Meet Jane and Mark who are New York State residents. They met in college 45 years ago, married and had 2 children, Jennifer and Peter. Jane worked for 20 years as a school teacher after her youngest entered grade school and has retired. Mark became an engineer and worked until he retired at age 70.
The children, Jennifer and Peter are married, but Jane and Mark are not close to their son and daughter-in-law. In fact, their son, Peter, has become somewhat estranged because of the poor relationship between his wife and his parents and as a result, Jane and Mark don't see their 3 grandchildren as often as they would like. Their daughter, Jennifer, made some poor choices and not only has had difficulty with earning a living but has also been in and out of a number of relationships and is currently going through a divorce.
Jane and Mark, have some legal documents that they acquired shortly after Jennifer, their youngest, was born. The documents in their possession are 35 years old and consist of a Will and Power of Attorney. The attorney who prepared these documents was a general practice attorney and the documents he prepared gave everything to the spouse and if the spouse per-deceased, then everything went to the children equally. Mark and Jane did not have the original Will in their possession. About 10 years ago, Jane was facing a surgical procedure, so she had a Health Care Proxy created at that time. Mark doesn't see the need for a Health Care Proxy since he has never been sick in his life. They had talked about updating the documents but every time they would decide to do something, life would get in the way. In fact, the attorney who created the documents is no longer in practice.
Financially, Jane and Mark have a mixture of assets. In the early years they were concerned with paying bills and school loans and never formed a cohesive plan for the future. As a result, they took advice from friends, family members and co-workers until Mark was 65 and then they worried about being comfortable in retirement. Jane remembered that the person who serviced her retirement plan had some ideas about "rolling over" those retirement funds so she and Mark met with the representative and he suggested an annuity. They owned their house jointly, a summer home jointly and various bank accounts jointly. These all totaled about $1,200,000.00. Jane had about $800,000 in her retirement account from being a teacher, and Mark had about $900,000 in his retirement account. On top of that they each had $250,000 life insurance policies naming each other as beneficiaries and Mark had a "fun" investment account with which he dabbled in the stock market and it had about $150,000 in it. All told they had $1,200,000 jointly, Jane had $1,050,000 of various funds in her name and Mark had $1,300,000 worth of assets in his name for a grand total of $4,5550,000.
Just as they were finally deciding to have everything reviewed Mark and Jane were in a severe car accident, the result of which was Mark suffered a traumatic brain injury and Jane was hospitalized with her jaw wired due to the injuries to her face. So who is in charge of Mark and Jane and their "stuff"?
Jane, by writing, asks Mark's treating doctor to tell her about Mark's condition. The doctor politely asks if Jane had a Health Care Proxy and discovers that Mark never believed in them. The doctor explains to Jane that he is bound by the Federal HIPAA laws (the so-called privacy laws) and he cannot legally discuss Mark's case with her and that she has no authority to give directives as to his care. Jane is devastated because she knows that if the only thing keeping Mark alive are the machines, then he would choose to have them turned off rather than be kept alive. Finally, the doctor determines there is no hope for Mark, and after meeting with hospital administrators comes to Jane, who is being visited by a distressed son Peter, and asks if they would consent to removing the machines, in essence, killing Mark. Peter takes the news badly and informs the doctor that his Dad was a fighter and would never give up and refuses permission. Jane is still wired and doing poorly. The doctor leaves and Mark's family is left with the agony of indecision.
A few hours later, the doctor comes back and informs the family that Mark passed away due to his injuries.
Suddenly Jane is caught up in a whirlwind of details dealing with the passing of a spouse. She is asked what is to be done with the body, who will be in charge of the funeral arrangements, who is going to pay the bills and when, and it seems that every time she responds to one request five more come at her. Peter offers to help, but Jane isn't sure where Mark kept all the papers and suddenly realizes she doesn't really know what she and Mark had. She is feeling lost. A few days later, Mark is buried, after the funeral parlor has received its payment. Now the attention turns to the assets.
Peter suggests she gets an attorney to help her and he calls the attorney who recently helped him with a traffic ticket and with whom he had been discussing the possibility of filing a bankruptcy. The attorney agrees to help and during the discussion with Jane and Peter tells them he will be charging 5% of the gross estate as his fee and explains that this is standard in the industry. Since they have no other point of reference, the two agree to the fee. The attorney asks Peter and Jane to gather statements for all the assets in Mark's name and to get him the original Will. He also asks for a retainer payment of $15,000 against the final fee which they pay.
Peter goes to the house and after hunting through Mark's papers finds the copy of the Will and statements for the insurance policies, the retirement account and the joint bank accounts. He cannot find anything for the "fun" account. He calls the attorneys office and leaves a message. After hearing nothing back from the attorney he goes to the attorney's office and drops of what he has found. A few weeks later, the attorney calls and tells him that the copy of the Will is not sufficient and that he needs the original Will. Peter goes to the address where the original attorney was located and finds that the attorney is no longer there and he cannot get the original Will. Peter leaves a phone message at the attorney's office explaining what he found. By this time Jane has been released from the hospital and Peter feels he in longer needed.
A few weeks later the attorney calls and tells Jane that since there is no original Will, he will have to go through a proceeding in court to have the copy accepted instead. Since the attorney would have to make this special appearance he explains he will have to bill some more and requests another check. By this time, six or seven weeks have passed. The attorney gets the copy approved and the court then requires he sends a Waiver letter to Mark's extended family so that everybody is in agreement with the terms of the Will and that they have no interest in the assets. Unfortunately, a few family member do not respond to the letter, so a second request goes out. Another 8 weeks pass but finally the judge decides there are no contests, so he issues the orders that allow all of Mark's personal assets to be put into Jane's name. The life insurance and retirement accounts passed to Jane outside of the probate court's jurisdiction because she was the beneficiary on those accounts, yet for the computation of the fees, those items were included in the gross estate. The attorney's final bill was 5% of the $1,300,000 in his name plus the extra for the proving of the copy of the Will.
Jane had not been doing well and after all the stress suffered a heart attack and passed away. Peter and Jennifer argue about the funeral arrangements and Jennifer wants to know when she will get any money since she is in the middle of a divorce. After checking, Peter discovers that Mark was the beneficiary of the life insurance policy and the retirement funds but Jane had never put a contingent beneficiary. As a result, the companies tell him that Jane's estate will receive the money and that he has to go to probate court before they will release anything.
The State of New York makes a claim for 16.7% of the estate as an estate tax, which is paid.
Peter goes to the lawyer who handled his father's estate and again faces a fee of 5%. 18 months later, the judge issues the final order of distribution and Jennifer and Peter get their inheritance. Jennifer's divorce is not finalized, and her soon to be husband's lawyer argues that the inheritance should be included in the equitable distribution. Peter had listened to his attorney, and filed for bankruptcy a few months after his mother died. The end result, Jennifer lost half her inheritance and Peter lost $190,000 of his inheritance, the amount owed to his creditors when he filed bankruptcy.
Did Mark and Jane know that this is how their story would unfold? Is this how you would want your story to unfold? Or would you rather know that with proper planning, Mark and Jane are in charge of all decisions regarding their health care and the protection of their assets whether they are alive and well, or alive an not well. In addition, they could have avoided the court system, the payment of New York estate taxes, the payment of 10% of the estate in attorney's fees and that both Jennifer and Peter would have kept all their inheritance no matter what happened in their lives.
