SERVICE DOGS AND EMOTIONAL SUPPORT ANIMALS

This post diverges somewhat from my usual practice areas, but the topic interests me and I hope it will interest my readers as well.

Many people suffer from conditions which require assistance.  Often, that assistance comes from animal support in the form of a service dog.  Your legal rights vary depending upon the status of your service animal. 

The Americans with Disabilities Act (ADA)  requires privately owned businesses that serve the public to allow people with disabilities to bring their service animals onto business premises in whatever areas customers are generally allowed. 

 The ADA defines a service animal as any guide dog, signal dog, or other animal individually trained to do work or perform tasks for an individual with a disability.  The task(s) performed by the animal must be directly related to the person's disability.   Service animals perform some of the functions and tasks that the individual with a disability cannot perform for him- or herself. People are most familiar with guide dogs for the blind, but service animals that provide assistance for any other disability meeting this definition are also considered service animals under the ADA.    The ADA does not require service animals to be licensed or certified by any governmental entity, nor does it require service animals to wear a vest, ID tag, or specific harness.  Business owners are not permitted to request any documentation for the animal, require that the animal demonstrate its task, or inquire about the nature of the person's disability.  They may ask only whether the service animal is required because of a disability, and what work or task the dog has been trained to perform.  People who use service animals may not be isolated from or treated less favorably than other patrons, and may not be charged additional fees due to the presence of a service animal.

 

Growing attention is being paid to the category of “emotional support animals (ESA).”     An ESA is not a service animal as defined by the ADA.  Rather, an ESA is a companion animal that has been prescribed by a licensed mental health professional for a person with a verifiable disability as part of a treatment program, and is meant to bring comfort and minimize the negative symptoms of a person’s emotional or psychological impairment.  A formal prescription letter from a licensed mental health professional is sufficient to categorize an animal as an ESA.   Unlike service dogs, ESAs do not need any specific task-training.  They are not required to perform any specific tasks for a disability, but are meant solely for emotional stability.   Their presence alone mitigates the symptoms for which they assist the owner.  Any domesticated animal (not only dogs) may qualify as an ESA.  Once again, ESAs do not need to be licensed or certified by any governmental entity, or wear a vest, ID tag, or specific harness.

ESAs, however, are entitled to fewer legal protections than those afforded to service animals.  The main difference is that with two exceptions, no public or private entity is legally required to permit an ESA access to their establishment, and their entry is not protected by law.  The proprietor of any establishment that does not permit pets has no obligation to grant access to an ESA.

There are two exceptions to this ESA policy.  First, under the Federal Department Air Carrier Access regulations, an airline must permit an ESA to fly with its handler in the cabin of an airplane without being charged a pet fee.   The carrier may require certain documentation, most customarily a letter from a mental health professional verifying the necessity of the ESA for emotional or psychological support. 

The other exception relates to housing.  The Federal Fair Housing Amendments Act of 1988 (FHA) requires “reasonable accommodations” in housing communities, even those that have a “no pets” rule.  An ESA is considered a reasonable accommodation and must be permitted by property owners and landlords without extra charge.  The FHA applies to most housing types, including apartments, condominiums and single family homes.  Certain types of housing are exempted.  For more specific information, see http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/FHLaws/yourrights.

One last caveat:  several creative entrepreneurs have established websites offering their services to register your service animal or ESA with official-looking organizations such as the “United States Dog Registry”, the “National Service Animal Registry” the “United States Service Dog” registry, and others.  Again, neither service dogs nor ESAs need be registered anywhere, so do not be taken in by these commercial websites who “facilitate” the registration of your animal for a sometimes substantial fee, and while they are at it, try to sell you a variety of equipment such as vests, tags and similar items which they suggest are necessary for proper identification of your service animal.  Those items are not required.  Do not be fooled by these sites. 

Irrevocable Life Insurance Trusts

Under federal and state estate tax laws, the face (payout) amount of a life insurance policy owned by an individual will be included in the taxable estate of such individual at death if the policy is owned in the name of the insured during his or her life.  If the life insurance policies have substantial payout amounts,  the decedent’s taxable estate may exceed the allowable estate tax exemption.  If life insurance policies represent much of the taxable estate, a Irrevocable Life Insurance Trust (ILIT) is a good tool for removing the face amount of a life insurance policy from the taxable estate of the insured. 

