Asset Protection

October 2, 2012

Will Estate Tax Burdens Affect More Families in 2013?

The occupancy of the White House and party control in the U.S. House and Senate will undoubtedly influence the future tax situation at a federal level That includes the tax that most immediately think of when considering their inheritance–the estate tax.

Last week the Wall Street Journal picked up on a new report that argues that the estate tax burden may affect a large number of households next year. The report–crafted by the well-known consulting group, LIMRA–suggest that without changes from the current trajectory, 15 million U.S. families may have some estate tax liability next year. That would represent 1 in 8 households–a far cry from the assumption that this is a concern only for the super-rich.

The findings were reached by analyzing the Survey of Consumer Finance from the Federal Reserve Board. LIMRA noted that many households might be pulled into the bracket where the estate tax applies because of the wide range of assets included in estate tax calculations–things like real estate, business ownership, and life insurance values.

March 13, 2012

New York Estate Planning Attorney on Funding of Trusts

by Ettinger Law Firm

This weekend the Times Herald-Record published an article written by our New York elder law estate planning attorney, Bonnie Kraham, discussing a basic estate planning concept–the proper funding of trusts. There is often a misunderstanding among some residents about the effect of signing the trust documents. Signing the trust documents is a necessary but not sufficient way to ensure the overall estate planning process works as intended. It is also crucial to actually transfer assets into the trust. This does not happen automatically. Transferring assets into a trust–known as “funding” the trust–usually requires changing title of those assets to the name of the trust. This process should also involve identification of the trustee and date of the trust’s establishment.

Of course, the delicate nature of the funding process makes it imperative that it be done in conjunction with one’s estate planning lawyer. In this latest article Attorney Kraham discusses some of the ways that funding occurs for various types of assets. For example, real estate is one of the most common assets that area residents might have and want to protect by putting into a trust. To transfer real estate into a trust one must sign a new deed in the name of the trust. That deed must be recorded at the county clerk’s office. Considering that one’s home is often the largest single asset that a community member has, understanding this process and performing it properly is crucial.

Many local residents may also have assets like stocks, bonds, and mutual funds that should be placed in a trust. Ownership changes for these assets usually require filling out certain paperwork providing by those in charge of managing the asset–a broker, investment company, or transfer agent. Similarly, savings bond transfers require filling out a reissue form from the Federal Reserve Bank of New York. Moving a brokerage account into a trust is a bit more extensive. A trust account application must be completed along with an account transfer request. The transfer request essentially authorizes the broker to close the account and transfer the securities into the new trust. To transfer a stock certificate one must fill out a “stock power” and W-9 form. Those items must then be mailed with the original stock certificates to the “transfer agent” of the stock company.

February 23, 2012

Avoiding Lump Sum Inheritances for Young Adults

by Ettinger Law Firm

Parents often worry about their children–even their adult children. In many cases, no one knows about a child’s strengths and weaknesses better than their parents. Local residents often take this into account when crafting New York estate plans. For those whose children may not be ready to handle a large inheritance, many parents reasonably want to know what options they have to both pass on assets to children but protect them from getting the funds before they can handle them.

In fact, this issue has been getting a bit of media coverage over the past two weeks upon the death of pop star Whitney Houston. As reported in Forbes this week, speculation abounds regarding the star’s estate planning. Most suspect that the singer is likely to have left her entire fortune, reportedly worth $20 million or more, to her only daughter–18-year old Bobbi Kristina. The young girl is undoubtedly fragile at this stage in her life, especially after just losing her mother. In addition, many family members have voiced concerns that the young woman has also battled substance abuse problems over the past few years. This is leading many to question the daughter’s ability to handle a lump sum payout from her mother’s estate.

Early reports suggest that Ms. Houston had done some estate planning–but not much. She apparently had a will which left everything to her daughter. Because her daughter is a legal adult, under a will she will receive the money immediately. As most community members appreciate, few 18-year olds are truly ready to handle millions of dollars. However, without any other advance planning, the only option for the family is likely to go to court and try to get the teenager declared legally incompetent to manage her finances. They could then seek a conservatorship which would allow a third party to control the inheritance until such time that the court finds the daughter able to handle the responsibilities of the inheritance.

