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

Biggest Estate Planning Celebrity Lessons from 2014, Pt. 1

December 16, 2014,

This year saw a number of tragic celebrity deaths, and some were complicated further with estate planning issues. Using these stories can be a good way to transition into discussing issues of estate planning with your own family. A look back on the celebrity deaths and estate battles of the rich and famous shows just how many things can go wrong when an estate is not properly planned.

Patrick Swayze

Although Patrick Swayze died over five years ago, reports are coming out now that members of his family believe that his will was forged only a couple of months before his death while Mr. Swayze was hospitalized. His entire estate was left to his widow, and nothing was left to his mother or siblings. Because of the length of time that the estate has been closed, chances are that the estate documents will remain valid despite allegations of forgery.

The lesson learned: estates are administered according to state rules and regulations where the person died. Anyone who feels wronged by the terms of an estate must act quickly before the statute of limitations on the will runs out.

L'Wren Scott

Mick Jagger's girlfriend and fashion designer L'Wren Scott committed suicide earlier this year, and Mr. Jagger was so distraught that he postponed part of The Rolling Stones' world tour. The delay caused a multi-million dollar insurance claim that led to further legal proceedings between Mr. Jagger and insurance companies. The dispute was settled quickly after the insurance companies requested personal information regarding Ms. Scott's death from her family members, medical records, and social media accounts.

The lesson learned is that insurance disputes regarding a deceased loved one are not uncommon, especially when there is a dispute about who should be the rightful beneficiary to part of the estate. Good estate planning can help avoid these types of issues between family members or from becoming public.

Tom Clancy

The late author's estate is currently embroiled in a fight over eight million dollars because Mr. Clancy was never clear about who should be responsible for the taxes resulting from his $82 million estate. The dispute is whether his wife's share of a trust should pay for half of the IRS bill or if his children from a prior marriage should be forced to pay it all.

The lesson learned from his estate is that it is important to be clear and unambiguous in the drafting of a will and other estate planning documents. This is especially important in families with subsequent marriages, children from multiple families, or if the bonds of family are strained in any way.

Lou Reed

Musician Lou Reed only relied on a will to distribute the entirety of his $30 million estate. Because the contents of a will are public record through the probate court system, newspapers and other media outlets could publish the details of Mr. Reed's assets, income, and distributions.

The lesson learned from Mr. Reed is that probate is public, time consuming, and expensive. The use of other estate planning tools instead of or in conjunction with a will can help keep a family's affairs private and out of probate.

Establishing Gun Trusts

December 1, 2014,

In previous posts, we have discussed the use of trusts to pass down pieces of art and other collectibles to your heirs. However, special considerations come into play when estate planning involves the inheritance of guns. Regardless of whether it is an antique gun from the Revolutionary War, your grandparent's service gun from his time in war, or a current collection of guns for hunting or home protection, gifting firearms comes with a set of unique challenges. However, some estate planning attorneys are solving these issues through the use of a new planning tool, the "gun trust."

What is a Gun Trust?

A gun trust is typically set up as a revocable living trust. It is made specifically to transfer firearms, with the gun owner set up as the trustee. Gun trusts are most commonly used to transfer firearms that come with federal restrictions, such as guns with silencers. This is because the trust can cut down on some of the paperwork needed to possess, transfer, and own these types of guns. However, a growing number of people are now using gun trusts to pass down a deceased loved one's personal collection.

Benefits of a Gun Trust

One benefit of a gun trust is that the person named as executor or trustee can have a working knowledge of state and federal gun laws, safety and storage protocols, and how to best liquidate a collection. In addition, any successor trustee named to the gun trust can be well-versed in firearms before inheriting control of the trust.

Another benefit of a gun trust is that the owner of the collection can state with specificity how the collection should be handled. In one case, the owner made a list of collectors that he knew would properly value the collection and instructed family to only interact with them when liquidating the guns.

Having a gun trust can also ensure that the beneficiaries are legally allowed to own or access the firearms. The trustee or successor trustee can check that all beneficiaries clear the restrictions of the U.S. Gun Control Act or enact contingency plans in the case that a beneficiary can no longer legally possess the collection.

One final benefit of a gun trust is avoiding the probate system. When a firearm collection has to go through the probate court, it and the beneficiaries involved become part of the public record. For collectors with particularly impressive gun collections, privacy also gives an added layer of protection against thieves.

