Results tagged “New York trust lawyer” from New York Estate Planning Lawyer Blog

Federal Government Looks to Restrict GRATs

May 25, 2015,

The White House recently released its budget proposal for 2016, and one of the major aspects of the plan is to restrict the use and effectiveness of a common estate planning tool: grantor retained annuity trusts (GRATs). The administration has proposed limitations on the use of this estate planning technique in the past, but this is the first time that real change may be enacted in the way that people can use GRATs in their estate plan.

What is a GRAT?

A grantor retained annuity trust is an irrevocable trust that is designed to distribute assets from the trust with little to no gift tax attached. In order to properly establish a GRAT, the creator of the trust places assets into the trust that he cannot touch in exchange for receiving a small portion of those funds through annuity payments over a number of years. The distributions are kept just under the federal gift tax limit so that no federal taxes apply to the distributions.

At the end of the number of years that the GRAT is designed to run, anything that is left in the irrevocable trust is passed on to designated beneficiaries in either one lump sum or in trust. However, this only applies if the creator of the trust outlives the period of years that the GRAT is designed to run. If the creator dies before the GRAT ends, then the trust assets are considered part of the creator's estate.

Why Restrict GRATs?

The main reason why the federal administration wants to restrict GRATs is because the tool allows for the creator of the trust and the designated beneficiaries to receive the assets in the GRAT without paying any or very little gift tax. The wealth is accumulated when the assets in the GRAT appreciate at a higher rate than the IRS rate during the month that the GRAT is created. Because the IRS rate has been at historic lows, this estate planning tool is becoming more popular than ever as a means to transfer wealth without being subject to federal tax liability.

Any appreciation of the trust funds in the first month above the IRS rate can be transferred to the creator or beneficiaries at little or no gift tax. Currently, it is one of the best options for low risk, high reward wealth transfers in estate planning unless the government passes the suggested changes to the GRAT process. The government has estimated that it is losing millions of dollars every year in federal gift tax because of the current structure and use of GRATs.

The current proposal on the table would eliminate the ability to "zero out" a GRAT where the remainder of the trust is theoretically worth nothing. The proposal would require that any remainder interest in the trust be subject to gift tax. In addition, a GRAT would be required to have a minimum term of at least ten years; however, existing GRATs would be grandfathered into the rule.

The Right Tools for Retirement

February 6, 2015,

Just like you would not attempt a do-it-yourself project around the house without the proper hardware tools, you should not go into retirement without the proper estate planning tools. This means that you need to have the right planning vehicles and strategies in place that will ensure that you are receiving a paycheck or funds for decades into retirement. Thankfully, there is a basic estate planning toolkit that can help you get started on your retirement planning.

Realistic Budget

The foundation of every retirement plan is a realistic budget that plans for all incoming money from things like Social Security, pensions, and savings as well as plans for all outgoing expenses like basic necessities, medical care, and miscellaneous costs. This is not a tool that is created and forgotten; you should revisit your budget frequently to make sure that your finances are still on track.

If possible, try to think of all expenses to add to your retirement budget like annual insurance premiums and other infrequent costs. You should also have a slush fund to account for any expenses that may occur without warning, such as a medical emergency, housing repairs, or a new car in addition to any money that you plan on using to help family members.

Asset Allocation

Even before reaching retirement, you should start to reallocate assets within your portfolio to match your lifestyle. This typically means taking more assets out of risky ventures and investing them in assets that can give you sustained, long-term growth. This helps prevent against inevitable market declines, especially when you do not have an employer's paycheck to rely upon.

An Experienced Attorney

While many people are uncomfortable discussing their personal lives with a lawyer, retirement age is not the time to shy away from asking for help from an experienced attorney. An estate planning attorney can go over what you have already done to prepare for retirement as well as draft the necessary documents that ensure that all of your affairs are in place. An attorney can also give you advice about the proper time to take care of things like Social Security withdrawals and structure your estate in a way that minimizes taxes.

