January 2012 Archives

Famous Feuds and New York Estate Planning Lessons for Every Family

January 30, 2012,

A Reuters story late last week suggested that while estate planning feuds of the famous usually involve millions, the principle issues are the same as those faced by all local residents. Every case must be evaluated individually, but the same main issues are found again and again. That is why our New York estate planning lawyers urge residents to visit with experienced professionals when making preparations because they have likely seen similar issues in the past and can help anticipate problems that might come up down the road. As this latest story explained "anyone thinking about wealth transfer faces the same issues: dysfunctional families, potentially unequal positions in the family business, perhaps multiple marriages with kids from each." This applies whether one has $50,000 or $50 million.

For example, second marriages often create planning problems. When crafting an estate plan, one must balance the needs of the second spouse with the children of the first marriage. If one doesn't do it, as the author notes, "you're basically buying a litigation case." For example, the longest estate litigation case of the last century was that of Anna Nicole Smith. She was a second wife of a billionaire investor. The children from the man's first marriage engaged in a prolonged battle to ensure that Ms. Smith did not receive any substantial portion of the man's wealth. The case was still not resolved with Ms. Smith herself passed away.

Family businesses also present common issues for those in all income brackets. Much family wealth is wrapped up in a business. Often some of the children participate in the business while others do not. This often creates significant estate planning issues regarding who gets what share of the business. One of the most well-known examples of this is that of the Koch family in New York. The patriarch had created a fortune after developing a new cracking method in oil refinement. However, upon his death the man's four sons engaged in a prolonged legal dispute over control of the business. As the article notes, "there are a lot of ticking time bombs in family businesses that creates litigation."

Many judges involved in these sorts of cases have explained that they believe estate litigation is on the rise. The fact patterns of the cases are consistent: second marriage issues, family business struggles, and similar situations. Those involved also report that the size of the estate is often of no consequence. Estate disputes are not only the concern of millionaires.

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The Dynasty Trust May Keep Inheritance In the Family

Huguette Clark's Only Friend Has Her Own New York Estate Plan Settled

January 26, 2012,

One of the most well-known New York estate planning stories (and mysteries) of recent years is that of Huguette Clark. The extremely reclusive heiress recently passed away, leaving hundreds of millions of dollars with many wondering where exactly the money will end up. Of course, in most cases an inheritance will go to surviving close family members, dear friends, or well-known charitable causes. However, Ms. Clark had very few surviving family members, and it is now being reported that she only one "real" friend, a French woman named Suzanne Pierre.

Ms. Pierre had become somewhat of a liaison between Ms. Clark and the rest of the world. It was alleged that Ms. Pierre was one of the few people who was privy to the heiress's estate planning documents. In fact, according to the New York Observer, Pierre once helped anonymously sell some of Ms. Clark's impressive art collection. She was also the recipient of a $10 million gift of a rare painting from the estranged heiress. Before Ms. Clark's passing some predicted that Ms. Pierre would actually be named heir to much of Ms. Clark's fortune. However, that possibility vanished when Ms. Pierre herself passed away a few months before Ms. Clark moved on.

One of Ms. Pierre's own most valuable assets, her Park Avenue apartment, was recently sold during the disposition of her estate. City records indicate that the unit sold for just under $2 million. The sale comes as many in the real estate world speculate on the prospects of Ms. Clark's own, massive Park Avenue apartment. The 42-room unit is expected to fetch somewhere around $70 million. Many are calling the unit the most sought-after apartment in the entire city and "the listing of the young century."

However, it remains unclear when the unit will actually be listed, because a fiasco still exists regarding the ownership of Ms. Clark's assets.

As it now stands Ms. Clark's estimated $500 million is in limbo. Accusations of fraud and undue influence have already been made. Caregivers, financial professionals, and distant relatives are all locked in a legal struggle to determine what happens to the fortune. Our New York estate planning lawyers always find these drawn-out legal feuds to be quite sad. Of course this sort of situation is almost expected when there is so much money at stake. However, similar in-fighting occurs even when much less is on the line. The emotions of the situation often run high and the focus becomes "winning" as opposed to properly respecting the wishes of the one who passed on. Anything that can be done to prevent such situations ahead of time should always be explored.

