Asset Protection

August 14, 2013

Reminder: More Estate Planning Opportunities for Couples After Windsor v U.S.

A JDSupra post from last month offers a helpful reminder of the changing legal landscape for New York same sex couples who are married.

As virtually everyone knows, in late June the U.S. Supreme Court declared the main portion of the federal law known as the “Defense of Marriage Act” (DOMA) unconstitutional. The crux of the particular case, Windsor v. United States, related to the estate tax. Windsor, a New York resident, was forced to pay over $350,000 in estate taxes following the death of her wife, Thea Spyer. The couple’s marriage was legally recognized in New York, but the federal government treated the pair as strangers.

Estate Planning Options

June 26, 2013

The 3 Generation Rule – Legacies the Last

by Ettinger Law Firm

You’ve built a nest egg after years of consistent work, prudent planning, strategic risk, a lot of focus, and a bit of luck. You want to retire peacefully and provide a legacy that will hopefully secure some degree of wealth for you family for generations to come.

But what are the odds of wealth making it decades (or even centuries) after you are gone? If history is any indication, most inheritances won’t make it long at all. Wealth surviving into the third generation only happens in one out of ten cases. As a recent Senior Independent story on the subject reminded, this principles takes the form of an often-used refrain: “Shirtsleeves to shirtsleeves in three generations.”

The story points out that over the course of their lifetimes about two-thirds of Baby Boomers in the United States will inherit about $7.6 trillion. Yet, those same individuals will lose about 70% of that wealth before passing any of it on to their own children or other relatives.

April 22, 2013

New Study: Marriage Boosts Retirement Security

by Ettinger Law Firm

Do I have enough to retire? Countless New Yorkers ask their financial advisers, estate planning attorneys, and other professionals that very question each and every day. There is no one-size-fits-all response, as retirement is a personal matter based on individual expectations, goals, and perspective.

Mountains of pages have been written about how much money you should have before retiring and what you should do with it. Perspectives abound.

Interestingly, there is less disagreement about general characteristics that make one more or less likely to be financially secure enough to retire. For example, the Wall Street Journal pointed to a new study last week which found that married couples are far better positioned to make the leap and officially enter retirement.

April 19, 2013

New Steps By Google Allowing Users to Name “Heirs”

by Ettinger Law Firm

Digital estate planning has attracted more and more attention in recent years as online assets become more central to our lives. On a legal front, the rules regarding inheritance destruction, and/or preservation of these online accounts remains unclear. That is because most rules are based on the terms and conditions of each individual social network or online program. For example, the process of taking down a Facebook page of someone who has passed away is not the same as taking down a Twitter account. There is little uniformity.

However, as the issues related to passing on access to these accounts grows, more social networking companies are working to enact different procedures and protocols to make the transition easier.

Passing on Google Account Data at Death

April 8, 2013

Wide Ranging Impact of Fiscal Cliff Deal on Estate Planning

by Ettinger Law Firm

Earlier this year we touched on the possible estate planning implications of the compromise law that averted the so-called “fiscal cliff” in early January. As with many of these issues, the full implications are hard to evaluate immediately, only playing out as planners get to work crafting options for clients. In the first few months of the year, many estate planning attorneys and financial advisers have done just that, getting a better understanding of how the altered legal landscape will affect common techniques to pass on assets securely and with minimal tax implications.

For example, an “On Wall Street” article last week explored a few of these issues, noting how the fiscal cliff deal actually has widespread implications. The main issue, claims the article, is that the apparent permanent federal estate tax will limit the need for many families to engage in complex maneuvers to avoid the significant tax bite. Bypass trusts are pointed to as a tool which may be less necessary because many families will fall well below the federal estate tax exemption level ($5.25 million, pegged to inflation). Yet, one must not forget that this permanently high estate tax level has no impact on estate taxes levied by the state. New Yorkers must still pay that state rate, and it hits far lower than the federal level. In addition, these sorts of trusts are often crucial in addressing other risks, like divorce, remarriage, etc.

The article also touches on potential effects on charitable giving. The fiscal cliff law also calls for a phase out of itemized deductions and personal exemptions for all income over $250,000 annually ($300,000 for couples). This may alter some previously common charitable planning. Though the article points out that it may make charitable remainder trusts more common. These trusts are particularly useful for gifting assets which will appreciate, allowing the defference of capital gains taxes.

January 11, 2013

New York Estate Planning Beyond Taxes

by Ettinger Law Firm

Some mistakenly assume that estate planning only deals with minimizing taxes. With all of the focus on the estate tax in recent weeks it is easy to see how this assumption might gain ground. And it is true that for some families, significant planning must be conducted to ensure that as large a portion of an estate as possible makes its way to the intended beneficiary instead of the pockets of Uncle Sam.

But it is a mistake to suggest that taxes are the only or even the most important factor for most long-term planning for New Yorkers. The reality is that many tangential issues are just as important and often even more important. A recent WRALTechwire article reminds readers of several “non-tax” issues that are critical and must be addressed in estate planning efforts.

