Recently in Trusts Category

Why Consider a Special Needs Trust?

July 28, 2015,

Supplemental Needs Trusts (also called Special Needs Trusts) have become fairly popular in recent years. These trusts are designed to protect a disabled person's assets in order to ensure the greatest amount of funds available for care and support. In 1993, Congress passed legislation in 42 U.S.C. § 1396 et seq. that specifically allows a disabled person to exempt assets from public aid determinations. You can click here to read more about how the government treats these unique trusts. One look at the complex federal regulations that control these trusts should be reason enough to consult an experienced elder law attorney to find out if it is right for your situation.

How much money can a disabled person keep and still be eligible for public aid?

In general, for a person to qualify for Medicaid, he or she must be impoverished. This means having less than $2000 in personal assets. Previously, there were fairly strict provisions that made it difficult for a disabled person to keep assets and still qualify for Medicaid funding of long-term care. Nursing home and rehabilitation costs can be exceedingly expensive, and people are often concerned that a disabled family member could quickly spend all of their assets on care and support before qualifying for government assistance.

How does a Supplemental Needs Trust help protect assets?

While there are many complex laws that govern this area, as a general rule, the law allows 2 types of these trusts: "Self-settled" and "Third-party."

1. Self-settled Supplemental Needs Trusts

A self-settled trust is one that is funded with the disabled person's own assets. This is common where the disabled person perhaps receives a settlement in a lawsuit or had a sizable net worth prior to becoming disabled. In these cases, Medicaid may have certain limitations on how the funds are used, and generally upon the death of the disabled person, his or her estate will have to "pay back" Medicaid for any public aid paid on his or her behalf. Therefore, if years of care are provided, there may not be much left to distribute to heirs. The goal of these trusts is not to preserve an inheritance so much as it is to provide for the well being of the disabled person for life.

2. Third-party Supplemental Needs Trusts

A third-party trust is one that is funded with somebody else's assets. This is common where a family member leaves an inheritance to the trust or places personal assets in the trust for the disabled person. There are many creative ways for an elder law attorney to arrange this. The greatest difference between this and a self-settled trust is that these are not readily available to the disabled person. Indeed, someone else is the primary beneficiary and acts as trustee, thereby giving someone else control over the use of the funds. Some parents of disabled adult children choose to establish these trusts and name another child to act as trustee. This way, following their death, they can be confident that their other children will have the necessary assets to take care of their disabled sibling, while permitting the disabled sibling to receive public benefits.

Despite these clever estate planning tools, there are many exceptions and limitations on the use of trust funds that require an attorney's careful review. Naturally, no plan is 100 percent foolproof; all trusts come with their own unique pros and cons depending on your own circumstances.

Back to the Basics - Moving after Retirement

June 24, 2015,

Retirees are acutely aware of the future, and they have usually spent between thirty and forty years saving up for it. While many dream of beach living and travel, current numbers show that most retirees opt instead to continue living in their home. Historically, the biggest move that a retired person makes is from their home to a nursing facility when they are unable to care for themselves anymore, but new trends are coming up in moving after retirement that people should be made aware of.

Trends in Retirement Moving

More seniors today are moving after retirement than in the past. In fact, the likelihood of moving has tripled between the age groups of 1968-1984 and 1996-2011. Interestingly, another trend being noticed by experts is that the average age at the time of the move is considerably lower than it was before. More young, wealthy retirees are choosing to sell their home and move into a retirement community. This is drastically different than past generations, where wealth meant that a person could remain living in their own home significantly longer.

Other research has shown that seniors who move are often happier after the move than retirees that do not. Those who moved because they chose to, and not because they had to, were also happier with their choice. However, overall the seniors that made the decision to try somewhere new were almost always happier than retirees who chose to stay in their homes until forced otherwise.

New Focus on Retirement Living

One of the main causes of this shift in moving after retirement comes from a new set of priorities in this latest retirement generation. In the past, retirees found that they were less satisfied with retirement until they were forced to move to a retirement facility because of physical and mental limitations. Now, these communities are luring retirees there at a younger age with the promise of an improvement in lifestyle earlier on.

