Articles Posted in Estate Planning


On January 29, 2014, the New York Department of Taxation and Finance, Office of Counsel issued an advisory opinion in regards to a question regarding transfer of personal property from the settlor (creator) of the trust to the corpus of the trust. More specifically, a party inquired if “substituting” personal property from the settlor of the trust to the trust itself triggers sales tax liability. New York law now considers the transfer of assets from the personal property of the settlor to the trust as a taxable event. While the legal logic is sound, this adds to the list of taxes that one may have to pay when creating or funding a trust. Depending on different factors, the settlor must address a gift tax on the money or assets transferred to a trust. Any amount gifted above $14,000 per year is taxable by both the federal government and New York. The trust must also pay taxes on any income earned.


This scenario does not involve gifting, which has its own tax liability. The language used in the advisory opinion indicates that it speaks to a specific scenario, namely, when there is “a transfer of title or possession for consideration.” The logic that the New York Department of Taxation and Finance employed is simple. To exchange personal property to a trust involves a change in ownership, as the settlor and the trust are different legal entitites. At the same time, New York tax law imposes sales tax on the sale of every personal item, unless specifically exempt.


While previously a settlor thought that he or she could sell assets to the trust, without liability, or, just as important, without complication, now there is the need to address sales tax. What further complicates the matter is that New York City has its own sales tax of 8.875 percent while the rest of the state is at four percent. As such, the sale of a rental property for $1,000,000 now requires a payment of $40,000 dollars or $88,750 dollars, in addition to the various costs and taxes associated with real estate transfers.


California residents deal with similar issues to avoid the state’s high income tax. The manner in which it is accomplished is by converting a tangible personal item to an intangible. The settlor sells the property to an LLC, then passes the stock in the LLC over to the trust. This approach has already been addressed, at least in a peripheral way, two times in New York Division of Taxation and Finance advisory opinions. The advisory opinion of TSB-A-10(1)M, issued on April 8, 2010 approved of the avoidance of estate tax. While estate tax is obviously not sales tax, this opinion speaks to the same legal issues that are involved in analyzing whether or not sales tax applies, namely, location of the physical asset and transfer within New York state. The additional opinion of TSB-A-08(1)M, issued on October 24, 2008 addressed the same issue The larger lesson is that the LLC is a valid means to avoid tax liability.

Given the constantly changing nature of the law on estate planning, a consultation with an experienced estate planning attorney is well advised.


On April 20, 2015 the Department of Labor officially published a proposed rule change in the federal register.  To put the matter in dollars and cents is approximately $17 billion dollars per year, according to one estimate by the White House council of economic advisors.  The proposed plan seems simple enough, but whenever $17 billion dollars is at stake, many voices on both sides of the debate will weigh in and drown out that which seems simple.  To add urgency to the matter, over 10,000 people per day are slated to retire over the next 15 years.  Most particularly, the rule would require that retirement advisers give investors advice that is in the client’s best interest.  The rule itself is called the “conflict of interest” proposed rule.  Another name for the client’s best interest is the “fiduciary rule”.  Registered-Investment advisors are already held to the higher standard, while brokers-dealers are held to a lower, “suitability” standard.  


The main critic of the proposed rule, not surprisingly, is the very industry who stands to have its ox gored by the proposed regulation.  One trade group, representing broker-dealers, banks and asset managers argues that the data used to support the conclusion that the rule will accomplish its intended goal is flawed.   The same trade group further argues that there is a serious risk of “unintended consequences” in the form of driving out a large number of investors.  

On October 28, 2015 the House of Representatives passed a bill aimed at blocking the proposed rules.  Entitled the “Retail Investor Protection Act”, it is not likely to be signed by President Obama and, as judged by the 245-186 vote, not likely to be able to overcome a presidential veto.  One supporter noted that “the fiduciary rule will take away investment advice from hundreds of thousands, if not millions of low to moderate income people.”


Supporters of the rule cite the obvious and self evident conclusion that those who advise you on your financial decisions should take your best interest into account and not some compromise which would allow for only “suitable” advice.  Furthermore, allowing for advice when the broker profits from creates inherent conflicts of interest.  In one widely discussed Washington Post article, a former Department of Labor economist contacted nine firms to elicit advice on how to handle his federal retirement Thrift Savings Plan.  Eight of the nine gave him advice that was clearly against his best interest.  The same article notes that in 2013 alone, workers pulled $10 billion dollars alone.  For federal employees, the cost between their default thrift savings plan and the average 401(k) plan is approximately 20 times as much.  

