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

Parents Talking to Adult Children About Estate Plans

June 8, 2012,

Smart Money published an interesting story this week that lists several things that parents should tell their children about their personal estate plan. This planning is conducted for individuals, but it obviously implicates entire families. It is often challenging to balance the need for parents to make their own choices about these affairs while respecting the fact that many others, especially children, are affected by those decisions. Our New York estate planning attorneys work with many residents who are grappling with these questions--trying to understand what they should or should not tell their children about their plans.

The Smart Money article argued that, generally, parents fail to provide enough information to their children about these affairs. Not every detail necessary need be explained. However, the author argues that it is imperative to share at least four details: (1) Who is the executor/trustee, (2) What is the long-term care pan, (3) Is there a living will, and (4) Where are important documents located.

Who Is the Trustee?
Depending on the type of planning conducted, it may include a will and trusts. Executors and trustees must be named to administer the estate via the guidelines in these documents. Children are often asked to handle these matters--frequently with the help of professionals like a New York estate planning lawyer. Those children should be made aware of their role ahead of time.

Long-Term Care Plan
Assisted living and nursing home care costs are quite high. When a parent reaches a point where this care is needed, it usually falls onto children to ensure the appropriate care is obtained. As such, children should be informed of any plans that are in place to provide the care. Sometimes this might involve long-term care insurance, while at other times it could include plans to enroll in Medicaid.

Living Will
A living will--sometimes referred to as an advance medical directive--shares information about how an individual would like certain end-of-life medical decisions handled. This includes the extent of life-support measures desired. It is helpful for children to be aware of the content of this will ahead of time so that there is not confusion in the event of severe injury or disability.

Important Documents
Many adult children face added stress after a loved one's passing or disability when they cannot locate important documents or other materials. Children should know where bank account information, online passwords, and similar items can be located in the case of emergency. Not sharing this information often leads to unnecessary complications for already stressed loved ones.

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Misconceptions About Cost of Insurance

May 31, 2012,

Market Watch reported last month on new research that suggests that many community members are misinformed about the cost of certain types of insurance. As New York estate planning attorneys we understand the importance of life insurance policies in many local resident's financial planning efforts. Similarly, an important part of an elder law estate plan often involves securing long-term care insurance. Misinformation about the practicalities of these insurance options may leave local residents less legally and financially secure down the road.

The latest research focuses mostly on life insurance and was conducted by LIMRA and the non-profit group, LIFE (Life and Health Insurance Foundation for Education). Most surprisingly, the effort--conducted via surveys--found that consumers often overestimate the cost of life insurance. The confusion about the costs means that some families may have less protection than they need.

The research involved asking respondents to estimate the cost of different types of policies. The average estimates were four to seven times higher than the actual cost. For example, the annual cost of a 20-year, $250,000 life-insurance policy for a healthy 30-year old is about $150, but the average consumer guess was over $400.

Our New York City estate planning lawyers understand that buying more life insurance is not always in the best interest of local residents. However, there are times when it might be a prudent choice. Understanding whether it is a good fit requires an accurate understanding of the costs and benefits.

A 2012 "Insurance Barometer" study found that 66% of consumers admitted that they needed more life insurance. The main reason that they did not have it was because it was "too expensive." However, this latest research suggests that misconceptions about the cost may be influencing that assessment. The research found that women, minorities, and young adults were the most likely to be underinsured and misinformed about the costs of life insurance.

The CEO of LIMRA explained that it was the group's hope "that the broader industry will use these insights to help address the crisis of underinsurance this country faces."

At the end of the day, insurance needs must be based on each individual's very specific circumstances. Long-term care insurance, for example, will have very different costs depending on the age and health of the one purchasing the policy. Also, it is important to remember that insurance is one part of the overall financial and legal planning that should be conducted to ensure one's affairs are secure in the future.

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New Federal Bill Would Open More Estate Planning Options for Military Families

May 25, 2012,

Local families with disabled children often have added complexities when conducting New York estate planning. Parents of children with special needs have a clear desire to ensure that estate plans are in place so their loved one will have necessary resources throughout their lives--even after the parents are gone. Fortunately, New York allows parents to set up trusts which provide benefits to children without disqualifying them from Social Security and Medicaid programs.

However, it is crucial to work closely with an estate planning lawyer on these "supplemental needs trusts," because there are very specific rules about what can and cannot be purchased with the funds without risking benefit payments to the child. In particular it is usually best to make distributions from the trust "in kind" instead of direct cash payments to the child.

Military families with disabled children may have even more challenges when planning for the long-term well-being of their children. For example, as reported this week in Forbes, a military retiree can set aside up to 55% of his monthly stipend to provide for family members upon the retiree's death. Yet, those benefits are counted as income when given to other family members. If the one who receives it is a dependent child with disabilities then the income may risk the child's participation in Medicaid and Social Security Disability Insurance programs.

A piece of legislation has been introduced to help these families provide the resources to their children without forfeiting benefits: The Disabled Military Child Protection Act of 2012. The measure would allow retired servicemembers who participate in the set-aside program--known as the Survivor Benefit Plan--to transfer the disbursements into a special needs trust. A special needs trust is another name for the supplemental needs trust.

