July 2012 Archives

Will Inheritance Soon be a Thing of the Past?

July 30, 2012,

As recent article in the Star Tribune put it, all but the wealthiest of us have moved from an "inheritance" society to "let's make sure Mom and Dad have enough to live out their lives scenario."

Ten years ago Americans expected more inheritance from their parents than they do now. Longevity has generated the need for more retirement money which in turn has led to a decrease in the total assets left to others. In addition, our New York estate planning attorneys know that the recent economic crisis has exacerbated the situion, trimming nest eggs and making it hard for many to cover their elevated health care costs and other financial obligations.

All of these issues were recently touched on in the StarTribune article. It noted that for those who reach age 65, 40% of the men and 53% of the women will live to at least 85. Since most of their income derives from Social Security, it creates a situation where they seek support from their children instead of living off a nest egg to pass on to those children.

Estate planning obviously takes these challenges into account.

On the one hand, it is hard for the older generation to discuss such financial matters with their families; they may be afraid to disappoint their children and want to take care of themselves. On the other hand, younger generation might also find it hard to express their concerns about their parents' financial situation.

But there are subtle ways to discuss the issue, such as asking whether parents have a living will or how they would like things to be handled if they get sick, rather than abruptly asking how much money they have. However tough it might be, for those willing and able to support their parents, raising the issue always eases up the state of things.

This also opens the door for discussion of other elder law estate planning questions, like insurance options. For the past generations, long-term care insurance was relatively unused, but for the Boomers it is a different story. Figuring out how one will receive long-term care is critical for those whose life expectancies continues to increase. In addition, most people today marry at an older age and have children when they are older.

Now more than ever it is important for people to have a retirement plan and to begin their estate planning as early as possible.

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New York Counties Hurt By Nursing Home Medicaid Glitch

Losing Home Over $400 Tax Bill

The Story Behind the New York DOMA Challenge

July 27, 2012,

Earlier this week we shared information on the latest challenge to the U.S. Defense of Marriage Act (DOMA), Windsor v. United States. While the case awaits final resolution, many are working to spread information about the story behind the lawsuit. The goal is to better explain to the community at large how this sort of law affects same-sex couples. Each New York estate planning lawyer at our firm understands the significance of the law in the lives of local couples. It is about more than words but the actual rights, obligations, and privileges given to some couples and not others.

As reported in the Washington Post, the lead plaintiff in the case, Edie Windsor met her long-time partner, Thea Spyer, in 1963. Four and a half decades later, the pair was still together following a lifetime of love and happiness. Following Thea's long battle with multiple sclerosis, the couple decided to legally marry in 2007 before Thea's condition deteriorated further. It represents the strength of a couple's commitment and the ability of society to change to recognize the value of that commitment.

Yet, while enormous strides have been made, actual equality remains elusive. That is, in part, because of DOMA. Edie hopes to change that.

Sadly, Thea passed away in 2009. As expected, she left her estate to Edie which mostly included the two homes owned by the couple. They owned a Manhattan apartment and small house in the Hamptons. Each property was purchased long ago, but the values skyrocketed over time.

For hetereosexual couples, the inheritance would be a simple transfer from two spouses without estate tax ramifications. Yet, even though they were legally married and together for forty five years, the federal government treated Thea and Edie as strangers. That subjected Edie to estate taxes. Edie was forced to find a way to pay a $360,000 tax bill.

That tax owed by Edit specifically because she was in a same-sex relationship, makes up the crux of her legal challenge to DOMA. The lawsuit was filed on her behalf by various legal entities, including the New York Civil Liberties Union foundations. The Obama Administration has refused to defend the law, and so the defense is being handled by a congressional group led by George W. Bush's former solicitor general.

While the law's defenders are framing the issue as one related to Congressional powers, the plaintiff's attorneys are keeping the effect of the law on the couple front and center. Our estate planning attorneys appreciate that while big issues are tossed about, what matters most is how these laws affect actual residents day in and day out.

