Legal Preparedness in the Time of Coronavirus

If you need to draft or revise your Will, or draft or revise your medical directives or Power of Attorney, please contact my law office today (212-222-4175). We can meet over Zoom, work on drafts virtually, and I can notarize your documents electronically. #EstatePlanning #COVID19

Asserting Rights Obtained through Inheritance from a Foreign Decedent

In New York, individuals who wish to assert rights obtained through inheritance from a foreign decedent without first obtaining the required documentation may likely find that they do not have standing to pursue their claims in New York courts without first obtaining required letters or filing an affidavit. While this additional proof does not guarantee standing, it does allow for the presentation of a more complete record to be made upon which the court can make a determination of standing.

In 1935, Paul von Mendelssohn–Bartholdy, a descendant of the composer Felix Mendelsshon and a member of a prominent German Jewish family, was forced to sell under duress a Picasso painting “The Absinthe Drinker (Angel Ferdinand de Soto)” to the Nazis.  In 1995, Sotheby’s sold the painting to The Andrew Lloyd Webber Art Foundation at an open auction.  The Foundation then sought to sell the painting in 2006 at auction at Christie’s in New York. Julius Schoeps, a German national and a great-nephew of Bartholdy and an heir to 12.5% of the estate, filed suit against the Foundation in the United States District Court for the Southern District of New York, seeking temporary restraining orders to stop the sale of the painting and preventing the Foundation from taking the painting out of the United States (Schoeps v. Andrew Lloyd Webber Art Foundation, 66 A.D.3d 137, 884 N.Y.S.2d 396, 2009 N.Y. Slip Op. 06155)

For its part, the Foundation claimed that Schoeps lacked standing in New York to pursue his claim because he had not been appointed a personal representative of the estate pursuant to Estates, Powers and Trusts Law §§ 11–3.2(b) and 13–3.5.  Schoeps argued that, under German law, ownership rights vest immediately in the heirs, making the appointment of a personal representative of the estate unnecessary.

Section 11–3.2(b) of the Estates, Powers and Trusts Law provides, in pertinent part, that an action for injury to person or property belonging to a decedent may be maintained by a personal representative of the decedent.  EPTL 13–3.5(a)(1) provides that a personal representative of a foreign decedent who seeks to maintain a cause of action in New York must, within 10 days after commencing the action, file a copy of the letters issued to the representative, duly authenticated as prescribed by CPLR 4542. If the action is not brought by a personal representative, the individual is required to submit an affidavit setting forth the facts which authorize him to act for the decedent, along with such other proof as the court may require.

For his part, Schoeps relied on an outlier case, Roques v. Grosjean, that was nonetheless on point.  (Roques v. Grosjean, 66 N.Y.S.2d 348, [Sup. Ct., N.Y. County 1946]).  Roques remains the only New York decision holding that letters are not needed by a nonresident to maintain a cause of action in New York, when the law of the plaintiff’s domicile vests title to personal property in the heirs at the time of death. Such was the case for Schoeps.  The Roques court had based its holding in part on a Ninth Circuit decision in California, holding that the public administrator was not a necessary party to an action for fraud by the heirs of a French resident and California property owner (see Anglo California Natl. Bank of San Francisco v. Lazard, 106 F.2d 693 [1939], cert. denied 308 U.S. 624, 60 S.Ct. 379, 84 L.Ed. 521 [1939] ).  However, the Ninth Circuit added a footnote that laid out the appropriate method for an heir to a French estate to establish his/her standing, namely by filing all testamentary instruments with a Notary, and then having the Notary execute a written instrument known as an “acte de notariété” (id. at 699 n. 2). A proceeding before a French Notary was still necessary for standing.

In Schoeps, the court denied Schoeps standing to pursue his claim against the Foundation because he had not complied with the procedures set out in either Estates, Powers and Trusts Law §§ 11–3.2(b) or 13–3.5.

Schoeps and the Andrew Lloyd Webber Foundation reached an out-of-court settlement that allowed the foundation to retain ownership of the painting and to be free to sell the work.  On 23 June 2010, the painting was sold at auction for £34.7 million.

