Balancing the relationship between a trustee and beneficiary can be delicate, and if it is not handled properly the results can be costly problems and years of frustration. The beneficiaries are set to inherit valuables, homes, stock, and other assets. Yet it is the very nature of those assets that can cause tension with a trustee who controls the purse strings. However, there are some tips that can help ease the tension and create a good relationship between the person in charge of managing a trust and those set to inherit it.
Address Sources of Tension
The entire purpose of a trustee is to be a barrier between an heir and the money, so there are natural sources of tension between a trustee and a beneficiary. Most often, an heir wants access to their inheritance faster, and the trustee is hesitant out of fear that the money will be spent unwisely.
If a beneficiary wants access to the trust earlier, they should look into the terms of the trust and see if a case can be made to the trustee. However, some trusts give a lot of leeway to the trustee to change the terms as the circumstances change.
Both parties need to try and see the other perspective. For example, a beneficiary may think that taking money from the trust to put a down payment on a house is a good reason for distributions, but the trustee may be hesitant because money was distributed recently and wants to grow the portfolio before distributing again.
Discuss Money Issues
Fees are often another source of conflict between a trustee and beneficiary. The terms for fees can vary widely: private trustees can set their own terms, some states offer guidelines for fees, and other trustees do it for free as a personal favor to the trust creator. If a beneficiary thinks that the fees are too steep, he may hire another person to run the investment of the trust funds.
Splitting the roles may help keep the trustee's costs down and thereby ease tension with the beneficiary. However, another money issue that sometimes arises is the actual investment of trust funds. Beneficiaries need to keep an eye on how the funds are being invested, and it should be tailored to the needs of the beneficiary at that time in their life.
Try to Resolve Disputes
If the beneficiary is unhappy with the way that the trust is being handled, the first thing to do is open the lines of communication to the trustee before doing something drastic, like litigating. Try setting a meeting with the trustee, and feel free to bring an attorney to mediate the situation.
First, try to figure out the reasoning behind the trustee's actions because there may be a good reason why the decision was made. Also, try to seek compromise between the wishes as a beneficiary and the trustee. If the relationship is beyond saving, a change in trustee may be necessary. However, whenever possible, try to resolve disputes before taking more serious action.
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Balancing the relationship between a trustee and beneficiary can be delicate, and if it is not handled properly the results can be costly problems and years of frustration. The beneficiaries are set to inherit valuables, homes, stock, and other assets. Yet it is the very nature of those assets that can cause tension with a trustee who controls the purse strings. However, there are some tips that can help ease the tension and create a good relationship between the person in charge of managing a trust and those set to inherit it.
Couples without children have two main tasks when it comes to estate planning: the first is determining how to distribute the assets in the estate. The second, and arguably trickier task, is to assign a person or people who will handle your medical and financial affairs in the unfortunate event that you become incapacitated.
Durable Power of Attorney and Healthcare Proxy
A durable power of attorney form names a person to handle all of your financial matters if you become incapacitated or otherwise unable to take care of your own finances. This includes some legal matters, as well. A healthcare proxy is similar to a durable power of attorney, but this person is responsible for all medical decisions if you are incapable of making those decisions for yourself.
Naming the Proper Proxies
Couples with children typically name one of them as the durable power of attorney and healthcare proxy; however, oftentimes people without children struggle to find someone that they can trust. Spouses can appoint each other to these positions, but almost every estate planning attorney recommends having a "Plan B." This usually entails naming another, younger person to serve simultaneously or in succession to these positions in case the spouse also becomes incapacitated or passes away.
Horror stories abound of childless couples that only named each other as proxies and then had something happen to them both. Their loved ones or extended family members then had to go to court in order to have a successor appointed, a process that takes time and thousands of dollars in court fees.
In some states, there are professional fiduciaries that can be hired as professional powers of attorney or as a healthcare proxy. Some geriatric care managers will also agree to serve in proxy positions, as well. Other possible candidates for childless couples include nieces, nephews, friends, trusted neighbors, clergy, siblings, or cousins.
When naming a durable power of attorney or healthcare proxy, it is important to do more than sign the forms. Be sure to sit down with the person or people that you appoint and go over what your wishes are for your legal, financial, and medical future.
For the healthcare proxy in particular, consider drafting a living will. This estate planning document lists your wishes regarding any and all medical care should you become incapacitated. This includes certain medications, procedures, resuscitation, and the like that you do or do not wish to have done to you in a medical emergency. Your healthcare proxy is bound to your wishes in the living will, and it can ensure that your medical wishes are carried out.
In addition, consider paying or bequeathing assets to your proxies as payment for services rendered. This lets them know not only that you appreciate the service that they are providing, but it also prevents your proxies from feeling resentful. It can also prevent your proxies from helping themselves to your assets or money while you are incapacitated.
One estate planning scam is growing in popularity for people who are looking to begin crafting their estate plan and have amassed wealth or business over their lifetimes. The estate planning aggregator claims to do comprehensive planning for people who have concerns about taxes on their wealth or business issues in their estate.
Estate Planning Aggregator
An aggregator is a person who claims to do comprehensive estate planning for individuals with complex estates. Typically, they recommend that you purchase a "wealth blueprint" or something similarly named for tens of thousands of dollars that will detail how exactly your estate will be taken care of.