Some of those issues include:

January 9, 2013

U.S. Supreme Court Sets Date for Gay Marriage Case Hearings

by Ettinger Law Firm

Late last year the U.S. Supreme Court agreed to hear two separate cases impacting various same-sex marriage issues. As we have frequently discussed, in ruling on these issues the Supreme Court may set precedent which impacts marriages across the country, including in New York. In so doing the Court may set in motion legal changes that impact estate planning issues for all of the thousands of same sex couples living throughout the state.

However, we will have to wait a while longer before anything is finalized. That is because agreeing to hear the case was just the beginning of the process. The next step was the setting of specific dates for hearings in which both sides argue their case and answer questions posed by the nine justices.

This week the Court released its schedule for those gay marriage cases. As reported in the Huffington Post, the hearings will take place over two days in late March. First, on March 26th the court will hear arguments in Hollingsworth v. Perry. Perry is the case related to Proposition 8 out in California. Beyond “standing” issues, this legal matter may clarify what the U.S. Constitution has to say about the substantive right to marry for same-sex couples. Depending on what they decide, nothing can change, gay marriage may be allowed in California, or, theoretically, gay marriage could become the law of the land across the country.

December 6, 2012

Unsellable Artwork Donation Saves Estate Tax Liability

by Ettinger Law Firm

The heirs of art dealer Illena Sonnabend faced a very unique problem after the woman’s death in 2007. One the most valuable pieces of her estate was a work by Robert Rauschenbeg known as “Canyon.” The 1959 piece of art is a collage that include various three dimensional materials, including a stuffed bald eagle. Canyon would prove to be a sticking point in the heir’s attempt to settle the estate–a process which ultimately dragged on for five years.

Taxes Always Due

For estate tax purposes, the value of artwork in an estate is appraised and the tax is owed based on the total appraisal value. Sonnabend’s estate had a significant number of pieces and the artwork taken together was valued at over $1 billion. According to a Wall Street Journal story on the case, this led to an estate tax bill of about $471 million. The two heirs to the estate sold about $600 million of the artwork to pay for that bill.

November 7, 2012

Two Teens, a Custody Battle, and $1 Billion New York Trust

by Ettinger Law Firm

DNA Info in New York shared an interesting story on the intersection of a custody dispute, estate planning, and a one billion trust fund waiting in the wings. The tale is a reminder of how money and the emotions following a death are a breeding ground for feuding and conflict among many different parties. It is always best to proceed with the assumption that strong disagreement will arise and to crafts plans and take those into account. Perhaps those worst fears won’t materialize, but, if they do, they must be accounted for.

The situation in this story concerns two teens who are set to inherit the $1 billion inheritance from their great aunt’s fortune–the New York philantropist Doris Duke. Duke was a tobacco heiress andspent much of her time in a $44 million Upper East side apartment. Duke obtained the fortune after the death of her husband–Lucky Strike cigarette magnante “Buck” Duke–and holding from her own mother’s fortune. Upon Doris’s death in 1993, the fortune passed down to her nephew with whom she was close–the father of the twins. Sadly, he died in 2010 at age 57 due to a methodone overdose. He had divorced the teens’mother in 2000 and was awarded custody at that time.

As one might expect, confusion broke loose following the father’s death. The children’s biological mother was given custody at first, though serious concerns have been raised about her ability to raise the children, with past reports identifying her as suffering from paranoia and post-traumatic stress disorder. The twins’ stepmother has been trying to obtain custody of the children but has thus far been unsuccessful.

October 25, 2012

Navigating the Appropriate Inheritance Amount

by Ettinger Law Firm

Is it possible to receive too large of an inheritance? Of course most community members want their family members and friends to be helped in various way by receiving an inheritance. However, few want that inheritance to fundamentally alter the character-building efforts of the recipient or to come with more baggage than necessary. It is not always easy to determine how to most appropriately split an inhertiance between different indiviuals and outside causes. As with everything related to estate planning, careful thought must be involved. Not all goals are best met by simply saying, “Give everything to my children.”

This principle is best illustrated by a story we have touched on frequently, the legal battle over the inheritance of Whitney Houston’s daughter. Ms. Houston’s daughter inherited the entirelty of her mother’s roughly $20 million estate. However, the young woman’s grandmother and aunt, the executors of the estate, have serious concerns about the daughter’s ability to handle that inheritance at such a young age. The executors basic argument is that Houston’s wishes were to provide long-term stability to her daughter (now 19 years old), and those wishes are not kept by the current disbursement schedule. The legal case is on-going, and it remains unclear how much the daughter will challenge the request.

While this sort of situation might seem unique to celebrities and those with unique family situations, the underlying principle exists for many local families. There is such a thing as receiving too much too soon. It is reasonable for parents to have reservations about their children’s ability to have an inheritance in a safe, responsible manner. Fortunately, tools exist to take those concerns into account. One need only be clear and comprehensive in estate planning matters to provide an extra layer of protection to guard against an inhertiance damaging one’s motivation and self reliance.