New York Estate Planning Lawyer Blog

Do I have enough to retire? Countless New Yorkers ask their financial advisers, estate planning attorneys, and other professionals that very question each and every day. There is no one-size-fits-all response, as retirement is a personal matter based on individual expectations, goals, and perspective.

Mountains of pages have been written about how much money you should have before retiring and what you should do with it. Perspectives abound.

Interestingly, there is less disagreement about general characteristics that make one more or less likely to be financially secure enough to retire. For example, the Wall Street Journal pointed to a new study last week which found that married couples are far better positioned to make the leap and officially enter retirement.

Couples Save More
Fights about money are common. Many relationships are made of one partner who is more frugal than the other, and disagreements about what to buy and when to buy it are persistent. The frugal partner in the relationship might daydream about the amount of money that they could save if they were on their own, without the compromises necessary for any healthy relationship.

But according to a new study from the National Bureau of Economic Research (NBER), on a system-wide scale, married couples are significantly better prepared for retirement than single individuals.

According to the NBER study, married couples who may be considering retiring (between 65 and 69 years old) on average have a nine-times larger nest egg than their single counterparts. That "nest egg" includes IRAs, 401(k)s, savings, and investments for the purposes of the study. Excluded were housing wealth and available Social Security.

The disparity is even more stark in raw numbers. In 2008 (the year that the study data was culled) married couples had saved, on average, $111,600. That compared to only $12,500 in savings for singles.

The Causes
The NBER did not delve into actual causation. But many different ideas are speculated about regarding the root reason for this disparity. For example, single parties are unable to take advantage of the "economies of scale" that allow married couples to pool resources and split costs that each would otherwise have to pay wholly on their own.

Divorce is also a costly endeavor, and it often takes years before divorced partners have the same income level they did during the marriage. Similarly, single parties are usually hit harder by tough economic times or catastrophic events. Whereas a couple can rely on one another for aid during difficult times, a single party may be decimated, requiring years (or decades) to deal with all of the financial ramifications.

Money is always at the top (or near it) of lists describing issues that most commonly bring stress into our lives. It's cliche to say that "money is the root of all evil," but its obvious that dealing with financial issues is a common concern for families of all shapes, sizes, and even income levels. There is so much different advice out there about what you should be doing or could be doing as it relates to money matters that it is hard to distinguish between the useful and the fluff.

One such story posted in Yahoo Finance this week offers a somewhat helpful distillation of seven basic concepts that can be used for those of all income levels and at different life stages. They are referred to as "paradigms" of financial health. The entire list is worth browsing, but a few of the items on the list include:

***If you are a couple with two incomes, you can pay for "essentials" with only one spouse's income. Those essentials are things like the mortgage, insurance, child care , and similar items that cannot be cut easily. Essentially this is one way to check whether you may be living above your means. It is an easy shortcut to figure out if you can survive in the event of a lost job or other emergency.

***You only have one car payment or a "car replacement account." This is another shortcut to emphasize the concept of not having too many cash flow demands at any given time. One of the biggest concerns related to financial health is ensuring that you can survive in an uncertain future. One challenge is having too many bills that must be paid each month. Obviously, there is no way around obligations, mortgages, student loans, insurance, etc. However, in those areas where it is possible to cut back (i.e car payments), minimizing obligations is helpful.

***You have conducted estate planning. The article says is succinctly, "Estate planning isn't just for wealthy people. You're steps ahead of the game if you have a will and durable power of attorney for finances and health care in place after turning 18, the age at which you're considered an adult by law." As we repeatedly remind local residents, taking care of these matters does not hinge on your age, income level, or other life factors. It's essential.

For help with estate planning or similar issues, please get in touch with our lawyers for guidance. We have offices in New York City and throughout the state. We are proud to work with families in all situations on estate planning and elder care issues.

It is not everyday that important retirement and estate planning issues make their way into popular entertainment drama. One of the few exceptions was the movie "The Descendants" a few years ago which garnered widespread acclaim--and some Oscar awards--in a tale focused on a man who unexpectedly comes into control of vast land holdings in trust following his wife's surprising death. The main character, played by George Clooney, is forced to grapple with a range of issue while dealing with feuding in-laws and uncertainty about his wife's wishes.

