Results tagged “albany estate planning” from New York Estate Planning Lawyer Blog

Estate Fights for Music Royalties in the Digital Age

April 14, 2014,

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.

April is Financial Literacy Month - Plan for Your Future

April 8, 2014,

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.

Understanding Estate Sales - What Can You Sell?

March 14, 2014,

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.

The Basics
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.

Secret Marriage, New Will Leads to NY Estate Fight

March 6, 2014,

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.

Marriage Matters - A Reminder of the Tax Benefit

February 28, 2014,

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.

Estate Battles the IRS - The Michael Jackson Example

February 11, 2014,

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.

Federal Charitable Deduction Debate Continues

February 6, 2014,

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."

Changes Ahead
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.

NFL Players & Estate Planning Errors - It Can Happen to Anyone

January 31, 2014,

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.

Former New York State Medicaid Inspector General Sets His Sights on Charity Regulation

January 23, 2014,

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.

Thinking About the Un-thinkable - When Children Are Involved

January 21, 2014,

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.

Do-It Yourself Estate Planning Problems: Transferring Real Estate

January 16, 2014,

There are some tasks where the "do-it-yourself" approach makes sense. This includes tightening a leaky pipe under the sink or changing the headlight bulb on your old car.

With those tasks, it is clear right away if your skills were up to the challenge and you did it correctly. If the sink still leaks or the light is still out, then you know that your efforts failed and you may need to call in a professional.

But there are some challenges where this "safety net" does not exist, and where do-it-yourself attempts can cause serious, irreparable harm. That is certainly the case with estate planning. Crafting a plan to transfer assets and save on taxes is delicate in that the only time when it will be used is at the very moment when it cannot be changed--after a passing. In other words, there are no "do overs" with estate planning, and so it is essential to have the aid of an experienced estate planning lawyer when making decisions about these issues.

Do Not Just Transfer the Deed
One of the most common do-it-yourself estate planning mistakes involves real estate. In an attempt to streamline the transfer of assets, some New York seniors are tempted to transfer ownership in a home to an adult child. The idea is for the senior to remain living in the home indefinitely but with ownership transferred so as to simplify probate upon senior's death.

This idea may sound logical, but there are many potential adverse ramifications of this do-it-yourself strategy that may trip up residents. Most notably, the tax consequences of such a move can be significant. That is because the "basis" upon which the possible tax is assessed differs considerably depending on whether the home was given while the seniors is still alive or transferred after death.

When the real estate is given during the senior's lifetime, the gift takes a "carryover" basis upon eventual sale of the house. Conversely, receiving the home after death results in a "step up" basis.

For example, consider a house that is worth $350,000 today and the senior father first bought the home 30 years earlier for $50,000. If the adult child receives the house while the parent is still alive, when the home is eventually sold to a third party, then the son will be taxed, roughly, as if he made a capital gain of $300,000 (the sale price from the first purchase price). Conversely, if the home is received after the death, then the sale to a third party will start with a $350,000 basis, and if the home is sold for that price, then zero capital gains are recorded (and no tax is owed).

The bottom line: Do not go it alone with estate planning. These issues are too important to do haphazardly, and there are no second chances. Contact our estate planning lawyers today to see how we can help.

Disorganization & IRA Inheritances

January 15, 2014,

Many New Yorkers invest a sizeable portion of theirs assets into IRAs--retirement accounts to fund their golden years after their work life is over. Of course, no one knows exactly what their future holds, and so it is common for IRAs to contain significant funds upon one's passing. Deciding who will receive those assets is a critical part of estate planning.

Unfortunately, as discussed in a recent Forbes article, sloppy planning on that front, which leaves designated beneficiaries in the dark, may ultimately cost those beneficiaries their inheritances.

Make Your Wishes Known
The financial lives of many New Yorkers are complicated. People have different bank accounts, work with various brokerage firms, and otherwise create a complex web of records for their diverse, scattered assets. It is hard enough for individuals to keep track of their own financial lives let alone that of a loved one after a passing.

But dealing with this problem following a sudden death without estate planning is more than just a paperwork nightmare--it can have very real financial consequences. For example, what happens if the designated beneficiary of an IRA does not know that they inherited the account?