If you would like to discuss your own personal situation with me, you can get a free 30-minute consultation simply by filling out this contact form.   I will get back to you promptly.

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When Estate Planning Goes Awry: Ambiguous Beneficiary Designations on Testamentary Substitutes

Beneficiary designations appear most often in insurance contracts, retirement plans, and annuity contracts.  These contracts are known as  testamentary substitutes because they pass outside of the probate estate. The insured or annuitant is asked to designate both the primary beneficiary(ies) and the contingent beneficiaries.  We will examine a case where an issue of construction with respect to the primary beneficiaries required Surrogate Court intervention.

On March 10, 1989, Archibald Foley executed a Will in which he divided the residuary estate as follows:  “…shall be divided into six (6) equal shares․ one each of those shares to each of my brothers and/or sisters who shall survive me and one share to be divided equally between my niece, Carmel Foley, and my nephew, Lawrence Foley, or their survivor.   If neither of them survive me or if any of my brothers and sisters shall fail to survive me, then I direct such share as would have gone to them to be divided equally amongst those brothers and sisters who do survive me.”

On March 13, 1989, Dr. Foley changed the beneficiary designation on four 20-year guaranteed retirement annuities with a combined date-of-death value of $275,872.75 to read:   “to be divided equally, share & share alike among my living brothers and sisters, and one share to be divided equally between my niece (Carmel Foley) & nephew Lawrence Foley.’  Then on March 20, 1989, Foley designated the primary beneficiary under his defined contribution retirement plan with a date-of-death value of $709,380.04 to read:  “to be divided in equal shares among my living brothers and sisters-and an equal share to be divided between my niece Carmel Foley and my nephew Lawrence Foley.” He did not designate contingent beneficiaries under either the retirement annuities or the defined contribution retirement plan.  Foley’s Will was admitted to probate on April 7, 1998 (In re Estate of Foley, 181 Misc. 2d 258, 693 N.Y.S.2d 843, 1999 N.Y. Misc. LEXIS 241 (N.Y. Sur. Ct. May 24, 1999)) [http://caselaw.findlaw.com/ny-surrogates-court/1444422.html]

By the time Archibald Foley died, all of the primary beneficiaries under the annuities and the retirement plan had died except for his sister Edna and his niece Carmel.  The executor of Foley’s Will sought a judicial ruling as to how to distribute the proceeds, particularly the 1/4 share to his predeceased nephew Lawrence.

As it turned out, this was an issue of first impression for the New York County Surrogate’s Court.  ” No authority has been discovered which addresses whether a predeceased beneficiary’s share under a retirement plan or annuity contracts passes to the estate of decedent or to the surviving beneficiaries.” Basing its analysis on prior analogous cases (The New York City Fire Department Life insurance Fund and totten trust accounts), the court reasoned that where beneficiaries were designated as individuals (Carmel and Lawrence) and not as a class (my living brothers and sisters), then they took as tenants in common and not joint tenants with right of survivorship. “Here, Mr. Foley did not expressly declare a joint tenancy in the beneficiary designation of either the retirement plan or the annuities.   Nor does the Court find the evidence that Mr. Foley intended for Lawrence Foley’s proceeds to pass to the surviving beneficiary, Carmel Foley, to be sufficiently clear.  Thus, the Court is required to hold that a tenancy in common has been created.  [See EPTL 6-2.2(a) ]. Accordingly, Lawrence Foley’s share of the proceeds from the retirement plan and the annuities are to be distributed to the estate of Mr. Foley.”  The Will then governed the distribution of Lawrence’s share, being the only document with express instructions as to predeceased relatives.  Thus a non-probate asset became a testamentary asset subject to probate.

The court was sensitive to the fact that this holding may have disrupted the intent of Mr. Foley’s estate plan, but in the absence of express declarations and named contingent beneficiaries, and the ambiguity of the language used to create the primary beneficiary designations, this was the only possible result.  Yet the court was aware that this was an anomalous result: “In the absence of legislation reversing the general common law presumption in the context of retirement plans, annuity contracts and other testamentary substitutes, modern thinking as to presumed intent cannot be extended to these assets.   This anomaly merits consideration and therefore is referred to the EPTL-SCPA Advisory Committee for such action as it deems appropriate.”