Protecting your nest egg for retirement should be a top priority, which should be revisited periodically.  Given the current state of the law, with all of the various claims on both sides and a potential change in the law, it is best to consult with an experienced contact an attorney to help determine for yourself what is in your best interest.  


In New York, as well as perhaps every other jurisdiction, an attorney may not serve as an attorney as well as a witness in the same case.  Rules of Professional Conduct, Rule 3.7 is mandatory and not permissive.  It does not matter if it is a bench trial, jury trial, traffic court case or surrogate’s court case.  In fact, the rule is so important to judicial administration that even partners and members of the same firm cannot act as a witnesses.  Courts refer to the issue as the lawyer-witness rule and it comes up often enough in surrogate court cases.  The June 2, 2015 case of Will of Lublin, 2015 NY Slip Op 31038(U) is a good example of how estate lawyers face these issues.  While the lawyer in Lublin avoided the issue of Rule 3.7, a small change could have made it not so.  Very briefly, the decedent, Mr. Irving Lublin, executed a will in 1997 and passed away in 2010. Someone objected, claiming that the decedent did not have sufficient mental capacity to create such a will, the will was not properly executed and that the will was the result of fraud and undue influence.  The lawyer who drafted the will was deposed during the discovery phase.  If, perhaps, the attorney who created the will also represented the executor, an entirely plausible and even relatively normal scenario, the attorney would be disqualified, as he/she would be a material witness.  


It is not surprising that the attorney who drafted a will would have unique insight into the mental state of the decedent.  It is not unusual for a will to go through several drafts before it is  properly worded and structured.  During this time, the attorney may be able to determine if the decedent is subject to undue influence.  Moreover, the drafting attorney often witnesses the signing of the will, even if they are not listed as a witness on the will.  They can offer an insight into any particular events or unusual circumstances that allow for the inference of fraud.  


While experience alone is not going to save every attorney in every situation from making a mistake, lawyers and lay people alike know that the more experience an attorney has the better they are able to avoid mistakes.  Experienced attorneys know how to insure that there is sufficient evidence to avoid a surrogate court battle.  Here are some simple steps to avoid such a batte:

  • Disinterested witnesses sign the will and certify that they found the testator to be of sound mind;
  • If there is a drastic change in the terms from a previous will, the reason for the change should be sufficiently explained;
  • If a child or other potential heir, who would inherit in the event the will is invalidated, is cut out, the reason for that must be explained;
  • If the testator decided to grant gifts or otherwise depleted the estate, the reason for this should be outlined

When you decide to create or review your will, it is is essential you speak with an experienced estate planning attorney to help avoid these issues and to see to it that your will is administered without complication.  


The issue of how to deal with the collection of fine art that you amassed over the years should be dealt with now rather than allowing your heirs decide for you.  Perhaps your heirs do not have any appreciation for your original Ansel Adams or Edward Curtis photo collections.  If you view it as an investment, then timing your sale to maximize profit should be the most important criteria.  Timing may not be right for several years or it may be right now.  If you are looking to maximize profit which will only go to to your estate, you may consider waiting to pass it on.  If, you happen to value your art collection because of its intrinsic artistic value, you have another set of criteria by which to make your decision.  Perhaps you have a family member you know would appreciate it more than say your son or daughter.  Perhaps you should sell it to insure that the artistic value continues to be appreciated.   Country Living spotlighted an artistic marble collector who decided to sell his collection to insure that it would continue to be appreciated.  In any event, Capital gains tax on collectibles, gift tax and estate tax, both state and federal, must all be considered.  


The top 2015 federal estate tax rate is 40 percent, while the federal estate exemption is 5.43 million dollars.  That means that you can pass just under 5.43 million dollars to your heirs without incurring any federal estate liability.  In 2014 the New York legislature passed a bill which changed the state estate tax to mirror the federal tax exemption, but with a variable tax rate, depending on the size of the estate.  


The current capital gains rate for collectibles is 28 percent.  If the art is an investment, this is obviously a better tax rate than the 40 percent required if it is included in an estate.  But the discussion does not end there.  If you intend on passing that cash on in your estate, depending on the amount, it may be double taxed.  If you gift the cash to someone, you also may be double taxed.  In 2015, you can gift up to 14,000 dollars per year without any gift tax liability with a lifetime maximum of 5.34 million dollars. If you gift away more than 14,000 dollars, it is included against your estate tax exemptions.  


