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

The Danger of Passing on Reverse Mortgage Problems to Heirs

July 9, 2014,

People entering retirement age are now facing an unexpected hurdle - dealing with the pitfalls from their parents' reverse mortgage. The same loans that were supposed to be helping their elderly parents stay in their homes are now pushing the children out of them. In fact, the same situation is playing out all across the United States, where the retirement age children of elderly borrowers are discovering that their parents' reverse mortgages are now threatening their own inheritances.

Reverse Mortgage Schemes
A reverse mortgage is a financial tool that allows people age 62 and older to borrow money against the value of their homes. This money does not need to be paid back until they move out of the home or die. Unfortunately, many children of parents who invested in reverse mortgages are discovering the issues that arise with them.

Under federal law, survivors of a reverse mortgage are supposed to be given the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are now threatening the heirs with foreclosure on the homes unless they pay in full. In fact, some reverse mortgage lenders are foreclosing in a matter of weeks after the borrower dies, and it has led to a rash of lawsuits in state and federal courts against reverse mortgage lenders.

In other cases, the reverse mortgage lenders do not move to foreclose but instead plunge the heirs into a bureaucratic quagmire if they want details about how to save their family home. The lenders make it nearly impossible to figure out what the rules are in order to pay back the loan, and they wait for the heirs to either give up or run out of time. Another tactic is where lenders do offer the heirs a chance to pay a percentage of the value of the house, but since the time that the reverse mortgage was taken out the overall value of the house has increased.

An Increasing Problem
According to various elder care and estate planning leaders, reverse mortgage lending issues are on the rise in the United States. Tens of thousands of survivors of reverse mortgages are now attempting to beat the ploys of these lenders. Unfortunately, this problem will only increase over time as more Americans are reaching their elder years and are turning to their homes for money. The combined debt of those ages 64-73 is now higher than any other age group, and right now 13% of all reverse mortgages are underwater.

For heirs, the main issue is that few know about the set of reverse mortgage rules set forth in the Department of Housing and Urban Development. While the department vets reverse mortgage lenders, it does not provide a list of firms in violation of the rules or that have been penalized.

What Heirs Need to Know
According to the rules set forth by the Department of Housing and Urban Development the lenders of reverse mortgages must offer heirs up to thirty days to decide what they want to do with the property. Additionally, they must give up to six months to arrange financing. Most importantly, the rule states that heirs are allowed to pay only 95% of the current fair market value of the property. Hopefully, by making the rules and pitfalls of reverse mortgage lending public more parents and heirs can avoid the problems that come with them.

The Most Valuable Assets for Your Heirs

July 7, 2014,

Planning for retirement can be difficult; however, if you also plan on leaving money to heirs in your estate plan the process can be even more complex. Deciding which financial accounts should be tapped first for retirement funds and which should be left for inheritance purposes is a tricky question. The answer is often determined by your own financial needs for retirement as well as the needs of your heirs, but you can expect the following to occur with your heirs with each of these retirement accounts.

Roth IRA

As a general rule, a Roth IRA account is a great asset to leave for inheritance. When inherited, Roth distributions are tax-free for your heirs. If planned properly, your heirs can take distributions from the account over the course of their lifetimes and simultaneously leave the bulk of the principal from the account to continue to grow in interest. Additionally, the federal estate tax exemption is now at $10.6 million for a married couple. That means that most Roth IRA accounts that are inherited will be both income and estate tax free.

However, there is one issue that was recently decided by the courts regarding retirement accounts and inheritance. If your heir inherits your Roth IRA and then goes bankrupt your bequeathed Roth IRA is subject to their creditors. You should take the time to explain to your heirs that your retirement accounts are not shielded from their bankruptcy.

Stocks, Bonds, and Mutual Funds

Other types of retirement assets such as stocks, bonds, and mutual funds are good accounts to leave for inheritance if they have greatly increased in value over time. The reason for this is called the "step up" in cost basis. Cost basis is the price of an asset (like a stock or bond) when it was first purchased. This is the price that all increases or decreases in value are measured by. When you sell an asset, the capital gains taxes are determined by the amount of value that your stock or bond has increased. However, if you pass along those assets to your heirs, they get to "step up" the cost basis to the value of the asset on the day of your death. Therefore, when your heirs decide to sell the stock or bond, the tax break on capital gains will be significant.

One common idea for funding retirement, while still leaving assets for heirs, is to focus on selling stocks, bonds, and mutual fund assets that have seen the smallest gain or loss. That way the assets that will have the largest tax breaks are reserved for your heirs. Also, keep in mind when determining which assets will go to heirs that annuities inherited by non-spouses and U.S. savings bonds do not get the "step up" in cost basis.

IRA or 401(k?)

In terms of value, the costliest assets to leave to heirs are tax-deferred retirement accounts such as an IRA or a 401(k). These accounts get no step up in cost basis like stocks, bonds, and mutual funds. Additionally, they are distributed at ordinary tax rates for your heirs, unlike the Roth IRAs.

