New Wage Liability for General Contractors and Construction Managers in New York

Michael FleishmanBlog Post

Effective January 4, 2022, New York State amended its wage theft laws which makes contractors and construction managers jointly and severally liable for wages and benefits owed to employees of its subcontractors.

Specifically, pursuant to New York Labor Law Section 198-e (NYLL 198-e) general contractors, prime contractors, and construction managers (hereinafter “contractors”) that hire a subcontractor directly are now strictly liable for that subcontractor’s failure to pay its employees standard wages, prevailing wages, and overtime. Accordingly, wage actions may be brought directly against the contractor by employees of the subcontractor, as well as a union, another representative acting on the employee’s behalf, or the New York State Attorney General’s office. The limitation period for such claims against the contractor is three (3) years, while the general limitation period for wage claims is six (6) years.

Notably, the law applies to contracts entered into, renewed, modified, or amended with a subcontractor on or after the effective date of the new law. Thus, any amendment or revisions to applicable construction contracts which occur after January 4, 2022, even changes in the contract unrelated to issues concerning subcontractors or wages, may trigger liability for contractors. That said, the law excludes from the definition of “construction contracts”:

a) home improvement contracts with the owner of an occupied dwelling and
b) construction contracts for one or two family dwelling units, except where such contractor or contracts involve the construction of more than ten (10) units at one project site.

In connection with the aforementioned changes to the New York Labor Law, and to ensure that wage and hour records of subcontractors are properly maintained, Section 756-f of the New York General Business Law (GBL 756-f) now requires subcontractors, at a contractor’s request, to provide certified payroll records containing:

  • Information regarding wages and benefits paid to workers;
  • The names of all subcontractors’ employees, and those of any sub-subcontractors working on the project, including the names of all those designated as independent contractors;
  • The anticipated contract start date and duration of the work under the subcontract;
  • The name of the local union(s) with whom the subcontractor and each sub-subcontractor is a signatory contractor (if applicable);
  • The name, address, e-mail address, and phone number at which the subcontractor can be reached.

Given these new changes to labor law making general contractors and other upstream contractors strictly liable for the subcontractor’s failure to pay its employees proper wages and benefits, contractors may consider withholding payment from subcontractors who fail to provide the above referenced information for each employee on the job site, and to consider such compliance in selecting subcontractors for future projects. In that regard, contractors should take the following precautions and safeguards to monitor their subcontractors’ compliance with paying their employees proper wages and benefits in order to avoid potential liability by the contractor:

  • Contractors should document all requests to their subcontractors for employee information, as well as any responses to such requests. Contracts with subcontractors should clearly state that subcontractors must provide all relevant employee wage information as outlined in GBL 756-f.
  • While NYLL 198-e prohibits contracts that prevents the subcontractors’ employees from exercising their rights to collect lost wages and benefits, contractors should include in all their subcontracts provisions that subcontractors shall indemnify the contractor for all damages brought an employee of the subcontractor against the contractor under NYLL 198-e, including for interest, liquidated damages, attorneys fees and costs, resulting from the subcontractor’s failure to comply with wages and benefits due its employees under the New York Labor Law.
  • Contractors should retain their subcontractors’ employee and related records for a minimum of three (3) years following completion of the operative construction contract.

As you can see, these recent changes to the New York Labor law can have significant implications with respect to a contractor’s potential liability relating to wage claims by the subcontractor’s employees. Thus, general contractors, construction managers, and other upstream contractors should immediately review their contracts and relationships with subcontractors to ensure compliance with this new law. If you would like further guidance in that regard, please do not hesitate to contact Michael Fleishman, Esq. at Goetz Fitzpatrick, LLP to discuss further.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

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Michael Fleishman

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Goetz Fitzpatrick LLP Establishes Case Law Relating to Construction Manager as Agent for Owner

Goetz FitzpatrickBlog Post

Goetz Fitzpatrick, LLP recently prevailed on a cross-motion to compel a construction manager (CM) as agent for a disclosed principal to arbitrate the Third-Party claims of a trade contractor client, even though direct privity of contract between the CM and trade contractor was questionable.

