August 2011 Archives

Estate Tax Issues Continue to Plague Married New York Same Sex Couples

August 30, 2011,

Thousands of same sex New York couples have wed since the state became the sixth to legally allow such unions last month. At the time our New York estate planning attorneys noted how the change means that these couples are no longer required to pay state taxes on domestic partnership benefits, will gain access to worker's compensation benefits, can bring wrongful death lawsuits on behalf of their spouse, and can file joint state tax returns. In addition, surviving same sex spouses are no longer subject to New York estate taxes on assets they receive from their partners at death.

However, the fight for equality continues. Same sex marriages are specifically repudiated at the federal level through the Defense of Marriage Act (DOMA). This has significant repercussions on the estate planning needs of married same sex couples. These couples cannot file joint tax returns or joint bankruptcy petitions. Upon the death of one spouse the other cannot inherit veterans benefits or Social Security benefits. Also, property passing to a surviving spouse is subject to federal estate taxes.

Our New York estate planning lawyers work with families on plans that account for both state and federal tax and asset transfer issues. We understand the complexities that same sex couples continue to face when preparing for the future as a result of the divergence in the law at the state and the federal levels. These inequalities led several area publications to issue joint appeals last week calling for DOMA to be declared unconstitutional. For example, the Syracuse Post-Standard noted that "the law discriminates by denying homosexual spouses significant federal benefits that flow automatically to heterosexual spouses."

In addition, late last month our New York Attorney General Eric Schneiderman filed a friend-of-the-court brief in a federal case related to a surviving spouse who was forced to pay estate tax on the inheritance of her female partner. Mr. Schneiderman noted that "The State of New York has long recognized out-of-state, same sex marriages and the enactment of the Marriage Equality Act further cements our state's position on this critical civil rights issue." The case is working its way through the federal system and is expected to reach the U.S. Supreme Court. However, the law is still on the books making it important for all married same sex couples in our area to seek professional assistance to ensure that their long-term financial and caregiving preparations are tailored to account for issues at both the state and federal level.

See Our Related Blog Posts:

Married Same-Sex Couples Need to Consider Effect of Defense of Marriage Act

Marriage Equality May Change New York Estate Planning Needs for Same Sex Couples

Tips for Giving Financial Aid to Family and Friends

August 26, 2011,

These tough economic times have placed many local residents in difficult financial situations. Many established families in our area may be considering ways to help out their less fortunate friends or family members who have faced recent financial bumps. However, there are often concerns about how tax issues will affect this generosity and whether or not certain giving will have consequences on inheritance plans. Whenever local families are considering large gifts it is helpful to consult with their New York estate planning attorney to understand how the law applies in their particular case.

Tax considerations are not the only thing that local families care about when considering helping out a friend or relative in need. However, there are various ways in which aid can be given, and it may be prudent to consider helping in one way instead of another based on tax issues. Unless the assistance is to one whom you are legally obligated to assist, such as a minor child, then the government will likely consider the gift in the same light that it would all others--including those intended to shrink an estate to protect it from other government taxes or benefit programs. These gifts will likely count against a lifetime gift exclusion amount, and therefore they may have consequences on a local family's previous New York estate planning.

Forbes published a story this week explaining some options for families in this situation. For example, often the easiest way to avoid gift taxes is to give a value less than the annual federal exclusion amount of $13,000. Couples can combine this amount and may be able to give $26,000 to an adult child or other loved one in need without triggering tax consequences. Another alternative is to pay directly for the medical, dental, or tuition expenses of another. However, these payments must be made directly to the service providers, not to the individual whom the help is intended to benefit.

Various other types of assistance may also be provided without gift tax consequences. Rent-free living can be offered to one who is without housing so long as the fair market value of the rent comes within the annual exclusionary amount. A friend or family member could also be hired as an employee to provide work such as child care, bookkeeping, or other services. Yet it is important that pay for these services be reasonable and not more than what a stranger would be paid for the same work. Special rules may apply to all of these situations, and so consulting an estate planning attorney or other trusted professional before taking action is always a safe step.

