Estate Planning

June 14, 2011

The Dynasty Trust May Keep Inheritance In the Family

Some area residents assume that they do not need a New York estate plan because they have no special requests, just a desire to pass on their inheritance to their children. They often wrongly assume that the “default rules” would work just as well as anything that a professional could create. Yet, the rules that the state will apply to inheritances are often much different than what one might suspect. For one thing, it takes specific, careful effort to ensure that large taxes and potential creditors are kept from the inheritance. In addition, without planning, there is a chance that your inheritance may leave the bloodline once you are gone. Unique strategies are often required to ensure that the assets you have worked a lifetime building stay with your children and grandchildren.

A New York estate planning lawyer can explain alternative options like inheritance trusts, heritage trusts, and dynasty trusts which all seek to keep an inheritance in a family long after you (and even your children) move on. An article in the Napa Valley Register recently discussed one of the options in more detail, the dynasty trust. This trust is often particularly helpful for those who want to ensure that their children do not lose their inheritance because of problematic creditors, a lawsuit, or to an ex-spouse in a divorce.

The general idea is that the grantor leaves an inheritance to children in the form of this trust. In that way, the inheritance is not the specific property of the child but is instead a unique legal entity from which the child benefits. The separation provides more protection against creditors. In addition, it is easier for your child to claim the trust as separate non-marital property out of the reach of a spouse in divorce proceedings.

A dynasty trust also takes advantage of tax rules which often mean that no additional estate taxes will have to be paid on your death or even the death of your descendants. Of course there are usually rules against having the trust last indefinitely, with laws often requiring that a trust be completely distributed within 90 years of your death. The details of this possible limitation can be shared by trust creation professionals.
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June 10, 2011

Many Forget to Include “Letter of Instruction” As Part of Estate Plan

by Ettinger Law Firm

Over the past several decades many more local community members have come to understand the importance of crafting a New York estate plan. From the drafting of wills to the creation of complex trusts, the value of conducting asset preparation for one’s family is much more appreciated now than at times in the past. Yet, many New Yorkers stop a bit short in their preparation–often leaving uncertain whether their exact wishes will be fulfilled once the decision is in the hands of others.

One thing often forgotten is a “letter of instruction.” As reported by SmartMoney, a recent survey suggests that 56% of Baby Boomers have a will but very few have appropriate “letters of instruction.” These documents are generally not legally-binding–unlike a will–but they are instead explanatory instructions to help others understand your specific wishes.

These letters may include a variety of information that your heirs would want to know when you are gone. They are perhaps best viewed as supplements to your official estate plan, providing more explanation for the choices made in the legal documents of the plan. The letter may also include specific explication of funeral wishes or even more practical information like PIN numbers and computer access codes.

In addition, it may be important to have “letters of instruction” sent to third parties as part of your estate plan. For example, upon creating a Medicaid Asset Protection Trust, our attorneys advise that letters of instruction be sent to those who prepare your taxes and perhaps your homeowners insurance company. No matter what your circumstances, these explanatory letters are important additions to your overall estate plan, complimenting documents like your will, living will, and durable power of attorney. They may go a long way in easing the stress and confusion of your surviving family members.
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June 6, 2011

How to Take Advantage of New Tax Relief Act

by Ettinger Law Firm

Many in our area have decided to visit a New York estate planning attorney this year in order to learn how they can take advantage of Tax Relief Act which President Obama signed in December. As many are aware, the law allows individuals to give gifts up to $5 million without triggering any tax losses. Couples can give twice that amount. This is five times more than under previous law. The rule changes only apply until 2012, however, so it remains vital that all families take advantage of this favorable condition while they still can.

Worth.com recently provided a nice summary of a few ways that residents can act while the tax law is in effect. Perhaps the simplest way to use the increased exemption rate is to give a gift to a responsible adult child or grandchild. If you were considering creating a portfolio for a loved one, now might be the ideal time to do it.

