Estate Planning

November 14, 2011

Trustees Need to Be Educated On their Role in Estate Plans

Last week Advisor One discussed an estate planning issue that is underappreciated by some community members: the need for an educated trustee. Our New York estate planning attorneys commonly use trusts to help local residents avoid probate and save on estate taxes upon their death. When a trust is used a trustee has to be designated, which is an individual or entity that will carry out various responsibilities upon the death of the one who created the trust, the Grantor. The trustee is obligated to complete a range of legal and practical duties at that time. Without proper education and guidance they run the risk of failing in their obligations and causing a variety of problems for the family involved.

Upon the death of the Grantor, for example, the trustee must delve into the Grantor’s personal and financial situation. That includes creating a list of all of the individual’s assets, including personal property, real estate, stock, and other items. The fair market value of the property must be assessed so as to establish a new tax basis for possible future appreciation purposes. An assessment must be made to determine if estate taxes are at issue before equitable distribution of property to beneficiaries per the agreement’s terms. Many other duties must also be fulfilled. Outstanding debts have to be paid, life insurance claims filed, retirement accounts handled, tax returns filed, and other accounting documents properly crafted. While the settling of a trust is easier than the probate process, it still demands prudent action by those involved.

The complexities of the position make it necessary that trustees be educated about their role, and it makes it important for the Grantor to give careful thought to trustee selection. The article notes of participants at a recent trustee education seminar that “grantors were trying to determine which made most sense for them: a personal trustee, a corporate one, or a personal trust company.” The article went on to explain how it was often difficult for families to identify a personal trustee that possessed the technical skills and relationship with the Grantor needed to best fill the role.

November 9, 2011

Estate Planning Documents Must Be Updated So They Work When You Need Them

by Ettinger Law Firm

Yesterday the Kansas City Star published a story on the necessity of properly updating estate planning documents. The article shared the story of a local woman whose mother had just died. The mother had created a living trust several years before and placed her residence within the trust. However, a few years after the planning occurred, the mother sold her house and moved into a different home. She died shortly after the move. The adult daughter was left wondering whether or not probate would be required for her to obtain her mother’s home.

The daughter learned after talking to legal professionals in the area that the key issue was whether her mother had taken title to the new home in the name of her trust. If so, then the new home would likely be part of the mother’s living trust to be passed to the named beneficiary of the trust per its terms. However, if the new home was not titled in the trust’s name, then it likely would not pass on via the trust. Instead the public probate process would be required for the daughter to obtain the residence.

Of course the entire purpose of the mother creating a trust in this case was to avoid probate, save on taxes, and ensure that her family members would have as seamless a transfer process as possible in the inherently difficult time. By not taking her earlier planning into account when making future transactions or consulting her estate planning attorney to assure everything was in order, the mother risked having her plan fail to work as desired at the very moment it was needed.

November 7, 2011

An Estate Planning “Perfect Storm”

by Ettinger Law Firm

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a “perfect storm” for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, “If individuals are trying to transition assets to the next generation, we currently have a perfect storm–in a good sense–to do it.”

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain–it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

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.

November 1, 2011

Federal “Super Committee” May Target Gift Tax in Deficit Reduction Scheme

by Ettinger Law Firm

The gift tax has implications in a variety of New York estate planning situations, from deciding the best way to provide aid to loved ones to conducting business succession planning. As with many other tax issues, timing is important because lawmakers at the federal and state level can change these rates. While the risk of rate changes always exists, there has been significant discussion as of late about a variety of potential changes involving the 12-member federal “Super Committee.” The Super Committee has been charged by Congress with reducing the federal deficit by $1.5 trillion over the next ten years. To do so, the group will have to enact a combination of spending reductions and tax changes. No matter what combination they ultimately decide upon, it is highly likely that their work will have effects on local residents crafting their New York estate plan.

For example, last week the Wall Street Journal’s Market Watch published a story explaining proposed changes to gift tax exclusions. The specific committee meetings are mostly private, so some of the recent thoughts on the committee’s actions are speculative. However, it is known that one of the President’s proposed recommendations to the committee includes reducing the estate, gift, and generation-skipping transfer tax thresholds. The proposal would reduce the tax-free gift threshold to its 2009 level of $1 million. Currently the tax-free threshold is supposed to stay at $5 million until the end of 2012. However, many are speculating that the committee may decide to return the exclusion back to $1 million a year early as a cost-saving measure.