It is also essential to consider the elder law consequences of such gifts. Should an application for Medicaid benefits be needed within five years of the date of the gift, the donor may be denied such benefits based on the amount of the gift. Consultation with an elder law attorney should be considered in this context as well. All of our attorneys are well versed in both elder law and estate planning.

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Adult Children Often Remind Senior Parents of Estate Planning Importance

New York Estate Planning Attorney Shares Common Estate Planning Mistakes

Proper New York Estate Planning Necessary to Combat Possible Legal Challenges

August 24, 2011,

Our New York elder law estate planning attorneys are proud of our work as counselors at law, acting as trusted advisors for the clients who count on us. In this capacity we spend each day meeting with community members to understand their family dynamics and listening to their concerns and fears about the planning process. By familiarizing ourselves with the unique circumstances of each client we are able to anticipate possible challenges to their plan and ensure that all the bases are covered ahead of time. In this way we can use our knowledge and experience to help clients pass on their assets and protect those assets in a seamless manner that avoids legal challenges and court proceedings.

The use of trusts is one of the key ways that our New York estate plans help clients stay out of the courtroom. Unlike wills, trusts do not require court proceedings to settle, both in this state and in other states where property might be owned. Avoiding probate saves the time, stress, and high costs of the legal proceeding.

Besides avoiding probate, our New York estate planning attorneys work hard to craft plans that cannot be successfully challenged by those who may be upset by client decisions. This is where taking the time to understand the family dynamics of each client is essential. It is important to anticipate ahead of time individuals that might have hurt feelings because of the details of a plan or become disgruntled upon learning of a client's decision regarding their assets. Unfortunately, family disagreements arise frequently in these situations, often leading some upset individuals to challenge the legality of the plan in an effort to overturn it.

In fact, sometimes involved parties outside the family can seek to legally challenge these decisions upon a death. For example, a New York Post story this weekend explained how a landlord is challenging the inheritance of a rent-controlled apartment in the city's West Village. The landlord claims that a 63-year old woman should not be able to inherit the unit from her 83-year old husband, because the landlord believes she married the man specifically to acquire the low-rent apartment. The landlord's legal complaint alleges that widow used "gamesmanship, seduction, and artifice" to get the man to marry her only one month before his death. The landlord also claims that the deceased was "out of it" at the end of his life and did not have the capacity to enter into the marriage and pass on the apartment.

Attacking one's mental capacity is a common technique used by those challenging inheritance and other decisions with which they do not approve. Having the professional assistance of a New York estate planning attorney is one way to ensure that these types of challenges are protected against. Without aid in these actions, many families set themselves up for costly, stressful, and time-consuming legal battles that could otherwise have been avoided.

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Adult Children Often Remind Senior Parents of Estate Planning Importance

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Common Pitfalls of Pet Bequeaths

August 22, 2011,

The most recent survey from the Humane Society found that there are at least 78.2 million owned dogs and 86.4 million owned cats in the United States. The data indicated that nearly 40% of all American households own a dog while roughly 33% own cats. Pet ownership rates are near the highest ever reported. In addition, many owners go to unprecedented lengths to integrate their animals into their families, from including them in annual Christmas card photos to ensuring they have a spot in all family vacations.

Considering the close bond so many families have with their animal friends, it is only natural that they would want to provide for them in an estate plan. Our New York estate planning attorneys know that in our area pet trusts are no longer only for the rich, famous, or eccentric. Recent research has shown that somewhere between 12 and 27 percent of pet owners provide some provisions for their animals in their wills. Many families have visited our office and expressed a wish to take legal steps to ensure that their beloved pet will have the resources they need for as long as they need them in the future. In fact, we have set up a relationship with providers of these services at www.PetEstates.com to help clients gain the peace of mind of knowing that their animal will be protected after they are gone.

It is vital to have professional help with these matters, because haphazard planning could risk leaving your pet without any support. A recent Reuters article took a look at these common pet trust pitfalls. Many large, high-profile pet trusts have been severely curtailed by judges. Ensuring that the trust includes only a reasonable amount necessary to account for the animal's well-being is important. Many problems can also be avoided if the trust names a caretaker who is willing to comply scrupulously with the terms of the trust. On top of that, if a trust names a final resting place for the pet it is important to check that the location will accept the animal. Most pets cannot be buried in mausoleums for humans in the United States.

