabranes and
ersed
g tho
Judge s
e
Richman Sec.
the pre osition of Federal Ru
int
5
Moreover,
Judge
Corp., 467 F.Supp.v. Wilder
Leval – albeit
por tin Circuit rev upo
n theLeval
imp
er
se
s, pla le 11
$15,19 of the wit
232-33 (D. Conn.
provides a roadm
2d 228,
dicta –
to the judges und 2
upon the amend
r, chorelied
tement
Second Order solely ments
Court
Found. v. Aerofloa2006); Laser Med. Research
howeveto the
benefit these sta imposing Ru these
Actt made by Congre
and judges alike, ap for practitioners,
s
istrate cedure 11. ited States puboted firs
of
2000,
Wood’ . The Panel,now
t
Dist. LEXIS 15210t Soviet Airlines, 1994 U.S.
-mowhich
ss in
on each side
basis for an order und that suppub- r vested
issue.
of this
*2 (S.D.N.Y. 1994);
Civil Pro ly, the Un ond Circui sed ,
tead furthe
gro
Magee v. Paul
magistrate
judges
ground ignore the but
inswith
e
tiary
Revere
moved ns on the
Recent for the Sec t add res
range
eviden
osed
ws.a Th
of contempt powF.R.D. 33, 37 (E.D.N.YLife Ins. Co., 178
ls
18
tha
not to for appeal ers.
magis
g vie
otJudgemoLeval
sanctio ents had no orneys oppt the
. 1998).
tin
21.
See
flic
of Appeaa dec isio n , whether
also
to
und
the
viewed this
Maisonville v.
att
con indicat
Kathryn C.
gro
ity
F2 Am. Inc., 902
as
ive ofjudthe
747-48 (9th Cir.
ges,fact
statem fendants’ g that tha ord
Cole,
lysis of
their
lish ed other things the author es, or,
F.2d
1990).
rec
Honorable Richard a former clerk to the
De
that Congress
uin
trate
lished Circuit’s ana
t
intend
t.
by
22.
e
Kiobel,
gis
arg
elv
ed
por
tric
ong
ted
to
592
C.
hav
ma
ms
Wesley of the
allow
F.3d
am
por
tion,
Circuit Court
Second
23. Id. (“I respectf at 106-07.
Second – whether nt to a dis d tomagistrate judges
judges sanctions the y to make a
of Appeals, is
the moents were sup
ully
a commercial
igation associa
trate
dated
needs to be untied suggest that this knot
le 11
lited issue ing pursua authorizemenCourt
te at Farrell Fritz,
ized onl
statem 7
Order” tra te
act
are
P.C.
issue Ru are author the District le 11
Supreme Court.”) by Congress or by the
ce.
recom
gis
when reference,
on and
d,
.
eviden
y make on whether
“Opini 200 6, Ma int iffs ’
tion to tion of Ru orinstea
court’s ers, or onl
osi
imp
In an
menda
29,
judges be imposed
teied pla
recom for the imp ision is an
ionissue ordto district
tem ber ma n den the first sta h
ctit
for
uld
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Sep
pra
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ce
s
sho
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Pit
wit
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ns.3 Th
l court issue that
thi s
Jud ge with respec the motion and
sive gui
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Rule 11 es persua h sid e of ss or
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ment,
def end8 For the
e as Con Court
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man
t to
pra ctit il such tim Supreme
s
ent s. te Judge Pit each
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unt
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tes
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Circui
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1320 RXR Plaza
Factual ve class actiont of New York
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Uniondale, NY 11556
Ma gis san cti ons
A putati thern Distric
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en Tor
of def
im pos
in the nt to the Ali
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sing out
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©2010 Long Island
ement
U.S
Business News,
involv
all rights
dants
R.O
UBA
amount that would have been included
in gross income from a distribution of the
entire balance of the traditional IRA
being converted. In general, that distribution would be fully includible in gross
income, except to the extent it includes
IRA contributions that were not
deductible. The includible amount is not
subject to the 10% penalty.15
tax-free and without penalty, without
regard to whether the Tax-Free
Conditions have been met. One exception, however, is the 10% penalty will
apply to the extent that the portion of the
amount converted or rolled over, which
was includible in gross income, is withdrawn from the Roth IRA within 5 years
of the day of the conversion or withdrawal.19 To maximize the amounts to be put
in the Roth IRA, the tax resulting from
the conversion or rollover should be paid
from funds other than those being converted or rolled over. A conversion or
rollover made in 2010 was subject to special tax rules (generally, half of the gross
income could be recognized in 2011, and
half in 2012). However, these special
rules no longer apply to conversions or
rollovers made after 2010.