Where the CM acts as agent for a disclosed principal (the owner), standard language in the construction management agreement (CMA) usually provides:

Notwithstanding anything to the contrary which may be set forth in this Agreement, it is expressly acknowledged and agreed that the Construction Manager is acting as agent for Owner and all benefits of this Agreement shall run to the Owner as if the Owner were a signatory hereto.

It is also standard form that trade contracts entered into between the CM as agent for owner are signed by the “[the CM] As Agent for Owner.”

The obvious purpose of such language and manner of execution of the CMA is to attempt to shield the CM as agent from any direct claims and/or liability asserted by any of the trade contractors since it is long-established that an agent which signs a contract on behalf of a known principal cannot be held to have made a commitment in its individual capacity. (See e.g., Shoenthal v. Bernstein, 276 A.D. 200, 205, 93 N.Y.S.2d 187 (1st Dept 1949), appeal dismissed 276 A.D. 831, 93 N.Y.S.2d 908). This principle has been consistently applied in the context of arbitration. (See e.g. Matter of Metamorphosis Constr. Corp. v. Glekel, 247 A.D.2d 231, 668 N.Y.S.2d 594 (1st Dept 1998).

However, that consistency is no longer a constant, thanks to the compelling arguments provided to the Commercial Division of the New York County Supreme Court by attorneys from Goetz Fitzpatrick.

In Sciame Construction, LLC v. Accurate Specialty Metal Fabricators, Inc., NY Co. Index No. 655666/2021, Sciame Construction LLC (“Sciame”) commenced an arbitration “on behalf of owner” against Accurate Specialty Metal Fabricators, Inc. (“Accurate”). Accurate, in turn, asserted Third-Party claims against Sciame for breach of the trade contract. Sciame then filed a Petition to stay the Third-Party claims in arbitration based on the premise that Sciame was merely an agent for a disclosed principal and, as such, there was no contract between Sciame and Accurate which would subject Sciame to arbitrate the claims directly with Accurate.

Goetz Fitzpatrick filed a cross-motion to the Sciame Petition and argued, among other things, that Sciame cannot avoid arbitration of Accurate’s Third-Party claims because Sciame obtained direct benefits from both the construction management agreement and the subcontract, both of which contained arbitration clauses. In other words, Sciame was stopped from avoiding arbitration. The Court agreed and specifically ruled that “even if Sciame was not in privity with Accurate due to it having entered into the Subcontract as agent of Owner, Sciame received direct benefits from the CMA and the Subcontract – serving as the Construction Manager and being entitled to a Construction Services Fee based on work performed by Accurate under the CMA – such that it is estopped from disputing that it is subject to the broad arbitration clauses [citations omitted].”

In short, there is now clear case law from the Commercial Division, New York County, that a CM as agent for owner cannot avoid arbitration of direct claims asserted by a trade contractor where the CM has received a benefit from the CMA and/or trade contract.

The attorneys on the case were Donald J. Carbone and Gerard S. Strain.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

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Goetz Fitzpatrick



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The New iPhone Feature for Your Digital Legacy

Alison Arden BesunderBlog Post

A (relatively) new concept has entered the realm of estate planning: a digital legacy. With so much of your information stored in the cloud, where will it go when you die? Will everybody have access to it? Will anybody have access to it? In the WSJ+ webcast earlier this year, Joanna Stern interviews Goetz Fitzpatrick Partner and Trusts & Estates attorney Alison Arden Besunder about how to prepare your digital legacy. Recently, Joanna and Alison revisit the topic in Joanna’s Wall Street Journal article, “The iPhone Feature to Turn on Before You Die”. This article gives step-by-step instructions on how to set up this new legacy setting in iOS 15.2 that allows you to specify who can access the information in your iCloud if you die.

And how do you know if you’re on iOS 15.2? Go to Settings > General > About and look at your software version. If you’re not on the latest version, you can easily update by going to Settings > General > Software Update and agreeing to the terms.

As 2022 approaches, it’s time to make a New Year’s Resolution to get your estate in order. You can start today by setting your legacy contacts in your iPhone, then calling the Trusts & Estates team at Goetz Fitzpatrick LLP at 212.695.8100 ext. 28 to set up a consultation.