When Isn't a Gun Trust for You?

A gun trust does not always make sense for a client who wishes to pass down firearms. If your heirs are adept at firearms and know the laws surrounding them, a gun trust may not be for you. In addition, if the collection is not very valuable you do not have to worry as much about the guns going through probate and becoming part of the public record. Finally, if the guns do not come with federal restrictions, the benefits of a gun trust are also diminished.

Creating an Estate Plan for Your Treasures

November 19, 2014,

One New York resident, now 65 years old and in retirement, has amassed a Las Vegas chip collection worth an estimated $500,000 over the course of two decades. However, he is childless, and no one in his extended family has expressed an interest in keeping the collection. He is also concerned that they will sell the collection for far less than its actual worth. Collectors can spend a lifetime accumulating things like baseball cards, comic books, casino chips, and art. However, too often these collectors do not think about what to do with these collections once they pass away.

The Need for Proper Planning

Many collectors hope that someone in their family or group of friends will enjoy their collection enough to keep it and maintain what they have done. Others think that another collector will pay a lot of money to their heirs for what they have amassed and assume that the heirs know what it is worth. Some hope that their collections will be donated to a museum in order to be displayed for posterity. However, none of these plans can be known for certain without proper estate planning.

If you do not state with certainty what you wish to have happen to your collection after you pass away, it could as easily end up in a yard sale as it could a museum. In addition, you and your heirs could miss out on valuable tax saving opportunities if you do not have an estate plan for these belongings.

Estate Planning Options for Collectors

There are a few estate planning options for collectors in regards to what they wish to have happen to their collections after they are gone. Each option comes with its own set of steps to ensure that your heirs follow through with your final wishes for your collection.

Passing on the Collection

If you wish to pass on your collection to your heirs, the most important thing to do is make sure that there is someone who wants to take it. You also need to make sure that your heir has the ability to maintain the collection and pay for any upkeep, including insurance and storage.

Other considerations for passing on a collection include how to compensate those heirs who do not receive the collection? If more than one heir expresses an interest in the collection, how do you split it up? If you split the collection, will it affect the value? Finally, if no one can afford the upkeep on the collection, are you willing to leave an endowment from your estate to maintain it?

Selling the Collection

If you wish to have your collection sold upon your death, the first thing that you should do is have it appraised, both as a whole and as any smaller lots you may think might happen in the selling process. Keep in mind that collectibles are taxed for capital gains at a rate of 28%, and the sale might be subject to other costs like commission and shipping.

Donating the Collection

A final option for collectors in estate planning is to donate their collections. Donation can be a complex and time consuming process. Some institutions only want part of a collection, and others want a donation of money in addition to the collection for maintenance and storage. However, donating to public organizations can also come with tax benefits for the current year and up to the next five years.

The Smartest Ways for Grandparents to Help Pay for College

October 22, 2014,

More and more grandparents are now using some of the money that they have tucked away using retirement and estate planning to help their grandchildren pay for college. According to a study done by Sallie Mae, 17% of families in the United States relied on relatives to help pay for college. This percentage is expected to increase as more grandparents use their estate plans to help benefit their families.

However, it is important that grandparents should be smart about how they help their grandchildren pay for school because it can have major tax consequences for them and their loved ones if the correct steps are not taken.

Understanding Estate Planning Gift Taxes

One of the biggest tax implications for grandparents and grandchildren are the federal gift tax rules. In 2014, the federal gift tax exclusion is $14,000. This means that each grandparent cannot gift more than that amount to a single person during the year without incurred taxes. At most, grandparents can gift one grandchild up to $28,000 without being taxed.

However, these is an exception to the gift tax rules if the grandparents are contributing the gift to a "529 plan." Up to five years of gifts, or $70,000 per grandparent, can be contributed at once if paid directly to a 529 plan for a total of up to $140,000.

Establishing a 529 College Savings Plan

Estate planning experts usually recommend setting up a 529 college savings plan for grandparents that wish to help pay for their grandchildren's college. One of the main benefits is that the grandparents maintain control of the account and the funds within it. The grandchild is named as a beneficiary of the account, but the grandparents remain the account holders. This allows them to transfer assets out of their estate into the account for estate planning purposes.

If the grandparents own the 529 plan, the account is treated like a student asset and is assessed as such. In addition, FAFSA assessed student income at 50% from the 529 plan which can seriously reduce the amount of aid given. However, if the grandparents transfer the account into a parent's name before their grandchild applies for aid, all of these problems are avoided.