Some legal advocates are calling for changes to make it even easier to recognize the role that pets play in the lives of many families. For example, some are urging an extension of the charitable remainder tax deduction to pet trusts. Others suggest that reforms should be advanced which would make it easier to create trusts for future generations of animals, known as grand-kid pets. One of those pursuing legal changes explained her belief that "American inheritance law is trapped in an outdated family paradigm. That paradigm assumed that the decedent's closest relatives by blood, adoption, or marriage are the most deserving recipients of the decedent's estate."

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Estate Planning Can Provide Lifetime Care for Pets

High Profile Example Highlights Need for Clarity in the Estate Planning Process

Estate Plan Still Needed to Divide Properly Equally Between Children

August 18, 2011,

Some local residents believe that they do not need to worry about creating a New York estate plan if they only want to divide all of their assets between their children equally. These community members are under the incorrect assumption that the default legal rules will ensure that everything works out as they wish. Unfortunately, this is rarely the case.

This weekend My SA News discussed this all-too-common mistake of voicing intent to be even-handed with asset distribution but not taking the proper legal steps to carry out that intent. For example, the story used the real example of a family with two parents and five daughters. Both parents had been married to one another their entire lives with no divorces. They did not conduct any estate planning because they always explained that they wanted everything to be divided equally among their children at their death. They did not even have wills drafted.

However, their actions did not reflect that voiced intention, and there was no plan in place to protect the family. For example, after the father died, the mother deeded the family home to the first sister. Later, a second sister deeded another house to the mother, but upon the mother's death that sister wanted the home back. A third sister visited an attorney and asked for help. She wanted the family home and the second home to be divided equally among the children as the parents always wished.

Unfortunately, without any estate plan there is often little that can be done to enforce the verbal assurances of parents. Actions such as signing deeds over to others have important legal ramifications that cannot be undone. Failure to visit with an estate planning attorney to understand the consequences of these decisions often leaves those involved without legal recourse. In this case, the family home will likely remain with the first sister. The second home may be divided among all the children according to the intestacy rules of the state, because the second sister will likely be unable to force return of the house if she gave it to her mother free and clear.

An important take away from this convoluted story is that clear legal planning must be done to ensure that all vocal intentions are respected. Beyond that, it is important to remember that proper preparation in these matters does more than simply pass on property at death. By visiting a New York estate planning attorney those in our area can also keep certain assets in the bloodline, save on estate taxes, and provide for disability.

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New York Estate Planning Can Address Religious Goals

August 16, 2011,

Proper estate planning involves respecting client wishes about distribution of assets while creating legal documents to avoid probate, save estate taxes, and plan for disability. Many plans include similar components, but there is flexibility so that each client's unique goals and preferences are accommodated. For example, many area community members work hard to adhere to their religious principles in all areas of their lives--including their New York estate plan.

A new article posted at Wealth Journal recently explained how few areas of the law are as entangled with religious issues as estate planning. Many components of an estate plan may be influenced by one's religious or spiritual beliefs, from traditional rules about asset distribution to statements about medical decisions and funeral arrangements. For example, traditions like Judaism, Islam and Orthodox Christianity have detailed rules of inheritance that some may wish to follow as closely as possible. Similarly, it may be important to leave detailed instructions for trustees on how funds should be dispersed in accordance with those religious traditions and values.

Most residents usually apply a hybrid approach to blending their religious belief with their estate plan. One many wish to avoid following any religious custom except for burial and funeral arrangements. Others may seek strict adherence except restrictions on cessation of heroic medical measures. There is seemingly an endless combination of approaches that one might seek to balance in their estate plan. Of course, whatever one's desires it is crucial to have open and honest discussions with loved ones about these issues so that they can be communicated effectively during the planning process. In our area it is also important to contact an experienced New York estate planning attorney who can effectively integrate religious wishes into a plan that simultaneously respects legal, tax, and ethical issues.