Conclusion
To obtain the tax advantages of the
Roth IRA, even though these advantages
have a cost of no tax deduction for direct
contributions and immediate taxation on
conversions and rollovers into the Roth
IRA, consideration should be given to
putting maximum amounts into a Roth
IRA. The consideration increases if it is
believed that tax rates will rise, since the
tax-free withdrawals would become even
more advantageous. Nonetheless, even
without a rate increase, the tax-free
growth and tax-free distribution of funds
make the Roth IRA a very attractive
investment vehicle.
Stanley D. Baum is Counsel at Lerner Law
Firm & Associates. He practices in employee
benefits and employment law.
1. IRC sec. 408A(d)(1) and (2). This article does not
discuss the state tax consequences pertaining to
Roth IRAs.
2. IRC sec. 408A(c)(5).
3. IRC sec. 408A(c)(4).
4. Treas. Reg. sec. 1.408A-2, A-4; IRS Publication
590, at p. 68.
5. See IRS Publication 590, p. 68.
6. IRC sec. 408A(d)(2)(A)(iv) and (B).
7. See IRS Publication 915, p. 3, Worksheet A.
8. IRC sec. 408A(c)(1). Also, see IRC sec. 62(a)(7),
allowing a reduction in AGI for deductible traditional IRA contributions.
9. IRC secs. 219(b) and 408A(c)(2)(A).
10. IRC sec. 408A(c)(2)(B).
11. IRC secs. 219(b) and (c) and 408A(c)(2); IRS
Publication 590, p.60
12. IRC sec. 408A(c)(3).
13. IRC secs. 219(f)(3) and 408A(c)(7).
14. IRC secs. 408A(c)(6)(A) and 408A(e)(1)(B)(i);
Treas. Reg. sec. 1.408A-4, A-1 (b).
15. IRC sec. 408A(d)(3).
16. IRC secs. 402(c)(8)(B) and 408A(e)(1)(B)(ii).
17. IRC secs. 401(a)(31), 403(a)(5), 403(b)(10),
408A(c)(6)(A), 408A(e)(1)(B)(ii), 457(d)(1)(C)
and 3405(c).
18. IRC sec. 408A(d)(3).
19. IRC sec. 408A(d)(3)(F).
Hosted by: Kenneth J. Landau, Esq.
Shayne, Dachs, Corker, Sauer & Dachs, Mineola
on 90.3 FM WHPC
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G
Emplo
late Se yers must
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The ong
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ESTATE TAX ...
Continued From Page 3
The Federal estate tax is computed on
the combined total of assets held at
death and lifetime gifts.3 The moral is:
don’t assume that your client will not
owe a New York estate tax because the
value of their current assets are less
than $1 million. If lifetime gifts have
been made, the estate tax analysis must
consider the effect these gifts will have
on the estate tax projection.
New York QTIP
As the applicable exclusion amount
steadily increased from the $600,000
amount available in 1997 to the $5 million amount available in 2012, it became
possible to shelter increasingly significant amounts from Federal taxation in
the survivor’s estate by funding a credit
shelter trust in the first estate.
The one drawback to this estate planning technique was that in order to fully
fund a credit shelter bequest with the
maximum that could pass Federally taxfree at death, a significant New York
estate tax liability would be imposed in
the first estate. A New York estate tax
would have to be paid on the excess of
the credit shelter trust funding over the
New York $1 million exclusion amount,
since the applicable exclusion amount
for New York estate tax purposes does
not correspond to the Federal exclusion.
The New York exclusion amount is still
limited to $1 million.
This was the dilemma: to shelter the
maximum that could pass tax-free from
Federal estate tax in the survivor’s
estate and pay New York estate tax on
the excess of the credit shelter trust
funding over $1 million; or shelter only
$1 million in the first estate and postpone all New York estate tax until the
survivor’s death.