  • As noted above, the first thing you need to decide is how do you want to deal with the art itself.  Is it an investment or something more?  
  • If you are passing on certain items, they may be subject to further documentation.  Not surprisingly items of military historical value, such as historical guns are all subject to numerous state and federal laws.  It is best to gain a basic understanding of that those laws are.  
  • Get appraisals of your works of art.  Three different groups to contact aht may be able to help are:


There are no numerous ways to avoid the issues that are involved in estate planning.  You can create a trustee, with a trusted friend or family member as the appointed trustee.  You can create a corporation with only a limited group of people able to own the stock.  You can create the rules of that corporation, that decides in advance who gets to sell, under what circumstances they can sell their stock.  You can decide what and when certain items are sold.  

Whatever your decision, it will require legal counsel to guide your decision every step of the way.  Only an experienced

estate planning attorney should be considered for these decisions.

On June 24, 2015 a trial Court in California invalidated a California law as unconstitutional, which created a default surrogate decision maker when that individual is mentally incapacitated and does not have a family member, or anyone else for that matter, to make key decisions for them.  The law and the issues addressed are not limited to California.  Even though by definition, the law deals with individuals with no proxy decision maker, that does not mean someone did not exist in the past or could not step up to become one.  Proxy decision makers pass away themselves, they move or simply just fade away and no longer attend to their responsibilities.  New York law deals with these issues in a rather collaborative way.  In 2010, New York enacted the New York Family Health Care Decisions Act, which creates a decision ladder for medical professionals who need to know with whom to check with for certain critical decisions.  It was designed to avoid the parade of horribles that the California law dealt with.  Certainly, no one wants a loved one or relative, even a distant relative, to have to rely on these provisions; they are used as a last resort.


In the absence of a health care proxy, The New York Family Health Care Decisions Act begins to shape decisions, for all intents and purposes, at the time of the determination of incapacity.  

  • First, there is an in house decision making process by which specially licensed individuals may decide if a patient lacks the capacity to decide certain health care decisions;
  • Second, if there is a determination that the patient lacks capacity, the patient and the prospective surrogate;
  • If the patient objects to the determination, or the choice of surrogate, the patient’s decision controls;
  • Unless there is a legal determination of incapacity by a Court.

Each step outlined above has further breakdowns in procedures to help avoid the matter escalating to the next step.  For example, step two notes that if there is a determination of incapacity, the first person who may act is a court appointed guardian, if there is one, next is a spouse, an adult child, a parent, a sibling, even a close friend.  The surrogate decision maker’s consent is not necessary if the patient already made a decision, even if only made orally and not memorialized in writing.  The decision must be in line with the moral and religious beliefs of the patient.  


The New York Family Health Care Decisions Act by definition does not cover those who have a valid health care agent via a health care proxy, as well as other circumstances, such as when a guardian is appointed due to mental or cognitive limitations.  The issue of allowing essentially a stranger, albeit a well intentioned and competent one, can be avoided by creating a well crafted health care proxy with multiple contingencies built into it.  Health care proxies can allow for a second health care agent in the event that the first health care agent is not available. A third and fourth even can be named in the event that the the first two or three are not available.  

There is no better way to deal with these issues than by consulting with an elder law attorney who can create a road map to avoid these issues.   

Say you live here in New York and made significant plans to avoid probate.   You have a will, own a business that you pass on and even set aside significant assets for your grandchildren. You worked hard to put your financial house in order.  Now you find out that you have to move to another jurisdiction for work and will likely be there for some time.  More likely than not your will and other plans to avoid probate will survive as legally enforceable documents in the new jurisdiction.  Nevertheless, you worked hard for your plans to be finalized and do not want to live with the idea that “more likely than not” your plans will be followed.  As such, it is always best to check with a local estate planning and review your plans.  


There are a few things to keep in mind when it comes to decisions on where to live and changes in law and nuances on how to handle the change.  Most laws are relatively uniform throughout the country.  Procedure may be different but substantive laws are similar in many cases.  Except when they are not.  Some issues have two different ways of handling things.  A good example is common law states versus community property states.  Community property states are generally Rocky Mountain states and west (Louisiana and Wisconsin are the exceptions).  There are some important differences in their approach to passing on assets between the two camps.  Another factor to address is that you need to clarify your residence or domicile or you may end up paying taxes in two different states, as what happened to the heir to the Campbell’s soup fortune in 1939.