The lesson here is clear:  the drafting of beneficiary designations on testamentary substitutes needs to be done with great care.  Moreover, you should safeguard even your testamentary substitutes by having a Will with clear bequest, beneficiary, and residuary estate language.

If you would like to discuss your own personal situation with me, you can get a free 30-minute consultation simply by filling out this contact form.   I will get back to you promptly.

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Recovery of Lost or Stolen Art: The Case of the Missing Lipchitz

Jacques Lipchitz was a Lithuanian-born Cubist sculptor best known for abstract “transparent” sculptures.  He moved to Paris in 1909 to study at the Ecole des Beaux-Arts and thereafter joined a group of artist that included Pablo Picasso and Amedeo Modigliani.  He became a French citizen in 1924.  When the Nazis began to occupy Paris during WWII, Lipchitz who was Jewish fled France to escape deportation to the death camps.  He arrived in the US as an asylum seeker and eventually settled in 1949 in New York State in the town of Hastings-on-Hudson in Westchester County.

In 1928-29 while still in Paris, Lipchitz sculpted an erotic piece originally titled “The Couple.”  Considered shocking when it was first exhibited in Paris in 1929, Lipchitz change the title to the more ambiguous “The Cry” in order to later exhibit the sculpture in Amsterdam.  The sculpture kept this title when Lipchitz imported it to the US in order to avoid confiscation as pornography by American customs authorities.

In 1948, Lipchitz married Yulla Halberstadt, also a sculptor, with whom he had his only child Lolya. After Lipchitz died in 1973, his wife Yulla took up with a self-styled psychic and music producer Biond Fury (who also once owned John Lennon’s white suit that Lennon wore on the Abbey Road album cover) and lived with him for the last 17 years of her life until 2003.

In 1997 Yulla made an inter vivos gift to Fury of “The Cry” by inscribing the following handwritten message on the back of a photo of the sculpture:   “I gave this sculpture, ‘The Cry’ to my good friend, Biond Fury in appreciation for all he did for me during my long illness. With love and warm wishes for a Happy Future, Yulla Lipchitz/Oct. 2, 1997, New York.”  Fury subsequently sold his interest in “The Cry” in 2005 to Toronto art collector David Mirvish for $220,000.  Mirvish then sought delivery of the sculpture to Toronto.

Unbeknownst to both Fury and Mirvish, Hanno Mott, Yulla’s son by a first marriage and her executor, had loaned the sculpture to the Tuilleries Gardens in Paris in 1998, unaware of the gift.  Neither Fury nor Mirvish had any idea that the sculpture was no longer in New York.  Mott further claimed that he had sold the sculpture to the Marlborough International Fine Art Establishment, along with two other sculptures, for $1 million. 

To determine the rightful ownership of “The Cry,” Mott commenced an action in New York County Surrogate’s Court against Mirvish.   Mirvish  filed a cross motion for summary judgment asking that the court find the decedent’s inter vivos gift to be valid.  Mirvish also sued Mott in Supreme Court for replevin and conversion to recover possession of the sculpture.

The Surrogate’s Court ruled in favor of Mirvich, finding that the inter vivos gift to Fury had been completed, and that Fury thus has the right to sell his interest to Mirvish.  Mott appealed the decision and the Appellate Division, First Department found in Mott’s favor, finding that Mirvish’s claims in replevin and conversion were time-barred by the three-year Statute of Limitations and that the accrual on the Statute of Limitations began on the date that the conversion tool place, that is, on the date when the sculpture left New York for the Tuilleries Gardens in 1998.  In essence, the court found that Mirvish was too late in filing his claims.  The fact that neither Fury nor Mirvish had any knowledge that “The Cry” had been transported to Paris was immaterial. Mirvish appealed.