Once a person agrees to purchase a wealth blueprint and sends in information regarding their estate and assets, the aggregator will create a thick booklet full of flowery discussion of your wealth, all sorts of spreadsheets and discussion that shows how you can reduce your estate taxes to zero, give your assets silver-bullet protection against creditors, and also reduce your income taxes to a pittance. It sounds great, but once you agree to the plan, the scam kicks in.
The Aggregator Scam
The aggregator will inform you that he does not actually do any of the work for the estate plan, but he can recommend the professionals who will know how to get it done. The planner then sends you a letter recommending that you go see Attorney A about drafting one part of the plan and Attorney B about another part. You also have to meet with Insurance Salesman C because you must have life insurance with your estate plan, and do not forget to see Financial Planner D to invest your moneys.
That is the scam of the aggregator - someone who does not make money doing any of the actual planning but makes great money putting together the information into a pretty booklet. For the tens of thousands of dollars that you paid, he took a couple of hours inputting your information into a program, five minutes printing the pages, and another ten minutes to bind it and stick it in the mail.
Sometimes the aggregator will tell you that the reason for the price is the state of the art software that he developed or the countless hours that he spent creating your plan. However, several companies license software to aggregators and claims of their own proprietary software should not be seriously considered.
Strength of the Plan
Some people might think that the aggregator is still worth it because in the end you got an amazing plan, but the aggregator does not know whether his strategies will work or fail. His job is simply to cast a wide net for planners and strategies that he can sell to potential clients. It does not matter if the strategy works as long as it looks like it could create huge savings for the client.
In addition to the tens of thousands of dollars received by the client, the aggregator also makes much more. Each strategy peddler that the aggregator sends a client to also sends him a referral fee for services, depending on what they spend. The planners are usually just mills, meaning that they only do one or two specific transactions but does a lot of them cookie-cutter style. No matter the client's particular circumstances or needs, the client is going to be squished into fitting that strategy.
According to the Pew Research Center, the number of never married Americans is at an all-time high. In 2012, almost twenty percent of all adults over the age of 25 had never been married, compared to only nine percent in the same age bracket back in 1960. The research center cites shifting public attitudes towards marriage as one of the top reasons why Americans are putting off marriage or never marrying at all. Half of all never married adults do not wish to ever walk down the aisle and are perfectly comfortable just remaining in a committed relationship.
But for a committed couple, there are estate planning benefits that come with marriage that you do not receive with a domestic partnership. Here are some of the few financial and legal benefits that come with a marriage certificate:
Qualifying for an estate tax marital deduction
When one spouse dies, the estate is passed to the surviving spouse tax free. For domestic partners the deduction does not apply, and although the federal level of exemption is high at $5.34 million, the state estate tax exemption levels can be very low.
Qualifying for a gift tax marital deduction
As long as your spouse is an American citizen, you can make gifts of any amount tax free. Unmarried couples are subject to a gift tax if they financial support the other spouse, and the maximum tax free gift an unmarried person can make each year is only $14,000.
Rolling over deceased spouse's IRA into surviving spouse's IRA
If your partner dies with an IRA and names you as the beneficiary you must start taking distributions immediately, regardless of your age. If you are married, the surviving spouse has the option of rolling the IRA into their own, allowing the surviving spouse to delay making distributions until age 70 ½.
Contributing to a spousal IRA
If you are domestic partners and one does not work, that partner cannot contribute to an IRA for retirement savings because there is no earned income. However, if you are married and one spouse is not working, the non-working spouse can use the working spouse's income to qualify for IRA contributions.
Receiving survivor's benefits from a pension plan
If your spouse has a pension and elected for survivor's benefits you will continue to receive pension benefits after the other spouse dies. However, that does not apply for domestic partnerships.
Receiving Social Security benefits
Married couples can file for spousal benefits that allow the surviving spouse to collect up to fifty percent of the deceased spouse's social security amount. There is also the possibility for a larger benefit upon the death of a spouse. In a domestic partnership there is no option.
Saving on health insurance
Even if it is an employer sponsored plan, most health insurance plans are cheaper for one plus a spouse, as opposed to two single plans. This is particularly helpful if one partner does not have access to insurance through an employer, like if one partner is self-employed.
Legal advantages in case of spouse's incapacitation
If one partner is incapacitated in the hospital, it can be incredibly difficult to see them if you are not a blood relative or a spouse. You must go to a judge in order to be named as a healthcare proxy, and that takes time and money. If there is any family discord you could be battling family members over everything.
When many people begin the estate planning process, they sometimes believe that they are doing the right thing by giving more to one child than the other. One child may be making more money, is more successful, or has married into wealth of his or her own. Parents think that giving an unequal share of the estate to one child over the other is the best way to rectify the situation; however, unequal inheritance comes with hazards that parents may not consider when creating an estate plan.
By giving one child an unequal share of the estate, it punishes the success of others. In addition, with today's economic and financial climate the success of one child today does not guarantee it for life. A lot can change over the course of five, ten, or twenty years to your children financially. The more successful child could fall on hard times, and the less successful child could start doing much better financially.
Creating Family Drama
More importantly, unequal distribution of an estate can lead to resentment among children after their parents die and create a lot of family drama. At the very least, the more successful child is going to be asking why, and questioning whether the parents did not love them as much as the child that got more. Unequal distribution can lead to fights among siblings, and accusations of undue influence could be raised to challenge the will.
Fights among siblings can lead to long, protracted legal battles in probate court that can destroy a family and burn through the estate assets. Some estate battles take years and the estate only serves as a legacy of pain.
