Would Changes to Charitable Tax Deductions Affect American Gifting?

December 4, 2013,

Many New York residents make charitable giving a part of their estate plan. Whether for estate tax benefits to pass on values and ethics to family members and many other reasons, residents commonly set aside certain assets to go to causes about which they are passionate.

However, according to a new report from a conservative "think tank" if any changes are made to federal rules about charitable tax deductions, then one can expect total giving in the country to decrease by billions each year. Before delving into the details it is critical to point out that the group releasing the study, the American Enterprise Institute (AEI), is known as a long-time opponent of all changes which would increase tax revenues. In addition, this AEI estimate is far higher than that found in similar studies by other groups.

The Charitable Giving Report
According to an article from Philanthropy.com discussing the new estimates, AEI researchers found that a limit to the value of charitable deductions--proposed by President Obama--may cause donors to give up to $9 billion less to charities each and every year. That large reduction in giving would have serious effects, the authors claim, on many non-profit organizations that rely exclusively on the gifts of donors for their yearly operations.

If the President's proposal passes, it is claimed that overall donations would fall by about 4.4 percent. The researchers used that figure against total giving nationwide to come up with the $9.4 billion amount that may be lost with changes to the tax law. The AEI report argues that the largest donors in particular would likely cut back on giving with the changes, because it is the "top 1 percent" of earners who are most likely to itemize their deductions and benefit from the charitable giving tax break.

All of this is being used to push back against the President's proposal to curb deductions that certain high earning individuals can take on these donations. Right now the upper limit is at 39.6 percent and the proposal calls for its shift down to a 28 percent limit. For his part, the President and his supporters argue that current law is unfair in that it provides more benefit to high earners to donate than it does to lower income donor. In addition, the additional revenue raised by the tax changes would be used to bolster programs supported by most non-profit organizations.

For help understanding how charitable giving can be incorporated into your estate plan, seek out the help of an experienced attorney today.

New Decision on Valuation of New York LLC for Estate Tax Purposes

December 2, 2013,

Last month the United States tax court issues a decision in a case which caught the eye of many involved in estate planning matters. The main issues in the case, Tanenblatt v. Commission of Internal Revenue, was the value of a deceased individual's interest in a limited liability company. As most know, estate taxes are based on the value of the total assets owned by an individual at the time of passing. Consequently, determining the exact value of items like a business interest are critical in determining the tax burden. As you might imagine, there is frequently disagreement between surviving family members and the IRS regarding the overall assessments.

LLC Value
The tax court opinion (viewed in full online here) explains how the case involves a family that received a notice of deficiency from the IRS, claiming that an additional $309,000 in federal estate taxes was due. The discord was caused by confusion over the value of the decedent's interest in a New York LLC (the 37-41 East 18th Street Realty Co.). As the name implies, the LLC's main asset was a building on 18th Street in New York City. In preparing their tax return, the family essentially determined the value of the building (using an income capitalization approach), added a few smaller assets, applied "net asset value" (discounts for various reasons), multiplied by the individual's percent interest and determined the value of the share in the LLC -- around $1 million.

The government disagreed however. Their math showed that the property interest was worth around $2.5 million. The disagreement ultimately made its way to court and went to trial.

In deciding the disagreement, the court's main focus was on the specific methods used to calculate the overall value and taxable amount. Interestingly, there was significant disagreement about whether certain appraisals could be introduced at trial. Some tax court rules were not followed, and one favorable opinion from the family's perspective was not counted by the court. Essentially, the court determined that this favorable expert's opinion did not count because she was not officially qualified as an expert in this case--she only issued a report and did not testify at trial.

Ultimately, the court determined that the fair market value was around $2.3 million--slightly less than the IRS initially claimed but significantly more than the family argued. The family will therefore have to come up with funds to pay for the additional estate tax burden.

