USA – NEW YORK Law and Practice Contributed by: John M Teitler, Nancy A Murphy and Constance E Shields, Teitler & Teitler LLP
Residence is a place of abode, and an individual can have multiple residences. An individual is considered a New York resident for tax purposes if New York is the individual’s domicile or the individual’s perma - nent place of abode is in New York and the individual spends 184 days or more there. Even if an individual is considered a non-resident, the individual may remain subject to income tax on New York-sourced income. 7.2 Expeditious Citizenship There are no expeditious means for an individual to obtain citizenship in the United States. 8. Planning for Minors, Adults with Disabilities and Elders 8.1 Special Planning Mechanisms For minors or adults with special needs, a common planning mechanism is a special needs or supple - mental needs trust. The intent of the special needs or supplemental needs trust is to supplement and not In the event of a party’s incapacity, the court would have to be petitioned to appoint a guardian for the person and/or property. Various planning mechanisms can be put in place to minimise the need or scope of a guardianship proceeding, such as: • a revocable trust; • a durable power of attorney; • a health care proxy; and • a living will. diminish federal or state benefits. 8.2 Appointment of a Guardian If it is desired to have a non-US resident or citizen appointed as a guardian, specialised planning may be required. 8.3 Planning for Incapacity Planning for mental incapacity is generally governed by state law.
There are a number of mechanisms available to plan for mental incapacity in New York and similar options are available in other states. • Revocable trusts – a revocable trust provides a vehicle for the management of assets in the event the grantor becomes incapacitated. A trustee (other than the grantor) can manage the assets during the grantor’s incapacity and has discretion to distribute the trust assets to or for the benefit of the grantor as needed. A revocable trust may also provide that the trustee has discretion to distribute trust assets to benefit the spouse of the grantor and make gifts in order to take advantage of annual exclusions from gift tax and other tax exemptions and deductions. While it is fairly common for the grantor to be a trustee, this could be problem - atic should the grantor become incapacitated. To address this, a revocable trust usually sets forth the standards for determining incapacity and who makes such determination, such as a doctor, and that upon such determination the grantor will cease to act as a trustee. A revocable trust is a disregard - ed entity for tax purposes and during the grantor’s lifetime, including during the grantor’s incapacity, the grantor is deemed the owner for income taxes and reports the income of the trust on the grantor’s income tax returns. • Durable power of attorney – a durable power of attorney is a common and powerful tool to plan for mental incapacity, especially in conjunction with a revocable trust. A power of attorney allows one (referred to as the “principal”) to designate a person or institution (referred to as the “agent”) to make financial decisions and manage assets on behalf of the principal. In the event of loss of men - tal capacity, by using a durable power of attorney, any assets not transferred to a previously created revocable trust can be transferred by the agent to the trust, where the assets can then be managed by the trustee. Even though the Durable Power of Attorney is generally intended to only be used in the event of the principal’s incapacity, it goes into effect immediately upon signing. It is important for the principal to name trustworthy agent(s) and to safeguard that the power of attorney is not improp - erly used. While New York does permit a “spring - ing” power of attorney that sets forth the condi -
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