Now, some retirement and assisted living communities are actively trying to sell a certain lifestyle to retirees interested in moving. "Developers are offering more square footage, innovation in floor plan layouts that are more attractive, brownstone apartments with a more urban look, access to technology, and they're bundling more health and wellness activities like swimming pools and fitness centers." In addition, some communities are offering more environmentally friendly homes or an array of living styles in the same community so that they can transition over time without leaving the area.

Where Seniors are Moving and Why

A study by the Pulte Group found that sixty percent of seniors do not wish to leave the state if they move after retirement. However, certain factors are able to influence retirees to move across state lines if the community and environment fit their needs. States in the southwest and southeast offer a better climate for most seniors. In addition, states like Florida, Nevada, and Texas are offering no income taxes to those that move. Other states have low property taxes, or do not require that retirees pay taxes on their Social Security.

Virtual Representation of Minors and Beneficiaries

May 29, 2015,

While parents make the vast majority of decisions for their children, it comes as a surprise to many that they cannot automatically make decisions regarding a trust or estate in their child's name. Estate law protects the interests of the beneficiary above all others, even from the parents of a minor beneficiary. If a parent is not able to sign for their child's trust or estate, a court appointed guardian is assigned that is also known as virtual representation.

Virtual Representation

The concept of virtual representation occurs when an adult is appointed to speak on behalf of a minor trust beneficiary. Many of the provisions regarding virtual representation are found in the Uniform Trust Code (UTC), Uniform Probate Code (UPC), and state laws. Essentially, virtual representation gives a minor beneficiary the power to speak through an adult that actually has legal capacity to make decisions. A virtual representative can be appointed for minors, incapacitated adults, unborn children, unascertained beneficiaries, and adult beneficiaries that cannot be found.

The main point of a virtual representative is that they make decisions that are in the best interest of the beneficiary and cannot have any conflict of interest with the trust or estate. In addition, a virtual representative can be given powers that are broader than given in the UTC or state law. If the virtual representative is assigned to a beneficiary through the UPC, probate administration can be made much simpler.

The Need for Virtual Representation

Without a virtual representative for minor beneficiaries, the handling of the minor's accounts would be placed in the hands of a court-appointed guardian or conservator. All communications, notifications, accounting, and decision making are made by these appointed individuals. Every decision is binding on the minor beneficiary, regardless of whether the minor agrees. A guardian or conservator essentially eliminates the minor from the decision making process of their own assets and cannot be released from the situation without the court's approval.

A virtual representative is there to explain and work with the minor or other beneficiary to determine the correct course of action. While the specifics of each virtual representation are different, they are all meant to keep the minor apprised of the decisions that are being made about their assets. In addition, a beneficiary can challenge the decisions of a virtual representative and does not necessarily need to get the approval of the court to terminate the relationship.

Gifts and Transfers to Minors

The Uniform Transfers to Minors Act (UTMA) and the Uniform Gifts to Minors Act (UGMA) were enacted to help with transfers or gifts made to a minor beneficiary through a trust or estate. These acts allow a virtual representative to hold funds for the minor's benefit until the beneficiary reaches a certain age.

It allows for the virtual representative to handle the account instead of appointing yet another guardian or conservator just for the account. It not only simplifies the process, but it also saves on the costs of another administrator involved in the beneficiary's affairs.

Who Will Inherit Whitney Houston's Estate?

February 27, 2015,

Bobbi Kristina Brown is the only heir to the estate of her mother, renowned singer and actress Whitney Houston, but since being placed in a medically induced coma questions have arisen about who is next in line to inherit her fortune. Whitney Houston's estate was estimated to be around $20 million at the time of her death three years ago. Bobbi Kristina was found on January 31 unresponsive in her bathtub and has remained unresponsive in a coma.

Whitney Houston's Estate

Since being discovered on January 31, Bobbi Kristina has yet to regain consciousness, and there are rumors that her organs have started to fail. With reports that Bobbi Kristina's family is considering taking her off of life support, people are now looking to the terms of Whitney Houston's will and estate planning documents. According to the terms in her will, if Bobbi Kristina dies, Whitney Houston's mother, Cissy, and her two sons are next in line to inherit Ms. Houston's estate. The estate includes full royalties from the singer's music, likeness, and image that will continue to distribute revenue over time.