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New Twist in Huguette Clark Estate Plan Controversy

Questions Remain About Huguette Clark's $500 Million New York Estate Plan

Protecting Assets When Facing Uncertainty

January 23, 2012,

NuWire News published an interesting blog post last week that runs down a few ways that community members can use estate planning techniques to protect assets in "uncertain times." Of course, our New York estate planning lawyers realize that uncertainty exists at all times, because no one knows for sure what tomorrow might bring. However, there are always some circumstances when future financial trouble seems particularly likely--such as when one might need long-term care either at home or a long-term care facility. The article authors note that it is always beneficial to shield assets before they become a target, otherwise, depending on the circumstances, there are a range of penalties that may attached to the conveyance. For example, when it comes to applying for New York Medicaid, it is vital that asset transfers be made at least five years before applying. Strategies exist to protect assets even when on the nursing home doorstep (without five years to wait), but there is much more than can be done the earlier one takes the time to plan for these issues.

Outside of the long-term care context, there is similar benefit from protecting assets well ahead of time, before they may be targeted by a creditor. The article discusses ten different techniques that may be applicable, depending on one's circumstances. For example, the story discusses spousal gifting trusts. These are special trusts (also known as irrevocable grantor trusts) that allow married couples to protect assets from creditors and estate taxes while still retaining control and use of the assets.

Obviously insurance considerations are also important for protecting assets in uncertain times. After all, insurance is all about having security in the face of potential problems down the road. Long-term care insurance is clearly helpful to account for senior care costs. Unfortunately, that particular insurance is often out of reach for middle class community members. However, even basic life insurance should not be forgotten when thinking about estate plans. For younger families with children life insurance provides security in the case of untimely death. For wealthier families the insurance can also be important to protect assets from estate taxes.

At the end of the day there is a seemingly endless array of combinations that may work in each individual case to protect assets from the uncertainty of the future. In many cases a combination of trusts, gifts, donations, insurances, and other strategies combine to protect assets from taxes, long-term care costs, and creditors. Sadly, many community members fail to take advantage of these options until it is too late, when the adverse event--death, divorce, lawsuit--has already occurred.

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Golden Globe Winning Film Explores the Trust Industry

January 19, 2012,

Estate planning usually doesn't come to mind when one thinks about award winning Hollywood movies. Most popular films are about great adventures, tragedies, and disasters. Planning for one's long term financial and medical well-being, on the contrary, is all about prudently working to avoid major crisis or drama. However, a film that many movie buffs believe has the inside track to win this year's Academy Award for Best Film actually involves estate planning, with a trust and a trustee at the center of the action. This weekend the movie won the Golden Globe Award for Best Dramatic Film.

"The Descendants" tells the tale of a man who is dealing with the impending death of his wife who suffered a traumatic injury and is on life support. The film's protagonist, played by George Clooney, is the victim's husband. As his wife slips away he is forced to deal with the consequences of handling her estate. She had come from a very wealthy family, and the couple (along with their two children) had lived on acreage of land in Hawaii that was held in trust.

Clooney, as the husband, is the trustee of his wife's multi-generational estate worth billions. The other trust heirs (his cousins) want to sell the land to generate income to meet their personal needs. However, Clooney remain unsure of the best long-term decision. He knows that the original intent of the family was to preserve the land for succeeding generations.

After calling the movie "the best trust film ever released," writers at The Trust Advisor noted that the film echoes many real-life situations faced by trustees debating the wishes of those who have passed with the needs of those still living. They explained "every multi-generational trust is a balancing act between the living and the dead, with the trustee in the precarious position of having to weigh the wishes of the vanished grantors against the priorities of their heirs."

Our New York estate planning attorneys were not surprised to learn that the movie was based in large part on the real life situation faced by the Campbell family--heirs to a billion dollar Hawaiian estate. For one hundred and seven years a trust held title to thousands of acres of land on the big island. In 2007, after the last of the heirs who was alive when the trust was created passed away, the trustees were forced to decide how best to handle the situation. Eventually some of the remaining beneficiaries took large cash disbursements. A few of the others chose to roll over their interests into a new real estate corporation, meaning that the family still controls thousands of acres on the island.

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Trustees Need to Be Educated On Their Roles in Estate Plans

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Common Estate Planning Mistakes

January 17, 2012,

Last week an article in the Mansfield Patch listed "Five Vital Estate Planning Mistakes" made by local community members. The list touched on a few issues that each New York estate planning lawyer in our firm has seen time and again. Like history, these errors tend to repeat themselves. Being aware of the common problems is the best way to ensure you don't make them yourself.

Of course common mistake number one is putting off estate planning efforts entirely. Passing on is usually not a topic that most enjoy thinking about. Estate plans inherently involve some considerations and preparations in the event that one is no longer alive, and so many simply avoid the idea altogether. This delay ultimately serves no purpose. As the article author remarks tough-in-cheek, "If you don't die before retirement, chances are pretty good you'll die sometimes afterwards." Considering that death is inevitable, there is simply no logical reason to do no planning and risk paying more in taxes, the uncertainty of the probate process, or the potential squabbling of family members.