The New York Court of Appeals disagreed with the First Department.  The Court found that Fury’s possession of the photo with the handwritten note by Yulla meant that Yulla’s inter vivos gift to Fury had been “delivered.”  Thus all of the elements of an inter vivos gift had been satisfied:  a present transfer; a delivery of the gift, and acceptance by Fury.  Fury thus had every right to sell his interest to Mirvish who was indeed the rightful owner of the sculpture.

What lessons can we learn from this case?  First, one’s executor should be made aware of any inter vivos gifts, including artworks.  Mott, who was an attorney, would not on behalf of the Lipchitz family have loaned the sculpture or sold it to Marlborough had he been made aware of the gift. Second, to avoid having a claim for lost or stolen art dismissed because of a statute of limitations, it is best to file a claim for replevin and conversion as soon as the artwork is found missing.  And third, a buyer of artwork should examine the provenance of the artwork carefully, noticing any gaps or suspicious ownership claims.  

If you would like to discuss your own personal situation with me, if lost or stolen artwork is part of an estate,  or you would like to make an inter vivos gift  tailored to your needs, you can get a free 30-minute consultation simply by filling out this contact form. I will get back to you promptly.

Alexander Hamilton, Trusts and Estate Attorney: Part 1

When we think of Alexander Hamilton, we think of him as George Washington’s aide-de-camp, as the writer of the majority of the Federalist Papers, as this country’s first Secretary of the Treasury, and the founder of the New York Post. Less well known is Hamilton’s career as an attorney and the lasting impact that he had as a practicing lawyer, a practicing estates lawyer.

After leaving public service, Hamilton established his law practice in New York. Well-known for his pro bono work with destitute women and orphans, Hamilton was also an astute corporate and trusts and estates attorney. Because of his brilliance in these domains, he wrote a Last Will and Testament that not only created the wealthiest and most successful charitable bequest in New York history, the Sailors’ Snug Harbor for aging sailors, but the trust he created would later establish the right of the State to create corporations in response to charitable bequests in Wills. An ardent advocate of individual property rights, Hamilton drafted a Will that not only withstood legislative debate but also a legal challenge by an heir of the testator that would end up in the US Supreme Court.

What made this trust and estates practice unique was that Hamilton was carving out new legal ground when it came to estates. Prior to the revolution, all lands had been the property of the Crown. The original grantee would then sell off parcels of land under his original grant. The Treaty of Paris (1783) that ended the Revolutionary War also put an end of any residuary rights held by the Crown, but this only meant that a landowner in the United States no longer had any allegiance to the British Crown. Land ownership per se was not addressed by the Treaty.

During the colonial period in New York City, the merchant class under both the Dutch and the English held land by occupying it and forcibly holding it. Some of the large estates were owned by Loyalists (or Tories) who remained loyal to the British Crown during the Revolution. After the Revolution, under the leadership of New York’s first governor (and future vice president under both Thomas Jefferson and James Madison) George Clinton, the legislature passed three laws that effectively confiscated the property of the former Loyalists and forfeited their rights to their land: the Confiscation Act (1779), the Citation Act (1782), and the Trespass Act (1783). Hamilton opposed these laws as flouting fundamental democratic property rights, and he defended Loyalists against these takings by the State. All the while, he was looking for a way to the State to legitimately transfer land without the use of confiscation or eminent domain. The opportunity presented itself with the drafting of the Last Will and Testament of Robert Richard Randall.

The story will continue in Part 2 of this story…

The Presumption of Due Execution:The Importance of an Attorney-supervised Will Execution Ceremony

In a contested probate proceeding, proponents of the Last Will and Testament being offered for probate must submit evidence establishing a prima facie case for probate.  Those who object to the probate must raise a material issue of fact.  One such challenge concerns the due execution of the Will.

These days, there are any number of websites that can be used to create generic Last Wills and Testaments.   While these options may seem more cost-effective than hiring an attorney to draft a Will, in the end they may prove to be very costly options, especially in those cases where there is a Will contest.  In addition to not having the benefit of the advice of an attorney knowledgeable in New York’s Estates, Powers, and Trusts Law for the preparation of this very important document, a person availing himself/herself of these low-cost options also deprives himself/herself of something invaluable:  the presumption of due execution.

