Inheritance Trusts

The Four Basic Protections of Elder Law Estate Planning

Published on: August 28, 2020 | by Ettinger Law Firm

Elder Law Estate Planning is an area of law that helps us maintain control of our lives and assets in four basic areas.

First, Elder Law is planning for disability which includes naming people who will make decisions for us if we become incapacitated. You choose the people who will act on your behalf and thereby avoid the government taking over your life in a “guardianship proceeding.” Wills do not provide for disability because they are plans for death. Living trusts, on the other hand, name trustees who manage trust affairs during incapacity. Other necessary disability planning documents include a Power of Attorney that names people who make financial and legal decisions, a Health Care Proxy that names people who will make medical decisions and a Living Will that expresses end of life decisions such as resuscitation.

Second, another protection of Elder Law is asset protection planning from the costs of long-term care. Plan A to protect assets from long-term care and nursing home costs is to buy long-term care insurance. If you do not have long-term care insurance, Plan B is the Medicaid Asset Protection Trust (MAPT) that protects trust assets from nursing home costs paid for by Medicaid after the assets are in the trust for five years. The MAPT protects assets from home care costs paid for by Medicaid after the assets are in the trust for two and a half years.

TRUST MODIFICATION IN NEW YORK

Published on: March 9, 2016 | by Ettinger Law Firm

THE PROBLEM AND THE LAWS RESPONSE

Sometimes when a person creates a trust they do not know all of the material facts, indeed cannot know all of the material facts regarding what is in the beneficiary’s best interest. Perhaps the trust expressly states that the beneficiaries cannot receive payment from the trust until they reaches 25. What happens if one of the beneficiaries is diagnosed with a medical condition with treatment that is not covered by his/her health insurance? Surely it would seem appropriate to allow the trustee or the beneficiaries to modify the terms of the trust. Situations such as these have always been an issue since the creation of trusts and Courts have dealt with this issue, with reported opinions going back centuries. One famous case that allowed for the beneficiaries to reform or modify a trust, Saunders v. Vautier, came out of England in 1841.

The principles outlined in the case helped to dictate the common law throughout Anglo-American law, namely that as long as the beneficiaries are all of the age of majority and not under legal disability a Court should allow a party to modify the terms of a trust. But unfortunately life is so much more complicated than that. Look at the tragedy of Bobbi Kristina Houston. Following Whitney Houston’s passing, her daughter (Bobbi) stood to inherit her estate in stages with the first disbursement of approximately eight million dollars at the age of 21. Bobbi’s grandmother Cissy Houston and aunt Marion Houston both sought to reform the terms of the trust granting Bobby Houston such sums, arguing that she, the beneficiary, would be at heightened and unacceptable risk of undue influence of third parties. When there is an allegation of undue influence, it is often the case that the trustor or settlor is alleged to have been under undue influence, not the beneficiary that may fall prey to undue influence. The need to reform a trust may have more mundane reasons such as mistake. Take the not uncommon example of a trust created in a will, called a testamentary trust, of a husband and wife, who, other than their names and other identifying information, have identical wills. At the signing of the wills by the parties, they mistakenly sign each other’s will and not their own.

INTENTIONALLY DEFECTIVE GRANTOR TRUSTS ARE ANYTHING BUT BUSTED OBJECTIVES OF THE TRUST

Published on: January 18, 2016 | by Ettinger Law Firm

An intentionally defective grantor trust is an extremely effective tool that accomplishes multiple objectives. First, it helps to minimize gift or transfer tax liability that a person may have to pay if the asset passed through normal probate process or it were gifted to the intended recipient. Second, it helps to step up the cost basis, which can be extremely valuable if the asset grew in value and then stabilized. It is often an effective tool for a small business owner who seeks to pass his/her business on to children or grandchildren. It is even more fitting if the same small business grew in size but then stabilized in value.

But, the question has to be asked. What’s with the reference “defective” in its name? It certainly is not a name conducive to marketing its rather impressive abilities. The term does not refer to something being broken (or busted). The term defective has a simple explanation, it is defective as to income tax liability. To state it in the inverse may help to explain it better; the trust is effective for estate tax purposes. In other words, the trust does not eliminate all taxes in that the grantor still pays the income taxes generated by the asset that is the corpus of the trust, but it does eliminate estate tax liability. Furthermore, it is a “grantor trust”, as defined at 26 U.S.C. § 675, meaning that it satisfies the legal definition of a grantor trust.

WHAT ABOUT GIFT TAX LIABILITY?

The 3 Generation Rule – Legacies the Last

Published on: June 26, 2013 | by Ettinger Law Firm

You’ve built a nest egg after years of consistent work, prudent planning, strategic risk, a lot of focus, and a bit of luck. You want to retire peacefully and provide a legacy that will hopefully secure some degree of wealth for you family for generations to come.

But what are the odds of wealth making it decades (or even centuries) after you are gone? If history is any indication, most inheritances won’t make it long at all. Wealth surviving into the third generation only happens in one out of ten cases. As a recent Senior Independent story on the subject reminded, this principles takes the form of an often-used refrain: “Shirtsleeves to shirtsleeves in three generations.”