Some states, such as Massachusetts,
permit a QTIP election to be made for
state estate tax purposes only. This
would solve this dilemma by allowing
the full amount of the Federal exclusion
amount to fund a credit shelter trust, but
avoid current payment of the state estate
tax by electing QTIP treatment for state
estate tax purposes only for the amount
subject to state estate tax. The excess of
the credit shelter trust funding over $1
million would be QTIPed to postpone
current payment of the state estate tax.
New York still has not passed legislation permitting state-only QTIP elections. However, on March 16, 2010, the
Department of Taxation and Finance
issued a statement interpreting current
law as permitting a state-only QTIP
under two specific circumstances: if no
Federal estate tax return was required,
because the value of the gross estate was
below the Federal estate tax filing
threshold; or, if there was no Federal
estate tax in effect in the year of death.4
The Tax Department rationale is stated in the Guidance Memo as follows:
Because the IRC in effect on July 22,
1998, permitted a QTIP election to be
made for qualifying life estates for a
surviving spouse (see IRC Section
2056(b)(7)), that election may be made
for purposes of a decedent’s New York
State estate tax return even if a
Federal return is not required to be
filed. If no Federal return is required,
the election must be made on the proforma Federal estate tax return
attached to the New York State
return. As provided in IRC Section
2056(b)(7), once made, this election is
irrevocable. In addition, the value of
the QTIP property for which the election is made must be included in the
estate of the surviving spouse. See:
IRC Section 2044 and New York Tax
Law Section 954.
Even though New York has no state
legislation authorizing a state-only QTIP
deduction, this Guidance Memo issued
by the New York State Tax Department
finds that authority for the state-only
QTIP lies in the applicable Federal QTIP
statute (IRC 2056(B)(7)), which New
York State follows, with all amendments
through July 22, 1998.
The Guidance Memo does not discuss
the effect of a state-only QTIP election on
the Federal estate tax liability for the
second estate. However, the logical
result would be that the QTIPed assets
would not be subject to Federal estate
tax in the second estate, since no QTIP
election was ever filed with the Internal
Revenue Service.
To illustrate the application of this
Guidance Memo, assume a decedent dies
with a gross estate of $5 million. A credit shelter trust could be funded with $5
million. The New York estate tax liability on the $4 million excess over the New
York exclusion amount could be postponed until the survivor’s death by
QTIPing the amount in excess of $1 million for New York State tax purposes
only.
If the gross estate was $6 million,
instead of the $5 million in the first
example, and the credit shelter trust was
funded with the same $5 million, the
New York estate tax could not be postponed. It would have to be paid at the
nCBA new members
We welcome the following new members
Attorneys
Anthony Agolia
Mark A Baghdassarian
Jonathan Bell
Timothy J Byrnes
Richard J. Chertock
Richard P Cronin
John K. Diviney
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Alexander C. Pabst
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Students
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Kathleen Victoria Meara
Jeanne Waters
Jennifer E Weisser
In Memoriam
Roderick J. Minogue
James M. Pedowitz
time of the first estate because, in this
second example, a Federal estate tax
return would have to be filed since the
estate exceeds the $5 million filing
threshold.
Since there would be no QTIP deduction taken on the Federal Form 706 filed
in the second example (QTIPing the
credit shelter trust for Federal estate tax
purposes would defeat the purpose of
sheltering the assets from tax in the second estate), there could be no QTIP
deduction on the New York Form
ET–706, since New York still does not
recognize a state-only QTIP under these
circumstances.
Administration Expenses
Since there is a vast disparity
between the applicable exclusion
amount available for Federal and state
estate tax purposes, the situation will
often arise where administration
expenses will be beneficial as deductions
on the New York estate tax return (Form
ET-706), but wasted if deducted on the
Federal estate tax return (Form 706).
For example, assume a $6 million
estate, which passes $3 million to the
decedent’s surviving spouse and $3 million to the decedent’s children. A Federal
estate tax return will have to be filed
since the gross estate exceeds $5 million.
No Federal estate tax will be due, since
the taxable estate is only $3 million.