Explore more articles from our Trusts & Estates team:

Selecting Your Beneficiaries

What to Expect When Meeting with an Estate Planning Attorney

The Perfect New Year’s Resolution: Developing Your Estate Plan

SLATs: The Hot New Estate Planning Technique for 2021

Now is the Perfect Time to Add a GRAT to Your Estate Plan

Author

Alison Arden Besunder

Alison Arden Besunder, Esq. is Chair of the Trusts & Estates Planning and Fiduciary Litigation group at Goetz Fitzpatrick. She has extensive experience and focuses her practice in the areas of Trusts & Estate Planning, Guardianship, Estate Litigation, Commercial Litigation, Elder Law, and Business Succession Planning.

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On the Mark | A Podcast Series that Explores the Effect of COVID-19 On Various Industries

Howard RubinInsight

On the Mark is a podcast series that explores the effect the COVID-19 pandemic has had on various businesses and how companies can survive, thrive, and sometimes experience even greater success. Hosted by Howard M. Rubin, Esq., Senior Partner at Goetz Fitzpatrick LLP and sponsored by The Strategic Forum.

Author

Howard Rubin

Howard Rubin provides general counsel for his clients, representing startups and closely held companies in the real estate, commercial, and construction areas.

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Construction Delays Due to COVID—Who Bears the Costs?

Benjamin BlumBlog Post

You’re a general contractor who signed an AIA form contract to perform certain specified work at a construction project. Then, the calendar turns to March 2020. A global pandemic rears its head and each day, the government puts more and more restrictions in place regarding your work. Then, the construction project that your company is working on gets shut down. Months later, once the construction industry is allowed to re-commence its work, your work is subject to new governmental restrictions and protocols which, in turn, increase both labor and material costs (such as costs for personal protective equipment and other new equipment to “monitor” potential outbreaks at a project).

These costs were clearly not anticipated when you signed your contract pre-pandemic. What do you do now? Since you signed an AIA form contract, look to the force majeure clause. Article 8.3.1 of the AIA form contract sets forth the force majeure provision which states “[i]f the Contractor is delayed at any time in the commencement or progress of the Work…..by labor disputes, fire, unusual delay in deliveries, unavoidable casualties or other causes beyond the Contractor’s control; or by delay authorized by the Owner; or by other causes that the Owner determines may justify delay, then the Contract Time shall be extended by Change Order for such reasonable time as the Owner may determine.” Such a claim must be made in accordance with Article 15 of the AIA form contract – which would allow for an extension of time to complete the project due to delay.

But, this clause is silent as to damages. Section 8.3.3 of the standard form contract does not state that an extension of time is the sole remedy for delays – it in fact states that the force majeure provision “does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents”.

However, if you want to submit a claim for damages due to COVID-19 related costs – any claim that is submitted must strictly comply with the terms of the AIA form contract which requires that any claim for “delay/disruption damages” must be submitted in detail with the nature, extent, and amount of the damages and must include all relevant documentation. Moreover, the claim for these damages must be submitted within the time period set forth in AIA Article 8 and AIA Article 15, which requires that claims must be initiated within ten days after the occurrence of the event giving rise to such claim or within ten days after the contractor first recognizes the condition, whichever is later. This provision is strictly enforced – a failure to give such notice in a timely fashion would constitute a waiver and release of any and all claims arising from such event and would be a waiver of any right to recovery for “delay/disruption” damages.

Under Section 3.2.4 of the AIA form contract, one would argue that they are entitled to damages for these items because “additional costs or time is involved because of clarifications or instructions”. Section 3.9.2.3 of the AIA form contract actually mandates the issuance of a change order as a result of increased costs and requires that the amount of the change order shall reflect (1) the difference between actual costs and the allowances under Section 3.9.2.1 and (2) changes in Contractor’s costs under Section 3.9.2.2.

Although Section 8.3 of the AIA form contract clearly allows for extensions of time as a result of COVID-19, it does not explicitly entitle a contractor to damages for delay, i.e., the increased costs incurred as a result of the delay, and thus, the contractor would be likely required to bear the costs during the delay period until the parties adjudicate a claim for delay damages.

