Estate planning essentials to know

Naeisha Rose Associate Editor

“Be prepared” is not just the Boy Scout motto or a line in the Disney movie “The Lion King,” but a means to an end for a person to safeguard his or her assets during retirement, in case of incapacity or after death.

One of the best ways to manage, preserve or distribute one’s properties, prized possessions or resources to either leverage for the future or pass them on to loved ones, while minimizing confusion, is estate planning.

For many seniors 62 and older, leveraging one’s home via a reverse mortgage for a lump sum of cash, monthly payments or a line of credit to retire on may seem ideal, but could have drawbacks.

“That I would not ever recommend,” said Jeanette Wilson, a realtor and notary from Springfield Gardens. “If anything, I would definitely seek out an attorney and get everything in writing to put in order. You may never know what may happen. You always want to be prepared for the abnormal ... We have to learn to be prepared a different way.”

Before making any major decisions like obtaining a reverse mortgage, Wilson suggests that seniors share their plans with family members or friends they are close with.

“For seniors, I would definitely make sure that there is more than one person who is aware about what is going on with their house,” Wilson told the Chronicle. “As they get older, people have a tendency to take advantage of them. As far as estate planning in general, see an attorney, put everything in your will, put it on paper and make sure somebody knows where those documents are and have multiple copies of them ...

“Also, after a certain age, you definitely should have more than one person on the deed. That also helps with fraud. Make sure it’s someone you truly trust ... There’s a lot of equity there.”

To get more advice from Wilson, call her at (646) 335-6161.

Michael Corcoran, an attorney with Queens Legal Services, shared Wilson’s sentiment.

“For seniors who are interested in a reverse mortgage, it is really important that they have an attorney they can trust to evaluate the mortgage product they might be entering into,” said Corcoran, an attorney for QLS’ Homeowner and Consumer Rights Project, which protects clients from foreclosure. “There is a lot of good reasons for seniors to take out a reverse mortgage, but in my practice, I would say a vast majority of seniors ... did not adequately understand the terms of the mortgage or the implications of what they are doing.”

When an older person dies, the entire amount he or she owes on the reverse mortgage will have to be paid by their heirs or the property would go into foreclosure.

“We are routinely introduced to family members with modest or no income, who have been living in their home with their parents for their entire life, and now that the parent has died, they are responsible for paying off a large mortgage and they don’t have the resources to do it. Sometimes that is the decision the parent made and sometimes they didn’t realize that would happen,” Corcoran told the Chronicle. “It is not the heir’s debt to pay, but the debt has to be paid through the sale of the house.”

If not represented by a real estate attorney with a specialty in closings, a senior can get taken advantage by a reverse mortgage broker who gives him or her a higher interest rate than there should be or push for a lump sum payment that is less than the maximum amount that one is allowed to borrow.

“Depending on what your circumstances are, you can take out a reverse mortgage with a maximum borrowing amount of $500,000, but actually borrow no money after closing and just have a credit line you can access in the future if you need to pay for any specific things you might want. Work with an attorney that has nothing to gain with you taking out a reverse mortgage.”

Lawyers at QLS have a significant number of clients who have been foreclosed on because of a family member’s passing and lack of estate planning.

“We have tried to develop programming to specifically address some of the unique issues that these families face in terms of trying to take a title in the name of the deceased homeowner and to put it into the name of the deceased’s heirs, the legacies or devisees named in a will,” Corcoran said. “We have not secured funding to provide estate planning services, but it is without question that every single family that we meet with, whether the homeowner is alive or dead, should be engaging in estate planning because the failure to do estate planning results in a myriad of unintended consequences.”

A lack of knowledge surrounding the state’s inheritance laws could result in the erosion of wealth that families have built up in their homes, said the attorney.

“In New York, when a person dies without a will their assets transfer in accordance with the state’s inheritance laws,” he added. “There is a hierarchy for who is entitled to inherit.”

In the Big Apple, half of one’s assets will go to their spouse and the other half to their children, Corcoran said. If there are no children, everything will go to the spouse or vice versa.