Interestingly, the same general advice also applies to those who specifically want no religious components in their plan. It is often a mistake to assume that the default rules will lead to no religious involvement in end of life affairs. It may be important to use estate planning documents to expressly indicate a preference for no observances to override incorrect assumptions by friends and family members. Without such clear guidance there is a chance that a third party could impose religious traditions on some end of life issues like funeral and burial decisions.

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Power of Attorney & Health Care Proxy Are Crucial Components of New York Elder Care Plan

August 15, 2011,

Every New York elder law estate plan should likely include a Power of Attorney and Health Care Proxy. These documents allow another person to handle a variety of legal, financial, and medical affairs on your behalf in the event of disability. Our New York elder law attorneys know that preparing for all possible contingencies is the main purpose of this planning, and so inclusion of these documents remains essential.

Some residents are less familiar with the importance of these decision-making tools and may assume them to be unnecessary in their particular case. They may believe that their friends or family members will step up and handle affairs appropriately without the need for formal legal documents. Unfortunately, that assessment is misguided because very often family disagreement arises among these individuals under the stress of dealing with the disability--setting the stage for conflict without prior delegation of decision-making power. The director of a local public aging services center explained that "the last thing you want is if you age and lose capacity, to become a pod in a power struggle between your kids or your grandkids." On top that, even if one's family members do not disagree on any financial or medical issue, the law will not automatically grant these powers to a certain friend or family member. In many cases, the disability requires court intervention to appoint a guardian which is a situation that should always be avoided.

Failure to provide this legal clarity ahead of time can have wide ranging effects. For example, KFBB News reported late last week on one man who is facing felony kidnapping charges after allegedly taking his 92-year old mother out of her long-term care facility and bringing her into another state without permission. The man was not his mother's Power of Attorney. The family was confused about the local elder care laws, and the man assumed he had the right to move his mother. He didn't. He is now awaiting extradition to face possible criminal sanctions for his conduct. It is likely that the man would not be facing any charges at all had a Power of Attorney been drafted.

While kidnapping charges in these circumstances are rare, all families have much to gain from ensuring that there will not be legal confusion in the event of a disability. In addition, it is important to have professional help with the creation of these legal documents. Experienced attorneys can explain what specific powers are useful to include. These are powers that otherwise might be forgotten and left out, such as the right to change beneficiaries on IRA's, annuities, and insurance policies, to create a trust, or make gifts.

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Women Can Take Control of Family Estate Planning

August 12, 2011,

An experienced New York estate planning attorney has likely come to appreciate how asset preparation issues are particularly important for women. Demographics play a role in this reality. Women tend to outlive men, and a wife is more likely than a husband to be left alone after a disability or death. In addition, men frequently take charge of handling family financial affairs while alive and risk leaving their wives in an unfamiliar position if preparation is not conducted ahead of time.

Yet polls continue to reveal that it is only a minority of women who admit prioritizing estate planning or familiarizing themselves with family financial issues. A Forbes article yesterday discussed this disconnect between the importance of financial preparation for wives and their prioritization of it. The story mentioned that women are much more likely to experience a decline in their standard of living following the death of a spouse because of their longer life expectancy, tendency to marry older spouses, and lower lifetime earning average. Interestingly, this also means that wives frequently have the last word about where a couple's assets ultimately end up--either to the family, charity, or tax coffers--particularly when the family had conducted no prior planning.

This makes it essential for women to become equal participants in the estate planning process or to take charge of the process if no preparation has yet been completed. While talking about mortality is rarely easy or light hearted, it is a topic that cannot be avoided in the end. The story's author suggests that it is often helpful to have a series of conversations about the topic instead of trying to cover everything at once. Of course every couple will have their own ways of communicating. However, it may be useful to mention the need to consider the children, refer to someone who recently passed away, or bring up a news article that discussed estate plans.