One of the other exceptions is the massively-popular British drama Downton Abbey. The BBC program has been running for several seasons, with the most recent batch of episodes just finishing to high rating here in the United States. The story is set over the course of several years in the first part of the 20th Century, including the first World War and the decade or so afterward.

Much of the drama revolves around one family living off "old wealth" and the challenges presented in maintaining a large estate and transitioning for its transfer to another generation. Recently, a Wall Street Journal article offered an interesting take on some estate planning lessons that viewers can glean from the ups and downs depicted in the show surrounding the inheritance drama.

For example, one key problem is the challenge of maintaining a significant amount of wealth in a large home. The family in Downton Abbey engages in a range of struggles all in an effort to keep the large estate in the family. In reality, it is often far easier to simply sell a home and distribute cash instead of being burdened by the exigencies of maintaining an unwanted piece of real estate.

Another lesson is the value of dynasty trusts. In the show, the patriarch of the home pour vast holding in one bad investment and risks the entire family fortune. If that fortune had been handed down with certain limitations, perhaps via a dynasty trust, then the danger of massive loss to creditors or mismanagement may be limited.

Of course, most New Yorkers do not have the wealth of the Crawley family in Downton Abbey. Yet, the basic lessons in the show hold true to the present day and apply to families of varying asset levels. Diversify holding, protecting against sudden illness, guarding against ramifications following divorce, remaining flexible with asset allocation, and many other issues in the show are faced everyday by local families. For help navigating these somewhat confusing legal and financial waters, please contact the New York estate planning attorneys at our firm for tailored guidance.

Advisor One shared a useful story this week that touches on an item commonly forgotten in wealth transfers, including those using trusts or other legal tools. It is critical to remember how insurance coverage might be affected by the transfer. That way, changes can be made immediately to guarantee that coverage is in good standing at all times. Sadly, as you might expect, this error is often only uncovered after some catastrophic accident, when insurance coverage is needed. The last thing anyone wants is that "oops" moment, when it is discovered that the coverage does not exist because of the previous transfer via trust or other tool (like an LLC).

The Basic Problem
Insurance policies are written to provide coverage to an owner or titleholder. This is the case for virtually all types of coverage, from home, automobile, and boats to collectibles. Problems arise, however, when a transfer is made and the insurance policy is not updated to reflect the change. For example, if a home is transferred into a trust, it is important to confirm that the proper changes are made so that the homeowners policy covers the new arrangement.

While this may seem like an obvious step that must be handled as part of these transfers, it is all too often forgotten. The article argues that the mistake is more likely to be made in situations where ownership changes but the actual possession of the property remains with the former owner. For example, if a senior transfers title of a house to a trust for tax and planning purposes, the senior is likely to still live in the house. In those cases it is critical to ensure that the insurance covers both the actual owner and the "occupant." The same general idea also applies vehicles and other valuable items.

The specific protocol to ensure proper coverage may depend slightly on the item and the insurance company. In most cases, it is just a quick fix. But, the consequences of failing to making that quick fix before a possible accident are staggering. It goes without saying that it is beneficial to have a decent relationship with your broker such that you can make a quick call after these transfers to get specific information about what needs to be done in your exact case to guarantee that these insurance details are account for.

The bottom line: keep insurance issues in mind when all of these transfers and be sure to bring it up if it seems to be a forgotten detail.

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

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

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

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

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

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

The Daily Jeffersonian published a story recently on the bizarre details of a case involving a lottery winner's apparent murder and the subsequent estate battle. Like the plot of a Hollywood crime drama, the tale includes a mysterious death, a series of hidden family feuds, and considerable money on the line. While quite dramatic, it is a vivid example of the difference that common sense estate planning can make in the aftermath of a death.