Even a delay in knowledge about beneficiaries may be problematic. That is because non-spousal IRA beneficiaries are usually required to withdraw a minimum amount from the account each year. Failure to do so may result in a penalty, often 50% of the very amount that should have been withdrawn each year! This is not a small slap on the wrist. It is not necessarily uncommon for delays to drag on for years, with IRA beneficiaries having no idea that they are due money--the banks where these accounts are held are under no obligation to find the beneficiary.

On top of this, if the account holder eventually turned the funds over to the state as part of their abandoned property protocol, then an additional problems may arise--like income taxes. That is if the beneficiary ever finds out about the IRA at all.

All told, various nightmare scenarios can be worked out involving IRA beneficiaries who have no idea they are set to inherit, with subsequent complications resulting in the account assets being completely devoured by fees and taxes.

It is a bit cliche, but this situation is yet another reason to never let this planning go undone. Beneficiaries need to know what they are set to receive and the steps that must be taken to ensure their inheritance gets to them in full. Too many New Yorkers spend a lifetime acquiring assets and have the goal of leaving some to loved ones only to have that wish derailed by poor or non-existent estate planning.

Favorable New York Estate Tax Laws on the Horizon?

January 13, 2014,

New York State, known as one of the heavier tax-imposers in the country particularly when it comes to estate tax, may soon be more appealing to retirees. New York may be following on the heels of the federal government's revamped estate tax codes, which raised exemption amounts to levels that effectively omitted the vast majority of individuals and families from an Uncle Sam estate tax hit. The New York State Tax Relief Commission issued a December 2013 report that proposes changes in 2014 to lower the highest estate tax rate and raise the exemption amount to the same levels as that imposed by the federal government.

The Potential for Major Estate Tax Relief

The federal government and seventeen states impose taxes on estates upon the death of the individual. Each exempts a certain amount of an estate's net worth from these taxes, although these amounts differ state to state. Thanks to the passage of the American Taxpayer Relief Act of 2012, starting in 2013 the federal government began operating under new rules for estate taxes that significantly increased the exemption amount and provided that this value would be indexed each year for inflation.

Currently, New York exempts $1 million for estate taxpayers, and assesses a top tax rate of 16% on amounts above that threshold. New York's current exemption level is one of the lowest of the states that employ some type of death tax (either estate tax, inheritance tax, or both). If the Commission's proposal were to become law, however, this exemption would rise to that of the federal level, which right now is $5.25 million, and would be indexed each year for inflation just like the federal exemption. Additionally, the top tax rate on any amount above the exemption threshold would decrease to 10%.

Any individual decedent's estate with a net worth at or less than the exemption level would therefore be exempt under both federal law as well as New York law if this proposal were to come to fruition. This would undoubtedly sway many more New Yorkers to remain in the state since nearly 90% of all estates would be exempt from any estate tax. As indicated in the Commission's report, middle-income New Yorkers would benefit greatly because until now, the exemption levels have failed to increase along with the growth in home values. While the state treasury itself would lose out on significant revenue, this money would be left with consumers to put back into the economy.

This is all of course contingent on the proposal becoming law. It is also unclear whether the new rates will commence in 2014, 2015, or later, and whether one set rate will be implemented immediately or phased in over time. New Yorkers should keep a keen eye on the progress of this proposal as it will no doubt influence their estate planning, including the decision of whether to remain in New York or head for greener pastures such as Florida or North Carolina, which now have no estate taxes.

Last Minute Gift? Cashing A $100,000 Check

January 8, 2014,

Estate planning disputes can arise in any situation and based on any number of facts. However, one situation where disagreement is far more likely to arise is when planning steps are taken, gifts are made, or other actions pursued while an individual is on their death-bed or known to be very sick. Naturally, observers are skeptical of these actions, because they are more likely to involve fraud, mistake, coercion or other means.

That does not mean that all death-bed actions are unenforceable. On the contrary, many Wills are and signed and trusts created at just this time specifically because one wishes to get their affairs in order near the end. However, because of the potential for abuse and the natural skepticism, estate cases frequently involve last minute actions.

Was It a Legitimate Gift?
Consider, for example, a case discussed today in the Morning Sentinel. A former university professor died recently, leaving virtually all of his wealth to the university itself. The only exceptions were his car and a few valuable personal belongings that he left to his friend, a man named Daniel Toto.

