Trusts

August 6, 2013

GRATs – A Good Idea in this Low Interest Rate Environment?

A post over at Think Advisor last week provides some helpful insight into one financial and estate planning tool which might be appropriate for some New York residents. The tool is know as a GRAT – Grantor Retained Annuity Trust. As with many other trusts, one key purpose of the GRAT is to minimize tax liability, particularly for those with significant assets.

How It Works

The basic concept behind the GRAT is straightforward. Assets are placed in trust. The grantor (person creating the trust) then retains the right to receive fixed payments from the trust. Those payment can last either for a set period of time designated in advance or over the grantor’s life. At the end of the trust’s life the assets placed in the trust then fall to the beneficiaries.

August 2, 2013

Think Twice Before Disinheriting A Child

by Ettinger Law Firm

Families are complicated. No matter how well intentioned, virtually all family histories include some situations, dynamics, and incidents that cause immense disagreement, tension, stress, and frayed relationship. Virtually all families have some level of “dysfunction,” and no family is perfect.

Estate planning attorneys are acutely aware of this reality, as we worked with every manner of family on issues which must take into account their unique situations. Simply “splitting everything between the children” is not an ideal option for many. In certain cases parents have serious concerns about their child’s ability to manage an inheritance or the fairness of dividing things equally.

In the most extreme cases, some parents consider disinheriting a child altogether. This may be based on many different reasons: the child is estranged, they have significant means and do not need an inheritance, or perhaps they have drug and alcohol problems.

July 5, 2013

The Unanswered Questions Following the DOMA Decision

by Ettinger Law Firm

It will take some time for all of the implications of the Defense of Marriage Act (DOMA) Supreme Court decision to be fully understood. Over the past week we discussed a few of the most critical effects on estate planning for New York married same sex couples.

All those wondering about the grey areas that remain when it comes to the ruling should browse a recent Forbes article on that situation. It offers a helpful overview of the remaining question marks that will likely be shaped by political, judicial, and administrative actions over the next few months and years.

Most notably, there remain somewhat murky questions about what happens when couples move between states. This is not some isolated worry, as it is quite common for a couple get married somewhere and move away for any number of reasons: job, family, adventure, etc. Married New York same sex couples must be very careful about their situation to ensure they do not lose their rights upon leaving.

June 26, 2013

The 3 Generation Rule – Legacies the Last

by Ettinger Law Firm

You’ve built a nest egg after years of consistent work, prudent planning, strategic risk, a lot of focus, and a bit of luck. You want to retire peacefully and provide a legacy that will hopefully secure some degree of wealth for you family for generations to come.

But what are the odds of wealth making it decades (or even centuries) after you are gone? If history is any indication, most inheritances won’t make it long at all. Wealth surviving into the third generation only happens in one out of ten cases. As a recent Senior Independent story on the subject reminded, this principles takes the form of an often-used refrain: “Shirtsleeves to shirtsleeves in three generations.”

The story points out that over the course of their lifetimes about two-thirds of Baby Boomers in the United States will inherit about $7.6 trillion. Yet, those same individuals will lose about 70% of that wealth before passing any of it on to their own children or other relatives.

June 7, 2013

Estate Planning for Spouses: The Basics

by Ettinger Law Firm

This week Forbes published an article that outlines the basics of how to fund an estate plan for spouses. The story is a helpful reiteration of many of the basic issues that are common for all New York couples thinking about their future and trying to create security no matter what the future holds.

Helpfully, the story explains how estate planning is not the creation of a stack of legal documents that are signed and then stored until needed. Instead, the process is far more comprehensive and involves examination of all of one’s assets, wishes, legacy interests, elder care goals, and more.

As a general matter, on the estate planning side, one of the main goals is avoiding probate at all costs. That means that something like a last will and testament is inefficient. Instead, for most New York couples it is best to create a series of revocable living trusts which are far superior, allowing property to be protected and passed to others without the need for court intervention. After the trust is created spouses transfer property directly into the trust.

May 20, 2013

Discriminatory Old University Trust May Be Modified

by Ettinger Law Firm

Upon visiting an estate planning lawyer for the first time and learning about available options, many are surprised at the flexibility of different legal tools involved in the transfer of property. Far from simply doling out assets to specific friends and family members, one has immense control in deciding how those assets are used, when they are received, and what can trigger the loss of those assets. In this way, unique plans can be crafty which account for any number of family dynamics–multiple marriages, concerns about ex-spouses, children with special needs, relatives with poor money management skills, and more.

Similarly, the same flexibility often exists with gifts to charity. Many New Yorkers decide to share part of their assets with favorite non-profit causes. Those gifts can be one-time transfers or they may involve the creation of trusts for use in specific ways. For example, one of the most common charitable trusts involves setting up a scholarship fund to an alma mater to benefit future students. The trust may be funded with various assets, growing over the years and helping countless students.

Those creating these trusts can set many different terms on the gifts. Perhaps you’d like the funds to be used solely for those interested in pursuing nursing or for those who came from a certain disadvantaged background. In most cases, an attorney can help craft the legal arrangement so that your exact wishes are carried out.

May 7, 2013

NYT on the “Moving Target” of Estate Planning Today

by Ettinger Law Firm

The New York Times published a story last week that reminds residents of the complexity of many estate planning matters. The story reiterates two key principles when it comes to long-term financial and inheritance planning: (1) It is a critical task for families of all income levels; (2) It requires frequent pruning and updating.

Not a Problem for the Wealthy

There remains a misconception that estate planning is a concern only for the wealthy. If one does not have assets over the $5.25 million federal estate tax exemption level, then there is no need to worry about visiting an attorney or otherwise handling this inheritance details, right? As we often point out: this is a huge misconception. The truth is that estate planning deals with a wide-range of issues beyond the estate tax. From ensuring proper designation of life insurance policies and retirement accounts to using trusts to avoid probate and save on expenses, properly planning for transfer of assets is necessary for families of all income levels.

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 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 3, 2013

U.S Supreme Court Hears NY Estate Tax Case for Gay Couples — Decision in June

by Ettinger Law Firm

Last week is already being referred to as one of the most important in the history of the equality movement for gay and lesbian couples. That is because, as all news outlets reported on significantly, the U.S. Supreme Court heard two cases related to marriage rights for same sex couples. We have discussed these cases frequently over the last few months, one of them deals with the federal law known as the “Defense of Marriage Act” (DOMA) and the other involves a state referendum in California known as Proposition 8.

For New York estate planning purposes, the DOMA case has very obvious ramifications. The very plaintiff in the case is a New York resident (Edith Windsor) who is suing in her capacity as executor of her later partner’s estate (Thea Spyer). Windsor and Spyer were married in Canada and that relationship was legally recognized in New York. However, because of DOMA, the federal government did not recognize the marriage. The divergent recognition of the couple’s relationship was not merely a symbolic difference, it had very real legal impacts. Specifically, Ms. Windsor was forced to pay over $360,000 in estate taxes to the federal government that she otherwise would not have paid if her relationship to Spyer was recognized. It is a pretty cut-and-dry demonstration of how same sex couples are impacted because of a lack of federal recognition of their marriage.

Obviously, the Supreme Court’s ultimate determination of the constitutionality of the challenged portion of DOMA will affect the planning of same sex couples.