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

Integrating Business Succession Into Estate Planning

August 11, 2014,

When many business owners talk about business strategy they often refer to financing, expansion, partnerships, marketing, and the like. However, many business owners fail to take into consideration the question of continuity and business succession. According to the U.S. Small Business Administration, over 70% of all small business owners do not have a business succession plan integrated into their other estate planning documents.

Why You Should Create A Plan Now

Many small businesses are family owned, and as a result they do not feel the need to be so formal with a succession plan. However, this can be a huge mistake and many businesses have crumbled after an owner dies or leaves because of the lack of a plan.

Another reason why business owners do not create a business succession plan is because, like writing other estate planning documents, the process makes them feel uncomfortable. Keep in mind that creating a plan is necessary to ensure that the business will continue in line with your goals. A succession plan can also protect your employees, their retirement plans, and your future, as well.

Creating the Plan

At a minimum, the business succession plan should include details about the transfer of management and ownership of the business. Management and ownership planning can include:

· Development, training, and support for successors
· Delegation of responsibilities and authority to successors
· Identification of outside advisors
· Retention of key employees through compensation, benefits, etc.
· Coordination between who will own and who will manage the business
· Consideration of transfer during the lifetime of the owner
· Consideration of the best interests of the business and owner's family

The last point is particularly important for the owners of small businesses. Many small business owners and successors have difficulty separating personal preferences and what is best for the business when creating a succession plan. You must treat the family business as what it is, a business, and if you need to speak with professional advisors about the succession plan then you should do so.

Benefits of Creating a Succession Plan

One benefit to creating a business succession plan is to avoid probate. All assets, including business assets, must go through probate and the courts unless arrangements are made beforehand. Another benefit to creating a business succession plan is to maximize potential tax considerations for your estate and your business.

Your business may continue to grow in between the time that you create a business succession plan and when you pass away. The taxable estate will include the increased value unless it is planned for accordingly. Options for avoiding probate and increasing tax benefits include an ILIT, GRAT, GRUT, family limited partnership, or family limited liability company.

An ILIT is an irrevocable life insurance trust that can provide liquidity for a business during probate. The funds from the life insurance trust do not pass through probate and are available immediately to help with the costs of business. The GRAT and GRUT are types of trusts that you can transfer the assets of the business into for successors while still maintaining a source of income for yourself. Any appreciation in business value is not subject to probate and is shielded from estate taxes. The final option is a family limited partnership or a family limited liability company. Using these in a succession plan can allow the owner to transfer business assets to the successor without probate and can even discount some assets for gift tax purposes.

The Pros and Cons of Dynasty Trusts

July 28, 2014,

A dynasty trust used to be a very popular estate planning tool that has declined in use over the last few years. A dynasty trust ensures that upon the client's death their assets would still qualify for an estate tax exemption. In the past, if a deceased spouse did not have a trust, their part of the estate would not qualify for the exemption.

However, today's rules for trusts and estate tax exemptions are different. A deceased spouse's portion of the estate tax exemption passes automatically to their surviving spouse. Additionally, the tax exemption level has risen from $1 million to $5.3 million per person. As a result, a lot less people need to worry about a part of their estate being taxed upon their death, and dynasty trusts have mostly fallen out of use.

Benefits of Dynasty Trusts

The estate tax exemption is not the only benefit to dynasty trusts, and estate planning attorneys can utilize them in a variety of ways to ensure that a client's family is taken care of for years. The most basic reason for a dynasty trust is asset protection. When a client dies if their children lose a lawsuit the trust cannot be forced to pay. A dynasty trust also prevents a surviving spouse from remarrying and disinheriting the beneficiaries of the trust.

A dynasty trust also provides the option to set up the trust in perpetuity. Most trusts designate that distributions should be made to beneficiaries when they are 18, 25, or 30. However, by having a dynasty trust the young beneficiary does not have the opportunity to squander all of their money at a young age. By using a dynasty trust a young beneficiary can have ownership of the money, but not necessarily access to it. A trust can be put in place for over one hundred years, and the trustee decides when and how distributions should be made.

Finally, dynasty trusts protect against legal loopholes and changing laws. For example, usually when a surviving spouse remarries she will forfeit the tax exemption on the deceased spouse's estate. A dynasty trust prevents that from occurring. This type of trust also locks in the exemption level at the time of the creation of the trust. So if the level of exemption falls back to $1 million, the dynasty trust created now will keep its exemption of $5.3 million.