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DOMA Developments May Have Implications for Married Same-Sex Couples in New York

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

DOMA Challenge Likely Headed to U.S. Supreme Court

July 25, 2012,


In the wake of the passage of marriage equality laws in our state, many assumed that the issue was settled for New York's same-sex couples--they would be treated the same as all other couples in our state. Not so. Our New York estate planning attorneys are acutely aware of the continued inequalities faced by these citizens. The problem is rooted in federal treatment of these couples with clear estate planning ramifications.

A 1996 law--the so-called, "Defense of Marriage Act" (DOMA)--forces the federal government to treat same-sex married couples differently than others. Breaking with long-standing tradition of recognizing all marriages legal in each states, the federal government explicitly defined marriage as not including same-sex couples. As a result, same-sex couples married legally in individual states are still considered strangers by the U.S. government. Obviously, this split recognition has negative consequences for the involved couples. All estate plans for these couples must continue to take this into account.

Yet, many observers believe that the federal law which creates the division is on its last leg. The most high-profile challenge to DOMA was recently decided at the federal level. In June, the New York district court ruled that DOMA was unconstitutional. Even before an appeal to the intermediate appellate court ("Circuit Court"), the plaintiffs in the case, Windsor v. United States, asked the U.S. Supreme Court to hear the case.

While bypassing a federal circuit court is highly unusual, many believe the U.S. Supreme Court will hear the challenge this Fall and issue a ruling the following Spring. That is because two other challenges to DOMA are also pending in federal district courts. No matter what the outcome, the case will likely need to be settled by the high court anyway.

A final resolution on this issue cannot come soon enough. Our New York estate planning attorneys are aware that even the plaintiff--a woman whose female partner passed away in 2007--will not be able to receive relief even following her victory at the district court level. The district court decision was automatically stayed and so she will not see any relief until there is an ultimate resolution at a higher court.

Many local couples will undoubtedly be following the developments closely. As the executive director of the New York Civil Liberties Union noted, "The impact of DOMA is felt most dramatically today here in New York. At least 10,000 same sex couples have been married in New York since our marriage law went into effect. But DOMA subjects gay and lesbian married New Yorkers to a form of second-class citizenship."

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DOMA Developments May Have Implications for Married Same-Sex Couples in New York

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

Yet Another Call for Use of Gift Tax Exemption Before Its Too Late

July 23, 2012,

A recent Forbes article put out yet another call for residents to take stock of their estate planning details by the end of the year to take advantage of a favorable tax situation that may be gone soon. The story notes that interest in the gift and estate tax rates have been eclipsed in recent weeks and months over calls for overall tax reform, including changes to income tax rates. But that doesn't mean resident should forget the soon-to-be-gone rates.

Our New York elder law estate planning attorneys know that everyone's situation is different, and it is impossible to predict what the rates might be in the future. Yet, even a quick look at the current political dynamic suggests that those who might include gifting as part of their plan are well advised to take advantage of current rates before year's end. Right now, when inflation is factored in, individuals can transfer up to $5,120,000 tax free. That level will likely rise in just over five months.

Per tradition, Congress is yet to put together a permanent plan in place. When these original cuts were passed in 2001 with progressive cuts to 2009, most assumed that a permanent plan would be in place by the end of that decade. Not so. In fact, Congress's delay meant that there was no estate tax in 2010. This is why very wealthy individuals who died in that year--like George Steinbrenner--were able to pass on their entire estate tax-free.

Yet, estate planning attorneys continue to remind residents that taking advantage of these tax rates does not require one to pass away. That is because assets can be given away to intended heirs now, even when one is alive, at the high exemption rates. Taken together, a couple can pass on up to $10,240,000 without tax right now. If they wait five and a half months a large part of the transfer would be eaten by taxes.

It is crucial to take a moment to ask a legal professional how this might be best applied in your case. A lot will hinge on one's overall financial status such that gifts can be given now without compromising the individual or couple's long-term stability and planning. For example, to take advantage of this exemption rate gifts do not necessarily need to be given outright. Tools like trusts can be used to keep the donee from having complete control of the assets at this time while still taking advantage of the tax situation.

Other consideration include the value of giving gifts that will appreciate in value. That is because this comes with the benefit of ensuring the appreciation is also taken out of an estate so that it is not taxed upon one's death.

