Wills

THE CLAT – STRANGE NAME, GREAT PLAN

Published on: March 28, 2016 | by Ettinger Law Firm

CHARITABLE LEAD ANNUITY TRUST

There are many great estate planning strategies that allow a person to avoid or lower estate tax liability and give money to charity at the same time. With the large estate tax exemption and portability of estate tax exemptions only a small number of Americans will face the possibility of paying the federal estate tax. For many New Yorkers, however, the federal estate tax is a secondary consideration in light of the lack of right to transfer any unused estate tax exemption from for the first deceased spouse to the next. Instead of a double benefit, New Yorkers face a potential double hit of not only having a lower estate tax threshold, but being taxed on the entire estate amount, sans estate tax exemption. For couples that face this possibility and for those with larger estates, few match the simplicity of the charitable lead annuity trust, often abbreviated as a CLAT. It is also a good fit for those who seek to defer the payout of their trust payments to relatives quite some distance in the future.

The CLAT works quite simply by funding the trust with a certain amount, usually a large amount (since it is generally used by families or grantors looking to reduce their estate tax liability) that is scheduled to be paid out to a charity over of a certain length of time. Once the payout period for the charity is over, a certain sum, plus any additional monies earned (minus taxes and expenses of course) is paid to the remainderman beneficiary of the trust.

WHAT HAPPENS IN MY HEIR PASSES AWAY BEFORE ME?

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

NEW YORK ANTI-LAPSE STATUTE

This blog previously discussed what happens if an heir passes away simultaneous with a testator and how the property that would otherwise go to the person who simultaneously passed away with testator ends up getting transferred. An obvious related question is what happens if an heir or beneficiary passes away prior to a testator? This blog also explored this issue in the past. It is now time to reexamine that issue in more detail and in light of the larger legal structure that the law provides for various contingencies that exist in the law regarding property passing via probate when some sort of mistake or event occurred that would otherwise leave the property unpassed to the next generation.

In both cases the law has default, fall back statutes to specifically address these sorts of scenarios. In the case of property or money left to an heir who predeceases a testator, if the property or money passes to siblings or children of the testator, New York’s anti-lapse statute controls and allows for that property or money to pass to that sibling or child’s heirs, almost as if the heir did not predecease the testator. If an heir passes away prior to distribution that bequest is considered to have “lapsed”. New York’s anti-lapse statute, as judged by its name, obviously prevents the lapse from occurring. In the absence of the anti-lapse statute, a bequest that fails to pass to the intended heir that heir predeceased the testator, the bequest becomes part of the larger estate, to be dealt with via other provisions in the will or otherwise dealt with through the application of the state’s intestacy statute. All states have anti-lapse statutes. In a sense the anti-lapse statute provides a substitute heir via statutory decree for the beneficiary who predeceased the testator.

GENERATION SKIPPING TRANSFER TAX

Published on: February 24, 2016 | by Ettinger Law Firm

CLOSING PERCEIVED LOOPHOLE

Congress created the generation skipping tax almost 40 years ago in 1976 and ushered in an age of increasing complexity for the tax code, always complicated and cumbersome, to fix a problem perceived at the time (and since) of avoiding taxable events by transferring assets to “several generations while avoiding the Federal Estate Tax” via use of trusts and other transfers of property rights. At the time, Congress saw how wealthy families were creating life estates in their kids, followed by a life estate in their grandkids and followed by a life estate of their great grandkids.

Life estates are not subject to federal estate tax. This meant that wealthy families who had the inclination to create these arrangements and the money to pay an attorney to do so avoided paying large amounts of taxes and smaller families and estates were paying more in taxes than wealthier ones. As such, Congress decided to tax any transfer of property or assets from an individual to another individual that is more than one generation away from the grantor, in the case of family members, or from one person to another who is at least 37 1/2 years younger than the grantor, in the case of nonfamily members. The tax applies even if the transfer is via a trust

UNDERSTANDING HEALTH SAVINGS ACCOUNTS

Published on: February 22, 2016 | by Ettinger Law Firm

GOOD FOR CERTAIN SUBSET OF POPULATION

A health savings account is another way to save your money, tax free, for an inevitable expense that everyone will have to face and deal with eventually. Unfortunately one of the variables of retirement is that you will never know how much you will spend on health care costs. At the same time, as the body ages health invariably declines with more visits to the family doctor or perhaps even more expensive specialists. To further add to the expense, modern medicine has added significantly to the life expectancy of the majority of people who do not meet some unfortunate trauma or accident.

This is often the result of more expensive treatments, more costly medicines and more diagnostic tests or procedures that occur more often. Often these treatments, medicines, tests and procedures are medically appropriate, so any money spent is money well spent. But as with anything in life, the question must be asked, from where did the money come from? Insurance does not cover all medicines, tests and procedures and even when it does, it does not one hundred percent of their costs. You can pay for better insurance plans, with the inevitable higher monthly premiums, which leads back to the original question of where does the money come from for these costs? A more sound approach to these unknown variable but inevitable costs is a health savings account. Health savings accounts are not for everyone, but for a sizable portion of the population they are a good fit.

NOT JUST ANOTHER CELEBRITY ESTATE

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

ROBIN WILLIAMS UNIQUE ESTATE PLANNING GENIUS

This blog discussed some of the aspects of Robin Williams estate in the past. Mr. Williams will be remembered for a long time due to his many accomplishments, with a long, funny, inciteful and compassionate comedic wit. While it seems fairly certain that Mr. Williams mental state was brought on by a biological or, more accurately, a neurological condition that spawned a profound depression. Mr. Williams will also be remembered for his estate which was perhaps the first of many to come from actors, singers or other celebrities who have value in their likenesses or other unique personal attributes.

