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Showing posts with label Estate Planning. Show all posts
Showing posts with label Estate Planning. Show all posts

Wednesday, December 16, 2020

New York is Really Tired of Banks and Title Companies Not Accepting Powers of Attorney

banking , Estate Planning
New York is Really Tired of Banks and Title Companies Not Accepting Powers of Attorney

Governor Cuomo has signed into a law Assembly Bill A5630A which aims to simplify the statutory short form power of attorney and increase its acceptance by third parties (looking at you title insurers and banks). 

Previously, a power of attorney could be void because it did not contain the "the exact wording of the form set forth in Section 5-1513". This strict language caused many third parties relying on the form to refuse to honor powers of attorney not prepared using their own templates out of fear that the form they were unfamiliar with had a small technical error rendering it invalid. 

Now, a power of attorney is valid so long as it "substantially conforms to the form required pursuant to Section 5-1513" even if it contains insignificant mistakes in "wording, spelling, punctuation, or formatting, or the use of bold or italic type... or uses language that is essentially the same as, but not identical to, the statutory form." Even more, "failing to include clauses that are not relevant to a given power of attorney shall not in itself cause such power of attorney to be found to not substantially conform with the requirements of such form." Long story short, the statute now gives much more leeway in the preparation of the form, hopefully avoiding the voiding of powers which in all fairness should have been valid for the purpose intended. 

To promote acceptance of more powers of attorney, the new bill bakes in protections for third parties relying upon powers, as well as penalties for third parties that unreasonably reject powers. 

Section 5-1504 of the General Obligations Law is amended to contain a presumption that a duly acknowledged (notarized) power of attorney is genuine and valid. It also is amended to provide for a mechanism to release a third party relying upon a power of attorney from liability after reasonable acceptance. The third party may "request, and rely upon, without further investigation" (1) an agent's certification under penalty of perjury any factual matters relating to the power and (2) an opinion of counsel (from the principal is fine) as to any matter of law concerning the power. There are strict time limits (10 business days) in which the third party must reject a power of attorney together with a written explanation given to the principal and agent, and then either reject or honor the power after receipt of written explanation received from the agent/principal (7 business days). Most importantly, if the agent receives an acknowledged affidavit from the agent stating that the power is in full force and effect, the third party must accept the power of attorney except for reasonable cause, which is enumerated in the statute. If the third party and agent/principal follow all the steps in this dance, the "third party shall be held harmless from liability for the transaction." 

But what if your bank or title insurer still won't accept your power of attorney? A special proceeding may be commenced against the third party refusing to honor the power, awarding damages (including reasonable attorney's fees and costs) if the third party acted unreasonably in refusing to honor the power of attorney. 

Time will tell if these changes, coupled with the elimination of the statutory gift rider, will result in more widespread use and acceptance of powers of attorney. Banks and title insurers are notorious for avoiding risk when it comes to the use of powers of attorney and the State's attempts to promote their acceptance has bordered on Sisyphean. 




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Friday, April 10, 2020

Spousal Refusal in Medicaid Planning

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Spousal Refusal in Medicaid Planning
Do you need Medicaid and can’t wait for a 5-year lookback to qualify?

Then, consider Spousal Refusal, which with the Reverse Rule of Halves, represent 2 options to avoid the 5-year lookback requirements.

Spousal Refusal means that assets are transferred from the Medicaid applicant to such applicant’s spouse (the community spouse or the spouse not receiving Medicaid). Luckily, these transfers of assets to a spouse are exempt from the five-year look back period and thus, don’t trigger a penalty period.

Under Medicaid law, the community spouse can sign a Spousal Refusal which states that the community spouse refuses to make their income and resources available to the Medicaid applicant. This can be done especially when the community spouse may have assets over Medicaid’s allowable recourse limit or in excess of the income allowance.

In New York, Social Services Law §366(3)(a) provides that if the community spouse refuses or fails to provide the applicant with the necessary care and assistance, the medical assistance furnished to the applicant creates an implied contract with the community spouse. The cost of the medical assistance then may be recovered from the community spouse. However, this takes a lawsuit, which is often settled for far less than what was transferred, if the lawsuit is pursued in the first instance. Also, if repayment is pursued, the repayment rate is only based on the Medicaid reimbursement rate, which is significantly less than the private pay rate so there is very little to lose for a spouse to claim Spousal Refusal when they cannot plan in advance of the 5-year lookback.

Regardless, those needing Medicaid often have unique circumstances and everyone should get tailored legal advice on any strategy they seek to pursue before effectuating such strategy.


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The Reverse Rule of Halves in Medicaid Planning

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The Reverse Rule of Halves in Medicaid Planning
Medicaid provides a penalty period for the transfer of assets for less than its fair market value within 5-years of an individual’s application for Medicaid. The penalty is calculated by taking the amount of the transfer and dividing it by the average cost of one month of nursing home care in the region where the applicant resides.