As this case shows, many of these valuation issues are quite complex. Even relatively small differences can have a sizeable effect on estate tax burdens. As a result, it is always prudent to seek out the help of estate planning lawyers before and after a passing for clear guidance and advocacy.

Congressman on Future of Estate Tax

November 27, 2013,

At the beginning of 2013, a federal compromise was reached which seemed to put to rest the uncertainty surrounding the estate tax. Based on the January law, the federal estate tax excludes property up to $5.25 million this year, with that figure set in the future and pegged for inflation. The top tax rate for assets over that amount is 40%, representing a slight increase from the previous level of 35%. In addition, the new law keeps transfers between spouses tax-free and makes "portability" permanent. Portability is the tool that allows one spouse to take advantage of the other spouse's unused exemption.

Importantly for New York residents, all of those details apply only to the federal estate tax. There are still New York inheritance taxes to consider which take effect at a far lower level--$1 million.

The Future
Even though the federal law passed in January appears to be "permanent," in reality there is nothing about federal law which cannot be changed. Advocates on both sides of the aisle continue to have differences of opinions of the estate tax, with some calling for its complete elimination and other seeking to lower the exemption level. As a result, the tax may be used as a bargaining chip in any federal negotiation.

Are any estate tax changes in the works now?

The Republican Chairman of the House Ways and Means Committee, Representative Dave Camp, is actually working on legislation that would dramatically alter the U.S. Tax system. The proposed legislation includes a wide range of general changes to tax law, including lowering rates for both individuals and corporations while eliminating "loopholes." Rep. Camp previously claimed that he intended to release the proposal this year, though he recently conceded it may not be ready until early next year.

However, according to a report this week from Bloomberg, when asked about the estate tax specifically, Camp said, "I don't think that policy needs the reform that the rest of the code does." In other words, it is unlikely that the estate tax will be changed as part of this proposal. And if the Republican chairman of this powerful committee does not believe the tax needs revision, then, as a practical matter, it is near certain that such a change won't take place...at least in the short term. With a divided Congress and many other issues taking priority, the best current guess is that current federal estate tax details will remain unchanged.

The Pendergrass Estate and Control of a Legacy

November 26, 2013,

The Times Standard reported on another high-profile estate battle brewing that touches on many common themes, including a divided family and conflicting claims about last wishes.

Legendary R&B singer Teddy Pendergrass is probably best known for his smash hit "If You Don't Know Me By Now." Pendergrass dealt with various challenges throughout his life, including a serious car accident in 1982 that left him a quadriplegic. The accident required him to have around-the-clock care, but he survived and thrived until his death in early 2010.

Family Battle
Unfortunately, there was much discord in the family regarding the distribution of his assets and control of his legacy. The main dispute--as is so often the case--seems to be between Pendergrass's second wife (whom he married in 2008) and the adult children from his first marriage. From the available reports, it seems that only very basic planning was complete, without use of trusts, leaving the situation open for dispute.

According to court records, the singer's adult son claims that a 2009 Will names the son as executor and beneficiary of his father's estate. The singer's wife contests the validity of the Will. At one point the wife argued that she had possession of a "codocil" or addition to the Will which revealed different terms than those in the 2009 original. It is unclear if she is still making that claim.

Regardless, a civil trial in the matter is underway now, and it seems that the wife is contesting the validity of the 2009 Will entirely. One interesting claim suggests that the singer was physically not able to sign the legal document as claimed. A long-time nurse of the man explained last week at trial that the singer could not hold anything himself after the accident and required aid for even the most basic tasks. She testified that she did not believe his motor skills allowed him to sign his name or make initials on paper. In addition, there was confusion about how the singer could have left the home at the time that the Will was supposedly signed without caregivers knowing about it.

Both sides concede that they are concerned about the long-term legacy of the singer. Beyond the physical assets and bank accounts, control of an estate also includes the ability to dictate how the singer's legacy is handled, including future use and licensing of the famous name.