One solution that some parents attempt when unequally distributing an estate is to discuss with their children the reasons behind it. Explaining why there is an unequal distribution can at the very least eliminate the questions of "why" after the parents have passed away. Typically, this can temper some of the family anger but in the end the parents are still punishing the success of some of their children.
Another way to account for children's differing financial situations without showing favoritism in the will is to use an irrevocable trust. The parents appoint a trustee that is not one of the children, and they place the assets of the estate into the trust. The trustee then has the authority to make distributions to the children based on need or other specifications left by the parents. This way, the child that is having more trouble financially can be supported by the trust at an unequal rate to their siblings. In the future, if the financial situation flips for the children the trust can then provide for the child that was more successful at the time when the parents created the trust.
The irrevocability prevents the children from opposing the trust instrument and keeps the estate out of probate court. It can provide the flexibility of unequal distribution without the hazards of explicit unequal division of assets in a will.
Many people believe that estate planning is only for the elderly or those at retirement age. However, there are some documents and tools within estate planning that should be considered at a much earlier age. If you have a child that is about to leave for college or go on a gap-year trip there is one last thing that you should do as you prepare for the separation: ask your child to sign a durable power of attorney and health care proxy forms.
Why These Forms are Important
Estate planning forms like a durable power of attorney and health care proxy forms are important for a number of reasons. Without them, most states will not allow a parent of an adult child to make health care decisions or manage money for their kids. This applies even if the parent is paying for college, claiming the child as a dependent on tax returns, and still covers their kid for health insurance. Without these estate planning forms if your child is in an accident and becomes disabled, even temporarily, you would need a court order to make decisions on their behalf.
The risk for these possibilities is very real. Accidents are the leading cause of death for young adults, and over 250,000 people in the United States between the ages of 18 and 25 are hospitalized with nonlethal injuries every year. Without these documents, even finding out about your child's medical condition can be a challenge, let alone gaining the authority to make medical choices on their behalf.
Why Some Children Do Not Want to Sign
A few different reasons have routinely been cited for why a child is hesitant to sign a durable power of attorney or health care proxy form. One big reason is because at this age, adult children are finally attempting to become independent for the first time. Most kids think that they know better, do not want their parent's help, or want to try to do everything for themselves. Another major reason why children do not want to sign these documents is because as a power of attorney a parent can gain access to their child's grades.
Different Ways to Approach the Situation
Even though at this age most children believe that their parents are clueless, there are ways to approach the subject of estate planning forms and becoming your adult child's proxy. Gentle persuasion is usually the most effective technique. Explain that these documents can help in case of an emergency, wiring money to a bank account, and signing forms like an apartment lease when the child is gone.
Another tactic is to make the forms a condition of your child's education or trip. In exchange for signing the estate planning documents, the parent agrees to help pay for college or time abroad. A final way of approaching the situation is to have an experienced estate planning attorney draft the forms as a back-to-school package. You all sit down as a group and have the attorney explain the significance and importance of the documents to your child.
In an oral ruling last week a probate court judge ruled in favor of Shelly Sterling selling the Los Angeles Clippers against Donald Sterling's objections. Judge Michael Levanas ruled in a probate Los Angeles Superior Court case that Shelley has the authority to sell the professional basketball team to businessman Steve Ballmer, who has agreed to purchase the team for $2 billion.
Appellate Proof Ruling
The judge's ruling took the extraordinary step of granting Shelley's request for an order under section 1310(b) of the California Probate Code. It states that the trial court can direct the powers of a fiduciary to exercise powers as though no appeal was pending. Under this provision, the sale of the Clippers could be completed regardless of an appellate court intervention on the part of Donald Sterling.
Donald Sterling's Removal as Co-Trustee
One of the most significant parts of the ruling was that the judge stated that Shelley had her husband properly removed as a co-trustee of the family trust, which held the ownership of the Clippers, before she made the sale. According to sources, the Sterling family trust included a provision that if either Shelley or Donald was found by two qualified doctors to have "an inability to conduct affairs in a reasonable and normal manner" he or she could be removed as co-trustee. Shelley had Donald see two neurologists back in May for a competency test, and those doctors found that Donald was incompetent to manage the trust as co-trustee due to Alzheimer's disease.
Removing a Trustee
Removing a trustee from a trust is usually a painful and lengthy process. Under the law, trustees are presumed to be competent in order to be able to perform their duties. Therefore, when beneficiaries or co-trustees want a trustee removed for incompetence they must prove to the court that the trustee is incapacitated to the point that he is unfit to serve in the position.
Most actions to remove trustees involve family members. Oftentimes, the trustee in question is a parent that is serving as trustee for their children's trust or like in the case of the Sterlings one spouse is petitioning to remove the other. Litigation to remove a parent or spouse as trustee is costly, time consuming, and often comes at the expense of emotionally devastating a family.
How to Establish Incompetence
Because the court presumes competence for trustees there are only a few ways to prove that a trustee is unable to serve and incompetent for the position. Some trusts, like the Sterling family trust, come with instructions about how to prove incompetence or how to remove a person as trustee. If no such language exists, the beneficiaries or co-trustee must turn to case law. Typically, it involves a showing that the trustee is unable to resist fraud, undue influence, or duress. The other option is usually to show that the trustee is no longer able to provide himself with personal needs like food, clothing, and shelter without aid.
