Articles Posted in Estate Planning

Professional assessors have a duty to a standard of care under federal and state law. New York Department of Taxation and Finance (“DTF”) licensed assessors must take adequate precautions to not commit 1) errors of omission; or 2) commission that would significantly affect a valuation appraisal. All valuation of real property and special property assets of an estate or otherwise, must involve numerous checks during the process to ensure prevention of errors that could affect the value conclusion of an assessment report. Sufficient attention to site inspection should be followed by county recorder record to exhibit due diligence has been practiced so to avoid errors or omissions to the extent no further inspection is required. Evidence that accurate data from reliable sources shows that a value has been ascertained accurately. Only in a circumstance where real property consists of a substantial inventory of assets with value changing characteristics, should repeat onsite inspections be required.

ASB Appraisal Guidelines

The Appraisal Standards Board (“ASB”) of the Appraisal Foundation responsible for the definition and publication of  Uniform Standards of

The New York Department of Taxation and Finance (‘DTF”) recognizes the Office of Real Property Tax Services (“ORPTS”) and Appraisal Standards Board (“ASB”) definition of  Uniform Standards of

Professional Appraisal Practice (“USPAP”) guidelines

for the appraiser inspection process requiring licensed appraisers identify 1) the property to be inspected; 2) the purpose and intended use of the assessment report; 3) the data collection and analysis process; 4) conditions or limitations to valuation; and 5) the effective date of the valuation. Property rights and interests are a key rule element in the rules to professional appraiser valuation of real property in the state.

Estate planning involves asset valuation for purposes of taxation, financial and investment planning, and future distribution to heirs and beneficiaries of record. New York Department of Taxation and Finance (“DTF”) guidelines for ad valorem real property taxation of estates is defined by the standards of the Office of Real Property Tax Services (“ORPTS”). The Uniform Standards of Professional Appraisal Practice (“USPAP”) is basis to New York guidelines for property valuation, including the statistical techniques and professional appraisal practices. The USPAP is informed by both federal and state laws; as well as precedent setting case record; and rules and regulations of the ORPTS. Estate planners should be aware of the rules to ethical best practice when working with an appraiser during the valuation process.

Ethical Standards of Valuation

The New York ethical standards of valuation as described by the USPAP, are divided into four (4) four categories best practices:

High wealth investors can avoid federal estate taxes on digital assets with the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”) since 2015. Estate planners know that the end-of-life planning of trust and estate assets may include a whole host of digital assets, including financial assets such as cryptocurrency, as well as nonfinancial assets like business websites, digital storefronts, payment gateways, enterprise data, cloud storage repositories, contact lists, social media, subscription accounts, as even digital medical images and records.

Terms of Service Agreements

Legal consideration of terms of service agreements exhibits statutory provisions limiting access to designated user account access. Legal issues arise when the owner of a digital account has died or is otherwise incapacitated. Without the capacity to log into an account, an estate executor is posed with a challenge that has the potential to result in probate court intervention. If the owner of an account mentioned in a will or last testamentary documents of an estate is deceased, the account providers are under no binding legal obligation to allow others to access those digital accounts held in the decedent’s name.

Celebrity assets left without a will or formal testamentary estate document are increasingly of interest to both estate and intellectual property law practitioners. Example is the estate of the late Singer, Aretha Franklin. Otherwise known as the “Queen of Soul,” the estimated $80 million estate involving the value of the artist’s artistic copyright and the trademark of her celebrity, has been embroiled in ongoing legal dispute over permissions to her name, work, image, and likeness within commercial publicity. Of the estate’s intellectual property which has been contested in litigation over publicity rights, a significant portion of those assets has been recently subject to taxation.  

Merchandising Rights of Publicity

Trademark and copyright law allow for estate administration of port-mortem rights to publicity associated with intellectual property assets. For purposes of valuation, the image, likeness, or representation of an artist or celebrity is an asset. Merchandising rights entitle a copyright or trademark licensee to derive future value from those assets, based on strategic performance estimates of a publicity campaign. Celebrity publicity valuation is complicated by publicity placement, as well as the cost of trademark permissions. Request for use of a copyright or trademark for publicity requires legal agreement. Terms and conditions to publicity agreements generally include a royalty clause, specifying a percentage based on an estimate of the future streams of income to flow from the use of a celebrity’s work or image.

September 28, 2018, the estate of Cuban American Artist, Ana Mendieta filed suit against Amazon Studios for copyright infringement of her work in a Seattle federal court, Mendieta Estate v. Amazon Studios, Case No. 2:18-cv-01426. The dispute claims that the Amazon’s cinematic production, Suspiria directed by Luca Guadagnino, a remake of the 1977 horror film of the same directed by Dario Argento, extrapolates its content from Mendieta’s work. Guadagnino the director of award-winning film Call Me by Your Name, 2017, clarified his interest in Mendieta as inspiration, citing feminist artists in development of his film productions. The case exhibits how estate fiduciaries can protect copyrights to artistic assets under federal law.