But – what if you want to claim that you’re entitled to an equitable adjustment for the increased costs under your AIA form contract due to pandemic costs? In reviewing a claim for increased costs by a government contractor, the Civilian Board of Contract Appeals allowed an equitable adjustment of a contract price for increased “outbreak” costs in Valerie Lewis Janitorial v. Dep’t of Veterans Affairs, CBCA 4026, 2020 WL 2507940 (May 5, 2020).  In that matter, the contractor was permitted damages for increased costs due to new and more stringent protocols which increased the time and resources needed to meet new requirements, for example, cleaning. The “more stringent “ protocols resulted in cost increases for labor—costs which were not originally contemplated at the time that the contract was made. One could argue that the AIA form contract allows for a claim for these increased COVID-19 costs due to the equitable adjustment doctrine in addition to the other provisions of the contract allowing for potential recovery.

However, as set forth above, one needs to strictly comply with the notice of claim provisions contained within the contract. A failure to strictly comply will bar the recovery of these costs – with you, as the contractor, bearing the increased costs due to these new protocols.

Please feel free to contact the attorneys of the Construction Group at Goetz Fitzpatrick LLP at 212.695.8100 to discuss any questions you may have regarding your commercial construction contract.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

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Benjamin Blum

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Shelf Life of Judgments and Confessions of Judgment

Goetz FitzpatrickBlog Post

In commercial actions, the relief sought is almost always a monetary judgment. Often, years are spent pursuing a case in hopes of getting the best outcome for your client. If and when your client finally obtains that judgment, both counsel and the client should be mindful of how long those judgments last. A monetary judgment is valid for twenty years and acts as a lien for the first ten years. CPLR § 211(b). Importantly, the lien (and likely the judgment) can be extended after the first ten years. CPLR § 5014; see In re Vinieris, 391 B.R. 707, 711 (Bankr. S.D.N.Y. 2008); Anchor Sav. Bank v. Parker, 10 Misc. 3d 1074(A) at *1 (Sup. Ct. Nassau Cnty 2006).

Confessions of Judgment (“COJ”), which are generally used in conjunction with settlement agreements, have a different shelf life. COJs are entered “upon an affidavit executed by the defendant,” CPLR § 3218(a), not by a court. A COJ admits liability and is often used in circumstances where the settlement agreement allows for payment over a period of time. If the defendant defaults on the settlement agreement and fails to pay the amount owed, then the plaintiff can obtain a judgment by filing the COJ.

A plaintiff has three years to file the COJ with the county clerk before it expires. Once filed with the county clerk, a judgment is entered and it becomes valid for twenty years. However, a Confession of Judgment cannot be otherwise extended and so failing to file within the three years can be a fatal mistake. Parties can negotiate around this three-year deadline by placing language in the settlement agreement requiring the defendant to execute successive COJs. For example, if the parties agree that the settlement should be paid monthly between 2021 and 2026 and the defendant executes the first affidavit in July 2021, such language requires the defendant to execute a new affidavit prior to July 2024.

While these affidavits are a useful tool, keep in mind that the plaintiff must file the Confession of Judgment with the county clerk where the defendant resided at the time the affidavit was executed or filed. CPLR § 3218(b). Consequently, a COJ can only be filed against a party that was a New York resident either at the time the affidavit was executed or at the time of filing. If the defendant was never a New York resident, then a COJ is not a viable option.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

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Goetz Fitzpatrick



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The Implications of a Proposed New York State Heirs Tax

Christopher CanfieldBlog Post

New York State faces a budget deficit of $15 billion over the next two fiscal years. In what is proclaimed to be an effort to avoid cutting funding for education and social services programs, New York State legislators in both chambers have proposed an “Heirs Tax,” which they claim will raise $8 billion annually. This is a companion bill to proposed legislation that would tax New York’s top earners, a move Governor Cuomo has opposed, arguing it will force New York’s wealthiest residents to relocate, thereby depriving New York of base tax revenue on which the state depends.

New York’s current estate tax law provides that inheritances up to $5.93 million are exempt from state estate taxes. There is a “cliff tax” that subjects the entirety of the Estate to state estate taxes if the taxable estate exceeds 105% of the exemption. The proposed Heirs Tax bill seeks to drastically reduce that threshold and also add a gift tax.  New York currently does not have a gift tax, although it does “claw back” gifts made within three years of a decedent’s estate for the purpose of calculating the gross estate. Proposals in the Heirs Tax bill include:

  • imposing a NYS tax beginning at 5% on estates over $250,000
    • retirement and pensions would be exempt
    • a $2 million primary residence exclusion would be allowed for estates under $5 Million
  • levying a marginal tax of 50% on assets over $10 Million
  • instituting a gift tax
    • 5% on gifts from $50,000 to $100,000
    • 50% on gifts exceeding $2 Million

It should be noted that the NYS Senate and Assembly have recently released separate bills calling for an increase to the estate tax rates but with no reference to the more substantial changes referred to above. All of these changes face uncertain prospects for passage but warrant watching.