Disadvantages of Other Plans

A lot of grandparents assume that setting up a UGMA account for their grandchildren is the best course of action when helping pay for college, but the rules have changed drastically for these types of accounts over the years. The tax benefits that the accounts used to receive are now almost completely eliminated.

Additionally, the grandchild owns all assets in the account and can technically do what they wish with the funds, even if they were gifted for the purposes of paying for college. Because the grandchild owns the assets in the account, it can also dramatically impact the amount of financial aid that they receive through FAFSA and other government programs. This is because federal aid programs typically take into consideration twenty to 25% of the student's assets, which includes any money gifted through a UGMA account.

Three Important Estate Planning Questions to Ask Your Spouse

August 22, 2014,

Estate planning is not many couples' idea of fun, but it is necessary to ensure that your loved ones are cared for after you are gone. An experienced estate planning attorney can handle drafting the proper documents and explaining the law behind estate planning; however, there are three important questions that you should address with your spouse or significant other regarding an estate plan.

How well does my spouse know my estate planning attorney?

If you are the one in charge of the estate planning process and the finances of the family, it is possible that your spouse has never met, or only met once, your estate planning attorney. Perhaps they met to briefly sign some papers, but the client/advisor relationship is not very strong.

If you are the first to pass away, your spouse would be relying on a person that they barely know during the most difficult time in their life. Since your estate planning attorney will know about every asset, final wish, and plan for the estate it is important that your spouse form a strong relationship with your estate planning attorney.

Does my significant other know where all of the accounts are located and how to access them?

The surviving spouse or significant other will need to access money immediately in order to pay for funeral expenses. Even if an insurance policy covers funeral expenses the reimbursement does not come until weeks or months later. Hospital bills and the daily expenditures of everyday life also need to be taken care of. Your spouse will not have time to search everywhere trying to figure out what accounts exist and how to access them.

You need to ensure that your significant other is aware of all financial accounts and how to access them after you pass away. It is helpful to make a list (or two) and leave them for your spouse that includes:

· Password lists for all online accounts and memberships
· Names of all accounts and memberships, online and offline, along with any necessary instructions
· Location of all estate planning documents
· Names, addresses, and phone numbers of all lawyers, financial planners, accountants, and others who helped create the estate plan

Are all of our estate planning documents and beneficiary designations up to date?

Life events such as births, deaths, marriages, divorces, and job changes can all necessitate an update to your estate plan. This applies to the will, estate planning documents, and any beneficiary designations. Be sure to check:

· Retirement plans (401K plans and IRAs)
· Life insurance
· Annuities
· Taxable investment accounts

...and other assets that require a beneficiary designation.

By talking with your spouse or significant other about these important aspects of your estate plan you can minimize the stress and confusion of the entire process. If your spouse has a good relationship with your estate planning attorney, is knowledgeable about your accounts, and has worked with you to update the estate plan and beneficiaries you can be assured that your loved ones will be properly cared after you are gone.

Estate Planning Issues Involving Pets, Pt. 1

August 13, 2014,

Legally, pets are considered personal property of their owners, but for many people their pets mean so much more than any piece of furniture or inanimate object. They can be a person's best friend, companion, and family. When a person begins the estate planning process the pets need to be addressed, as well.

For many people, the wellbeing of their pets is not a concern in the estate planning process, and unfortunately it can lead to the abandonment or euthanizing of the animal once the owner is gone. The only way to protect pets after the death of the owner is through legally binding estate planning documents. Allergies, conflicts with other pets, and exclusion of pets in rental agreements are the most common reasons why informal promises made by friends and family members to take care of a pet often fail.

The idea of legally enforceable documents that ensure a pet's wellbeing in estate planning is a relatively new concept. Mockery in the press is also another reason why people do not seriously consider providing for pets in an estate plan, even if the remainder of the funds is set to go to an animal charity or other worthy endeavor. The most well-known example of this was Leona Helmsley, who left millions for her dog, Trouble, in a pet trust. Sadly, she was ill-advised when creating the trust, and her wishes were never fulfilled.

Legal Documents for Pet Protection

There are two main documents to consider when planning for the future of your pet - a will and a pet trust. Each document has its advantages and disadvantages, so the best option is to discuss with an estate planning attorney what the best choice for your estate should be.

