Long Island Personal Injury Lawyer

Navigating Estate Complexities: Expert Insights on Will Planning and Settlements

Feb 9, 2024 | Featured Articles, Uncategorized

We will discuss several cases regarding personal injury and what happens to your assets after a person passes away or perhaps they lack an heir. Attorney William Bird highlights the complications arising in an estate without a will, exemplified by a young heir facing unexpected legal and financial hurdles. Meanwhile, Elan Wurtzel discusses structured settlements and annuities as tools for minors, ensuring tax-free funds growth until adulthood. This foresight can yield substantial educational and housing benefits upon maturity. Elan’s insights reveal the nuanced considerations necessary in estate planning and personal injury settlements, underscoring the importance of informed legal guidance to navigate these complex situations.

Bill, please tell us about your firm and what you do.

William Bird: Certainly, my name is William Bird. I am a principal at Murtha & Bird, P.C.. We’re located in Westbury, New York. Our primary focus is estate planning and elder care. I assist clients with crafting their estate plans, including wills, trusts, or a combination of both. For my older clients, it involves structuring their assets to shield them from Medicaid liens and to qualify for Medicaid assistance.

Elan, can you summarize the case involving the elderly man injured due to negligent home care service?

Elan Wurtzel: A few years back, we represented a client who was injured and, post-hospitalization, was discharged to his home. He was expected to receive home care and skilled nursing care. He had diabetes, and regrettably, he developed an infection that the home healthcare providers failed to manage appropriately. As a result, he lost his leg and then subsequently, passed away. Consequently, a lawsuit was initiated. The case was eventually settled. When death occurs, court approval is necessary to resolve the case, and involves a two-tier process.

First, you must gain the court’s approval to settle, showing that the settlement is fair and reasonable. Secondly, permission from the surrogate court — the court responsible for estates — is required to distribute the settlement funds to the rightful heirs. In this instance, the gentleman wasn’t married. He had a daughter born out of wedlock and several siblings and nieces & nephews that survived him.

There was a legal dispute over the rightful recipient of the settlement funds — his out-of-wedlock daughter or his other surviving relatives. The complexity arose partly because some relatives contested paternity due to the absence of his name on his daughter’s birth certificate.

William Bird: To Elan’s point, there was a 2018 case, not identical in detail but involving an individual who perished during 9/11. The question was whether a child born out of wedlock was indeed the decedent’s. Given the decedent’s demise on 9/11, his genetic material was available, which allowed the court to authorize a genetic marker test for the daughter to prove her lineage. This was crucial in that case.

However, proving such a relationship can be challenging without sufficient resources, especially if the biological mother has passed or if the father’s name isn’t on the birth certificate. If you can not establish that connection, as Elan mentioned, the estate goes to the next of kin — first the parents of the decedent, and if they are deceased, then to the nieces and nephews if there are no living siblings.

It’s vital to have all your pertinent documents or even affidavits of heirship, where a disinterested party can attest to the family relationship. But disputes can arise, as in Elan’s case, when someone else claims entitlement to the settlement.

Elan Wurtzel: Absolutely! A complication in our case was that many relatives were born and resided outside New York State. Acquiring birth certificates and other documents from different states proved challenging. Ultimately, we were successful, and our client received the entire settlement. We often advise clients to draft wills in anticipation of such family disputes and health-related uncertainties. This ensures that should their estate receive settlement funds, the will dictates the distribution, regardless of the family disputes.

William Bird: It’s not specifically regarding settlement proceeds, but clarity is vital when discussing family members with clients. Omitting someone can cause more issues, as an overlooked estranged family member might challenge the decedent’s capacity. I advise clients to mention everyone, even if they choose not to leave anything to specific individuals. This prevents any claims of oversight or incapacity. As Elan suggested, earmarking settlement proceeds in a will is prudent, alongside acknowledging all family members to avoid disputes from unexpected claimants.

Regarding the probate court’s role, do they have to go through probate for all of this?

Elan Wurtzel: It is a two-step process requiring approval. The court that handled the original case—the Supreme Court—rules or determines whether the settlement is fair and reasonable. So, the amount of the settlement is approved by the Supreme Court. Then you have to go to the Surrogate Court to get permission to distribute the funds to the heirs, and that’s where these kinds of issues commonly arise. It’s not an everyday problem, but it does occur.