Bobbi Kristina was the beneficiary of a trust for Whitney Houston's estate. She received ten percent of the estate, around $2 million, when she turned 21 years old. She is scheduled to get another fifteen percent when she turned 25 years old and the remainder of the estate when she turned thirty years old. The will stated that Cissy Houston and her two sons would inherit Whitney Houston's estate if Bobbi Kristina dies before coming into the majority of the estate.

Other Potential Claimants

Bobbi Kristina's father and Whitney Houston's former spouse, Bobby Brown, does not stand to inherit anything from Ms. Houston's estate, even if his daughter passes away. Bobby Brown was married to Whitney Houston for fourteen years and the couple divorced in 2007. According to experts, Bobby Brown's opportunity to contest anything in the estate would have been when Whitney passed away. He has no claim purely by virtue of once being married to her.

It also seems unlikely that Bobbi Kristina's partner, Nick Gordon, would inherit anything, as well. Mr. Gordon was taken in by Whitney Houston when he was twelve but never formally adopted, and he and Bobbi Kristina announced their engagement and marriage publicly. However, a representative of the family has stated that a formal ceremony of marriage never took place. Therefore, Mr. Gordon does not have a valid claim to the estate.

It was Mr. Gordon and a family friend that found Bobbi Kristina in the bathtub in their home in Roswell, Georgia where the couple lived. Authorities are also looking at possible foul play in the incident involving Bobbi Kristina because of injuries found on her face and mouth. Mr. Gordon is currently a target of the investigation, and the couple has a history of domestic abuse. In addition, one of the co-executors of Ms. Houston's estate, Pat Houston, obtained a restraining order against Mr. Gordon for, among other things, making threatening comments towards her.

Who Should Run the Family Trust?

February 4, 2015,

When a trust is created, most often the creator turns to a trusted friend, relative, or confidant to oversee it. This makes a lot of sense to most people because the purpose of a trust is often personal in nature, and the creator wants someone to run the trust that has been a part of their life for many years. However, things like friendship, family drama, and emotions can all complicate the decisions that a trustee makes for a family trust in regards to carrying out the terms of the trust.

Use of Non-professional Trustees

The use of non-professional trustee has been growing as more people set up trusts to operate during their own lifetimes. A lot of these creators do not believe that they need to hire a professional because they can keep an eye on the trust while they are still alive. People are creating lifetime trusts for a variety of reasons. Many are looking ahead at minimizing estate taxes if their assets are above the $5.43 million exemption limit ($10.86 million for a couple). Others are attempting to minimize the level of current state taxes on their assets or gain financial control of their legacy.

Benefits of a Professional Trustee

Hiring a professional trustee to run a family trust can provide a lot of benefits to the creator and beneficiaries. For one, professional trustees are experts at running trusts and knowing how complicated, long-term trusts work. This is particularly important if your family trust is designed to last for more than one generation.

Another benefit of a professional trustee is that the person is removed from any potential family drama or biases. When a trustee controls how much money a beneficiary is entitled to receive, conflicts inevitably arise. If a professional trustee is handling the decision, family prejudice, jealousy, and bias can be eliminated as potential sources of conflict.

Having a personal trustee can also alleviate certain legal issues, as well. For example, a professional trustee is more apt to pay attention to when changes need to be made or when distributions are supposed to be made to beneficiaries. When these things don't occur, a lot of legal drama can result.

Potential Downsides of a Professional Trustee

There are also potential downsides to hiring a professional trustee to run the trust. First, professional trustees typically charge higher rates than a family member or friend would charge to manage the trust. It is not unusual for a professional trustee to charge as much as 0.25% per year to operate the family trust. In addition, there are sometimes concerns that a professional trustee is looking out more for the bank's interests than those of the beneficiary.