By allowing the military family to transfer Survivor Benefit plan funds into the trust, the families will be able to take advantage of the trust which provides resources to the child without compromising their program benefits. The military retirement benefit payments would not be considered an asset that counts toward the child's qualification for Social Security or Medicaid. Instead, the resources can be used to supplement program support--the same rules about "in kind" payments would apply.

The bill is being pushed by the National Military Family Association. The measure has been introduced in the U.S. House of Representatives. Considering that this is an election year, it is unclear how much progress will be made on any legislation in the coming weeks and months. However, the bill does not invoke much of the partisan division of other legislation, so it might stand a chance of making it out of the Congress and signed into law.

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Supreme Court Rules on Survivorship Benefits in Posthumous Birth Case

May 23, 2012,

We previously discussed the Supreme Court case Astrue v. Capato. At root in the case was the issue of whether or not children conceived after the death of a parent are entitled to federal survivorship benefits. It is important to note that this refers only to those whose actual conception occurred following the passing, usually using frozen sperm that was saved while the parent was still alive. While representing a relatively small group of children, our New York City estate planning lawyers know that these sorts of techniques are actually growing in popularity. Cancer patients and military servicemembers are the most likely to take advantage of this option.

The father of the children that sparked this case had his sperm frozen after being diagnosed with cancer in 2000--he passed away in 2002. Not long after his passing, his wife became pregnant with twins. After their birth she applied to the U.S. Social Security Administration for survivorship benefits. The agency denied the claim, sparking a lawsuit.

The district court sided with the SSA in denying the claim because application of the state intestacy laws would not have allowed the children to recover. On appeal, the U.S. Court of Appeals reversed. The U.S. Supreme Court agreed to hear the case and arguments were made in the middle of March.

This week the nation's highest court issued its opinion in the case--reversing the U.S. Court of Appeals and siding with the district court. In other words, the decision agrees with the Social Security Administration, allowing them to deny benefits to the children conceived after the death of their father. Estate planning lawyers understand that this decision will need to be taken into account when families who may be in this situation conduct long-term financial planning.

The ruling holds that the Administration is free to interpret the Social Security Act to allow benefits to children only if those children could inherent from a father under state intestacy laws. The Court found that this reading of the law better matched the purpose of providing support to those who were supported by the deceased wage earner during his or her lifetime.

Court observers noted that there seemed to be genuine disagreement between the justices during the arguments on this issue. However, those disputes must have been worked out, because the final decision was a 9-0 opinion with all justices in agreement.

For local families, this ruling means that a genetic link to a parent is not necessarily enough to trigger Social Security survivorship benefits. This should be taken into account when conducting estate planning or when deciding whether to take advantage of new assisted reproduction technology.

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U.S. Supreme Court Hears Arguments on Benefits for Posthumously Conceived Children Case

Questions Remain Regarding Rights of Posthumously Conceived Children

More Options to Account for Animals in Estate Planning

May 21, 2012,

Many senior residents have concerns about outliving their beloved pets. That concern can be met as part of a thorough New York estate plan. Our state allows residents to create "pet trusts" that work just like regular trusts. Individuals can transfer assets into these entities with the funds to be managed by a trustee (or multiple trustees) to arrange proper care for the animal for the remainder of their lives.

While trusts are a helpful way to account for the long-term care of pets, a pet trust may not be the only option. Our New York elder law estate planning attorneys also know that some additional programs exist to help residents--particularly seniors--create alternative care arrangements for their dogs, cats, and birds. A recent Business Insider article discussed some special programs that animal shelters have set up to help care for pets after a senior dies.

The article shared the story of an 84-year old woman who adopted a dog from a local shelter a few years after her husband died. The companionship of a trusted dog or cat has long-been shown to provide significant health and well-being benefits to seniors living alone. The woman in this case had concerns that she might not outlive her new pet. The dog was only six years old, and as a Shih Tzu mix it was expected to live for many years ahead.

To account for her concerns, the woman enrolled in a special program through the shelter. In exchange for a certain donation to the "no kill" shelter, the facility guaranteed that it would take care of the animal throughout his life.

This was a simple way for the senior to gain the peace of mind of knowing that a plan was in place for her animal friend for the rest of his days.

Yet, that sort of pet estate planning may not be for everyone. For one thing, only certain shelters have such programs in place, and many of them only allow one to participate if the animal was adopted from the shelter itself. In addition, many residents do not enjoy the idea of their pet living out their years in a shelter. In those situations a pet trust likely remains the best available option.

Provisions can be made in a will to pass on ownership of an animal to another. However, the problem with will transfers is that they place no obligations on the individual who receives the pet. There are no guarantees that the person will keep the animal or ensure that the pet is properly cared for. Trusts provide much more accountability. They also avoid the probate process so the new caregiver can take ownership of the animal immediately without the limbo period while the court process works itself out.

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New Yorkers Worry About Outliving Their Retirement Funds

May 17, 2012,

The economic recession of 2007 and 2008 hit many residents quite hard. Retired and those near retirement in New York were often hurt hardest as the values of many assets were decimated. Our New York estate planning lawyers appreciate that fears about outliving one's money are very real for thousands of local residents.