Up to Date Documents

Updating all estate planning documents is also a must. Like the budget, your estate plans should not be something that is created and then ignored. As life events occur, you should be reviewing and updating your estate plans accordingly. This includes all actual documents regarding your estate that could pass through probate in addition to any and all accounts that include a beneficiary designation.

A Non-Financial Plan

Finally, you should also draft a non-financial plan to keep you and your loved ones physically and mentally engaged in retirement. Many retirees do not contemplate how such a drastic shift in living can affect them, body and mind. A lot of people who reach retirement find themselves depressed or becoming coach potatoes when they do not have a non-financial plan in place for their retirement years.

Should You Establish a Trust?

September 18, 2014,

There are a lot of benefits to establishing a trust in your estate plan. It can eliminate the need for probate, keep your affairs private, and reduce the chances of issues arising among your heirs regarding their inherited share. However, creating a trust is a big investment that involves a considerable amount of time and legal fees that should not be taken lightly. Here are some factors to consider when deciding whether or not to establish a trust in your estate plan.

Factors in Establishing a Trust

· How much of your estate can you shield from probate?
One of the main advantages of a trust is being able to bypass the process of probate, which can be expensive and time consuming. However, not all assets are subject to probate. Jointly owned assets with a right of survivorship and beneficiary designated assets do not go through the probate process.

· Will you qualify for simplified probate?
If your entire estate is going to a spouse or the estate is small enough it may qualify for simplified probate. You can find out what the requirements are for your state's simplified probate here, or you can consult with an experienced estate planning attorney.

· How expensive is probate in your state?
The cost of probate varies wildly depending on the state. For example, California has one of the highest costs of probate, with attorneys' fees starting at four percent of the entire estate. Because the legal fees can be so high, it may make more sense to establish a trust.

· Do you own property out-of-state?
If you own property out-of-state you should consider establishing a trust. The property that is located out-of-state must go through that state's probate process or ancillary probate in addition to the probate process in your home state. Placing all of the property in a trust is a much easier and cheaper option.

· How private do you want your affairs to be?
Another downside of probate is how public the process can be. All details of your finances and final wishes are on the public record and accessible to anyone. Establishing a trust can protect your privacy and avoid public disclosure of your estate.

· Do you have a child with special needs?
You should definitely consider creating a special needs trust if you have a child that will need help physically and financially after you are gone. If you do not establish a trust for your child with special needs, the inheritance could disqualify them from receiving government support or programs.

· Do you wish to do something original with your estate plan?
If you want to add specific instructions for inheritance or do something creative with your estate, establishing a trust is the best way to accomplish it. If the estate goes through the probate process your heirs do not have to comply with your final wishes before gaining access to their portion of the estate.

· Do you have a taxable estate?
Currently, the federal estate tax limit is set at $5.34 million, and estates worth less than that are not subject to the tax. If your estate is worth more you should consider placing assets in a trust to shield them from state and federal estate taxes.

· What are the chances of issues arising within your family regarding inheritance?
If you are dividing your estate unequally, or if there is a possibility of infighting amongst your heirs after you are gone, you should consider creating a trust to reduce the chances of that occurring. You can stipulate that any heir fighting their portion is eliminated from the estate, and keeping your estate out of probate eliminates the chances of an heir using the public information to sue for a larger part of the estate.

The Estate of New York Musician Lou Reed

November 15, 2013,

Celebrity estate planning remains one of the most common ways that local residents are confronted with issues regarding wills, trusts, and other inheritance issues. As the old adage makes clear, the only certainties in life are death and taxes. It does not matter whether one is a billionaire, international celebrity, elementary school teacher, or anything in between. We will all face death and deal the the aftermath of a passing.

In that way, it is useful to take advantage of high-profile deaths as a way to again share information on the value of estate planning.

The most recent celebrity planning story to hit the headlines is that of famed musician Lou Reed. Reed died in late October in Southampton, New York following liver disease complications at the age of 71.