January 4, 2012

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

by Ettinger Law Firm

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

December 9, 2011

Tax Litigation Continues to Rage Four Years After Death of Brooke Astor

by Ettinger Law Firm

New York estate planning mishaps and disputes often make headlines when they involve large sums of wealth and larger-than-life characters. Perhaps none has received more publicity recently than that surrounding the “grand dame of New York City society,” Brooke Astor. Ms. Astor died four years ago at the ripe age of one hundred and five. However, inheritance and tax issues continue to rage around her estate and they show no sign of nearing a resolution. As discussed in Forbes, seven new lawsuits were recently filed by her estate refuting IRS demands that she owe an additional $62 million in taxes.

It seems that one of the key issues is the overall size of her estate. Every New York estate planning lawyer knows that the total value of an estate is a fundamental factor in evaluating the overall tax burden. A smaller taxable estate means a smaller tax. In some cases, if an estate is below a certain threshold, then certain taxes need not be paid at all. That is why most tax litigation involves dispute between the government and the individual (or their estate) about the total value of taxable assets. In this case, the government claims that the value of Ms. Astor’s estate is $223 million, but representatives for Ms. Astor say the figure is around $93 million. Tens of millions of dollars in potential taxes hang in the balance depending on what sum the court ultimately decides is accurate. The tax bill could be anywhere from $35 million to $97 million. The disagreement between the parties centers mostly on charitable bequests (totaling $96 million) that the estate claims can be deducted but which the IRS disputes. In addition, the IRS claims that there was $20 million in lifetime gifts which should have been included. Part of the IRS request includes over $2 million in penalties for the failure to file and pay those gift taxes properly.

The estate admits that certain gift tax returns were not filed. However, many of those gifts were to her son, who was earlier convicted of 14 different crimes related to neglecting her care and stealing from her estate. Many estate planning attorneys have used the drama surrounding Ms. Astor’s estate and her son’s crimes as an example of what can go wrong when a Power of Attorney is in the wrong hands. As the Forbes article author noted, “the Astor case is a reminder to families that it’s important to make sure you get these basic estate and disability planning document right.”

November 3, 2011

Reality Star Feuds with In-Laws in Estate Fight

by Ettinger Law Firm

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

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

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

September 20, 2011

Many Challenges Face Estate Executors

by Ettinger Law Firm

For decades our New York estate planning lawyers have helped local residents use living trusts instead of wills to plan their affairs. For many clients a will simply creates more problems than it solves. For example, yesterday the Wall Street Journal published a story exploring the myriad of issues faced by a will executor–the person named to manage the estate of a deceased individual in a will. It was explained how a wide variety of complex tasks are required of the executor, there are legal repercussions when mistakes are made, and many relationships are ruined in the process of settling the estate.

Executors are often siblings or other family members of the deceased. It is the executor’s job to administer a will through the probate process by accounting for assets, paying debts, and distributing property. Red tape, complexity, tedium, and relationship conflicts are inherent in the process. Many professionals in the field report that there has been a steady increase in the number of “executorships gone bad.” Some believe that recent economic troubles have led to more inheritance fights as of late, complicating the executor’s job even further. When a will is challenged by an heir (a frequent occurrence), the executor is usually thrown into the middle of depositions, court appearances, and other legal situations that most would prefer to avoid.

Observers admit that the role of executor is generally not suited for amateurs. Often the individual is required to be aware of taxation rules, potential conflicts of interest, and even investment strategies like picking stocks and bonds. All of this comes with little pay, because state guidelines set the amount of money that an executor can receive.

August 8, 2011

Season Tickets, Frequent Flier Miles, and Other Unique Assets in Estate Plan

by Ettinger Law Firm

Local residents visit our New York estate planning attorneys for professional assistance to protect and pass on their assets. Many also expect guidance identifying the items that should be considered an asset and included in the planning. Most area families need to consider things beyond homes, cars, investment portfolios, and similar items when creating their New York estate plan.

For example, what happens to frequent flier miles and rewards upon an individual’s death? Many residents spend years and thousands of dollars in airfare racking up mileages and benefits in airline sponsored loyalty programs. A recent article in Payments News explained how many fliers spend time accumulating these “miles” and rewards only to leave them unused at their death. Some reports indicate that as many as 3.5 trillion miles currently remain unused in these programs. Interestingly, each airline has a different policy in place regarding transferability of loyalty benefits at death. American Airlines specifically allows accumulated mileage credit to be transferred to a person named in a court-approved will or estate plan. Other carriers, such as United Airlines, require that a beneficiary be named with the program, a fee be paid, and require an executor to contact the airline before miles can be transferred.