It is impossible to predict how a court will rule in this case. Any time an estate battle goes to trial, there are unknowns which can sway the matter either way. That is why everything should be done ahead of time to avoid legal disputes, dispensing with the matter efficiently and quickly. An estate planning attorney can help ensure you have details in place to avoid conflict.

WSJ on Last Minute Will Changes

November 22, 2013,

A Will is far more likely to be challenged during probate if significant last-minute changes were made to the legal document. This is to be expected considering that the main causes for challenge--undue influence, lack of capacity, improper procedure--are far more likely to occur when an individual is older and nearing death.

But that does not mean that all Will changes should be avoided later in life. Often is is essential to make changes to reflect one true wishes and best protect assets. It is simply critical to made those changes carefully and with an eye toward the ways to minimizing the risk of a Will contest.

Act Prudently with Deathbed Changes
A Wall Street Journal story last week discussed these risks, noting that it is only when death is near that many suddenly have a clearer idea of how they want their legacy to live on. They often seek to change their Will to reflect that new vision. But without accounting for the risks of deathbed revisions, this may open the door for prolonged court battles.

For one thing, it is critical to have the aide of a neutral party to actually draft the last-minute revisions. That is because the appearance of undue influence or even fraud are higher when the changes are managed by a family member or other party who is benefitting from any late change. History is littered with cases of Wills which are thrown out because last-minute changes benefited new parties who were not recognized in previous versions. These changes may very well be motivated by good intentions and reflect the true wishes of the testator. But never forget that when planning defensively, the only thing that matters is what can be proven later on, not simply was is true at the time.

Similarly, health issues must be accounted for if the senior suffers from dementia, Alzheimers, had a stroke or otherwise may lack capacity to make the change. At those times, it may be worthwhile to have a mental competency examination performed and documented so that later attempts to challenge capacity can be defeated with real evidence of the individual's mental health.

Of course, do not forget that other tools exists beyond a Will, like trusts, which can offer superior flexibility and protection without many of the risks for challenge and feuding. Trusts are useful for families throughout New York with many different levels of wealth. Consider contacting an estate planning attorney to learn more about your options.

Inheritance Dispute: Family Claims IRS Overvalued Artwork

November 21, 2013,

Estate tax rates at both the federal and state level are set by lawmakers, and there is little that any individual can do on thee law. However, residents can significantly alter their tax burden with smart estate planning--like prioritizing tax free transfers (to a spouse), using protected trusts, and more.

But there is also another aspect to the estate bill that is often overlooked--the appraisal. The tax burden is based on applying a tax rate to the value of an asset. But who decides the value? Actual laws which set the rates cannot account for this detail, and so disputes about appraisals are quite common, often with millions of dollars on the line.

Theoretically, the value of many different assets can be disputed. But in practical terms there are some types of property that are open to far more value uncertainty, often spurring challenge. Perhaps the most obvious example is that of high-end artwork. There may be significant disagreement about how much each piece of art is worth.

New York Appraisal Complaint
DNA New York recently ran a story that shared information on a real-world example of this situation involving the family of Jean-Michel Basquiat.

Basquiat was a well-known New York "graffiti artist" who had exhibits in world famous museums before his untimely death over twenty five years ago, in 1988. Basquiat was only twenty seven when he died and all of his assets were left to his parents. Basquiat's mother passed away in 2011. She died without a will, and so after her passing, a large amount of artwork she owned passed via intestacy rules to her heirs--Basquiat's father and sisters.

According to reports, the family was initially forced to pay $8.5 million in estate taxes on the inheritance. Not long after making payment, the IRS allegedly then demanded that the family pay an additional $10 million because the art collection was worth much more than the family claimed.

The initial value of the work was based on an appraisal by the Sotheby's auction house, reaching the conclusion that the mother's share of the artwork was worth $36 million. However, the IRS conducted its own audit and found the share to be more than twice as high, $69 million. Who is right?

