Estate Planning

May 1, 2013

Die Without a Will? Inheritance May Go to Government

Forbes recently reported on a unique case that illustrates what happens when one fails to conduct any NY estate planning and does not have close heirs to take an inheritance via default intestacy rules.

The article explained how a man named Roman Blum died in January of this year. A former real estate developer, Mr. Blum was worth about $40 million at the time of his passing. He was 97. Remarkably, for one with such wealth, Blum did not have any estate planning conducted–no use of trusts or even a will to designate final wishes and property distribution.

When one dies without a will special rules apply which include a ranking list of possible inheritors. In New York, for example, an estate is usually split between a spouse and children (with a special $50,000 addition to the spouse). If there are no children, then everything goes to the spouse. If there is no surviving spouse, then everything goes to the children. If one has no spouse or children, then everything goes to parents, and absent living parents, siblings.

April 29, 2013

Developments in Anthony Marshall Case – Brooke Astor Estate Fiasco

by Ettinger Law Firm

Celebrity estate planning complications and feuds are often used to illustrate basic planning principles or common problems. Perhaps none of those examples are as well-known, especially for New Yorkers, as the sad case of the estate of Brooke Astor. The legendary socialite and philanthropist died several years ago. Since her passing, a wide-range of claims were made regarding the distribution of her assets and criminal activity on the part of those responsible for her care and affairs in the later years of her life.

Astor reportedly suffered from Alzheimer’s at the end of her life–an affliction that similarly affects many New York seniors. Unfortunately, also like many others, it seems that her condition was abused by the very people who were supposed to look-out for her.

Astor’s son, Brooke Marshall, was criminally charged with exploiting his mother to funnel more money to himself. Marshall was ultimately convicted, along with a co-defendant, of illegally giving himself a $2 million “raise” to administer the estate. Claims also suggested that an amendment to Astor’s will in 2004 included a forged signature.

April 26, 2013

The DuPont Case, Mental Illness, and Wills

by Ettinger Law Firm

Residents are often warned to complete their estate planning–wills and trusts–before it is “too late.” Most assume that the planning is only “too late” if they die before getting it done. But that is a mistake. In many cases “too late” actually refers to losing the competency to create the legal documents. As a practical matter, it may even mean before one even has the appearance of mental health issues, because even a hint of problems may open the door to legal challenge from others.

Estate planning is about ensuring one’s wishes are carried out and maximizing the preservation of assets without controversy. Limiting that controversy includes completing the planning early and efficiently, minimizing the risk of problems down the road. Thought of in that way, “too late” is far earlier than simply “before you die.”

John duPont Estate

April 24, 2013

Retirement Planning & The President’s Proposed Budget

by Ettinger Law Firm

One of the challenges of estate planning is that some of the rules are constantly subject to change. A few of the principles are seemingly timeless, like deciding inheritances and determining alternative decision-makers in the event of disability. But the more sophisticated matters, usually involving minimizing tax liability, are frequently open to modification, providing complexity to the task of putting future plans into place.

For example, the tax benefits of certain trusts or the eligibility rules for New York Medicaid can all be altered by lawmakers on yearly basis. As a practical matter, those changes are most common in times like these–when budgets are stretched to the max and lawmakers are looking for ways to avoid cuts to programs without passing obvious tax increases. Often, when policymakers refer to closing “loopholes,” they are referring to various tax savings strategies or other aspects included in sophisticated estate planning. Local residents should look closely at the specifics of these “closing loophole” proposals when they are offered to determine if it may impact their own situation.

Retirement “Loopholes”

April 19, 2013

New Steps By Google Allowing Users to Name “Heirs”

by Ettinger Law Firm

Digital estate planning has attracted more and more attention in recent years as online assets become more central to our lives. On a legal front, the rules regarding inheritance destruction, and/or preservation of these online accounts remains unclear. That is because most rules are based on the terms and conditions of each individual social network or online program. For example, the process of taking down a Facebook page of someone who has passed away is not the same as taking down a Twitter account. There is little uniformity.

However, as the issues related to passing on access to these accounts grows, more social networking companies are working to enact different procedures and protocols to make the transition easier.

Passing on Google Account Data at Death

April 17, 2013

New Case: Inheritance Rights of “Adopted Out” Children in New York

by Ettinger Law Firm

A case recently came before a New York court that delved into a very unique inheritance issue. The case, Matter of Svenningsen involved the inheritance rights of “rejected” adopted children. “Rejected” is a harsh word, but refers to children who were adopted and whose adopted parents terminate parental rights. It is a rare occurrence, but various health issues or circumstantial factors may make such change in parental rights necessary in some cases.