If you are planning on leaving money to your heirs as well as to charitable causes, consider leaving the tax-deferred assets to charity. Charitable organizations are not taxed on those types of assets, and the tax-free or stepped up assets can then be left for your heirs.

Inheriting Parental Debt

June 23, 2014,

The loss of a parent is a heartbreaking experience, and discovering that your parent had a large amount of debt can add even more stress to the situation. Usually, creditors have a certain period of time in which to make claims against your parent's estate. In most cases, you are not responsible for the debts of your deceased parent and if there are not enough assets the debt dies with them; however, in certain circumstances you can be on the hook to pay for what your parent left behind. Responsibility for debts is typically determined by the type of debt, the assets available, and where your parent resided.

Assets can be protected from creditors even if your parent passed on with debt. If you are listed as the beneficiary of a retirement account or life insurance policy that money cannot be touched by creditors. However, other assets in the estate may have to be sold in order to pay off the debts of creditors. This can greatly reduce or eliminate your inheritance from your parent's estate.

Credit Card Debt
In most cases, you are not responsible for the credit card debt of your parent. However, if you are a co-signor for your parent's credit cards then you can be held liable for the debt. Credit card companies are considered low priority creditors. That means that they fall behind other lenders, funeral care costs, and tax agencies. If you are responsible for paying off your parent's credit card debt, typically the credit card companies will agree to negotiate a lower payment because of their low priority.

Medical Care Debt
Deciding who is responsible for unpaid medical bills is separated into two categories: those who were on Medicaid and those who were not. If your parent was on Medicaid then you are not responsible for the debt. Under Medicaid rules, the only major asset that a person can possess and qualify for Medicaid is a home. The state can place a lien on the home to recover payments, but that money will come from the estate.

If your parent was not on Medicaid and had unpaid medical bills, state law determines whether or not you are responsible for the debt. The estate must first try to pay off all outstanding medical bills from estate assets. If the debt remains, "filial responsibility" may mandate that you pay off the remainder. Almost thirty states have filial responsibility statutes that require adult children to pay off the remaining debt if the estate cannot.

Mortgage Debt
If you inherit your parent's home and it comes with a mortgage you may be responsible for the underlying debt. If the mortgage exceeds the value of the home you can consider foreclosing in order to pay off the mortgage on the property. After the foreclosure sale if mortgage debt still remains the bank can go after the estate for the difference. If you wish to keep the inherited home then you are responsible for making all mortgage payments on the home going forward.

Taxes
You are not responsible for paying off the taxes of your parent. Government agencies are usually top priority creditors and they can take from the estate to pay off outstanding taxes, but they cannot go after you for any remaining balance if the estate is unable to pay it off in its entirety.

With Age Comes Wisdom - Limiting Child's Access to Family Money

May 20, 2014,

The current generation of older Americans make up the wealthiest generation this country has ever seen. As the number Baby Boomers (people born between 1946 and 1964) retire or pass on, the United States is expected to see an "inheritance boom" unlike any other in history. At the same time, the generation that stands to inherit this money generally lacks the money management skills to handle these inheritances. But there are some things that the older generation can do to help the younger generation "grow into" its money.

Provide Children And Grandchildren With A Financial Education

Young adults often are launched into adulthood with little or no financial education. In the United States, only four states require students to take a personal finance class in high school. Worse yet, a 2009 study by the University of Arizona and the National Endowment for Financial Education gave students an "F" grade for money management skills. When the study was repeated two and a half years later, students' money management had declined by an additional 7 percent.

Five money management skills that members of the older generation can help to teach their children and grandchildren include--

1. You sometimes have to wait to buy something you want. Although this is a hard concept to learn, the ability to delay gratification can determine how successful one will be as an adult.
2. You need to make choices about how to spend the money you have. Financial decision-making is a key factor in successful money management as an adult. It is important that children and grandchildren be taught that money is finite and that when money is spent on one thing, it is not available for other another thing.
3. The sooner you start saving, the faster your money can grow. The concept of compounding interest is critical for children and grandchildren who will be inheriting or otherwise receiving family money because they need to learn that saving accrue on the initially received money plus on past interest received from the initial savings.
4. You should pay with credit card (or cards) only if you can pay off the balance in full each month. The average American household has over $15,000 in credit card debt. This, along with average student loan debt which is almost $34,000, threatens to choke most young people. To counter this debt trend, it is important that the older generation help children and grandchildren understand that it is important to budget and use credit cards wisely.
5. You need to know how to budget. Learning to create a budget is a main key to learning to live within one's means and budgeting techniques are critical for a successful adulthood.