A New York estate tax will be due,
however, on the excess over the $1 million applicable exclusion amount. An
administration expense deduction would
be beneficial on the New York estate tax
return in this example, but unnecessary
on the Federal estate tax return, since
there is no Federal estate tax liability.
In an ideal world, a fiduciary should
be able to claim administration expenses
against the New York estate tax liability
and still preserve the right to deduct
these expenses against the Federal fiduciary income tax on Form 1041.
Although this world is far from ideal, an
argument can be made to support this
position.
An estate must elect to claim administration expenses either as an estate tax
deduction or as an income tax deduction.5 In the example above, a rider could
be submitted with the Federal estate tax
return (Form 706) stating that the
administration expenses reported on the
return were being claimed as an estate
tax deduction for New York State estate
tax purposes only, which should preserve
the deduction for the Federal fiduciary
income tax returns.
When the Form 1041 is filed reporting
February 2012
n
17
these deductions, a New York fiduciary
adjustment would have to be included on
the New York fiduciary income tax
return (Form IT-205) to add these
expenses back into taxable income. Such
an adjustment is not specified in the list
of modifications to Federal gross income
set forth in the New York Tax Law.6
However, the New York taxable income
of a resident estate or trust is defined as
“its Federal taxable income as defined in
the laws of the United States for the taxable year ….”7 Since the Federal tax code
prohibits double deductions of the same
expenses against estate tax and income
tax and since the Tax Law adopts the
Federal tax code, a fiduciary adjustment
to add these expenses to the New York
taxable income should be recognized.8
A fiduciary adjustment for these additional expenses would have to be allocated in accordance with each beneficiary’s
share of distributable net income DNI.
This could provide an inequitable result
in certain situations.
For example, if the estate has no taxable income, adding back $30,000 of
administration expenses to the New
York taxable income will cause each beneficiary to have to report a pro rata share
of the $30,000 increase in the New York
taxable income. If an inequity is substantial in amount and also in relation to
the fiduciary adjustment, the tax law
permits the fiduciary to use an alternate
method of allocating the adjustment,
such as allocating it to the fiduciary.9
Although there is no current statute,
regulation or tax Guidance Memo directly approving the deduction of administration expenses for New York estate tax
purposes only, even when a Federal
estate tax return is filed, existing law
supports such a deduction as discussed
above.
Susan M. Bacigalupo is a former Chair of the
Nassau County Bar Association Surrogate’s
Court Estates and Trust Committee and a partner with the Garden City law firm of McCoyd,
Parkas & Ronan LLP, which practices exclusively in the areas of estate planning, probate
and administration of estates and trusts, and
estates and trust litigation.
1. Tax Law § 954.
2.1997 NY Laws Ch. 389 Pt. A § 7.
3. 26 U.S.C. § 2001.
4. NYS Dept. of Taxation and Finance, Qualified
Terminal Interest Property (QTIP) Election for
New York State Purposes When No Federal
Return is Required, TSB-M-10(1)M (Mar. 16,
2010). A copy is available at
http://www.tax.ny.gov/pubs_and_bulls/memos/co
rporation_memos.htm.
5. 26 U.S.C. § 642(g).
6. Tax Law §§ 612, 619.
7. Tax Law § 618.
8. 26 U.S.C. § 642(g); Tax Law § 618.
9. Tax Law § 619.
DID YOU KNOW?
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the Nassau Lawyer.
Legal notices in Nassau Lawyer can only refer to:
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ALL notices including Bankruptcies & Foreclosures
can also be placed in Long Island Business News.
To place an ad contact:
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or 631-737-1700
n
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n
February 2012
n
Nassau Lawyer
ALTERNATIVES ...
Continued From Page 3
tamentary provisions being economically
more favorable to the care-taking family
member. Eventually, the parent dies and
a contest ensues.
In a traditional adversarial model a
‘rights’ based strategy is adopted by the
litigation attorney. This approach translates the dispute into an argument over
legal rights and ignores the practical or
emotional aspects of the contest. In a
sense, a contest over resources replaces
the examination of the emotional facets
of the family’s experiences. This traditional ‘rights strategy’ not only obfuscates the real issues of the family’s dispute, but it also raises the stakes for
clients by offering only two possible outcomes, winning and losing. Even when
settlement is accomplished the parties’
relationships are often destroyed beyond
repair because the real issues of the conflict have not been addressed and the litigation strategies have exacerbated hostilities.