Even without the current economic challenges, the process of figuring out exactly how much money one will need in retirement is inherently speculative. The U.S. Social Security Administration explains that a 50-year old man today is expected to live to age 82; for woman the average life expectancy is 85. Younger generations are expected to have life spans averaging 90 or 100 years. That is why figuring out ways to survive financially for the long-term is daunting for everyone, not just the retired or nearly-retired.

No matter what way you slice it, retirement planning is intimidating. That is probably why the latest research indicates that only 13% of Americans are on track to meet their retirement goals.

Last week Next Avenue published an interesting article that shares some tips to help ensure you do not outlive your money. Expectedly, the first suggestion is to act as soon as possible to put a retirement plan into place. The details of the plan will be different for everyone, but it must include consideration of a range of issues: do you have chronic health concerns; do you want to work in retirement; will you need to support other family members; and similar questions.

In addition, retirement planning requires one to think long and hard about what they truly want to do in their later years. Retirement doesn't necessarily mean not working--it often means simply having the freedom to make your own choices about when and how to work.

The story suggests that it is important to have professional help from an estate planning lawyer, financial advisor, and perhaps tax experts. These individuals will be able to share information on more complex issues that must be considered, such as coming up with realistic projections about monthly retirement needs, total savings requirements, and the best tax saving strategies. In the past, financial planners often used the rule of thumb that one could withdraw 4%-5% of their investment portfolio each year without worrying about running out of money. That rule of thumb is less applicable in today's economic environment, and so experts must be consulted to provide specific advice about how these money rules will play out today.

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Do Not Let Long-term Care Destroy Your Retirement Planning

Ettinger Law Firm Attorney Shares Terminology of Elder Law Estate Planning

Not All Children Treated Alike

May 16, 2012,

Two of the most common claims local seniors give for failing to visit with a New York estate planning lawyer are:

(1) I do not have much wealth, so I don't need fancy planning.
(2) I just want my children to split everything and make decisions together.

Neither of these situations actually makes elder law estate planning unnecessary.

For one thing, this planning involves issues that affect everyone, regardless of how many assets they have. Keeping their affairs out of the courtroom, saving on taxes, ensuring family members won't have complex paperwork to deal with, saving costs on long-term care, preparing for alternative decision-making in case of disability, and similar issues shouldbe a concern to everyone--not just the rich.

In addition, assuming that everything about the planning should involve splitting things equally between the children may not be appropriate. That doesn't necessarily mean that all the children will not receive the same inheritance, but allocating assets is just one part of the New York estate planning effort.

For example, the plan will likely require naming an executor to handle various affairs after a passing. While it is possible to name all the children, it is usually best to name only the one who is best with these sorts of management responsibilities. The duties of the executor are not only confusing, but they must be handled at the most stressful of times. Forcing children to decide all of these issues jointly is setting them up for even more drama. In many cases, in fact, it may be appropriate to choose a third-party to take this role, like a trusted friend or professional.

It might also be appropriate to treat children differently in the form of their inheritance. For example, even though one wants to split an inheritance equally, it is rarely as easy or simple as writing checks for equal amounts to each beneficiary. Instead, it is often necessary for each child's specific situation to be considered. Children with special needs are usually best served by receiving an inheritance via a special needs trust, instead of outright. Similarly, if a child has substance abuse problems or otherwise might have many creditors, it is often far superior to leave the child an inheritance via trust.

At the end of the day it is impossible to know for sure what strategies will be best in your situation without first talking to a legal professional about your family. In virtually all cases there is a benefit to planning ahead. Leaving issues to random intestacy rules and the probate process is more costly, time-consuming, and stressful.

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Clumsy Estate Planning: Transferring A House to A Child

May 14, 2012,

Some local residents might be tempted to come up with short-cut methods of New York estate planning. Unfortunately, many of these efforts not only fail to work as intended, but they may actually lead to many unintended consequences. For example, some senior residents may be tempted to protect their family home--often their largest asset--by transferring ownership of the home to an adult child. There is a misonception that this is a smart way to protect the home from potential long-term care costs, save on estate taxes, and avoid probate.

While this step is well-intentioned, it is crucial that local families understand the serious risks of this move and the superior alternative methods of accomplishing the same goals.

A Huffington Post story this week shared a cautionary tale of one senior that took this step, only to learn of the unintended consequences far too late. An adult daughter and her family moved into the elderly man's home after the man's wife died. Eventually, for the purposes mentioned above, the senior transferred ownership interests in his house to his daughter. However, not long after this step, tragedy struck--the adult daughter died unexpectedly. The 34-year old had not conducted any estate planning--she did not even have a will.

Under intestacy laws in the state, all of the daughter's property was split between her husband and her 4-year old son. As the minor child's parent, the son-in-law effectively became sole owner of the home in which his father-in-law lived. Eventually, the son-in-law began dating again and decided that he did not like his father-in-law living in the same home. He asked the senior to find other living arrangements. There was little that the elderly man could do.

Even though this chain of events might seem remote, similar situations occur more than many might expect. When assets are transferred to children, those assets are exposed to the adult child's vulnerabilities, including things like divorce, bankruptcy, and judgment creditors.