A final option in some states to remove a trustee is to deem him unfit to run the trust by a doctor or medical professional. The doctor must test the trustee and testify that medically he is unfit by reason of health problem or mentally incompetent to fulfill the duties as trustee. This, aided by language in the family trust document, was the route that Shelley took to have her husband ruled incompetent as co-trustee so that she could complete the sale of the Clippers.
Many people, business owners and everyone else, are concerned about the federal estate tax when creating their estate plans. Although the federal estate tax is 40%, it does not apply unless the decedent has an estate worth over $5.34 million, and the estate amount is doubled if the person is married. However, there are other concerns besides the federal estate tax that a business owner should take into account when creating an estate plan.
Other State and Federal Taxes
The estate tax should be the least of a business owner's worries when creating an estate plan. Before an estate tax is even considered other state and federal taxes are first deducted from a business and the estate. The federal income tax rate on an equity owner of a business can top out at 44.6%. State income taxes compound the issue by charging even more on an equity owner's share. A business owner should first try and minimize the damage done by income taxes on his estate before dealing with the possibility of an estate tax.
Before creating an estate plan that involves a business it is important to consider how issues that arise during life could affect the business after a death. For example, after the announcement of his cancer and subsequent death of Apple founder Steve Jobs the stock in the company plummeted. Another issue that may arise is the founder of the company spending all of the equity for senior and long-term care. These and other risk management issues must be addressed first before any kind of effective estate plan can be enacted.
A business needs to have a solid plan in place for asset and stock distributions after the death of an equity owner. Loss in share value can occur from issues in probate, problems in the boardroom, and the simple passage of time. If the distribution of wealth is anticipated and prearranged in the estate plan less of the wealth will be lost in the actual distribution.
A business owner needs to provide liquidity in his estate plan for the continuation of the business. After the death of an owner the business will still have bills to pay, creditors to appease, benefit plans to fund, and need money to supplement any lost revenue. When liquidity is not arranged in the estate plan assets are usually sold at a discount in order to quickly pay the bills. However, if it is planned for in the estate there will be plenty of liquid assets to pay off all debts and still have distributions available for the heirs.
One of the largest hidden problems for a business owner when drafting an estate plan comes from the family. Sometimes the biggest predator to the business is a family member who got the least in the rest of the estate. A business owner can avoid this issue if the estate plan establishes a solid post-death business transfer to the correct heirs.
While many New York residents familiar with and have an existing will in place in the event of their death, most people do not realize that estate planning documents extend far beyond a last will and testament. The world of estate planning documents includes not only living wills and advanced medical directives, but also trusts. Trusts offer several benefits associated with them, and come in two forms: revocable and irrevocable.
Benefits of Having a Trust
Trusts can not only provide for loved ones upon death, but they can provide for the person who created the trust during their lifetime. This is important in cases where the creator has a health issue, a mental disability or incapacitation, and other scenarios. Trusts can be administered without the need to involve a probate court, and can therefore protect privacy as to the contents of the trust. Trusts also serve as protection of assets for trust beneficiaries, and offer a wide variety of options in creating them to suit different needs.
Revocable trusts are a type of trust that can be changed at any time. The creator of the trust could simply modify the terms of the trust through an amendment. Or, if they want to revoke the trust in its entirety, they can do that as well. In revocable trusts, the assets contained within the trust are considered the creator's assets and will be treated as such for tax purposes and if creditors exist.
As one may expect from its name, an irrevocable trust is not able to be changed once it is signed by the creator of the trust. These trusts are often complex and require a special degree of care in drafting them in order to meet the creator's needs and desires for his or her estate. It is imperative to consult with an experienced estate planning attorney when setting up an irrevocable trust in order to ensure your estate is properly protected, and any concerns you have about being unable to change the terms of such a trust are addressed and handled appropriately.
That being said, irrevocable trusts have a number of specific benefits associated with them. Often times, estate taxes are significantly lessened or even eliminated through the creation of an irrevocable trust. Irrevocable trusts also offer a high degree of asset protection for the creator of the trust and the trust's beneficiaries. Both of these advantages are possible with irrevocable trusts because once the assets are placed into an irrevocable trust, the creator gives up his or her control and ownership of the trust assets.
NY Estate Planning Attorney
If you are interested in securing estate planning documents or are interested in further discussing the benefits of trusts and how they apply to you, the experienced estate planning attorneys can help you.
Family feuding is all too common, and finances are often at the root. One argument often made in legal cases involves these matters is that an adult child or other close relative is abusing a position of trust and confidence with a parent to take advantage of them financially. Proving such an abuse is the challenge of an undue influence lawsuit.
Undue influence is usually defined the use of confidence for the purpose of taking unfair advantage of one with a weakness of mind (or other vulnerability). In other words, undue influence is about pressure. The question is when does pressure become excessive, and thereby amount to undue influence. In a legal case where undue influence is an issue, a court may consider a number of factors:
1. Unusual or inappropriate time of discussion of the transaction;
2. Unusual location of the completion of the transaction;
3. Insistence that the transaction be finished at once;
4. Repeated warning of the adverse consequences of delay;
5. Involving multiple individuals to apply persuasive pressure;
6. Absence of third-party advisors.
To illustrate, it is useful to consider a few real world examples:
In 2011, the children of actor Tony Curtis claimed that their father was the victim of undue influence. Curtis, redid his Will and changed other aspects of his estate plan a few months before he died from heart failure. As a result, Curtis's five children, including actress Jamie Lee Curtis, were left with nothing. The Will stated that Curtis intentionally disinherited his children, yet no reason was given. Shocked and deeply suspicious, daughter Kelly Lee Curtis sued, accusing Tony's widow Jill or others of convincing Tony to change his Trust through undue influence, fraud, or duress.
