November 2011 Archives

New Twist in Huguette Clark Estate Plan Controversy

November 30, 2011,

Yesterday there was a new twist in the high-profile New York estate planning story involving Huguette Clark, the woman who died this year leaving behind a $400 million Gilded Age fortune. As we discussed earlier this week, the woman's family was not provided for in her will. Instead her fortune was given mostly to a newly created art charity with some benefits going to her long-time nurse, attorney, and accountant. Instead of using various trusts to ensure the woman's estate was transferred seamless per her wishes, her New York estate planning attorney surprisingly utilized only a will. Expectedly, the will has been challenged by the woman's family.

However, new information was just released revealing that Ms. Clark actually signed two wills, one only a few weeks before the other. According to a report by MSNBC, both wills were genuine, meaning that they were properly executed. The first will, seemingly revoked by the signing of the second will, would have left her fortune to her family. The family filed the first will with the court yesterday--the first step in what will assuredly be a prolonged battled over the Clark family millions. The attorney representing the disinherited family members claimed that the case involved "undue influence and exploitation of a very elderly and extraordinarily wealthy woman at the hands of two professionals who, with the help of certain others...ultimately stripped her of her free will, as well as millions of dollars."

As this situation demonstrates, it is incredibly ill-advised for any family to rely solely on a will to conduct inheritance planning, especially for families with large amounts of wealth. Like clockwork they almost always cause more problems than they solve. Will contests are common and virtually guaranteed to occur when two wills are signed in short succession with family members being cut out between them. In this case, while twenty one relatives would have split the fortune in the first will, the second gave a large amount to a nurse, small sums to an accountant and lawyer, and then put the rest in an art foundation that was to be managed by the same lawyer and accountant. That chain of events raises many red flags about the influence that the small group of individuals who benefitted from the second will had on the woman. It is made even more suspect by the fact that the estate planning attorney who was to benefit from the will was the same one that drew it up.

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Questions Remain About Huguette Clark's $400 Million New York Estate

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Questions Remain About Huguette Clark's $400 Million New York Estate Plan

November 28, 2011,

New York estate planning is a necessity for virtually all local residents, no matter where on the income scale one falls. Easing the emotional, social, and financial burden on one's family and ensuring wishes are carried out upon one's death is important if one has $400,000 or $400 million to pass on. Unfortunately, New York estate planning mistakes are made at all income levels, often with serious results for the individuals involved. The most common mistake includes not taking advantage of all of the legal tools available. For example, while wills are still commonly thought of as a basic estate planning necessity, in truth they are becoming obsolete for many families. Trusts are much more useful in that they can avoid probate and provide for substitute decision-making if disability strikes. Yet, many local residents, including those with vast fortunes, still fail to take advantage of the benefits that trusts bring.

One high-profile local example is that of Huguette Clark. The reclusive heir to her father's copper and mining fortune died earlier this year at the age of 105. She was rumored to have more than $400 million at the time of her passing--an estate she inherited upon her father's death over eighty five years ago in 1925. Ms. Clark had been a mysterious figure, having lived in a hospital room since the late 1980s. She left her Fifth Avenue apartment empty for over twenty two years even though she was in relatively good health until just before her passing. Ms. Clark was long estranged from her family, and only a very small and intimate group of advisors had any contact with her for the last quarter century.

Surprisingly, even though she had such a large estate, Ms. Clark's advisors never had her create a trust to protect her long-term financial affairs. An article about her story published today by Forbes explains how most estate planning attorneys would have at least advised the client to utilize a revocable living trust, instead of a will. The need for a trust was made even more necessary considering the size of Ms. Clark's wealth. In addition, there are questions about the terms of the will--drafted and signed when Ms. Clark was ninety eight years old. The will left most of the woman's fortune to a newly created art fund and gave a significant amount to Ms. Clark's long-time nurse. However, the will also named a partner in the very law firm that drafted the will as a beneficiary. Even if this was the exact intent of Ms. Clark, the potential conflict of interest issues would usually counsel the firm in question not to prepare the will. Many other questions remain surrounding her advisors spending over $100 million of her estate in the last two decades of her life.

