Trusts

October 5, 2011

Planning Required to Make Smart Charitable Contributions

Our New York estate planning attorneys have spent decades helping local families make long-term preparations for their estate. Legal and tax rules must be accounted for in all significant property transactions, even when one is giving money away. As a Wall Street Journal story this weekend explained, it can actually be quite challenging to properly plan for a charitable gift. If professionals are consulted, residents can often leave money in ways that provide significant tax breaks, particularly if they account for the ever-changing estate tax rules.

When conducting New York inheritance planning, many community members indicate an interest in leaving assets to support a favorite cause, like helping the less fortunate or nursing the arts. When the gift is made at death it is known as a “bequest.” A bequest lowers the money subject to estate taxes; however, donors cannot enjoy an income tax deduction for the gift if it is made at the time of death. If a gift is given while the individual is alive then an income tax deduction can be taken. Yet, lifetime charitable gifts are irrevocable and an individual cannot change their mind about the donation as they might be able to if they were planning a bequest.

Of course, many residents leave funds to charity for reasons beyond taxes, but there is no reason why community members should not take stock of the tax consequences when planning to give money to these causes. In 2010, the year when there was no federal estate tax, charitable bequests increased by nearly 17%. That year donations totaled just shy of $23 billion nationwide according to information published by the Giving USA Foundation.

October 3, 2011

New York Inheritance Issues in Second Marriages

by Ettinger Law Firm

Proper Inheritance planning requires much more than simply filing in the blanks on standardized forms. That is why experienced New York estate planning attorneys are essential advisors when local community members are evaluating their long-term financial preparations. Proper planning of these affairs requires consideration of unique family dynamics and an ability to anticipate potential issues before they actually arise. Anticipating possible conflict and accounting for it ahead of time is one of the main benefits that local residents can derive from creating and updating their New York estate plan.

For example, local families often have concerns about the effect that a second marriage will have on their inheritance plans. Many emotions are at play when a parent remarries after a divorce or the death of a spouse. As a CNN story this weekend explained, adult children commonly express apprehension when a parent re-enters the dating pool or indicates a wish to get remarried. Financial concerns are occasionally the cause of that trepidation. One woman who lost her father several years ago explained, “I want my mom to be happy, but how do I know that her suitors don’t have ulterior motives? I’m concerned that she’ll jump into another marriage and her second husband will take advantage of her financially.”

Conversations between loved ones about these issues are frequently thorny and often result in strained family relationships. On one hand, as the article author notes, a parent is free to use their finances as they see fit. After all, an inheritance is not an entitlement but a gift. However, adult children need not stand by if a parent is genuinely making damaging financial decisions or is legitimately being taken advantage of–elder financial exploitation is a common problem. Therefore, in these situations an experienced, trained professional can often provide a crucial perspective to balance the competing concerns.

September 15, 2011

When Considering Inheritances, Baby Boomers Fear Children’s Financial Acumen

by Ettinger Law Firm

Professional inheritance planning continues to rise in popularity among all classes of society as more and more seniors reach retirement age and come to appreciate the legal tools available to help in their planning efforts. Interestingly, a new poll discussed in Time magazine this month explains that many of the newest retirees from the Baby Boomer generation have doubts about their heirs’ ability to manage an inheritance. This is a common concern, and our New York estate planning lawyers work with many clients in this area who are specifically tailoring their plans to account for it.

The new survey found that only 49% of millionaire Baby Boomers indicated that leaving money to their children was a priority in their estate planning. When analyzed closely it is clear that the polling figures do not indicate that these parents have stopped worrying about the well-being of their children. Instead, many of them have deep concerns about the effect that a large inheritance will have on their offspring. For example, one-fifth of survey respondents felt that their children would simply squander the inheritance and a quarter of these seniors thought that receiving too much money would only make their heirs lazy. Perhaps because of this, a majority of these retirees admit that they keep their children in the dark about their exact net worth so as to prevent expectations about what will be left behind.

Fear about the financial sense of children has long been a concern for local community members. For decades, attorneys at our New York elder law estate planning firm have worked with residents who were worried about a family member’s ability to handle money. Fortunately, tailoring inheritance plans to account for spendthrift children is exactly a benefit one derives from seeking professional help in this area. A variety of trusts exist which allow parents to pass on the assets they feel appropriate to their heirs in a way that guards against their fears that the inheritance would be wasted, abused, or usurped by a non-relative.

