Articles Posted in Estate Planning

Art and Antique Succession Planning Should Not Be Overlooked

Published on: December 5, 2011 | by Ettinger Law Firm

In many cases the most difficult aspect of conducting proper New York estate planning is ensuring that everything necessary is taken into account. Experienced New York estate planning lawyers usually know what options make the most sense in any given situation, but those plans are less effective if certain aspects of a community members’ situation are not accounted for within the overall plan. Few individuals forget to discuss assets like bank accounts and real estate. Fewer take the time to conduct less common planning needs, such as ensuring proper business succession details are in place.

Another often overlooked planning area involves art and antique collections. Last week Wealth Management discussed some tips for art succession planning. The authors noted many families have considerable wealth invested in their antique or art collections, but many fail to take much planning care with these items. The articles notes that “Many don’t realize the true value of their ‘stuff,’ thinking that the antique toy collection, family jewelry, or painting passed down by grandpa have no significant worth for which succession planning is essential.” Often that idea is misguided. A new Social Welfare Institute study from researchers out of Boston College found that in a few decades inter-generational asset transfers will total $41 trillion, of which roughly 10-13% will be art and antiques.

Considering that sizeable sum, it is incumbent that these objects be properly accounted for in all estate plans. Failure to do so is a serious preparation mistake. Not accounting for these assets may result in significant tax liabilities. Also, without proper evaluation there may be large discrepancies in the asset allocation to heirs–with one child getting much more than another accidentally. Even worse, heirs may dispose of collectibles at rates much less than their actual worth if they do not suspect something is valuable and are not given any guidance on its worth.

Editorial Calls for Repeal of the Estate Tax

Published on: December 2, 2011 | by Ettinger Law Firm

Local residents with a taxable estate over $5 million need to conduct New York estate planning to ensure that they are best positioned to save on estate taxes. The estate tax is essentially a tax on one’s right to transfer property at death, and it can result in substantial liability for those with large estates. However, there are seemingly endless political debates about who should be taxed and at what level. The law in this area changes with surprising regularity. For example, in 2004 the tax applied to all those with taxable estates over $1.5 million. A few years later that threshold amount was increased to $2 million. In 2010 the tax was eliminated altogether. While it currently stands at $5 million, it is unclear whether policymakers will change that figure in the coming years. Of course, our New York estate planning attorneys closely monitor all estate tax developments, as these laws are important factors in our work helping residents conduct inheritance planning.

Criticism of the estate tax and the political wrangling around it is common. For example, a Forbes editorial last week called for repeal of the tax entirely. Pointing to the seeming randomness of the rates, the article author noted that “over the past ten years the federal estate tax rules have bordered on the ridiculous.” The author explained that planning plays a crucial role in helping residents legally avoid much estate tax liability. Proper planning can actually pay dividends for entire families. He wrote that “with a little bit of planning, not only would the estate of a person who died in 2010 be excludable from estate tax, but the future estate of the surviving spouse would be free of estate tax as well.” At the end of the day, the amount of tax paid often hinges on whether or not an individual has prepared a proper estate plan ahead of time or not.

Currently the estate tax generates about 2% of the annual federal revenue. The editorial author suggests that it would be logical to shift the tax system so that the 2% is paid as part of a more progressive income tax system. He specifically suggests increasing tax rates for capital gains and qualified dividend income. It is argued that even slight alterations to these taxes could generate $200 to $250 billion in additional revenue from those making more than $300,000 annually. The goal of this tax shift, claims the proponent, would be to provide a more logical taxation system that is easier to administer without sacrificing much needed public revenue at a time of tight budgets.

New Twist in Huguette Clark Estate Plan Controversy

Published on: November 30, 2011 | by Ettinger Law Firm

Yesterday there was a new twist in the high-profile New York estate planning story involving Huguette Clark, the woman who died this year leaving behind a $400 million Gilded Age fortune. As we discussed earlier this week, the woman’s family was not provided for in her will. Instead her fortune was given mostly to a newly created art charity with some benefits going to her long-time nurse, attorney, and accountant. Instead of using various trusts to ensure the woman’s estate was transferred seamless per her wishes, her New York estate planning attorney surprisingly utilized only a will. Expectedly, the will has been challenged by the woman’s family.

However, new information was just released revealing that Ms. Clark actually signed two wills, one only a few weeks before the other. According to a report by MSNBC, both wills were genuine, meaning that they were properly executed. The first will, seemingly revoked by the signing of the second will, would have left her fortune to her family. The family filed the first will with the court yesterday–the first step in what will assuredly be a prolonged battled over the Clark family millions. The attorney representing the disinherited family members claimed that the case involved “undue influence and exploitation of a very elderly and extraordinarily wealthy woman at the hands of two professionals who, with the help of certain others…ultimately stripped her of her free will, as well as millions of dollars.”

