New York Estate Planning Lawyer Blog

The possibilities to tailor an estate plan to one’s exact specifications is virtually endless. That is perhaps most evident in the various ways that heir’s can be required to meet certain guidelines as part of a gift or inheritance. The Wall Street Journal dove into this idea last week with an article on “controlling heirs from the grave.” While that phrasing likely conjures images of busybody relatives, the basic concept of securing one’s wishes after death is entirely prudent

The story explains that many consider adding “strings” when passing on assets to others. The conditions can be placed both on inheritances and gifts given while still alive. Our New York City estate planning lawyers appreciate that many community members are strategically making sizable gifts this year in order to take advantage of favorable exemption levels and tax rates that are set to expire at the end of December.

One common concern about large gifts is the requirements that one give up control of the asset entirely–they are usually given as part of an irrevocable trust. Yet, it is important to realize that some strings can still be attached to those gifts. In general, gifts can be given with any requirement attached, even when the requirement seems silly–like demanding that family members spell their name a certain way. One of the most common provisions are “spendthrift clauses” which strive to protect a gift given to one who is known to have poor financial acumen.

Ken5 News reported on a unique estate planning case this week involving a man who left a fortune to his favorite canine.

The report explains how the man amassed a large collection of various valuables over his lifetime, from fine china to antique furniture. His possessions were enough to fill ten homes. Wanting to ensure his wishes were carried out after his passing, the man contacted an estate planning lawyer to ensure legal documents were in place. Trusts were used to protect the valuables and delineate ownership in the event of death or disability. Our New York estate planning lawyers know that all of this is similar to steps taken by local families (of all net worths) when planning for the future.

What was different in this case, however, was who was set to receive all of these valuables at the man’s death. Interestingly, the man’s will left everything to his dogs–only one of which, named “Lucky,” was actually alive when the man passed away.

Designating inheritances is not the only purpose of a New York estate plan. Some local residents may feel like there is no rush to have a plan in place, because they do not have many assets to pass on or have no particular wishes about their possessions. But inheritances are just a part of the planning. For one thing, all families with children–regardless of their net worth–need to have a plan in place to designate alternate caregivers for their children in the event of death or disability.

Naming an appropriate guardian is one of the most important preparatory steps that a parent can take to ensure their child’s well-being no matter what the future holds. If the parents do not make their wishes known in appropriate legal documents, then the decision is left to the court. While the court will work to make the best decision with the information in front of it, there is obviously no replacement for a parent’s choice.

In our area it is crucial to have a New York estate planning lawyer guide your family through this process. That is both to ensure the legal formalities are met and also to have an experienced third-party involved in the event of disagreement.

The financial world is a complex one. It is easy for local residents to get lost in the mire of special accounts and various loopholes to maximize their savings while protecting their hard-earned dollars. As always, the professional guidance of financial experts, estate planning attorneys, and others is usually the only foolproof way to ensure costly mistakes aren’t made. This also comes with the added benefit of having a trained set of eyes ensuring that one doesn’t fall for one of the many financial scams.

For example, the Wall Street Journal published a story late last month discussing the prevalence of Individual Retirement Account (IRA) scams. A growing number of states have opened investigations into fraud as a result of “self-directed IRAs. These special retirement accounts allow investors to use funds in a range of ways, including things like hedge funds and land purchases. The investments involved in these efforts are not publicly-traded which, officials advise, makes them far more susceptible to fraud.

For example, in one high profile case several defendants were accused of convincing individuals, mostly seniors, to roll their retirement accounts into these self-directed IRAs. Those doing so thought that the decision was a safe alternative to stocks or bonds. In this case, the investors were told that the money would be used to fund profitable small businesses.

Consumer Reports came out with a helpful new report which is of value to all local residents thinking about creating a New York estate plan.

The study examined the value of “Do It Yourself” (DIY) websites for legal documents, including wills. Obviously everyone values efficiency, and maximizing value while minimizing time and expense is of value in the legal arena. But it is crucial to properly balance those needs. The cheapest option, for example, often proves costly if it results in errors that led to serious problems down the road. Unfortunately, that is the case with most DIY wills.

The Consumer Reports analysis on the effectiveness of these wills found clearly that there is no replacement for actually visiting an estate planning lawyer. The testing found that the most popular DIY wills were not only ineffective for all but the simplest of plans, but in many cases they likely led to “unintended consequences” which distorted the actual intent of the involved parties.