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Number One Retirement Surprise: Leaving Money For Surviving Spouse

July 19, 2012,

The National Association of Personal Financial Advisors was recently polled to get an idea of common surprises encountered by their clients--those planning for retirement. A a Chicago Tribune article highlighted one of the most common responses from those advisors: a failure to appreciate the need to set aside significant income for a surviving spouse.

Our New York estate planning lawyers understand the inherent complexity of this issue. It is one thing to examine how long an individual is expected to live, subtract that from their current age, and determine how much is needed each of those years. By no means is this an exact science, but it is somewhat intuitive to roughly understand how much a single individual needs to retire. Things quickly get confusing, however, when spouses get thrown into the mix. Tackling this dilemma for locals is a key part of New York estate planning.

As one planner interviewed for the story noted, "One thing people don't plan for is the reduction of income if a spouse or partner dies."

Think about Social Security. When two partners are alive, each may receive Social Security benefits. However, if one of the spouses die the income will disappear. Even taking into account a larger benefit for the surviving spouse, the overall family income will be lower than before. Similar problems can arise for those living off a pension. A spouse's death may cause the pension income to dry up. If not accounted for, this can thrown some seniors into a financial tailspin, with insufficient funds to pay monthly obligations.

One professional interviewed for the story explained a recent client whose retirement income dropped 35% following her husband's passing, with a marginal 10% decrease in expenses. This ultimately required a significant lifestyle change for the woman at the very moment when she craved stability following the loss.

Estate planning attorneys appreciate the value in preventing this situation. Various tactics can be used to minimize the long-term consequences and provide more stability no matter what the future holds. For instance, a higher-earning spouse may choose to refrain from taking Social Security. This may earn her "delayed credits" up to 8% a year until the age of 70. If that spouses passes on, the surviving spouse may be able to switch to the value of the other's benefit, including delayed credits and cost-of-living adjustments.

For pensions a "joint and survivor annuity" might be appropriate, where less is paid out monthly for the peace of mind of knowing that income will continue even if the pensioner dies first.

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Surviving Spouses Should Seek Help from Financial and Legal Professionals

Estate Planning May Be Family Decision

Plan Your Estate As Well As Your Vacation

July 17, 2012,

This weekend Lake County News published an interesting story noting how so many community members spend more time planning their summer vacation than their inheritance and long-term issues. Think about it: how many different contingencies are accounted for when heading away from home for a one to two week trip? Pet sitters are hired, mail is paused, email auto-responders are set-up, plants are moved inside and friends are asked to water them, doors are locked, and a spare key is left under the mat in case of emergency. We take these steps just in case, so that we can enjoy our time away with the peace of mind that everything back home can be dealt with in most situations.

In many ways New York estate planning involves the same forethought--understanding possible issues down the road and taking steps to account for those contingencies. Yet, vacation planning is done instinctively while estate plans are often delayed or ignored.

Considering the importance that this planning has for one's future well-being and that of family members, it is sometime illogical for New York elder law estate planning to be ignored by prudent local residents. What gives?

For one thing, it is easy to procrastinate on these sorts of issues without immediate compulsion. Summer vacation planning has to be done by a known date. Estate planning is not that easy, because no one knows for sure how much time they have or if (and when) they may need long-term care. The indefinite future makes it easier to procrastinate.

Yet, planning is vastly more effective when conducted before emergency necessitates it. That does even account for the peace of mind that comes with knowing inheritance and plans are in place.

Many also put off the planning because they assume that the planning is complex and time-consuming. Planning will be done when they finally "have time" for it. It goes without saying that time will never magically appear; instead one simply has to make time to do things that matter.

But beyond that, the planning itself does not necessarily have to be as complex or time-consuming as one imagines. After all, the whole point of having professional help with these issues is to hand of the work to those who deal with these matters day in and day out. In most cases, a legal professional will explain how a trust can be created--depending on the size of your estate--and other documents put into place, including a Power of Attorney and Health Care Proxy. Even if nothing more complex is required, having these few pieces in place can make all the difference in case something happens unexpectedly.