The current New York State estate tax exemption remains in place until January 1, 2022, however, any new legislation could be retroactive. In addition, the federal estate tax exemption is at an historic high ($11.7 million per person; $23.4 million per couple with portability). This summary is provided for informational purposes only and is not intended to be relied on as legal advice, which depends on each individual situation. If one of your objectives is preserving more of your assets for future generations and avoiding it being eroded by estate taxes, and you would like to discuss strategies that will protect your assets now and in the future, contact us at 212.695.8100 ext. 289.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

Author

Christopher Canfield

Christopher Canfield has been practicing for 25 years in the fields of trusts and estates and related tax law.

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Author

Alison Arden Besunder

Alison Arden Besunder, Esq. is Chair of the Trusts & Estates Planning and Fiduciary Litigation group at Goetz Fitzpatrick. She has extensive experience and focuses her practice in the areas of Trusts & Estate Planning, Guardianship, Estate Litigation, Commercial Litigation, Elder Law, and Business Succession Planning.

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Selecting Your Beneficiaries

Andrew P. HerreraBlog Post

Selecting your beneficiaries is one of the most important parts of your estate plan. A beneficiary of your estate is the recipient of all or a portion of your estate. Beneficiaries of your estate can include family, friends, charities, or trusts.

What to consider when selecting a beneficiary
Often times, clients struggle with a few key questions when considering who to select as the beneficiaries of their estates, such as:

  • Who should I list as a beneficiary/beneficiaries?
  • How much should I leave each beneficiary?
  • Should the bequest be stated in the will and paid outright or held in trust for my beneficiaries?

Other things to consider in terms of the beneficiaries are the laws of the state which control the distributions, the estate tax implications, if any, and the needs of a beneficiary.

Have a backup plan

You should also think of who you want as an alternate beneficiary. An alternate beneficiary should be selected in the event the primary beneficiary predeceases you. If the primary beneficiary predeceased you and you did not name an alternate beneficiary, then the bequest lapses and becomes invalid, and will either pass to the residuary beneficiaries or by intestacy as deemed by the court.

Assets passing by intestacy means that the inheritance will pass pursuant to the law. The applicable statute in New York is Estates, Powers & Trusts Law (EPTL) Section 4-1.1. This section provides that the inheritance will pass to the closest family member, e.g., spouse, children, parents.

Laws dictating beneficiaries

Individuals that require special consideration are surviving spouses and minors. In New York, a surviving spouse is protected by the law and must receive a portion of an estate. The applicable statute in New York is EPTL Section 5-1.1-A. This section provides that the surviving spouse has a personal right of election which provides that the surviving spouse shall take the greater of:

  • Fifty Thousand Dollars ($50,000.00)
  • One-third (1/3) of the net estate.

The same does not apply to children. There is no law requiring that an individual include their children as a beneficiary of their estate. When minor children are named as beneficiaries, they can receive their share outright or in trust. New York does not allow a minor to own property outright and requires the appointment of a Guardian of the Property to manage the property until the minor reaches the age of 18. Our office encourages clients to have all amounts paid to minors to be held in-trust until a specific age which avoids the additional time and expense of needing a Guardian of the Property.

Please feel free to contact the attorneys of the Trusts & Estates Group at Goetz Fitzpatrick LLP at 212.695.8100 ext. 289 to discuss any questions you may have regarding creating or updating your estate plan.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

Author

Andrew P. Herrera

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Author

Alison Arden Besunder

Alison Arden Besunder, Esq. is Chair of the Trusts & Estates Planning and Fiduciary Litigation group at Goetz Fitzpatrick. She has extensive experience and focuses her practice in the areas of Trusts & Estate Planning, Guardianship, Estate Litigation, Commercial Litigation, Elder Law, and Business Succession Planning.