Detriments of Dynasty Trusts

However, there are some drawbacks to creating a dynasty trust. Setting up a dynasty trust is a complex legal process that requires a significant amount of time and money to accomplish. If a client wants to set up a dynasty trust in perpetuity, advisers need time to discuss who the trustees will be, what money and assets will be used, and under what circumstances the terms of the trust can be altered. Dynasty trusts can be written in a way that seems like a hand is controlling from the grave or can be done with a great deal of flexibility in the terms.

If you or a loved one is considering creating or revising an estate plan, discuss the possibility of a dynasty trust with your attorney and see if it may be a valuable option for you.

Supreme Court Ruling - Inherited IRAs Not Protected in Bankruptcy

June 20, 2014,

In a unanimous decision the Supreme Court has ruled that an IRA is not protected from creditors in bankruptcy proceedings when it is inherited in an estate. In the case of Clark v. Rameker, Heidi Heffron-Clark inherited an IRA from her mother in 2001. The account contained roughly $450,000 and she began to make distributions. In 2010, Mrs. Heffron-Clark and her husband filed for bankruptcy, but they claimed that the remaining $300,000 in the account was shielded from creditors as retirement funds. The creditors and bankruptcy court disagreed, and the case went all of the way up to the Supreme Court.

Key Distinctions of Inherited IRAs

The Court made its decision that inherited IRA accounts are subject to bankruptcy and creditors based on a couple of specific differences between inherited IRAs and owner IRA accounts. Owners of an inherited IRA cannot put additional funds into the account. Additionally, they can take distributions from the account at any time without penalty. In fact, the law states that an heir to an IRA account must either withdraw the entire amount from the account within five years of the original owner's death or at the very least take out a minimum amount starting the December 31st after the original owner died. This applies to regular and Roth IRA accounts.

Inherited IRAs differ from IRA owner accounts because the purpose of an IRA is to ensure that retirement funds will be available in your elder years. If an IRA is inherited, the original owner clearly no longer needs those funds for his retirement, and therefore the need for bankruptcy protection of those assets no longer applies.

Ramifications on Estate Planning

This decision does have some effect on estate planning. First and foremost, it is important to remember that IRAs are typically not covered in a will. When an IRA or other employer-sponsored retirement fund is created the owner of the account must fill out a beneficiary designation form. This form can later be amended, but the account is inherited by the person named on this legal document.

Spouses face the biggest consequences from the decision in Clark. A spouse that inherits an IRA has the option to rollover the inherited account into her own IRA. Distributions from her IRA are postponed until the spouse turns 70½, and penalties apply if the spouse takes the IRA early. If a spouse elects not to rollover the IRA, it is considered an inherited account and is now subject to bankruptcy proceedings.

Besides rolling over the account another option for avoiding an inherited IRA being subject to bankruptcy proceedings is to name a trust, as opposed to a person, as the beneficiary of the IRA. With the advent of the decision in Clark we are likely to see an increasing number of account owners naming trusts as the IRA beneficiary and having their loved ones named as beneficiaries to the trust. However, setting up IRA beneficiaries as a trust is a complicated legal issue, and if you elect this option the best decision is to talk to an experienced estate planning attorney about the matter.

Tips on How to Leave an Inheritance to Your Children

June 19, 2014,

According to some estimates, the Baby Boomer generation will leave over $30 billion to their children in their wills over the next thirty to forty years. When leaving an inheritance for minor or adult children sometimes personal, professional, or financial issues can flare up and complicate the process. If you wish to leave your estate to your children here are five simple steps that will ease any conflicts in the planning.

· Use open communication to manage expectations
Talk to your children about what to expect from the estate. Recent surveys have found that children often undervalue their parents' estates by over $100,000. Letting your children know where you stand financially and what they should reasonably expect resolves a lot of conflicts before they even begin. You should also communicate about how their expectations should change because of economic downturns, long-term medical care, or other unexpected issues.

· Create a level playing field
Creating a level playing field does not necessarily mean that you must distribute all assets equally. This can also apply to the distribution of responsibilities when it comes to settling your affairs. When your children feel included in the process it makes them feel like they are worthy, capable, and trusted by you. Getting everyone involved can minimize fighting over aspects of your estate.

· Distribute assets yourself
One common issue that causes problems between children occurs when assumptions are made about asset distribution. A lot of parents will name one child as the beneficiary of a life insurance policy or other account and simply expect that child to equally distribute the money to the rest of his siblings. To avoid any potential issues, name all children as the beneficiaries to the accounts that you wish them to share.