In addition, home ownership transfers come with other complications. For example, protecting assets from long-term care costs is rarely as simple as transferring title to a child. New York Medicaid has a "look-back" period, and so if the transfer occurred within five years of the senior's application for program participation, there may be a penalty. Also, all transfers may have gift tax implications. Failure to take those implications into account can be troublesome.

Each New York City elder law estate planning attorney knows that local residents are almost always better off when they have professional help with these issues. Various trusts can be created to accomplish the same goals--saving taxes, avoiding probate, protecting assets from healthcare costs--without the risks.

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Gary Coleman Estate Feud Continues--Rocky Relationship Made Public

May 8, 2012,

TV Star Gary Coleman died unexpectedly nearly two years ago in May 2010. He was only 42 years old. Coleman had some previous estate planning measures handled, because his former manager was apparently named as executor and beneficiary of his estate as early as 2005. However, the plan does not seem to have been updated in any way in the intermediate five years, even though many changes took place in his life.

This has led to an on-going feud that continues to drag out under the public eye--a reminder of the need to update estate plans and the value of privacy that these plans provide.

In 2005, Coleman met a woman, Shannon Price, on the set of a movie. The two began dating and were married about two years later. However, the marriage was apparently a rocky one, and the two divorced less than a year after the wedding. The couple remained living together after the divorce. In fact, it was Coleman's ex-wife who discovered that he had fallen in the home in 2010. And it was his ex-wife who made the decision to take Coleman off life support after suffering a severe head injury in the fall.

Now Ms. Price is engaged in a very public dispute with Coleman's former manager for control over his estate. Our New York estate planning lawyers understand that situations like this--with possible ambiguities in the legal documents--often lead to prolonged estate battles. Failing to update documents to account for life events, like marriage and divorce, remain one of the most common planning mistakes. Many often assume that there will be plenty of time to handle those details later, but no one knows for sure when the documents will be necessary.

The Coleman case is also a reminder of the value of privacy that comes with estate plans that use tools like trusts to avoid probate and keep matters out of the public eye. One doesn't have to be a celebrity to desire keeping unflattering details or disagreements about one's life private. However, the legal proceedings related to these issues are almost always public matters.

For example, the Washington Post reported on a recent hearing in the case where details about Coleman's rocky relationship were made public. The former manager seeking to gain sole control over his estate claims that he and his ex-wife frequently fought and that Price was physically abusive to Coleman. Allegations were also made that the ex-wife treated the TV star like a child--walking him around by his wrist. A former neighbor testified that the former couple's home was a mess.

No matter what the truth, it is likely that Coleman--like anyone--would have preferred not to have all of these unflattering details made public even after his passing.

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Passing On Religious Values at Death

May 4, 2012,

A New York elder law estate plan usually includes a range of features, from a trust and pour-over will to a Power of Attorney and Health Care Proxy. Yet, no two plans are identical. While inheritance, retirement, and long-term care issues are common to all, the exact way to accomplish those goals depend on one's situation, perspective, and values.

For example, religious belief can have very obvious implications on some of these issues. End-of-life decisions delineated in a living will reflect an individual's personal perspective on advanced life support measures--often guided by a particular faith. In some case an advanced medical directive might include a clause that indicates such end-of-life decisions must be made by an individual with a particular religious perspective--perhaps an Orthodox rabbi with an expertise in Jewish law.

Religious traditions and inheritance issues are usually the most controversial way that one's faith can affect their estate plan. Many families have individuals with varying kinds and degrees of religious faith. This is often a recipe for feuding for a family when religious issues are involved in how assets will be dispersed. Often there are few easy answers.

The most conflict-ridden of these issues relates to parents who wish their children to marry someone within the tradition. These parents often seek to disinherit those who marry outside the faith. Disinheritance on these grounds may lead to family divisions and costly legal fights. That is why it is important to talk with experienced professionals about these concerns to be made fully aware of one's options and the potential ramifications of certain actions.

Clauses in inheritance documents that hinge on marriage decisions by heirs have been upheld in many courts so long as they are not deemed to encourage divorce. Yet, one purpose of planning is to account for possible legal challenges before they occur to hopefully prevent them altogether. One common alternative that may be less divisive is to leave assets to heirs in trust with a trustee given broad criteria to make distributions. In that way, religious conduct may play a role in the inheritance while allowing special circumstances to be taken into account.

In addition, our New York estate planning lawyers often advise clients on the benefit of crafting an "ethical will." These wills are not legally binding but instead are exercises undertaken by thinking about one's overall legacy. An ethical will is often given to a family while one is still alive. It acts as a way to pass on the values, wisdom, and perspective gained over the course of a lifetime. Quite often an ethical will shares morals and lessons rooted in the author's spiritual faith. It is yet another way for one to pass on those faith-based beliefs to loved ones.

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New York Estate Planning Can Address Religious Goals

Filing Taxes After Death

May 3, 2012,

Most discussion about taxes and death involve the "estate tax." This is a tax imposed on certain assets usually given to others as an inheritance by a deceased individual. However, after a passing there are still other tax issues that surviving family members have to deal with, even if estate taxes are not a concern. For example, Kiplinger News published a helpful story last month that discusses the federal income tax issues faced after a death. The IRS demands a final accounting--an added stress for families dealing with an already stressful situation.