In order to alleviate these issues, some family trusts are now using a combination of non-professional and professional trustees to run the trust. Co-trustees are designated to both remain impartial in the management of the trust while still being attuned to the individual needs and backgrounds of the beneficiaries. Regardless of what type of trustee is chosen, experts agree that all trusts should include the proper documentation to remove and replace a trustee if the arrangement is not working out.

Three Important Estate Planning Questions to Ask Your Spouse

August 22, 2014,

Estate planning is not many couples' idea of fun, but it is necessary to ensure that your loved ones are cared for after you are gone. An experienced estate planning attorney can handle drafting the proper documents and explaining the law behind estate planning; however, there are three important questions that you should address with your spouse or significant other regarding an estate plan.

How well does my spouse know my estate planning attorney?

If you are the one in charge of the estate planning process and the finances of the family, it is possible that your spouse has never met, or only met once, your estate planning attorney. Perhaps they met to briefly sign some papers, but the client/advisor relationship is not very strong.

If you are the first to pass away, your spouse would be relying on a person that they barely know during the most difficult time in their life. Since your estate planning attorney will know about every asset, final wish, and plan for the estate it is important that your spouse form a strong relationship with your estate planning attorney.

Does my significant other know where all of the accounts are located and how to access them?

The surviving spouse or significant other will need to access money immediately in order to pay for funeral expenses. Even if an insurance policy covers funeral expenses the reimbursement does not come until weeks or months later. Hospital bills and the daily expenditures of everyday life also need to be taken care of. Your spouse will not have time to search everywhere trying to figure out what accounts exist and how to access them.

You need to ensure that your significant other is aware of all financial accounts and how to access them after you pass away. It is helpful to make a list (or two) and leave them for your spouse that includes:

· Password lists for all online accounts and memberships
· Names of all accounts and memberships, online and offline, along with any necessary instructions
· Location of all estate planning documents
· Names, addresses, and phone numbers of all lawyers, financial planners, accountants, and others who helped create the estate plan

Are all of our estate planning documents and beneficiary designations up to date?

Life events such as births, deaths, marriages, divorces, and job changes can all necessitate an update to your estate plan. This applies to the will, estate planning documents, and any beneficiary designations. Be sure to check:

· Retirement plans (401K plans and IRAs)
· Life insurance
· Annuities
· Taxable investment accounts

...and other assets that require a beneficiary designation.

By talking with your spouse or significant other about these important aspects of your estate plan you can minimize the stress and confusion of the entire process. If your spouse has a good relationship with your estate planning attorney, is knowledgeable about your accounts, and has worked with you to update the estate plan and beneficiaries you can be assured that your loved ones will be properly cared after you are gone.

Back to the Basics: What is the Difference Between Revocable and Irrevocable Trusts?

May 1, 2014,

While many New York residents familiar with and have an existing will in place in the event of their death, most people do not realize that estate planning documents extend far beyond a last will and testament. The world of estate planning documents includes not only living wills and advanced medical directives, but also trusts. Trusts offer several benefits associated with them, and come in two forms: revocable and irrevocable.

Benefits of Having a Trust
Trusts can not only provide for loved ones upon death, but they can provide for the person who created the trust during their lifetime. This is important in cases where the creator has a health issue, a mental disability or incapacitation, and other scenarios. Trusts can be administered without the need to involve a probate court, and can therefore protect privacy as to the contents of the trust. Trusts also serve as protection of assets for trust beneficiaries, and offer a wide variety of options in creating them to suit different needs.

Revocable Trusts
Revocable trusts are a type of trust that can be changed at any time. The creator of the trust could simply modify the terms of the trust through an amendment. Or, if they want to revoke the trust in its entirety, they can do that as well. In revocable trusts, the assets contained within the trust are considered the creator's assets and will be treated as such for tax purposes and if creditors exist.

Irrevocable Trusts
As one may expect from its name, an irrevocable trust is not able to be changed once it is signed by the creator of the trust. These trusts are often complex and require a special degree of care in drafting them in order to meet the creator's needs and desires for his or her estate. It is imperative to consult with an experienced estate planning attorney when setting up an irrevocable trust in order to ensure your estate is properly protected, and any concerns you have about being unable to change the terms of such a trust are addressed and handled appropriately.