Money & Murder
The case centers of the estate of Urooj Khan who immigrated from India in 1989 and established several successful businesses. In 2010 he hit a jackpot and won a state lottery; his actual take-home from the winnings were about $425,000. According to reports, he planned on using the windfall to pay off his mortgage, expand his business, and donate a sizeable sum to a local children's hospital.

Unfortunately, his long-term planning was for naught. A few days before he was set to collect his winnings, after a dinner with family, he became very ill. He collapsed that night and ultimately passed away. It was only later that the strange circumstances of his death became known.

According to published reports, officials at first assumed the death was due to natural causes. However, when a relative came forward with suspicions, investigators looked closer. A toxicology report was authorized and a lethal amount of cyanide was found in his system. He had been murdered.

No Estate Planning
As you might expect, the murder of a middle-aged man just after he won the lottery led to immediate speculation about who could have been involved. Authorities have yet to arrest anyone for the crime or name suspects; the man's body is set to be exhumed, indicating that authorities are still working to collect evidence.

Money is the likely motive in the murder, and speculation is rampant about who may have played a role. For one thing, Khan apparently did not conduct any estate planning before his untimely death. No trusts exist to pass on assets seamlessly, and there is no will to indicate who he wanted to have his assets.

As often happens in these cases, a court battle ensued. Intestacy laws in the state suggest that the man's wife and daughter (from a different relationship) would split the assets. However, Khan's siblings have voiced concerns about the inheritance and have suggested that their brother's wife might not properly protect Khan's daughter's share of the money. Khan's ex-wife has also come forward claiming that she did not even know that Khan or her daughter was still in the country, as she assumed they had moved back to India.

Considering that Khan's wife is set to inherit, many have questioned whether she played a role in his passing. For example, reports indicate that Khan's wife previously claimed that she, her husband, her daughter, and her own father ate the same meal the night before his passing. However, the meal was lamb curry, which the wife would not have eaten on account of her vegetarianism. In addition, her own father has come under suspicion, as he owes over $124,000 in federal tax liens.

The saga truly has the makings of who-done-it murder mystery. One can only hope that authorities are able to get to the bottom of the situation to ensure justice and fairness.

Like the monster from a horror movie that will not stay still no matter what is thrown at it, there are already suggestions that the apparent "final" decisions related to the estate tax may not actually be all that final.

As we previously explained, as part of the fiscal cliff compromise bill certain estate tax issues were seemingly made permanent. The exemption level was kept at $5.12 million and indexed to inflation. The top rate was set at 40%. Both of these figures were less intrusive than that original proposals from the White House and far less severe than those mandated by the fiscal cliff itself. Many observers were happy with the outcome, no matter what their personal preferences, for the fact that it at least offered some stability. Having an uncertain tax rate is never a welcome prospect when planning for the future.

Also, as pointed out in a recent article discussed the estate tax components of the bill, the tax will continue to be "portable." This means that one spouse may use their deceased spouse's "unused" portion of the exemption level. This is a very helpful tool which allows more assets to pass tax-free without the need for more complex estate planning techniques.

Not Over?
However, that actual permanence of that estate tax situation is in doubt. For one thing, there is actually never any assurance that any current tax will remain indefinitely. That is because Congress always retains the ability to pass new legislation to alter things. In practical terms, "permanent" is usually used to refer to tax rates that have no sunset date (like the current one).

But there are already some concerns that the estate tax is not necessarily out of the woods. That is because this compromise bill does nothing about the possible spending cuts. Congress and the White House will again have yet another showdown in the coming months to hash out agreement over those cuts and possible need to raise the debt ceiling. Anytime that the parties are in negotiation over these large budget issues, virtually all taxes are theoretically on the table. That means that it is not out of the question that the estate tax rate or exemption level may be edited in some way as part of those future deals.

At the end of the day, none of this alters the inescapable fact that estate planning should be done now. As the last year has demonstrated explicitly, there will never be complete certainty about these issues. But planning by experienced professionals is able to adapt to those permanent uncertainties to provide the security you need.