However, a dispute is brewing regarding a check that the professor allegedly wrote to Toto for $100,000 a week before his death. When Toto went to the bank to cash the check--two days after the death--the bank refused to honor it. That is because the personal representative for the professor's estate (the executor) challenged the authenticity of the signature on the check.All of this has led to a lawsuit filed by Toto against the estate and the bank seeking to have the check honored.

It seems that the professor did a good amount of planning near the end of his life, as his Will itself was only signed about two months before his death. This may suggest that the $100,000 check was simply another action taken by the professor near the end to distribute his property according to his wishes.

On the other hand, the Will apparently lays out the professor's wishes in "meticulous detail." This may lead some to question why he would engage in such "off-the-cuff" actions (like writing a $100,000 check) if his other affairs were so neatly organized.

This particular case is an example of the scope of issues that may arise in these matters. Even when the Will is not challenged, as it does not appear to be in this case, ancillary issues (like a large check) may pop up and raise questions about one's actual wishes.

Clarity in Estate Planning - Who Owns Fawcett's Warhol Painting?

December 23, 2013,

Unintended consequences are rampant in do-it-yourself Will creation and other estate planning. Even arrangements that seem simple at first blush may prove to have hidden ambiguities or uncertainties that only come to light during probate--when it is too late to fix.

Partner vs. University
To get an idea of how ambiguity in estate planning can lead to controversy, consider the brewing legal battle between actor Ryan O'Neal and the University of Texas at Austin. The dispute centers on an Andy Warhol painting of actress Farrah Fawcett.

Though they never married, O'Neal and Fawcett were long-time romantic partners. Fawcett died rather young, in 2009. Her possessions were distributed to many different parties, but the single issue in contention here are provisions that all of her artwork be left to the University of Texas. No side disputes that the University should receive her artwork. However, they do disagree on what art was owned by Fawcett and what was owned by O'Neal.

Specifically, the well-known pop artist Andy Warhol painted two identical pictures of Fawcett and gave them to the couple in the 1980s. The University of Texas is already in possession of one of those pieces. However, they are now suing O'Neal to receive the other one. For his part, O'Neal claims that Warhol gave the couple each one of the pieces. Therefore, O'Neal claims that he himself owned one of the paintings, not Fawcett, and so it should not pass to the University.

As discussed in an AP news story, the case went to trial late last month. Expectedly, much of the testimony revolved when the couple received the paintings and what terms were implicit in the transfer of the items from Warhol to the pair. For example, O'Neal's legal team had a former hairdresser of the star explain on the stand that Fawcett told her in 1994 that one of the paintings belonged to O'Neal.

Interestingly, the trial also included dispute about the value of the work. O'Neal claims that a 2009 appraisal had the item pegged at less than $1 million. The University of Texas has their painting insured for $600,000. Yet, at trial testimony from an expert witnesses suggested that each painting was worth upwards of $12 million.

The bottom line: always have the support of an experienced estate planning attorney when doing this work. Experienced professionals can identify possible problem areas from the outset, finding solutions that give you and your family the best chance to settle these matters efficiently and conflict-free when the time comes.

Rock N' Roll Estate Fight - Decades After Death

December 16, 2013,

One of the biggest misconceptions about settling an estate is that all of the loose ends will be handled within weeks or months of the passing. In reality, it often takes years or more before all of the details are finalized. In cases of sizeable wealth, unique assets, or complex administration arrangements, the estate details may linger for decades.

Consider a story in last week's New York Post regarding the estate of former New York Dolls guitarist Johnny Thunders. Thunders was only thirty eight years old when he died in 1991. Yet, even though the death occurred more than 23 years ago, there is a legal estate planning battle brewing over control of his assets.

Thunders Estate Fight
Thunders had little to his name when he died--with an estate valued only at $4,000. Not having a Will, the singer's assets were set to go to his estranged wife, their two children, and a third child from a second mother from Sweden. The singer's sister was named Executor of the estate and she worked on its administration.

Over the years, the sister was quite savvy with the estate management, taking advantage of some re-birth in popularity of New York Dolls songs to generate significant income for the estate. As part of her role as administrator of the estate, the sister made twice yearly payments to the singer's children and wife. These payments lasted for decades until the sister's death in 2009.