September 6, 2011

Many Middle Class Families in New York Use Trusts in Estate Plan

by Ettinger Law Firm

One of our New York estate planning attorneys, Bonnie Kraham, Esq., recently authored an article that shares information on the increasing use of trusts in the estate plan of many local middle class families. The story was published in this weekend’s Times Herald-Record, and explains the various types of trusts that residents can use and the way that each holds and transfers property. Unfortunately, there remains a misconception among some local community members that creating a New York trust is a project only for the wealthy. That is not the case. As attorney Kraham notes, there has been a “living trust revolution” over the past few decades where many middle class families have discovered the ways in which these legal entities can be used to avoid probate, save taxes, and protect assets.

All trusts begin with a written agreement, and each includes at least three necessary parties. These include a “grantor” who creates the trust, “trustee” who manages the assets, and “beneficiaries” who use the trust assets. For example, the three roles may be filled when a senior couple creates a trust (grantors) to be managed by their lawyer (trustee) to provide for the couple’s children (beneficiaries). The three roles need not be filled by different individuals, however. Often a grantor will also act as beneficiary, so that they can still use those assets while they are alive. Following the written agreement which establishes the trust, assets are transferred into the entity by way of “retitling.” This involves changing the name on accounts, mutual funds, and stock certificates to the name of the trust, and transferring title to property to the trust.

The two main types of trusts are testamentary and living. Testamentary trusts are created only after an individual’s death pursuant to their will, while living trusts are created while a grantor is still alive. Living trusts are an increasingly common way for many families to transfer assets at death. Among other benefits, a living trust can help families avoid probate, saving time and expense in closing the estate.

September 1, 2011

Questions Remain Regarding Rights of Posthumously Conceived Children

by Ettinger Law Firm

Last month we shared information on the unique estate planning issues related to the inheritance rights of children conceived posthumously. A growing number of community members are cryopreserving their gametes for use through in vitro fertilization. This is a particularly popular process for those diagnosed with cancer and undergoing chemotherapy and for those in the military who are leaving on a tour of duty. The Centers for Disease Control and Prevention report that assisted reproductive technology accounts for only 1% of yearly births in the country. However, the overall use of the technology is rising dramatically. The total number of these births doubled in the last ten years, rising to 60,190 in 2009.

The expanding use of cryopreservation has presented novel legal questions about the rights of children conceived after the death of one of their parents. The inheritance rights of these children remain unclear, particularly as they relate to government benefits and trust participation. Several high-profile legal battles have ensued in the last few years as parents fought with the U.S. Social Security Administration to have their children receive their former partner’s benefits even though the child was conceived after the partner’s passing. The Social Security Administration usually defers to state rules regarding parentage and inheritance rights. Currently, most states only grant inheritance rights to children born after the death of a parent if they are conceived naturally.

Yesterday, Fox News reported on an appellate court decision in one of those cases where the court found that an 8-year-old girl born two years after her father’s death was not entitled to his Social Security benefits. This decision overruled a lower court ruling in the same case which had found otherwise. The appellate judges declared that the federal government’s interpretation of the state law was reasonable, and therefore the denial of benefits was upheld. The resolution in this case and several others like it lead many observers to believe that the United State Supreme Court will be forced to decide the matter soon.

July 15, 2011

Careful Consideration Required Before Selecting A Trustee

by Ettinger Law Firm

A trust is a centerpiece of many New York elder law estate plans. Trusts are usually superior to wills for transferring assets at death. Trusts are preferred because they can be used to avoid probate, reduce estate taxes, protect children from earlier marriages, and more. Essentially these entities remove assets from a personal estate and place it in a trust so that more wealth can be given to beneficiaries.

Transferring assets to a trust means that a trustee must be designated to manage the entity and its assets. Therefore, selecting an appropriate trustee is an important aspect of the New York estate planning process. A Yahoo Finance article this week discussed the role of the trustee and the need to give careful thought to trustee selection. Those who create a trust usually chose between an individual trustee (often a friend or family member), a professional trustee (like a bank, lawyer, or trust company), or a combination of both.

Trustees have a fiduciary duty to the beneficiaries of a trust, and so it is vital to select a trustee who can fulfill that duty. Trusts require the trustee to appropriately balance the needs of a current beneficiary while preserving capital for future beneficiaries. In addition, trustees must be able to file annual fiduciary returns. While friends and family members will usually try to act in the best interests of beneficiaries, they are often inexperienced with trust management. Difficulties often arise when family issues conflict with the best interests of the beneficiaries. Also, a trust may be held in limbo if an individual trustee dies or becomes incapacitated in some way.

