Estate Planning

January 20, 2016

SINGLE PARENT ESTATE PLANNING – STANDBY GUARDIANSHIP SUBSTITUTE FOR CUSTODY ORDER

In today’s society it is common, to say the least, to have a single parent household. Most of the time the parents are divorced or simply not together and one of the parents is less hands on than the other. Perhaps this is a because of distance, as the other parent may live quite some distance away or perhaps due to work obligations and can only physically parent a month or two out of the year. Then there are truly single parents insofar as the other parent has passed away or perhaps the other parent is just not in the picture for any number of reasons or there is a history of domestic violence and the other parent’s custodial rights are extremely curtailed.

For this population, their will serves not only to memorialize how they want their possessions and property to be disposed of, it also allows for them to indicate who they want to take custody of their children. To be sure, if the other parent is named as the father/mother to the child and the primary custodian passes away, the other parent has the legal authority to take custody, absent good cause. There are, however, other ways of addressing these concerns outside of the four corners of the primary custodians will. Enter the standby guardianship which was specifically designed in response to such situations.

SUPERIOR TO CUSTODY ORDER

January 15, 2016

DISINHERITED HEIRS NOT ALWAYS A SURPRISE

by Ettinger Law Firm

It happens often enough that a parent for many reasons decides to disinherit one, several or all of his/her children. At the same time, this is often not a controversial decision and is just as common both understandable and predicable. Perhaps a person promised their estate to a specific child, stepchild or niece or nephew for taking care of them instead of being required to be sent to a long term continuing care facility. Perhaps the parent provided financial largesse to his/her via college education, graduate school and even helped them purchase a house but had one child who had special needs who always lived at home and insured that child’s future by funding a trust during his/her lifetime and then disinherited all of his/her other children by putting the whole of the estate into the trust.

Mickey Rooney was a very well known and well paid actor that had a long career, with many children and many marriages and disinherited his children. He instead left his estate to his stepson and explained that his kids were better off than he was. By the time Mr. Rooney passed, his estate dwindled to just about $18,000, so there was little incentive for any of his kids to contest the will, although the same did not hold true for Mr. Rooney’s then current spouse. Unfortunately for some families, this can be a shock and there are sufficient incentives for the family to contest the will.

INVALIDATING THE WILL

January 13, 2016

EQUITABLE ADOPTION IN INTESTACY CASES ALL BUT THE ORDER SIGNED

by Ettinger Law Firm

Think about this, you were born to your mother and father. At a wee young age your mother and father separated and your mother raised you. Nothing unusual there. Say then your mother later married another man and he started to raise you as his own; while your stepfather may have always been known as a stepfather, he still loved you and treated you as his own without distinction as to his own biological children. Then at a certain point your stepfather moves to adopt you. Adoption can be a lengthy process, with a mandatory minimum three month waiting period. During that process your stepfather passes away intestate. You are not legally his child so there are no inheritance rights; so what do you do?

Perhaps you seek various government benefits that you would be entitled to if you were adopted, such as Social Security benefits if you are still a minor, benefits through the Veterans Administration, et cetera. This scenario is entirely plausible and actually happened in the case of Matter of Mazzeo, 466 N.Y.759 (A.D. 3rd Dept 1983). Mazzeo shows some of the problems that goes beyond what was outlined above, in that in Mazzeo after the necessary parties filed the adoption petition for an adult adoption, the stepmother (Rose Mazzeo, hereafter Mrs. Mazzeo) passed away intestate and her niece filed for letters of administration, claiming that under New York’s intestacy statute, Mrs. Mazzeo’s only surviving heirs were her five nieces. The stepson (Joseph Mazzeo, hereafter Mr. Mazzeo) opposed this move and claimed that he was equitably entitled to be considered the child of the deceased. The New York Appellate Court agreed with Mr. Mazzeo and found that under principles of equity, or, fundamental fairness, an adoption should be construed for purposes of considering Mr. Mazzeo as the heir to Mrs. Mazzeo.