As it quite common when a will is used, Ms. Clark's family members have contested the will. They are claiming that she was mentally incompetent at the time she signed the document and will likely allege that the small group of advisors around her exercised undue influence. If successful, the distant family members may ultimately obtain the fortune. All of this fighting likely could have been averted had trusts been used to provide for her charity and pass along assets as intended.

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Professional Help Needed When Crafting a Will

November 22, 2011,

Our New York estate planning lawyers continue to advise local community members that wills are virtually obsolete for many residents. A will often creates more problems than it solves, because probate is still involved, the information is made public, and legal challenges to the will provisions are common. Estate planning is meant to simplify the transfer of assets, and wills often fail at that goal. Instead, the creation of trusts is usually a far superior method of saving taxes and streamlining the process to distribute assets quickly and seamlessly.

However, there may be limited situations where a will might be appropriate, depending on the age of the individual and their assets. As Forbes explained in an article last week, even when a will is used instead of a trust, it is vital to have professional help writing it. While do-it-yourself projects are worthwhile for home improvements and car maintenance, it is not the same vital financial planning tasks. When professional help is not sought and problems are created, it is only at the exact moment when the document is needed to work that its flaws come to light. At that point, there is no going back.

As the article explains, when done without experienced aid, wills are often filled with errors. For example, failing to sign the will, not updating it, or adding amendments improperly are common mistakes that can nullify the document. Without the guidance of professionals, imprecise wording is often used. It is much harder than many suspect to craft legal documents with language that is void of any ambiguity. Vague language is easy to misinterpret, and the one who knows for sure what was intended will not be around to explain the mistake. Estate planning lawyers are well versed in crafting legally precise terms in standard language that doesn't equivocate.

Besides making sure one's specific intentions are explained without ambiguity in the will, a legal professional can also ensure that important issues are considered and incorporated into the document if necessary. For example, when drafting a will on their own, many community members fail to consider important issues. What happens if an heir dies first? What happens when an asset distributed in a will is no longer owned when the will is executed? Who is responsible for paying the expenses on certain assets, like a house? A professional experienced in these matters can bring up these and many concerns that may need to be considered when going through the drafting process. This is particularly important in more complex situations, such as with blended families.

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New York Estate Planning Lawyer Explains Dangers of Joint Accounts

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Forbes Shares Information on Celebrity Estate Planning Stories

November 18, 2011,

Families across the country will come together to celebrate the Thanksgiving holiday next week. As a Forbes article recently explained, the holiday is a perfect time to discuss estate planning issues, because the planning is all about helping out one's family. One of the main goals of an estate plan is to ensure that surviving family members will be taken care of and not forced to endure stressful, complicated, and costly procedures to get financial affairs in order following a death.

One way to broach the topic over Thanksgiving dinner, say the article authors, is to frame the talk in the context of high-profile celebrity stories. The article includes a list of the "Top 5 Celebrity-Based Estate Planning Conversation Starters." Kim Kardashian's story made the list to highlight the role that marriages have on one's estate. The socialite ended her seventy two day marriage last month. Of course all marriages (short and long) have significant effects on one's estate planning documents, and estate planning attorneys should be consulted when a marriage is entered into or ended. It is smart to make appropriate changes even before a divorce is finalized; otherwise the estranged spouse may still retain control if a death occurs before the separation is official.

The feud over Michael Jackson's estate is also ripe with lessons. It was explained how the music pop star created a trust before he died and named his mother, three children, and personal charity as beneficiaries. Two trustees were named to help manage the trust. Our New York estate planning lawyers help clients in our community create these legal entities all the time. However, besides creating the trust, it is vital that the trust be "funded." Funding is the process where assets are moved from an estate and into the trust. Failure to do this makes the trusts seemingly ineffective. That is where problems have arisen for the Jackson estate.