Also, this year is the perfect time to create an irrevocable life insurance trust, because the trust can be funded with the new $5 million exemption. Even without the increased tax-free amount these trusts are important parts of an estate plan. They pay for life insurance premiums and can also be used to help settle how much each heir will receive in the future.

Another option might be the creation of a qualified personal residence trust (QPRT). The QPRT is helpful for those who have value tied into residential property. If the individual seeks to have their children own that property than the new law is helpful because it allows them to allocate a larger amount to this trust. A defective grantor trust may be used this year to take advantage of the exemption. As the article notes, “if you seed a defective grantor trust with, say, $1 million, then sell assets worth up to nine times that amount with the trust issuing a note to the grantor, any gains in the trust assets in excess of the note’s interest grow tax-free.”
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June 4, 2011

Parents Grapple with Effect of Inheritances and the Meaning of Money

by Ettinger Law Firm

New York inheritance planning involves passing on values as well as assets. No matter how large the family estate, most parents think long and hard about how their inheritance will affect the lives of their children. For many there are no easy answers to questions like how new wealth will affect their children’s independence or how much wealth is the appropriate balance between proper inheritance and philanthropy.

As a story last week in the Belleville News Democrat explained, many parents are taking steps to share important information about the meaning of money as part of their inheritance plan. Most families strive to pass on the right amount of money so that children are provided for but still maintain the incentive to work, strive, and succeed.

One hardworking family, including a 60-year old retired teacher and 62-year old real estate broker, explained how they have worked with their now 30-year old daughter on financial matters, noting “We really want to encourage her to develop a personal financial plan, a personal philosophy, and become really familiar with the types of investments.” The family admits that frankness and early discussions about these issues is important. Children should know what to expect and parents should not be afraid to share their concerns with their loved one.

Some are worried that their loved ones may be unprepared to handle the estate that they receive. Those families often face issues with asset planning for spendthrift children. They are aware that their children are poor at handling money or inexperienced with such matters. Many options exist for parents in those situations. For example, trusts are perfect tools to ensure that a child has access to reasonable assets but is unable to abuse the overall value of the estate. In these situations a designated “trustee” manages the actual estate with rules about what the child receives and when they receive it.
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June 2, 2011

$100 Million Estate Finally Reaches Relatives After 92 Years

by Ettinger Law Firm

An important benefit of visiting with a New York estate planning lawyer to help with your asset planning is that on top of carrying out your wishes, the professional can share avenues available to you of which you may not be aware. For example, many area residents are under the impression that their will is nothing more than a document that specifically divvies up assets. In reality wills can be crafted in virtually unlimited ways depending on specific family dynamics and the ethical values of the testator.

Perhaps no high-profile case better illustrates the complexity with which a will can be drafted than the story of Wellington R. Burt. At one point one of the richest men in America, Mr. Burt made his wealth in the robber baron age and was primarily involved in the lumber industry. Mr. Burt lived to age 87, passing away in his Michigan mansion in 1919 with an estimated net worth around $60 million.

The lumber giant gained notoriety following his death as the details of his will were revealed. Mr. Burt was particularly careful to ensure that his living relatives received only a small part of his fortune. To avenge an apparent family feud, Mr. Burt left his children relatively small annual payments from $1,000 to $5,000–except for one favored son who received $30,000 yearly. The rest of the man’s estate was held in trust until 21 years after the death of his last direct descendant alive at the time of his death.

ABC News reported recently that that final requirement was met in 2010–92 years after Mr. Burt’s passing. Mr. Burt’s last grandchild died in 1989, triggering the 21 year wait which finally expired in 2010. Last month the twelve descendants of the lumber tycoon reached an agreement to split up the estate now valued over $100 million. Based on seniority, the individuals received values ranging from $16 million to $2.5 million.