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Bizarre Estate Feud Leads to Drive By Shooting

July 12, 2012,

One of the more unique estate planning feuds in recent memory remains under investigation, three years following the death of the family matriarch that started the debacle. While few families descend into physical violence, our New York estate planning lawyers appreciate that this case is a stark reminder of the mix of extreme emotions often present in these cases.

According to a Seacoast Online report, when Eugenia Boies died in 2009 at the age of 96 she left a family fortune valued at $12 million. The estate had mostly passed to her when her longtime husband passed away in 2007. The family wealth originated on the husband's side of the family, dating as far back as a Civil-War era gunpowder company. The wealth included over a million dollars in the bank, real estate in North Hampton, and millions in stocks.

Before her death Eugenia named her nephew, Peter, as one of three executors of her estate. Shortly after Eugenia passing, while the probate process was underway, Peter and his wife were awoken in the middle of the middle to a drive by shooting, with dozens of high-caliber bullets shot into the family's bedroom. The family home was riddled, but fortunately the couple survived the ordeal.

Investigations into the motivation behind the shooting eventually led to questions about Peter's position as executor of the estate and potential inheritance.

The Controversy
According to reports, Peter suggested this is aunt name a third executor to manage the estate so that there would be an odd number if necessary. His aunt then asked Peter to be that third executor, along with a trust company and local estate planning attorney.

Eugenia's will left everything to her two children and her nephew, Peter. Records indicate that her nephew was added later, in the last years of the elderly woman's life. This addition of the nephew was apparently the cause of the family feud. One of the woman's two children was reportedly so anger at his inclusion that she was heard to say she "wanted to kill him."

In police investigations following the shooting, one of the two children told authorities that she felt Peter had ulterior motives for befriending their mother and helping with finances near the end of her life. She denied committing the crime but bizarrely noted that "maybe, Peter got what he deserved."

Three years later no arrests have yet to be made in the ordeal. In fact, three years later, the probate process itself has yet to be entirely resolved, with various assets still awaiting final disbursement.

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Consider Updating Your Estate Plan Before Remarrying

July 10, 2012,

Our New York estate planning attorneys frequently remind residents that it is important to update an estate plan following major life changes, such as a divorce or marriage. However, that basic advice may be misleading, because in some cases it is crucial to consider updating the plan before the major life event takes place. That may be especially true in the case of second marriages.

A recent Elder Law Answers article summarized a few points to consider at this time:

-Make sure both spouses are on equal footing. Secrecy at this time is toxic. Both partners should take an inventory and understand what assets and debts are on the table. All planning extends from that base.

-Basic finances roles should be decided. Is one spouse selling a house and moving in with the other? Will debts be combined? There may not be a single right answer, but the decision should be clear so that neither side is surprised.

-Makes inheritance plans. This is one of the most confusing areas and a place where New York estate planning attorneys can be of great service. Blended families often require more complex legal work to ensure the "who gets what" decisions have legal backing. Creating trusts and structuring asset ownership is critical at these times, as the "default rules" about inheritance are unlikely to match with the exact wishes of a couple in a second marriage, particularly if children are involved.

-Consider a prenuptial agreement. While these contracts are often spurned by about-to-be-married partners, it is simply wise to consider whether a legal agreement before the marriage is a necessary precaution. This is not just for each partner but also the families. Agreeing to various issues ahead-of-time can spare each family stress and disagreement down the line. A prenuptial agreement does not mean that the partners do not think that the relationship won't last. It is simply prudent action by each spouse.

-Determine if beneficiary designations need to be changed. Retirement plans, annuities, and insurance policies all include designations of beneficiaries. However, divorced partners should consider that their divorce decree may not allow them to simply change a designation if the assets were factored into the divorce settlement.

-Consider if more protection is needed. Depending on the answers to these issues, it may be prudent for a couple to consider buying more insurance to protect each spouse For example, if a divorced partner cannot change a beneficiary designation without violating a divorce decree, then perhaps it is prudent to buy additional life insurance. Similarly, it may be wise to purchase long-term care insurance, if affordable. It is unfortunate for wealth accumulated over a lifetime to be drained on the care of a new spouse. If long-term care protection is feasible, it is wise to take advantage.