Establish A Trust

One option to slowly ease children or grandchildren into the adult world of personal financial management is through a trust. One form of trust which is sometimes used in the case of inheritance is a "spendthrift trust." A spendthrift trust can be created for a child or grandchild to limit access to the trust funds. An independent trustee is given full authority to make decisions about how trust funds can be spent for the benefit of the child or grandchild and funds are not under the child's or grandchild's control. An additional benefit of the spendthrift trust is that the child or grandchild cannot assign any of his or her present or future income to creditors, or sell his or her rights to the trust principal.

A spendthrift trust can be tailored to the maker's specific wishes and particular family circumstances. For example, a spendthrift trust can be established for the child's or grandchild's lifetime or until he or she reaches an age designated by the maker of the trust. To ensure that family wealth is responsibility passed on to the next generation, it is important to discuss trust specifics with an experienced NY estate planning law firm.

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.

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

January 31, 2014,

For sports fans, all eyes this weekend are planted squarely on New York City with the Super Bowl set to kick off early Sunday evening. Beyond the usual chatter about who will win and lose, many commentators are discussing how this single game will impact the long-term legacy of many players in it.

Of course, at the end of the day, this game represents just a single game in a career. And for many players, that career is relatively short-lived. Football is a demanding sport, and it is not uncommon for players to retire in their late twenties or early thirties. It is only a rare few who play successfully into their late thirties.

This presents an unique dilemma for players who must then find other careers and/or properly manage their affairs early in life ensure financial stability for what is hopefully a many-decades long retirement. As you might imagine, many players are clumsy in this regard, making a plethora of estate planning mistakes that cause harm to themselves and their families down the road.

Professional Athletes Estate Planning Mistakes
In honor of football's biggest night, this week Life Health Pro discusses a list they dubbed the "Six Biggest Estate Planning Mistakes NFL Players Make." Most of the list centers on the basic idea of failing to think long term.

First, estate planning professionals who work with athletes explain that athletes often do not get out of the present. No matter how big one's check in any given month, the entire purpose of planning is to stretch today's earnings to an uncertain tomorrow. That need is especially acute for those in unique positions, like professional football players, who earn the vast majority of their lifetime earnings within a specific window that is often no more than a decade.

Along the same lines, a common NFL player planning mistake is spending outside their means. It is easy to mistake a large paycheck now for a license to make luxury purchases. And perhaps those purchases are feasible. But without an actual idea of the funds needed to sustain a decades-long retirement, in too many cases that high living comes at the cost of financial struggles down the road.

Be sure to take a look at the full article for the entire list of common planning errors.

Get Legal Help
The specific estate planning needs of most New York residents will be quite distinct from professional football players. High net worth individuals who are likely to have uneven earnings over the years present very unique planning challenges. But the underlying principles of prudent foresight and seeking out tailored advice to ensure your own actions fit your actual needs is important for all of us, regardless of our age, career, or particular challenges.

For help with estate planning for you and your family be sure that you contact an attorney as soon as feasible and secure the peace of mind that it brings.

Thinking About the Un-thinkable - When Children Are Involved

January 21, 2014,

According to a survey by legal services website RocketLawyer, 70% of American parents with minor children do not have a Will. The survey revealed that 76% of respondents believe that a Will is not an "urgent" matter. Parents of young children certainly must have many urgent claims on their attention. Many of them, it seems, are not inclined to give any consideration at all to the horrible possibility that they may not be around to raise their children themselves.

What would happen to your children if the unthinkable did happen and you were no longer there to care for them? If your children have two parents in their lives, then you might think that the chances of both parents dying in a common accident are too remote to merit serious consideration. Still, remote as the chances may be, we know that it does happen. Every day, couples face deadly risks together. How many times have you and your spouse found yourselves in a place where some quite plausible accident might befall you both? A car accident? A plane crash? A house fire? Upon reflection, you might discover that you face the risk of common accident almost every day.

Protect Your Child's Future
In New York, if both parents die, the fate of a minor child will be influenced heavily by the parents' Will, or the absence of a Will. If the parents leave a Will that designates a guardian for their child, the prospective guardian may petition the Surrogate's Court for appointment as guardian of the child's person or property (or both). The court is obliged to act in the best interest of the child, but within this broad parameter, New York courts will show great deference to the parents' wishes. The court will confirm that the prospective guardian (and other adults in the guardian's household) are not named in the New York State Registry of Child Abuse and Maltreatment. If there is no evidence of past abuse, the court will likely grant the petition for guardianship.

If there is no Will, the court will have to devise its own plan for the child. If you have ever given the guardianship question much thought with respect to your own family, you know how complicated this decision can be. Suppose a child has two loving adult relatives, both of whom wish to act as guardian. One is the child's favorite uncle, but he has four kids and a wife who is overwhelmed by the idea of adding another to their brood. Would it be best to have this child live with a more distant relative, if it meant that the addition of the child to the new household would cause less strife?

Although there is no perfect solution, in most cases, parents will be in a better position to find the best alternative. Think now about the unthinkable, and going forward, you can be assured that you have provided the best possible future for your child. Contact our estate planning attorneys today to learn more.