Will: A will is valid after death and serves to distribute property. However, there are many pitfalls to relying solely on a will for a pet's wellbeing. Instructions in a will are not enforceable, and disbursements cannot be made over time. In addition, the lag time between when a will is read and disbursement of property can also create issues. Changes to a will are also in a court's discretion, so if a judge does not think that the pet deserves a disbursement the document can be changed. Finally, in states without pet trusts any disbursement to a pet in a will is considered "honorary."

Pet Trust: A pet trust enlists a pet trustee who distributes funds for the pet's wellbeing and ensures that it is being properly cared for per the previous owner's instructions. This document has many advantages over a will. Pet trusts are valid during and after the owner's life and a trust can preempt problems in the estate. Control over the disbursement of funds is also better under a pet trust. Pet trusts also allow for an investment trustee or trust protector for the proper investment and disbursement of funds. Finally, a pet trust allows for provisions about incapacity, and it can instruct that the pet goes with the owner to a nursing home or other care facility.

Part two of this article will discuss the various issues that need to be contemplated concerning the wellbeing of your pet during the estate planning process.

Key Estate Planning Questions to Help Avoid Mistakes

July 1, 2014,

Many people are uncomfortable with the process of estate planning. As a result, people are not always completely forthcoming with their estate planning attorney or do not think through all aspects of their plan. If you are just starting to draft your estate plan or are thinking of revising your current documents, here are some questions to consider that can make the process easier.

· What are your personal goals? Professional goals?
Establishing personal and professional goals can give an idea of how much you will need to live comfortably in your lifetime and how much will be left for your heirs. If you plan on retiring early or need more money for personal, financial, or health reasons an attorney can help you structure your estate plan accordingly. Establishing goals is also a good way to indicate to your heirs what they should expect to receive from your estate.

· What would you like to achieve with your wealth?
Knowing what you want to do with your money can also help with estate planning. Are you planning on investing in a post-retirement business, do you want to spend most of your wealth before you die, or do you want to set aside a significant amount for your heirs?

· What keeps you up at night about your money?
Knowing your concerns about your current estate can also help your attorney plan accordingly. If you are unsure about how to use money in retirement and have some left for your heirs they can help you structure a plan, and if you don't know the best way to leave money for your heirs an attorney can tell you what your options are.

· What do you want for your children? Parents? Other family members?
Everyone wants their loved ones to be happy, healthy, and taken care of. However, you need to think carefully about how exactly you want your estate to help. Do you want your loved ones receiving lump sums of money after you are gone, or would setting up a trust be more prudent? In the case of you passing before your parents do you want part of your estate to be put towards their senior care?

· Who have you considered for the role of executor of your estate? Why?
What you should be asking yourself when appointing an executor is who knows best about my estate wishes and has the ability to see them through? It could be a spouse, child, or family friend. You can also appoint someone outside of your close circle like an attorney in order to avoid any personal or familial conflicts that could arise.

· Who have you considered for the role of trustee of your various trusts? Why?
The trustee(s) to any accounts set up for your estate should be knowledgeable about your financial matters as well as your wishes for those assets. You can appoint someone who is close to your family and knows the intimate needs of the beneficiaries, or if you can appoint a neutral third party who will make decisions based on what is best for the trust.

· Who have you considered for the role of custodian for your children?
This person will be in charge of raising your children, and it should be someone who can effectively communicate with the executor and any trustees for your estate to ensure that your children are properly cared for in the estate plan.

· Do your family members get along? If not, why?
If your family does not get along, you need to discuss with your attorney how this may affect your estate plan. Beneficiary, executor, trustee, and other designations can be greatly affected if there is discord in your family. This may mean that you include a letter in your estate plan explaining your decisions, or it may mean restructuring your plan entirely to avoid any further strife.

The Power of Legacy - Could a Will have Prevented WWII?

April 11, 2014,

Life is about far more than the accumulation of material wealth. Working hard and collecting valuables to enjoy and pass on to others at death is nothing to spurn. But there are many other things that are accumulated over a life and can be passed on at death: morals, lessons, memories, stories of hope, words of kindness, inspiration, and countless other values.

When thinking about life transitions and estate planning, it is important to consider those intangibles just as much as those items that have a monetary value. This is why, in addition to creating legal wills and trusts, we work with New York families on "ethical wills" to pass on all of those moral and spiritual items that solidify a legacy.