Cease and Desist

The estate claims two of the scenes from the movie derive narrative from Mendieta’s photographic work, Rape Scene, 1973, and her performance Untitled: Silueta Series, Mexico, 1978. Amazon was served with a cease and desist letter in July of this year. Damages for the use of Mendieta’s work without express consent of the estate were demanded. Amazon’s response to letter has been to remove the contested scenes from the movie’s trailers.

The disposition of digital assets after death has increasingly become a question of clients planning an estate. While some digital accounts hold cryptocurrencies or payment gateway assets, others are nonfinancial, yet equally or more valuable in terms of worth to beneficiaries. Accounts including online bank or brokerage accounts and other locked digital assets should be given special attention to ensure transferability of those assets to heirs or beneficiaries without probate at the time of an estate holder’s incapacitation or death. Since enactment of the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”)  of 2015, an estate advisor can assist a client in the creation of a directive with express instructions, identifying a representative responsible for their user access credentials once they are gone.

The Role of an Estate Planning Advisor

Estate planning advisors can assist a client in planning for transfer and administration of digital estate assets. Like traditional estate planning, an advisor, usually a licensed attorney, will provide legal advice and drafting of the necessary will or testamentary documents during the formation of an estate or trust. Under the RUFADAA, and estate planning advisor can assist a client in the assignment of a representative to administer their digital assets at time of incapacitation or death.

Since ratification of the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”) in 2015, the guidelines for third-party access of digital assets of deceased or incapacitated parties has been refined to include guidelines to estate fiduciaries (i.e. trustees, executors, or other agents) and court-appointed conservators or guardians of protected persons’ estates with power of attorney appointment to gain lawful access to a named individual’s digital accounts. RUFADAA provides instructions for third-party treatment of digital assets in a 3-tier system:

Tier 1: Custodian Online Tool

RUFADAA provisions allow for custodian online tool administration of account management after an individual with designated user access credentials is deceased or incapacitation. For example, Facebook Legacy Contact and Google Inactive Account Manager offer terms of service agreement instructions for account modification or deletion where

U.S. citizens currently residing and working abroad and foreign residing in the United States who are participating in a foreign retirement contribution plan, should evaluate the most recent federal Internal Revenue Service (“IRS”) tax reporting requirements to avoid penalties on those assets or future estate transfer. Foreign pension fund contributions made in the interest of retirement and trust formation in preparation of an estate, may be subject to taxation without the professional assistance of an estate law attorney.

Tax Exemption and Treaty

U.S.-based participants contributing to foreign pension funds in some jurisdictions such as Canada, the United Kingdom and Belgium, are not required to file tax reporting with the IRS due to treaty. An example of tax-free treaty is Article 18 of the U.S./U.K. Income Tax Treaty, which allows for transfer without taxation by either jurisdiction. The U.S. also allows for a U.K. national assignee to be temporarily employed in the country while continuing participation in a 401k pension plan abroad with limited tax obligation under IRC section 402(g) covering tax treatment of earnings in a foreign plan. Pension funds located in non-treaty host countries are subject to taxation if a fund is not considered a “qualified plan” under IRS rules.   

By 2060, the population of the United States 65 years and older will more than double, increasing to over 98 million from 46 million in 2016. Coinciding with this demographic change will be the estimated 14 million elders diagnosed with Alzheimer’s disease and other related disorders associated with the onset of old age. The presence of dementia in older family members presents a challenge in the field of estate planning. Characterized as “diminished capacity” within U.S. law, an incapacitated party no longer has the mental ability to make routine and complex decisions, yet still holds legal rights to their own property and assets. To avoid risk, estate planning of a will, estate, or trust with the counsel of a licensed estate law attorney will protect an elder with diminished capacity from exploitation.  

Estate Planning and Financial Capacity

The mental capacity and self-efficacy required to exercise investment decision and management of finance and property assets must be present to plan a will, estate, or trust document. Financial capacity is essential for completion of the estate planning process. When signs of Alzheimer’s emerge, an elderly client may not entirely understand their investment options, or the implications of designated asset distribution. This includes tax implications for heirs and beneficiaries. If a loved one is experiencing diminished mental capacity it is likely they lack sufficient financial capacity to make estate planning decisions. If a family member has already been deemed the trustee of an elderly family member’s estate, they have the power-of-attorney to administer a will, estate, or trust, yet not the power to resolve controversy.

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