Reed first entered popular culture as a musician, singer, and songwriter for the ground-breaking band, the Velvet Underground. He then went on to some solo success, performing for many decades, right up until this very year. A native New Yorker, Reed is very much recognized for his attachment to New York City. Many of his songs were based around experiences and relationship he had in the city.

As discussed in a recent Express story, Reed took advantage of very favorable tax rules to leave the vast majority of estate to his wife. Recently, Reed's will was filed in Manhattan Surrogate's Court. Virtually all of his assets will be split between his elderly mother, sister, and wife.

The exact total of Reed's estate is unknown, though it includes sizeable cash, a penthouse in Manhattan, and a home in East Hampton. The estate also includes his copyrights and licensing for his music. Many entertainment stars own rights to their work which can prove quite valuable in the years (or even decades) after their death.

The will indicates that Reed's wife will inherit about 75% of the estate. In the will Reed also explained that, "It is my hope and desire, without imposing any legal obligation, that my said sister will use a portion of this cash bequest to help care for our mother, Toby Reed, for the balance of her life."

These details are common in many wills. It is reasonable for one to leave all or most of an estate to a surviving spouse--there are both practical and tax benefits to that arrangements. In addition, it is natural to indicate how one hopes a loved one will use a bequest, though simply laying out one's hope is not legally binding itself. In certain cases, more effective tools can be used to ensure that funds are used in a certain manner after a passing.

Back to the Basics: Trusts Are Not Only For the Wealthy

October 31, 2013,

One of the biggest misconceptions about general estate planning is that a "trust" is something that only rich families need to consider. This perception likely arises from colloquial use of "trust funds" to signify wealthy individuals who are living off substantial earnings preserved for them in a trust.

A better understanding of the legal tool takes away much of the mystique. The bottom line is that trusts are for everyone, serving as an incredibly useful option for middle class New Yorkers to protect assets accumulated over a lifetime for themselves and their loved ones.

The Basics
So what exactly is a trust? In simple terms, it is a separate legal entity that you "create" by drafting formal documents. This entity then "holds" assets, and you can designate many details about the use, distribution, and management of those assets in the trust. There are different tax and creditor protection benefits that this separation allows. Various types of trusts exist, each with their own rules about how they operate and whether they can be changed. An estate planning attorney can explain exactly what trusts are right for you and how they work.

So do you need a trust?

Because of the widespread benefits, virtually all New York families can derive value from the use of trusts. A Fox Business article on the subjects lists a wide-range of situations where a trust is crucial. Some of the most apt include:

1) When you have a blended family. Trusts allow much more flexibility to provide for the needs of spouses and children who themselves are not related. Assets can be protected for children while still supporting a spouse without the potential for conflict down the road.

2) When you want to pass on assets automatically. Probate is a costly, stressful, time-consuming process. Trusts do not operate like Wills; they can work without the need for specific court direction.

3) When you worry about creditors. Because a trust is a separate legal entity, creditors are not always able to just take assets inside the trust when they are owed. For those with children or other loved ones who may be in debt, a trust is a great tool to pass on assets without worrying about them immediately being snatched away by others.

4) When you may need long-term senior care. A Medicaid Asset Protection Trust (MAPT) is just one of many special trusts which can provide very specific protections for likely events in the future.

If you live anywhere in New York, please consider contacting our experienced team of estate planning attorneys to learn more and see how you can take advantage of a legal trust.

Criminal Charges for New York Estate Executor

October 16, 2013,

You have probably heard the term "Executor." Under New York law, this is the name given to the person (or trust company or bank) that is named in a Will and instructed to carry out the decedent's wishes as outlined in a Will. Executors are entitled to a fee for their work, and it is usually paid out of the estate itself.

While friends and family members are often named as executors, the required duties can be complex. They include collecting assets and paying debts, expenses, and taxes. The process usually takes months (if not longer) and involves tricky procedural chores. Making mistakes can result in significant personal liability to the Executor, and so it is important that no party is surprised by their duties or uncomfortable with the work.