While a “spite clause” is perhaps not advisable for many area families, the case of Wellington Burt stands as an evidence of the immense flexibility that exists to all those considering what to do with their assets following death.
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May 31, 2011

Lack of a Will Leads to Controversy in Estate of NFL Legend Gene Upshaw

by Ettinger Law Firm

New York estate planning is often given little thought by some local residents until a specific event brings attention to the issue. A retirement, death of a close friend or relative, and similar occurrences often act as a catalyst leading residents to consider plans for their own affairs. Unfortunately, for many residents that triggering event never occurs, and they end up waiting too long to properly prepare matters related to their estate. It is in those cases that controversy and disagreement often leads to fighting among surviving relatives.

That appears to be what happened with the estate of NFL football great and union leader Gene Upshaw. Earlier this month The Washington Post reported on the saga surrounding Mr. Upshaw’s death, lack of will, and controversy among his friends and family in the aftermath of his death. The 63-year old Upshaw was vacationing with his wife in 2008 when he unexpectedly fell ill. He was taken to a local hospital and died three days later.

Mr. Upshaw did not have a will or any other estate planning matters settled before his sudden illness. As a result, there was a chaotic, questionable attempt to have a will drafted and signed in the three days between his illness and ultimate death. According to reports the last-minute document appeared to leave all of the man’s assets to his wife, naming her as trustee and executor. However, many questions remained about Mr. Upshaw’s mental state at the time the will was drafted and whether or not he actually signed the document.

A few months after his death, Mr. Upshaw’s eldest son filed suit disputing the will. He claimed that his father was essentially unconscious in his final days and unable to execute the paperwork. His mother-in-law, however, asserted that he was conscious and capable of speaking. It was later revealed that Mr. Upshaw had not in fact signed the document but that his friend had done it on his behalf. Both sides entered into a prolonged dispute. The matter was set to go to trial earlier this month but was finally settled privately a few days before the start.
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May 29, 2011

Are Prenuptial Agreements for Everyone?

by Ettinger Law Firm

Over the past few decades stories in popular culture have raised the profile of one type of contract–the prenuptial agreement. Some area residents use this document as an important part of their New York estate plan to help clearly set out the rights and responsibilities of both married partners in case of divorce. They are most common for those not entering their first marriage.

Many couples remain unclear about whether a prenuptial agreement is right for them. For example, most young couples who are entering into their first marriage do not find the idea of creating a contract in case of divorce to be very romantic or indicative of their plan to spend their lives together. In those cases the couples often do not have large assets with which to be concerned, and so a prenuptial agreement may not be appropriate.

However, confusion remains because some financial experts continue to insist that all couples should consider entering into these agreements. As discussed this month by Investing Answers the most common reason for this opinion is the high divorce rate. Yet the off-hand remark that “half of marriages end in divorce” has been debunked as inaccurate or at the very least, misleading. Measuring the divorce rate is complicated, because even if there are half as many divorces as marriages in a single year, that does not necessarily mean that 50% of marriages do not last. In fact, some segments of the population, like those with college degrees, are shown to have only a 10% chance of divorce within the first 10 years.

Of course even though divorce may not be as frequent as some suggest, they still do occur, making prenuptial agreements important for certain couples. Individuals who are entering a marriage with significant assets may want those protected. If one partner has significant debt, the other may reasonably want protection.
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May 27, 2011

High-Profile Example Highlights Need for Clarity in the Estate Planning Process

by Ettinger Law Firm

Perhaps no New York estate planning effort has received more attention over the past few years than that of well-known New York hotelier Leona Helmsley. Upon her death in 2007 a scramble ensued to determine what would happen with her estate, estimated to be worth billions. As a post yesterday at Financial Planning explains, the subsequent way in which her assets were divided imparts lessons for all local residents, regardless of the size of their estate.

Mrs. Helmsley’s wishes captured the public attention when it was revealed that the she left $12 million to care for her dog, Trouble, and created a charitable trust worth billions to be spent primarily for the care and welfare of dogs. Mrs. Helmsley’s wishes were placed in a “mission statement” where she explained that she desired the trustees to use their discretion to disperse funds first for the care of dogs and only secondly for “other charitable activities as the Trustees shall determine.”

But there were concerns about the legal effect of the intentions placed in the statement. For one thing, the statement gave the trustees discretion to spend the resources. On top of that, the statement was never incorporated into her will or other trust documents.