· If distributing unequally, explain why
The largest issues often come from inequality in asset distribution. Children fight when one gets more than others. Oftentimes, parents have good reasons for allocating more of the estate to one or more children. One child may make more money, another may need more for schooling or special needs, or a variety other logical reasons for unequal distribution. The easiest way to resolve this issue is to simply explain why. Because parents often feel uneasy about having these kinds of talks with their children, another option is to leave a note with the will or address it in your estate planning documents.

· Eliminate uncertainty by placing the estate in a trust
A lot of attorneys who specialize in estate planning suggest distributing estate assets to children in chunks, particularly if the children inheriting the estate are at a younger age. The logic of this is that children will make more mature financial decisions as they age. One simple way to control when and how your children receive their inheritance from your estate is by putting your estate in a trust. In addition to placing specifications about when and how distributions should be made, many other types of provisions can be written into a trust. It can ensure that your children will make wise and prudent decisions about the inheritance that you provide.

Estate Planning & Technology - Including a Digital Estate Plan

June 4, 2014,

In the Information Age our digital presence and assets are just as important as our physical estate. Digital assets consist of all of our property that exists online. This can include brokerage accounts, bank accounts, PayPal, and online currency such as bitcoin. However, our digital presence extends far beyond that into other areas such as social media accounts, email addresses, online subscriptions, documents, photographs, and digital music libraries. Over 75% of all Americans have some kind of social media account or have an account on a social networking website. When creating an estate plan you need to consider what your wishes are for your digital assets as well as how you would like them to be handled.

The first step in creating a comprehensive digital estate plan is to identify and organize all of your digital assets. A simple way to track these assets is to create an Excel spreadsheet. You can break your digital property into categories in addition to having all pertinent user names, passwords, and other information necessary for access. Excel sheets can be password protected, so for those who are worried about other people gaining access to their online accounts a level of security can be added. Other people keep track of accounts and information in a small notebook or other non-digital means.

The next step is deciding who should be the "trustee" of these accounts. This is the person who would manage all of your wishes for your digital property. This person would distribute assets, delete or erase accounts, or continue to manage any digital accounts that you have. Typically, a family member or friend is named as trustee, but the digital assets could be broken into separate groups with a different trustee for each. The best person, or people, to choose are those who will handle the assets according to your wishes.

Providing access to the list of digital assets is also a consideration that must be made. If you choose to organize your assets on a password-protected Excel sheet or lock away a hard copy your trustee needs to know how to access the information or where it is located. For estate planners that are a little more tech savvy, a variety of online companies provide services for storing passwords and other online information. Some of these password manager companies include:

· Lastpass
· Dashlane
· PasswordBox
· Keeper
· Password Genie
· Passpack
· Deathswitch, and others.

The final aspect of creating a digital estate plan is providing instructions in the overall estate planning process. Using language in an estate plan that gives permission to the trustee or explains how to gain access to the digital list is a reliable way of ensuring that they will gain access to your accounts. You can also include as a part of your overall estate plan instructions for inheritance or bequeathing of specific digital assets. An experienced estate planning attorney will be able to seamlessly integrate your digital estate plan with your plan for the rest of your physical estate.

Common Goals of Estate Planning for Married Couples

May 30, 2014,

Estate planning is meant to provide direction and security for loved ones when we pass away, but complications can arise in the estate planning process when structuring a plan as a married couple. Each person in the marriage has individual estate planning goals, tax-related objectives, and ideas for the future. However, upon probing deeper through the individual wants and needs of the spouses common goals run through the estate planning process of almost all married couples:

· Providing for family and loved ones
This is typically the top priority for all married couples. They want to know that their surviving spouse, children, grandchildren, extended family and friends are all provided for after they are gone. Even pets can be provided for if an estate plan is structured correctly.

· Minimizing taxes
Couples also want the taxes on their assets to be as minimal as possible so that their beneficiaries can fully inherit after they are gone. This includes federal estate and income taxes as well as state estate and income taxes.

· Protecting property/assets going to family and loved ones
Similar to providing for loved ones, married couples also want to know that specific property and assets will be protected from creditors or from future family issues such as a future spouse.

· Cost effective planning
The cost of estate planning is one of the main reasons why couples put off the process for so long. They want to have a plan in place that meets the individual and couple's goals, but at the same time want a plan that isn't too costly to create. In most cases a compromise must be made. In order to achieve all of the estate planning goals a basic level of complexity must go into the planning process. At the same time, structuring an incredibly intricate plan can be costly. Therefore, finding an attorney that can cover all of the basic goals while also keeping the plan under a certain budget is vital.