Make a Careful Choice
One added reason to be careful about choosing an Executor is the fact that the position can be abused. For example, just last week the WCF Courier reported on the criminal case of a New York woman who faced theft charges as a result of her conduct while the Executor of a man's estate.

According to the report, the woman was named the Executor of Elias G. Grover Jr.'s estate. Grover Jr. was the former owner of a local construction company. The man died in 2007, and his Will was filed for probate shortly thereafter. However, while the matter was going through the process, the assets in his estate were seemingly wiped out.

At the same time, Grover's relatives (including 8 children) challenged the Will. They claimed that the woman and her mother unduly influenced the man to change an older Will, which was drafted in 1984 to exclude the children and leave everything to the two women (they were his caregivers). Eventually, the court agreed, throwing out the new Will. Sadly, by that time, most of the estate was already gone, as the Executor apparently spent over $140,000 on trips, casino visits, and gifts to others.

Recently, the Executor and her mother both entered pleas in their criminal cases--they will receive probation. Unfortunately, it is unlikely that either will be able to pay back much of what was taken from the estate, leaving the children out of luck.

This sad example is a reminder of the need to be very vigilant about all choices related to an estate plan, including the naming of an executor and trustees. An attorney with experience can identify possible issues to lower the risk that these sorts of crimes are committed in the case of your loved one.

Two Teens, a Custody Battle, and $1 Billion New York Trust

November 7, 2012,

DNA Info in New York shared an interesting story on the intersection of a custody dispute, estate planning, and a one billion trust fund waiting in the wings. The tale is a reminder of how money and the emotions following a death are a breeding ground for feuding and conflict among many different parties. It is always best to proceed with the assumption that strong disagreement will arise and to crafts plans and take those into account. Perhaps those worst fears won't materialize, but, if they do, they must be accounted for.

The situation in this story concerns two teens who are set to inherit the $1 billion inheritance from their great aunt's fortune--the New York philantropist Doris Duke. Duke was a tobacco heiress andspent much of her time in a $44 million Upper East side apartment. Duke obtained the fortune after the death of her husband--Lucky Strike cigarette magnante "Buck" Duke--and holding from her own mother's fortune. Upon Doris's death in 1993, the fortune passed down to her nephew with whom she was close--the father of the twins. Sadly, he died in 2010 at age 57 due to a methodone overdose. He had divorced the teens'mother in 2000 and was awarded custody at that time.

As one might expect, confusion broke loose following the father's death. The children's biological mother was given custody at first, though serious concerns have been raised about her ability to raise the children, with past reports identifying her as suffering from paranoia and post-traumatic stress disorder. The twins' stepmother has been trying to obtain custody of the children but has thus far been unsuccessful.

In this midst of this tragedy and custody fighting, the children's mother has been making strange requests of the $1 billion trust fund that the two teens will inherit when they turn 21 years old. The large fund is currently managed by JPMorgan with specific rules about how much funds are dispersed to the children while they remain minors. Recently, the mother has been making large, somewhat bizrre requests of the trustees, claiming that the children "feel like they are poor" because of the trustee's denial of many of the requests.

Right now the family received a range of monthly allotments, including $8,000 for housing, $1,800 for food, $3,600 to rent a car, $500 for gas, $2,000 for random monthly expenses, and pre-pad nanny service, tuition, medical insurance, and more. All of this, however, is apparently not enough and the mother has been making repeated calls for more money. For example, $6,000 was requested for a Halloween party, with the trustee providing only $2,800. At Christmastime, the mother asked for $50,000 to cover expenses for gifts and several trips. That request was denied.

In the midst of all of these financial requests, the trustee asked a Manhattan Court for guidance on how to respond to the financial requests. As often happens in these cases, the court has appointed an independent guardian to act in the children's best interest in the matter. It is still pending with the court.