While Mr. Williams created a multi-tiered estate plan, he was sure to include the right to profit, or, more accurately, to curtail a person, company or entity from profiting from his likeness and publicity for 25 years following his death. In other words, movie studios, music producers or producers of Mr. Williams stand up comedy routine cannot take Mr. Williams image, voice or any other asset tied to his likeness or even his publicity and profit from it. While some pundits commented on the novelty of it and the breadth of the prohibition on his likeness and the length of time, it is not surprising that someone created such a blanket prohibition. Look at what the producers of Forrest Gump did with John Lennon or President Lyndon B, Johnson. To someone unaware of the times, they would be unaware that the producers of the movie morphed and cut and pasted the images and footage into the movie and could believe that Mr. Lennon or President Johnson personally appeared in the movie.

DISINHERITED HEIRS NOT ALWAYS A SURPRISE

Published on: January 15, 2016 | by Ettinger Law Firm

It happens often enough that a parent for many reasons decides to disinherit one, several or all of his/her children. At the same time, this is often not a controversial decision and is just as common both understandable and predicable. Perhaps a person promised their estate to a specific child, stepchild or niece or nephew for taking care of them instead of being required to be sent to a long term continuing care facility. Perhaps the parent provided financial largesse to his/her via college education, graduate school and even helped them purchase a house but had one child who had special needs who always lived at home and insured that child’s future by funding a trust during his/her lifetime and then disinherited all of his/her other children by putting the whole of the estate into the trust.

Mickey Rooney was a very well known and well paid actor that had a long career, with many children and many marriages and disinherited his children. He instead left his estate to his stepson and explained that his kids were better off than he was. By the time Mr. Rooney passed, his estate dwindled to just about $18,000, so there was little incentive for any of his kids to contest the will, although the same did not hold true for Mr. Rooney’s then current spouse. Unfortunately for some families, this can be a shock and there are sufficient incentives for the family to contest the will.

INVALIDATING THE WILL

LET GO OF MY INHERITANCE – INTERFERENCE WITH AN EXPECTANCY

Published on: January 6, 2016 | by Ettinger Law Firm

WRONGFUL INTERFERENCE WITH WILL

It is known by many different names, depending on the state and the era. Most recently it made its appearance in news headlines with the name – intentional interference with expected inheritance, sometimes even shortened it IIEI. The United States Supreme Court referred to it as “a widely recognized” cause of action and as the “tort of interference with a gift or inheritance” in the Anna Nicole Smith case. Marshall v. Marshall, 547 U.S. 293, 296 (2006). The matter has surfaced in the news over at least the last century, most famously (perhaps infamously) in the Father Divine case in New York, in 1949. Latham v. Father Divine, 299 N.Y. 22 (1949).

The American Law Institute published the The Restatement of Torts (Second) of Torts in 1979. That was the first time that the tort, known by many names, was formally recognized as such. Prior to this, the principal and concept was recognized but only in the most egregious of circumstances. There are several seminal cases that speak to the larger concept, one of which was the New York case dealing with Father Divine case noted above.

INVALIDATING A WILL

Published on: December 21, 2015 | by Ettinger Law Firm

WHAT HAPPENS IF A WILL IS INVALIDATED?

Wills are perhaps the most basic and simple form of passing on property and the transmission of wealth from one generation to the next. It allows the testator to give away the property and money that they own and have on hand as they see fit. A person can write a person out of a will, with certain limitations, include another non-child in the distribution and treat them as if they were a child or even leave it all to a charity. While the vast majority of wills are honored and respected without question, there is always the possibility that a potential heir may contest a will. In the event a will is invalidated a Surrogate’s Court must still resolve the issue of how and to whom shall the property be distributed. One possible way of dealing with issue of distributing the property if a will is invalidated is to utilize the state’s default, intestate distribution scheme. Another means is to revive a previous, otherwise valid will. This latter method is called the doctrine of dependent relative revocation.

DOCTRINE OF RELATIVE REVOCATION

INHERITANCE RIGHTS OF POSTHUMOUSLY CONCEIVED CHILDREN

Published on: December 5, 2015 | by Ettinger Law Firm

GROWING LEGAL ISSUE

The federal Department of Health and Human Services estimates that there are currently approximately 600,000 frozen embryos in the United States and the number continues to grow each year. Of these, it is estimated that approximately 60,000 could be implanted for full term pregnancy. In still other cases, a father or mother may freeze and store some sperm or eggs for future family planning purposes. In either event, a mother must have artificial insemination or in vitro fertilization or the embryo implanted. It is possible, even likely, that some of these embryos may be implanted and born after the passing of the father or mother with the use of a surrogate mother. The legal rights of these posthumously conceived children are still being fleshed out in legislatures and courtrooms throughout the country. In 2012, the United State Supreme Court dealt with rights of a posthumously conceived child to the Social Security survivor’s benefits of the deceased parent in Astrue v. Capato.

FEDERAL AND NEW YORK LAW

Power of Attorney Capabilities

Published on: June 5, 2015 | by Ettinger Law Firm

If you are granted a durable power of attorney over another person, it means that you have the right to make financial and legal decisions on their behalf. However, the power of attorney does have its limits, and a recent case that went to the Supreme Court in South Dakota illustrates the importance of clarifying what the capabilities of the power of attorney entail.

Facts of the Case

In the case of Studt v. Black Hills Fed. Credit Union, Dorothy McLean invested a certificate of deposit (CD) with the credit union in 2008. Then in 2012, she moved in with her son, Ronald Studt, and also named him as her attorney-in-fact with a durable power of attorney form. In his role, Mr. Studt would be allowed to transfer and gift property to persons or organizations as long as Ms. McLean’s financial needs could still be met and that the transfers were for estate planning purposes.