Another asset which one may wish to leave behind is the option to purchase valuable season tickets. Area residents often spend years waiting for the opportunity to become a season-ticket holder for their favorite teams. A post this weekend at The Faculty Lounge recently discussed this topic. Most teams have policies in place that allow an individual’s decedents to gain the right to purchase. However, it is important to closely examine the team policy related to ticket transferability to understand what issues might arise. For example, there may be conflict over who gains the right if several children share in ones’ assets. Many team policies indicate that there will be no transferability if several individuals share in the right and do not agree on a single transferee. Some teams also expressly prohibit a non-relative from receiving the right to purchase the tickets.

July 19, 2011

Tips to “Lawsuit-Proof” An Estate

by Ettinger Law Firm

Our New York elder law estate planning lawyers know that proper estate planning can help clients save money on taxes and probate costs, ultimately allowing them to pass on more of their assets at death. Besides leaving a larger estate, preparation also ensures that the distribution is likely to occur exactly as desired. Unfortunately, family infighting can erupt after a death that leads to a lawsuit challenging an estate. These legal struggles tear families apart and can distort the intent of the one who has passed.

Estate battles should be avoided at all costs. Last week Forbes published a helpful “tip list” of common sense and practical ways to “lawsuit proof” an estate. For one thing, it is very helpful to divide up specific possessions among friends and family members before death. Distributing family heirlooms–like a wedding ring, antique furniture, and similar items–can be contentious if not done ahead of time. There is no “right” way to divide these possessions, but communication is crucial. Talking about the issue gives families a chance to understand what items actually matter to each of them and avoid lawsuit-provoking surprises at death.

If you give large loans, advances, or gifts to children while alive it is helpful to provide close records of the transfer. Sometimes a parent will give a child a large amount of money–perhaps for a down payment on a house. Afterwards there may be disagreement about whether that money was “in advance” of an inheritance. By unequivocally clarifying your intent beforehand, a donor may prevent others from litigation the issue in the future.

One of the most common allegations in estate litigation is that someone did not have sound mind when their plan was created. Understanding this risk and accounting for it can go a long way in preventing a lawsuit ever being brought. Some seniors who seem vulnerable may be particularly apt to having their wishes attacked on this ground. In those cases evaluation by a treating physician and geriatric psychiatrist immediately before signing documents can help dissuade potential litigants from attacking the estate plan.
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June 8, 2011

Cost of Nursing Home Care Increases Nationwide

by Ettinger Law Firm

Few residents understand the often staggering cost of long-term care, such as a private nursing home, until they are faced with the dilemma first-hand. It is only when they or a loved one is already to the point of needing that care that many people first realize the expense of securing a spot in a quality nursing home. In fact, beyond dictating how assets will be dispersed later, gaining advice and planning preparation for future medical and caretaking needs is one of the most important parts of creating a New York estate plan.

The need for the preparation becomes clear once many realize the cost of long-term care facilities. The latest figures calculated in Genworth’s Cost of Care Survey were recently released showing that the median cost of nursing home care nationwide rose 3.4% last year–to $77,745. Of course, this is only an average from across the country. In our area many quality facilities charge much higher rates, around $140,000-$150,000 per year.

Those costs are much higher than the average family income in many American homes, meaning without proper long-term care planning some families are forced to use up a lifetime of assets to pay for the necessary costs. But if thought is given to these matters ahead of time, then options exists to reasonably provide for these expenses in a coordinated manner that protects family wealth.

For example, all of a family’s assets may be protected ahead of time with the use of a Medicaid Asset Protection Trust (MAPT). These trusts usually have to be created at least five years before the care is needed, so forethought goes a long way in ensuring a positive financial future for families in these situations. An even better option is the purchasing of long-term care insurance–which ultimately provides the most flexibility when seniors reach the point that they need extra care. With this insurance a loved one may have the assets for expensive home-care, without the need to move into a nursing home at all.

However, even if the MAPT and long-term care insurance options do not apply, other choices are available. The “Gift and Loan” Strategy allows one to save part of an inheritance from the costs that Medicaid would usually take while still ensuring that Medicaid pays for the care needed. It is not an ideal choice, but meeting with a professional to discuss its applicability is still much better than facing it alone without any assistance–a visit to a New York Medicaid attorney is invaluable.
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