New York Estate Planning Lawyer Blog

November 22, 2011

Professional Help Needed When Crafting a Will

Our New York estate planning lawyers continue to advise local community members that wills are virtually obsolete for many residents. A will often creates more problems than it solves, because probate is still involved, the information is made public, and legal challenges to the will provisions are common. Estate planning is meant to simplify the transfer of assets, and wills often fail at that goal. Instead, the creation of trusts is usually a far superior method of saving taxes and streamlining the process to distribute assets quickly and seamlessly.

However, there may be limited situations where a will might be appropriate, depending on the age of the individual and their assets. As Forbes explained in an article last week, even when a will is used instead of a trust, it is vital to have professional help writing it. While do-it-yourself projects are worthwhile for home improvements and car maintenance, it is not the same vital financial planning tasks. When professional help is not sought and problems are created, it is only at the exact moment when the document is needed to work that its flaws come to light. At that point, there is no going back.

As the article explains, when done without experienced aid, wills are often filled with errors. For example, failing to sign the will, not updating it, or adding amendments improperly are common mistakes that can nullify the document. Without the guidance of professionals, imprecise wording is often used. It is much harder than many suspect to craft legal documents with language that is void of any ambiguity. Vague language is easy to misinterpret, and the one who knows for sure what was intended will not be around to explain the mistake. Estate planning lawyers are well versed in crafting legally precise terms in standard language that doesn’t equivocate.

November 18, 2011

Forbes Shares Information on Celebrity Estate Planning Stories

by Ettinger Law Firm

Families across the country will come together to celebrate the Thanksgiving holiday next week. As a Forbes article recently explained, the holiday is a perfect time to discuss estate planning issues, because the planning is all about helping out one’s family. One of the main goals of an estate plan is to ensure that surviving family members will be taken care of and not forced to endure stressful, complicated, and costly procedures to get financial affairs in order following a death.

One way to broach the topic over Thanksgiving dinner, say the article authors, is to frame the talk in the context of high-profile celebrity stories. The article includes a list of the “Top 5 Celebrity-Based Estate Planning Conversation Starters.” Kim Kardashian’s story made the list to highlight the role that marriages have on one’s estate. The socialite ended her seventy two day marriage last month. Of course all marriages (short and long) have significant effects on one’s estate planning documents, and estate planning attorneys should be consulted when a marriage is entered into or ended. It is smart to make appropriate changes even before a divorce is finalized; otherwise the estranged spouse may still retain control if a death occurs before the separation is official.

The feud over Michael Jackson’s estate is also ripe with lessons. It was explained how the music pop star created a trust before he died and named his mother, three children, and personal charity as beneficiaries. Two trustees were named to help manage the trust. Our New York estate planning lawyers help clients in our community create these legal entities all the time. However, besides creating the trust, it is vital that the trust be “funded.” Funding is the process where assets are moved from an estate and into the trust. Failure to do this makes the trusts seemingly ineffective. That is where problems have arisen for the Jackson estate.

November 16, 2011

New Survey Reveals Financial Planning Helps in Bereavement Process

by Ettinger Law Firm

Our New York estate planning attorneys have decades of experience helping local families following the death of a loved one. We have come to appreciate the role that we play in this difficult time via the estate administration and probate settlement process. Financial uncertainty is the last thing that families need when struggling with emotions after losing a loved one.

A recent New York Life Foundation survey of local residents who had lost a spouse confirmed the vital role that New York estate planning plays in many lives. As reported yesterday in Life Health Pro, nearly sixty percent of survey respondents admitted that “losing my spouse has significantly impacted our standard of living.” More than half of survey respondents explained that they were not financially prepared at the time that they lost their spouse. For those widows and widowers who still had children living with them at the time of the loss, the financial struggles were even more severe.

The report found that “nearly everything involving money–either on their own behalf or on behalf of their children–was harder following the loss.” These money troubles were especially pronounced among families that had lost a spouse young or had failed to conduct any estate planning. For example, two out of three spouses agreed that it was much harder to save money following the loss. Sixty percent admitted that they had trouble managing household finances after the loss, with few able to find any available resources to spend even modest sums on themselves. For families with children, the consequences of these money troubles can be long-lasting. Over sixty percent of parents said that it was virtually impossible to save for their children’s college education following the death. Nearly half had the same problem in paying for affordable health care.

