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Articles Tagged with bronx estate planning lawyer

Most people plan their estate believing that everyone they have left money or bequests to will survive them, such as when a parent specifies that money or property will be left to a child. But sometimes unexpected deaths happen and when it does, many people are left wondering what will happen to the property that they specified to go to the predeceased. It is a tricky situation, but thankfully New York law and proper estate planning precautions can address the problem.

New York “Anti-Lapse” Statutes

Common law followed in the past dictated that gifts to someone who was deceased was null and void. This is due to the fact that a dead person cannot own property. Since they cannot have property, they cannot inherit it. When someone left property to a person who had predeceased them, the bequest would be said to have lapsed. This would have unintended consequences, such as cutting out people who would have inherited the property if the bequest had not failed and others receiving more than the testator intended.

We’ve already discussed Prince’s passing previously here on the Estate Planning blog.  Prince, one of the most successful music artists of all time, passed away without leaving a will. This means that he died intestate, and the laws of the state he was domiciled in dictate who will inherit from his estate. That almost universally means that your closest living relatives, usually a spouse or child, will inherit in an intestate situation, but this can get tricky. In Prince’s case, siblings, nieces, nephews, cousins and now self-proclaimed children have come out of the woodwork to lay claim to the late singer’s vast fortune and catalogue of music. Prince has no acknowledged surviving children, who would be near the front of the line in an intestate situation. So how exactly do you go about proving you’re the son of a decedent?

Acknowledged Children, Have No Fear

New York intestacy law is very clear on who will inherit when the deceased is intestate. If there is a spouse but no children the spouse inherits everything. If there are children but no spouse, the children inherit everything. If there is a spouse and children, the spouse inherits the first $50,000 plus half of the balance of the estate, with the children splitting the rest.

GOOD NEWS AND BAD NEWS

Most people are aware that April 15 is tax day. That simply means that you have to have your taxes filed and paid by that date and that the year that those taxes are due for are from January 1st to December 31st of the previous year. New York, however, takes a slightly different approach to estate tax liability. Estate tax liability rates are set from April 1st to March 31st. So, if you are administering an estate, wherein the deceased passed away on March 30, the estate tax liability will be different and lower than if they passed away on April 2 of the same year. As this blog discussed in the past, New York state amended its estate tax in 2014 so that it will be on par with the federal estate tax rate in 2019. Prior to 2014, New York had an estate tax exclusion of one million dollars. As of April 1, 2016 the estate tax exclusion is $4,187,500. As such the good news is that with the passage of the changes to the estate tax laws, more estates will not have to pay any estate tax at all. The bad news is that the majority of the estates that exceed that value will likely have to pay a higher tax rate than before and maybe even more than the federal tax rate.

Starting in 2019, New York’s estate tax rate exclusion will mirror the federal amounts. Since both are pegged to inflation, they will grow year to year. That is where the differences will end. Under the federal estate tax, only the amount above the federal tax exclusion is taxed. So, just to make the example easy, if the federal tax exclusion is $5,000,000 (it is not), an estate worth $6,000,000 would only be taxed by the federal government on $1,000,000. New York’s estate tax requires that if the estate is greater than 105% of the exclusion, the entire estate is taxed. So, with the same example immediately above, the entire estate (6,000,000) would be taxed. If the estate was say $5,249,999 (one dollar less than 105%) instead of 6,000,000, the entire amount would not be taxed, since the estate has to exceed 105%. If the estate was $5,250,001 (one dollar more than 105%), the entire estate would be taxed.

SELL NOW OR PASS ON

The issue of how to deal with the collection of fine art that you amassed over the years should be dealt with now rather than allowing your heirs decide for you.  Perhaps your heirs do not have any appreciation for your original Ansel Adams or Edward Curtis photo collections.  If you view it as an investment, then timing your sale to maximize profit should be the most important criteria.  Timing may not be right for several years or it may be right now.  If you are looking to maximize profit which will only go to to your estate, you may consider waiting to pass it on.  If, you happen to value your art collection because of its intrinsic artistic value, you have another set of criteria by which to make your decision.  Perhaps you have a family member you know would appreciate it more than say your son or daughter.  Perhaps you should sell it to insure that the artistic value continues to be appreciated.   Country Living spotlighted an artistic marble collector who decided to sell his collection to insure that it would continue to be appreciated.  In any event, Capital gains tax on collectibles, gift tax and estate tax, both state and federal, must all be considered.  

ESTATE TAX

Say you live here in New York and made significant plans to avoid probate.   You have a will, own a business that you pass on and even set aside significant assets for your grandchildren. You worked hard to put your financial house in order.  Now you find out that you have to move to another jurisdiction for work and will likely be there for some time.  More likely than not your will and other plans to avoid probate will survive as legally enforceable documents in the new jurisdiction.  Nevertheless, you worked hard for your plans to be finalized and do not want to live with the idea that “more likely than not” your plans will be followed.  As such, it is always best to check with a local estate planning and review your plans.  

FACTORS TO CONSIDER

There are a few things to keep in mind when it comes to decisions on where to live and changes in law and nuances on how to handle the change.  Most laws are relatively uniform throughout the country.  Procedure may be different but substantive laws are similar in many cases.  Except when they are not.  Some issues have two different ways of handling things.  A good example is common law states versus community property states.  Community property states are generally Rocky Mountain states and west (Louisiana and Wisconsin are the exceptions).  There are some important differences in their approach to passing on assets between the two camps.  Another factor to address is that you need to clarify your residence or domicile or you may end up paying taxes in two different states, as what happened to the heir to the Campbell’s soup fortune in 1939.

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