Timing is of critical importance with estate planning matters. Obviously, a plan must be in place early enough to be of use before one falls ill or suffers from mental issues. For example, creating a will or trust may be impossible after one suffers a stroke or succumbs to serious effects of Alzheimers. This is why we continue to encourage residents to make plans early and consistently update them.

Time also factors into matters after a death. Many beneficiaries may face hardship if they are forced to wait months (or even years) to have an estate settled. One of the key benefits of an inheritance plan is to minimize the risk of a long delay between the actual passing on of assets, often focused on avoiding probate and preventing feuding.

Celebrity Example
The latest developments in the estate battle of Huguette Clark offers an example of the consequences of a drawn-out legal battle. Ms. Clark was the reclusive daughter of Guilded Age baron Senator William Andrews Clark. He amassed a fortune in the copper and railroad industries and is known as the founder of the city of Las Vegas. An intensely private individual, Huguette spent the last three and a half decades in Manhattan hospitals, even though she was not actually ill. In the several decades before that she rarely left her Fifth Avenue apartment.

Ms. Clark died over a year and a half ago, in May of 2011. However, her assets--valued between $300 and $400 million--have yet to be distributed. That is because a dispute arose between the woman's extended family and others close to her. Two wills were apparently found, signed by the heiress six weeks apart. The first will gave most of the fortune to her extended family while the most recent will left them nothing. The extended family contested the second will, as they have concerns about the undue influence her network of nurses and doctors may have had over the elderly woman. There are claims of coercion related to gifts totaling tens of millions of dollars that were given to some of those individuals.

The legal battle is still unresolved. However, according to a Huffington Post story from this week, one of the potential heirs recently died. A 60-year old great nephew of the heiress was found last week under a bridge in Wyoming. The man was apparently homeless and died as a result of exposure to the elements on the cold winter's night. Had he survived he may have stood to gain nearly $20 million as a result of the inheritance. His cut of the inheritance will now go to his other relatives.

The case is a sad reminder of the many ancillary consequences of not having detailed estate plans in place to handle matters as efficiently as possible.

Virtually everyone agrees that it is important to invest for retirement, take care of inheritance details, prepare for long-term care, and otherwise plan for the future. But there is a big difference between understanding the value of these tasks and actually taking the time to do it. Considering the financial and political stresses that come with caring for an aging population, figuring out how to motivate community members to do what is necessary to plan for the future is drawing more and more attention.

One new tactic stems from unique psychological research on financial motivation. In previous studies out of Stanford, experts found that one way to spur real action on long-term planning was getting individuals to visualize their future, elderly selves. Interestingly the researchers found the most benefit not when people just imagined themselves in old age but actually saw digitally enhanced images of themselves when they were older. The surprise of seeing their own face in old age was a real spur to stop putting off the necessary planning.

The lead researcher in the Stanford experiment summarized that, "People who see an age-progressed rendering of themselves are more likely to allocate resources to the future."

See For Yourself
In fact, interest in this technique has advanced to the point that Bank of America's "Merril Edge" program allows anyone to go online, take a picture of themselves, and see how they might look in the future. The tool is known as "Face Retirement." You can check it out for yourself here.

The program allows you to view images of yourself at various ages. On top of that, the tool provides estimated cost of living figures for each of those ages. Those cost of living calculators adjust for inflation so that consumers have a real idea of what they'll need to do to be financially secure well into their golden years. Perhaps expectedly, considering the tool was created by a financial services firm, the program also provides information about steps that can be taken now to prepare for the future.

Action Matters
No matter what you use to motivate yourself to plan for the future, the bottom line is that there is nothing to lose from taking action today. Thinking about money is always stressful. That is particularly true when worrying about retirement and other end-of-life issues. But it is important not to forget that the easiest way to ease the stress burden is to actually do something about it. No matter what your current financial situation--good or bad--there is value to beginning the process of long-term planning.

If you are in New York City, Albany, Fishkill, MIddletown, Nyack, Rhinebeck, Saratoga Springs, White Plains, or elsewhere throughout our state, please feel free to reach out to the attorneys at our firm to see how we can help.

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

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

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

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

What Does It Mean For You?