A lawsuit was recently filed by the family in which the IRS appraisal was contested. One of the main issues of contention is application of a "blockage discount." The idea is that the art markets are quite sensitive, and flooding the market with so many pieces in a sale at one time would drastically lower the value of the work. As a result, when estate taxes are applied to these assets a blockage discount is applied so the taxable amount is lower.

The case is set for trial next year.

The Estate of New York Musician Lou Reed

November 15, 2013,

Celebrity estate planning remains one of the most common ways that local residents are confronted with issues regarding wills, trusts, and other inheritance issues. As the old adage makes clear, the only certainties in life are death and taxes. It does not matter whether one is a billionaire, international celebrity, elementary school teacher, or anything in between. We will all face death and deal the the aftermath of a passing.

In that way, it is useful to take advantage of high-profile deaths as a way to again share information on the value of estate planning.

The most recent celebrity planning story to hit the headlines is that of famed musician Lou Reed. Reed died in late October in Southampton, New York following liver disease complications at the age of 71.

Reed first entered popular culture as a musician, singer, and songwriter for the ground-breaking band, the Velvet Underground. He then went on to some solo success, performing for many decades, right up until this very year. A native New Yorker, Reed is very much recognized for his attachment to New York City. Many of his songs were based around experiences and relationship he had in the city.

As discussed in a recent Express story, Reed took advantage of very favorable tax rules to leave the vast majority of estate to his wife. Recently, Reed's will was filed in Manhattan Surrogate's Court. Virtually all of his assets will be split between his elderly mother, sister, and wife.

The exact total of Reed's estate is unknown, though it includes sizeable cash, a penthouse in Manhattan, and a home in East Hampton. The estate also includes his copyrights and licensing for his music. Many entertainment stars own rights to their work which can prove quite valuable in the years (or even decades) after their death.

The will indicates that Reed's wife will inherit about 75% of the estate. In the will Reed also explained that, "It is my hope and desire, without imposing any legal obligation, that my said sister will use a portion of this cash bequest to help care for our mother, Toby Reed, for the balance of her life."

These details are common in many wills. It is reasonable for one to leave all or most of an estate to a surviving spouse--there are both practical and tax benefits to that arrangements. In addition, it is natural to indicate how one hopes a loved one will use a bequest, though simply laying out one's hope is not legally binding itself. In certain cases, more effective tools can be used to ensure that funds are used in a certain manner after a passing.

Does Dementia Affect the Validity of a Will?

November 14, 2013,

If a family is dragged into a drawn-out court battle over an estate planning issue, chances are it is a "will contest." This phrase refers colloquially to cases where one party claims that something is wrong with a will and that the legal document should be thrown out. It goes without saying that preventing this very scenario is exactly why you should talk with planning professionals as early as possible. An attorney can explain how alternative tools--like trusts--can be used to almost eliminate the risk of a will contest entirely. Alternatively, the lawyer can explain the common challenges to a will and the way to guard against them.

Guarding Against A Will Contest
Essentially, there are four main ways that a will may be rejected by a court following a challenge:

1) Failure to follow proper signature requirements
2) If the Testator (the person who makes the will) did not have the capacity to sign it
3) If fraud was involved (i.e. the Testator did not even know they were signing a will)
4) If the Testator was unduly influenced

Many different scenarios may make it more or less likely that a will might be challenged on one of these grounds. One of the most common scenarios for New Yorkers today is when the Testator suffers from dementia. If you or a loved one is facing some cognitive conditions, it is imperative to act very carefully when making an estate plan, perhaps adding a few steps to minimize the risk that one's condition will be used down the road to challenge the will.

Every case is slightly different, and it is impossible to note what steps should be taken in every case. However, when figuring out how to guard against challenge when a Testator is suffering from some cognitive challenges, it is helpful to consider what issues will be be considered.

For example, consider these questions:

*Who actually wrote the will? An attorney? Another family member?