Nothing is easy when dealing with the Internal Revenue Service (IRS). Even situations that seems straightforward or streamlined invariably involve developing complications that present headaches to taxpayers. Our New York estate planning attorneys know that this bears out in many planning issues.

Take, for example, the estate tax. As helpfully explained in a recent Wall Street Journal story, if not careful estate executors may cause spouses to miss out on millions in estate tax exemptions. This June the IRS intended to help families by streamlining the process for receiving the exemption. The new guidance sought to fix the complications caused by one spouse leaving all their assets to the other. Each spouse has a $5.12 million exemption individually, but when leaving assets to one another one of those exemptions was oftenlost. The new rules clarify the “portability” of the exemption from one spouse to another. In the past, various trusts were needed to get around this problem.

Yet, the new portability of the exemption does not mean that nothing need be done after a death to take advantage of the spouse’s exemptions. An estate tax return must be filed within nine months of the partner’s death to receive the benefit. Many executors may be under the mistaken impression that the return does not need to be filed. Failure to complete this step may be the difference between sheltering $5 million from the tax instead of over $10 million. Estate planning lawyers appreciate that this is no small error–literally millions of dollars might go to Uncle Sam which would have stayed with a family.

Prenuptial agreements commonly make headlines as celebrities getting hitched try to protect their fortunes. But the focus on celebrities (or the ultra-rich) is misleading. In reality, average Americans should, and frequently do, make use of the benefits of prenuptial agreements. In our area, New York estate planning attorneys know that these agreements are an important part of one’s long-term planning, particularly in the event of late-in-life or second marriages. These agreements allow for an individual to prepare and protect themselves and their families. But the creation of these legal documents is not without some pitfalls.

The Basics

A prenuptial agreement is essentially a contract between two people planning to get married. They agree prior to marriage on how they will divide their assets if they are divorced and on any number of other issues. While this process can be emotional, especially because the couples are naturally optimistic and excited about their future, forming this agreement while everyone still cares for each other and wants the best for each other is always the preferred model. If the good feelings should disappear, this agreement allows a couple to separate as fairly and painlessly as possible.

The estate tax saga wages on in the halls of Congress as both sides seem to be engaging in more symbolic acts on the measure with little progress on reaching an agreement which might actually become law. New York estate planning lawyers appreciate the limbo this places on many local families.

For example, Politico reported late last month on changes to the Democrats proposed tax plan. The changes come, insiders say, in order to present a united Democratic front during the election season–there is still not actual consensus among Democrats on the appropriate estate tax level. The move is likely an attempt to re-focus the election debate away from estate taxes (on which there is intra-party disagreement) and toward another tax issue–whether or not to extend Bush-era tax rates or let them expire.

The main concerns over the estate tax has been explained often by estate planning attorneys. Right now estates worth more than $5.12 million face a 35% tax rate. However, if Congress does not act, next year estates over $1 million will be hit with a 55% tax rate. Disagreement reigns regarding whether to extend current rate, let them expire to old rates, or find some middle ground.

An appraisal is an expert assessment of the value of a particular asset at a given time. Many factors involved in the appraisal of a property can easily distort its value–overvaluing or undervaluing it.

The IRS uses appraisals in the process of assessing property taxes, which requires the appeal of experts in the subject. As such, the IRS’s Art Appraisal Services’ (AAS) job consists of assessing the value of works of art for tax purposes. Our New York estate planning lawyers work with families who have valuable art collections and whose tax burden is significantly affected by these appraisal services.

A recent article in Accounting Today discusses the IRS’ need to improve its appraisal of the value of art and the Government Accountability Office (GAO) report on the matter.

As recent article in the Star Tribune put it, all but the wealthiest of us have moved from an “inheritance” society to “let’s make sure Mom and Dad have enough to live out their lives scenario.”

Ten years ago Americans expected more inheritance from their parents than they do now. Longevity has generated the need for more retirement money which in turn has led to a decrease in the total assets left to others. In addition, our New York estate planning attorneys know that the recent economic crisis has exacerbated the situion, trimming nest eggs and making it hard for many to cover their elevated health care costs and other financial obligations.

All of these issues were recently touched on in the StarTribune article. It noted that for those who reach age 65, 40% of the men and 53% of the women will live to at least 85. Since most of their income derives from Social Security, it creates a situation where they seek support from their children instead of living off a nest egg to pass on to those children.