Asset Protection

Back to the Basics – What is a Bequest?

Published on: July 5, 2016 | by Ettinger Law Firm

When writing a will, many people seek to ensure that certain people in their lives get specific things, such as a family heirloom necklace, property, or an allotted amount of money. The gifting of property or assets to a certain person through the provisions of your will is called a bequest. There are few types of bequests and different situations in which to use them.

(1) Specific Bequest: It is the gifting of a specified property or asset to an identified person or entity, distinguished from the property in the estate. For example, a specific bequest would be gifting your home to your son, or gifting your diamond earrings to your niece. The main issue faced by the estate is when, upon death, the specific gift that is to be given, i.e. the property or the diamond earrings, are no longer owned by the testator. In this situation, the intended beneficiary then gets nothing, because there is nothing to satisfy or substitute from the estate.

(2) General Bequest: A general bequest is what most people think of when they think of gifts in a will. This bequest is a gift that is payable from the assets of the estate. Most commonly seen are provisions gifting a specified amount of money to a certain person, for example, $10,000 to my nephew, or a stock or securities bond. Unlike specific bequests, these type of bequests are not for a specified item, so other assets in the estate may be sold to satisfy the gift if it is not available when distribution comes.

Float like a Butterfly, Sting like a Contested Estate: Muhammad Ali’s Unhappy Heirs

Published on: July 2, 2016 | by Ettinger Law Firm

It seems that Muhammad Ali’s estate is destined for trouble, similar to other celebrity estates that we have covered on this blog recently. It is unknown if the boxing legend died with a will, but even if he did, a will contest may be likely. Forbes reports that Mr. Ali died with an estate worth in between $50 and $80 million, had nine recognized children, four different marriages, and struggled with a debilitating disease that affects the mind. These are the circumstances that set the stage for a drawn out estate contest.

Troublesome Children

The large amount of children Mr. Ali had, as well as his four marriages, makes the number of people who may have an interest in contesting Mr. Ali’s estate quite high. One child in particular, Muhammad Ali Jr., has been estranged from his father since Mr. Ali’s fourth and final marriage in 1986 and has been cut off from the family fortune ever since. Ali Jr. in particular blames Mr. Ali’s fourth wife for driving him and his father apart.

Family Feud Forever: Dr. King’s Family Squabbles Continue

Published on: June 19, 2016 | by Ettinger Law Firm

Dr. Martin Luther King Jr. left behind a legacy of peace and understanding, but he may have been surprised by the legacy that his estate is forging. Last Friday, a Fulton County Superior Court Judge declined to make a ruling in a dispute over two items left behind by Dr. Martin Luther King Jr, his Bible and his Nobel Peace Prize. Fox News reports that the case over these two items is likely to go to trial, with King’s estate, controlled by his two sons, against their sister, Bernice. This is only one of many lawsuits that have crept up in years past over the legacy of Dr. King.

Managing Estate Assets and Legacies

Dr. Martin Luther King Jr’s estate is not technically what many would consider an estate in the traditional sense. It is not a probate estate, with his assets being liquidated according to his will. Rather, Dr. King’s estate is the for-profit Martin Luther King Jr. Estate Inc. with his three surviving children being the sole shareholders and directors. As the sole shareholders and directors, his three children control Dr. King’s name, image, likeness and his possessions.

BACK TO THE BASICS – HOW TO BE AN EXECUTOR

Published on: May 30, 2016 | by Ettinger Law Firm

AN IMPORTANT AND SOMETIMES THANKLESS JOB

There are times in life when we all will have to do or engage in a thankless job. One such time is when a close friend or a family member asks you to be the executor of their estate. The difference between an executor and an administrator of an estate is small but noteworthy. An executor is someone who is appointed by the terms of the will itself to administer the estate. If there is a trust document to convey property to heirs, they are then known as trustee.

An administrator is the title for the person who appointed to administer the estate by the Court when someone dies intestate, or without a will, or when the appointed executor refuses or cannot complete the task. In either event the probate Court Judge must approve of the selection. A recent survey by U.S. Trust found that three-quarters of high net worth individuals choose a family member or close and trusted friend to be the executor of their estate and two-thirds of the same people chose a friend to be the trustee for their testamentary trust. The process is started when the executor presents the will and a death certificate to the Surrogate Court in the County in which the deceased resided. The Court then issues letters testamentary to the executor, which is when the hard work begins.