*What exact state was the Testator in when the will was signed? Was he or she taking medication at the time? Did they have any episodes that led to hospitalization before or after?

*Are there any signs in the senior's life which indicate the extent of their capabilities? Were they still driving to book club? Could they make their own meals?

Of course, that above list is just a snippet of many questions that may be asked to gauge whether one has testamentary capacity to sign a will. For tailored guidance in your case, be sure to reach out to a NY estate planning attorney.

Ruling on NY Inheritance Case for Mother Who Drowned Children

November 12, 2013,

Earlier this year we shared information on a controversial New York inheritance case that was soon to be decided. The issue revolved around a mother's attempt to inherit part of her children's estate, valued at around $350,000. Her three children died in 2008 after the mother herself drowned them.

Of course, it seems perverse that an individual who causes a death could then benefit from the tragedy via intestacy laws which would pass on assets. In this case, the estate itself was sizeable specifically because of a wrongful death lawsuit brought by two of the children's fathers against Nassau County for alleged lapses in social worker care.

Should She Inherit?
In general, a New York law is in place to prevent criminals from profiting from their crimes--often referred to as the Son of Sam law. That rule would seem to prevent the mother from inheriting in this situation. However, the wrinkle is that the mother was actually found not guilty in the criminal trial after the deaths due to a mental disease. The issue, then, is whether she can inherit because she was technically not convicted of the crime.

In a ruling handed down last week, the judge in the case denied her the right to inherit. As reported by ABC News, the specific ruling was somewhat convoluted. The judge noted that the Son of Sam law technically does not apply in this case (because there was no conviction), however the mother was denied inheritance rights on separate "equitable" grounds.

The judge explained, "The fact that the state cannot criminally punish an insane defendant is irrelevant to a determination of whether it is equitable for the killer to inherit from the victim." This reasoning is already being referred to as the "Brewer Rule" -- in reference to the mother in this case.

Who Will Inherit?
This decision does not end the matter, however. Still being contested is whether the fathers (the children had two different fathers) legally abandoned the children while they were alive. If so, then the fathers would also not be eligible to inherit the children's estate. Legal abandonment usually cuts off inheritance rights. In fact, the attorney for the mother in this case explained that the attempt to allow the mother to inherit was specifically done in order to prevent the fathers from cashing in on the tragedy even though they were largely absent from their children's lives.

A hearing on the abandonment issue will be held next month, and the estate will remain in limbo until that time.

Tips for Preventing Health Law Fraud in New York

November 8, 2013,

In October of 2014, the Affordable Care Act, also known as Obamacare, will finally come into effect. As a result, many across America (including seniors) will have access to more affordable healthcare options. However, with these benefits come a variety of considerations and issues that the elderly must be aware of.

In fact the New York State Office for the Aging (NYSOFA) has developed a list of advice for helping elderly New Yorkers avoid health law fraud, and also provides tips for navigating all of the health law changes that will occur once Obamacare comes into effect.

The Tips
The NYSOFA is an organization whose goal is to ensure the protection and equal treatment of the elderly in New York. The NYSOFA recommends that all elderly who use Medicare or Medicaid should become aware of their local communities Senior Medical Patrol programs, or SMPs. SMPs are designed to assist the beneficiaries of Medicaid and Medicare, so that they can detect, prevent and avoid healthcare fraud. The NYSOFA wants the elderly to be aware that they are often perceived as an easy target for healthcare fraud, and thus they must be outfitted with knowledge and protections so that their rights are upheld and protected.

The NYSOFA has three key points of advice to assist the elderly in avoiding health care fraud. First, they recommend that all New York citizens go through great measures to protect their personal information, including closely guarding Medicare and Medicaid membership information. Identity theft used to procure Medicare and Medicare benefits costs the federal government billions of dollars and prevents those who need medical treatment the most from receiving the help they deserve. NYSOFA advises people to never give out their Medicare, Medicaid or social security numbers, and to remember the Medicare representatives never call or make home visits to beneficiaries.