In terms of estate planning, clients
are often faced with situations that
become the catalysts of future family
conflict. Should the estate be divided
equally or should the testator address
each child’s personal situation independently? At the core of this situation is a
competition of interests. An equal division does not address the Testator’s real
concerns. However, an unequal division
will often cause a rupture in the family’s
post-death relationships.
There are a number of other situations where a professionally structured
lifetime dialogue could avoid post death
litigation. Following are some of the
more common circumstances which are
familiar to most estate planners:
1. Testators with multiple marriages;
2. Blended families arrangements;
3. Special needs children with unique
support needs;
4. Children with disparate education-
al backgrounds and financial means;
5. Grandchildren the testator wants
to consider;
6. A child or children who will take
care of another child;
7. A child who is estranged or distant
from a parent;
8. Existence of a family retreat, ranch
or farm and
9. The transfer, restructuring or sale
of a family business.
Many of these circumstances are ripe
for a process that focuses on the needs,
wishes, interests, motivations and expectations of both testators and beneficiaries.
These approaches anticipate problems
and issues and address them through an
open facilitated dialogue structured by a
trained mediator or an interdisciplinary
mediation team whose focus is on resolving both the legal issues and their implications in the family dynamics. This
mediation team would consist of a skilled
attorney as well as a trained mental
health professional, both of whom have
developed their mediation expertise in
areas of trust and estate practice. By
directly engaging with the potential conflict as part of the planning process, the
escalated emotional and financial costs of
litigation can be avoided. Essentially, we
can now offer our clients a multi-dimensional estate planning experience where
mediation is incorporated into their estate
planning process.
Collaborative practice is another
alternative dispute resolution process.
Its essential feature is an agreement
between the parties and their attorneys
to settle the dispute out of court. And, if
the parties cannot reach settlement,
both attorneys must withdraw from
their representation. Disputes resolved
through collaborative practice take place
in the shadow of the law and ‘rights entitlement’ but are not determined by it. In
many cases, it may be most important
for the clients themselves to create their
own sense of justice which enables them
to live with the outcomes they choose
both economically and emotionally.
PORTABILITY ...
Continued From Page 7
use the unused basic exclusion amount of a prior
spouse). Note that the basic exclusion amount (the
$5,120,000 for 2012) will be adjusted for inflation
(UNLESS they amend the IRC again and decrease
the basic exclusion amount), while the amount of the
DSUEA is NOT adjusted for inflation.
The predeceased spouse’s Executor makes the
portability election for such spouse’s DSUEA by
timely filing (including extensions) a Federal estate
tax return (Form 706), which will permit the surviving spouse to use the DSUEA. Therefore, even
estates below the filing threshold ($5,120,000 in
2012) must consider whether to file a Form 706. To
make the portability election, there is no need to
make an affirmative statement, check a box or otherwise affirmatively elect on the Form 706; the election
is made simply by timely filing a properly prepared
and complete Form 706. Note that the IRS can examine the return of the predeceased spouse at any time
for purposes of determining the DSUEA available for
use by the surviving spouse .
Many say a full blown Form 706 is overkill because
many states do not require a full Form 706 to be
attached to the State estate tax return (New York
does), or the estate may be too small to require even a
State estate tax return. This results in a huge expense
for estates that want to elect portability which would
otherwise not be required to file a Form 706. (Note
that the portability election is pursuant to Federal
law; New York does not recognize portability.)
However, not filing a full Form 706 to elect portability may create a malpractice risk if the second
spouse’s estate is in excess of $5 million at the time
of the second spouse’s death (or whatever the basic
By adopting a client centered process
such as mediation, interdisciplinary
mediation or collaborative practice,
clients and their professionals begin to
focus their efforts on reaching a mutually agreeable resolution from the outset.
Although the structure of each of these
processes is different, they all involve a
solution-oriented, client-centered, interest-based approach. Mediation, interdisciplinary mediation and collaborative
practice emphasize identification of suitable solutions, and building areas of
mutual agreement instead of an
approach which polarizes the issues and
pits parties against each other.