Our New York estate planning lawyers have worked on many facets of the process that disproportionately affect women. For example, a family home is exempt from Medicaid while both spouses are living. However, if a husband dies, the wife must make special arrangements to keep the home from being used for long-term care costs, such as creating a Medicaid Asset Protection Trust. In addition, Caregiver Agreements are more frequently used by daughters to compensate them for the job of caring or boarding an aging parent or to receive a lump-sum distribution to help provide for that care.

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New Website Services Offers Online Method of Distributing Personal Property

August 10, 2011,

Most New York estate plans have various components and include several legal documents. Most will have a Revocable Living Trust, Medicaid Asset Protection Trust, or both. A pour-over will is also frequently added as a failsafe to cancel an old will and ensure that any assets left outside the trust are brought into it after death. The plan will have various other facets, including a Power of Attorney, Health Care Proxy, burial instructions, and other final instructions for a family.

In addition, a common practice is to leave a list which indicates which valuables will go to each heir. This list is usually handwritten and specifically requests that a trustee honor its terms. In this way, if a client changes their mind about the distribution of their personal property they can simply handwrite a new list without needing to visit their attorney to cement the change. This step is important because many local families experience in-fighting when trying to distribute sentimental personal property without the guidance offered by a New York estate plan. When more than one family member wants the same item, the stage may be set for strong disagreements that often profoundly and permanently affect relationships. Most family members are under immense stress at the time of a passing which makes the situation even worse.

A few online web services have recently sprung up which claim to help families distribute this property in a fair manner. For example, one of the more popular services is eDivvyup. The website essentially sets up a family auction using non-monetary "credits." A family first selects an "executor" to set up the auction by cataloging personal items, inviting family members to participate, and assigning credits. Each family member then visits the site and places bids on items of interest to them using the non-monetary credits they are provided. The auctions usually work like eBay, spanning anywhere from a day to several weeks. The goal is that by the end of the auction each family member will have gotten the fair chance to indicate which items mean the most to them.

While these online tools may offer a helpful way for some families to have discussions about the distribution of personal items, it is absolutely essential that users not be misled into substituting these tools for actual legal planning. The eDivvyup website itself specifically notes that it is intended to be used aside from proper legal efforts at property distribution. Our New York estate planning attorneys know well that the utmost care must be taken with every legal document crafted to ensure that it is capable of withstanding legal challenge. Online and "do-it-yourself" resources may be helpful and convenient tools for some residents. However, they cannot act as a substitute for proper legal planning because they generally have no legal effect and are readily challenged.

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Season Tickets, Frequent Flier Miles, and Other Unique Assets in Estate Plan

August 8, 2011,

Local residents visit our New York estate planning attorneys for professional assistance to protect and pass on their assets. Many also expect guidance identifying the items that should be considered an asset and included in the planning. Most area families need to consider things beyond homes, cars, investment portfolios, and similar items when creating their New York estate plan.

For example, what happens to frequent flier miles and rewards upon an individual's death? Many residents spend years and thousands of dollars in airfare racking up mileages and benefits in airline sponsored loyalty programs. A recent article in Payments News explained how many fliers spend time accumulating these "miles" and rewards only to leave them unused at their death. Some reports indicate that as many as 3.5 trillion miles currently remain unused in these programs. Interestingly, each airline has a different policy in place regarding transferability of loyalty benefits at death. American Airlines specifically allows accumulated mileage credit to be transferred to a person named in a court-approved will or estate plan. Other carriers, such as United Airlines, require that a beneficiary be named with the program, a fee be paid, and require an executor to contact the airline before miles can be transferred.

Another asset which one may wish to leave behind is the option to purchase valuable season tickets. Area residents often spend years waiting for the opportunity to become a season-ticket holder for their favorite teams. A post this weekend at The Faculty Lounge recently discussed this topic. Most teams have policies in place that allow an individual's decedents to gain the right to purchase. However, it is important to closely examine the team policy related to ticket transferability to understand what issues might arise. For example, there may be conflict over who gains the right if several children share in ones' assets. Many team policies indicate that there will be no transferability if several individuals share in the right and do not agree on a single transferee. Some teams also expressly prohibit a non-relative from receiving the right to purchase the tickets.