Second, the NYSOFA recommends that the elderly take the steps necessary to be able to quickly detect discrepancies and other signs of fraud in their Medicare accounts and medical bills. Tips for doing so include reviewing every Medicare statement received for discrepancies, and always closely reviewing medical billing statements, instead of just blindly accepting the charges.

Third, the NYSOFA recommends that you immediately report any discrepancies or health fraud that you become aware of. Proper reporting of such issues to your local SMP as soon as you become aware of them will allow the local SMP office, as well as other federal agencies, to swiftly take action in order to minimize any damage that could occur to the health care benefits that you are allotted.

Obamacare will undoubtedly have significant impact on the healthcare benefits afforded to the elderly in New York. The confusion regarding these changes may expose the elderly to health care fraud and other related issues. The NYSOFA is so committed to preventing health law fraud against elderly New Yorkers that they have made it their goal to assist the elderly in protecting their rights, so that frauds are not easily perpetuated.

Many Same-Sex Couples Still Need to Update Plans Post-DOMA

November 7, 2013,

As we have mentioned many times before, in June of 2013, the Supreme Court's decision regarding the Defense of Marriage Act ("DOMA") allowed same sex married couples to receive the same federal benefits as their heterosexual counterparts. This landmark decision will have a significant impact on estate planning for same sex couples who possess significant assets. Luckily, these impacts are extremely positive and will finally provide for the equal treatment that same sex couples deserve. The Supreme Court's decision in DOMA will have a variety of impacts, including greatly lowering the taxation rate for asset transfers between same sex spouses.

Even though the ruling came down months ago, many New York couples have yet to ensure their estate planning reflects the changes in the law. As a result, it it worth re-visiting the basics and remind same-sex couples to take time to update previous work.

DOMA Law
Section 3 of DOMA originally held that a "spouse" was defined as "a person of the opposite sex, who is a husband or wife", and defined the term "marriage" as a "legal union between one man and one woman".

In the case United States of America v. Windsor, the issue revolved around whether the same-sex spouse of a deceased woman was entitled to take a marital tax deduction previously only allotted to heterosexual couples. This federal marital deduction allows spouses to transfer assets amongst one another without being required to pay federal estate and gift taxes that usually accompany such asset transfers. When the Supreme Court overturned section 3 of DOMA, they made it so same-sex couples were allowed to take the marital deduction just like heterosexual couples.

DOMA'S Effects on Same Sex Estate Planning
The Windsor case concerned Edith Windsor whose same sex partner of 44 years died in 2009. The couple, who were domiciled in New York, had gotten married in Canada, before New York passed the gay marriage law. At issue in the Windsor case was the large tax that the defendant was expected to pay for the inheritance left to her by her late partner. Because of the definitions of marriage and spouse contained within DOMA, the defendant was unable to benefit from the marital deduction tax break, because she and her partner were not considered married under DOMA, and thus not married under federal law. As a result, Windsor was expected to pay federal taxes in the amount of $363,053, a fee that would not be imposed on a heterosexual couple.

The Supreme Court in its scathing 4-5 decision found that such an unfair result was essentially unconstitutional, and struck down DOMA's section 3 definition of marriage. By doing so over a thousand federal laws, regulations and exemptions now apply to same sex married couples, as they already did for heterosexual couples. The impacts of this decision are significant and finally allow for same-sex marriages to be equally recognized as heterosexual marriages under federal law. More specifically the Windsor will allow same-sex couples to receive significant tax benefits in estate planning that heterosexual couples have been receiving for years.

Same sex couples are finally being allotted the equal rights that they deserve. The decision in DOMA will have positive effects on same-sex estate planning, because it allows transfers amongst spouses to receive the marital deduction previously reserved only for heterosexual couples. The attorney's here at Ettinger Law Firm are standing by, ready to deliver legal advice and assistance for those same sex couples that require estate planning services in light of this recent federal decision.