That being said, irrevocable trusts have a number of specific benefits associated with them. Often times, estate taxes are significantly lessened or even eliminated through the creation of an irrevocable trust. Irrevocable trusts also offer a high degree of asset protection for the creator of the trust and the trust's beneficiaries. Both of these advantages are possible with irrevocable trusts because once the assets are placed into an irrevocable trust, the creator gives up his or her control and ownership of the trust assets.

NY Estate Planning Attorney
If you are interested in securing estate planning documents or are interested in further discussing the benefits of trusts and how they apply to you, the experienced estate planning attorneys can help you.

Developments with the New York Estate Tax

April 9, 2014,

We often discuss the importance for local families to account for the New York estate tax. Far more media coverage is given to the federal tax, and some local residents are under the mistaken assumption that the state law mirrors the federal. It currently does not. Even families who do not have asset to trigger the federal tax may still need to plan appropriately for the New York tax on estates.

However, if current plans are carried out, in a few years .there may be much more congruence between the state and federal rules. That is because earlier this month New York changed exemption levels for the estate tax. Previously, assets over $1 million were exposed to the tax at a 16% top rate. Now, however, the exemption level is raised to slightly more than $2 million ($2,062,500). Not only that, but that level is set to steadily increase or five years until, in 2019, the exemption level matches the federal exemption amount at that time (projected to be $5.9 million).

Important Provisions in the Estate Tax Law
There are other aspects to the new state rules that must be understood by local residents seeking to minimize their obligations and legally save on taxes. Some items to keep in mind:

***There is no "portability" as there is with the federal tax. This means that surviving spouses cannot use unused portions of their partner's exemption amount to lower their burden.

***Under the law, all gifts made within a three year window will likely be included in the estate to calculate the tax burden (at least for gifts made starting this April and extending to 2019). Naturally, this means that one must act early to move assets in ways that take them out of the estate and lower its value.

***There is a risk of falling of the estate tax "cliff" during the phase-in which could mean those with assets just slightly over the exemption amount may face a tax on the full value of their estate. This issue is complex, but in a helpful comment letter the New York State Society of CPAs provides a more detailed analysis of how this may come about.

***The new law repeals the state's generation-skipping transfer tax while also providing more relief for some surviving non-citizen spouses.

Contact our NY estate planning lawyers today for tailored guidance on how these rule changes affect your financial future.

U.S. Tax Court: New IRA Rollover Decision Strongly Criticized

April 3, 2014,

Intricate financial and estate planning details are understandably hard for many residents to wrap their head around. There are hundreds of thousands of page written in federal statutes, case opinions, and regulations dictating what can be done and what cannot. Making matters even more complex is that fact that even professionals can disagree on how certain rules should be applied.

For example, many financial planners are up in arms following a recent opinion by a U.S. Tax Court related to IRA rollovers.

The Case
The ruling examines a provision in the tax code that allows one to withdraw money from an IRA without tax or early withdrawal penalties so long as the funds are put into a different account within 60 days. Based on federal law, account owners are required to wait one year before making the move again. In other words, you cannot keep changing accounts every month.

According to many, based on guidance repeatedly published by the IRS for nearly three decades, this "one year wait" rule applied separately to individual IRA accounts.

However, earlier this year a federal Tax Court judge issued a ruling in a case that the once per year rule applies to all IRA account collectively. Essentially then, as an American College of tax Council brief in the case explained, the issue is whether the once per year rule applies per IRA or per taxpayer.

In the aftermath of the decision, many tax attorneys and other practitioners are calling for the decision to be vacated. They argue that it undermines public confidence for taxpayers to be punished even when following the IRS's own guidance. However, following the ruling, IRS officials released information suggesting that updated guidance will reflect this most recent decision, limiting IRA rollovers to once per year per individual.

Keeping an Eye Out for Legal Changes
The specifics of this case are somewhat nuanced and based on statutory interpretation. But rolling over IRA funds is a common practice that is used by residents of all income brackets, and so this issue has direct relevance for many.