See Our Related Blog Posts:
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Special Needs Trusts for New York Families

February 27, 2012,

Special needs trusts are helpful legal tools that allow parents and grandparents to leave behind assets to loved ones with special needs without damaging the beneficiary's ability to receive SSI and Medicaid benefits. Our New York estate planning attorneys know that in the past the best strategy for these families was often to disinherit relatives with disabilities. Otherwise, assets might be given to the individual which would disqualify them from receive certain federal benefits. Of course this seems a perverse effect and unfair effect for those with disabilities. The special needs trust fixes that. The trust is a device that allows a resident with special needs to receive an inheritance and keep their benefits, all without the state actually receiving less than it likely would otherwise. The trust funds can be used to pay for a wide range of services for the individual like clothing, education, entertainment, household goods, and similar costs. Families have much to gain from taking advantage of this tool.

An article this weekend from Lake County News explored these trusts, distinguishing between the various types of special needs trusts. For example, testamentary trusts and stand-alone special needs trusts are compared. Testamentary trusts are those which are established at the death of the benefactor. Conversely, stand-alone trusts are created while the one passing on the assets is still alive.

One key difference between these trusts is that the stand-alone special needs trust can receive assets from different individuals. Some families may have a few parties that want to help provide for their loved one with special needs. The stand-alone trust, because it is not tied to any single parties' will or trust, allows for these multiple benefactors. In addition, accessing the funds in the trust can be somewhat easier in a stand-alone special needs trust. That is because the funds are made available to the beneficiary in the stand-alone trust instantly upon the death of the benefactor. Conversely, in a testamentary trust, the assets must first need to be transferred into the trust following the benefactor's passing.

As all estate planning attorneys will explain, an important consideration in each of these financial preparation efforts is determining if trust assets can be reached by creditors. Because the stand-alone trust usually involves assets being transferred into the trust while the benefactor is alive and solvent, those assets cannot be reached by creditors. They are essentially removed from the benefactor's estate. Conversely, is the trust is not funded until the death of the individual, then the total assets are subject to creditor claims before they are transferred into the trust.

See Our Related Blog Posts:

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Family Disagreement Over Special Needs Trust Leads to Court Battle

Famous Feuds and New York Estate Planning Lessons for Every Family

January 30, 2012,

A Reuters story late last week suggested that while estate planning feuds of the famous usually involve millions, the principle issues are the same as those faced by all local residents. Every case must be evaluated individually, but the same main issues are found again and again. That is why our New York estate planning lawyers urge residents to visit with experienced professionals when making preparations because they have likely seen similar issues in the past and can help anticipate problems that might come up down the road. As this latest story explained "anyone thinking about wealth transfer faces the same issues: dysfunctional families, potentially unequal positions in the family business, perhaps multiple marriages with kids from each." This applies whether one has $50,000 or $50 million.

For example, second marriages often create planning problems. When crafting an estate plan, one must balance the needs of the second spouse with the children of the first marriage. If one doesn't do it, as the author notes, "you're basically buying a litigation case." For example, the longest estate litigation case of the last century was that of Anna Nicole Smith. She was a second wife of a billionaire investor. The children from the man's first marriage engaged in a prolonged battle to ensure that Ms. Smith did not receive any substantial portion of the man's wealth. The case was still not resolved with Ms. Smith herself passed away.

Family businesses also present common issues for those in all income brackets. Much family wealth is wrapped up in a business. Often some of the children participate in the business while others do not. This often creates significant estate planning issues regarding who gets what share of the business. One of the most well-known examples of this is that of the Koch family in New York. The patriarch had created a fortune after developing a new cracking method in oil refinement. However, upon his death the man's four sons engaged in a prolonged legal dispute over control of the business. As the article notes, "there are a lot of ticking time bombs in family businesses that creates litigation."

Many judges involved in these sorts of cases have explained that they believe estate litigation is on the rise. The fact patterns of the cases are consistent: second marriage issues, family business struggles, and similar situations. Those involved also report that the size of the estate is often of no consequence. Estate disputes are not only the concern of millionaires.

See Our Related Blog Posts:

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

June 27, 2011,

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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Estate Planning is Particularly Important for Families with Autistic Children

May 25, 2011,

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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