Will Contests & the Super Wealthy

December 9, 2013,

In the emotional tumult following a passing it is common for disagreement to arise regarding property and other matters between friends and family members. Jealousy and greed can cause bitter family feuds for years to come. It is for this reason that, at the very least, all New York residents need a will to ensure that loved ones are taken care of in the manner you see fit.

It is critical not to think that just any document will suffice as a will. There are very specific legal rules regarding what documents will be used by the court to settle these matters, and will contests are startlingly common. In order to have a valid will in New York, the documents must be signed in front of a minimum of two witnesses; the witnesses must sign the document in front of each other; the person whose will it is must be of sound mind; and the person cannot be under any undue influence or duress.

Will contests are not isolated only for those in dire financial straits, disputes can arise even among those who do not have any financial need at all.

For example. a high-profile inheritance lawsuit taking place in New Jersey's Hackensack Civil Court, Revlon billionaire Ron Perelman's daughter, Samantha Perelman, is suing her uncle, Jamie Cohen, for almost $600 million from her grandfather, Robert Cohen's, estate. Despite being the daughter of a one of the richest men in the world, Samantha wanted anywhere from one-third to half of her grandfather's estate. A thirty carat jewel, lavish real estate and life insurance worth $30 million dollars that Robert Cohen left Samantha were not enough for the 23 year old.

Samantha and her lawyers argued that she is entitled to a larger piece of her grandfather's estate as a matter of right. A Superior Court previously ruled that it was unreasonable to say that Robert Cohen was obligated to leave Samantha with one-third to half of his entire state. Additionally, Samantha and her expensive legal team tried to get her grandfather's will voided by arguing that he was not legally competent when he made the will. This line of argument was also rejected by past courts.

It will be interesting to see how this case turns out. Samantha Perelman has lost all 18 court decisions so far, between three states and five different courts, all before her grandfather passed away. Additionally, Samantha also lost an appeal in October of this year.

Protect Your Estate With A Will
As this case illustrates, wills can be a source of contention in families and cause years of feuding between family members and loved ones. Estate disputes are not exclusive to the rich; people from all walks of life can be affected. In order to avoid (or mitigate) such a result, you should incorporate a properly drafted will and perhaps use of trusts into your estate planning. This can also cut down on future legal disputes.

For help with estate planning matters throughout New York state, please contact our attorneys today.

The Pendergrass Estate and Control of a Legacy

November 26, 2013,

The Times Standard reported on another high-profile estate battle brewing that touches on many common themes, including a divided family and conflicting claims about last wishes.

Legendary R&B singer Teddy Pendergrass is probably best known for his smash hit "If You Don't Know Me By Now." Pendergrass dealt with various challenges throughout his life, including a serious car accident in 1982 that left him a quadriplegic. The accident required him to have around-the-clock care, but he survived and thrived until his death in early 2010.

Family Battle
Unfortunately, there was much discord in the family regarding the distribution of his assets and control of his legacy. The main dispute--as is so often the case--seems to be between Pendergrass's second wife (whom he married in 2008) and the adult children from his first marriage. From the available reports, it seems that only very basic planning was complete, without use of trusts, leaving the situation open for dispute.

According to court records, the singer's adult son claims that a 2009 Will names the son as executor and beneficiary of his father's estate. The singer's wife contests the validity of the Will. At one point the wife argued that she had possession of a "codocil" or addition to the Will which revealed different terms than those in the 2009 original. It is unclear if she is still making that claim.

Regardless, a civil trial in the matter is underway now, and it seems that the wife is contesting the validity of the 2009 Will entirely. One interesting claim suggests that the singer was physically not able to sign the legal document as claimed. A long-time nurse of the man explained last week at trial that the singer could not hold anything himself after the accident and required aid for even the most basic tasks. She testified that she did not believe his motor skills allowed him to sign his name or make initials on paper. In addition, there was confusion about how the singer could have left the home at the time that the Will was supposedly signed without caregivers knowing about it.

Both sides concede that they are concerned about the long-term legacy of the singer. Beyond the physical assets and bank accounts, control of an estate also includes the ability to dictate how the singer's legacy is handled, including future use and licensing of the famous name.

It is impossible to predict how a court will rule in this case. Any time an estate battle goes to trial, there are unknowns which can sway the matter either way. That is why everything should be done ahead of time to avoid legal disputes, dispensing with the matter efficiently and quickly. An estate planning attorney can help ensure you have details in place to avoid conflict.

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.

Deathbed Planning: In the Face of Serious Illness

October 25, 2013,

Most estate planning advice stories include one theme over and over--plan early and update consistently. Because no one know what the future holds and life changes occur frequently, it is critical to ensure your legal planning will work as you want it to when you need it.