· Privacy in estate planning matters
Keeping the decisions of estate planning private from others is also a common goal of most married couples. Not only does it keep their business out of public knowledge, it can help protect the surviving spouse or other beneficiaries from being the victims of fraudulent schemes after the estate plan goes into effect.

· Control over assets
One of the biggest concerns that married couples have when estate planning is ensuring that the surviving spouse has control of the assets of their marriage after one passes away. The same is true in most cases when it comes to ensuring that the children will also have control over the assets of the marriage when both spouses pass.

· Planning for incapacity
Although it is tough to think about, most couples also want provisions in an estate plan that provide for the incapacitation of themselves or their spouse. An estate plan can provide for more than just death, and in the case of incapacitation a plan can dictate power of attorney as well as medical wishes.

· Asset management
Typically, one spouse in a marriage is more adept at asset management, and an estate plan can structure a new management system for the surviving spouse if the other is incapacitated or passes away. This ensures that someone capable is always managing the family's assets.

Discussing these common goals before meeting with an estate planning attorney can help a married couple facilitate the process of creating an estate plan. Not only does the process become much easier, it also provides peace of mind that both individual and common goals are being met when planning for the future.

Growth of Online Memorial Services

February 13, 2014,

Making preparations for funeral services, burial preferences, and other memorial issues is a natural part of New York estate plans. These details have been a staple of the mourning and remembrance process for centuries. However, if trends continue, a new form of memory may be added to many plans: professional, digital tributes.

Online Memorial Websites
The stratospheric rise in popularity of online social networks and blogs should make it no surprise that remembrances for lost loved ones are moving online. Placing an obituary in the local paper or buying a memorial ad on the yearly anniversary is no longer the only way to share information about a passing and gracefully remember those who are gone. The process has moved online.

The Wall Street Journal published a story this week that discusses many of the most common options local families are turning to when trying to craft an online memorial for their loved ones. These sites are often referred to as "virtual gravestones" that allow friends and family a shared place to mourn across the web. A few of the most common vendors:

Legacy.com
ForeverMissed.com
LifeStory.com
Facebook

Of the above list, Facebook and LifeStory are free. The Facebook option is simply conversion of an old account into a "Memorialized Account." This preserves many of the memories and message on the page for friends and family. Similarly, using a Facebook account, LifeStory.com provides a more formal online memorial with specific pictures, messages, and memories added.

Alternatively, Legacy.com and ForeverMissed.com are stand-alone memorial companies that offer various degrees of customization. These sites range from a $35 to $100 and vary as to whether there is an annual subscription renewal charge or if the site will remain up indefinitely.

All told, one reviewer who searched various sites in an effort to compare features and functionality argued that all of these formal online memorial sites have much room to grow. Many of the sites seem outdated and have not fully embraced the social connectivity that undergird so much online browsing today. For example, critiquing Legacy.com (currently the largest provider online memorials), the reviewer noted that the site "pages are limited to a collection of preset boxes and small photos that might have been cutting edge in 2002."

The safe bet is that more and more options will pop up in the coming years for New York residents to craft official online memorial spaces. These tools may eventually make their way into formal estate plans so that residents are able to specifically explain how they would like their online remembrance to look and feel.

Estate Planning Tips from the Stars - James Gandolfini's Will Filed in Manhattan

July 9, 2013,

Last month many in the entertainment world were shocked and saddened by the sudden death of New Yorker James Gandolfini at the age of 51. His passing from an apparent heart attack is a somber reminder that none of us know for sure what the future holds.

This week reports were released discussing some of the estate details. Gandolfini's will was made public and filed with a court in Manhattan. Wills are public documents when filed with the court. The only way to keep these matters private is by using trusts and other devices which transfer property automatically without the need to go through the probate process--Gandolfini did make some arrangements outside of the will that are not known publicly.

Gandolfini Will
A look into the late actor's estate planning documents reminds that the basics of transferring assets after a passing are similar for everyone, from regular community members to the rich and famous.

All told, Gandolfini's estate may be worth nearly $70 million. That is broken up into a range of assets. As with most, the majority of his wealth will pass on to his children. A CNN analysis of the will suggests that his 14-year old son was the named beneficiary of a $7 million life insurance policy. That policy was held in trust and set up in his name. In addition, the trust may purchase a condominium that Gandolfini owned in Greenwich Village.

Gandolfini's current wife will receive most of the tangible property in the estate, though she will not benefit from any other major provision in the will. The document states that other arrangements were made for the wife, outside of the will.