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What to Expect When Meeting with an Estate Planning Attorney

Alison Arden BesunderBlog Post

Are you unsure of what to expect during the estate planning process? Read this Q&A, prompted by a response we got from “The Perfect New Year’s Resolution: Developing your Estate Plan.”

Q: I am making it my New Year’s resolution to meet with an estate planning attorney but the reason I’ve been putting it off in the first place is that I have no idea what I need to prepare in advance to make the meeting efficient and successful. What kinds of documents do I need to bring with me? What types of questions will the attorney ask?

A: If you have made the decision to meet with an estate planner, congratulations. You will thank yourself in the future. Now, before your meeting, there are some questions you should be prepared to answer. These are some of the major points you will want to consider regarding your estate.

Guardians and Alternate Guardians of Minor Children Who do you want to serve as guardian should something happen to you? Who do you want to appoint as successor guardian if the primary guardian is unable, unwilling, or unavailable to serve? Do you want the guardian’s spouse or another individual to serve as co-guardian? Do you want a different guardian to be appointed for different children? Should a bond be required? Where do you want your minor children to live? Do you want your children to live in their guardian’s home, or would you like your guardian and their family to move into your home? In either case, will there be a need for capital to make improvements to accommodate or house the expanded family unit?

Trustee(s) and Successor Trustee(s) for Minors’ Trust Minors’ Trustees are effectively guardians of the property of your minor children. They oversee the money left to your children if they are still minors (usually when both spouses predecease). The Trustee does not need to be the same person as the guardian, and there are certain merits to keeping them separate, i.e., ensuring checks and balances on the money and distributions, and ensuring that both sides of a family are in contact after the parents are deceased. The guardian is usually someone who you feel can impart the most important values to your children, while the Trustee is someone who can handle money, will be responsible, and have a long-term view of preserving principal while balanced against providing for the minor children.

Age at Which Minor Children Receive Money If both spouses pass away, you need to specify at what age your children will receive distributions of remaining principal. While the Trustee usually has the discretion to distribute both income and principal for the health, education, maintenance, and support for the minors (a fairly broad standard), you need to state at which age the minor children will receive what is left. One common setup is to allow for 100% of the remainder (or their share) at the age of 21, 25, 30, or 35. Another is to allow for one third each at age 25, 30, and 35. Another is to allow for half at age of 25 and the other half at 30 if the child graduates from an (accredited) college or graduate school, otherwise at 30 and 35.

Executors Spouses are usually named executors for the other’s will, as well as successors. An exception can be in second marriages where there are children of the first marriage and the Testator wants to ensure that the assets pass to the children of the first marriage after the death of the second spouse. Things to consider: Do you want your executor to be compensated? Do you want to impose a limitation on the amount of compensation they should receive? Keep in mind that being an Executor (or Trustee) can entail a lot of work – it is essentially managing the aspects of your personal life that you manage now, such as balancing bank accounts and maintaining oversight over assets and satisfying liabilities. Should your Executor be required to post a bond? (i.e., insurance if the Executor loses or absconds with money).

Wills and Credit Shelter Trusts Each spouse can establish a Credit Shelter Trust in his or her will up to the maximum amount that can be exempt from federal estate taxes; currently $5.34 million for 2014 and adjusted annually for inflation. A Credit Shelter Trust can also help save on state estate taxes. This Trust is typically funded at death with the surviving spouse being named the co-Trustee. Each spouse must choose a co-Trustee that the other will feel comfortable serving with. As with any fiduciary, you should choose someone who is responsible and a “prudent” investor, but who will also make distributions to provide for the spouse. You want to choose a “friendly” Trustee that will cooperate, so that if your spouse needs access to principal for a reasonable purpose, the Trustee will not deny that distribution.

Insurance Trust The insurance trust, or irrevocable life insurance trust (ILIT), is often used to set aside cash proceeds that can be used to pay estate taxes, as the life insurance policy should be exempt from the taxable estate of the decedent. Once placed in the trust, the insured person no longer owns the policy, and it will be managed by the Trustee on behalf of the policy beneficiaries when the insured person dies. Again, as with choosing any fiduciary for a living or testamentary trust, you should pick a Trustee that is prudent but not unreasonable, and that the surviving spouse can work with after you die.