However, that does not mean that there is ever a point when it is too late and not worth crafting a plan. Taking the time to put affairs in order even in the midst of serious illness or terminal conditions can make a world of difference for a family. A recent article provides a helpful discussion that touches on some of the key issues with regard to "deathbed planning."

Late Estate Planning
Is the individual competent to make legal decisions? One initial hurdle is identifying whether or not the ill party is still in a condition to assent to the crafting of a plan or updating of legal documents. It is important to have witnesses, verification from medical professionals, audio recordings, or other proof of competency just in case the issue is challenged down the road. If the individual is not legally competent, then the only other option is for one was previously given authority (via durable powers of attorney) to act on their behalf.

Assuming that the individual is competent or an agent exists, what are the main issues to consider during deathbed planning?

The general goal is to update an older plan or craft new one that covers all of the most fundamental issues. That includes ensuring that executors and trustees are properly named, the provisions of a will or trust documents still reflect the clients wishes, and similar matters. In addition, all beneficiary designations need to be considered. Is the beneficiary on a life insurance policy still correct?

If a plan was created years ago, there is a good chance some things have changed. For example, it is not uncommon for certain children, nieces/nephews, or grandchildren, to be named with others left out. Those not mentioned may simply not have been born at the time the original planning was conducted. Obviously, these oversights need to be corrected near the end.

Administratively, it is also helpful at this time to locate all necessary paperwork, records, and important information that will be needed for estate administration. Similarly, funeral and burial requests should be spelled out clearly. In the heart of grief, it is common for family members to disagree over even the most minor details. Preventing that possible feuding by making these wishes explicit is vital.

Of course there are many other potential issues to consider at this time. But, In short, most deathbed planning involves getting all of the "basics" correct so that assets will be transferred in the desired manner as efficiently as possible.

The Affordable Care Act and Estate Planning in New York

October 21, 2013,

With the recent launch of the President's health insurance marketplaces across the country, the Affordable Care Act has taken on a much more tangible character. Over 36 states are participating in the federally run internet exchange, while New York is one of a dozen of states running separate markets with its own operating system. The New York exchange is known as the "New York State of Health." In just a few months, the Affordable Care Act (ACA) will come into full effect. While parts of the law are already in place, 2014 will bring in a whole new set of changes, including dozens of tax provisions that can be difficult to understand.

With this in mind it is important to understand if and how the Affordable Care Act may affect your estate planning. Some of the provisions may have a relatively uncomplicated impact on your future. For example, nonmedical withdraws from health savings accounts will be taxed at 20%. Additionally, using pre-tax flexible spending accounts on nonprescription medications will be prohibited.

Other parts of the ACA's provisions, though, are exceedingly complex. Careful planning and advice will be necessary to ensure that you can reduce your overall tax liability. One of the largest effects to your estate comes from the investment income surtax of 3.8%, which applies to the lesser of the investment income or the amount that income exceeds over the threshold. The threshold is $200,000 of Adjusted Gross Income ("AGI") for unmarried filers or heads of household, $250,000 AGI for married filing joint, $125,000 AGI for married filing separate filers, and $12,000 AGI for trusts and estates. Further, there is an additional Medicare Earnings Tax on earnings above $200,000 for unmarried filers, $250,000 for married filing joint, and $125,000 for married filing separate filers. There is little that people can do to avoid these taxes, which will go up .9% from the existing rate to 2.35%. That is, except if you decide to earn less money!

You, however, are not without options concerning the new surtax. For example, investors can use Roth IRAs, which do not count as taxable income.

The American Institute of CPAs has put together a number of useful articles and webinars to help you better understand the how the ACA will affect your finances. Check out their site here and be sure to keep up to date on all of our analysis as the ACA continues its rollout!

The Huguette Clark Drama Continues--Possible Settlement?

September 27, 2013,

The New York estate feud that dominated headlines for months may finally be nearing an end. Mysterious New York heiress Huguette Clark died in 2011 at the ripe old age of 104. For several decades before her death, Clark lived inside a hospital room--even though she was healthy enough to live elsewhere. Her several mansions remained empty for years. In fact, a documentary film based on Clark's life and death is currently in creation--several books have already been published.

Because of her unique lifestyle and secretive existence, many were intensely interested in her estate plan--curious as to how her $300 million fortune would be passed on. So began a complex back-and-forth between dozens of different parties who apparently had a stake in the estate--including Clark's doctor, lawyer, nurse, the hospital where she stayed, her distant relative, named charities, and more.

Clark's estate planning was relatively bare considering the size of the assets. Essentially two wills were produced. The two wills were both created in 2005. The terms of those two wills could not be more different. The first will gave most of her assets to her distant relatives. The second will cut the family out entirely and instead sprinkled money to her doctor, nurse, lawyer, accountant, and arts-related charities.

It was not long before the different parties at stake were locked in a legal battles. As a substantive matter, the main issues was which of the two wills should be followed. Last week, we explained how negotiations had broken down and the matter was set for trial.

