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When retirement investors are considering assets for estate or trust transfer, one of the main priorities is the impact of risk. In the past several years, cryptocurrency assets have increased in popularity. Until 2017, Bitcoin and other digital currency assets were also considered as tax-exempt “property” under federal Internal Revenue Service (“IRS”) guidelines. Recent IRS rule reform of tax-exempt treatment of cryptocurrency assets reflects a growing concern about the lack of direct oversight of digital currency within the regulatory environment. Identified as the most significant risks of cryptocurrency asset transfer within policy formation at this time: pricing transparency, price manipulation, as well as the potential for fraud scams, custody disputes, and liquidity issues.

How CFTC & SEC Oversight Will Help

Regulatory oversight of price transparency and control over price fixing, and price manipulation is uneven across national and international markets. For this reason, digital currency cannot be traded on regulated financial markets. Derivatives like Bitcoin futures trading on the CBOE or CME offer investors the least risky investment for profit.

The record of retirement investment and trust fund fraud is extensive, and not restricted to sales agents, fiduciaries, and retirement investment advisers.

In New York, attorney malpractice in the area of retirement investment and estate planning has led to professional activism by the New York Bar Association and national affiliation the New York Bar Association, and punitive action by the courts. The Lawyers’ Fund for Client Protection is an independent public trust, financed by attorney registration fees.

The Fund reimburses legal clients for “losses caused by dishonest conduct of former New York State lawyers,” including theft of estate assets and falsely promised and paid for legal services. Adopted by the American Bar Association House of Delegates, the Model Rules for Lawyers’ Funds for Client Protection enacted August 9, 1989 is an amendment of the Model Rules for Clients’ Security Funds first ratified in 1981.  

New York laws of intestacy and probate do not allow an executor to sell real estate or property belonging to a decedent’s estate where no will is present without official appointment by the Surrogate’s Court of the jurisdiction where the case has been filed. If a decedent’s will does not deny sale of real property and other assets, the executor can sell a property without the consent of beneficiaries or probate proceedings. The power of a fiduciary representative in such case, depends on the terms of a decedent’s last will and testament.

Fiduciary Appointment and Duty

According to New York statute, in probate cases where no will is present, an administrator, rather than an executor must be appointed for probate distribution of estate assets to proceed. This includes fiduciary liquidation of the decedent’s financial assets such as stocks, bonds, bank accounts, and sale of real estate. All proceeds are to be deposited into the estate’s holdings for distribution after all creditor claims, legal fees, and other expenses have been satisfied.

Rarely is there a more interesting circumstance presented an attorney of an estate law practice than a matter implicated with bioethics. Advances in Assisted Reproductive Technologies (“ARTs”) have created a range of reproduction options for infertile individuals. The result is that human conception or artificial insemination (“AI”) in vitro fertilization (“IVF”) and cryopreservation refined by the scientific assisted reproduction process through innovation of new technologies, has created the conditions for new rule elements within law.

ARTs and Statutory (Pro-)Creation

At the heart of the legal debate lies the United States Supreme Court’s interpretation of the fundamental principle of rights to procreation. For example, cryopreservation (cryogenic freezing) is one of the latest technologies incorporating IVF and incorporated in IVF, which allows for storage and preservation of reproductive material. While the technology offers advantages for improving the success rate of IVF, cryopreservation implicates the inheritance laws of U.S. states in its potential for the posthumous conception of children.

Fair market value of assets held by the estate is key for determining tax liability of an estate. In Estate of Eva  Kollsman v. Commissioner of Internal Revenue, taxation of the sale of two 17th-century Old Master paintings was contested in federal tax court. The federal U.S. Tax Court agreed to expert analysis of the IRS’s testimony and opposition to the Plaintiff’s valuation of the two paintings sold at auction as “unpersuasive” and “unreliable.”

Appraisal Below Fair Market Value

The two paintings, Village Kermesse, Dance Around the Maypole (“Maypole”) by Pieter Brueghel the Younger, and Orpheus Charming the Animals (“Orpheus”) by Jan Brueghel the Elder or the Younger were, according to the IRS, worth more than claimed by the estate in the case. “Maypole” was later sold by Sotheby’s New York, Auction Lot. 43 in 2009 for $2,100,000 hammer price. Following Eva Franzen’s death In September 2005, Vice President of Sotheby’s North America and South America, George Wachter appraised the value of the paintings at $500,000 for Maypole and $100,000 for Orpheus, respectively. In his testimony before the Tax Court, damage caused by the decedent’s smoking was reportedly the reason for lower than fair market valuation of the paintings in the estate’s 2005 IRS tax return.