Inherited Property & First Time Homebuyer Credit

November 4, 2013,

Estate planning can seem like a simple process--but usually only when it works as intended. A well-designed plan can make the passing on of assets and handling of various end-of-life matters occur seamlessly. Alternatively, when there is no planning or only partial steps are taken, then the true complexity of the situation becomes clear. In other words, it is only when things do not go correctly that many appreciate the value of this work. But by then it is usually too late.

For one thing, many steps have unintended consequences. Consider inheriting a home. This seems like a straightforward task that is relevant for many families. The home is the largest single asset for many New Yorkers. Determining what happens to the property upon the owners death is an obviously critical step. But tangential effects of the step must be understood.

For example, what are the tax consequences for the one who inherits the home?

Recent Case
Last week, the U.S. Tax Court ruled on a case, Gary Herring v. Com. of Internal Revenue. The case hinged on the definition of "first time home buyer" in the U.S. Internal Revenue Code and the effect that inheriting a home has on one's ability to fit that definition. The general issue was that the IRS claimed that a man owed money (a tax deficiency) because he improperly claimed a first-time homebuyer exemption on a recent return. The taxpayer challenged that determination.

The facts of the case are somewhat convoluted but according to the court opinion, the man inherited a one-third interest in a family home about eighteen years ago upon his mother's death. The home was owned by himself and his two other brothers.

While the legal analysis is complex, the court essentially ruled that the one-third interest in the inherited house barred the man from claiming to be a first-time homebuyer on a subsequent property he purchased twelve years after inheriting. The opinion is somewhat unclear on whether the man's living in that inherited property for a few years as a primary resident affected its determination. In other words, if the man only inherited one-third interest and never actually lived in the home, the ruling may have been different.

Regardless, this case is an example of one of many countless issues that are often tied up in inheritance and estate planning matters. None of this means that one should allow such issues to determine inheritance decisions. But it is a reminder of the need to carefully think through all implications, preferably with the aid of experienced attorneys who understand these matters.

What Matters When Choosing an Executor?

November 1, 2013,

Understanding the specifics of the law is just one aspect of successful estate planning. Obviously it is critical that a will is created in a such a way that it will be upheld or that a trust will have legal effect (or that you take advantage of all available trust options to begin with).

But that legal knowledge is not enough to best prepare for the future. In addition, it is critical to understand the social, emotional, and practical considerations that affect these issues. Are certain family members more likely to feel jilted by a specific arrangement? Is there a financial danger that should be guarded against? These and hundreds of other questions must be considered when planning. Memorizing statutes and legal books will only provide so much guidance--experience on these issues fills in the gaps.

Advice for Executor Selection
For example, when creating a will it is important to name an executor. The executor is charged with ensuring that the provisions of the will are carried out. But what considerations should one make when deciding who to name? Choosing the wrong executor can lead to a myriad of inheritance problems and often spurs feuding.

A recent Advisor to Client article touched on a few important considerations. Even a quick perusal of the list of considerations makes clear that the choice must be guided by practical considerations (and not legal nuance).

For example, often the two most basic qualifiers are not considered: Is the executor capable of doing the job and does he or she even want the job? When it comes to capacity, it is important to select someone who is of proper age and in good health. Additionally, the task involves understanding many administrative matters, taxes, and more. If the executor is uncomfortable with these topics, mistakes are far more likely to be made. Similarly, forcing someone into the position is a recipe for disaster. Individuals may have very different reasons about why they do or do not want to play this role, but it is important to lay it all on the table at the beginning so an executor is not chosen who truly does not want the responsibility.

No one has better appreciates how an estate plan can go well (or poorly), then attorneys working on these matters. When choosing an estate planning lawyer be careful to select a team that has years (or even better, decades) of experiences to provide the practical advice you need to best position your family to deal with these matters in a timely, efficient, conflict-free manner.