Apparent Settlement
But on the eve of jury selection in the case, the New York Post is reporting that a settlement may have been reached. Per the terms of the possible agreement, a group of 20 relatives will split $34.5 million from that estate. Another major beneficiary would be the new foundation created and set up at Clark's California estate. The Corcoran Gallery will receive $10 million, the hospital where she lived would get $1 million, and a loyal doctor-friend would receive $100,000.

Interestingly, not everyone involved with walk away with some piece of the estate. For example, her attorney and accountant will not receive anything. In addition, Clark's nurse will not receive the nearly $7 million she would have per the terms of the second will.

The next step is for the settlement to be put before the judge. So long as he approves it, the matter may finally be settled.

Financial Advisors Discuss Ways to Save on Increased Capital Gains Taxes

September 19, 2013,

Many New Yorkers know that, as part of the federal tax package compromise that was passed on January 1st of this year, the capital gains tax rate was increased. Last year the top rate was 15% but that is now up to 20%. In addition, some individuals will also face a 3.8% investment surcharge tacked on top.

Prudent estate planning always takes tax considerations into account, and transferring assets which have accumulated in value is one of the most important (but trickiest) aspects of the process. As such, it is prudent to closely consider ways to legally save on taxes, particularly considering the new rates.

Forbes on Capital Gains
A personal finance article from Forbes delves into some general strategies that may be used to legally save on those capital gains taxes. For one thing, there may be great benefit to saving assets until death so that heirs get a "stepped up" basis on assets which have appreciated considerably. In many cases, this results in those assets moving to heirs without the capital gains tax coming due at all. Though, don't forget that other taxes (like the estate tax) will still be in play at those times.

Yet, depending on your situation, there may come a time when assets must be sold before death. For one thing, seniors are often forced to sell assets in order to pay for retirement or long-term care. This may risk a huge capital gains tax bill. [Sidenote: this is one of many reasons why it is prudent to invest in long-term care insurance].

So what can one do to save on capital gains while alive? For one thing, passing on gifts to children or others under the annual tax exemption rate may be prudent. As the WSJ story reminds, "you can give $14,000 a year in cash or property each to as many individuals as you'd like without eating into your lifetime gift/estate tax exemption."

Other strategies can be used to keep one's income below the mark which imposes the 3.8% investment tax ($200,000 for singles/$250,000 for couples). One way to do so is to put more money into retirement savings accounts like 401(k)s as pre-tax contributions. This won't eliminate all capital gains, but it is always worth saving even smaller amounts like 3.8% from leaving your bank accounts.

The story delves into many other specific financial strategies, some which impact long-term estate planning. It is worth perusing the entire story, and hopefully acts as a spur to seek out professional guidance on all of these matters to protect assets for you and your family.

How Does New York Stack Up for Retiree Taxes?

August 26, 2013,

Do you have enough money to retire? It is a questions that tens of thousands of New Yorkers ask themselves every day. When talking with attorneys and financial advisers, many factors are weighed to determine whether enough resources are available for one to have the type and length of retirement that they want and need.

One of those factors, as always, is taxes. Retirement income is frequently taxed, with a portion of money going to state and local government. These are not necessarily trivial amounts, as the exact size of the tax burden may affect whether or not the nest egg is large enough to cash in one's chips and begin the next phase of life.

Federal taxes will obviously be the same everywhere, but the rules about retirement taxes vary considerably from state to state. When making long-term plans regarding finances, it is critical to understand how state tax rules will affect your retirement

New York Retirement & Taxes -- High Burden
One recent report from Kiplinger includes a helpful map that compares relative state retirement tax burdens nationwide. New York is rated as one of the "worst" for retirement purposes, because of its relative lack of senior-related retirement tax benefits. As you can see in this full map, New York is one of ten group into the "least tax friendly."

The designation was based on analysis of various factors, including: state sales tax, social security tax, income tax, estate/inheritance taxes, and other special treatment of income used for retirement.

For example, New York has a 4% sales tax, an income tax ranging from 4-8.82%, and a relatively aggressive state inheritance tax. Compare that to a relatively senior "tax friendly" state like Florida, which has a 6% sales tax but with no state income tax and no state inheritance tax.

None of this is to say it is all bad news for local retirees. New York does not tax Social Security benefits or public pensions, and provides some tax exemptions for private and out-of-state pensions. However, our state does have some of the highest property tax rates in the country, which can hit seniors hard.

More and more seniors are at least taking a look at this data when making future plans, including any thoughts about relocating. Even if the tax issue does not ultimately affect your retirement decision, it is still important to appreciate the differences if you are moving out of New York or into it. Those families entering the state should account for the effect that our relatively high rates may have. While those moving elsewhere should be sure to check on their eligibility for different senior-based retirement tax breaks.