As a result, the trustees have been given the power by local judges to essentially disperse the charitable trust funds in any way they wish. So far the trustees have donated $450 million to charity; of that amount only $100,000 has been given to dog-related efforts. That constitutes less than one fiftieth of one percent–hardly an amount which would indicate dog welfare as the main priority suggested in Mrs. Helmsley’s mission statement. Several animal charities sued to force a larger share of the trust given to animal efforts, but their legal efforts have been unsuccessful.

The overarching goal of all New York estate plans is to ensure that an individual’s specific wishes are carried out when they won’t be around. However, without a clear, consistent plan a judge usually decides what happens to an estate, regardless of one’s actual wishes. Even when some planning is done, as in this case, confusion may remain unless those planning documents are updated and integrated so that there remains no ambiguity about how to handle affairs.
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May 25, 2011

Estate Planning is Particularly Important for Families with Autistic Children

by Ettinger Law Firm

Virtually all local families have much to gain from taking the time to conduct proper New York estate planning. However, for some the need to ensure that future finances are in order and loved ones are secure indefinitely is a particularly strong necessity. Families who have children with special needs, like autism, must give careful thought to how their vulnerable children will have the resources that they need no matter what the future holds.

Yesterday the Sacramento Bee profiled one young family that is taking steps to ensure that their four children–including three with signs of autism–will be financially secure in the future. Considering many forms of autism make communication and basic social interaction a challenge for these children, their dependence on loved ones will often last a lifetime. There remain millions of families in this situation as an average of one child out of every 110 suffers from autism.

Paying for medical expenses alone is often a challenge for these families. While the average American usually spends about $317,000 in direct medical costs in a lifetime, individuals with autism often pay roughly twice that amount, nearly $630,000. Of course that does not even account for non-medical expenses, including basic needs like clothing, food, education, transportation, entertainment, and countless other costs. Thinking about these details is overwhelming for some, but it is important to remember that it is manageable. One of the first steps is to contact a New York estate planning lawyer to learn what options are available to you.

One possible choice that can be explained to you is the creation of a special needs trust. Depending on your family’s financial situation, this option may allow you to pass on more of your assets to your child without risking the loss of government benefits like Supplemental Security Income (SSI), Medicaid, or state residential programs. However, even if the trust is created there are risks of government benefit reductions depending on how the trustees make payments.
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May 23, 2011

New York Estate Planning is Much More than Wills & Trusts

by Ettinger Law Firm

When many area residents are told to consider visiting a New York estate planning lawyer their mind immediately envisions someone who will craft a will or a create a trust. However, estate planning is much more than document creation. Instead, it is best viewed as a process by which an individual works to eliminate future uncertainties and reduce potential financial complications for their loved ones. Wills and trusts may be a component of that process, but they are by no means its sum total.

This multifaceted approach to estate planning was nicely summarized this weekend in an article at Today Online. Most local community members spend a large part of their lives on asset accumulation–the process of building up their estate. Yet the important considerations of asset preservation and distribution are often given only minimal thought. That is where the New York estate planning attorney comes in.

Beyond mere drafting of wills and trusts, these professionals are capable of helping you determine what strategies will ensure that extended medical costs, taxes, and other factors swallow as little of your accumulated wealth as possible. This may involve the creation of a Medicaid Asset Protection Trust or perhaps advice on the acquisition of long-term care insurance. In any event, the most important part of the process is figuring out what needs to be done to best save your wealth–the creation of documents to actually carry out those wishes only occurs later.

In addition to preserving your estate, the planning process also involves a discussion of its ultimate distribution. This includes both ensuring that your estate is divided as you wish but also that the division occurs in as quick and straightforward a manner as possible. Many clients remain surprised by the type of advice and information that they receive about how their estate can be distributed. For example, many conditions can be placed on when an inheritance is dispersed or how it is spent for certain family members. The options are essentially unlimited. Understanding those choices and matching them with your wishes is a vital part of the process.
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