The story’s author summarizes the changes by noting, “Overall tax planning and gift tax thresholds that are now available could be at risk for families…not much good can come from the committee’s recommendations from a wealth preservation perspective.” Clearly, the potential actions by this group may make it important for some local residents to take long-term financial actions now. Our New York estate planning attorneys urge all community members who may be affected by these changes to visit with a professional to either create a plan or update an existing one. Depending on the advice received, it may be prudent to accelerate planned lifetime gifts, review estate-tax funding mechanisms, or otherwise revise estate plans.

October 27, 2011

Economic Uncertainty Leads to Rise in Estate Planning Interest

by Ettinger Law Firm

An article this week from West Fair Online explained how professionals working with residents on financial issues have seen a significant increase in demand for their services as of late. While there may be a tendency among some to become paralyzed when the economy is so volatile, many others view the instability as a time to act prudently and plan ahead as much as possible. The article reports what our New York estate planners have long known: the need to have an estate plan remains strong regardless of the circumstances.

Experts know that the need for prudent planning is perhaps even more important at times like these, when there tax and policy uncertainties at the local, state, and federal levels. One planner interviewed for the story explained how in turbulent financial times “the area’s residents should have a vested interest in knowing what the stakes are for their assets.” While those residents at the top income levels are often more aware of how the laws affect them, many middle class families have just as much to gain by using the legal tools available to plan their financial future and save taxes in the long-term.

Most observers have applauded the steady rise in estate planning awareness. However, there are still a few groups which continue to neglect their planning needs. For example, many local small business owners continue to miss out on opportunities to visit with a New York estate planning lawyer to take care of long-term financial goals. Of course, small business owners wear many hats. Rarely do they have time to accomplish everything on their “to do” list each day. Yet, many benefits have been reported by those who have carved out time to visit with financial professionals to protect assets, create a succession plan, and conduct similar tasks.

October 25, 2011

Proposed Tax Policy Changes May Affect Future Options for Estate Planners

by Ettinger Law Firm

Any time is a good one for local residents to conduct New York estate planning, because no one can say with certainty what tomorrow will bring. Having a plan in place provides the peace of mind of knowing that affairs will be handled no matter what the future holds. However, as reported this weekend in the New York Times, proposed federal tax changes should act as even more motivation to take advantage of planning options now which may not be available in the coming years.

National policymakers continue to disagree about budget deficit reduction strategies, with countless variations of tax increases and spending cuts proposed. No one can say with any confidence what may happen. However, experts continue to explain that it is always advisable to plan for what is known and not for what one speculates might happen. A variety of tax changes may go into effect next year or the following year, and so it may be advisable to take steps now to plan for their long-term financial affairs. A key part of that process for local residents involves visiting a New York estate planning lawyer to have a plan created or updated.

For example, observers note that it may be advantageous for those thinking of transferring ownership of a company or other property to adult children to do so in 2011 or 2012 while there is a $5 million exemption from gift taxes. At the current schedule by 2013 that exemption will drop to only $1 million and the tax rate itself is set to increase from 35% to 55%. As an experienced New York estate planning lawyer can explain, personal gifts may be an important part of reducing eventual estate taxes. Individuals can give up to $13,000 annually without tax to anyone, and couples can double that amount. One expert explained that a popular way that parents and grandparents can utilize the $13,000 annual exclusion is to set up a Roth I.R.A. for a student who has a side job. As long as the relative has some earned income, than an I.R.A. account may be opened for them.

October 21, 2011

New York Estate Planning Best Done Before Health Declines

by Ettinger Law Firm

When it comes to New York estate planning, timing matters. While it is always better to conduct some long-term financial and well-being preparation than none, there is a large benefit to handling the planning while one is still capable. This means before a medical emergency strikes. Of course, it is also necessary to regularly update the plan so that it accounts for changes in life circumstances. On Wednesday, Forbes published an article that emphasizes the importance of planning before a serious medical or financial setback makes things more complicated. The article was part of a week-long series shared to promote National Estate Planning Awareness Week.