Advice for the Future -- Preventing a War
One common part of an ethical will is the sharing of advice to the next generation. The value of passing on advice should not be underestimated. An extreme example suggests that one of the greatest horrors in human history--World War II--may have been prevented if only a last will and testament was more widely disseminated.

A Daily Mail story last month discussed the will of the former President of Germany, Baron Paul von Hindenburg. Hindenburg led the nation until his death in 1934. He was widely respected in the country, particularly among the powerful political class.

Recently declassified information suggests that Hindenburg's last will and testament did far more than dispose of his property. The will also contained very specific advice to his country about the preservation of democracy and limiting the power of the up-and-coming populist leader at the time: Adolf Hitler. Recognizing Hitler's goal of taking complete control of the government, Hindenburg's will explained that the country need to maintain established principles, like an independent army and separation of powers. The document was intended specifically to prevent Hitler from fulfilling his ambition. One historian described the will as "a bomb timed to go off posthumously and blow Hitler off course."

Unfortunately, it did not work out as intended. That is because before the will was made public, Hitler found out about the contents. He immediately ordered the document seized, and the German people never learned of the lessons their statesman wanted to impart. Instead, a forged document was released to the public which wrongly asserted that Hindenburg had nothing but glowing praise for Hitler.

While this example is a bit different than the lessons that many New York seniors wish to impart, the underlying principle stands. Estate planning offers a chance to think wholistically about the meaning of life and how one would like to be remembered by the generations to follow.

Art Collections and Estate Planning

March 10, 2014,

Art Collector Disappointed Her Kids Don't want her Collection: Makes Backup Plan

A recent Wall Street Journal article discussed how estate plans protect art collections. The feature focused on a widowed woman with an art collection worth $250,000. The woman and her late husband traveled extensively and amassed the collectibles over a 50-year time frame. Now in her 80s, she wants to make future plans for the valuable collection.

Upon her death, she would like her cherished art to pass to her two daughters. However, she discussed her desires with her children and discovered that they do not want the Asian art collection. She reluctantly came to grips with the reality of her art moving beyond the family. The Asian art aficionado requested that, if possible, the art assortment stays together and be sold to one collector.

This story, and countless others, highlight the importance and necessity of pre-planning for the inevitable with a clear estate plan.

Options for Art Collections
A New York Times piece focused on both the monetary and emotional worth attached to personal collections. Because of the later, many people avoid including their prized collections in any type of estate plan. This is a mistake.

A robust estate plan prevents confusion and often times costly estate taxes. An estate planning attorney can assist and plan for the proper disposition of your property, including art collections.

Here are some options for collectors and what to do with their treasured collections:

· Pass it on to family members - this seems to be a popular 'default' for most collectors. However, in some instances, it may be a good idea to discuss your desires with your family members, or those whom you wish to inherit your valuables. Not everyone has the same taste and may not want the collection.
· Sell it - as noted above, not all family members want to inherit collections. So, one option is to sell to a buyer with the same passion as the original collector.
· Donate it - some collectors opt to donate to a museum or their alma mater. This way, the collection can stay together, which is an important factor to many collectors.

An estate plan that clearly incorporates all your desires, including how and where you want your collection to be dispersed, is central to avert any future issues.

NY Estate Planning
It is important for everyone to make an estate plan. When valuables, such as special art collections, are involved, it is imperative to create a plan and entertain a 'fallback plan' as well. Discuss and make proper arrangements for the disposition of belongings with an experienced estate planning attorney.

Continuing Legal Hurdles for Same-Sex Couples

February 18, 2014,

Each day seemingly brings news of additional states that are joining New York in allowing same sex couples the right to marry. Although the new laws and court decisions represent a monumental victory for residents seeking to take advantage of the protections and benefits afforded by same-sex marriage, same-sex couples will still face several unique legal challenges. .

Though the US Constitution requires states to give full faith and credit to judicial decrees, a marriage license does not fall under this category. Rather, a marriage license is an administrative license issued by the state or county and historically has not been subject to full faith and credit. This means that other states do not have to recognize the legal status of a same-sex marriage that was entered into in New York.

The majority of states do not recognize same-sex marriage, and 36 states currently have "defense of marriage" statutes that expressly provide that the state's government will not recognize a same-sex marriage. This presents a problem for same-sex couples looking to travel out of state. If same-sex couples travel or move to another state or country, their marriage may not be recognized.