In addition, Gandolfini owned property in Italy. That will be split between the 14-year old son and Gandolfini's second child, an 8-month old girl. The property will be held in trust until the younger child reaches the age of 25. Interestingly, Gandolfini used the will to offer his advice about for the property. The actor wrote, "It is my hope and desire that they will continue to own said property and keep it in our family for as long as possible."

The will lays out specific provisions for several others that he wanted to recognize, including his nieces, two assistants, his godson, and family friends.

These estate planning details from Gandolfini should be used as a general reminder of the many different options available when crafting your long-term wishes. If you haven't made arrangement yet, there is no benefit to waiting. Act now and ensure your family will be protected no matter what.

Obama Budget Proposal Calls for Changing Charitable Deduction Details

April 15, 2013,

Last week we discussed the release of President Obama's proposed budget. For estate planning purposes, one of the most obvious red flags in that proposal was a call for yet another edit to the federal estate tax. The President wants to raise the tax rate and lower the exemption level again, altering what was some thought was a more permanent fix agreed upon in the law passed in January.

But the estate tax is not the only aspect of the budget proposal which might affect long-term planning for New York residents. For example, the President is also calling for changes to how charitable contributions implicate tax matters. The possible change is being suggested in an attempt to increase tax revenues to plug budget holes.

The Future of Charitable Deductions
As discussed in a Forbes story, the proposal calls for a reduction in the value of charitable tax deductions. This is an idea that is not new, as the Administration has been calling for it for several years. The change would reduce from 35% to 28% the amount of any charitable deduction that can be taken for tax purposes.

Critics of the idea have been quick to pounce, one noted: "The White House proposal would raise the cost of giving to charity from 60 cents per dollar to 72 cents per dollar. That's a 20 percent increase in what can be called the 'charity tax.'" Some point to studies which indicate that anywhere from $2-$9 billion in fewer charitable contributions will be made each year as a result in the tax deduction shift.

Opponents of this shift also contend that the charitable tax deduction is unlike similar tools which may rightly affect only the affluent. For example, deductions can be taken for home interest mortgage payments. That deduction obviously benefits those with expensive homes more than those with smaller homes. In the same way, the charitable deduction benefits those capable of donating the largest sums more than those who are only able to give a little. But, there is a big difference between using taxes to incentivize the purchase of a large home versus using it to incentivize charitable giving.

As with the estate tax proposal, it is important to remember that many ideas in these budgets are merely opening salvos in negotiations--nothing is certain. But it is important for New York residents to be aware of this possibility and talk with an estate planning lawyer and financial advisers to see if it alters the feasibility of any long-term plan.

Obama Budget Proposal Calls for Changing Charitable Deduction Details

April 15, 2013,

Last week we discussed the release of President Obama's proposed budget. For estate planning purposes, one of the most obvious red flags in that proposal was a call for yet another edit to the federal estate tax. The President wants to raise the tax rate and lower the exemption level again, altering what was some thought was a more permanent fix agreed upon in the law passed in January.

But the estate tax is not the only aspect of the budget proposal which might affect long-term planning for New York residents. For example, the President is also calling for changes to how charitable contributions implicate tax matters. The possible change is being suggested in an attempt to increase tax revenues to plug budget holes.

The Future of Charitable Deductions
As discussed in a Forbes story, the proposal calls for a reduction in the value of charitable tax deductions. This is an idea that is not new, as the Administration has been calling for it for several years. The change would reduce from 35% to 28% the amount of any charitable deduction that can be taken for tax purposes.

Critics of the idea have been quick to pounce, one noted: "The White House proposal would raise the cost of giving to charity from 60 cents per dollar to 72 cents per dollar. That's a 20 percent increase in what can be called the 'charity tax.'" Some point to studies which indicate that anywhere from $2-$9 billion in fewer charitable contributions will be made each year as a result in the tax deduction shift.

Opponents of this shift also contend that the charitable tax deduction is unlike similar tools which may rightly affect only the affluent. For example, deductions can be taken for home interest mortgage payments. That deduction obviously benefits those with expensive homes more than those with smaller homes. In the same way, the charitable deduction benefits those capable of donating the largest sums more than those who are only able to give a little. But, there is a big difference between using taxes to incentivize the purchase of a large home versus using it to incentivize charitable giving.

As with the estate tax proposal, it is important to remember that many ideas in these budgets are merely opening salvos in negotiations--nothing is certain. But it is important for New York residents to be aware of this possibility and talk with an estate planning lawyer and financial advisers to see if it alters the feasibility of any long-term plan.