A final income tax return must be filed after one's passing. This task usually falls to an executor or administrator of an estate. However, if none are named then a surviving family member must deal with it. Figuring out what income needs to be included on that final tax return is not easy. Depending on when income is earned or received it may be included on the deceased's tax return or instead taxed as part of the estate. For example, interest earned on accounts is only considered income on the personal tax return up to the date of the passing. The interest that accrues after that date is taxed to either the beneficiary or the estate.

In general, actual monetary inheritances are not subject to the federal income tax. However, the article highlights one major exception--funds in IRAs, company retirement plans, like 401(k)s, and annuities. These funds are treated as "income in respect of a decedent" and taxed to the heir. Then again, Roth IRAs and Roth 401(k)s are an exception to the exception, with unique rules all their own.

It is easy to see how these tax issues can get quite complicated very quickly. Depending on other assets owned by the deceased, many other complex issues might arise when filing the last federal income tax return.

Ensuring these taxation and other "paperwork" issues are handled as smoothly as possible following a passing is one of the key goals of all New York estate plans. Families should be able to go through the grieving process at their own pace and in their own way. Worries about tax issues should not be an added stress. In our area, families are well served by visiting with a New York estate planning lawyer to ensure that they will have professional support throughout the entire process.

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Gifts & New York Estate Planning

April 17, 2012,

Passing on wealth to subsequent generations is a crucial part of New York elder law estate planning. At times, giving assets to others as a gift may be an important part of that strategy. While giving a gift may seem like a straight-forward step, in the overall estate planning process it comes with various complications. Tax consequences are at the heart of gifting, and so it is vital to understand how gifts fit into an overall asset transfer plan.

Giving gifts to others is one helpful way to lower a taxable estate. After all, if assets are given away while one is still alive then the total value of one's estate at death will be lower leading to a smaller tax burden. If an individual planned on giving the asset away at death anyway, why not give it away while alive to save on taxes.

However, it is not necessarily that easy. For one thing, there are limits to what can be given as a gift tax-free each year. Under current law, transfers up to $13,000 per year per person are tax-free. Married couples can pool their exemption and give $26,000 to a person each year without paying taxes. Over a lifetime, the gift tax exemption is connected to the estate tax exemption. Right now the lifetime exemption level is $5.12 million. In other words, currently an individual can give away $5.12 million total without paying taxes while alive and the total amount given away will be applied to the estate tax exemption level at death for estate tax purposes.

In addition, there are some transfers that are always exempt from the gift tax. Gifts to spouses, academic institutions, and medical care providers often escape the tax. Transfers to political organizations and charitable organizations are also exempt.

Our New York estate planning lawyers often help clients figure out if gifting is a helpful part of their own planning process. It can become a complex determination. Sometimes even figuring out the value of the gift can be tricky. Real estate and antique gifts must be appraised. Stock values are an average of the high and low price on the day that the stock is given away. The value of a bond is the present value of its future payment.

In addition, some transfers that might seem to be gifts are not. Most notably, "future" gifts generally do not apply and are fully taxable. For example, if a property is gifted to another but with restrictions on when that property can be used for a period of time, then the gift may not apply for the gift tax exclusion.

It is obviously crucial to have professional help to avoid these and similar issues when working out an overall transfer strategy.

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Protecting Assets When Facing Uncertainty

Favorable Tax Rates and Tools May Soon End

Rumors About the End of Living Trusts Have Been Greatly Exaggerated

March 1, 2012,

A small minority of misguided observers might suggest that using estate planning tools like revocable living trusts are becoming less necessary in recent years because of increases in the federal estate tax exclusionary amount. According to this line of thinking, use of the trust was limited solely to avoiding estate taxes--taxes on the assets given as part of an inheritance. Because community members can currently pass on up to $5 million individually without triggering the tax, there may be a mistaken assumption that those with fewer assets do not have much need for trusts. Of course, our New York trust lawyers work with thousands of clients who are living proof that this suggestion is a drastic oversimplification of the use of these legal tools.

An article last week in LifeHealth News made the same point, reminding readers of the various benefits that trusts provide beyond estate tax savings. Just two of the many benefits include: (1) avoiding probate; (2) allowing flexible inheritance arrangements

Perhaps most importantly, use of these trusts allows families to avoid the time-consuming, stressful probate process that is required when only a will is used. The probate process is court supervised, which means that judges ultimately decide how everything shakes out. Depending on the circumstances, the judge's final decision might be far different than what the family thinks appropriate or even what the one who passed on might have wished. Using trusts and keeping the process out of the courts is a huge benefit for those who want to ensure that their wishes are actually carried out in the most straight-forward manner possible.

Not only is the trust process easier for the families, but it may also be cheaper. Fees and court costs that need to be paid to settle an estate via probate are often anywhere from 3% to 10% of the assets of the estate. That means that tens of thousands of dollars of an inheritance can be lost just in the process of having the court determine where it should all go. Trusts avoid this, because they operate automatically upon one's death. In that regard, trusts are also private, whereas the probate process is made public. This is a very real concern for those who do not want names and information about beneficiaries to be available to everyone.