Second on the list was failure to consider naming guardians for one's children. While most local residents conducting New York estate planning have adult children, planning is important for younger community members as well, particularly those who have young children. When crafting an elder law estate plan for clients, we always take into account the family dynamics involved. When young children are present it is important to make plans for those children in the event something happens to you, the parent. This is another task that is often put off, because it is not pleasant to think about orphaned youngsters. However, at the end of the day failing to name a guardian only means that the buck will be passed to some other decision maker if anything happens--usually the court. No one is better positioned than a parent to name a potential replacement in case of tragedy, and so it is always prudent for parents to do so.

Another common mistake includes failing to update policy beneficiaries. Single parents or those who are divorced are more susceptible to this error. For example, when their children are young a single parent may name a grandparent as a beneficiary on things like an IRA, 401(k), or life insurance policy. They then fail to change that designation down the road, after their children have grown. Similarly, divorced spouses often forget to change each other as named beneficiaries after the divorce.

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Now Remains a Good Time for Baby Boomers to Conduct Estate Planning

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The Sociology of Giving Back in Inheritance Planning

January 12, 2012,

On Tuesday we discussed a few ways that our New York estate planning lawyers incorporate charitable giving into strategies to reduce taxes during inheritance planning. Of course, for most local families who want to give some of their wealth away, the motivation is not just to save tax money for themselves or their heirs in the process. Instead, as an interesting new article discussing the matter in Financial Planning noted, there are many emotional connections behind giving back. A mix of empathy, gratitude, and the desire to make an impact for others are often behind philanthropic efforts included in New York estate plans.

One sociologist suggests that empathy is at the root of most charitable giving--the ability to actually experience the struggles faced by others. Many donors providing support to certain charitable causes see much of themselves, their children, parents, or other family members in those that they are helping. The ability to care for others as an extension of ourselves is one of the most valued human abilities, and many of our clients share that attribute, wanting to incorporate it as part of their long-term planning.

The time that many are conducting estate planning is usually a time when they are winding down their efforts to collect more wealth. As a result it is a natural opportunity to consider other objectives, goals, and wishes. A sociologist familiar with this time in life explained how residents "then face the question of how to live next and impart to their children a moral biography. Most will want to give back because giving is a natural source of happiness." When reflecting on how far one has come in life, many consider that they themselves were helped along the way. Giving aid to others (financial and otherwise) is a way of returning the help one personally received at a time when it was needed most.

Another consideration is the effect that particularly large inheritances might have on offspring. Researchers have found that many wealthy individuals fear the effect of a large inheritance on their children. Increased charitable giving seems like an appropriate action in those situations.

At the end of the day, providing help to others is perhaps the single most important way that any of us can shape the world around us. At the same time it is a way of meeting our own needs as well. The Greek word from which we derive philanthropy, "philia," actually means "mutual nourishment."

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Adding Charitable Giving As Part of Your Estate Plan

Charitable Remainder Trust (CRT) as an Estate Planning Tool

Adding Charitable Giving As Part of Your Estate Plan

January 10, 2012,

New York estate planning is primarily concerned with passing on assets to family members and saving taxes in the process. While the inheritance planning portion of the effort may seem straightforward, there are many considerations involved. It is much more than simply saying that John gets the house and Jane gets the car. When done right, the process should include consideration of many issues like what legacy one wishes to leave, how they'd like their children to remember them, and what values they wish to pass on. For many families this process involves leaving some assets to a charity of choice.

A story in this weekend's Western Farm Press emphasized how charitable giving is an important part of estate planning for many families. It was a follow up to an article that had been recently written about the value that farm families have in visiting an estate planning attorney to keep a farm alive in the future. The latest story noted that including valued charities in one's inheritance is a helpful way do some good while saving on taxes in the process.

It was explained how using these charitable donations in combination with estate tax exemptions can go a long way to pass along assets to desired family, friends, and causes without losing it to the government. Many assets that have appreciated significantly in value can be given to charity which may allow them to avoid being eaten up by capital gains taxes. Also, retirement savings, like IRAs, can be included in estate planning efforts to benefit charity. This often helps to reduce or eliminate tax liabilities. When done properly it can increase the funds that are going to heirs while also increasing the amount provided to a charity.

Perhaps the most common way that our attorneys work with clients on charitable giving is via use of charitable remainder trusts. These legal entities are unique tax-exempt irrevocable trusts that often provide the best avenue to transfer cash or assets to a charity of choice. Upon the trust's creation, assets are transferred into it. The one who created the trust is then allowed to receive income from that trust (either for life or a set number of years). Whatever is remaining at the end of that income collection period is then given to the named charitable cause. In fact, in certain circumstances the trust income may be paid over the life of one's spouse or children. There are limits on payout rates and other tax implications, and so it is always important to have experienced legal advice to explain whether or not one of these devices in useful in your specific situation.