The story points out that over the course of their lifetimes about two-thirds of Baby Boomers in the United States will inherit about $7.6 trillion. Yet, those same individuals will lose about 70% of that wealth before passing any of it on to their own children or other relatives.

Family Feuding Over High-Profile East Coast Cavern Dynasty

Published on: March 25, 2013 | by Ettinger Law Firm

Infighting over control of family assets is far from uncommon no matter the value of the holdings. History is replete with examples of siblings, step-relatives, and other engaged in estate battles over property that has little to no value. Of course, that is not to say that the possibility a disagreement increases with the value of the property. Things can get especially sticky when things like family businesses, land holdings, and other tangible and valuable items are at issue. Many of these assets may have been within a family for decades (or generations) and fighting over control is quite predictable, especially when estate planning is inadequate.

For example, the Wealth Strategist Journal reported recently on the battled over control of supposedly the largest underground series of caves in the eastern United States–Luray Caverns. The caverns are incredibly popular, and it is reportedly the third most visited cave in the country. Considering its popularity, the location has grown into a significant business for the family which owns it. A Washington Post story notes how the cave has been open to the public for nearly 130 years. At $24 for a one-hour tour, the business of showing the cave is estimated to bring in about $30 million annually.

Unfortunately, control over the caverns is apparently is disarray as the family in charge seems perpetually mired in controversy. The Post story explains how two of the family siblings recently sued two others in an attempt to disqualify them for participating in a family trust. In total, control of the caverns rests with six children bore of a family patriarch who died in 2010 at the age of 87.

The Importance of Having a Will Even if You are Young, Especially with Children

Published on: November 5, 2012 | by Ettinger Law Firm

Do you really need to conduct estate planning if you are only in your 30s, don’t have many assets, and don’t have a lot of money to spend on legal and planning services? Absolutely.

The specific costs of these planning efforts can always be arranged to meet your resources. And it is critical not to forget that the planning includes components that apply to all parites, regardless of how old they might be or how wealthy. For one thing, an elder law estate plan in New York includes preparations related to long-term health and extreme medical care wishes. Serious accidents affect community members of all ages, and it is critical to have legal documentation in place to explain how you’d like things handled in the event you are seriously incapacitated or disabled.

The need for these documents is even more paramount if children are involved. It goes without saying that parents usually devote their lives to ensuring their children are cared for, protected, and secure in their future. Yet far too many young mothers and fathers forget to take a simple step to prolonged that security indefinitely–use legal documents to identify child care issues in the event of their passing. There is no way to completely prepare for the death of young parents on a child. Yet, dealing with the tragedy is always made a bit easier when the parent or parents had taken some time to identify clear successor guardian wishes in the event of their own death or disability. It is critical that all parents–no matter how old–have very clear plans in place for alternative caregiving.

Increase in Blended Families Cited For Causing “Uglier” Estate Fights

Published on: March 19, 2012 | by Ettinger Law Firm

The world is a different place today than it was in 1950. Several decades ago the vast majority of families were of similar make-up: father, mother, kids, dog, house, and car. Inheritance planning in those situations often followed very predictable patterns. A spouse received the assets after a death, and the children split the remaining assets when the second parent moved on. However, our New York estate planning lawyers know that there is much more complexity these days.

That is true for several reasons. On one hand, the law has changed, with different tax situations, legal tools, long-term care concerns and other realities forcing estate plans to take more into account. In addition, families are much more diverse these days than in the past.

Blended families are quite common, necessitating families take special care to account for their inheritance wishes. “Default” statutory inheritance rules may have been a bit less off-putting several decades ago. However, considering the unique make-up of most families these days, it is incumbent upon local residents not to risk their estate being split via default intestacy rules. As a new USA Today story explains, it is no longer a luxury to have the help of an estate planning lawyer–it is a necessity.

Common Estate Planning Mistakes

Published on: January 17, 2012 | by Ettinger Law Firm

Last week an article in the Mansfield Patch listed “Five Vital Estate Planning Mistakes” made by local community members. The list touched on a few issues that each New York estate planning lawyer in our firm has seen time and again. Like history, these errors tend to repeat themselves. Being aware of the common problems is the best way to ensure you don’t make them yourself.

Of course common mistake number one is putting off estate planning efforts entirely. Passing on is usually not a topic that most enjoy thinking about. Estate plans inherently involve some considerations and preparations in the event that one is no longer alive, and so many simply avoid the idea altogether. This delay ultimately serves no purpose. As the article author remarks tough-in-cheek, “If you don’t die before retirement, chances are pretty good you’ll die sometimes afterwards.” Considering that death is inevitable, there is simply no logical reason to do no planning and risk paying more in taxes, the uncertainty of the probate process, or the potential squabbling of family members.

Second on the list was failure to consider naming guardians for one’s children. While most local residents conducting New York estate planning have adult children, planning is important for younger community members as well, particularly those who have young children. When crafting an elder law estate plan for clients, we always take into account the family dynamics involved. When young children are present it is important to make plans for those children in the event something happens to you, the parent. This is another task that is often put off, because it is not pleasant to think about orphaned youngsters. However, at the end of the day failing to name a guardian only means that the buck will be passed to some other decision maker if anything happens–usually the court. No one is better positioned than a parent to name a potential replacement in case of tragedy, and so it is always prudent for parents to do so.