The ILIT is created to own the life insurance policies in its name, and is also named as the beneficiary of any policies owned.  Upon the death of the insured, the proceeds of the policies on the life of the insured will be paid to the ILIT and held by the ILIT in accordance with its terms.  Generally the ILIT requires that the proceeds of policies owned by the ILIT are held for benefit of the surviving spouse. Distributions may be made to the spouse only at the discretion of the Trustees.  Upon the death of the surviving spouse, the terms of the ILIT will govern the division and distribution of the assets in the Trust.  Most commonly, upon the death of the surviving spouse, the proceeds will be distributed to children according to the terms of the ILIT, though any successor beneficiary may be named if there are no children to receive a share.  By using an ILIT, the policy proceeds will not be included in the taxable estate of either the insured or the surviving spouse.

If you are applying for new life insurance and have established an ILIT, the application should be made by the ILIT rather than by the individual.  When the policy is issued, it will be owned by the ILIT, and In that event, the tax protections of an ILIT are immediately available.   If you transfer already existing policies into an ILIT, there is a three year waiting period before the transfer is deemed complete.  If the insured dies within that three year period, the proceeds of the ILIT will come back into his/her estate.

It is important to note that or an ILIT to be effective, the policy owner must give up all “incidents of ownership” in the policy. Thus, an independent third party trustee must be named to take active responsibility and control at inception.  it is important to name a trustee with whom the surviving spouse will feel comfortable since the Trustee controls the payout of trust assets.  It is prudent to name at least one successor trustee in the event the initial trustee is unable to serve.  Because of the potential length of time the ILIT may exist, it is prudent to select a younger person as trustee to ensure they will be able to serve for the duration, and to name a series of successor Trustees to avoid a complete vacancy in that office.

The Trustee will be responsible for all administrative duties.  One such duty is the payment of annual premiums on the policy.   When a premium is due, the insured may not pay the premiums directly. Instead the insured must make a “gift “ in the amount of the premium to the ILIT, and the Trustee will then pay the premium from that gift.   To comply with gift tax laws, the beneficiaries are entitled to withdraw a portion of the gift within a 30 day period after the gift is made.  These are known as “Crummey Powers”.  The trustee must send written notices to each beneficiary of the gift made and the right of withdrawal.

Although there are great advantages to using an ILIT to own life insurance policies, there are certain downsides:

1.       An ILIT is irrevocable. The insured surrenders all control over the policies and any other contributions made.  The settlor of the trust cannot change the beneficiaries, cancel the policies, borrow against the trust, or otherwise alter the provisions of the trust if circumstances change, nor can anyone compel the Trustee to do any of those actions.  

2.       If an existing policy is transferred to the Trust less than three years prior to the death of the insured, the ownership of that policy will revert back to the estate of the insured and the face amount thereof will be includible in the calculation of his or her taxable estate.

3.               The beneficiaries are given a mandatory withdrawal right which could result in the exercise of that right in opposition to your intent.

4.               The surviving spouse as beneficiary of the ILIT does not receive the policy proceeds free and clear, but instead must work with the independent trustee on matters of management and distribution of trust assets.

Notwithstanding these limitations, an ILIT it is widely considered to be a worthwhile tool in estate planning as a very effective way of reducing the size of a taxable estate, thereby reducing estate taxes by a substantial amount.  

Wow, technology is tough

Greetings, loyal readers.  Once again, I have not been able to post, simply because google has changed their platform and it has taken me until now to figure out how to get back into this blog page to post new entries.  This is a test, and with luck, I will be back in and posting articles far more interesting than this one.  Thanks for your patience.  And here we go...

Mea Culpa

To all of you loyal readers of this dormant blog-- it had been my intention to post regularly, but I I was thwarted by circumstances beyond my control, so I have been less attentive than I was previously. I am hoping to revive this and again post information of interest to my clients.

I'm a beneficiary under an estate. When will I receive my share?

When I probate an estate of a dearly departed, one of the first questions I am often asked is "When will I get my inheritance?"  Unfortunately, distributing the assets to the beneficiaries can take several months, and is the last thing the Personal Representative (PR) is likely to do. 