When collaborative practice is used,
each party works with their specially
trained attorney who is contractually
bound to act only as settlement counsel.
The structure of the settlement negotiations in collaborative practice is fundamentally different from a traditional settlement approach. In traditional legal
negotiation, settlement is usually started when substantial resources have been
expended in preparation of the best possible legal arguments. In the traditional
arena settlement discussions are considered to be more effective if lawyers act on
exclusion amount is at that time). Since you never
know what can happen in life (ex. surviving spouse
wins the lottery!), you should advise the executor of
the estate of the first spouse to die to file the Form
706 to protect the portability election and, if they
decline, obtain a written statement from the executor
and the surviving spouse specifically stating that
they do not want to take advantage of the portability
election and fully understand the consequences
thereof, which should be enumerated.
So, with the advent of portability is it still necessary to employ the use of credit shelter trusts? You
bet it is! Besides New York State not recognizing the
portability concept, Federal estate tax portability
Besides New York State not
recognizing the portability concept,
Federal estate tax portability only
applies to estates of decedents
dying in 2011 and 2012.
only applies to estates of decedents dying in 2011 and
2012. If portability is not extended for the years 2013
and beyond, a decedent dying after 2012 who did not
effectively use his or her basic exclusion amount
through appropriate estate planning tools (ex., use of
a credit shelter trust) will have wasted the basic
exclusion amount.
The DSUEA is not indexed for inflation and may
decrease if reduced by Congress. For example, suppose husband dies in 2012 leaving all of his $5 million
estate to his wife, having used none of his $5 million
basic exclusion amount, and relying on portability.
Wife dies in 2015, when Congress has reduced the
basic exclusion amount to $1 million, which in this
behalf of their clients; focus on the likely
legal outcomes and minimize the potential emotional dimensions of the conflict.
This orientation often produces mediocre
and unimaginative settlements at a
point at where the parties are embittered and settle to avoid further expense
and not because they are satisfied with
the outcome.
On the other hand, collaborative practice offers a settlement approach which
removes the spectre of litigation and the
zero sum set up from negotiations. It
incorporates the direct participation of
clients and focuses on the real issues of
the conflict. In a collaborative process,
Counsels’ responsibility to facilitate settlement replaces their duty to win in litigation. Conflicts are examined in a nonadversarial manner and negotiations
become a search for a practical solution
that respond to the primary interests of
each party.
Inter-disciplinary mediation allows
the parties to maintain their individual
counsel but provides the parties with a
neutral multi-discipline mediation team
who structures the settlement process to
address both the legal as well as the family dynamic issues of the conflict.
As judicial support and client awareness for conflict resolution alternatives
grow, the norms of client service will
require adoption of these new processes.
Trust and Estate practitioners should
begin to recognize and respond to these
new paradigm shifts and either develop
the necessary skills to become effective
conflict resolution advocates or adopt
new business models which incorporate
access to conflict resolution alternatives
in their firm’s services.
Harriette M. Steinberg has a legal practice in
Nassau County in the areas of Trust, Estate,
Elder and Matrimonial Law. She is currently
co-chair of the New York State Bar
Collaborative Practice Committee of the
Dispute Resolution Section and has recently
opened Going Grey Matters™ an interdisciplinary mediation service which can be found at
www.goingreymatters.com.
case would mean the DSUEA from the husband is
reduced to only $1 million for the wife. If the wife also
had $5 million of her own in addition to the $5 million
she inherited from her husband, only $2 million of
assets in her estate would be excluded from Federal
estate tax (her $1 million basic exclusion amount and
the husband’s $1 million DSUEA), and $8 million
plus any appreciation on the $5 million received from
husband, would be subject to Federal estate tax. If
husband had created a $5 million credit shelter trust
in his Will, the full $5 million plus any appreciation
would have escaped Federal estate taxation, and only
$4 million would be subject to Federal estate tax in
wife’s estate (wife’s $5 million less the assumed $1
million basic exclusion amount at wife’s death).