In addition, one of the many lessons to take from this particular debate is the fact that you need to constantly have eyes on your long-term plans to determine if they need to be updated or changed. That is one value of having professional oversight of your affairs, peace of mind comes with knowing someone else watching out for changes on the legal landscape that must be reflected in your planning.

Do Not Act Too Quickly After a Passing

April 2, 2014,

Much of estate planning involves preparations that can streamline matters in the aftermath of a death. The probate process can be long and drawn-out, forcing families to wait months before working out the basic details of asset transfer. Alternatively, by using trusts, the process can be far more seamless, saving time and taxes. Trusts are important for all New York families, not just those with significant assets.

While it is prudent to handle legal and financial details in a timely fashion following a death, as a practical matter, it is important to not "overdo" it. A helpful article from Mondaq offers a few thoughts on ways that family members can "jump the gun" and cause more complications by rushing to deal with various matters.

Causing More Complications
Conduct that should be avoided in the immediate aftermath of a passing includes:

Acting as executor before officially be appointed by a court: A last will and testament names an "executor" to handle many of the administrative details. However, the appointment is not official until a court actually names the executor in the probate process. It is reasonable for a soon-to-be executor to take some basic steps to prepare for their role. However, in certain situations, this can go too far, such as when one signs contracts or enters into agreements beforehand. For example, one cannot sell the decedent's home before officially being given the power to do so by the court.

Canceling accounts and credit cards immediately: Closing down a decedent's financial life is often far more complex than family executors realize. There may be an urge to just cancel everything immediately. However, this can be a mistake, because there may be outstanding bills to be paid automatically from those accounts. Shutting them down can lead to bounced checks, late fees, and,ultimately, more hassle than if the financial details were handled more cautiously.

Quickly disposing of personal property: It is not uncommon for family members to be overwhelmed in the immediate aftermath of a death. A common response is to try to "get over it" as quickly as possible, often by getting rid of personal effects immediately. But this is often a mistake. Some items may need to be properly appraised, and it is important that the property (or the value of the items) go to the designated heir. Rushing this process can lead to tax problems and potential feuds.

For more tailored, specific help with any issues related to estate planning, probate, and administrative complexities following a death, please contact our New York estate planning attorneys today.

Don't Leave Your Planning Up to a Coin Toss

March 25, 2014,

A headline-grabbing story last week in the New York Post offers a good reminder of the need to be crystal clear in certain estate planning situations to avoid drawn-out legal battles.

According to reports, two siblings are engaged in a dispute over how to divide up an inheritance that they are to split from their uncle. The two men are the nephews of David Barrett, a well-known Manhattan interior designer who passed away in 2008 at the age of 85. Per the terms of Barrett's estate planning, his $5.6 million estate is set to be split between the two men.

However, the division of those assets into two is apparently not going smoothly.To help determine how the various assets are to be split, an executor of the estate apparently recommended that a coin toss be used. For example, to determine ownership of a painting valued at around $45.000 a coin toss was performed, with the younger brother winning.

This did not sit well with the older sibling, who has reacted to the loss by making aggressive accusations against his sibling and executors in addition to filing a lawsuit challenging the distribution plan. The most recent suit has put a hold on the process, slowing the ultimate distribution and preventing any named heirs from receiving property from the estate.

In defending the lawsuit and his concern about the distribution plan, the older brother explained "This case is about more than my share of my uncle's estate. It is about my uncle, his legacy, his reputation, and his family."

Planning Lessons
All those who follow high-profile estate planning matters appreciate that feuds of this nature are not rare. When significant assets are at stake, all those involved are frequently willing to go to extreme lengths to ensure the matter is handled to their liking. Unfortunately, there are often no winners in these situations, as the drama often causes significant delay and enormous resources spent on the legal battle itself. There are various lessons that can be taken from this Barrett story:

Be As Specific As Possible - While it is impossible to specifically list every single item big or small, it is usually worthwhile to explicitly indicate where every valuable item will go. This is particularly true when an estate is divided between various parties who may disagree on who is to get what piece of personal property.

Understand the Personalities Involved - Certain friends and family members may be a more "hot headed" than others. Conflict is more likely to be prevented with those unique personalities are accounted for.