Power of Attorney
One consequence of a state's refusal to recognize a same-sex marriage entered into in New York is that same-sex couples may not be allowed to be involved in the decision-making process should something happen to one of their loved ones while traveling. For example, a recent article explains that a hospital in a state lacking public accommodation procedures based on sexual orientation may refuse to allow visitation rights to a same-sex partner. Furthermore, a same-sex spouse may be prohibited from making end-of-life decisions for their spouse or loved one. As a result, same-sex couples should consider taking certain precautions before traveling, such as executing health care and financial powers of attorney and carrying those with them while out of state. These documents will ensure that proper procedures are in place should an accident occur while in another state or abroad.

Adoption
Another legal issue that arises for same-sex couples is whether a state will recognize a legal relationship between same-sex parents and their children. A New York Times article notes that a concern among same-sex couples is that without their adoption papers, their parental rights may be questioned while traveling. Another concern is that the nonbiological parent will lose rights if the couple divorces or the family moves to a different state.

Some states may not recognize a child's relationship to a same-sex couple. Therefore, it is important for same-sex couples to adopt their children in legal proceedings. If a same-sex couple does not have a biological relationship with their child, then their relationship would rest only on a marriage certificate, which may not be recognized in all states. Since states are required to give full faith and credit to an adoption certificate, as it is approved by a judge, a same-sex couple will have clear legal rights and a recognition of their relationship with their child while out of state.

Contact an New York Estate Planning Attorney
It is important to speak to an attorney that can help you make sure that you and your loved ones are have plans in place whatever the future holds. Contact our estate planning attorneys today to see how we can help.

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.

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.

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.

Would Changes to Charitable Tax Deductions Affect American Gifting?

December 4, 2013,

Many New York residents make charitable giving a part of their estate plan. Whether for estate tax benefits to pass on values and ethics to family members and many other reasons, residents commonly set aside certain assets to go to causes about which they are passionate.

However, according to a new report from a conservative "think tank" if any changes are made to federal rules about charitable tax deductions, then one can expect total giving in the country to decrease by billions each year. Before delving into the details it is critical to point out that the group releasing the study, the American Enterprise Institute (AEI), is known as a long-time opponent of all changes which would increase tax revenues. In addition, this AEI estimate is far higher than that found in similar studies by other groups.

The Charitable Giving Report
According to an article from Philanthropy.com discussing the new estimates, AEI researchers found that a limit to the value of charitable deductions--proposed by President Obama--may cause donors to give up to $9 billion less to charities each and every year. That large reduction in giving would have serious effects, the authors claim, on many non-profit organizations that rely exclusively on the gifts of donors for their yearly operations.

If the President's proposal passes, it is claimed that overall donations would fall by about 4.4 percent. The researchers used that figure against total giving nationwide to come up with the $9.4 billion amount that may be lost with changes to the tax law. The AEI report argues that the largest donors in particular would likely cut back on giving with the changes, because it is the "top 1 percent" of earners who are most likely to itemize their deductions and benefit from the charitable giving tax break.

All of this is being used to push back against the President's proposal to curb deductions that certain high earning individuals can take on these donations. Right now the upper limit is at 39.6 percent and the proposal calls for its shift down to a 28 percent limit. For his part, the President and his supporters argue that current law is unfair in that it provides more benefit to high earners to donate than it does to lower income donor. In addition, the additional revenue raised by the tax changes would be used to bolster programs supported by most non-profit organizations.

For help understanding how charitable giving can be incorporated into your estate plan, seek out the help of an experienced attorney today.

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.

Planning for Posthumous Children in New York

October 11, 2013,

One of the more unique estate planning issues arising in recent years relates to "posthumous births." This refers to a child who is born after one of their parents has already died.

This was always a possibility, as a parent could pass away in the months after a child was conceived by before the actual birth.

Yet, the issue has grown more acute with reproductive technology advances, including tools that allow the extraction and storage of genetic material, combined with in vitro fertilization. Children are now able to be conceived years after one of their parents has died. While the option is available to anyone, families in certain situations are currently more likely to take advantage of the technology, including those deployed in the military and when a partner has a serious medical ailment, like cancer.

Estate Planning Complications
As with all unique family situations it is critical to craft a tailored estate plan that takes these issues into account. Few laws exist which clearly explain how to handle these posthumous births for estate purposes. That makes it even more important to fill the gap and plan on your own to avoid a web of problems if left to unclear rules.