“If any of the children die, but had children if they predecease the homeowner, their children will step into the deceased child’s shoe,” he said.

If an individual is estranged from a child or spouse before passing and didn’t want that per- son to inherit anything, but preferred someone else to distribute their home, in the absence of a will that does not matter, added Corcoran.

“Saying my parent would have never wanted this is of no legal import,” he added.

Partition sales are another means of heirs ending up without their stated stake in a home because of a loved one’s failure to change or add a name on a deed before passing.

Corcoran says there are real estate investors who intentionally seek to buy a stake in a home that has passed on to several heirs by seeking out one or more of the family members who are willing to sell their interest and then they force a sale of the property, even if the other relatives are still living there.

“This is not illegal,” said the attorney. “This is the perfect example of the failure to do any estate planning.”

In one egregious case involving a disabled woman, he said her father and uncle purchased a home 50 years ago, but since her uncle’s death, five of his children and additional grandchildren have sold their interest in the property for $15,500. By forcing the sale of the house, the investor will receive $350,000. The city Department of Finance says the home is worth $700,000, said Corcoran.

People should start estate planning as early as 18 or when they come into any assets, he added.

“It’s never too early to start planning,” he said.

QLS can be reached at (347) 592-2215.

The city Department of Aging agrees that the sooner one starts estate planning the better it will be for an individual later in life. The process will also reduce stress for a person’s family when they die.

“There are different types of powers of attorney that serve different needs,” said a spokesman for the DFTA.

Other forms of estate planning include living wills, an advanced care directive; and a health proxy, a document indicating a person who is aware of how someone would like to receive care. Then there are guardianships, which is when someone petitions the court to be assigned to make decisions on all aspects of an individual’s life due to the person being unable to adequately care for himself or herself or manage his or her affairs.

Older residents can call Aging Connect at (212) 244-6469 to receive a referral to pro bono legal services to help with a long-term estate plan.

Yan Lian Kuang-Maoga is a 9/11 victim’s compensation attorney, who also specializes in elder law, Medicaid planning, trust and estates planning, probate, estate administration and special needs planning.

“When we talk to seniors, they are concerned about two big issues,” Kuang-Maoga said: Where their assets are going to go after they die and how they will protect their assets if they need homecare or nursing homecare.

Kuang-Maoga recommends that elderly people sit down and spend time deciding how they plan to distribute their assets via a will or who will take care of them if they are incapacitated but alive.

“In addition to setting up a will, we also need to set up paperwork so our family can take care of us if we get sick or at a nursing home,” she said. “We still have to live and we still have bills to pay. The legal documents for a power of attorney or healthcare proxy are very important, in addition to having a will.”

Unfortunately, there is no health insurance for homecare or nursing homecare, according to the lawyer.

“Nursing homecare is $15,000 to $17,000 a month per person,” Kuang-Maoga said. “For homecare, it is going to be at least $25 an hour for an aide. “Long-term, the cost is tremendous.”

Nursing homecare and homecare aides can be paid via Medicaid if a person is lowincome, she said.

“We can plan for it,” Kuang-Maoga said. “We can put the house in a trust ... There are many trust options.”

An irrevocable trust is the best option for those on Medicaid, according to the attorney.

“It says between the senior and a trusted family, I no longer own the house, but I have the right to live here until I pass, then you guys can sell the house or decide how to divide the house,” she said. “A revocable trust is just for estate planning purposes to help avoid the court process after a person dies when there is a trust.”

For more advice from Kuang-Maoga, people can email her at lk@pittabaione.com.

Estate planning is always a good idea for consumers, said Queens District Attorney Melinda Katz, but to avoid potential fraud, never sign a document that was not read and always take the time to have paperwork explained to you by someone you trust.

“You should never feel pressured or rushed to sign any documents,” Katz said via email. “If you do, that is a warning sign that this may be a scam.”

Anyone who thinks he or she is a victim of fraud can reach Katz’s office at frauds@queensda.org or (718) 286-6673. Q

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