Beyond avoiding probate, our New York estate planning lawyers appreciate that use of trusts give planners much more flexibility and control over how they'd like to disperse their assets. Wills simply give assets to certain people. Trusts, conversely, can pass along assets with very specific conditions and limitations. This, for example, allows parents and grandparents to pass on assets while putting in place some protections so that those assets are safe even in the event of divorce, bankruptcy, or even spendthrift relatives.

The list of trust benefits is long. In any event, it is important to remember that those benefits are apparent for community members of all income and asset levels. These are not legal tools just for the well-to-do.

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Avoiding Lump Sum Inheritances for Young Adults

February 23, 2012,

Parents often worry about their children--even their adult children. In many cases, no one knows about a child's strengths and weaknesses better than their parents. Local residents often take this into account when crafting New York estate plans. For those whose children may not be ready to handle a large inheritance, many parents reasonably want to know what options they have to both pass on assets to children but protect them from getting the funds before they can handle them.

In fact, this issue has been getting a bit of media coverage over the past two weeks upon the death of pop star Whitney Houston. As reported in Forbes this week, speculation abounds regarding the star's estate planning. Most suspect that the singer is likely to have left her entire fortune, reportedly worth $20 million or more, to her only daughter--18-year old Bobbi Kristina. The young girl is undoubtedly fragile at this stage in her life, especially after just losing her mother. In addition, many family members have voiced concerns that the young woman has also battled substance abuse problems over the past few years. This is leading many to question the daughter's ability to handle a lump sum payout from her mother's estate.

Early reports suggest that Ms. Houston had done some estate planning--but not much. She apparently had a will which left everything to her daughter. Because her daughter is a legal adult, under a will she will receive the money immediately. As most community members appreciate, few 18-year olds are truly ready to handle millions of dollars. However, without any other advance planning, the only option for the family is likely to go to court and try to get the teenager declared legally incompetent to manage her finances. They could then seek a conservatorship which would allow a third party to control the inheritance until such time that the court finds the daughter able to handle the responsibilities of the inheritance.

How could this have been avoided? By using a trust.

Our New York estate planning attorneys have helped many local families prepare for this possibility and plan ahead. Trusts are the ideal tool to accomplish this goal. They are private, meaning that they take place outside of the court process. This allows families to conduct much more detailed preparation with the assurance that the decision won't be changed by a judge when they are gone. One popular option is to have the trust dispense money to children at different rates throughout their life. For example, they may receive 20% at age thirty, another 40% five year later, and then the remainder at age forty. Alternatively, the payments can be set not at specific ages but times after the parent's death--20% at the parent's death, 40% five years later, and the remaining 20% ten years later, regardless of the age of the child.

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Fixed Annuities and the Benefit of Longevity Insurance

February 21, 2012,

It is a common question asked by area seniors conducting New York estate planning: How do I know if I have enough money to last the rest of my life? There are no easy answers. A lot depends on the source of income that one has when conducting their planning and exactly how those funds are being used. However, some financial planning tools exist which can provide peace of mind for those who want it, particularly in volatile market conditions. As explained this weekend by Investment News, one of the options is a deferred-income fixed annuity, often known as the main type of "longevity insurance."

Fixed annuities are essentially investment contracts with an insurance company. This means that the insurance company agrees to pay out a set income based on the value of the investment. These annuities can be either deferred or immediate. For estate planning purposes, deferred annuities often allow those thinking ahead to make investments before hand for guaranteed payouts down the road. Many different types of fixed annuities exist. Some are for a set rate of income while others take into account market conditions to some extent--blunting the effect of marketing downturns while allowing the recipient to share in some of the market booms. In this way, our New York retirement planning lawyers realize that lifetime annuities are often beneficial for those thinking about their long-term finances.

While they may be important investment tools for some, annuities are not for everyone. When compared to other investments, this type of insurance can offer lower rates of return. Many advisors suggest that the insurance is best when higher interest rates are present. This means that investors can put less money up front to get the same guaranteed income stream down the road. Often annuities are used in combination with other investment tools. Yet, many annuity plans have steep penalties for early withdrawal, which is unattractive to some.

However, where appropriate these insurance options are good ways for residents to have the peace of mind of never having to worry about "outliving" their money. In addition, this insurance can be helpful in some situations involving multigenerational trusts. For example, when a senior establishes a trust for an adult child, longevity insurance can be taken out on the adult child's life--the grandchildren are named as beneficiaries. This protects against the risk of the child living too long and using up funds that were intended for grandchildren.

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Tax Changes in the President's 2013 Budget Proposal

February 17, 2012,

Earlier this week President Obama unveiled his proposed 2013 federal budget. The mammoth document details how much money he proposes the government take in from taxes, possible changes to the tax code, and information on how that money should be spent. Considering the proposal includes various changes to what is taxed and at what rate, estate planning attorneys always pay attention to the details of the proposal. The budget applies to the federal fiscal year 2013, which actually begins on October 1, 2013.