In the context of probating an estate, before the assets can be distributed to the beneficiaries, the PR has several tasks, including: 

1.      Due to the adoption in Massachusetts of the Uniform Probate Code, there are now two methods by which the appointment may occur.  These are known as “Formal” and “Informal” probate.  Generally, informal probate is appropriate if the decedent had fewer assets or assets consolidated into just a few places, and no real estate. This process is fairly streamlined.  The PR is granted the authority to manage and dispose of assets without any further formal court proceeding.  Formal Probate is generally necessary if the estate is of a higher value, or there are numerous separate assets, or if the estate includes real estate.  Formal Probate resembles the general probate laws under the old system.   Both forms of probate require submission of documents to the Probate Court, the payment of filing fees, and a certain amount of time before appointment is issued.

2.      Once the PR is appointed, the PR must gather information and locate paperwork reflecting of all of decedent’s assets, as well as any estate planning documents.  The PR must value each asset at its date of death value.  This is important for the beneficiaries, who receive a step-up in the tax basis of any asset when sold.  It is also important for purposes of determining estate tax liability, if any. 

3.      Next, the PR must notify the decedent’s creditors, primarily by publication, and then pay the decedent's final bills and ongoing administration expenses.  The PR must then file applicable tax returns and pay applicable taxes.  These may include a final income tax return, an estate income tax return, and estate tax returns if applicable, and pay any taxes due.  The PR is personally responsible for all unpaid bills, administrative expenses and/or taxes due, so the PR wants to be absolutely certain that all liabilities have been accounted for.

4.      Finally, after all of the above is accomplished, the PR may distribute the remainder to the beneficiaries.  The timing of distribution will depend on many factors, including the types of assets the decedent owned, the value of those assets, a determination of taxes and expenses due, how many beneficiaries are involved, whether the beneficiaries get along, and the skills and diligence of the PR is administering the estate. A simple estate or trust may be settled within a few months, while a complicated estate or trust may take one or more years to settle.

The above explanation addresses the steps to be taken in the context of filing a will for probate due to the Decedent’s ownership of probate assets. Probate assets consist of assets owned by the decedent, outright in individual name. Non-probate assets consist of (a) property held jointly with a right of survivorship, (b) assets for which a beneficiary is named, such as retirement funds or life insurance, and (c) assets held in trust.  While the concept of “avoiding probate” is somewhat overstated, assets held in trust are not subject to the probate process, are likely to be organized in advance, and areup to date on payment of liabilities.  For this reason, the creation and funding of a Revocable (Living) Trust may save a great deal of time at the death of the decedent.

I am available for more information or to work with clients to establish an efficient estate plan.

What do I Tell My Heirs?

When a client completes an estate plan, I am often asked whether they should give a copy of the documents to their children, or otherwise share the content.  Unless there is close relationship or unusual circumstances, I generally advise the client not to do so.  I do recommend that they give a copy of the Durable Power of Attorney and Health Care Proxy to both the primary and the alternate appointees, because those are documents that might have to be accessed quickly in the case of sudden illness or catastrophe. But otherwise,  I encourage clients to keep the contents of the other documents to themselves.  Even if assets are distributed equally among children, one may be appointed in a fiduciary role, which may insult another child.  One child may feel that he or she is entitled to more than their equal share.  One may have special needs that warrant giving such child a larger share of the estate.  There may be an asset (such as a vacation home) which some children want but others don’t.  Any or all of these, and many other circumstances, may create ill will among the children that the creator of the plan would rather avoid. There are myriad circumstances that warrant keeping the information private until death, so that the children have no opportunity to influence a parent to make changes during life time.  It is best to make your own assessment, and you may determine that keeping the information to yourself is the best course of action.

More on Digital Estate Planning

Last February I posted an entry about how to manage on-line accounts and social media sites after death.  The New York Times has caught up to me with this recent article:

http://www.nytimes.com/2014/07/03/technology/personaltech/how-to-digitally-avoid-taking-it-to-the-grave.html?emc=edit_tnt_20140702&nlid=10789246&tntemail0=y&_r=1

Worth reading.