Loyalty reward points and season tickets are just two of an array of assets that an individual may need to consider in their estate plan. Credit card reward points often present the same issues as airline loyalty programs. Many online efforts--like blogs--are becoming important spaces that some may want to leave to others. Also, our New York estate planning attorneys understand the important of passing on values. That is why we often help clients create "ethical wills" which help residents pass on morals and principles gained over a lifetime.

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New York Estate Planning and the National Debt Crisis

August 4, 2011,

Over the past few weeks political debate around the national debt has dominated headlines. National leaders had disagreed for months on whether the debt ceiling needed to be raised. In addition, lawmakers had argued over whether spending cuts and revenue enhancements should be addressed as part of the debt crisis.

This week finally saw the apparent end of negotiations as the White House and Congressional leaders reached an agreement on many of these issues. The accord will raise the debt ceiling by $2.4 trillion, up to a total of $16.7 trillion. This will come with a $900 billion reduction in spending--a special Congressional committee will identify up to $1.5 trillion more in spending cuts in the coming months. Interestingly, no specific decision was made on revenue enhancements that either raises taxes or removes "tax loopholes" for corporations and individuals.

Our New York estate planning attorneys closely monitor all legislative developments that may influence how local residents decide to pass on their assets or plan for their long-term care. For example, finding additional sources of revenue enhancements generally means raising taxes. During this latest debate, increasing the estate tax was frequently mentioned as a possible way to increase federal revenue. The estate tax level was significantly reduced by President George W. Bush several years ago. Current leaders have often suggested that the Bush tax cut was misguided and that the level needed to be returned to its former amount.

Area residents leaving significant wealth must be cognizant of how estate tax changes may affect their New York estate plan. As a post yesterday in The Street explained, following this budget compromise, individuals can leave up to $5 million without triggering the sizeable estate tax. That tax-free amount can also be used to give money to others while one is still alive. However, this shelter is not guaranteed to be available forever. As it now stands the $5 million amount is only set to last for the next two years, expiring on December 31, 2012.

The volatility of these tax issues means that millions of dollars are often on the line depending on when residents make decisions about the transfer of their assets. However, proper preparation matters as much as timing when it comes to tax issues. For community members in our area, a New York estate planning lawyer can explain how trusts can be used to take advantage of the current tax-free gift amount right now, while allowing the benefactor to potentially draw into that gift amount if they need those assets down the road.

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Estate Planning is Not Just for Senior Couples

August 2, 2011,

Some area residents may think that New York estate planning is only for married seniors who have big families and substantial wealth. Fortunately, more and more people are coming to understand that this planning is a necessity for all community members, no matter what their situation in life. The Calgary Herald recently discussed the universal applicability of estate planning by sharing the example of a thirty-six year old mother of two who was recently divorced. The woman had never before seriously considered financial matters, but everything changed following separation from her husband.

It was not long before the mother began to realize that taking care of her family was now squarely on her shoulders--necessitating prudent preparation for long-term contingencies. For example, if she were to suddenly become ill, who would take care of her children? If she became disabled, how would the family survive? The woman began considering these and similar questions before realizing that she wanted the peace of mind of knowing that she had prepared for these possibilities ahead of time. The woman visited an estate planning attorney and learned what options were available to her. She eventually purchased life insurance, disability insurance, and had legal documents drafted to ensure others could make critical decisions on behalf of her family if the need arose.

The mother's situation is a good example of why estate planning is often particularly important for singles. Those without a partner frequently need to clearly spell out their wishes ahead of time, because fewer people may be around to speak on their behalf. For example, a thirty year old single man may get in an accident shortly before closing on his first piece of real estate. If he has taken the time to create a durable Power of Attorney, the named individual may be able to close on that new home on his behalf. There are countless similar situations that may arise where prior estate preparation can significantly affect an individual's life.

Creating a New York estate plan is much more than simply dividing up assets upon death. Instead, it is a comprehensive contingency plan that accounts for various possible life situations and ensures that resources are available if necessary. In this way, the planning is important for all community members, whether married or single, old or young, wealthy or middle class.

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