Michael Jackson's trust was never actually funded. That means that there was essentially nothing for the beneficiaries to receive--even though the singer's estate continues to grow. The deceased star's estate made a staggering $120 million last year alone. The unfunded trust problem has resulted in much in-fighting and legal wrangling. Also, because the property was not in the trust, it still had to pass through the probate court. It was only this week, two and half years after his death, that those in charge of the late singer's estate agreed to move $30 million from the estate into the trust. However, this step still does not guarantee that any of those assets will be given to the trust beneficiaries. The trustees still control the assets in the trust and will determine when any assets are distributed to beneficiaries and how much will be given.

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Reality Star Feuds with In-Laws in Estate Fight

Iron Clad Will Likely Avoids Inheritance Fight After Death of Amy Winehouse

New Survey Reveals Financial Planning Helps in Bereavement Process

November 16, 2011,

Our New York estate planning attorneys have decades of experience helping local families following the death of a loved one. We have come to appreciate the role that we play in this difficult time via the estate administration and probate settlement process. Financial uncertainty is the last thing that families need when struggling with emotions after losing a loved one.

A recent New York Life Foundation survey of local residents who had lost a spouse confirmed the vital role that New York estate planning plays in many lives. As reported yesterday in Life Health Pro, nearly sixty percent of survey respondents admitted that "losing my spouse has significantly impacted our standard of living." More than half of survey respondents explained that they were not financially prepared at the time that they lost their spouse. For those widows and widowers who still had children living with them at the time of the loss, the financial struggles were even more severe.

The report found that "nearly everything involving money--either on their own behalf or on behalf of their children--was harder following the loss." These money troubles were especially pronounced among families that had lost a spouse young or had failed to conduct any estate planning. For example, two out of three spouses agreed that it was much harder to save money following the loss. Sixty percent admitted that they had trouble managing household finances after the loss, with few able to find any available resources to spend even modest sums on themselves. For families with children, the consequences of these money troubles can be long-lasting. Over sixty percent of parents said that it was virtually impossible to save for their children's college education following the death. Nearly half had the same problem in paying for affordable health care.

Many surveyed said that the situation would have been better had some consultation been done before the loved ones' passing. Nearly two out of three survey respondents admitted that they did not have financial planning advice at the time of the death, and virtually all of them agreed that they would have been better off had they sought professional advice. Among the one third of survey respondent who did have the help of professionals with long-term financial planning, the vast majority of them found the aid help to be "very helpful." They explained that the helpfulness came in two forms: actual assistance with finances and basic emotional support while interacting with the family at the difficult time.

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Estate Planning May Be A Family Decision

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Trustees Need to Be Educated On their Role in Estate Plans

November 14, 2011,

Last week Advisor One discussed an estate planning issue that is underappreciated by some community members: the need for an educated trustee. Our New York estate planning attorneys commonly use trusts to help local residents avoid probate and save on estate taxes upon their death. When a trust is used a trustee has to be designated, which is an individual or entity that will carry out various responsibilities upon the death of the one who created the trust, the Grantor. The trustee is obligated to complete a range of legal and practical duties at that time. Without proper education and guidance they run the risk of failing in their obligations and causing a variety of problems for the family involved.

Upon the death of the Grantor, for example, the trustee must delve into the Grantor's personal and financial situation. That includes creating a list of all of the individual's assets, including personal property, real estate, stock, and other items. The fair market value of the property must be assessed so as to establish a new tax basis for possible future appreciation purposes. An assessment must be made to determine if estate taxes are at issue before equitable distribution of property to beneficiaries per the agreement's terms. Many other duties must also be fulfilled. Outstanding debts have to be paid, life insurance claims filed, retirement accounts handled, tax returns filed, and other accounting documents properly crafted. While the settling of a trust is easier than the probate process, it still demands prudent action by those involved.