If you acquired property during the life of the marriage in a common law state, it is not necessarily part of the marital estate.  The normal, almost default form of ownership of significant assets is tenancy by the entireties.  This seemingly simple issue has important estate planning implications.  Most importantly, the whole of the basis in the property in issue of the community property steps up from the original basis cost to the current market value.  Half of the difference between original basis and the new, higher basis must be accounted for in the decedent’s estate, which may or may not have tax implications depending on many factors.  What is sure is that the surviving spouse will have lower capital gains tax liability, due to the new, higher basis amount when he or she sells that property.  Compare that with common law states approach, which only allows for the deceased spouse’s basis to step up.  


Different states have different estate taxes thresholds.  Some states tax the estate of the deceased while others tax the inheritance that heirs receive.  All states allow spouses to inherit tax free.  The federal government taxes any estate above five million dollars.  Some states have higher thresholds and others lower.  

Gifting, trust creation and asset allocation or financial planning are all legal and appropriate estate planning tools. Only with the assistance of a trusts and estate attorney can you assure yourself that all of your planning will not be for naught.  

Perhaps your prodigal child wants to start a law firm or a medical practice and needs start up funding.  You have some money set aside for your children’s and grandchildren’s inheritance but agree to loan them the money out of this fund.  It’s not uncommon for these monies to be secured by a promissory note, even though many parents would not strictly enforce its terms.  If the promissory note is not paid off by the time the parents pass away, it becomes an asset of the estate that must be accounted for.  If it is a significant amount of money, the IRS or state tax authority will impute interest.  If the parent decides to forgive the loan, that is usually considered taxable income to the child.  


The parent controls these issues and to the extent that it can be controlled during his or her life, they should be.  Loans should be in writing, with the repayment schedule outlined.  Most loans obtained on the open market have extensive outlines of the remedies that the creditor reserves.  These are not necessary unless the parent actually intends to exercise these remedies.  If no remedies are outlined in the document, the parent always has the right to document his or her intentions on how the estate should treat these loans.   

In many circumstances it is not uncommon for a parent to simply loan money to a child and document the amount loaned and paid back.  When this happens, there are no enforceable rights and the money not paid back is essentially a gift.  


The parent can forgive the loan.  As noted above, cancellation of debt can be considered taxable income.  If the estate is probated or otherwise documented by, for example, state estate or inheritance tax returns, the IRS can cross reference this information with the debtor child’s tax return to insure accuracy.  The parent may even forgive whatever the balance of the loan is at the time of his or her passing.  If the balance on the loan is less than $14,000, it can be considered a gift without any tax consequences.  

One issue that must be considered if the estate goes through probate is that the creditors get paid first.  If the amount to be repaid is large enough the estate may essentially be insolvent due to the unpaid or forgiven debt.  


The parent can also decide that if the loan is not fully repaid, the unpaid amount can be offset against whatever amount the child would normally receive.  This allows for parent to maintain rather strict adherence to equal shares to the heirs.  


The parent can of course require full repayment of the debt in conformity with the promissory note.  The estate would receive the money from the promissory note.  

Many of these complications can be avoided in advance by planning and simple adjustments to future plans.  Whenever you decide to loan any significant amount of money to an heir you should address this in your estate planning with experienced estate planning lawyers.

Intellectual property is an umbrella term that includes several different specific areas of the law.  Trademark law, patent law, copyright laws and trade secret laws are all examples of intellectual property laws.  The constitution guarantees that the federal government has exclusive jurisdiction over patent and copyright laws.  Patent and copyright laws are designed to “promote the progress of science and useful arts.”  


Copyrights created after 1978 are generally good for the life of the author plus 70 years.  When written for a corporation, so called work for hire copyrights, the copyright is valid for 95 after first publication date to 120 years after the work is created.  To pass a copyright on to heirs, you must be careful to do it the right way.  If a painter passes a painting on to an heir the right to control the copyright of that painting does not necessarily follow.  The painter will have only passed on the original painting.  To pass a copyright, the trust, will or other document must specifically mention that the copyright to the painting passes to the heir.  It is entirely possible for a painter to pass the original work to a friend or partner but pass the copyright on to another person.  

There are some very serious pitfalls involved in passing on a copyright to a party not an heir.  17 U.S.C. § 203 allows for the termination of a copyright grant in some limited circumstances.  For example, a one hit wonder sells royalties to their song.  The one hit wonder then passes away.  The law allows for that transfer to terminate a number of years later, either 35 or 40 years after the transfer, depending on the circumstances, by serving notice of termination on the owner of the copyright as well as the Register of Copyrights.  The heirs of the one hit wonder could then recapture some of the income from the hit song, calculated from 70 years after the death of the author.  