In 2009, comedian Pauly Shore filed a lawsuit against his brother, Peter, alleging the use of undue influence against their 79-year old mother, Mitzi. Mitzi suffers from neurological problems, including Parkinson's disease. Prior to her decline in health, Pauly, Peter, and their mother were joint directors of The Comedy Store, a famous Hollywood comedy club. When Peter subsequently took to managing the club's finances, Pauly requested that Peter turn over about three years worth of tax returns and financial documents. After Peter refused Pauly's request and instead fired Pauly from the club's Board of Directors. Pauly brought an undue influence lawsuit, claiming that Peter orchestrated firing Pauly from the Board by taking advantage of their mother's frail health.
Undue influence doesn't just disturb the families of the rich and famous. Too often it surfaces in the financial matters of everyday people, whether in wills and trusts, or the operation of a family-owned business. When it does, it's time to speak with an experienced attorney about your legal rights so you can protect the vulnerable from the unscrupulous.
Estate planning can have ramifications decades (or even centuries!) after an individual passes away. On one hand, this is true because how one leaves assets and guidance to others can influence their long-term personal legacy. More specifically, however, planning can dictate legal matters far into the future. Whoever is in control of administering an estate has significant control over how some of those legal issues are handled.
Sudden Celebrity Death
Consider a dispute that recently arose between the estate of Rick Nelson and Capitol Records. Nelson was a popular musician an actor in the 50s, 60s, and 70s, best known for his role in the TV series "The Adventures of Ozzie and Harriet." Unfortunately, Nelson died unexpectedly in a 1985 plane crash at the age of 45.
Reports explain that complex feuding took place shortly after the death. Nelson was divorced, had a child outside of wedlock, and was dating a woman at the time of his death who was also killed in the plane crash. The estate was administered by David Nelson, Rick's brother. Fortunately, even though Nelson's death was sudden, he had some steps in place to protect his interests. A will left everything to his children from marriage (his out-of-wedlock child was ignored).
However, even though there was a will, problems arose. Nelson's ex-wife threatened a suit in order to claim life insurance money. She also attempted to take control of the estate away from David Nelson but failed. In addition, the parents of Nelson's then-girlfriend filed a wrongful death lawsuit against the singer's estate.
All of these issues were eventually resolved either via settlement between the parties or by the courts.
Drama Re-surfaces Decades Later
Interestingly, the estate of Rick Nelson made a recent reappearance in the news. That is because the heirs of the estate--his children--filed a lawsuit in 2011 against Nelson's former record label. At issue were royalties that the family claimed were owed to them under his original 1957 contract. Specifically, the family argued that the company was shorting them their share of income from digital downloads and streaming music agreements.
Fortunately, earlier this month, a settlement agreement was reached between the two sides. A spokesman for the record company announced the decision, noting that they are looking forward to working with the family to further promote the singer's most famous recordings.
Planning for an Uncertain Future
This example is an interesting reminder of how these decisions can have ramifications decades down the road. Obviously, at the time of Nelson's passing--and when his will was created--the idea of digital downloads and streaming music were unheard of. There was no way for administrators to understand how those issues would affect a contract, royalties, or inheritances in an estate.
All those crafting long-term plans now must appreciate that new technologies or issues may arise in coming decades that we simply cannot fathom now. As a result, it is critical to create plans that are flexible, providing a framework for any possible dispute to be resolved as efficiently as possible.
In the spirit of raising awareness of sound money management, April is officially deemed "National Financial Literacy Month." The U.S. Senate even passed a resolution on the matter a few years ago. The National Foundation for Credit Counseling usually leads the yearly effort, and many others in the financial world also use the occasion to discuss important money matters.
For example, Money Management International, a non-profit credit counseling agency, created a robust website sharing a variety of resources for consumers: www.FinancialLiteracyMonth.com. The website provides helpful tools on basic financial information, income worksheets, debt load calculators, financial goal tracking, and more.
While much of the information is focused on very general money management skills, if recent poll data is accurate, a majority of Americans remain far behind in prudent planning. Consider that a recent National Foundations for Credit Counseling (NFCC) survey found that over 60% of Americans do have any sort of budget. In addition, the survey found that nearly one in three Americans do not put anything from their annual income toward retirement savings. It is perhaps no wonder then that "retiring without having enough money set aside" is the most commonly cited financial issue that worries Americans according to the NFCC survey.
All of this suggests that far too many residents are living each month without a clear assessment of how their spending may affect their savings and long-term financial future.
Estate Planning - Thrive in your Golden Years
It is impossible to know exactly what the future will look like. That holds true for every aspect of life, from health and relationships to finances. Yet, that is not an excuse to avoid any long-term planning. In fact, the uncertainty counsels toward the opposite--taking steps to best position yourself to meet goals regardless of the future. Elder law estate planning is a key component of that preparation. Beyond designating one's wishes at death, this work also ensures steps are taken to secure a happy retirement with appropriate senior care.
Our team of legal professionals is proud to work with families throughout New York on a range of estate planning matters. We encourage all residents to take use National Financial Literacy Month as a time to re-evaluate current practices and take necessary steps to lead a safer financial life. From personal budgeting and saving to crafting long-term plans, getting a handle on these issues brings enormous peace of mind. Give us a call today to see how we can help.
