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Pitfalls of Will Planning
By Michael Ettinger, Esq.
So many clients are advised that they need a will. In fact, will planning is becoming obsolete for persons over sixty for many reasons.
Instead of actually solving problems, wills often create them. First, they must be proven to be valid in a court proceeding, the infamous probate, for estates in New York over $30,000.00. Court proceedings can be expensive, time-consuming and things often go wrong. Also, when the client dies, that will is usually out-of-date, having been created decades before. The executors may be the wrong persons, the beneficiaries or their percentages may be wrong or other changes in the family have not been taken into account.
Notice of the court proceeding must be given to certain relatives who may be difficult or impossible to locate. Complications arise with relatives in foreign countries who may need to go to the American Consulate for notarization or "consularization" of legal documents. If there is a disabled child, the court will appoint a lawyer to represent their interests, including preparing a report to the court, and your estate must pay that attorney's fees.
Proof problems with the will lead to delays that often prevent needed funds getting to surviving spouses or children. It is fairly common for real estate to be tied up, while the probate process drags on, causing potential buyers to be lost. In some cases, stock cannot be sold even though it may be falling in value rapidly. Law firms routinely commence probate proceedings as a courtesy for families who cannot even afford the legal fees to get the matter started. Needless to say, the cost of court proceedings today may be expected to be in the five figure range.
Two other pitfalls of will planning bear mentioning. First, since the will is filed in court, it becomes a public record. Anyone may then go into the courthouse and order a copy of your will to see what you had and who you left it to. Your privacy is out the window. Secondly, since notice must be given to the heirs you may have left out, or left less than they may feel they are entitled to, you run the risk of a will contest if your estate is distributed in anything but equal shares.
When you are in probate court, who is in charge? The judge, not you or your lawyer. Don't suppose that the Judge will always act in your best interests, as the court may have other interests to consider.
Always better to stay out of court, in our opinion. By using a living trust, instead of a will, you avoid probate court and keep control, or at least control rests with those you have chosen, if you die or become disabled. The expenses are so much less without court proceedings that you may easily save tens of thousands of dollars.
The other problem with a will? It only takes effect when you die. Today, about half of all people eventually become disabled. Since the will does not provide for disability, you risk guardianship proceedings. These proceedings occur later in life when someone becomes unable to handle their affairs and does not have an adequate plan set up. In a guardianship, the court will appoint someone to handle your affairs. Not only may it not be the person you would have chosen, it may not even be someone you know. Trusts, which take effect while you are living, are considered a highly effective tool to avoid guardianship proceedings and guarantee that the person or persons you choose will be in charge. This way, you may be certain that your best interests will be looked after.
In short, when someone tells you that you need a will, think again. It may be a living trust that you need instead.
The Stealth New York Estate Tax
By Michael Ettinger, Esq.

In our experience, a majority of New Yorkers are unaware (blissfully?) that New York State levies an estate tax.
New York's estate tax starts on estates over one million dollars. What is your estate for tax purposes? All of your real and personal property, your bank accounts, investments, IRA's, etc. as well as any life insurance that you own. Add it all up and, if you're under a million, then no problem.
But, if you're over a million, the tax rate starts at 41% (yikes!) and gradually goes down to about 10%. Below is a New York Estate Tax schedule prepared by our firm to help you see where you stand.

Fortunately, if you have a spouse, you can avoid paying up to about $100,000 of these estate taxes by creating two estates, one for the husband and one for the wife, and get two one million dollar exemptions.
For example, let's say a couple has two million in assets. Essentially, what happens here is that each spouse sets up a trust and we put one-half of the house and other assets into each trust. Both spouses are trustees, or managers, of both trusts. Now, say husband dies. Before, everything went to wife and while there is no tax on what you leave to your spouse, when she dies her estate has the whole two million and generates a $99,600.00 tax bill. Instead, with the two trusts, husband's assets stay in his trust, wife is in charge and can buy, sell, trade and spend. But when wife dies, husband's trust goes to the children, or preferably their inheritance trusts, and "bypasses" her estate. He passes one million tax-free. Her estate is also only one million and also passes tax-free. Savings = $99,600.00. Why don't more people do this? In fact they do. Ettinger Law Firm has used this technique for over twenty years in more than 10,000 estate plans to save thousands of New York families many millions in estate taxes.
Remember, you don't get the two exemptions just because you have a spouse. You only get the two exemptions if you set up the two trusts before the first spouse dies...in other words, if your estate is over one million dollars and you have a spouse, the time is now.
What to Do About Children Who Can't Handle Money
by Michael Ettinger, Esq.

It's an estate planning epidemic. So many successful parents we meet have children who are poor or worse at handling money, have not achieved significant success in life where they have garnered enough experience in handling money or they simply refuse to grow up. What's a parent to do?
Enter what has been termed the greatest invention of English common law: the trust. Trusts are legal entities that may hold and use assets for a beneficiary (your son or daughter) but have them managed by a trustee (one of more responsible adults, including a professional trustee).
Let's say your son Richard is the problem child. Your estate plan using a living trust would provide that upon your death or, if you have a spouse, upon the second death, Richard's share would go into the Richard (your last name) Trust with perhaps a family member and your attorney as co-trustees. The Richard Trust would continue for his lifetime, or until a stated age, perhaps sixty of sixty-five, when it would pay out to Richard. In the meantime, the trustees may use the money for Richard's health, education, maintenance and support. The trust can help him start a business or buy a house or, alternatively, purchase a house for him. Alternatively, the trust may go on for his lifetime and then, upon his death, to his children (at a stated age).
The sprinkling trust is often used in this context as well. Let's say Richard has two children and you are very concerned about them as well. You may set up a trust for Richard and his children and direct the trustee to "sprinkle" the income and principal amongst the beneficiaries, in equal or unequal amounts, whenever it is needed or will do the most good. So if one of Richard's children is accepted to Harvard, while the other goes to the local community college, the trust may help both. An added bonus with these trusts is that they keep the assets out of the hands of Richard's spouse who, in some cases, is a large part of the financial problem.
For children in dire financial straits or perhaps headed in that general direction, the effects of a potential bankruptcy on the inheritance and estate administration must be addressed. Noted New York bankruptcy lawyer, Jay Fleischman, Esq., has written about what happens if your son or daughter files for bankruptcy within six months of the date of your death. According to attorney Fleischman, "under the bankruptcy laws, people who receive the right to an inheritance within 180 days of the date on which they file for bankruptcy risk losing that money or property - even if they do not take actual legal title within that period of time. The right to receive that money or property is considered an asset of the bankruptcy that, depending on applicable bankruptcy exemptions (these vary from state to state), could be seized and distributed to creditors".
Nevertheless, by leaving assets to your son or daughter in a trust, giving the trustee discretion to distribute income and principal as the trustee sees fit, you may protect those assets from being lost in a subsequent bankruptcy proceeding.
There is a lot to talk about in a consultation concerning setting up a trust for an adult child, such as the pros and cons of naming siblings, other relatives, friends and professionals as trustees. Other considerations are how long the trust should go on, what payments the trust should allow or disallow, and who the back-up trustees might be. All your choices have their pluses and minuses which need to be fleshed out so as to provide the plan that best suits your family's needs.
Finally, one of the key features of our Lifetime Estate Planning Process, is the free review we provide every three years. This means that we will continue to monitor the estate plan so that if your son Richard turns things around and no longer needs the trust later on, an event we have experienced many times, the trust may be eliminated by the parent later on, before it is too late to undo it.
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