Don't Forget: There is a New York Estate Tax on Top of Federal Tax

April 10, 2013,

Much discussion at the end of last year dealt with the estate tax. As federal officials groped for a compromise to avoid the so-called "fiscal cliff," details about the federal estate tax were one part of the negotiations. Democrats wanted it returned to levels during the Clinton Administration while Republicans wanted it eliminated altogether.

Just before the deadline, a law was passed which apparently settled some of the matters of contention. In so doing, it seemed to finally provide some permanence to the federal estate tax. The tax rate now tops off at 40% (a jump from the previous 35%) and begins on parts of the estate over $5.25 million. The exemption level is pegged to inflation, and so it will rise slightly each year.

With news of this new estate tax compromise (and its relatively high exemption level), many have pointed out that the federal tax is now only a concern to a small slice of the population. After all, the majority of residents will not die with assets over $5.25 million, and so estate planning to avoid that federal tax is unwarranted.

Yet, in all the discussion over the tax and the political battle around it, some may be under the impression that the federal estate tax is the only major tax issue with which they need to be concerned regarding their long-term planning. This is misleading. That is because, among other things, many states still have their own separate estate tax. And the state taxes usually kick in at far lower levels than the federal one.

That is certainly true in New York. Our state taxes all assets over $1 million, with a top rate of 16%. While this may still seems like a large amount, there is a mountain of difference between one and five million dollars--and a huge number of families will need to account for New York estate taxes while not worrying about federal estate taxes. When the value of retirement accounts, homes, cars, stocks, bonds, and other assets are all taken into account, it is not uncommon for an estate to pass the $1 million threshold even when community members would not expect it to do so.

The bottom line is that many New Yorkers need to be aware of this estate tax burden. Don't be deceived about news stories touting a $5.25 million exemption level. Be sure to talk with a NY estate planning lawyer and ensure you are best positioned to pass as large a portion of your assets as possible in the manner you desire.

Can You Reject an Inheritance You Don't Want?

February 22, 2013,

Communication is absolutely essential to quality estate planning. That includes both sharing of information between client and planner, as well as the client being open and honest with their family about their wishes. Some might want to avoid difficult conversations about inheritances by keeping silent and allowing family members to find out only after they are gone. But this opens up the door to potential feuding and costly legal challenge. The goal of proper planning is to make transfers as seamless and efficient as possible, and meeting that goal requires others to know what to expect when the time comes.

Most of the time, unwelcome inheritance surprises come in the form of not getting what you expected to receive. Many adult children are surprised when a parent leaves assets to someone else or does not distribute equally between siblings. But the opposite may also be true. You may receive an item that you do not want. For a variety of reasons, not all gifts may be welcome. There are steps that can be taken to disclaim a gift that is part of an inheritance but they are often confusing.

Thanks, But No Thanks
As referenced in a NJ News article on the subject, both state and federal law set rules that must be followed to disclaim a gift. Failing to do this properly may result in various complications, including tax issues. Generally, however, a disclaimer must be made in writing and be irrevocable. The disclaimer cannot be made if you already accepted some benefit from the gift. The disclaimer must be received by the executor in a timely manner

There are many other complications that come with disclaiming, however. If the disclaimed gift reverts back to the estate afterwards (and the same person is set to inherit part of the estate generally), then the individual will need to disclaim the gift yet again as a portion of the inherited remainder.

Importantly, the above rules roughly describe the process when a gift is transferred via a will. Options may be far different if alternative methods are used--like trusts. At the end of the day, it is absolutely critical not to make decisions about these matters without first visiting with an estate planning attorney and other professionals to understand the implications and the exact rules that must be followed. At the same time, it is helpful to avoid this possibility altogether by having discussions well-beforehand so that a plan can be crafted whereby heirs know what they are getting and have accepted it.

Retirement Planning -- The Stages

February 19, 2013,

There are no shortage of articles discussing the need to get serious about planning for your retirement. Money is seemingly always tight, and taking a significant portion of assets and putting it away for another day is rarely an easy step. That is particularly true for middle class families who generally have much more pressure to ensure that income is sufficient to meet monthly bills. Of course, regardless of the difficulty, retirement planning is essentially for all of us--health and happiness in one's golden years depend on it.

A recent New York Times article provides some helpful analysis of the "stages" that many go through in putting off retirement planning before eventually buckling down and getting it done. The author argues that the well-known five stages of grief are perfectly adept at describing the stages of long-term financial planning as well. Those five include: denial, anger, bargaining, depression, and acceptance.