We settled another case recently involving a young man, under 30 years old, riding a motorcycle on a local highway at night on Long Island. He was riding with a friend who was following him in the right-hand lane when a car in the middle lane, without signaling, turned into their lane, clipped his bike. He lost control of his bike and ended up crashing into a tree and was killed. He had a one-year-old son and a partner–but he was not married to her. His partner hired us to represent the estate in a negligence claim. We successfully obtained all the insurance funds available and obtained court permission to settle.

The deceased and partner lived together for many years as husband and wife but never legally married. Under the law, she’s considered a stranger to him; the only legal heir and the sole recipient of the settlement funds was their young son. The loss of the father and partner was tragic, and the financial impact on this family unit was significant.

In such situations, it’s too late once the accident has happened; the facts are set. But Bill, how would you advise a client in a relationship where they’re not married about what happens if one passes away, and how can the unmarried partner protect themselves?

William Bird: This scenario is increasingly common. I always stress to clients that once there’s a change in family circumstances, such as having a child, you should create an estate plan. Regrettably, half the people in America don’t have an estate plan, meaning they don’t have a trust. In the case of Elan’s client, you have not only the loss of a child’s parent, but now you’ve also created a situation where a settlement must be managed. If not appropriately structured, the child will receive the entirety of the settlement at age 18. I’ve seen cases where attorneys, with the help of a parent, structure the settlement into annuity payments so the child receives it at a more mature age, like 25.

However, if it’s a lump sum, at 18, they are considered adults under the law, especially in New York, and will receive that sum. Whether it’s $500,000, $2 million, or more, you’re handing life-changing money to a young person who may not be responsible, potentially creating more problems. For the partner, New York law doesn’t recognize long-term partnerships. So, individuals need to have a will stating, “This is my partner; we’re not legally married, but I want them to receive a certain percentage of my estate,” to prevent any disputes. I recently had a case involving a doctor who passed away. He had a partner, but they were never married. The house was solely in his name. The estate decided to sell the house, disregarding the partner’s situation. Therefore, it’s crucial to have insurance policies where the partner is named as a beneficiary or to have a will or trust to provide for them, even if there’s no marriage.

Elan Wurtzel: That’s an interesting point. We’ve handled cases where clients passed away intestate, meaning without a will, and the funds were distributed according to New York law. I recall a case with several children as beneficiaries, one of whom had no relationship with the parent, hadn’t spoken or seen them in years, yet was treated equally under the law with the other siblings who had a close relationship. It might seem unfair that a sibling who has been out of the picture for 30 years receives an equal share.

William Bird: We tell clients they can’t blame the sibling who receives this windfall. It’s the responsibility of the parents to plan accordingly, and if they don’t, the law intervenes without regard for the nature of their relationships. Although there have been cases where a parent has been absent or abandoned the family, and there are provisions to disinherit such a parent, it’s a complicated process to prove. However, if a parent has had no contact for an extended period and had the opportunity to do so, that could be a strong argument for disinheritance.

Elan Wurtzel: Another case that we have worked on involved a 50-year-old man working as a construction laborer. Before the accident, he earned over $100,000 a year doing dangerous work on buildings under construction. He was involved in a major project in downtown Manhattan. He would start work early, around five in the morning, ensuring that each floor being built was free of debris and installing and maintaining netting around the open walls of the floor in order to prevent objects from falling and potentially injuring people walking on the streets below.

Unfortunately, he had an accident where he slipped and fell due to a large oil slick on the darkened floor, which led to a traumatic brain injury, among other physical injuries. He required brain surgery, and five years post-accident, he struggled with memory and could no longer work or focus, even at a computer terminal. The defendant’s vocational rehab expert, surprisingly, concluded that he was incapable of working in any capacity. We settled his case for a substantial amount of money and our client netted “seven figures” as part of the settlement.

At the time, he was a Medicaid beneficiary, and we had to consider how to protect his settlement while addressing his wish to spend it without restrictions. He had previously received a significant workers’ compensation settlement of over a hundred thousand dollars, which he spent within six months; we wanted to help him preserve this settlement for the long term.