November 14, 2011

Trustees Need to Be Educated On their Role in Estate Plans

by Ettinger Law Firm

Last week Advisor One discussed an estate planning issue that is underappreciated by some community members: the need for an educated trustee. Our New York estate planning attorneys commonly use trusts to help local residents avoid probate and save on estate taxes upon their death. When a trust is used a trustee has to be designated, which is an individual or entity that will carry out various responsibilities upon the death of the one who created the trust, the Grantor. The trustee is obligated to complete a range of legal and practical duties at that time. Without proper education and guidance they run the risk of failing in their obligations and causing a variety of problems for the family involved.

Upon the death of the Grantor, for example, the trustee must delve into the Grantor’s personal and financial situation. That includes creating a list of all of the individual’s assets, including personal property, real estate, stock, and other items. The fair market value of the property must be assessed so as to establish a new tax basis for possible future appreciation purposes. An assessment must be made to determine if estate taxes are at issue before equitable distribution of property to beneficiaries per the agreement’s terms. Many other duties must also be fulfilled. Outstanding debts have to be paid, life insurance claims filed, retirement accounts handled, tax returns filed, and other accounting documents properly crafted. While the settling of a trust is easier than the probate process, it still demands prudent action by those involved.

The complexities of the position make it necessary that trustees be educated about their role, and it makes it important for the Grantor to give careful thought to trustee selection. The article notes of participants at a recent trustee education seminar that “grantors were trying to determine which made most sense for them: a personal trustee, a corporate one, or a personal trust company.” The article went on to explain how it was often difficult for families to identify a personal trustee that possessed the technical skills and relationship with the Grantor needed to best fill the role.

November 9, 2011

Estate Planning Documents Must Be Updated So They Work When You Need Them

by Ettinger Law Firm

Yesterday the Kansas City Star published a story on the necessity of properly updating estate planning documents. The article shared the story of a local woman whose mother had just died. The mother had created a living trust several years before and placed her residence within the trust. However, a few years after the planning occurred, the mother sold her house and moved into a different home. She died shortly after the move. The adult daughter was left wondering whether or not probate would be required for her to obtain her mother’s home.

The daughter learned after talking to legal professionals in the area that the key issue was whether her mother had taken title to the new home in the name of her trust. If so, then the new home would likely be part of the mother’s living trust to be passed to the named beneficiary of the trust per its terms. However, if the new home was not titled in the trust’s name, then it likely would not pass on via the trust. Instead the public probate process would be required for the daughter to obtain the residence.

Of course the entire purpose of the mother creating a trust in this case was to avoid probate, save on taxes, and ensure that her family members would have as seamless a transfer process as possible in the inherently difficult time. By not taking her earlier planning into account when making future transactions or consulting her estate planning attorney to assure everything was in order, the mother risked having her plan fail to work as desired at the very moment it was needed.

November 7, 2011

An Estate Planning “Perfect Storm”

by Ettinger Law Firm

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a “perfect storm” for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, “If individuals are trying to transition assets to the next generation, we currently have a perfect storm–in a good sense–to do it.”

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain–it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

November 3, 2011

Reality Star Feuds with In-Laws in Estate Fight

by Ettinger Law Firm

Last month Forbes discussed an estate feud that brewed followed the suicide death of a reality show star. Late this summer, the 47-year old star of “Real Housewives of Beverly Hills,” Russell Armstrong, took his own life. His wife, Taylor Armstrong, had filed for divorce shortly before the death. However, the divorce was not final at the time of Mr. Armstrong’s passing, meaning that per the rules of the state she was the next of kin. As such she maintained a certain level of control over his affairs–including his funeral and burial plans. Without instructions to the contrary in estate planning documents, even estranged spouses may maintain this control.

Making matters worse in this situation, it appears that Mrs. Armstrong never maintained a good relationship with her former husband’s family. As a result, she did not initially tell the family about the funeral, burial, or memorial plans. The man’s parents and siblings wanted his remains buried in his home state of Texas, but Mrs. Armstrong claimed that she wanted to bury him in Los Angeles. It remains unclear exactly how the ugly situation will be resolved.

Unfortunately, the burial dispute may be just the beginning. Depending on Mr. Armstrong’s estate planning documents, his estranged wife may still be entitled to inherit most of his assets. That is why it is important to seek out professional help in the middle of a divorce. Otherwise, there is no telling what might happen. As the article notes, “Fights over the estate of someone who passed away in the midst of a divorce are especially common.” Other recent high-profile examples include the deaths’ of Dennis Hopper and Gary Coleman.