Most legal matters have built-in complexities. Anyone who has purchased a home, for example, can appreciate the mountain of paperwork will dense legalese that must be filled out . Things are only made more challenging where there are significant emotions tied up in the dealings--like when the home was owned by a loved one who just passed away.
One common example of a process that many New York residents face with a mix of intense emotions and legal complexities is an estate sale.
No two families are the same. Some wish to go through with a sale as soon as possible to settle the matter and move on. Others take more time to process the situation before handling matters like an estate sale. In all cases, however, it is critical to proceed with an understanding of the legal requirements.
Most importantly, one must understand what can be sold, when, and by whom. It is not as simple as adult children automatically being able to do whatever they want with their parents possessions. Answers to these questions will hinge on what estate planning was done beforehand. Use of tools like a living trust, for example, would likely streamline the process. On the other hand, those without any planning at all will have to wait for court resolution before anything can be done.
In general, all property can be labeled either as a probate asset or non-probate asset. Probate assets are those that must be collected and distributed through the court. When a will is used to pass on assets, then virtually all property in the decedent's name (individual who passed away) will be required to go through probate. Alternatively, non-probate assets pass to another automatically, or at least outside of the court's purview. This may include property held jointly with a right of survivorship, certain insurance benefits, or assets held in trust.
Those assets that do not need to pass through probate can be dealt with almost immediately. There will be a new owner or trustee who can do whatever they wish with the items, including sell them in an estate sale. Alternatively, probate assets cannot be immediately handled. Instead, the family must go to court and either present the will or have the court deal with the resolution per state intestacy laws. The court will appoint a "fiduciary" whose job it is to collect the assets and distribute them as necessary. This may include arranging a sale of a home. In more complex cases, like when the home is part of a cooperative, the same formal requirements must be met, including approval by a Cooperative Board.
Estate planning attorneys appreciate that on top of all of these legal details are very real emotional pressures. When it comes to an estate sale it is common for disputes to arise between grieving family members regarding what to sell and when. The stress and confusion is far more likely the less preparation and professional support is available. Feel free to contact our NY estate planning professionals for guidance on streamlining this process for your family.
It is impossible to predict exactly how every family member will respond in the aftermath of a passing. However, as experienced will and trust lawyers know all too well, there are many situations that dramatically increase the likelihood of controversy that leads to a contested estate. Mixed families, a large age-gap between spouses, and secrecy are often signs of family tension that may erupt after a death.
A high-profile New York estate feud offers an example of that very situation.
NY Photographer Bern Stern's Estate Fight
Celebrity photographer Bruce Stern is well-known for his legendary photos of Marilyn Monroe--many taken just before her death. Stern died last year at the age of 83, leaving a roughly $10 million estate behind. As discussed in a recent Post story, family members are in bitter disagreement over how the estate should be divided.
Stern had three children, all from his first marriage that ended in 1975. As far as the children knew, their father's assets were to be distributed per the terms of a 2007 will that split half the estate between the children while giving the other half to his own photography foundation.
However, just before his passing, Shannah Laumeister came forward claiming that she and Stern were married in secret in 2009. She directed a documentary about Stern in 2010 and is nearly 40 years his junior. The adult children had no idea of the union.
Laumeister produced a second will from 2010 that created a private trust with all of the assets and gave control of the trust to Laumeister. According to Surrogate Court filings, Laumeister claims that the adult children would still receive cash bequests as part of the new will, but the details of those bequests are unclear.
Psychiatry Records & Questions About Mental State
Expectedly, the adult children challenged the 2010 will. The feud is making its way through the court system. Most recently, reports suggest that the Laumeister is fighting to block sharing of information about Stern's meetings with a psychiatrist.
For their part, the children argue that information about Stern's mental and medical state when the contested will was created is of obvious relevance. Alternatively, the younger wife argues that release of the information would permanently damage Stern's reputation. The value of his estate is closely tied with his artistic works and reputation-damage would significantly harm the estate, she claims.
An obvious take-away lesson from this story is a reminder that an experienced estate planning attorney can point out the many red flags that suggests a feud may be likely. A legal professional can offer counsel on steps to take that may eliminate secrecy or otherwise increase the chance of a smooth, conflict-free process that is resolved fairly and efficiently.
Earlier this week we discussed the tragic death of New York actor Philip Seymour Hoffman. There are many estate planning lessons to take away for Hoffman's situation, including the need to update a will after every life event. Hoffman unintentionally left out two of his children by not updating his will to include them specifically--his oldest son is named directly as a beneficiary of a trust.
Yet another lesson that fellow New Yorkers can take from the case is the role that marriage can play in these matters.
Companions vs. Spouses
According to reports, the mother of Hoffman's three children was long-time girlfriend Marianne O'Donnell. The couple was together for years, though they apparently were split in the few months before the death (allegedly as a result of Hoffman's relapse). At no point was the couple married. This is not necessarily an unusual state of affairs for couples today. Due to many personal factors, even the most intimate partners with decades together may choose not to formalize that union by way of a marriage. In the eyes of the parties, their relationship is the same regardless of whether there is official government sanction or not.
However, it is important to remember that the law does not view all couples the same. In fact, the entire purpose of marriage is to classify couples into different camps with thousands of rights on the line. Those rights have clear estate planning implications.