The Surrogate’s Court will probate the Last Will and Testament of a decedent, or a copy in some circumstances if those original documents are missing. In New York, the attorney representative of an estate can petition the court to commence probate proceedings with a duplicate of a will. Petition to the Surrogate’s Court must be accompanied by clear and convincing proof that the dislocation of the Last Will and Testament is in error. If a decedent is found to have purposely destroyed the original documents of their own estate, the validity of the claim may be called into question by the court. A preponderance of evidence showing a copy of those documents should be demonstrated to verify that the interests of the decedent, and their estate are accurate.  

Rules of Intestacy Apply

When a court considers if a petition requesting probate of a copy of the Last Will and Testament of an estate, intestate succession laws apply. Rules of intestacy determine whether the parties claiming rights to distribution of a decedent’s assets are those designated as the rightful heirs and beneficiaries of an estate by law. New York rules of intestacy define the rights of surviving spouses, children, and other relatives to an estate’s assets in circumstances where no will exists.

Will your credit card debt haunt you when you die? Outstanding debts can be attached to an estate or trust if a creditor files a lawsuit against a decedent in court. Protect your estate and your loved ones from creditor attachment by taking precautionary legal measures to restrict debt collectors from forcing your last will and testament into probate court.

Who is obliged to a decedent’s credit card debt?

Whether a surviving spouse or other loved one is liable for the credit card debt of a deceased family member depends on signatory of creditor agreement. If a spouse or co-signing family member is participatory in a credit agreement, they will be obligated to pay outstanding debts owed on the account after the other co-signing party dies. Joint credit card accounts are the most common example of this circumstance. Authorized users of a decedent’s credit card account, however, are not necessarily liable for paying off the balance after the debtor dies. Not considered the true owner of the account, and authorized user does not have a duty to fulfill the card agreement with payment insofar that they have ceased using the card at the time of the owner’s death.

Creditor attachment of an estate to satisfy outstanding debt may subsequently involve those assets in a bankruptcy. Depending if debts are attached to estate property that is involved in a Chapter 7 (personal) or Chapter 11 (business) related bankruptcy, the court will appoint a trustee to oversee and administer the process.

The Bankruptcy Trustee’s role and responsibilities.

Before a bankruptcy petition is submitted to federal court, the bankruptcy trustee is responsible for the documented accuracy of liquidation transactions to meet court requirements for debt dilution (11 U.S. Code § 704 – Duties of trustee). Trustees receive a percentage of assets sold, as well as a fee for service for performing those transactions. Petition for Chapter 7 or Chapter 11 bankruptcy must be accompanied by the estate transaction record. The bankruptcy trustee must review all records involving an estate’s assets, including market value appraisals, and income tax returns. After the record substantiating the bankruptcy petition has been verified by the trustee, court filing may proceed.

The U.S. federal Securities and Exchange Commission (“SEC”) offers guidelines to Unit Investment Trusts (“UITs”). A fixed portfolio of securities with specific expiry, UITs are a trust vehicle for high wealth investors looking for estate portfolio diversification. The composition of UITs, generally a portfolio of bonds, stocks, and other securities, remains the same for the duration of the trust. Similar with primary market, closed-end fund products and open-ended mutual funds, UITs require a collective of investors.

The “Right Blend”of Diversification

For investors looking for diversification, UITs offer a unique investment model for stable financial planning. Both bond trusts and stock trusts can be formed as unit investment trusts. Bond UITs offer consistent income at a lower risk rate. Payments from bond UITs continue until date of maturity, at which time the full asset is paid out to investors. Stock UITs “issue a fixed number of units (like closed-end funds)” at initial public offering (“IPO”) during a period. IPO unit purchases offer “unitholder” investors a net cost basis in a trust.

Legalized marijuana is having important legal impact on state property rules, and estate law is no exception. In “pot legal” states, estate planning attorneys are faced with questions about the transferability of cannabis assets to an estate or trust, and existing rules affecting distribution to beneficiaries. If an estate planning client owns a marijuana business, the option of estate transfer of cannabis assets will depend on both federal and state statute to ensure a client’s intent is carried out within the limits of the law.  

Cannabis Assets

Estate distribution of cannabis-linked assets at death is an issue that has received differential treatment under state and federal law. In some states, a will may be seized, and a beneficiary held criminally liable for an estate’s possession of illegal cannabis products and materials intended for distribution. There is also the potential that courts will not permit an executor to administer a will which contains cannabis assets. If those assets are part of a state-legal medical treatment program, there will be issues associated with an executor’s capacity to administer distributions from an estate or trust.

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