The complexities of the position make it necessary that trustees be educated about their role, and it makes it important for the Grantor to give careful thought to trustee selection. The article notes of participants at a recent trustee education seminar that "grantors were trying to determine which made most sense for them: a personal trustee, a corporate one, or a personal trust company." The article went on to explain how it was often difficult for families to identify a personal trustee that possessed the technical skills and relationship with the Grantor needed to best fill the role.

These challenges are why our New York estate plan attorneys explain to residents that it may be prudent to chose a professional trustee, such as a trust company, bank, or lawyer. A clear benefit of a professional trustee is the expertise they bring to the position, guaranteeing that the actual settling of the trust will meet technical requirements. In this way, a Grantor can be sure that the trust will be properly managed and actually make the difficult time easier for the family. Some residents may feel comfortable with a mixture of both an individual trustee (like a relative) and a professional trustee (like a lawyer). In those cases, the two can both be named as co-trustees, often providing the balance of expertise and familial closeness that a Grantor prefers.

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Estate Planning Documents Must Be Updated So They Work When You Need Them

November 9, 2011,

Yesterday the Kansas City Star published a story on the necessity of properly updating estate planning documents. The article shared the story of a local woman whose mother had just died. The mother had created a living trust several years before and placed her residence within the trust. However, a few years after the planning occurred, the mother sold her house and moved into a different home. She died shortly after the move. The adult daughter was left wondering whether or not probate would be required for her to obtain her mother's home.

The daughter learned after talking to legal professionals in the area that the key issue was whether her mother had taken title to the new home in the name of her trust. If so, then the new home would likely be part of the mother's living trust to be passed to the named beneficiary of the trust per its terms. However, if the new home was not titled in the trust's name, then it likely would not pass on via the trust. Instead the public probate process would be required for the daughter to obtain the residence.

Of course the entire purpose of the mother creating a trust in this case was to avoid probate, save on taxes, and ensure that her family members would have as seamless a transfer process as possible in the inherently difficult time. By not taking her earlier planning into account when making future transactions or consulting her estate planning attorney to assure everything was in order, the mother risked having her plan fail to work as desired at the very moment it was needed.

As noted in the story, many residents fail to update their plans accordingly because they do not appreciate the specific actions that may implicate their plan. For example, most residents are well aware that following a divorce, changes in property ownership, altered inheritance wishes, and similar matters would require an overhaul of previous financial and inheritance plans. Yet, as demonstrated in the article, even property transfers may have serious implications on these affairs. In this way, estate planning is best thought of as a prudent habit instead of a one-time event.

Our New York elder law estate planning attorneys understand the need to keep plans updated. That is why all clients utilizing our services have free monitoring of their elder law estate plan. Every plan is individually reviewed every three years, clients are invited to bi-annual meetings to update their plans, and weekly contact is maintained so that clients can easily get in touch with our office if life changes have necessitated alterations in long-term planning.

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An Estate Planning "Perfect Storm"

November 7, 2011,

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a "perfect storm" for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, "If individuals are trying to transition assets to the next generation, we currently have a perfect storm--in a good sense--to do it."

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain--it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

No matter what the economic or political climate, trusts remain a primary tool to flexibly transfer assets and save on taxes. A variety of different trust mechanisms remain available to residents to customize their estate planning and gifting strategies. Grandparents can set aside funds for grandchildren by using a generation-skipping trust. Charities can be provided for through use of a charitable remainder annuity trust. Of course the first step in tailoring a plan to meet your specific goals is visiting an area estate plan attorney to explain your wishes and learn how they can best be fulfilled.