However, each New York estate planning lawyer at our firm appreciates that this bill is simply a blueprint--a starting off point to begin discussions about the budget, not a detailed map of what will likely occur. That is especially true this year, because election years are always known for their lack of compromise and avoiding of controversial tasks. It is important to read this proposal from that perspective. That doesn't mean that the budget proposal has no value when it comes to estate planning. The ideas set forth in the proposal are indicative of at least some ideas that will likely be brought forward for consideration that may become law. For one thing, contrary to the claims made by many reformers on both sides of the political aisle, the budget does little to simplify the tax code. Instead it suggests a range of increased layers of tax complexity.

The budget would change basic income tax rates, particularly for those in higher income brackets. For example, the budget calls for an increased minimum income tax rate of 30% for those making over a million dollars. In addition, the proposal assumes that the current income tax breaks for those making over $250,000, which were first passed by President Bush, will be allowed to sunset. Without Congressional action, these income tax rates will return to higher levels at the end of this year. In addition, the estate tax would rise in the current proposal to 45% from 35%, with the exemption rate dropping to roughly $1 million from $5 million.

Business taxes would also see some changes in this proposal. Bloomberg News explained that while the President has talked of simplifying the corporate tax code, the proposal does not suggest any ways to do that. Instead of lowering the 35% tax rate, the budget would simply add more credits and deductions. The incentives would be geared toward manufacturing and "high-tech" manufacturing companies, while domestic oil and gas production interests would lose billions of dollars in current tax "preferences."

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U.S. Senate Proposal to Alter Inherited IRA Rules

February 14, 2012,

Policy changes at the state and federal levels often have implications on New York estate planning. For example, we have frequently discussed the uncertainty that exists over the estate tax. Exemption levels and tax rates may very well hinge on exactly who wins various federal elections in November. While it may dominate headlines, the estate tax is not the only policy with implications for local residents' estate planning. For example, yesterday Bloomberg Businessweek discussed the latest news regarding proposed legislation that would impact inherited IRAs.

Inherited Individual Retirement Accounts (Inherited IRAs) are accounts left to a beneficiary after the owner's death. As the name implies, these are accounts that an individual has contributed to over a lifetime in order to provide financial resources upon retirement. More often than not a spouse is named as the beneficiary. The IRA offers a variety of tax benefits depending on how the account is "cashed out." As it currently stands, a beneficiary can stretch the ultimate income tax payment over a lifetime. Because of this benefit, our New York estate planning attorneys know that IRAs often act as an important way for individuals to pass on assets to loved ones while saving on taxes.

However, some federal lawmakers are seeking to limit the tax benefits of Inherited IRAs for beneficiaries. Various proposals are being offered, but in general they all seek to prevent beneficiaries from stretching out the income tax payment over a lifetime. Instead, some legislators have proposed changing the law so that those who inherit the IRA have to distribute (cash out) the sum over five years. The practical effect of the change is that beneficiaries would be required to pay more taxes on the income from that inherited account. All versions of the change thus far would exempt spouses from this requirement.

One analyst noted that the proposal would "really change the whole playing field for retirement planning. That would make things simpler, but it would really put a crimp in the whole legacy planning people do for IRAs."

Proponents of the change suggest that it would net federal coffers roughly $4.6 billion over the next ten years. The bill's main sponsor, U.S. Senate Finance Committee Chairman Max Baucus, said that he'd like to use the funds to pay for a federal highway bill that is currently being considered. However, the bill has a long way to go before passage, and most suspect that the current proposals to change IRA rules will not become law. In fact, Senator Baucus himself has suggested that he will ease off the proposed changes for now and seek alternative revenue sources for the highway bill.

Even if the measure does not pass this year, the fact that the bill was put forward at all suggests that lawmakers are considering various legal changes that could affect retirement planning in years to come.

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Bizarre Estate Planning Strategy: Adopting A Girlfriend

February 9, 2012,

A media wildfire spread this week after word got out about a particularly exotic estate planning strategy crafted on behalf of a Florida man. According to a report yesterday in The Huffington Post, the new estate planning strategy involved the man adopting his 42-year old girlfriend. Apparently this was done in an effort to strengthen their relationship legally without marriage while ensuring she has access to resources down the road.

The situation might make a bit more sense in context. The client in this case, John Goodman, is a wealthy man, having created a trust years earlier that is now worth hundreds of millions of dollars. The trust was created for the benefit of Mr. Goodman's descendants--his children. Two years ago Mr. Goodman was involved in a particularly deadly auto accident. According to criminal charges filed against him, he was apparently driving drunk, ran a stop sign, and hit another car--killing the other driver. A civil lawsuit has been filed by the surviving family members of the car accident victim. However, because the trust was set up years before the accident, the plaintiffs in the civil case will not be able to access those trust funds regardless of the outcome of the legal matter.

Having already had one marriage end in divorce, Mr. Goodman did not want to walk down the aisle a second time. However, he was in a very serious relationship with a 42-year old woman named Heather Laruso Hutchins. He wanted to strengthen that relationship without resorting to marriage. That's when he was advised to adopt her. By adopting Ms. Hutchins, she now becomes a legal descendant of Mr. Goodman's and is therefore entitled to distributions from the trust that was created earlier for the benefit of his heirs. In addition, Mr. Goodman himself may now be able to access the trust funds indirectly via his girlfriend/adopted daughter.