Furthermore, in the example above, if wife remarries and husband No. 2 predeceases her, having completely used up his basic exclusion amount, wife is
only eligible to use husband number 2’s unused basic
exclusion amount, which is $0. In this event, husband number 1’s basic exclusion amount would also
be completely lost. Keep in mind, also, that the
statute of limitations for review of a Form 706 used
to determine the DSUEA available to a surviving
spouse never runs, whereas the statute of limitations
on the values used to fund a credit shelter trust runs
upon the expiration of the statute of limitations for
auditing the Form 706 (generally, three years from
the date of filing).
While portability can be helpful where couples
have not had the opportunity to do proper estate
planning, in most cases, it should not be relied upon.
Patricia C. Marcin is an attorney at Farrell Fritz, P.C. concentrating in estate planning and estate administration.
1. IRC § 2010(c)(4)(B)(ii).
2. IRC § 2010(c)(5)(B)(i).
3. IRC § 2010(c)(5)(B).
Nassau Lawyer
VETERANS ...
Continued From Page 7
tion medications, health insurance premiums, transportation to physician
offices, and therapy. Costs for home care
and assisted living facilities are usually
high enough to reduce an applicant’s
income altogether.
F. Must have limited assets.
There is no exact asset level that an
applicant can have in order to qualify
for Aid & Attendance. The VA looks at
the “net worth” of an individual and
does an “age analysis” to determine
whether the applicant has “sufficient
means” to pay for their own care. The
rule of thumb figure that is widely used
by regional offices is $80,000. However,
based on the “net worth” determination,
a 90-year-old applicant may not be eligible with $80,000 in his name, but a
75-year-old applicant may be.
L
Medicaid v. VA Pension Rules
While Medicaid and VA Pension are
both means tested programs, eligibility
rules are quite different, and therefore
appropriate planning techniques are
often different as well. Some of the
important differences to note are as follows:
A. Look Back Period
The “look-back period” is an important concept in the Medicaid realm. The
look back period is currently 5 years,
and only applies to Medicaid nursing
home applications. When an applicant
makes a gift within the look-back period, the Medicaid agency will impose a
period of ineligibility, or “penalty period,” during which the applicant will be
required to pay privately for care.
However, there is no look back period
for VA Pension purposes. Therefore,
veterans may gift assets prior to a pension application without being penalized. It is important to note that the
look-back period does not apply to community Medicaid applications.
B. Individual Retirement Accounts
(IRAs)
Under Medicaid rules, IRAs of the
LAWYER
DIVORCE MEDIATION
applicant and the applicant’s spouse are
exempt resources as long as the applicant is receiving periodic payments. The
periodic payments, however, are
deemed to be income and will be budgeted by Medicaid accordingly. For VA
pension eligibility, IRAs are not
exempted and are countable assets.
C. Primary Residence
For Medicaid purposes, an individual
will not be eligible for benefits if the
individual’s equity interest in his or her
primary residence exceeds $786,000.
This limitation does not apply if a
spouse or minor, blind or disabled child
is residing in the home. However, for
VA pension benefits, the primary residence is not a countable resource and
there is no home equity limitation
requirement.
D. Life Estates
96 ADM 8 provides that “a life estate
will not be considered an available
resource” for Medicaid eligibility purposes. Thus, the retention of a life estate by
a Medicaid applicant will not preclude
eligibility. However, the VA takes a dif-
TO
n
February 2012
n
ferent position and treats a retained life
estate as a countable resource for VA
pension eligibility purposes. In addition,
the VA counts the value of the entire
property and not merely the life estate as
an asset. Note that Medicaid can recover
the value of the life estate interest held
by the applicant and/or his spouse at the
time of death.
Benefits under the VA are valuable
benefits that are often overlooked by
veterans. Veterans are strongly encouraged to discover the many other benefits they have earned by serving this
country. Elder law practitioners should
incorporate VA benefits into long term
care planning with veterans and/or
their surviving spouses.
Ronald Fatoullah, Esq. is the founder and
managing attorney of Ronald Fatoullah &
Associates, a law firm concentrating in elder
law, Medicaid eligibility, estate planning, special needs, trusts, guardianships, veterans
benefits and probate.
Yan Lian Kuang-Maoga, Esq. is an associate
attorney at the law offices of Ronald Fatoullah
& Associates.
LAWYER
FORECLOSURE, DEFENSE & TAX LAW
PHYSICIAN-ATTORNEY
OF COUNSEL ATTORNEY
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