It was at that point that another estate battle was put into motion. Originally, the singer's Swedish daughter from outside of his marriage was set to take control of the estate. Yet, the daughter, now 26 years old, could not afford the sizeable bond payment needed to oversee the fund. These bond payments are often required by the court to ensure that the administrator does not abuse their discretion and control of the funds.

Yet, even though the daughter could not afford the bond, no one else was named administrator. The estate funds--around $160,000--have set unused without payment to any of the children. All of this means that no one is around to take advantage of the continued interest in the New York Dolls legacy to capitalize on royalty and licensing funds.

To make matters worse, Thunder's other two children with his wife recently filed a suit seeking to bar their half-sister from ever taking control of the estate. Both sides are set for a court date in January but are hoping to reach a settlement beforehand.

"Donor Advised Funds" Gaining in Popularity

December 13, 2013,

Every day thousands of New York residents give donations of all sizes to popular charities. From dropping a few bucks in a local red bucket during holiday season to making multi-million dollars gifts to universities and everything in between, millions of residents are committed to giving a portion of their wealth to others.

Charitable giving is an important part of many long-term financial plans and estate planning efforts. While giving to charity may seem like a straightforward process--no different than buying a birthday gift--in reality, these donations can be structured in sophisticated ways to benefit both the donor and donee. New Yorkers are advised to speak with legal professionals to learn about their options.

Donor Advised Funds
Recently, Forbes discussed a rise in using one particular method of giving to a charity known as "donor advised funds." The author notes that these funds were colloquially referred to in the past as the "poor man's private foundation." These funds are simply legal vehicles which are created to manage the charitable giving of an entity (or family or individual). The fund has some tax advantages as compared to direct charitable giving but come with less cumbersome administrative details as private foundations. In addition there are fewer distribution rules. Private foundations usually must give out 5% of their assets annually, while donor advised funds have more flexibility on when and how much to give out.

A recent 2013 Donor Advised Fund report released by the National Philanthropic Fund illustrates that use of these tools is rapidly increasing. Specifically, the report explains how in the last year alone, the total assets held in these funds went from just over $38 billion to nearly $45.35 billion. In addition, in the last five years there was an increase of about 40,000 individual fund accounts.

Some speculate that use of these funds skyrocketed in 2012 as a result of uncertainty related to the extent of charitable tax deductions allowable under federal law. Use of these funds is, in essence, a way of "pre-giving" in order to ensure that the deduction will apply. The tax deduction can be taken when the money is moved to the fund, even though it does not have to be given to charity until later. Those tax rule changes did not take effect in 2012, though proposals are still on the table which may curb the overall tax benefit of charitable giving moving forward.

Contact our NY estate planning attorneys today for help weaving charitable giving into your estate plan.

Modifying a Will - Don't Just Scratch Things Off

December 12, 2013,

Our attorneys frequently advise New Yorkers of the immense benefit of using trusts to conduct estate planning instead of relying solely on a Will. More and more residents are recognizing the value of trusts and incorporating them into their planning. However, Wills remain the most well-known and used tool to pass on assets upon death.

There are specific laws which dictate when a Will can be deemed valid by courts in probate. For this reason, it is always prudent to have an attorney draft your Will to ensure it will work as desired when the time comes.

However, even those who have an attorney draft a Will may make the later mistake of trying to modify the WIll on their own, without legal help. This is a significant problem and may result in the entire Will being thrown out. It is not uncommon for an individual's assets to be divided via intestacy rules instead of per their actual wishes in a Will because of modifications made ad hoc.

One common urge may be for a resident to simply take a Will prepared by an attorney and scratch a few names out, write in new names, or change the exact assets that each is to receive. But this is a mistake. Modifications or additions to a Will, often referred to as "codicils," still have to follow the same witnessing, capacity and signature requirements as a new Will. Therefore, making haphazard alternations as a time-saving measure will likely not be upheld.

In fact, considering that most Wills today are created and stored digitally, there is virtually no reason to engage in the complex use of codicils or slight modifications. Instead, most of the time it makes more sense to simply have an attorney help draft a new Will to ensure that all formalities are followed and fewer questions will be asked in probate when the WIll is brought forward.