As this situation demonstrates, it is incredibly ill-advised for any family to rely solely on a will to conduct inheritance planning, especially for families with large amounts of wealth. Like clockwork they almost always cause more problems than they solve. Will contests are common and virtually guaranteed to occur when two wills are signed in short succession with family members being cut out between them. In this case, while twenty one relatives would have split the fortune in the first will, the second gave a large amount to a nurse, small sums to an accountant and lawyer, and then put the rest in an art foundation that was to be managed by the same lawyer and accountant. That chain of events raises many red flags about the influence that the small group of individuals who benefitted from the second will had on the woman. It is made even more suspect by the fact that the estate planning attorney who was to benefit from the will was the same one that drew it up.

Questions Remain About Huguette Clark’s $400 Million New York Estate Plan

Published on: November 28, 2011 | by Ettinger Law Firm

New York estate planning is a necessity for virtually all local residents, no matter where on the income scale one falls. Easing the emotional, social, and financial burden on one’s family and ensuring wishes are carried out upon one’s death is important if one has $400,000 or $400 million to pass on. Unfortunately, New York estate planning mistakes are made at all income levels, often with serious results for the individuals involved. The most common mistake includes not taking advantage of all of the legal tools available. For example, while wills are still commonly thought of as a basic estate planning necessity, in truth they are becoming obsolete for many families. Trusts are much more useful in that they can avoid probate and provide for substitute decision-making if disability strikes. Yet, many local residents, including those with vast fortunes, still fail to take advantage of the benefits that trusts bring.

One high-profile local example is that of Huguette Clark. The reclusive heir to her father’s copper and mining fortune died earlier this year at the age of 105. She was rumored to have more than $400 million at the time of her passing–an estate she inherited upon her father’s death over eighty five years ago in 1925. Ms. Clark had been a mysterious figure, having lived in a hospital room since the late 1980s. She left her Fifth Avenue apartment empty for over twenty two years even though she was in relatively good health until just before her passing. Ms. Clark was long estranged from her family, and only a very small and intimate group of advisors had any contact with her for the last quarter century.

Surprisingly, even though she had such a large estate, Ms. Clark’s advisors never had her create a trust to protect her long-term financial affairs. An article about her story published today by Forbes explains how most estate planning attorneys would have at least advised the client to utilize a revocable living trust, instead of a will. The need for a trust was made even more necessary considering the size of Ms. Clark’s wealth. In addition, there are questions about the terms of the will–drafted and signed when Ms. Clark was ninety eight years old. The will left most of the woman’s fortune to a newly created art fund and gave a significant amount to Ms. Clark’s long-time nurse. However, the will also named a partner in the very law firm that drafted the will as a beneficiary. Even if this was the exact intent of Ms. Clark, the potential conflict of interest issues would usually counsel the firm in question not to prepare the will. Many other questions remain surrounding her advisors spending over $100 million of her estate in the last two decades of her life.

Forbes Shares Information on Celebrity Estate Planning Stories

Published on: November 18, 2011 | by Ettinger Law Firm

Families across the country will come together to celebrate the Thanksgiving holiday next week. As a Forbes article recently explained, the holiday is a perfect time to discuss estate planning issues, because the planning is all about helping out one’s family. One of the main goals of an estate plan is to ensure that surviving family members will be taken care of and not forced to endure stressful, complicated, and costly procedures to get financial affairs in order following a death.

One way to broach the topic over Thanksgiving dinner, say the article authors, is to frame the talk in the context of high-profile celebrity stories. The article includes a list of the “Top 5 Celebrity-Based Estate Planning Conversation Starters.” Kim Kardashian’s story made the list to highlight the role that marriages have on one’s estate. The socialite ended her seventy two day marriage last month. Of course all marriages (short and long) have significant effects on one’s estate planning documents, and estate planning attorneys should be consulted when a marriage is entered into or ended. It is smart to make appropriate changes even before a divorce is finalized; otherwise the estranged spouse may still retain control if a death occurs before the separation is official.

The feud over Michael Jackson’s estate is also ripe with lessons. It was explained how the music pop star created a trust before he died and named his mother, three children, and personal charity as beneficiaries. Two trustees were named to help manage the trust. Our New York estate planning lawyers help clients in our community create these legal entities all the time. However, besides creating the trust, it is vital that the trust be “funded.” Funding is the process where assets are moved from an estate and into the trust. Failure to do this makes the trusts seemingly ineffective. That is where problems have arisen for the Jackson estate.

Estate Planning Documents Must Be Updated So They Work When You Need Them

Published on: November 9, 2011 | by Ettinger Law Firm

Yesterday the Kansas City Star published a story on the necessity of properly updating estate planning documents. The article shared the story of a local woman whose mother had just died. The mother had created a living trust several years before and placed her residence within the trust. However, a few years after the planning occurred, the mother sold her house and moved into a different home. She died shortly after the move. The adult daughter was left wondering whether or not probate would be required for her to obtain her mother’s home.

The daughter learned after talking to legal professionals in the area that the key issue was whether her mother had taken title to the new home in the name of her trust. If so, then the new home would likely be part of the mother’s living trust to be passed to the named beneficiary of the trust per its terms. However, if the new home was not titled in the trust’s name, then it likely would not pass on via the trust. Instead the public probate process would be required for the daughter to obtain the residence.