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

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

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Forbes Estate Tax Article Catches Fire on Social Media

Medical and technological breakthroughs in recent decades have impacted virtually every facet of life--estate planning is no exception. For example, many rules in the field hinge on definitions of legal heirs. In the past, it was pretty clear who those heirs were, typically biological or legally adopted children. When an indiviual dies intestate (without a will), then each state has specific default rules regarding what to do with the individual's assets. Often the biological or legally adopted children receive part or all of those assets.

But it doesn't end with inheritance rules. Many state and federal programs also use these definitions to make decisions about who qualifies for certain benefits. This includes the federal Social Security program. In many cases, when a parent dies, a family eligible for Social Security assistance for the minor children that remain following their parent's passing. In the past there as little confusion over when a child did or did not qualify for those survivor benefits.

No longer. As recent of improvements in medical research have changed reproductive technology, the line between when a child is considered an heir and when they are not is blurred. That is perhaps best evidenced by a new case that is slated to go before one state court.

In Mattison v. Commissioner of Social Security, the plaintiff in the case is a mother who gave birth to twin boys several years ago. She is seeking Social Security benefits for the children because her late-husband (and the twins biological father) died in 2001. In the past there would have been little controversy surrounding the case, as the boys would typically qualify for support. However, the unique aspect in this case is that the children were conceived after the father's death. The man had battled health problems for some time, and before his death he had his sperm frozen. It wasn't until a few days after his passing that his wife used the frozen sperm to conceive the children. This is unique, because while parents often die before their children are born (when they are in the womb), it is rare to have the children actually conceived after the death.

In a previous U.S. Supreme Court hearing, the high court ruled that the children were not automatically guaranteed the Social Security benefit. Instead, the Court determined that the specific definition of heir in each individual state determines whether the benefits accrue or not. In other words, it is a matter for the states to decide. As such, the case was returned to the state court where, according to a recent MLive article on the matter, a hearing is soon scheduled. However, those familiar with the situation argue that the state court is unlikely to rule in the woman's favor because the law as currently written requires conception before death to be deemed an heir.

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Questions Remain Regarding Rights of Posthumously Conceived Children

Planning for Your Digital Life After Death

Concerns are rising among many in the financial and estate planning fields as the year winds down without any more clarity on the future of the estate tax. A recent post from Advisor One, for example, explained that the shrinking 2012 calendar means that there are less than three months until the "ticking estate tax time bomb" explodes.

Here's the reality: without Congressional action, on January 1, 2013 the current $5.13 million exemption level will drop to $1 million and the current 35% top tax rate will increase to 55%. In other words, many more families will face an inheritance tax and the bite will be much stronger than in the past. While it may seem like any time is a good time for estate planning (that is true), it is undeniable that taking proactive steps in the next few months to plan for possible estate tax changes may prove incredibly beneficial down the road.

As the Advisor One post explains, that need to plan is critical because changes are undoubtedly coming no matter who wins the elections next month. Each Presidential candidate has very different ideas about the estate tax. On top of that, of course, a President cannot make changes to these laws on their own. The final partisan make-up of both the U.S. House of Representatives and the Senate will play into any ultimate resolution. In addition, it is not just exemption levels and tax rates that are at issue. Different policymakers also have different ideas about what assets are or are not included in the "gross estate" which determines the amount to be taxed. For example, the President has suggested that he supports including certain assets held in grantor trusts in the estates.

The one thing that is certain is, without action, the exemption levels and rates will change at the first of the year. This is a reversion to the 2001 levels. Regardless of one's political ideas about these tax issues, this revision would undoubtedly mean that more and more local families would be impacted by these tax issues.

There is no simple way for any local family to understand how these issues might affect them. But it is a mistake to do nothing under the assumption that the future is uncertain. Real legal steps can be taken to best position the family to save money on taxes and seemlessly transfer assets to others, inlcuding the use of gifts. Community members throughout New York should take a moment to contact the lawyers at our firm for help.