Copyrights also allow for the holder to control the means by which a work is published.  If all publishing contracts expire, the holder can decide to not execute any further publishing contracts.  That means that under this legal structure Ernest Hemingway’s work will not be a part of the public domain until 2031.  Life without Old Man and the Sea is hardly imaginable.   


Design patents are valid for 14 years from the issue date, while utility patents are valid for 20 years from the filing date.  In many circumstances a small business owns a patent rather than a particular person.  If that is the case, the stock certificates or ownership of the company is what is needed to transfer to control the patent as well as the right to receive the income generated from the patent.  

Ownership of a patent or copyright can be lucrative and is the reward of the market place for your unique genius.  You owe it to your heirs to insure that you pass it on to them in a fashion that is in line with your intentions.  This delicate task should only be handled by an experienced and prudent trusts and estates attorney.  

        The death of a loved one is an especially traumatic event. Lives can be upended and surviving family members and friends can be left feeling lost and confused about how to carry on. This is especially true when the death occurs suddenly or under tragic circumstances. Unfortunately, the law does not provide grief-stricken family and friends much time to mourn their loss before important work must be done. This important work involves admitting the deceased’s estate to probate and then administering that estate.

        In New York and elsewhere, an individual who dies with a will or similar document in place is said to die testate. If a person does not have such a document in place, the person dies intestate.

  •         Dying Testate: If the deceased left a will, the first step of administering the estate involves probating the will, or proving the will’s validity. Usually this involves simply introducing the will into the appropriate court. Once the will has been probated, the executor or administrator named in the will is tasked with carrying out the wishes of the deceased as expressed in the will, settling any lawful debts the deceased must pay, and providing an accounting or report to the court showing that the deceased’s assets were dispersed according to the terms of the will.
  •         Dying Intestate: If there is no will, the assets of the individual are brought under the supervision of the court by an interested party. The court will appoint an administrator to oversee the distribution of the person’s assets. Florida law provides direction and guidance as to how assets are to be distributed if there is no will.

This simple explanation of how a person’s estate is administered and his or her assets are distributed is overly simple. There can be any number of issues that arise that can complicate even a minor estate:

  •         A fight among the heirs regarding the validity of the will;
  •         Trusts that take certain property out of the probate process;
  •         Assets which do not go through probate.

Contact Legal Professionals

Our team at Ettinger Law Firm help you administer the estate of your loved one. Our probate administration attorneys are thoroughly familiar with New York’s probate laws and can help guide you through the process. This results in less anxiety for you during a time when you want as little stress as possible.

Making the decisions about your estate plan can be a daunting task. We are faced with a plethora of uncertainties and questions about our future and what to do about our “stuff.” There are a few documents that a client should consider executing with an attorney to protect their estate. One document called a Power of Attorney, that often complements a Will, can be overlooked by a client.

Understanding the Legal Document

A Power of Attorney typically comes in three fashions: a General Power of Attorney, a Specific Power of Attorney, and a Durable Power of Attorney. The distinctions are subtle, but extremely important. A General Power of Attorney allows a client to give authority to someone else to make decisions on anything that the client herself could make, such as financial and/or property decisions. The client is known as the “Principal” and the person that the client gives the power to is known as the “Agent.” In a very simple way, the Agent acts on behalf of the Principal in certain capacities, such as writing a check or selling a property.

This power, or authority, is only as broad as the Principal wants it to be. The Principal can be very specific with their Power of Attorney, in which the Agent only has the authority to make decisions regarding a very specific piece of property. This is called a Specific Power of Attorney. The Agent only has the authority to sell a specific piece of land, but does not have the general authority to buy or sell another piece of land. The Specific Power of Attorney can allow the Agent to pay only certain bills or  particular medical costs.  

Whether specific or general, an Agent’s authority is terminated once the Principal becomes incapacitated (physically or mentally unable to authorize powers) or passes. Typically a WIll would pick up where the Power of Attorney terminates. However, a Durable Power of Attorney extends the Agent’s authority when the Principal is incapacitated. The Durable Power of Attorney (the document itself) would illustrate the Agent’s authority.  This could allow an agent to pay for medical care through the Principal’s incapacitation, or to pay the rent while the Principal is in the hospital.

Without some documentation of a Power of Attorney or a Durable Power of Attorney can lead to many complicated issues that arise at the wrong time. This document can prevent a battle with a bank when the Agent needs to write a check on behalf of the Principal for the Principal’s doctor’s appointment. This document can prevent

Get Legal Help

Our experienced estate planning attorneys can explain and will draft the Power of Attorney document that is right for you. Our attorneys will review the subtleties and differences between the different types of documents. 

Contact Information