Prevent Surprises - Dispute often arises when one party is unprepared for some outcome. By having clear discussions with heirs ahead of time, all parties are able to come to terms with how the affairs will be handled This may prevent a knee-jerk, defensive reaction when unexpectedly confronted by an unfavorable part of the plan.

Secret Marriage, New Will Leads to NY Estate Fight

March 6, 2014,

It is impossible to predict exactly how every family member will respond in the aftermath of a passing. However, as experienced will and trust lawyers know all too well, there are many situations that dramatically increase the likelihood of controversy that leads to a contested estate. Mixed families, a large age-gap between spouses, and secrecy are often signs of family tension that may erupt after a death.

A high-profile New York estate feud offers an example of that very situation.

NY Photographer Bern Stern's Estate Fight
Celebrity photographer Bruce Stern is well-known for his legendary photos of Marilyn Monroe--many taken just before her death. Stern died last year at the age of 83, leaving a roughly $10 million estate behind. As discussed in a recent Post story, family members are in bitter disagreement over how the estate should be divided.

Stern had three children, all from his first marriage that ended in 1975. As far as the children knew, their father's assets were to be distributed per the terms of a 2007 will that split half the estate between the children while giving the other half to his own photography foundation.

However, just before his passing, Shannah Laumeister came forward claiming that she and Stern were married in secret in 2009. She directed a documentary about Stern in 2010 and is nearly 40 years his junior. The adult children had no idea of the union.

Laumeister produced a second will from 2010 that created a private trust with all of the assets and gave control of the trust to Laumeister. According to Surrogate Court filings, Laumeister claims that the adult children would still receive cash bequests as part of the new will, but the details of those bequests are unclear.

Psychiatry Records & Questions About Mental State
Expectedly, the adult children challenged the 2010 will. The feud is making its way through the court system. Most recently, reports suggest that the Laumeister is fighting to block sharing of information about Stern's meetings with a psychiatrist.

For their part, the children argue that information about Stern's mental and medical state when the contested will was created is of obvious relevance. Alternatively, the younger wife argues that release of the information would permanently damage Stern's reputation. The value of his estate is closely tied with his artistic works and reputation-damage would significantly harm the estate, she claims.

An obvious take-away lesson from this story is a reminder that an experienced estate planning attorney can point out the many red flags that suggests a feud may be likely. A legal professional can offer counsel on steps to take that may eliminate secrecy or otherwise increase the chance of a smooth, conflict-free process that is resolved fairly and efficiently.

Marriage Matters - A Reminder of the Tax Benefit

February 28, 2014,

Earlier this week we discussed the tragic death of New York actor Philip Seymour Hoffman. There are many estate planning lessons to take away for Hoffman's situation, including the need to update a will after every life event. Hoffman unintentionally left out two of his children by not updating his will to include them specifically--his oldest son is named directly as a beneficiary of a trust.

Yet another lesson that fellow New Yorkers can take from the case is the role that marriage can play in these matters.

Companions vs. Spouses
According to reports, the mother of Hoffman's three children was long-time girlfriend Marianne O'Donnell. The couple was together for years, though they apparently were split in the few months before the death (allegedly as a result of Hoffman's relapse). At no point was the couple married. This is not necessarily an unusual state of affairs for couples today. Due to many personal factors, even the most intimate partners with decades together may choose not to formalize that union by way of a marriage. In the eyes of the parties, their relationship is the same regardless of whether there is official government sanction or not.

However, it is important to remember that the law does not view all couples the same. In fact, the entire purpose of marriage is to classify couples into different camps with thousands of rights on the line. Those rights have clear estate planning implications.

Per the terms of Hoffman's will the bulk of his suspected $35 million estate will go to O'Donnell. However, both New York State and the federal government impose an estate tax. Above the exemption amount, the tax can hit as high as 40%. Of critical importance, the tax does not apply to transfers between spouses. But Hoffman and O'Donnell were not married, and so she will likely be hit with an estimated estate burden of $15 million or more. A marriage would have eliminated 100% of that burden.

The bottom line is that in cases like this, marriage saves on taxes. There are many different situations where a transfer of wealth to another would be taxed except for transfers between spouses. While no one should make life decisions regarding marriage based entirely on taxes, one should not overlook the reality that marriage matters under the law.

