Articles Posted in Estate Planning

The release of Stormy Daniels’ memoir, Full Disclosure by St. Martin’s Press is a landmark case of a legal matter post the 2006 Lake Tahoe meeting with now President Donald Trump.  The drama ensuing from the execution of a Non-Disclosure Agreement before the 2016 presidential election, has taught an inadvertent lesson about oral disposition of estates and the limited enforceability of nuncupative will formation within federal and state laws of probate.

Cohen’s Admission Under Oath

Paid $130,000 by Trump’s attorney, Michael Cohen, Daniels’s discusses the request for non-disclosure about the 2006 encounter with President Trump in her book. The final chapters focus on the federal court review of the details to the Non-Disclosure Agreement she argued were invalid – a claim disparate from the allegation that she felt intimidated by Cohen in her memoir. The story reported by the Wall Street Journal in January 2018, revealed the details of the federal court case, including Cohen’s admission to making the payment under oath. Further addressed in an interview on Anderson Cooper’s CBS broadcast television show 60 Minutes, Daniels’ expressed concern and fear about threats she claimed she received on the air.

The final step in a three (3) part series, advanced wealth and estate transfer planning allows an estate owner to shelter assets from estate tax. Strategies to reduce taxation and other penalties that may otherwise be assigned to distributions after an estate holder’s death are a core element of any professional estate planning strategy. Sales to Intentionally Defective Grantor Trusts (IDIT Sale) and Grantor Retained Annuity Trusts (GRATs) and are two common estate planning techniques used for financial control estate assets designated for transfer.

Tax Sheltering Assets Before and After Death

Most asset transfers from an estate while an estate holder is still alive fall under federal Internal Revenue Service (“IRS”) gift tax rules. The IRS applies the same rates of taxation to both gift and estate reporting of assets. If the value of gifted property will likely increase between date of the gift and date of a decedent’s death, “discounting” (i.e. freezing) the value of an asset so that it does not appreciate will enable a beneficiary to avoid transfer taxation.

The formation of a Qualified Terminable Interest Property (“QTIP”) trust is a tax-exempt estate planning option that allows for an owner to elect distribution of estate assets to named beneficiaries, including children of a preceding marriage. In most cases, estate property assets transfer automatically to a surviving spouse under federal and New York estate law. The creator of a QTIP trust does not transfer any assets during their life. Most estate holders include a trust as part of their will, not as a separate entity. A safe estate planning option for parents interested in protecting the rights of children to their estate, the QTIP is one of the best estate planning tools for transferring property after death.

                           The Interests of Surviving Children

The circumstance of a second or third marriage as part of the consideration of an estate or trust formation is most usually relevant where there are surviving children of those unions.

QTIP Trust Planning for Same-Sex Couples

When the United States Supreme Court struck down the Defense of Marriage Act (“DOMA”) in a 2013 ruling, estate planning opportunities for same-sex couples were broadly enhanced to include tax-exempt and tax-deferred asset protections. The landmark decision overturning the DOMA redefined the entire framework of estate related provisions formally reserved for the benefit of a marital union between a man and a woman. The modification of the Act has since had important impact on the financial, retirement, and estate planning of those families as result of a universal model of marital rights.

How DOMA Reversal Changed Estate Planning

Viatical settlement has become a popular strategy for investors seeking immediate liquidity for end-of-life expenses. Distinct from other derivative products, viatical settlement also offers life insurance policy holders immediate cash for reinvestment without the extenuating contract obligations of other financial assets. Settlement transfers the title of a life insurance policy to a new buyer in exchange for a lump sum cash payment. Eligible insured can also avoid the hassle of collateral borrowing against the limit on a life insurance policy with viatical settlement, which affords an investor immediate cash in exchange for the full value of the policy.    

Eligibility Requirements for Settlement

Life insurance policy holders in New York are eligible for life settlement depending on the terms and conditions of an agreement. An eligible policy can provide an investor with additional cash to offset finance medical or other important expenses. The seller and buyer must agree to any modification of a policy’s terms and conditions, such as obligation to premium payments assumed at time of origination. The full value of a life insurance policy must be determined prior to settlement. Distribution to named beneficiaries of a policy, or other condition to the sale of the policy value should be articulated before transfer.      Unlike other key investments such as real estate, a life insurance policy settlement is a fast and efficient process for enhancing retirement liquidity.

New York insurance laws allow for insurance providers to offer insured seniors life-care policy coverage. A specialized form of insurance coverage, a life-care policy indemnifies the holder for end-of-life care and treatment as part of an extended life services agreement. Distinct from a limited life insurance agreement, life-care coverage can be purchased as a separate policy. An option for estate planning clients, life-care can be written into an agreement as part of a comprehensive insurance policy. Combining life insurance with the added health and life expense benefits that may be required by an estate holder while still alive, life-care coverage protects valuable estate and trust assets in the interim. Insurance policies offering value-added, life-care coverage agreements:

1)    Extended Life-care Policies

A comprehensive life-care policy will cover life insurance beneficiaries on death, as well as any life expenses a holder may have such as residential services, housing, treatment, and end-of-life costs. Some extended life-care policies also offer healthcare services agreements with unlimited access to medical providers at little to no difference in fee assignment. Extended life-care policies tend have a higher sign-on fees.

Homestead exemption protect property assets from probate. Properties recognized under laws of homestead are off-limits to creditors seeking attachment. New York homestead law protects property owner rights to the value of an asset transferred to an estate or trust. Homestead declarations are automatic for title holders of residential property in the state. Jointly owned property owned by a married couple is held as a single married entity, “tenancy by the entirety” – not as individuals. Trustees of revocable trusts seeking homestead protections for property assets from lien, can consult with a licensed attorney specializing in estate probate law.  

NY Homestead Law

Federal and state property taxes are an exception to estate or trust homestead exemption from lien or attachment. No exempt homestead is exempt from taxation or from liquidation for purposes of payment of an outstanding assessment or tax lien. The NY C.P.L.R. §5206 Real property exempt from application to the satisfaction of money judgments outlines criteria for (a) homestead exemption; and (b) distribution of a property asset after the original owner has died. Homestead properties are “exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof: 1) lot of land with a dwelling thereon, 2) shares of stock in a cooperative apartment corporation, 3) units of a condominium apartment, or 4) a mobile home.”

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:

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