Per the terms of Hoffman's will the bulk of his suspected $35 million estate will go to O'Donnell. However, both New York State and the federal government impose an estate tax. Above the exemption amount, the tax can hit as high as 40%. Of critical importance, the tax does not apply to transfers between spouses. But Hoffman and O'Donnell were not married, and so she will likely be hit with an estimated estate burden of $15 million or more. A marriage would have eliminated 100% of that burden.
The bottom line is that in cases like this, marriage saves on taxes. There are many different situations where a transfer of wealth to another would be taxed except for transfers between spouses. While no one should make life decisions regarding marriage based entirely on taxes, one should not overlook the reality that marriage matters under the law.
Basic New York estate planning principles apply in virtually all cases, no matter if you have a $35 million estate or if your main asset is a family home. To ensure you take steps to protect your loved ones for the future, be sure to contact a NY estate planning attorney today.
When most hear the phrase "estate battle" the mind immediately jumps to fighting between families. Sadly, in the tumult of a passing, it is not uncommon for even close relatives to disagree sharply over how an assets should be divided. However, estate fights can also refer to legal problems related to taxes and the IRS. Tax matters are intricately woven into estate matters, and when problems arise, you can be sure that the IRS will be ready to defend their position in court.
How Much Was Jackson's Estate Worth?
To understand how these IRS estate battles often play out, one need look no further than continued wrangling over perhaps one of the largest estates in recent memory. Famed entertainer Michael Jackson died in 2009. However, the estate is still fighting with the Internal Revenue Service regarding how many taxes need to be paid.
As discussed in an LA Times story this weekend, the IRS and Jackson's executors are miles apart on what is owed. The executors claimed that Jackson's net worth at the time of his death was $7 million. The IRS, on the other hand, valued the estate and exponentially higher--$1.25 billion.
As most know, one's estate tax burden is based on the total value of assets. Obviously then, the executors and the IRS have staggeringly different ideas about how much tax is owed. For their part the IRS claims that the total estate tax was $505 million. Not only that, but they claim that errors with the tax return trigger double penalties, adding an addition $197 million in penalties to a total tax obligation of $702 million. Keep in mind, this tax bill alone is 100x larger than the executors claimed the entire estate was worth.
How could the two sides be so far off? Apparently, the main dispute surrounds the value of Jackson's "image" and his rights to a valuable trust which holds rights to legendary songs (including almost the entire Beatles collection). The executors argued his likeness was worth $2,105 and that Jackson had no interest in the song collection because he had borrowed hundreds of millions of dollars against it.
Unique Assets & Appraisals
When it comes to intangible assets that do not necessarily have an obvious value, then disputes often arise between the IRS and an estate. While very few will leave an estate or assets as large (or unique) as Jackson, the issue of proper appraisals and subsequent tax burden is not uncommon among New York residents. As always, the best approach is to structure an estate so that these assets are not included at all and not factored into possible estate taxes.
In December we shared information on proposed changes at the federal level which might limit the tax-saving benefits of charitable deductions. President Obama previously suggested limiting certain charitable tax breaks for high earning individuals. This possible change was just one part of large ideas about re-writing significant portions of the U.S. tax code. Many are hoping to simplify the code in an effort to increase transparency.
The charitable deduction change proposal in particular drew the ire of many when first suggested. Now a large group of sitting U.S. Senators are adding their names to the effort to protect the charitable deduction status quo.
The Senate Letter
Late last month a total of thirty three Senators from both parties sent a letter to the chairman and ranking member of the United States Senate Committee on Finance. The letter reiterated that tax deductions for charitable giving has been a staple of the national tax code for a century. The underscored their support for "protecting the full value and scope of the charitable deduction."
The Senators explained that while the tax code re-write is driven in part by a desire to eliminate "loopholes," the charitable deduction is not a loophole. Instead, the letter refers to the deduction (and charitable donations themselves) as a "lifeline for millions of Americans in need." Research is referenced which argues that any limitation in tax benefit for charitable deductions will correlate into billions in fewer charitable donations annually, ultimately hurting the vulnerable individuals and non-profit organizations that rely on such support.
Referencing the overall reasons for the possible change, the open letter suggested that any federal revenue benefit from changing the deduction would be offset by the consequences. In other words, federal tax revenues may tick up slightly as a result of the change, but the decrease in charitable contributions that result would actually lead to an increase in public spending to make up the difference. At the end of the day, the Senators argue, the change would be a net negative for all involved (including the government).
The letter ended by arguing that "the federal government must affirm its long-standing dedication to encouraging private acts of charity and compassion, especially when our charities and the people they serve are facing so many challenges."
These potential changes in tax savings for charitable giving are just one part of many possible tax code edits that could impact New York estate planning. Be sure to keep abreast of any alterations that could affect your or your family. Speak with a qualified NY estate planning lawyer for tailored guidance.
For sports fans, all eyes this weekend are planted squarely on New York City with the Super Bowl set to kick off early Sunday evening. Beyond the usual chatter about who will win and lose, many commentators are discussing how this single game will impact the long-term legacy of many players in it.
Of course, at the end of the day, this game represents just a single game in a career. And for many players, that career is relatively short-lived. Football is a demanding sport, and it is not uncommon for players to retire in their late twenties or early thirties. It is only a rare few who play successfully into their late thirties.