COMMON TOOL

January 11, 2016

PRETERMITTED OR OMITTED CHILDREN NOT ADDRESSED IN A WILL

by Ettinger Law Firm

Contrary to the European model, American parents are legally free to disinherit their children, but at the same time, they cannot simply forget or omit their children in their will by mistake. If the child is specifically addressed in the will and, at the same time, the will either fails to pass any property or assets on the child or specifically disinherits the child, there is nothing that the child can do to inherit something from the estate, aside from invalidating the will and potentially inheriting under the intestacy statutes. Children born after a will is created and not properly addressed in the will, via language that is expansive and inclusive that undoubtedly includes even children born or adopted after the specific will is created are referred to in the law by the ungainly term pretermitted children.

Not surprisingly it comes from a latin verb meaning to overlook or forget. New York’s law that addresses pretermitted children and found at NY EPTL §5-3.2, only addresses children born after the creation of a last will and not otherwise provided for by other means, such as life insurance proceeds, a trust or other assets. The children that fall under the pretermitted law protections are entitled to whatever the other children who are addressed in last will. Oddly enough, if the children born before the creation of the will are mentioned but unprovided for, the pretermitted child will not inherit anything. Indeed, the law specifically addresses this possibility, insofar as it indicates that “(1) If the testator has one or more children living when he executes his last will, and: (A) No provision is made therein for any such child, an after-born child is not entitled to share in the testator’s estate.” NY EPTL §5-3.2. Certainly there are many problems with this, insofar as some parents specifically disinherit their children. Anna Nicole Smith disinherited her son in her last will and then had a baby daughter only a short time prior to her passing away, without any change in her will.

RATHER COMMON PROBLEM WITH SIMPLE SOLUTION

January 6, 2016

LET GO OF MY INHERITANCE – INTERFERENCE WITH AN EXPECTANCY

by Ettinger Law Firm

WRONGFUL INTERFERENCE WITH WILL

It is known by many different names, depending on the state and the era. Most recently it made its appearance in news headlines with the name – intentional interference with expected inheritance, sometimes even shortened it IIEI. The United States Supreme Court referred to it as “a widely recognized” cause of action and as the “tort of interference with a gift or inheritance” in the Anna Nicole Smith case. Marshall v. Marshall, 547 U.S. 293, 296 (2006). The matter has surfaced in the news over at least the last century, most famously (perhaps infamously) in the Father Divine case in New York, in 1949. Latham v. Father Divine, 299 N.Y. 22 (1949).

The American Law Institute published the The Restatement of Torts (Second) of Torts in 1979. That was the first time that the tort, known by many names, was formally recognized as such. Prior to this, the principal and concept was recognized but only in the most egregious of circumstances. There are several seminal cases that speak to the larger concept, one of which was the New York case dealing with Father Divine case noted above.

December 27, 2015

HOW REVOCABLE IS MY IRREVOCABLE TRUST

by Ettinger Law Firm

IRREVOCABLE TRUSTS COSTS AND BENEFITS

Trusts are valuable estate planning devices that allow for the transmission of wealth with lower tax liability. When proper estate management is picked, they also allow for the creation of future income, potentially allowing for the life of the trust in perpetuity. Trusts also allow for the beneficiaries to benefit from the income of the corpus of the trust, yet insure that their creditors cannot obtain the income producing assets itself. The same also applies for a financially irresponsible beneficiary, in that it provides income but prevents the financially irresponsible beneficiary from squandering the income producing asset. One of the most popular types of trusts is the irrevocable trust. As with anything in life, there are upsides and downsides; one of the downsides to an irrevocable trust is that in most circumstances, and, more particularly, most states, an irrevocable trust is usually irrevocable. Unwinding an irrevocable trust when it no longer functions as it should, due to, for example, a major change in the estate and gift tax law is possible but must be done correctly, whereby the assets from the trust may be transferred or gifted to the beneficiaries or the settlor if still alive.

WHY TO MODIFY OR REVOKE?