July 11, 2011

Instructions Should Help Family Find the Information They Need

by Ettinger Law Firm

This weekend the Wall Street Journal published a helpful article discussing some important aspects of New York estate planning that many residents overlook. Besides creating documents like wills and trusts, the best preparation also includes clear instructions that help family members understand where and how they can access the information they need when a loved one passes on.

As our New York estate planning lawyers frequently advise, “letters of instruction” are often forgotten components of the process. These letters can include information such as online user names, passwords, military discharge papers, PIN numbers, and similar material. They are often kept in a safe-deposit box or with an attorney so that family members have access to bank accounts, can keep up with online payments, and perform similar tasks if necessary.

In today’s high-tech world, residents may also want to leave information related to their wishes regarding their online presence. This may involve social networks like Facebook and Twitter, blogs, or other internet sites in their control.

June 27, 2011

Marriage Equality May Change New York Estate Planning Needs for Same-Sex Couples

by Ettinger Law Firm

Late Friday evening New York Governor Andrew Cuomo signed a bill that had just been passed by the state Senate giving same-sex couples the right to marry in New York. The signature was the culmination of an intense week of politicking at the statehouse which drew national attention. Passage of the measure will have important consequences for the lives of same-sex couples in our area, not least of which include effects on those individuals’ New York estate plans.

New York became the sixth state to allow these unions and in doing so provided same-sex partners with a variety of financial benefits and legal rights. Before having the option to marry, many gay couples conducted unique planning in order to protect their assets, provide for their loved ones, and plan for their futures. With passage of the gay marriage law, those couples may rightly wish to reevaluate to understand how marriage rights will affect their previous New York estate planning efforts.

This weekend the New York Times blog discussed the way that the measure will alter the financial lives of gay couples who decide to marry. For example, those with large estates may now benefit from the unlimited amount of assets that New York allows their spouse to transfer at death. Previously, those individuals were subject to an estate tax on all gifts over $1 million. The federal tax will not be affected.

Also, couples may now file joint state income tax returns. Depending on the income level of those individuals, this may either increase or decrease the couple’s overall state tax burden. However, spouses in gay marriages must still file individual federal tax returns.

Partners who had previously taken advantage of domestic partnership insurance will no longer be required to pay state taxes on those benefits (they will still owe taxes at the federal level). New York state employees will now be able to treat their spouses like their heterosexual counterparts, making them eligible for health insurance, pension survivor benefits, and other rights. In addition, same-sex spouses now have access to workers’ compensation benefits and the ability to bring wrongful death lawsuits on behalf of their partner.
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June 14, 2011

The Dynasty Trust May Keep Inheritance In the Family

by Ettinger Law Firm

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 8, 2011

Cost of Nursing Home Care Increases Nationwide

by Ettinger Law Firm

Few residents understand the often staggering cost of long-term care, such as a private nursing home, until they are faced with the dilemma first-hand. It is only when they or a loved one is already to the point of needing that care that many people first realize the expense of securing a spot in a quality nursing home. In fact, beyond dictating how assets will be dispersed later, gaining advice and planning preparation for future medical and caretaking needs is one of the most important parts of creating a New York estate plan.

The need for the preparation becomes clear once many realize the cost of long-term care facilities. The latest figures calculated in Genworth’s Cost of Care Survey were recently released showing that the median cost of nursing home care nationwide rose 3.4% last year–to $77,745. Of course, this is only an average from across the country. In our area many quality facilities charge much higher rates, around $140,000-$150,000 per year.

Those costs are much higher than the average family income in many American homes, meaning without proper long-term care planning some families are forced to use up a lifetime of assets to pay for the necessary costs. But if thought is given to these matters ahead of time, then options exists to reasonably provide for these expenses in a coordinated manner that protects family wealth.

For example, all of a family’s assets may be protected ahead of time with the use of a Medicaid Asset Protection Trust (MAPT). These trusts usually have to be created at least five years before the care is needed, so forethought goes a long way in ensuring a positive financial future for families in these situations. An even better option is the purchasing of long-term care insurance–which ultimately provides the most flexibility when seniors reach the point that they need extra care. With this insurance a loved one may have the assets for expensive home-care, without the need to move into a nursing home at all.

However, even if the MAPT and long-term care insurance options do not apply, other choices are available. The “Gift and Loan” Strategy allows one to save part of an inheritance from the costs that Medicaid would usually take while still ensuring that Medicaid pays for the care needed. It is not an ideal choice, but meeting with a professional to discuss its applicability is still much better than facing it alone without any assistance–a visit to a New York Medicaid attorney is invaluable.
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