DYNASTY TRUST REEXAMINED

Published on: May 21, 2016 | by Ettinger Law Firm

VERY SIMPLE CONCEPT

This blog examined the dynasty trust in the past but it is time to reexamine certain aspects of the dynasty trust. The dynasty trust is a trust designed primarily to avoid the generation skipping transfer tax when a person wants to leave money to their grandchildren or great grandchildren (or even generations beyond that). Before getting into the nuts and bolts of what a dynasty trust is, it is best to outline some of the basic tax issues inherent in the generation skipping transfer tax.

Grandfather wants to leave an asset to his son, with the intention that he will leave it to his son and for him to leave it to his son and so on. Just to make the dollar figures simple, let us assume that it worth $10 million. For further simplicity, let us also assume that grandfather’s estate already went through the federal (and state) estate tax exemption. That means that son has to pay the current top estate tax rate of 40%, which means that the asset is no longer worth $10 million. Instead it is only worth $6 million. For further simplicity, father’s estate also passed through all of his estate tax exemption, so instead of the asset being worth $6 million when it passes to the grandson, it is now worth $3.6 million in light of the 40% estate tax. And the process goes on and on.

SPECIAL NEEDS TRUSTS AND GOVERNMENTAL BENEFITS

Published on: May 12, 2016 | by Ettinger Law Firm

CERTAIN LIMITATIONS ON SPECIAL NEEDS TRUSTS

Last year a case out of the Western District of Massachusetts Federal District Court dealt with the interplay of a special needs trust and eligibility for certain governmental benefits that the special needs trust was supposed to address. The case of DeCambre v. Brookline Housing Authority dealt with the beneficiary of a valid special needs trust who applied for a section eight housing voucher but was denied because of income that she received from a third party special needs trust, established by a Court. Ms. DeCambre was involved in a catastrophic accident which resulted in a series of settlements, with the proceeds directly deposited into the special needs trust. She received a total of $330,000.

The trust did not earn any income of it’s own, the truste only distributed the income in line with the terms of the trust and charged the normal and typical trustee fees. Ms. DeCambre did not have any control over the distribution of the income or money in the trust. The Court noted that the special needs trust was indeed valid and in conformity with the special needs trust enabling statute, found at 42 U.S.C. § 1396p(d)(4)(A) and (C). Indeed, the Court noted that Ms. DeCambre benefited from this trust insofar as she received Supplemental Security Income of approximately $850 per month and validly received Medicaid. These programs, the Court noted, specifically excluded the income from the a valid special needs trust. Ms. DeCambre applied for a section eight housing voucher through the Department of Housing and Urban Development (HUD) in 2005. The voucher was approved and provided from 2005 through to 2012, when HUD reduced it by approximately $1,000 per month, based on her income from the special needs trust. Ms. DeCambre sued HUD in Federal Court on several statutory grounds, based on HUD’s decision to reduce the amount of her housing voucher.

DISABLED MILITARY CHILD PROTECTION ACT HELPS WITH SPECIAL NEEDS PLANNING

Published on: May 5, 2016 | by Ettinger Law Firm

SPECIAL NEEDS LAWS HELP PROTECT THOSE WHO PROTECT US

For those of us who come from families with many military members, we know the sacrifices and hard work that service members incur for their principles and belief that there are certain obligations in life that precede all else. Unfortunately, until recently, for a select few of those dedicated service members faced a choice between two equally important obligations, their obligations to their country and their obligations to their family. More specifically, service members with special needs children who received benefits publicly funded programs such as Medicaid or Supplemental Security Income knew that if something happened to them and their family received monies through the Military Survivor Benefits pension, their children would lose those vital benefits.

It should be noted that the protections contemplated by the law are even allowed for if a service member retires and collects a pension for retirement but also diverts some of that money for the benefit of their special needs child. This was a choice that was too high for some service members and helped them decide to not reenlist. The military spends a tremendous amount of money on training and maintaining our military. Any lost member is a lost investment to put it in economic terms. To help combat the lose of these soldiers, sailors and airmen Congress created the Disabled Military Child Protection Act (DMPA). The DMPA allows a service member to choose a special needs trusts as the beneficiary of any money given through a Military Survivor Benefits pension. This allows the service member to have peace of mind knowing that if they do pay the ultimate sacrifice, their children and loved ones will not suffer further.