Our New York elder law estate planning attorneys help seniors every day who want to ensure that their long-term financial affairs are in order and to bring peace of mind by planning for end of life care. However, we are aware that a large segment of the population still has not taken the time to make necessary preparations. According to the National Association of Estate Planners & Councils, more than 120 million Americans have not created or properly updated their estate plans. While it remains tough for many residents to discuss these topics, there is far too much to gain to put off having conversations about long-term needs.

If you have an elder relative who has not yet crafted an estate plan or made preparations for long-term healthcare, it is often helpful to gently mention the benefit of the planning effort to them. Many residents wait too long to take action and fail to have any plan in place when they fall into poor health and need special care services. Having plans in place ahead of time, before a major illness, often means that the senior can preserve a much larger portion of their savings and can receive the best available long-term care that maximizes their quality of life.

October 19, 2011

New York Estate Plan Lawyer Shares Value of Business Succession Plans

by Ettinger Law Firm

Many local residents believe that crafting a New York estate plan only involves making of list of who will receive what at death and taking steps to ensure that taxes are saved in the process. While these issues are all important aspects of long-term planning, many others factors are also considered. Our New York estate planning lawyers tailor each plan uniquely to every new client, and no two community members are exactly the same. For example, many local families own and run businesses. It is incredibly important for these families to work on proper business succession planning when they consider their long-term preparations.

This weekend the Times Herald-Record published an article written by our New York estate planning attorney Bonnie Kraham, Esq, that explores the importance of business succession planning. Attorney Kraham explains how only a minority of family-owned business survive beyond the first generation. While 90% of all American businesses are family owned, 70% of them will end when the founding family member passes on. Only 15% of those current businesses will make it to a third generation. A large part of the declining rates and lack of longevity is the failure of many of these companies to have a business succession plan.

These plans take time, as the original entrepreneur should be around to help monitor the next generation for five to ten years while the process unfolds. A good rule of thumb is for the elder member to begin implementing the changes around the age of sixty. Of course the actual plan itself should be a collaborative process with input from the entrepreneur as well as the successors. There are many different variables to take into account, including the feelings, ambitions, and goals of all those involved. When done well the plan should also include input from a variety of professionals. Lawyers are necessary for the estate planning and agreement preparation, accountants should consider taxes, and financial advisors can determine the best investment strategies.

October 17, 2011

New York Estate Plans Tailored for Those with Multiple Sclerosis

by Ettinger Law Firm

No two New York estate plans are exactly the same. Proper long-term planning demands that each unique life circumstance and family issue be considered and incorporated into the legal preparations. For example, our New York estate planning attorneys have helped many families over the years make special arrangements to provide assistance for family members who suffer from a wide range of disabilities. For nearly two decade residents in our state have been able to set up special trusts so that a disabled loved one could receive an inheritance without disqualifying them from government benefits. Unlike in the past, there is no need for parents to disinherit disabled children or other family members out of fear of losing access to Social Security and Medicaid.

This weekend Forbes published an article reiterating the value of estate planning for all area residents. It was noted that a professional estate planning lawyer should always be consulted so that these plans can be tailored to one’s unique needs. As explained, this is particularly important for those living with disabilities or chronic illnesses. Families dealing with these issues are often forced to live day-to-day, because their medical problems come with a large amount of uncertainty. Ensuring that proper estate and financial plans are in place is one of the few ways that many of these families can provide some degree of certainty to their future.

For example, many New York families have loved ones living with multiple sclerosis (MS). It is a problem that flies under the radar, because as experts at the National Multiple Sclerosis Society explain, “some people do not understand that 96% of the symptoms of chronic illnesses are invisible.” For those with MS one of the most common systems is referred to as “exacerbations.” These are sudden attacks of fatigue. This fatigue is unlike normal tiredness, and instead it constitutes a complete exhaustion which makes it impossible for many suffers to function normally. It remains the number one reason why people with MS leave the workforce.