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Will Estate Tax Burdens Affect More Families in 2013

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

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

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

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

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

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

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Deal Reached in Estate vs. Museum Feud

Too Much Inheritance Too Soon

Some parents are understandably concerned about how a large inheritance might affect their children. That concern is heightened the younger the child is. Eighteen years old may be the official "adult" demarcation line. But being a legal adult and having the actual maturity to handle large sums of money are two different things. Considering that many eighteen years olds are just out of high school--or even still in high school--it is clear that many may not be in a position to manage sophisticated financial situations. Unfortunately, without proper planning ahead of time, it may be difficult to prevent young adults from having significant inheritances dropped in their lap before they are ready for it.

Take, for example, the current legal wrangling around the inheritance given to the daughter of Whitney Houston. Houston died suddenly last February. Her mother and sister-in-law/business manager were named executors of the estate. Virtually all of Houston's assets were left to her daughter, Bobbi Kristina.

However, in the months since Houston's passing, the executors have become concerned about Bobbi Kristina's ability to handle the sizable inheritance she is receiving. According to the Hollywood Reporter, late last month the executors filed a petition with the local court seeking to restructure the plan. Presumably, they are seeking to lower the funds available to the young woman who is now 19 years old. The petition argues that Bobbi Kristina "is a highly visible target for those who would exert undue influence over her inheritance and/or seek to benefit from [her] celebrity."

The court documents go on to note that there was a clause in Houston's planning documents noting that the intention was to "provide long-term financial security and protection for her child." The petitioners are therefore arguing that lowering the inheritance payments is needed to fulfill that intention. It will be interesting to see if Bobbi Kristina intends to fight this attempt to alter the current inheritance details--her lawyer is yet to comment on the situation.

The common technique to help manage these situation is inclusion of "spendthrift" clauses in estate planning documents. Some flexibility exists with these clauses, but the general idea is that they structure inheritances, so that a beneficiary does not receive a bulk of assets at one time. These arrangements are not only appropriate for children of celebrities or the super-rich. Instead, these clauses are often worked into the plans for many families, including those who have adult children with significant financial debt, substance abuse issues, or other vulnerabilities.

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Gary Coleman Estate Feud Continues

New York Estate Planning Feud Ends for Astor Family

Not many years ago student loans and estate planning were rarely discussed in the same sentence. That is because in decades past far fewer individuals took out student loans and, even when they did, the size of the loans were smaller. Things are changing, however. Higher education is becoming more and more crucial to long-term employment and the cost of that education is increasing. These changes mean that more individuals have to take student loan obligations into account when conducting long-term financial planning. Those loans may the planner's own loans or (even more likely) loans for children on which they co-signed.

In any event, more and more families have to take these issues into account in long-term planning. One issue on which there is much confusion is the discharge (or lack of discharge) of these obligations upon death.

Student Loan Obligations & Death
Forbes talked about a sad story this week on the potential long-term effect of loans, discharge, and taxes. The article shared the example of Roswell Friend--a student who committed suicide last year. The death wiped away over $55,000 in student loan debt that the student (and his mother) owed. However, while the debt obligation may be discharged upon death, that does not mean that there are not other financial complications--most notably involving taxes.

Cancellation of death income ("COD income") is taxable. The idea is that forgiven debt is akin to income, because it is money that you received--a net financial benefit. Tax and legal professionals can explain some exceptions to avoid the tax bill in some of these cases. However, sometimes there are no other alternatives. That often includes forgiven student loan debt.

For example, in the case of Roswell Friend, her mother was hit with a $14,000 tax bill.
IRS pursuits of tax on forgiven debt is not uncommon. Many parents may be shocked to learn that they owe often significant tax bills on forgiven debt on which they co-signed.

The U.S. Department of Education, last year alone, cancelled more than $2.7 billion in loans as a result of bankruptcy, disability, or death. When parents co-signed on those loans, they may be on the hook for a significant tax bill.

Sometimes there are steps that can be taken to minimize a tax bill--at other times there are not. But no matter what, it is essentially for these issues to be taken into account when conducting long-term retirement and healthcare planning.

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