CREDITORS OF AN ESTATE

Published on: May 5, 2016 | by Ettinger Law Firm

ORDER OF PAYMENT

It should not be a surprise to anyone that when someone passes away, their estate must pay for all legally binding outstanding debt owed by the decedent just prior to passing. New York as well as just about every other jurisdiction has laws that address how the estate puts creditors on notice that they must file a claim, but how the creditor must go about making a claim and getting paid from the estate. As in other areas of the law, there is an order and priority to the claims that can be paid. The administrator has a fiduciary obligation to the heirs to distribute the estate to the terms of the will. That fiduciary obligation also extends to creditors of the estate. The payment of expenses, ensuring that all disbursements are properly documented and all taxes and fees are paid are core responsibilities of the estate administrator.

To do this, the estate administrator must first understand what assets the deceased owned, the value of those assets, which in and of itself costs money. When an estate is insolvent, the creditors will surely examine every expenditure by the administrator to determine if they acted appropriately. On the other side of the ledger, the administrator must determine if the claims are valid or overpriced and inflated. The estate administrator has an obligation to dispute all claims, except properly owed, legally enforceable obligations. Since the final accounting by the estate administrator presupposes that all parties are already involved in litigation and there is a Court already scrutinizing all credits and debits, the likelihood that a party will enforce their rights, or, more specifically, object to the final accounting, is all the much greater. The balancing act that the estate administrator must engage in can be a complicated endeavor.

DEPENDENT CARE ASSISTANCE PROGRAM

Published on: May 3, 2016 | by Ettinger Law Firm

There is a relatively unknown or at least underutilized program in the law that can provide some important tax benefits for those who care for their elderly or special needs relatives. The Dependent Care Assistance Program (DCAP) is a tax benefit that is often offered by employers for expenses that a person incurs for any number of things for the care of others. It is a tax credit that can be claimed by the taxpayer for expenses related to the care for qualifying individuals so that the caretaker may work. The program is similar to a Health savings account insofar as a person can sock away a certain amount of money that can be used on certain delineated services or costs.

The good thing for New Yorkers is that this tax credit is for both federal government income taxes as well as state taxes. Not all states have such a tax credit; residents of these states can only utilize the federal credit and still have to pay state taxes on the money earned and diverted into the DCAP account. Under federal tax law, the tax credit is limited by to the amount that the worker earns. New York’s tax credit calculated as a percentage of the Federal tax credit. In addition, there is a $5,250 ceiling per year on the amount that a person can put into the account. The benefit is allowed for families earning up to $120,000. If the employee utilizes a DCAP program through their work, the tax credit is reduced by the amount that use through their employer’s program.

The money can be used for practically anything for the elderly or special needs relative, including adult day care, transportation, (reasonable) entertainment costs, as long as they costs are related to your employment. In other words, if you do not need to incur the costs to be employed, you cannot claim these costs. Overnight camp or educational costs cannot be incurred, since they are not related to or required to your employment. Fellow relatives cannot be the service provider. While an employee can take advantage of an employer based program, most employers do not offer it as an additional benefit; rather most employers who have such a program allow the employee to earn their income tax free.

MORE ON ESTATE PLANNING FOR THE FARMER

Published on: April 27, 2016 | by Ettinger Law Firm

PASSING THE FARM IS LIKE PASSING ON THE FAMILY CORPORATION

There is no doubt that some modern farmers run large multi-million dollar operations right in their backyard. Maintaining a herd of cows and other grazing stock costs potentially millions to buy or lease (or both) land for the animals to grow on. In addition, the processing equipment for milking cows, labor costs, insurance, veterinarian costs and any number of other costs can run into the millions each year. While most farmers are far from millionaires, most work much harder than many millionaires. Indeed there is more to farming than the land, buildings, equipment, animal stock or orchards and other tangible objects. Tending to corn fields, wheat, soy, orchards, vineyards, sod, tree farms, et cetera are all specific skill sets that require years of training and no small measure of technological investment. The same can be said of a family run saw mill or similar type of business. There is something unique about farmers, however.

Many families are tied to the land. John Mellencamp who was raised in farm country and one of the original founders of Farm Aid wrote about the life of the average farmer, growing up on the same farm that his own daddy did on land cleared by his grandpa, walking along the fence while holding his grandfather’s hand and of being tied to land that fed a nation and made him proud. It is this tie to the land, unique education and training that can start literally while the child is in diapers as well as the emotional bond with families that makes farmers different than most other family run small businesses. There are also unique legal protections found throughout the law for the benefit of family farmer. For all of these reasons transferring a family farm from one generation to the next requires special planning.