Back to the Basics: Trusts Are Not Only For the Wealthy

October 31, 2013,

One of the biggest misconceptions about general estate planning is that a "trust" is something that only rich families need to consider. This perception likely arises from colloquial use of "trust funds" to signify wealthy individuals who are living off substantial earnings preserved for them in a trust.

A better understanding of the legal tool takes away much of the mystique. The bottom line is that trusts are for everyone, serving as an incredibly useful option for middle class New Yorkers to protect assets accumulated over a lifetime for themselves and their loved ones.

The Basics
So what exactly is a trust? In simple terms, it is a separate legal entity that you "create" by drafting formal documents. This entity then "holds" assets, and you can designate many details about the use, distribution, and management of those assets in the trust. There are different tax and creditor protection benefits that this separation allows. Various types of trusts exist, each with their own rules about how they operate and whether they can be changed. An estate planning attorney can explain exactly what trusts are right for you and how they work.

So do you need a trust?

Because of the widespread benefits, virtually all New York families can derive value from the use of trusts. A Fox Business article on the subjects lists a wide-range of situations where a trust is crucial. Some of the most apt include:

1) When you have a blended family. Trusts allow much more flexibility to provide for the needs of spouses and children who themselves are not related. Assets can be protected for children while still supporting a spouse without the potential for conflict down the road.

2) When you want to pass on assets automatically. Probate is a costly, stressful, time-consuming process. Trusts do not operate like Wills; they can work without the need for specific court direction.

3) When you worry about creditors. Because a trust is a separate legal entity, creditors are not always able to just take assets inside the trust when they are owed. For those with children or other loved ones who may be in debt, a trust is a great tool to pass on assets without worrying about them immediately being snatched away by others.

4) When you may need long-term senior care. A Medicaid Asset Protection Trust (MAPT) is just one of many special trusts which can provide very specific protections for likely events in the future.

If you live anywhere in New York, please consider contacting our experienced team of estate planning attorneys to learn more and see how you can take advantage of a legal trust.

Should You Spend Those "Reward" Miles Now?

October 28, 2013,

One of the baseline legal questions to consider when planning for inheritances is determining what can be passed on in the first place. This may seem like an unnecessary question. After all, can't you pass on all of your assets to another? Not quite. At least, you cannot pass on everything that you control while alive--some things may essentially disappear.

The most obvious categories of items where this might come into play are "digital assets." This includes items like a Facebook page, blog, Twitter account, online photo album, and many similar items. Many estate planning attorneys discussed these issues in recent years, noting that most decisions hinge on the specific terms and conditions for each social media site. The process for passing on access to these accounts varies. If you place particular value on these accounts, it is important to ask your planners more specifically about these issues to ensure your wishes are followed.

Reward Points After Death
But "digital assets" are not the only items where questions exist about passing them on at death. Consider "reward points" offered for loyalty by airline companies, credits card companies, and similar enterprises. As a recent CNBC story discussed, in many cases those points--or "miles" for airlines--are likely to disappear.

As with most digital assets, whether or not these loyalty points can be passed on at death hinges on the terms and conditions agreed to when first enrolling in the program. Considering the companies craft these terms on their own, it is not surprisingly that they are not very generous when it comes to allowing points to be transferred to friends or family.

Interestingly, this is not a minor issue. According to one research company's estimates, in the last year figures were available (2011), outstanding reward points had a total value of around $50 billion. That is a large asset to disappear upon death, often amounting to tens of thousands of dollars for single individuals.

As a practical matter, only those with significant loyalty points racked up have likely given much thought to creating a "mileage estate plan." But it is becoming increasingly important for New Yorkers to consider whether they need to include these details in a will or trust. If so, it is critical to plan carefully to ensure your will provisions comply with the program's terms and conditions. For example, some programs only allow transfers to certain people (a spouse) or require a death certificate. The contractual arrangements made ahead of time with the company will trump provisions of estate planning documents.