The circumstances in the Svenningsen case are somewhat complex. Essentially, a New York family adopted a child, Emily, from China in 1996. The family had executed a trust in 1995 the had specifically included adopted children. A second trust was executed in 1996 that specifically named Emily. Sadly, the patriarch of the family died the following year, in 1997.

Eventually, Emily began attending a boarding school for children with special needs. Apparently Emily developed a close bond with those working at the school. As such, several years later, in 2003, Emily’s adopted mother agreed to terminate her parental rights under the assumption that Emily would be adopted by one of the director’s of her boarding school. No mention of Emily’s trust was provided during that second adoption hearing.

April 15, 2013

Obama Budget Proposal Calls for Changing Charitable Deduction Details

by Ettinger Law Firm

Last week we discussed the release of President Obama’s proposed budget. For estate planning purposes, one of the most obvious red flags in that proposal was a call for yet another edit to the federal estate tax. The President wants to raise the tax rate and lower the exemption level again, altering what was some thought was a more permanent fix agreed upon in the law passed in January.

But the estate tax is not the only aspect of the budget proposal which might affect long-term planning for New York residents. For example, the President is also calling for changes to how charitable contributions implicate tax matters. The possible change is being suggested in an attempt to increase tax revenues to plug budget holes.

The Future of Charitable Deductions

April 12, 2013

Federal Estate Tax — Back on the Agenda?

by Ettinger Law Firm

Earlier this week we touched on the fact that estate tax issues need to be on all New Yorkers’ radar, because the state tax kicks in at a far lower level than the federal tax. The federal rate was seemingly fixed as part of the compromise legislation that averted the “fiscal cliff” earlier this year. While any law can be changed, the passage of this legislation was assumed by most to signal some level of finality on the matter. Debate had raged for months (even years) about the exemption level and rate. The uncertainty was a challenge for estate planners, because it is more difficult to craft complex protection plans when the tax rules are a moving target

In that vein, regardless of one’s own opinion of the estate tax, passage of the compromise bill was a welcome relief–offering stability. But that stability may be short lived, as proposals about changing the federal estate tax have are already making their way back into national political discussions.

Here We Go Again

April 10, 2013

Don’t Forget: There is a New York Estate Tax on Top of Federal Tax

by Ettinger Law Firm

Much discussion at the end of last year dealt with the estate tax. As federal officials groped for a compromise to avoid the so-called “fiscal cliff,” details about the federal estate tax were one part of the negotiations. Democrats wanted it returned to levels during the Clinton Administration while Republicans wanted it eliminated altogether.

Just before the deadline, a law was passed which apparently settled some of the matters of contention. In so doing, it seemed to finally provide some permanence to the federal estate tax. The tax rate now tops off at 40% (a jump from the previous 35%) and begins on parts of the estate over $5.25 million. The exemption level is pegged to inflation, and so it will rise slightly each year.

With news of this new estate tax compromise (and its relatively high exemption level), many have pointed out that the federal tax is now only a concern to a small slice of the population. After all, the majority of residents will not die with assets over $5.25 million, and so estate planning to avoid that federal tax is unwarranted.

April 8, 2013

Wide Ranging Impact of Fiscal Cliff Deal on Estate Planning

by Ettinger Law Firm

Earlier this year we touched on the possible estate planning implications of the compromise law that averted the so-called “fiscal cliff” in early January. As with many of these issues, the full implications are hard to evaluate immediately, only playing out as planners get to work crafting options for clients. In the first few months of the year, many estate planning attorneys and financial advisers have done just that, getting a better understanding of how the altered legal landscape will affect common techniques to pass on assets securely and with minimal tax implications.

For example, an “On Wall Street” article last week explored a few of these issues, noting how the fiscal cliff deal actually has widespread implications. The main issue, claims the article, is that the apparent permanent federal estate tax will limit the need for many families to engage in complex maneuvers to avoid the significant tax bite. Bypass trusts are pointed to as a tool which may be less necessary because many families will fall well below the federal estate tax exemption level ($5.25 million, pegged to inflation). Yet, one must not forget that this permanently high estate tax level has no impact on estate taxes levied by the state. New Yorkers must still pay that state rate, and it hits far lower than the federal level. In addition, these sorts of trusts are often crucial in addressing other risks, like divorce, remarriage, etc.

The article also touches on potential effects on charitable giving. The fiscal cliff law also calls for a phase out of itemized deductions and personal exemptions for all income over $250,000 annually ($300,000 for couples). This may alter some previously common charitable planning. Though the article points out that it may make charitable remainder trusts more common. These trusts are particularly useful for gifting assets which will appreciate, allowing the defference of capital gains taxes.