How does this work in practice?  When an attorney drafts a Will, s/he will then arrange for a Will execution ceremony with the testator and the attesting witnesses present.  The attorney not only supervises the Will execution, but explains the legal significance ceremony to the attesting witnesses and asks the testator certain questions in front of the witnesses to ascertain certain facts being attested to by the witnesses and to establish the publication requirement.  Where the execution ceremony of a Will is supervised by the attorney who drafted the Will, the presumption of due execution exists.

The presumption of due execution creates a significant deterrent to someone who contest a Will offered to probate. In Matter of Leach, 3 AD3d 763, 764 (2004), the testator had a brother with whom he was not close.  The testator, perhaps anticipating a Will contest, hired an attorney to draft his Will. As part of his regular preparation for the drafting and execution of a Will, the attorney whom the testator retained gathered information about  the testator’s family, his assets, and how he wanted to dispose of those assets

When the testator died and his Will was offered for probate, his brother contested the probate alleging, among other things, a lack of due execution.   Both witnesses, the attorney who drafted the Will, and his secretary were deposed.  The attorney testified as to as to his usual routine for the preparation and execution of a Will, and to the facts and circumstances surrounding the execution of the Will.  The Surrogate’s Court of Chenango County admitted the Will to probate, and the brother appealed.

The Appellate Division, Third Department, affirmed the Surrogate’s Court’s ruling because, among other things, the petitioner had met her burden of proof of due execution;  “When an attorney drafts a will and supervises its execution, a presumption of regularity is raised that the will was properly executed.”   Because the Will had been drafted by the attorney who then supervised its execution, the presumption of due execution existed and the petition was able to meet her burden of proof on the issue of due execution.  The burden of proof then shifted to the respondent to produce admissible evidence creating a triable issue of fact.  Arguments are not enough to meet this burden of proof.

Will contests are an expensive proposition for those offering a Will to probate.  When a Will is not prepared by an attorney and that attorney does not supervise its execution, then that Will does not carry with it the presumption of due execution.  Hiring an attorney to draft this exceedingly important document may just be the wisest expenditure that you can make.  You will ensure that those left behind have the the presumption of due execution in their arsenal should they need to defend your Last Will and Testament.

The Basquiat Estate: Trumping The Dead Man’s Statute with The Federal Rules of Evidence?

Jean-Michel Basquiat was one of the most gifted artists of the late 20th century, raising graffiti art from its street roots to the pinnacle of fine art and in the process redefining Neo-Expressionism.  His untimely death from a drug overdose in 1988 stunned the art world.  He was 27 years old.  According to Phoebe Hoban in her book Basquiat:  A Quick Killing in Art, the auction house Christie’s determined that the artist had left behind a prodigious collection of  917 drawings, 25 sketchbooks, 85 prints, and 171 paintings.

Basquiat died without a Will (intestate).  At the time of his death, his parents Gerard and Matilde were estranged, but not divorced.  New York’s EPTL § 4-1.1 (a) (4) states that, where a person dies without a Will and is survived by one or both parents, the whole of the estate goes to the surviving parent or parents.  Gerard Basquiat began the long process of probating the estate, a process slowed by a number of lawsuits against the estate.  Matilde Basquiat died in November of 2008, leaving Gerard as the sole administrator of their son’s valuable collection.

In 1993, an art dealer named Michelle Rosenfeld sued the Basquiat Estate for allegedly failing to deliver three paintings that had been purchased from Jean-Michel pursuant to a partly written and partly oral purchase agreement.   At trial, defense counsel for the Basquiat Estate affirmatively waived his objection based on New York’s Dead Man’s Statute (CPLR  § 4519) to Michelle Rosenfeld’s testimony concerning her conversations with the deceased Basquiat.  This affirmative waiver came after the judge in the case said that he would instruct the jury about the Dead Man’s Statute if Basquiat chose to invoke it.    Rosenfeld proceeded to testify about her conversations with Basquiat. 