Advance Directive (also called Power of Attorney, Health Care Proxy) These are documents that are effective during your lifetime. Spouses usually name each other to make decisions for them, with successor agents to act in the event that the spouse is unable. While you can name one or more co-agents on the Power of Attorney, only one person can act at a time under a Health Care Proxy in New York. Successor agents are critical and should be identified, together with their appropriate contact information.

Living Will A living will is a directive authorizing your agent to withhold certain life-sustaining measures (such as artificial respiration, CPR, resuscitation) in the event that you are suffering from a condition from which you will not recover. Absence of a Living Will does not mean that the agent cannot make those decisions, however, the Living Will gives the health care agent the comfort, assurance, and authority to make those decisions in the event of a dispute with another family member or the hospital or health care professionals.

Special Bequests You should identify any specific items such as art, valuable books, collections, jewelry, heirlooms, or outright monetary bequests that you want to be given to certain individuals, and specify them in your will. New York does not recognize personal property memoranda that are outside the will. It is at the discretion of the Executor whether to honor them, but are non-binding.

Taker of Last Resort and Common Disaster Clause If both spouses and children pass away, where will the money go? Typically it goes to parents, siblings, nieces, and nephews. However, consider the situation of those people – leaving money to your parents could disrupt their own long-term planning needs and any Medicaid or other government benefits they might be receiving.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

Author

Alison Arden Besunder

Alison Arden Besunder, Esq. is Chair of the Trusts & Estates Planning and Fiduciary Litigation group at Goetz Fitzpatrick. She has extensive experience and focuses her practice in the areas of Trusts & Estate Planning, Guardianship, Estate Litigation, Commercial Litigation, Elder Law, and Business Succession Planning.

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The Perfect New Year’s Resolution: Developing your Estate Plan

Andrew P. HerreraBlog Post

What is your New Year’s resolution? Is it to lose weight? Is it to exercise more? Is it to save more money? What about preparing an estate plan? That’s something that’s been on a lot of people’s lists for quite some time but they never seem to get there. Oftentimes that’s because they’re unsure of what is actually involved. This blog addresses the fundamentals involved in creating an estate plan.

Key questions to consider when creating an estate plan are:

  • What does my estate consist of?
  • Who should I consult regarding my estate plan?
  • What estate planning documents do I need?

What does my estate consist of?

Your estate includes all property owned by you less your debts and liabilities. In order to properly plan your estate and assist your attorney in preparing the necessary estate planning documents, you should prepare an inventory of your assets, which would include the following:

  1. Description and location of the assets;
  2. Ownership interest;
  3. Value of the asset (cost/market value);
  4. Debts/liens; and
  5. Beneficiary designation, if applicable.

Preparing and periodically updating your inventory of assets will help avoid issues and minimize time and money spent in locating and marshalling your assets after your death.

Who should I consult regarding my estate plan?

 There are four key individuals that are involved in creating an estate plan:

  1. Your attorney is the individual responsible for the overall creation of your estate plan.
  2. Your accountant may be contacted to provide financial information needed to properly identify your assets and liabilities.
  3. The beneficiaries are the individuals who will inherit your assets upon your death.
  4. The fiduciary/executor is the individual in charge of your estate who will be working with your attorney in marshalling your assets, paying your debts, and distributing your assets to the beneficiaries.

What estate planning documents do I need?

The essential estate plan includes a Last Will and Testament, Power of Attorney, and a Health Care Proxy. In addition, there are a number of other advance directives that should be included in order to make your wishes clear.

  • Living Will
  • HIPAA Disclosure
  • Nomination of Guardian
  • Appointment of Agent for Disposition of Remains

Please feel free to contact the attorneys of the Trusts & Estates Group at Goetz Fitzpatrick LLP at 212.695.8100 ext. 289 to discuss any questions you may have regarding creating or updating your estate plan.

Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram

Author

Andrew P. Herrera

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Author

Alison Arden Besunder

Alison Arden Besunder, Esq. is Chair of the Trusts & Estates Planning and Fiduciary Litigation group at Goetz Fitzpatrick. She has extensive experience and focuses her practice in the areas of Trusts & Estate Planning, Guardianship, Estate Litigation, Commercial Litigation, Elder Law, and Business Succession Planning.

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