A recent Financial Advisor Magazine story touched on a few of these issues. Perhaps most obviously, there are concerns about inheritances. In most cases, after a passing an inheritance is doled out immediately. But does the child conceived later have any rights to that inheritance? If so, how long must one wait before those rights are extinguished? Should other beneficiaries receive their portion immediately?

There are no automatic answers to these questions, as they require a balancing of interests. It is therefore imperative for families who might be in this situation to have their clear wishes laid out in an estate plan ahead of time.

In New York, lawmakers are considering options to provide more concrete answers for residents who fail to plan ahead. As the FA story explains, "Legislation wending its way through the New York State legislature, for example, proposes that for a child born after the death of a genetic parent to be considered the offspring of that parent for inheritance purposes, it must be in utero within 24 months or born within 33 months."

On top of the proposed state law requires consent from the individual who is not alive at the birth. Without that consent, the child would have no inheritance rights, regardless of the time frame.

IRS Issues Guidance on Federal Taxes for Same Sex Couples

September 3, 2013,

Last week the Internal Revenue Service (IRS) released information on what has been dubbed a "hugely important" questions for same sex couples. Essentially, the new rules mean that same sex couples who are legally married in one state will still be treated as married for tax purposes by the federal government, even if they move to a state which does not allow same sex couples to marry.

More Protection for Couples
While the U.S. Supreme Court's landmark gay marriage decisions last summer were seen as a huge leap forward for equality, the decisions did not come close to permanently settling the matter. A majority of states still do not allow same sex couples to marry. This creates a complex patchwork of rules for taxes, inheritances, public benefits, and privileges. Same sex couples can be treated very differently simply by crossing a state line.

Obviously each state will treat couples differently based on state law. New York has marriage equality, and so same sex couples are treated the same as opposite sex couples here. But that still leaves open the question of treatment under federal law. What about couples who move out of New York? Do they lose all of their rights and privileges as a result?

The short answer: it depends. But, as a result of these new IRS rules, the couples will likely still be treated as married for federal tax purposes, even if they head to a non-marriage equality state. The U.S. Treasury Secretary explained that the IRS decision "assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change."

The decision means that the IRS adopted a "celebration" approach to determining marriage status. In other words, whether or not a couple is married for federal purposes is if the initial celebration (creation) of the marriage occurred in a state that allows it. The marriage laws of the couple's current residence does not decide the matter.

Most obviously, this will allows couples to file federal taxes jointly (though state taxes may need to be filed separately). On top of that, by treating same sex couples as married, the IRS decision will allow couples to claim additional exemptions attached to marriage, defer on IRA contributions, claim various tax credits available only for married couples, use the "portability" benefit for estate tax purposes, and more.

A Forbes story last week summarizes the specifics of the IRS decision. You can view the press release issued by the IRS here.

This is clearly good news for those hoping for fairness and uniformity for all legally married couples. If you have questions about how this may affect your estate planning or retirement, be sure to contact an attorney to learn more.

Issues with Family Vacation Homes

August 19, 2013,

Many New York families have vacation homes. While the reference often conjures up images of the super-wealthy wintering in palacial estates, the truth is that owning a second piece of real estate in a favorite location is not only for the elite. Middle class families who prudently save often decide to purchase a second home for investment purposes.

Considering the frequency of these homes, it is important for families to be aware of some financial and estate planning issues that they may create. A Forbes story from last week provides a helpful introduction into the topic.

Unfortunately, the use and future ownership of these homes is often cause for confusion, misunderstanding , and argument. For one thing, parents and children often have different ideas about the property. Is it meant to be a family keepsake that is passed down through the generations as a meeting place and memory maker? Or is it simply an investment item that can be sold if necessary without much thought? Often different family members have different levels of attached to these homes. One sibling may hold the location dear and never dream of getting rid of it while another may have few memories of the home and not wish to hold onto the property if it does not make financial sense.

The Forbes discussion notes that the single most common mistake made with regards to these issues is parents who decide to just "let the kids figure it out." Without honest discussion and legal planning ahead of time it is likely problems will arise. It is easy to see why. Adult children may live far away from one another. Those who live near the home may use it, while others may get nothing from the property. Those with a larger family and more immediate financial needs may view the property as a windfall, while others may not.