Adoption to Avoid Taxes -- When Marriage Is Not Open to Same Sex Couples

July 11, 2013,

The discrepancy in the law related to recognition of same sex unions may lead to some bizarre moves as part of an estate plan. That is particularly true when trying to avoid large tax burdens. For example, ABC News reported last week on a story out of Pennsylvania where a long-term couple decided to have one partner adopt the other to protect their long-term financial interests.

The couple has been together for four and a half decades. Yet, state law does not allow them to marry. As a result, even though they each planned to leave all of their assets to one another in the event of death, they would not be able to take advantage of inheritance tax exemptions for spouses.

One partner explained the situation regarding state inheritance taxes, "If we just live together and Gregory willed me his assets and property and anything else, I would be liable for a 15 percent tax on the value of the estate. By adoption, that decreases to 4 percent. It's a huge difference."

in deciding who would be the adoptive father and who would be the son, the couple did not have a choice. The younger partner's actual father is still alive, and it is impossible to have two legal fathers. That only left the younger partner to become the adoptive dad.

This situation is being used nationwide as a reminder of the lengths that still need to be taken to protect same sex couples in states where marriage is not allowed. Following the recent high-profile gay marriage decisions from the U.S. Supreme Court there is some confusion regarding the legal battles still on the horizon. As this adoption situation makes clear, full equality is far from reality across the country.

And it is not just about money. Many couples worry about service preferences. For example, one partner in this case explained that he wants to be sure his preferences (and not his biological family's wishes) are made clear, "I made all my end-of-life arrangements. I wanted to be cremated. With my Irish-Italian family, there would have been a four-day viewing and a Catholic mass and I don't want to put Gregory through that."

Equality in New York
Of course, the playing field is now level for local same sex couples. New York recognizes same sex marriage. With the Supreme Court decision related to DOMA last month, couples here are now afforded the same benefits as all others with regard to inheritance taxes and the many other benefits accruing to spouses under the law.

For help taking advantage of the benefits of these recent actions or to create a new estate plan to protect your family in the future, please visit our attorneys today.

Federal Marriage Rights Now Available for Same-Sex Couples

June 28, 2013,

Whether one is married or single is obviously a vital factor that impacts elder law and estate planning. Of course, that placed married New York same-sex couple in a strange position, as they were married under New York law, but single under federal law. As mentioned yesterday,with the U.S. Supreme Court decision in Windsor v. U.S., the federal law which deemed those couples unmarried is now gone. This will hopefully lead to a far more straightforward picture for those couples.

Marriage Rights & Obligations
Yesterday, The Globe published a story that delved a little more deeply into the specific rights which will now be afforded to married same-sex couples. The article is worth a look to get a better idea of some of the practical effects of yesterday's ruling--beyond the obvious cultural and social effect of finally eliminating the stigma.

*Estate Taxes: The plaintiff in the original case, Edie Windsor was a New Yorker who began the battle because of the over $300,000 in estate taxes that she had to pay after inheriting her long-time partner's estate. The couple's marriage was recognized in New York, but not by the federal government. After this week's decision, this same thing will never happen to other couples. Now, married same sex couples will be able to take advantage of the same spousal benefit for tax purposes--transferring unlimited assets to a spouse without a tax burden.

*Social Security Survivor Benefits: A partner will now be able to collect Social Security benefits of a partner, if the spouse dies while receiving a higher benefit amount.

*Retirement Accounts: Now, a partner in same-sex relationship will be able to roll over benefits in tax-preferred Individual Retirement Accounts without first being taxed on those funds.

*Citizenship: Citizen partners in a same-sex marriages will now be able to sponsor their spouse for a visa. If the partner chooses, they will also receive "spousal preference" on their path to citizenship. This will likely settle the debate that was raging in the U.S. Congress regarding whether or not gay couples should be treated equally in the new immigration bill that is being negotiated by Congress.

Of course, this minimal list is just a small snippet of the over 1,100 specific ways in which marriage applies in federal rules and statutes.

The elder law estate planning attorneys at our firm look forward to helping all New York couples take the necessary steps to protect their families and their future.

U.S. Senate Report on Proposed Tax Changes May Affect Retirement Planning

June 13, 2013,

It is notoriously foolish to take Congressional reports, proposed legislation, and similar matters as anything more than mere possibilities which may change federal law. For every piece of legislation that actually makes it into law, there are a hundred others that end up nowhere. Still, those who have an interest in certain issues, like retirement planning, may find value in examining the different ways that elected officials are considering modifying current rules.

For example, recently staff members of the U.S. Senate Finance Committee issued a report that outlines many different tax reform ideas that members of the committee will consider when they debate proposals this cycle. The report introduction explains that "The options described below represent a non-exhaustive list of prominent tax reform options suggested by witnesses at the Committee's 30 hearings on tax reform to date."

A full online copy of the document can be found online here.

What are some of the proposals that relate to retirement or long term financial planning?