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Reality Star Feuds with In-Laws in Estate Fight

November 3, 2011,

Last month Forbes discussed an estate feud that brewed followed the suicide death of a reality show star. Late this summer, the 47-year old star of "Real Housewives of Beverly Hills," Russell Armstrong, took his own life. His wife, Taylor Armstrong, had filed for divorce shortly before the death. However, the divorce was not final at the time of Mr. Armstrong's passing, meaning that per the rules of the state she was the next of kin. As such she maintained a certain level of control over his affairs--including his funeral and burial plans. Without instructions to the contrary in estate planning documents, even estranged spouses may maintain this control.

Making matters worse in this situation, it appears that Mrs. Armstrong never maintained a good relationship with her former husband's family. As a result, she did not initially tell the family about the funeral, burial, or memorial plans. The man's parents and siblings wanted his remains buried in his home state of Texas, but Mrs. Armstrong claimed that she wanted to bury him in Los Angeles. It remains unclear exactly how the ugly situation will be resolved.

Unfortunately, the burial dispute may be just the beginning. Depending on Mr. Armstrong's estate planning documents, his estranged wife may still be entitled to inherit most of his assets. That is why it is important to seek out professional help in the middle of a divorce. Otherwise, there is no telling what might happen. As the article notes, "Fights over the estate of someone who passed away in the midst of a divorce are especially common." Other recent high-profile examples include the deaths' of Dennis Hopper and Gary Coleman.

Our New York estate planning attorneys know that these complex situations occur in our area with surprising frequency. A loved one's passing is always an incredibly emotional time, and matters are made significantly worse if a spouse (estranged or otherwise) does not maintain a good relationship with the deceased's family. Traditionally, this situation is more likely to exist in second marriages. That is why there is immense benefit to ensuring that professionals are consulted ahead of time to account for potential disagreement down the road. In many cases, a neutral third party can be involved to ensure that fairness reigns no matter what the future holds. When clients in our area visit our New York estate plan lawyers to discuss second marriage planning, for example, we often recommend that the attorney be named a co-trustee of trusts to provide the necessary outside perspective.

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Federal "Super Committee" May Target Gift Tax in Deficit Reduction Scheme

November 1, 2011,

The gift tax has implications in a variety of New York estate planning situations, from deciding the best way to provide aid to loved ones to conducting business succession planning. As with many other tax issues, timing is important because lawmakers at the federal and state level can change these rates. While the risk of rate changes always exists, there has been significant discussion as of late about a variety of potential changes involving the 12-member federal "Super Committee." The Super Committee has been charged by Congress with reducing the federal deficit by $1.5 trillion over the next ten years. To do so, the group will have to enact a combination of spending reductions and tax changes. No matter what combination they ultimately decide upon, it is highly likely that their work will have effects on local residents crafting their New York estate plan.

For example, last week the Wall Street Journal's Market Watch published a story explaining proposed changes to gift tax exclusions. The specific committee meetings are mostly private, so some of the recent thoughts on the committee's actions are speculative. However, it is known that one of the President's proposed recommendations to the committee includes reducing the estate, gift, and generation-skipping transfer tax thresholds. The proposal would reduce the tax-free gift threshold to its 2009 level of $1 million. Currently the tax-free threshold is supposed to stay at $5 million until the end of 2012. However, many are speculating that the committee may decide to return the exclusion back to $1 million a year early as a cost-saving measure.

The story's author summarizes the changes by noting, "Overall tax planning and gift tax thresholds that are now available could be at risk for families...not much good can come from the committee's recommendations from a wealth preservation perspective." Clearly, the potential actions by this group may make it important for some local residents to take long-term financial actions now. Our New York estate planning attorneys urge all community members who may be affected by these changes to visit with a professional to either create a plan or update an existing one. Depending on the advice received, it may be prudent to accelerate planned lifetime gifts, review estate-tax funding mechanisms, or otherwise revise estate plans.

Under the current schedule the Super Committee is expected to present its recommendations to Congress on November 23rd. Congress will then have a month to take action on the proposal, and no amendments will be considered. If Congress does not pass the measure as proposed then automatic spending cuts will be triggered.

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