At first, many deny that the task is all that important. The article suggests, for example, that the amount of money needed to be saved is usually far higher than most suspect--so much so that many simply deny that the saving requirements are accurate. When that figure is shown accurate, many get angry about the difficulty of planning for retirement. With so many daily financial pressures it sometimes seems unfair that planning for one's retirement is such a burden.

Eventually, many move into the "bargaining" phase. This may involves attempts at shortcuts--saving less than necessary or using do-it-yourself options to plan for contingencies. A few people stop at this phase, leaving in place inadequate plans that are essentially an accident waiting to happen. In the estate planning context, this often means that residents leave their intentions unclear, setting up likely family feuds. Others, after acknowledging that half-measures are insufficient, fall into "depression," feeling dismayed about the task.

Fortunately, most people eventually make it to the final stage--admitting the reality and accepting the need to properly plan for retirement and put long-term affairs in order.

At the end of the day, long-term planning will not go away. Once you get beyond arguing about it, worrying about it, or assuming that the situation is hopeless, it is time to take deep breath and visit with professionals to get it done. That may include tax experts, financial analysts, and New York estate planning attorneys.

Trusting Kids with Large Inheritances Remains a Challenge

January 30, 2013,

One of the most common concerns that parents have when creating an estate plan in New York is worrying about passing on too much wealth to children who cannot properly handle it. After a lifetime of hard work, ingenuity, and prudent planning, the last thing many families want is to see a child obtain an inheritance and then lose it. One need only check newspapers headlines to see celebrity examples of younger individuals with too much money whose lives take a turn for their worst as they fail to handle their wealth carefully.

A Wall Street Journal article last week discussed this issue in the context of the now seemingly permanent federal estate tax rates. Per the "fiscal cliff" agreement, the estate tax law will allow each individual to shield up to $5.25 million. For a couple, that allows $10.5 million to be given to others tax-free.

While this is good news for those who have this much wealth to pass along, it does raise some questions for families. Is your child--no matter what age--prepared to handle an inheritance of this size? Will it be lost to creditors? Taken by a spouse? WIll the money change the child's motivation or long-term goals?

It is entirely prudent to ask these questions and work with estate planning attorneys to come up with creative ways to protect against one's concerns.

Of course, the trust is the crucial legal instrument that allows wealth to be passed on with certain protections and limitations set up, depending on your specific situation. Every trust is managed by a trustee. The trustee can administer the legal entity to ensure that beneficiaries are taken care of while protecting the principal. For example, the trustee can work with the beneficiaries to dole out funds when necessary--for college or a wedding--while not giving the beneficiary free control right away. Alternatively, disbursements to the beneficiary can be made in pieces, with a certain percentage of the inheritance given in five year increments.

At the end of the day, there are many different options that are available to families of considerable wealth to ensure that they pass on an inheritance without concern about how it will be used or affect their children. The first step is to visit with an estate planning lawyer who can provide tailored advice about what legal tools can be used to meet the specific needs of your family.

Donor-Advised Funds for Charitable Giving

December 18, 2012,

The holiday season is a popular time for charitable giving. It is helpful for those considering gifts--particular sizeable donations--to properly think through all of the tax and legal implications. There are smart ways to make contributions and clumsy ways. As always, an estate planning lawyer or similar professional can explain how any such decision is best carried out.

For example, the Wall Street Journal reported recently on the rise of "donor-advised" funds. The use of these tools is likely spurred by two tax uncertainties in the upcoming year. Will charitable deductions on taxes be limited in the future, counseling toward a large gift this year? Will income tax rates increase next year, counseling toward using the deduction next year instead of this year? It is a somewhat tricky problem, as no one knows for sure what lawmakers might decide.

That is where these donor-advised funds come into play. They are accounts managed by national charities and foundations. The basic idea is that a donor can give the gift this year--locking in a tax deduction--while waiting to actual disperse the funds to the charities as they see fit over time. The funds grow tax-free throughout this period.

Interestingly, the National Philanthropic Trust and other sources provides data on the sharp rise in use of these funds. Many of the largest charitable entities increased anywhere from 60% to 80% in use of these funds this year as compared to last year. And that is on top of the fact that last year saw a 10-15% rise in use from 2010.

Most accounts can be opened with $5,000--large sums are not needed. The donations can then be given out in small increments of as little as $50. In other words, there is a lot of flexibility for those with assets of all sizes. When using these tools however, it is important to have tailored advice on the best manner in which to give. For example, it might make sense to donate stock that has appreciated, instead of donating the profit after sale of the stock. By selling the stock directly some capital gains can be saved and a larger charitable deduction can be taken.