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Estate Planning Factors Beyond Taxes

July 5, 2012,

Taxes undoubtedly play a determinant role in New York estate planning. Understanding how assets can be transferred and passed on while incurring the lowest tax burden is crucial. Yet, it is a drastic oversimplification to assume that planning involves only looking at taxes. The "human" element is often even more important. Each New York estate planning lawyer at our firm understand that creating the best possible plan for each family requires an understanding of the unique family dynamics at play.

These family issues are not always easy to discuss. No one necessarily enjoys sharing information about potential family conflicts, personality issues, or other challenges which influence these decisions. However, as a new article in Financial Planning recently argued, failing to address these details often means that a plan will not work as needed.

What are these "human" factors beyond the legal, tax, and technical issues? The story summarizes them as "lifestyle choices, drug addictions, religious practices, health concerns, charitable goals, and preference regarding the disposition of collectibles and other personal property."

How do these issues play into an estate plan?

For example, if a family member has a serious addiction, steps need to be taken to account for the concern. Assets can be bequeathed to these individuals in a trust with specially selected trustees to make appropriate disbursements. In addition, the planner needs to ensure assets are not jointly held with one who a potentially debilitating addiction and make sure that other assets might not go directly to the heir without safeguards.

What if there are serious health or disability concerns?

Some individuals may have mental health issues which present competency concerns. It is absolutely critical that this is considered, not only to ensure the plan accounts for necessary care, but also to ensure the legalities of the agreement are enforceable at all. Common steps for families with these issues at play include creating automatic payment systems, setting up systems to ensure financial exploitation is prevented, consolidating assets, and simplifying the overall financial situation for the individual.

What about a family with multicultural concerns?

Families are diverse, and different member may not share religious, lifestyle, or cultural observances. This may affect how one wishes to leave assets or prepare for other issues in the future. Sometimes this makes it vital to have funeral decisions laid out clearly so that proper customs and guidelines are followed. In addition letters of instruction should be crafted with details about how children should be raised if caregiving must be passed on to another.

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Tax and Planning Consequences of Affordable Care Act?

July 3, 2012,

No legal news item last week was bigger than the U.S. Supreme Court's decision to uphold virtually the entirety of the Affordable Care Act (so-called "Obamacare"). In a move that surprised many observers, in a 5-4 decision the Court deemed the controversial "individual mandate" portion of the measure constitutional on grounds that it constituted a tax. While the court held that the Congress could not pass the law pursuant to its power to regulate interstate commerce, it did find it a permissible use of the legislature's taxing power.

Now that the matter is reasonably settled, local residents may be wondering how the law affects their New York elder law estate planning, if at all. A recent Smart Money story talked about some of these issues, explaining how certain tax matters will indeed change in the upcoming year as a result of the decision.

A few select rates will change next year. For example, an extra .9% Medicare tax increase will start for various individuals making over $200,000 or $250,000. In addition, some investment income (long-term capital gains and dividends) may face a 3.8% "Medicare contribution tax." This is in addition to the rising rates if the "Bush tax cuts" expire without renewal.

Starting in 2013 a cap will be added on contributions to a healthcare "flexible spending account" (FSA) plan. Right now, there is no cap, and so an unlimited amount of money can be contributed to the plan which is then subtracted from taxable income. The money can be used to reimburse qualified medical expenses. Starting next year, contributions to those plans will be capped at $2,500. Similarly, itemized deductions for medical expenses will now apply only to expenses that exceed 10% of annual gross income (up from the current 7.5%).

However, it is important to keep these tax issues in perspective, because they represent just a part of the bill. The overall goal, of course, is to provide comprehensive health insurance for more Americans so that overall expenditures go down while quality of care goes up. Our New York estate planning attorneys appreciate that the long-term effect of these sweeping changes will not be fully fleshed out for years to come.

While the high-profile and controversial nature of the law may suggest that many things will change for all residents once it is fully in effect, the truth may be a bit less dramatic for many local families. Elder law estate planning issues will remain largely the same--ensuring proper legal documents are in place and examining all available avenues to ensure proper long-term care is available when needed.

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