Rosenfeld testified that she had met Jean-Michel Basquiat at his apartment on 25 October 1982.  She said that during their meeting, Jean-Michel had agreed to sell her three paintings, identified in her complaint, for $4,000 each.  Jean-Michel then asked her for a 10% deposit.  Rosenfeld returned ten days later with $1,000 in cash whereupon she asked for a receipt.  According to Rosenfeld, Jean-Michel then set upon writing a “contract” in crayon that identified the three paintings and recited the agreed-upon price and the deposit.  The dated document was signed by both Basquiat and Rosenfeld (Rosenfeld v. Basquiat, 78 F.3d 84).

That trial ended in a hung jury. Rosenfeld filed for a new trial in the United States District Court for the Southern District of New York.  In a pretrial conference, the parties were asked to brief the court regarding the threshold question as to the applicability of the Dead Man’s Statute (Rosenfeld v. Basquiat, 866 F. Supp. 790; 1994 U.S. Dist. LEXIS 15662).  The court had to decide three preliminary questions:

“1. Does Basquiat’s waiver of his objection based on CPLR 4519 at the first trial, allow Rosenfeld to testify about her transactions with the decedent at the retrial?

2. Is Rosenfeld entitled to a jury instruction concerning the effect of CPLR 4519, if I exclude her live testimony?

3. Is Rosenfeld’s prior trial testimony admissible in evidence at the retrial?” Id. at 792.

The district court judge reasoned that the Federal Rules of Evidence (FRE) and specifically FRE 804(b)(1) governed hearsay, and not the Dead Man’s Statute. FRE 804(b)(1) “provides that a declarant is ‘unavailable’ if ‘exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of the declarant’s statement.'”  Id. at 793.  As a result, the judge ruled that if Basquiat asserted the Dead Man’s Statute, which the judge termed a “privilege” (FRE 804(a)(1)),  then Rosenfeld would become “unavailable” within the meaning of FRE 804(b)(1).  The judge would then admit Rosenfeld’s prior testimony, and so instruct the jury.

At the second trial, the trial court allowed the reading of Rosenfeld’s prior testimony from the first trial to the jury.  The jury found in Rosenfeld’s favor:  “The jury in the second trial reached a verdict in favor of Rosenfeld, returning answers to special interrogatories as follows: Basquiat entered into a written agreement in October 1982 to sell the three paintings to Rosenfeld for $12,000; although there was no initial agreement establishing a delivery date, they made a separate oral agreement approximately ten days later setting the delivery date; a reasonable delivery date was October 1987; Rosenfeld first learned of the breach in August 1988, when Jean-Michel Basquiat died; and the market price of the three works at that time was $395,000.” (Rosenfeld v. Basquiat, 78 F.3d 84).  The jury awarded Rosenfeld $384,000, the market value of the paintings minus the remainder of the purchase price, plus $217,301.92 in interest.  The Basquiat Estate appealed to the Second Circuit Court of Appeals.

The Second Circuit Court of Appeals distinguished the hearsay exceptions under the Federal Rules of Evidence from the Dead Man’s Statute.  The court said that the hearsay rule (Rule 802) is a rule of exclusion that makes certain out-of-court statements inadmissible as evidence.  FRE 804 lists several exceptions to the exclusionary rule for when a witness is “unavailable” to testify.  FRE 804 (a) defines “unavailability,” one instance of which is that the declarant “is exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of the declarant’s statement.” The District Court had ruled that New York’s Dead Man’s Statute was such a privilege, thus making Rosenfeld “unavailable” and her prior testimony admissible if the Basquiat Estate asserted the Dead Man’s Statute.

But the Second Circuit declined to follow the District Court in its definition of the Dead Man’s Statute as a “privilege” under the FRE.  Instead the Second Circuit defined the Dead Man’s Statute as a statute regarding witness competency.  But the court went on the say that even if Rosenfeld’s prior testimony could have been brought in under an exception to the hearsay rule of the FRE, that testimony would still have been barred by the Dead Man’s Statute.  The Federal Rules of Evidence are not independent of state statutes  While FRE 804(b)(1) does not bar the admission of prior testimony of a witness who is now “unavailable,” it does not resolve the threshold issue of whether that testimony is admissible in the first place.  New York’s Dead Man’s Statute made Rosenfeld legally incompetent as a witness.  Therefore, the FRE was irrelevant in this case.  Absent a compelling federal interest, federal courts may not ignore state statutes in their rulings unless the statute is unconstitutional.  The judgment of the district court was reversed a new trial was ordered.