December 26, 2015

ESTATE PROPERTY INCLUDES TAX RETURNS DUE

by Ettinger Law Firm

The United States Tax Court recently decided a case where the issue was the role that a tax return due to the decedent played in overall estate tax liability. The Estate of Russell Badgett, Jr. et al v. Commissioner, T.C. Memo 2015-226 (Nov. 24, 2015) dealt with a very large overpayment of taxes by the decedent during his last full calendar year of his life. The estate failed to include the value for the tax returns that Mr. Badgett, Jr. (or his estate as it were) received, which ultimately undervalued the estate a rather significant amount.

The Internal Revenue Service indeed caught this accounting error and sent out a notice of deficiency approximately a year and a half after the filing of the last tax return. The Tax Court ruled in favor of the Internal Revenue Service because estate tax returns must list all the property that an estate owns. The Tax Court cited an United States Supreme Court case that held that state law defines what property rights, while federal law defines what property is taxed. Morgan v. Commissioner, 309 U.S. 78, 80 (1940).

THE CASE OF MR. BADGETT, JR.

December 21, 2015

INVALIDATING A WILL

by Ettinger Law Firm

WHAT HAPPENS IF A WILL IS INVALIDATED?

Wills are perhaps the most basic and simple form of passing on property and the transmission of wealth from one generation to the next. It allows the testator to give away the property and money that they own and have on hand as they see fit. A person can write a person out of a will, with certain limitations, include another non-child in the distribution and treat them as if they were a child or even leave it all to a charity. While the vast majority of wills are honored and respected without question, there is always the possibility that a potential heir may contest a will. In the event a will is invalidated a Surrogate’s Court must still resolve the issue of how and to whom shall the property be distributed. One possible way of dealing with issue of distributing the property if a will is invalidated is to utilize the state’s default, intestate distribution scheme. Another means is to revive a previous, otherwise valid will. This latter method is called the doctrine of dependent relative revocation.

DOCTRINE OF RELATIVE REVOCATION

December 16, 2015

BACK TO THE BASICS – SPECIAL NEEDS TRUSTS

by Ettinger Law Firm

STRICT ADHERENCE TO FORM

On March 3, 2015 the Eighth Circuit Court of Appeals, sitting in Denver, Colorado, rendered an opinion in the case of Draper v. Colvin, where it explicitly admitted that it drew “a hard line” when it upheld the decision of the Social Security Administration that denied Stephany Draper eligibility for supplemental security income. Draper v. Colvin, 229 F.3d 556 (8TH Cir. 2015). Ms. Draper was an 18 year old woman who suffered traumatic brain injuries in an automobile accident and applied for supplemental security income benefits. In addition, she filed a personal injury case where she netted approximately $429,000 from the settlement. This amount of money would render Ms. Draper ineligible for both supplemental security income as well as Medicaid, both of which are means based programs.

SPECIAL NEEDS TRUSTS NOT COUNTED AS ASSET IN MEANS TEST

December 8, 2015

ANTICIPATED CHANGES IN IRS RULES REGARDING FAMILY BUSINESS VALUATIONS

by Ettinger Law Firm

WHY IT MATTERS FOR ESTATE PLANNING

Every year the Federal Department of Treasury publishes the greenbook which outlines the then current presidential administration’s revenue proposals, tax policies, job creation issues that relate to the Department of Treasury and other related fiscal and policy issues. The greenbook is scrutinized by tax pundits, politicians and others for what it contains, but what it does not contain is also important. Within the 2013 greenbook, there was an obvious lack of discussion of 26 U.S.C. § 2704, which mandates how the law measures the value of certain family controlled entities for estate and gift tax purposes. Some observers took that to indicate that the IRS plans on amending the regulations pursuant to this statute. This suspicion was validated when an official from the Department of Treasury spoke at an American Bar Association, tax section meeting in May, 2015. She indicated that a proposed regulation may be released as early as September, 2015. As of mid-November 2015 such regulations have yet to be published. This issue is of substantial import for estate planning throughout the nation. If and when a family business is transferred via an estate or even to a trust created by an owner of the business, it is likely be a taxable event, depending on the specifics of the transaction.

PASSING A FAMILY BUSINESS ON TO NEXT GENERATION