A strategy used to maximize an applicant’s excess assets is the Reverse Rule of Halves. Essentially, this strategy allows the applicant to retain at least half of his excess assets and to become eligible for Medicaid sooner. When using this strategy, the Medicaid applicant gives 100% of their excess assets to a family member or multiple members. As this transfer may be a violation of Medicaid’s look back rule, a penalty period of Medicaid ineligibility will result. The family member, however, can return half of the gifted assets in installments back to the Medicaid applicant through a promissory note, so that the penalty period is also cut in half. The applicant, then, can use the returned assets to pay for care during the penalty period.

To utilize this strategy, the assets must be accessible either through a competent individual’s signature, joint ownership, or a Durable Power of Attorney. The return of assets will need to be done through a Deficit Reduction Act (DRA) compliant promissory note. To determine the value of assets that can be preserved with this strategy, the following factors are considered: 
  1. Total value of the applicant’s assets that constitutes excess resources for Medicaid purposes;
  2. Total monthly fixed income of the applicant;
  3. Actual private monthly cost of the nursing home that the applicant will be entering or is in; and
  4. Average monthly nursing home cost figure used by the Medicaid district in which the applicant resides to calculate transfer penalty periods.

While there is a specific procedure calculating the maximum amount, the amount gifted is usually approximately equal to the maximum value of assets that can be protected. To determine whether this applies to a specific applicant’s circumstances and to determine whether using the Reverse Rule of Halves is the best strategy for their specific needs, applicants are encouraged to retain counsel as early as possible.


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Tuesday, April 07, 2020

Deeds & Estate Documents - Electronic Witnessing Now Permitted

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Deeds & Estate Documents - Electronic Witnessing Now Permitted
Through Executive Order 202.14 and effective from April 7, 2020 to May 7, 2020, the act of witnessing as required in signing a will, healthcare proxy, disposition of remains, recording of instruments regarding real property, power of attorney and living trusts may now be done through audio-video technology.

To do so, the following requirements must be satisfied:
  • The person requesting that their signature be witnessed, if not personally known to the witness(es), must present valid photo ID to the witness(es) during the video conference, not merely transmit it prior to or after;
  • The video conference must allow for direct interaction between the person and the witness(es), and the supervising attorney, if applicable (e.g. no pre-recorded videos of the person signing);
  • The witnesses must receive a legible copy of the signature page(s), which may be transmitted via fax or electronic means, on the same date that the pages are signed by the person;
  • The witness(es) may sign the transmitted copy of the signature page(s) and transmit the same back to the person; and
  • The witness(es) may repeat the witnessing of the original signature page(s) as of the date of execution provided the witness(es) receive such original signature pages together with the electronically witnessed copies within thirty days after the date of execution.

Similarly, video notarization has been permitted since March 19, 2020 through Executive Order 202.7, which we blogged about HERE.

This is one major step closer to remote real estate closings and estate planning.

Now, the NYS legislature needs to make this permanent and not let Coronavirus innovation be a wasted opportunity.


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Tuesday, March 31, 2020

Executing a New Will While in Quarantine? Avoid Will Deals That Seem too Good to be True

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Executing a New Will While in Quarantine? Avoid Will Deals That Seem too Good to be True
COVID-19 uncertainty is causing many people to rethink their wills and advanced directives.

With the acceptance of video notarization, which we blogged about HERE, many attorneys are advertising remote will execution ceremonies that remove the traditional requirement that the testator execute their will in a room with two witnesses and an attorney. The seeming ease of a remote will execution has caused a race to the bottom as attorneys compete on price for business. Things have gotten so desperate that I've seen an attorney advertise a will for $100.00. Is it too good to be true?

While the availability of remote notarization does make remote will execution ceremonies possible, it is important not to forget the fundamental requirements of a will signing. If your will is rejected by the Surrogate's Court because you failed to conform to the requirements of EPTL §3-2.1 all of your estate planning and forward thinking may have been for nothing. Avoid the nightmare scenario of your well-intentioned plans falling apart. 

The following is a list of some considerations which your attorney should be addressing when deciding how they are going to conduct a remote will execution ceremony:
    1. Your attorney must draft a will that conforms to your intentions.
    2. You must execute your will in the presence of two witnesses, or your signature must be acknowledged to the witnesses after it has already been affixed. Your remote execution procedure must qualify as "in the presence of". 
    3. Your witnesses must sign the will itself within thirty days of one another. 
    4. Your witnesses should sign affidavits attesting to the proper execution of your will. 
    5. Your attorney should sign an attorney draftsman's affidavit. 
    6. Your witnesses' affidavits should be notarized, and your attorney draftsman's affidavit should be notarized. 
    7. Your original signature, the witnesses' original signatures, the attorney draftsman's original signature, and the notary's original signatures should all be combined into one original document which can be presented for probate. 

If you think your attorney can do all of that for $100.00, it's probably too good to be true.


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