However, many are questioning the legality of this particular strategy. For one thing, there was apparently a side-agreement with Ms. Hutchins whereby she agreed to give his natural born children 95% of the funds remaining in the trust when it ends. It is unclear how this side agreement could contravene the terms of an irrevocable trust.

It is not uncommon for those with considerable wealth to engage in particularly unique techniques to plan for their financial future. However, our New York estate plan lawyers appreciate that these sorts of efforts, like adopting one's adult girlfriend, are quite rare and usually not of much use for local community members. Yet, there is nothing wrong with exploring all the legal options available when deciding on the best course of conduct in these matters. The very reason that most visit an estate planning attorney is to hear about the range of legal choices that are in front of them to save on taxes, pass on inheritances, and plan for their own future well-being.

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Will Estate Tax Limbo End This Year?

February 7, 2012,

Last week we discussed the uncertain future of the estate tax. It was noted that the issue would likely hinge on the outcome of the 2012 elections. As with all legislation, action usually requires support from sufficient members of Congress and the President. Therefore, the rates and exemption levels for the estate tax would likely depend on the partisan affiliation of most members of Congress and the White House. Each New York estate planning attorney at our firm appreciates that the uncertainty over the issue presents complications for those families who are hoping to create strategies to minimize their estate tax burden. The idea of waiting for the outcome of an election is cold comfort for prudent planners who are working to provide for contingencies and bring stability to the process as soon as possible.

Some policy insiders are now suggesting that estate planning lawyers will not need to wait long after the election to see what happens next with the estate tax. According to a report in Advisor One, the consensus opinion among those most familiar with Washington thinking on the issue believe that Congress will decide what to do with the issue this year--in the lame-duck session in December.

We've previously explained how, without any action, the current tax rate (created as part of the so-called "Bush tax cuts") would expire at the end of 2012. That means that by January 1, 2013 the rate would be 55% (up from 35%) and at a $1 million exemption level (down from $5 million).

Now those who intimately follow the issue in Congress are suggesting that no matter what the outcome this November, the current tax levels are likely to be extended. Not only that, but some are suggesting that Congressional leaders have no stomach for a short-fix, and so they will push to extend the current, lower rates for at least another ten years. The President of the National Association of Insurance and Financial Advisors reported after a "Day on the Hill" that the eight members of Congress that he spoke with all suggested that the likely outcome this year was an extension of the current tax rates--either for a year or longer.

However, all local residents thinking about their New York estate plans should temper their faith in these pronouncements. As recently as the "State of the Union" address last month, the President noted that he'd like to see the current rate revert back to pre-Bush levels. He said, "Right now, we're poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2% of Americans...Do we want to keep these tax cuts for the wealthiest Americans?" The estate tax was certainly part of those temporary tax breaks. The President believes that the former rates and exemption levels are more appropriate. However, it remains unclear how much a priority he places on that issue and whether he would be willing to compromise on the estate tax disagreement in order to gain support for his preferred policies in other arenas.

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Like Groundhog Day: Mistakes Retirees Make Over and Over

February 3, 2012,

Yesterday was Groundhog Day--that storied time when a prognosticating animal is supposed to tell us how many more weeks of winter we have left this season. According to most reports, yesterday the nation's most famous groundhog, Punxsutawney Phil, saw his shadow and scurried back out of the cold. Apparently this is a sign of many more weeks of winter to come. Punxsutawney Phil was made a national celebrity in the early 1990s after being spotlighted in the popular Bill Murray movie titled "Groundhog Day." The film has gained legendary status among some, as it chronicles the exploits of Murray who wakes up in Punxsutawney every single morning on February second, forced to relive Groundhog Day over and over.

Our New York estate planning lawyers know a few things about repetition. That is because when it comes to planning for one's financial future, many local families seem to make the same mistakes over and over again. Yesterday CBS News published a Groundhog Day special report listing seven money mistakes that retirees consistently make. Many of the items on the list are quite familiar to the New York retirement attorneys at our firm.

For example, the first mistake is putting off estate planning altogether. The story's author noted that "failing to create a financial or estate plan isn't just a matter of missing out on investment opportunities or tax advantages. It can get you in trouble later in retirement when you're no longer at the top of your game mentally." It is always comforting to push off thinking about potential mental challenges in the future, but failure to account for it only leads to heartache for one's family. Nearly 50% of the nation's population over eighty years old suffers from some sort of cognitive impairment. A host of challenges are created if planning is not done before the problems set in.

Another big mistake that is repeated over and over by retirees is paying too much in taxes. It is vital to learn how withdrawals from retirement accounts, volunteer work, and other issues affect one's taxes. Many seniors fail to create a plan of gradual withdrawals from retirement accounts to minimize tax burdens. In addition, many seniors who do regular volunteer work do not use tax deductions for things like mileage and out-of-pocket expenses.

Far too many seniors fail to take full advantage of the planning tools available under the law to put themselves and their family in better financial shape. All local residents should take the time to visit with a professional to ensure that they do not make the same mistakes that so many others continue to make day in and day out.

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