November 1, 2011

Federal “Super Committee” May Target Gift Tax in Deficit Reduction Scheme

by Ettinger Law Firm

The gift tax has implications in a variety of New York estate planning situations, from deciding the best way to provide aid to loved ones to conducting business succession planning. As with many other tax issues, timing is important because lawmakers at the federal and state level can change these rates. While the risk of rate changes always exists, there has been significant discussion as of late about a variety of potential changes involving the 12-member federal “Super Committee.” The Super Committee has been charged by Congress with reducing the federal deficit by $1.5 trillion over the next ten years. To do so, the group will have to enact a combination of spending reductions and tax changes. No matter what combination they ultimately decide upon, it is highly likely that their work will have effects on local residents crafting their New York estate plan.

For example, last week the Wall Street Journal’s Market Watch published a story explaining proposed changes to gift tax exclusions. The specific committee meetings are mostly private, so some of the recent thoughts on the committee’s actions are speculative. However, it is known that one of the President’s proposed recommendations to the committee includes reducing the estate, gift, and generation-skipping transfer tax thresholds. The proposal would reduce the tax-free gift threshold to its 2009 level of $1 million. Currently the tax-free threshold is supposed to stay at $5 million until the end of 2012. However, many are speculating that the committee may decide to return the exclusion back to $1 million a year early as a cost-saving measure.

The story’s author summarizes the changes by noting, “Overall tax planning and gift tax thresholds that are now available could be at risk for families…not much good can come from the committee’s recommendations from a wealth preservation perspective.” Clearly, the potential actions by this group may make it important for some local residents to take long-term financial actions now. Our New York estate planning attorneys urge all community members who may be affected by these changes to visit with a professional to either create a plan or update an existing one. Depending on the advice received, it may be prudent to accelerate planned lifetime gifts, review estate-tax funding mechanisms, or otherwise revise estate plans.

October 27, 2011

Economic Uncertainty Leads to Rise in Estate Planning Interest

by Ettinger Law Firm

An article this week from West Fair Online explained how professionals working with residents on financial issues have seen a significant increase in demand for their services as of late. While there may be a tendency among some to become paralyzed when the economy is so volatile, many others view the instability as a time to act prudently and plan ahead as much as possible. The article reports what our New York estate planners have long known: the need to have an estate plan remains strong regardless of the circumstances.

Experts know that the need for prudent planning is perhaps even more important at times like these, when there tax and policy uncertainties at the local, state, and federal levels. One planner interviewed for the story explained how in turbulent financial times “the area’s residents should have a vested interest in knowing what the stakes are for their assets.” While those residents at the top income levels are often more aware of how the laws affect them, many middle class families have just as much to gain by using the legal tools available to plan their financial future and save taxes in the long-term.

Most observers have applauded the steady rise in estate planning awareness. However, there are still a few groups which continue to neglect their planning needs. For example, many local small business owners continue to miss out on opportunities to visit with a New York estate planning lawyer to take care of long-term financial goals. Of course, small business owners wear many hats. Rarely do they have time to accomplish everything on their “to do” list each day. Yet, many benefits have been reported by those who have carved out time to visit with financial professionals to protect assets, create a succession plan, and conduct similar tasks.

October 25, 2011

Proposed Tax Policy Changes May Affect Future Options for Estate Planners

by Ettinger Law Firm

Any time is a good one for local residents to conduct New York estate planning, because no one can say with certainty what tomorrow will bring. Having a plan in place provides the peace of mind of knowing that affairs will be handled no matter what the future holds. However, as reported this weekend in the New York Times, proposed federal tax changes should act as even more motivation to take advantage of planning options now which may not be available in the coming years.

National policymakers continue to disagree about budget deficit reduction strategies, with countless variations of tax increases and spending cuts proposed. No one can say with any confidence what may happen. However, experts continue to explain that it is always advisable to plan for what is known and not for what one speculates might happen. A variety of tax changes may go into effect next year or the following year, and so it may be advisable to take steps now to plan for their long-term financial affairs. A key part of that process for local residents involves visiting a New York estate planning lawyer to have a plan created or updated.

For example, observers note that it may be advantageous for those thinking of transferring ownership of a company or other property to adult children to do so in 2011 or 2012 while there is a $5 million exemption from gift taxes. At the current schedule by 2013 that exemption will drop to only $1 million and the tax rate itself is set to increase from 35% to 55%. As an experienced New York estate planning lawyer can explain, personal gifts may be an important part of reducing eventual estate taxes. Individuals can give up to $13,000 annually without tax to anyone, and couples can double that amount. One expert explained that a popular way that parents and grandparents can utilize the $13,000 annual exclusion is to set up a Roth I.R.A. for a student who has a side job. As long as the relative has some earned income, than an I.R.A. account may be opened for them.