Of course, these donor-advised funds are just one of many ways that might be appropriate to give to charities smartly. Various trusts and other legal arrangements are available to ensure your gift is maximized. No matter what the case, though, it is important to act quickly, as the future remains uncertain and it is helpful to lock in current rates as soon as possible.

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First "Fiscal Cliff" Proposal Made -- What It Means for Estate Planning

December 4, 2012,

You cannot turn on the TV, flip open a newspaper, or pull up a news website this month without seeing the words "fiscal cliff." As many are aware, this refers to sweeping, mandatory federal tax and budgetary changes that are set to take effect January 1st unless the Congress and White House pass legislation with an alternative plan. Essentially the "cliff" is about $7 trillion worth of tax increases combined with significant spending cuts across the board--including everything from Medicare and Medicaid to the military.

What is interesting about the cliff is that virtually no one on either side of the aisle actually wants it to take effect. Instead, it was only put into place as a compromise over a previous debt ceiling legislative fight. The idea was that that the cliff would be so abhorant to both sides that its impending appearance would force a compromise. However, as the end of the year gets closer, more and more observers are worrying that even with the serious consequences of the cliff, no compromise is in sight.

Currently, the Obama Administration and Congressional leaders (most notably, the Republican House leaders) are trying to reach agreement on an alterantive to prevent the mandataory changes. As part of that effort, President Obama recently released his "first offer." As summarized in a recent article, the offer is far from what the Republican leaders have proposed, so it is unlikely that it will be taken seriously. Essentially, it calls for around $1.6 trillion in tax increases over a ten year period--mostly related to expiration of the so-called "Bush tax cuts." In addition, it calls for modest stimulus spending. The proposal would also permanently eliminate Congressional control over the debt ceiling level (which caused the current crisis to begin with).

On the one issue that has the most direct impact on estate planning, the proposal calls for estate tax rates to return to 2009 levels. That is a $3.5 million exemption level and a top rate of 45%. That is compared to a current $5.12 million exemption at 35%.

What Does It Mean For You?

No matter what the final resolution, advocates, advisors, attorneys, and others on all sides of the issue agree that stability is key. For planning purposes, it is always advisable to know what the rules will be for the future, instead of having the risk of major changes every two years.

For those hoping to dig deeper, the Tax Policy Center has a "Fiscal Cliff Calculator" that allows you to plug in your own details and see how various proposals and the cliff itself will personally affect you. You may be surprised at the significant nature of the results. For example, the "cliff" affects everything from unemployment benefits to payroll taxes, and so everyone is likely to be affected, no matter what their current situation. Be sure to keep a close eye on the possible proposals as they are discussed in the coming weeks. It is also important to talk to your financial advisors and visit with estate planning attorneys to learn more.

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Is "Prepaid" Life Insurance Becoming Popular?

October 19, 2012,

Life insurance is an important piece of long-term financial security for local families. It is entirely reasonable for parents and family breadwinners to wish to provide some security to their loved ones in case the unthinkable happens. However, with money tight and uncertainty about financial security remaining, some are unsure about the benefits of life insurance. Those in the life insurance industry have argued recently that their market is shrinking and returns are dropping. To jump-start the industry, some are now turning to a new product to sell to more community members.

A recent story in "The Motley Fool" provides some context for the product that may or may not be a good fit for some local families. This unique insurance option is actually a prepaid life insurance policy. It has been called the "marvel of simplicity." The product, spearheaded by a unique collaboration between MetLife and retail giant WalMart, is essentially a short-term one year life insurance policy that provides up to $25,000 in coverage. These are not huge sums, but the idea is to open the insurance up to a much larger market. MetLife likely sought out the arrangment so that they could tap into Walmart's large consumer base while saving costs of middlemen broker fees.

Interstingly, this approach is not the first of its kind. In the past Canadian insurer Manulife offered life insurance products through the U.S.-based big retailer Costco. In addition, in the past Walmart has sold customer various financial products, even including things like mortgages.

The article argues that MetLife is engaging in this somewhat unique life insurance marketing tool as a way to bolster sales in a slagging market. This latest move seems targeted at the less affluent and perhaps less financially aware community members. Selling financial products to this base--like prepaid debit cards--has proved lucrative in the past, and so MetLife may see long-term benefit down the road.

But is this sort of very short time prepaid life insurance plan right for you?

It is impossible to make any specific pronouncements about the merit of these financial tools. However, it must be noted that these one-year agreements are far different than long-term plans that provided security well into the future. As always, it is critical to seek out the help of financial experts, estate planning lawyers, and others who can explain what issues to consider and how any financial move might affect long-term plans.

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