William Bird: These situations are standard. The age of the client is significant here because he is 50. When a client under 65 receives a settlement while on Medicaid, they can establish a self-settled supplemental needs trust or a special needs trust. In Elan’s case, this would allow the client to retain Medicaid benefits without losing them due to the settlement. The funds in the trust can be used for non-covered expenses, like buying a television or traveling. However, any remaining funds would revert to the Medicaid agency upon their death. It’s also crucial that if the client were over 65, they wouldn’t qualify for such a trust, but there are alternatives like pooled trusts through non-profit organizations. It’s also worth noting that many clients think a large settlement will last indefinitely, but it can be quickly depleted without proper management. Additionally, having a power of attorney is essential to manage these affairs without incurring additional legal fees.

Elan Wurtzel: One aspect of personal injury practice is the significant overlap with other fields of law. We consistently deal with workers’ compensation and Medicare. Why highlight these? In instances where these entities have expended funds for the benefit of the injured party—whether it’s for workers’ compensation or Medicare medical expenses—they are entitled to reimbursement from any settlement proceeds.

For example, New York law mandates that if you know your client is a Medicaid beneficiary, you must notify the Medicaid agency when initiating a lawsuit. This notification triggers the county-based Medicaid agency to assert a lien on the settlement proceeds, which correlates to the medical care they’ve funded due to the individual’s injury.

Any Medicare beneficiary must repay Medicare for the medical costs incurred, which can be substantial. Take workers’ compensation: I have a case where a client has been receiving benefits for over five years. To date, workers’ compensation has disbursed almost $200,000 in benefits, which must be reimbursed. Typically, these agencies must accept a reduction of one-third of the amount they’ve paid. So if workers’ compensation or Medicare paid $150,000, they would need to accept $100,000, and sometimes, there can be further reductions.

Anyone over 65 is a Medicare beneficiary. Attorneys and insurance carriers must notify Medicare of potential liens. Upon notification, Medicare establishes a file and collects data on all related claims to linked to your injury. This is how they determine the expenses. We have access to this information. If an insurance company settles without resolving the Medicare lien, guess who’s liable for that payment? If they’re not around, Medicare will seek repayment from the attorneys and insurance companies. Everyone is careful to resolve these liens when a case is settled.

The same principle applies to workers’ compensation. Several adverse outcomes can ensue if you settle with a case without satisfying the lien; the attorney or insurance company might be held financially responsible. Iit can adversely affect the client’s eligibility for future benefits. So, we must be aware of these matters and address them as part of any settlement or case resolution.

William Bird: Yeah, a lot happens—all the time. I’m handling an estate right now where a young woman passed away. She left behind a teenage daughter, 18 years old, and the woman didn’t have a will. So, we had to manage an administration where this 18-year-old daughter became the administrator of her mother’s estate. She has no idea what she’s doing because she’s only 18. A few years later, she wants to sell the family home.

They had another attorney bring a wrongful death action against the hospital. They’ve now asked me to sell the house. When the report came up, lo and behold, there was a Medicaid hospital lien for $200,000 on the family’s estate. They were puzzled and asked, ‘Where did this come from?’ I inquired if their attorney had informed them that the hospital would file a lien to be reimbursed because of the action brought against them. They had no idea, assuming it would only be resolved once the personal injury case was satisfied. But that’s not just a judgment; it’s a lien.

As I said, it’s got to be negotiated, but it has to be paid back. They’re going to need more than the total value of the house. They thought everything would be settled with the personal injury claim, but they needed to be corrected.

Elan Wurtzel: I want to highlight one last point because Bill mentioned annuities and structured settlements. They are excellent tools for young children or any injured party under 18. The court must approve the settlement, and then the funds must be preserved for the child’s benefit until they turn 18. If you have a child who was injured at the age of five, you’re looking at more than 13 years of setting money aside. You could put it in a regular bank account and earn minimal interest. Or you could opt for a structured settlement, where the original settlement amount is placed in an annuity, and the money can’t be touched until the child turns 18; in the annuity, the settlement fund grows and all of the growth is tax free–unlike growth in a regular bank account–which is all taxable.

We had a case where about a hundred thousand dollars was invested in an annuity. That hundred thousand was expected to at least double over 15 years. When this child comes of age, they will have a substantial nest egg that can be used for college, buying a house, or other expenses.

The money that grows in an annuity is entirely tax-free. So, compared to a taxable interest-earning bank account, an annuity is a remarkable tool to generate additional benefits for young people. The benefits for those older than 18 depend on the interest rates and returns. However, for young individuals, it’s an important tool to have.

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