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Charitable Remainder Trust (CRT) as an Estate Planning Tool

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News Years Resolution: Finally Take the Time to Create (or Update) Your New York Estate Plan

January 6, 2012,

To ring in 2012, many New York estate planning attorneys urged local residents to use the holiday as a reminder of the importance of preparing for inheritance and disability. A humorous Huffington Post article yesterday walked readers down the same path. The story noted that even conducting the most rudimentary planning puts one ahead of the curve, as anywhere from 58-65% of Americans have done no planning whatsoever. In explaining her own reluctance to plan, the story's author quipped, "I got a trust together a few years ago but haven't really planned for life two years from now, never mind when I'm in the Great Beyond, since I'm too busy planning for the Great Here and Now."

The author rightly notes that estate planning is linked to death--an unpleasant connection that makes many put off thinking about it. Children are often the difference maker. It was explained that "when children come into the picture parents often enter the Kingdom of Anxiety, and concerns about what we leave behind are harder to sweep under the carpet." For the author, her wake-up call came when she realized that not visiting an estate planning lawyer to figure things out ahead of time meant that if anything happened to her, decisions about who would care for her children would be decided by then-anonymous decision makers in the probate court system.

Obviously all parents have an interest in ensuring their children are cared for properly no matter what the future holds. So what prevents many from conducting even basic planning? The author believes that part of the problem is the word "estate." Many hear the word and assume that "estate planning" is only for those with large portfolios, several homes, and valuable possessions. Sadly, many community members never realize that one needn't have vast wealth to gain immensely from estate planning. Besides deciding who will care for children and divvying up assets, planning also helps loved one's deal with the traumatic time after a passing.

Also, unpleasant as it might seem now, many have reported that the estate planning process forces one into the incredibly worthwhile task of thinking about where one's life is now, where it is headed, and what is still left to accomplish. The Huffington Post story references the irreverent book "A Lively Guide to the Bitter End," which explains, "of all the traits that distinguish humans from other animals...perhaps the most fundamental is our awareness of our inevitable deaths...What we do with that awareness is another story entirely."

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Estate Planning Mistakes (and Lessons) of the Rich and Famous

January 4, 2012,

Most local residents will nod in agreement when one explains the importance of conducting New York estate planning as soon as possible. It is easy for most to understand the value of planning an inheritance, saving on taxes, and preparing for alternative decision makers. Yet, all estate planning lawyers know that there is a difference between recognizing the importance of a task and actually taking the time to get it done. Psychologists have found that when it comes to making the leap from knowing that a task should be completed to actually doing it, personal examples are usually the most effective motivators. It is one thing to learn about the value of planning, it is another to hear about a specific case of proper planning that helped an actual person. In fact, experts have also found that even more effective than stories of positive benefits are stories of plans gone awry. The stick is often more persuasive than the carrot.

That is where the estate planning misadventures of the rich and famous can be useful. Unfortunately, recent history is replete with stories of many well-known figures who did not take care of their affairs properly (or at all) before their passing. This week the SM Mirror ran down a quick list of some of the more well-known cases of celebrity estate planning blunders. A few included examples:

Jimi Hendrix
The great young guitarist passed away tragically at the age of twenty seven. As is common for those around that age, Mr. Hendrix did not have a will. Possession of his estate was disputed for decades, with Mr. Hendrix's father officially taking ownership twenty years after the death. Upon the father's passing, everything went to the father's daughter from a second marriage. The father had adopted the daughter who was his second wife's child from her former marriage. That means that Mr. Hendrix's nearly $80 million fortune (which continues to grow) is owned by someone he never knew. This is the case even though there remain many family members who are still alive and were much closer companions to Mr. Hendrix during his life.

Marlon Brando
Marlon Brando supposedly explained to his long-time housekeeper that she would be able to keep the home in which they lived following his death. She had been living there for years beforehand. However, the promise was never committed to writing. Oral promises are easily contested and often invalid. Upon Mr. Brando's death the housekeeper lost her bid for the home and received only a small settlement.

Anna Nicole Smith
The model and TV reality star died without updating a will she had written six years earlier. The old will left everything to her son Daniel. However, Daniel had died several months before Ms. Smith. Therefore, the probate court will likely have to apply default rules to determine how her assets are distributed. However, the case remained unresolved five years after her death, because Ms. Smith herself was involved in a fifteen year battle for a share in the assets of her billionaire former husband after his own will was contested.

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