At the end of the day the takeaway is clear: have the aid of an attorney every time you create a Will or want to update a Will. Holographic Wills--handwritten and unwitnessed documents--generally will not be upheld in New York Probate Court except in very limited situations (like for members of the armed services who are overseas). For this reason, without the counsel of an attorney you always risks having a home-made Will thrown out and rendered ineffective, adding an extra challenge to grieving families at the exact moment that they do not need it.

What Matters When Choosing an Executor?

November 1, 2013,

Understanding the specifics of the law is just one aspect of successful estate planning. Obviously it is critical that a will is created in a such a way that it will be upheld or that a trust will have legal effect (or that you take advantage of all available trust options to begin with).

But that legal knowledge is not enough to best prepare for the future. In addition, it is critical to understand the social, emotional, and practical considerations that affect these issues. Are certain family members more likely to feel jilted by a specific arrangement? Is there a financial danger that should be guarded against? These and hundreds of other questions must be considered when planning. Memorizing statutes and legal books will only provide so much guidance--experience on these issues fills in the gaps.

Advice for Executor Selection
For example, when creating a will it is important to name an executor. The executor is charged with ensuring that the provisions of the will are carried out. But what considerations should one make when deciding who to name? Choosing the wrong executor can lead to a myriad of inheritance problems and often spurs feuding.

A recent Advisor to Client article touched on a few important considerations. Even a quick perusal of the list of considerations makes clear that the choice must be guided by practical considerations (and not legal nuance).

For example, often the two most basic qualifiers are not considered: Is the executor capable of doing the job and does he or she even want the job? When it comes to capacity, it is important to select someone who is of proper age and in good health. Additionally, the task involves understanding many administrative matters, taxes, and more. If the executor is uncomfortable with these topics, mistakes are far more likely to be made. Similarly, forcing someone into the position is a recipe for disaster. Individuals may have very different reasons about why they do or do not want to play this role, but it is important to lay it all on the table at the beginning so an executor is not chosen who truly does not want the responsibility.

No one has better appreciates how an estate plan can go well (or poorly), then attorneys working on these matters. When choosing an estate planning lawyer be careful to select a team that has years (or even better, decades) of experiences to provide the practical advice you need to best position your family to deal with these matters in a timely, efficient, conflict-free manner.

Should You Spend Those "Reward" Miles Now?

October 28, 2013,

One of the baseline legal questions to consider when planning for inheritances is determining what can be passed on in the first place. This may seem like an unnecessary question. After all, can't you pass on all of your assets to another? Not quite. At least, you cannot pass on everything that you control while alive--some things may essentially disappear.

The most obvious categories of items where this might come into play are "digital assets." This includes items like a Facebook page, blog, Twitter account, online photo album, and many similar items. Many estate planning attorneys discussed these issues in recent years, noting that most decisions hinge on the specific terms and conditions for each social media site. The process for passing on access to these accounts varies. If you place particular value on these accounts, it is important to ask your planners more specifically about these issues to ensure your wishes are followed.

Reward Points After Death
But "digital assets" are not the only items where questions exist about passing them on at death. Consider "reward points" offered for loyalty by airline companies, credits card companies, and similar enterprises. As a recent CNBC story discussed, in many cases those points--or "miles" for airlines--are likely to disappear.

As with most digital assets, whether or not these loyalty points can be passed on at death hinges on the terms and conditions agreed to when first enrolling in the program. Considering the companies craft these terms on their own, it is not surprisingly that they are not very generous when it comes to allowing points to be transferred to friends or family.

Interestingly, this is not a minor issue. According to one research company's estimates, in the last year figures were available (2011), outstanding reward points had a total value of around $50 billion. That is a large asset to disappear upon death, often amounting to tens of thousands of dollars for single individuals.

As a practical matter, only those with significant loyalty points racked up have likely given much thought to creating a "mileage estate plan." But it is becoming increasingly important for New Yorkers to consider whether they need to include these details in a will or trust. If so, it is critical to plan carefully to ensure your will provisions comply with the program's terms and conditions. For example, some programs only allow transfers to certain people (a spouse) or require a death certificate. The contractual arrangements made ahead of time with the company will trump provisions of estate planning documents.