If you would like to discuss your own personal situation with me, review your current legal life plan, or put together a legal life plan that is tailored for your needs, you can get a free 30-minute consultation simply by filling out this contact form. I will get back to you promptly.

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The New C.L.A.S.S. Act and Your Estate: Planning with Long-Term Care in Mind

On 23 March 2010, President Barack Obama signed into law the Community Living Assistance Services and Supports Act (C.L.A.S.S. Act), creating a new voluntary publicly-sponsored national insurance trust for long-term care. C.L.A.S.S. is a part of the Patient Protection and Affordable Care Act. Designed to be a low-cost voluntary insurance program, C.L.A.S.S. is self-supported by premiums paid into the program by workers; no taxpayer funds are used. Unlike Medicaid, C.L.A.S.S. is not an entitlement program. Therefore, the only way that an individual derives a benefit from C.L.A.S.S. is if that individual contributes into C.L.A.S.S. through the payment of voluntary premiums primarily through an employer.

The Secretary of Health and Human Services is charged with developing both the premiums schedule and the schedule of benefits. The legislation does not specify either. But Congress did mandate that the schedules be actuarially sound and self-sustaining. Notwithstanding, several groups, including the Congressional Budget Office (CBO), have developed projections about both premiums and benefits. For example, the CBO projected in June of 2009 that an individual paying $65/month for initial decade would receive an average daily benefit of $75/day. But after 2019, the CBO-projected benefits dropped to $50/day and premiums for new enrollees went up to $85/month. But remember that these are mere projections. The final implemented version through Health and Human Services may incorporate different assumptions and different benefits.

Because the Act does not mandate screening of applicants, C.L.A.S.S.  offers benefits to people who otherwise would not be eligible to apply for private long-term care insurance. However, C.L.A.S.S.  is not designed to cover the full cost of long-term care. MetLife provides a long-term care calculator that can give you some realistic costs for long-term care in New York City and New York State. For instance, the annual cost of a semi-private room in New York City is $128,480. The daily rate would be $285. The daily rate is significantly less for an assisted-living facility ($153), and even less so for home care, around $58 per day for five hours of care, five days per week. The benefits of contributing into C.L.A.S.S.  become apparent. And while some people would prefer to save for their long-term care needs, the rising cost of long-term care makes that prospect increasingly difficult.

In addition, no one can predict the seriousness of an injury or a disabling illness and the resulting costs of care and rehabilitation. But we can prepare to meet the challenge with a carefully crafted plan that take into account the individual’s current state of health (physical, mental, emotional), their rate of savings, their family relationships, and their preferences as to long-term care, among other factors. Long-term care considerations should be part of any estate plan to make sure that financial resources are available and that assets are protected when the need arises.

Fortunately, New York State also has a unique program called The New York State Partnership for Long-Term Care that combines private long-term insurance with public Medicaid Extended Coverage. The website provides a list of participating private insurers. Most importantly, the program allows for partial or complete asset protection, providing some protection against “spousal impoverishment” in the case of nursing home care. It is well to remember that, for institutionalized care, any transfers of assets into an trust for Medicaid purposes is subject to a five-year “look back” period, and that some penalties may apply for some transfers of assets by the individual or his/her spouse if the transfer is made within that five-year window.

C.L.A.S.S. will provide New Yorkers with another arrow in their quiver as they contemplate their long-term care needs. Together with the New York State Partnership for Long-Term Care, CLASS will provide a valuable safety net, especially for those with pre-existing medical conditions.

If you would like to discuss your own personal situation with me, you can get a free 30-minute consultation simply by filling out this contact form.   I will get back to you promptly.

I invite you to join my list of subscribers to this blog by clicking on “Sign me up!”  under Email Subscription on the left-hand side of the page so that you can receive a notification when the next installment has been published.  Thank you.