Solving these disputes is not as easy as simply giving the property to those who most enjoy it. After all, many parents seek to split their assets evenly between children. Because a second home may be one of the family's largest assets, it is often impossible to offset that value with something else.

On top of all of this there are tax issues to consider. What is the best way to pass on the asset? Children can receive it via will or perhaps as part of a trust (QTIPs are common in these cases). Alternatively, it may even be appropriate to use a limited liability company to make the transfer. These choices can literally save families tens of thousands of dollars (or more!).

In other words, there are many complex estate planning issues that come into play with vacation homes, and it is critical not to discount them or fail to anticipate them.

Think Twice Before Disinheriting A Child

August 2, 2013,

Families are complicated. No matter how well intentioned, virtually all family histories include some situations, dynamics, and incidents that cause immense disagreement, tension, stress, and frayed relationship. Virtually all families have some level of "dysfunction," and no family is perfect.

Estate planning attorneys are acutely aware of this reality, as we worked with every manner of family on issues which must take into account their unique situations. Simply "splitting everything between the children" is not an ideal option for many. In certain cases parents have serious concerns about their child's ability to manage an inheritance or the fairness of dividing things equally.

In the most extreme cases, some parents consider disinheriting a child altogether. This may be based on many different reasons: the child is estranged, they have significant means and do not need an inheritance, or perhaps they have drug and alcohol problems.

But is disinheritance the best option? Perhaps, but it should not be decided upon lightly. A planning professional can provide specific advice to discuss the pitfalls and ramifications of such a move.

A Bloomberg story from this month touched on the same topic, arguing that many parents who think that they want to cut their child out of their will may need to think twice.

The most obvious concern about cutting out a child is the door that it opens for subsequent litigation. As one professional interviewed for the story explained, "A good attorney will assume a will or trust will be contested. You do everything you can to cut off potential litigation in advance."

A disinherited child may pursue legal redress. Even if it is unsuccessful it requires resources and delays a final resolution. But even if the party left out does not do anything, a disinheritance also places immense pressure on those who did receive an inheritance. For example, cutting out one child automatically creates a rift between those children left in and left out--even if that rift did not exist before. It is a template for family drama.

No matter what, it is prudent to at least learn about the alternatives available, like trusts for spendthrifts and "sprinkle" trusts. These legal tools may be able to more accurately address concerns without the need to completely disinherit a child. The spendthrift trust can structure the inheritance in such a way that it cannot be exposed to creditors and does not allow the child to blow through it all at once. A 'sprinkle" trust may allow for an inheritance to be based on the child's need down the road, to account for different financial situations for each child.

"Funeral Shopping" - The Basics

July 26, 2013,

Last week Forbes dove into a topic that families give little attention until the task is thrust upon them: picking burial and funeral vendors. For obvious reasons, most of us have little direct experience evaluating different options for quality or negotiating to receive the best value.

For starters, as the story points out, it is important to have a specific idea of what you want at the services before calling any funeral parlor director. That is because, without an idea ahead of time, you may be persuaded to purchase many different things that you do not truly need or want. Having detailed plans in place as part of a comprehensive estate plan ahead of time can help narrow the focus.

There is a lot of pressure in any sales situation, and it can be made worse when it comes to funeral services. When a certain item is offered by the funeral parlor, a family may feel as if not agreeing to the most expensive options reflects on the value of the one who passed away. Of course this is not true, but the pressure is there. Having one's wishes laid one with clarity ahead of time takes away much of that burden from the surviving family.

Beyond being clear about wishes, it is also helpful to ask for a specific price list from the funeral parlor. It is easy to agree to many different services or features without appreciating the cost of each. As the story points out, by having a list in hand ahead of time, a family can weigh the value of each service with the cost to make the best choices on their own time after careful consideration.

Perhaps the most logical (but overlooked) tip is to shop around for services. Considering the emotional turmoil of the situation and time pressures, many families simply make a single call and go with whatever they hear. Even individuals who are normally prudent about getting the best deal fail to consider different options from different vendors when dealing with funeral services. This is a mistake. Prices vary considerably, and using a parlor just because your family has used it in the past or because it is close may result in significant over-payment. Assign someone to call around and get a feel for the basic price difference between a few relatively close options.

For more tailored advice about planning for these services, paying for them, and putting plans into place to ease the transition for family members, feel free to contact our estate planning attorneys today.