At least nine specific tax changes related to retirement are outlined in the report. It is worth reviewing the full list to get an idea of the options on the table. Some examples of what it includes are:

* Minimize retirement saving tax preferences. This would eliminate or reduce tax breaks for things like 401(k)s and Individual Retirement Accounts. As an alternative, some propose expanded mandatory enrollment in Social Security. Other options might minimize "catch up" contributions for those who are over 50, speeding up the timeline for distribution of inherited IRAs, and repealing "non-deductible" IRAs.

* Alternatively, some propose increasing retirement saving incentives. These options might include expanding the "saver's tax credit." In addition, limits on contributions or restrictions on distributions may be eliminated.

* As a middle ground, another set of options would increase the "effect on tax expenditures for retirement savings on retirement security." For example, this might include forcing certain employers to automatically enroll new employees in retirement plans unless they opt out. The goal could also be furthered by using more retirement savings for purchase of life annuities or long-term care insurance.

*Other options may prevent "leakage" of funds from retirement plans. This may be accomplished by tightening up withdrawal options or actually prohibiting withdrawal of a certain portion of funds before retirement altogether.

For advice on planning for retirement, creating an inheritance plan, and otherwise ensuring your long-term future is secure, consider contacting our NY attorneys for assistance.

Estate Planning Becoming Reality Show?

June 5, 2013,

Epic estate planning battles--particularly involving the wealthy and famous--have long been fodder for newspapers. There have even been a few high-profile movies touching on the topic, like the recent George Clooney film, "The Descendants." But now it appears that the sagas may make their way into yet another medium: television.

Reality TV continues to captivate audiences, and now some are looking to cast a new television show based on unique, intense, and interesting inheritance fights. The Trust Advisor recently shared information on the project which, if it becomes popular, is sure to raise awareness of common estate planning issues even more.

The show is still in the early stages of development, but it is clear that a large TV production team is looking for families to be filmed as their inheritance issues and planning details are sorted out. These early reports suggest that the show will center on inheritance and trust disputes among wealthy families. The purpose, one presumes, is to find families with the most unique issues, including family businesses, generations-long dynasties, and large personalities. The filming (and packaging as a television show) will likely highlight both the characters themselves as well as the unique processes involved in settling estate fights. While it may seem common knowledge to those of us working on these affairs, it is easy to forget that for most community matters, estate planning issues are foreign.

The article notes that "the goal is to get everyone to work out their grudges and actually resolve their issues without getting the litigators involved." Considering that this is the same goal shared by many who are beginning the estate planning process when not being filmed, it will be interesting to see if the show mirrors how the process actually works.

The producers explain that while the goal is to find situations where families can work out their disagreement, examples of "clients gone bad" may also be involved. This refers to situations where clear planning advice is ignored or obvious mistakes (perhaps intentional) were made which lead to hurt feeling, arguments, and broken relationships.

Of course, estate planning attorneys, financial advisors, and others working in these area will undoubtedly be a natural audience for this show. But perhaps beyond mere entertainment something like this will spawn into an important, educational tool for all community members. There remains a need for more families to seriously consider their legacies, and watching examples of feuding unfold on their television may be just the spur some need to stop delaying and make a call.

New York City Bar on Planning for Pets

May 28, 2013,

The New York City Bar Association's "Committee on Animal Law" recently released a helpful report on the many different legal issues to consider regarding the care of your pet in an uncertain future. The document offers a comprehensive examination of a wide range of issues which many fail to consider. It is worthwhile to review the whole thing if you are interested in some of the more detailed aspects of estate planning with pets in mind. A free .pdf copy of the report can be viewed online here.

The sad reality is that most pet owners give only cursory thought to what might happen to their furry friend in the event of a death or hospitalization. In most cases the extent of the planning is when an elderly individual or one with a serious illness considers another person to take ownership. Obviously that is a good first step, but it is important to ensure those wishes are actually guaranteed via legal documents. Also, identifying a new owner is just the beginning of effective planning for pets.

For example, many problems arise in the time period between an owner's death and the admission of a Will to probate. Even if a Will includes specifics about new ownership and the providing of provisions, the intermediary time may be left open. This can cause serious problems, which provide immense stress on the animal as well as those working to handle affairs in the aftermath of the passing. Similarly, the provisions of a Will are of little use if an owner is hospitalized and alternative pet care needs to be arranged.

Solving these issues is not necessarily straightforward, and there is not a one-size-fits-all solution. The NYC Bar report, however, provides a helpful list of options to fill these estate planning gaps and ensure your pet's care is not compromised. For example, the journal explores the ways to use shelters or charitable organizations if friends/relatives are not available. It also discusses the need for emergency instructions to provide short-term care in the event of hospitalization or illness.

The bottom line: There is much more to planning for one's pets than talking to a friend casually or even including certain provisions in a Will. A more comprehensive plan may bring more peace of mind to many NY residents.

For assistance with any number of estate planning concerns in New York City or throughout the state, please contact our legal team today.