Of course the entire purpose of the mother creating a trust in this case was to avoid probate, save on taxes, and ensure that her family members would have as seamless a transfer process as possible in the inherently difficult time. By not taking her earlier planning into account when making future transactions or consulting her estate planning attorney to assure everything was in order, the mother risked having her plan fail to work as desired at the very moment it was needed.

An Estate Planning “Perfect Storm”

Published on: November 7, 2011 | by Ettinger Law Firm

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a “perfect storm” for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, “If individuals are trying to transition assets to the next generation, we currently have a perfect storm–in a good sense–to do it.”

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain–it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

Reality Star Feuds with In-Laws in Estate Fight

Published on: November 3, 2011 | by Ettinger Law Firm

Last month Forbes discussed an estate feud that brewed followed the suicide death of a reality show star. Late this summer, the 47-year old star of “Real Housewives of Beverly Hills,” Russell Armstrong, took his own life. His wife, Taylor Armstrong, had filed for divorce shortly before the death. However, the divorce was not final at the time of Mr. Armstrong’s passing, meaning that per the rules of the state she was the next of kin. As such she maintained a certain level of control over his affairs–including his funeral and burial plans. Without instructions to the contrary in estate planning documents, even estranged spouses may maintain this control.

Making matters worse in this situation, it appears that Mrs. Armstrong never maintained a good relationship with her former husband’s family. As a result, she did not initially tell the family about the funeral, burial, or memorial plans. The man’s parents and siblings wanted his remains buried in his home state of Texas, but Mrs. Armstrong claimed that she wanted to bury him in Los Angeles. It remains unclear exactly how the ugly situation will be resolved.

Unfortunately, the burial dispute may be just the beginning. Depending on Mr. Armstrong’s estate planning documents, his estranged wife may still be entitled to inherit most of his assets. That is why it is important to seek out professional help in the middle of a divorce. Otherwise, there is no telling what might happen. As the article notes, “Fights over the estate of someone who passed away in the midst of a divorce are especially common.” Other recent high-profile examples include the deaths’ of Dennis Hopper and Gary Coleman.

Federal “Super Committee” May Target Gift Tax in Deficit Reduction Scheme

Published on: November 1, 2011 | by Ettinger Law Firm

The gift tax has implications in a variety of New York estate planning situations, from deciding the best way to provide aid to loved ones to conducting business succession planning. As with many other tax issues, timing is important because lawmakers at the federal and state level can change these rates. While the risk of rate changes always exists, there has been significant discussion as of late about a variety of potential changes involving the 12-member federal “Super Committee.” The Super Committee has been charged by Congress with reducing the federal deficit by $1.5 trillion over the next ten years. To do so, the group will have to enact a combination of spending reductions and tax changes. No matter what combination they ultimately decide upon, it is highly likely that their work will have effects on local residents crafting their New York estate plan.

For example, last week the Wall Street Journal’s Market Watch published a story explaining proposed changes to gift tax exclusions. The specific committee meetings are mostly private, so some of the recent thoughts on the committee’s actions are speculative. However, it is known that one of the President’s proposed recommendations to the committee includes reducing the estate, gift, and generation-skipping transfer tax thresholds. The proposal would reduce the tax-free gift threshold to its 2009 level of $1 million. Currently the tax-free threshold is supposed to stay at $5 million until the end of 2012. However, many are speculating that the committee may decide to return the exclusion back to $1 million a year early as a cost-saving measure.

The story’s author summarizes the changes by noting, “Overall tax planning and gift tax thresholds that are now available could be at risk for families…not much good can come from the committee’s recommendations from a wealth preservation perspective.” Clearly, the potential actions by this group may make it important for some local residents to take long-term financial actions now. Our New York estate planning attorneys urge all community members who may be affected by these changes to visit with a professional to either create a plan or update an existing one. Depending on the advice received, it may be prudent to accelerate planned lifetime gifts, review estate-tax funding mechanisms, or otherwise revise estate plans.

Economic Uncertainty Leads to Rise in Estate Planning Interest

Published on: October 27, 2011 | by Ettinger Law Firm

An article this week from West Fair Online explained how professionals working with residents on financial issues have seen a significant increase in demand for their services as of late. While there may be a tendency among some to become paralyzed when the economy is so volatile, many others view the instability as a time to act prudently and plan ahead as much as possible. The article reports what our New York estate planners have long known: the need to have an estate plan remains strong regardless of the circumstances.

Experts know that the need for prudent planning is perhaps even more important at times like these, when there tax and policy uncertainties at the local, state, and federal levels. One planner interviewed for the story explained how in turbulent financial times “the area’s residents should have a vested interest in knowing what the stakes are for their assets.” While those residents at the top income levels are often more aware of how the laws affect them, many middle class families have just as much to gain by using the legal tools available to plan their financial future and save taxes in the long-term.

Most observers have applauded the steady rise in estate planning awareness. However, there are still a few groups which continue to neglect their planning needs. For example, many local small business owners continue to miss out on opportunities to visit with a New York estate planning lawyer to take care of long-term financial goals. Of course, small business owners wear many hats. Rarely do they have time to accomplish everything on their “to do” list each day. Yet, many benefits have been reported by those who have carved out time to visit with financial professionals to protect assets, create a succession plan, and conduct similar tasks.