Basic New York estate planning principles apply in virtually all cases, no matter if you have a $35 million estate or if your main asset is a family home. To ensure you take steps to protect your loved ones for the future, be sure to contact a NY estate planning attorney today.

Using a "Life Estate" in a New York Estate Plan

February 25, 2014,

Property rights and rules are some of the most complex (and arcane) areas of the law. Of particular importance for estate planning purposes, property rules allow different individuals to each have different "interests" in the same piece of property. It is not necessarily as simple as one person owning each piece property. This presents unique opportunities for estate planning, often providing different options to structure an inheritance, save on taxes, and otherwise best protect the varying interests of all those in a family.

For example, consider the possibility of a "life estate" to pass on real property (a home or land). This tool is easiest to understand in the context of property interests in a family home. The family home is often the largest asset within one's estate. Protecting the home from potential estate taxes or being spent down to qualify for Medicaid is an important part of many New York estate plans.

Beyond simply transferring ownership to a family members or putting provisions in a will to pass it on to another. One option is the life estate. The life estate is a deed that essentially breaks up the interests in the home--at least for a time. The senior passes on ownership of the home, but they retain the right to live in the property for the remainder of their life. In other words by using a life estate deed, seniors keep some interest for themselves.

In legal terms this means that the senior retains a "possessory interest" in the home. There are different types of possessory interests, like a lease to a rental property. But with a life estate the possessory interest is based on timing, specifically the life of the senior. These issues implicate quite complex and tricky legal matters, and so one should never pass on assets in this fashion without complete understanding of the underlying legal principles involved. Also, there is often no way to reverse this step once it is taken, eliminating much flexibility.

Be Careful
This option can come with some benefits, such as transferring the house outside of probate. However, it is critical not to take this step without professional help, because potential complications remain. Depending on your circumstances, this option may implicate different tax burdens. In addition, it may be more prudent to use living trusts for a more comprehensive planning tool that includes all of your assets, not just a single piece of real property.

For help with these and other estate planning matters throughout New York state, please contact our estate planning lawyers today.

Can Your Heirs Work Together?

February 21, 2014,

Creating a will and drafting trust documents are forms of "transactional law." That means that, unlike litigation, the purpose is not necessarily to "win" in a conflict over another. Instead, the purpose is to put plans into place that explicitly avoids conflict down the road.

When doing this work it is critical to understand the details of the law to ensure documents are crafted and structured in ways that meet legal requirements and have the intended legal effect. But, in many cases, particularly estate planning issues, knowledge of the law alone is often insufficient to help prevent conflict. That is because, these issues are wrought with emotions. The interplay of family values, personal relationships, resentments, financial stress, and other matters are all wrapped up in the process. Working to prevent conflict therefore requires consideration of all of these issues in addition to simple knowledge of the letter of the law.

Feuding Siblings
Failure to take all of those factors into account is a recipe for family feuding in the aftermath of a death. For example, this week the New York Post reported about an on-going fight between two brothers over their father's estate. The patriarch died nearly sixteen years ago (in 1998) and the mother died six years later (in 2004). The fighting is over a $13 million estate which was built from profits of a garment company which sold women's lingerie.

According to a suit filed in a Manhattan Surrogate Court, the younger brother claims that his sibling embezzled more than $2 million from the estate to fund his lavish lifestyle. The son claims that millions were funnelled out of the estate, subsequently lowering his own inheritance. For his part, the older brother argues that all of the funds allegedly embezzled were gifts signed by their own mother before her passing.

This back-and-forth is far from uncommon. The roots of the feuding may be based in resentment from childhood, unbalanced relationships between parents and children, and many other factors. It is impossible to say with certainty what could have been done on the estate planning front to prevent this fighting. But simply "splitting the assets between the two sons" (as happened here) may have been too simplistic an option. At the very least, when potential challenges of this nature arise, it is important to explicitly list assets that are to go to each child, leaving no questions about whether lifetime gifts were to be factored into the inheritances. The less ambiguity the better.