This presents an unique dilemma for players who must then find other careers and/or properly manage their affairs early in life ensure financial stability for what is hopefully a many-decades long retirement. As you might imagine, many players are clumsy in this regard, making a plethora of estate planning mistakes that cause harm to themselves and their families down the road.
Professional Athletes Estate Planning Mistakes
In honor of football's biggest night, this week Life Health Pro discusses a list they dubbed the "Six Biggest Estate Planning Mistakes NFL Players Make." Most of the list centers on the basic idea of failing to think long term.
First, estate planning professionals who work with athletes explain that athletes often do not get out of the present. No matter how big one's check in any given month, the entire purpose of planning is to stretch today's earnings to an uncertain tomorrow. That need is especially acute for those in unique positions, like professional football players, who earn the vast majority of their lifetime earnings within a specific window that is often no more than a decade.
Along the same lines, a common NFL player planning mistake is spending outside their means. It is easy to mistake a large paycheck now for a license to make luxury purchases. And perhaps those purchases are feasible. But without an actual idea of the funds needed to sustain a decades-long retirement, in too many cases that high living comes at the cost of financial struggles down the road.
Be sure to take a look at the full article for the entire list of common planning errors.
Get Legal Help
The specific estate planning needs of most New York residents will be quite distinct from professional football players. High net worth individuals who are likely to have uneven earnings over the years present very unique planning challenges. But the underlying principles of prudent foresight and seeking out tailored advice to ensure your own actions fit your actual needs is important for all of us, regardless of our age, career, or particular challenges.
For help with estate planning for you and your family be sure that you contact an attorney as soon as feasible and secure the peace of mind that it brings.
There will soon be a new chief in town when it comes to monitoring the activities of New York charitable organizations. According to a report last week in the Wall Street Journal, James Sheehan was named the head of a state agency known as the Charities Bureau. This entity may not be a well-understood by most community members, but it plays a role in trust regulation and other activities which hit upon estate planning matters.
The New Chief
Mr. Sheehan is well known to many in the estate planning elder law community as the former New York Medicaid inspector general. The inspector general is charged with acting as a check on the system to watch out for misdeed and violations. It is that same commitment to enforcement and transparency in activities that Sheehan will take to the new office.
Speaking about his new role, Sheehan explained that he viewed himself as a "compliance officer." In other words, instead of acting aggressively to root out misdeeds, he hoped to help "organizations do the job that they are here to do."
Sheehan likely felt the need to point out the distinction in order to quell concerns about his reputation as an "aggressive enforcer." While working as the Medicaid inspector general, he acted vigilantly to ensure state funds were not misspent, leading to sharp disagreement with many in the healthcare industry who felt his actions were unfair and overly forceful.
Regulating Charities in NY
The Charities Bureau has a mixed charge, focusing on ensuring proper oversight of state non-profits, legal use of charitable trusts, and management of various public outreach programs. In fact, this years will mark the first where the Bureau makes use of expanded powers passed into law by the state legislature in December.
The New York Nonprofit Revitalization Act will take effect this summer. The Charities Bureau will be in charge of implementing this Act which, at its core, is intended to ease the somewhat complex regulatory stresses that many nonprofits face in the state. This will be in addition to the traditional duties of the government entity to guard against fraud and other violations.
Many New York residents include charitable donations and create charitable trusts as part of their estate planning. As changes take place at the Charities Bureau, it will be important to keep a close eye on the developments to determine if any of the alternations impact long-term planning options or strategies.
According to a survey by legal services website RocketLawyer, 70% of American parents with minor children do not have a Will. The survey revealed that 76% of respondents believe that a Will is not an "urgent" matter. Parents of young children certainly must have many urgent claims on their attention. Many of them, it seems, are not inclined to give any consideration at all to the horrible possibility that they may not be around to raise their children themselves.
What would happen to your children if the unthinkable did happen and you were no longer there to care for them? If your children have two parents in their lives, then you might think that the chances of both parents dying in a common accident are too remote to merit serious consideration. Still, remote as the chances may be, we know that it does happen. Every day, couples face deadly risks together. How many times have you and your spouse found yourselves in a place where some quite plausible accident might befall you both? A car accident? A plane crash? A house fire? Upon reflection, you might discover that you face the risk of common accident almost every day.
Protect Your Child's Future
In New York, if both parents die, the fate of a minor child will be influenced heavily by the parents' Will, or the absence of a Will. If the parents leave a Will that designates a guardian for their child, the prospective guardian may petition the Surrogate's Court for appointment as guardian of the child's person or property (or both). The court is obliged to act in the best interest of the child, but within this broad parameter, New York courts will show great deference to the parents' wishes. The court will confirm that the prospective guardian (and other adults in the guardian's household) are not named in the New York State Registry of Child Abuse and Maltreatment. If there is no evidence of past abuse, the court will likely grant the petition for guardianship.
If there is no Will, the court will have to devise its own plan for the child. If you have ever given the guardianship question much thought with respect to your own family, you know how complicated this decision can be. Suppose a child has two loving adult relatives, both of whom wish to act as guardian. One is the child's favorite uncle, but he has four kids and a wife who is overwhelmed by the idea of adding another to their brood. Would it be best to have this child live with a more distant relative, if it meant that the addition of the child to the new household would cause less strife?
Although there is no perfect solution, in most cases, parents will be in a better position to find the best alternative. Think now about the unthinkable, and going forward, you can be assured that you have provided the best possible future for your child. Contact our estate planning attorneys today to learn more.