Living Trusts

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.

The DuPont Case, Mental Illness, and Wills

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

Residents are often warned to complete their estate planning–wills and trusts–before it is “too late.” Most assume that the planning is only “too late” if they die before getting it done. But that is a mistake. In many cases “too late” actually refers to losing the competency to create the legal documents. As a practical matter, it may even mean before one even has the appearance of mental health issues, because even a hint of problems may open the door to legal challenge from others.

Estate planning is about ensuring one’s wishes are carried out and maximizing the preservation of assets without controversy. Limiting that controversy includes completing the planning early and efficiently, minimizing the risk of problems down the road. Thought of in that way, “too late” is far earlier than simply “before you die.”

John duPont Estate

Is the IRS Going to Crack Down on Non-Cash Charitable Deductions?

Published on: January 28, 2013 | by Ettinger Law Firm

Our estate planning attorneys often help New Yorkers create trusts that are used to pass on assets to charities. When structured properly, gifts to favorited causes is both a great way to give back and a smart financial move to save on taxes and ensure that your long-term inheritance wishes are met.

A Charitable Remainder Trust, for example, is sometimes a prudent estate planning tool. This is particularly useful for those with assets that have significantly appreciated who wish to save on taxes while generating an income stream on something that will eventually go to charity. Essentially, this works by creating a trust that is managed by the charity to which the asset will go. The trustee (the charity) then pays you a portion of the income generated by the trust for so many years or the rest of your life. Upon your passing the charity retains the principal.

These trusts have many benefits. They can take assets out of one’s estate for estate tax purposes. Also, income tax deductions can be taken on the fair market value of the interest that remains in the trust. By using appreciated assets, the capital gains tax can also be avoided.

Estate Planning, Values, & Spirituality

Published on: November 21, 2012 | by Ettinger Law Firm

A perennial hot-button topic in estate planning and the creation of inheritance documents involves the passing on of personal values. Of course, the majority of work related to estate plans invovles physical assets: who gets the house, the bank accounts, the stocks, the insurance, the family china, and more. Making these allocations efficiently and saving on taxes are the hallmarks of these preparations. But our team often discusses the other aspects of estate planning, including setting in place material that ensures one leaves a legacy for those they are leaving behind.

This often includes spiritual issues but can just as well include secular notions like hard work, the importance of charity, and other values.

But how are these issues woven into an estate plan?

Mike Wallace’s Passing Reminder of Planning Needs for Dementia

Published on: April 13, 2012 | by Ettinger Law Firm

Dementia refers to the loss of cognitive ability to a degree beyond what is expected from normal aging. It is not a specific disease but simply a phrase to collectively refer to a set of symptoms. In later stages of the condition, the affected may have severe impairments, becoming disoriented in time and place. They may also be unable to understand who they are or who is around them. Alzheimer’s disease is perhaps the most common form of dementia, but there are many others including semantic dementia vascular dementia, and dementia with Lewy bodies.

Dementia is far more common among the geriatric population. For example, according to the Alzheimer’s Association, one out of every eight Baby Boomers will get Alzheimer’s disease after they turn 65. However, “early onset dementia” can also occur, affecting those under 65 years old. The risks posed by dementia and the uncertainty with which it strikes makes it common sense for elder law estate planning efforts to be put into place ahead of time to guard against the risks. As a Forbes article notes, the recent passing of veteran newsman Mike Wallace is a reminder of this.

Wallace’s son, news anchor Chris Wallace admitted that his father suffered from dementia in his later years. “Physically, he’s okay. Mentally, he’s not. He still recognizes me and knows who I am, but he’s uneven,” the son explained. Our New York elder law estate planning lawyers know that many local residents have families in the same situation. Fortunately for the Wallace family, planning had been conducted to account for this possibility.

Careful Consideration Required Before Selecting a Successor Trustee in Estate Plan

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

Local residents usually take the time to craft a New York estate plan because they wish to prepare for disability, save estate taxes, and avoid the probate process. In most cases these goals are best met through the use of a living trust. The trend over the past several decades is for middle class families to craft trusts instead of wills for their inheritance planning. As our New York elder law estate planning attorney Bonnie Kraham explained in an article published this week in the Times Herald-Record, unlike wills, trusts are private documents that do not need to be filed with the Surrogate’s Court. No costly, stressful, time-consuming probate process needs to be undertaken upon one’s death when a trust is used.

Instead of court involvement, a trust is usually administered by a successor trustee. Upon the death of the original trustee (the individual who created the trust), the successor trustee must inform the beneficiaries of the situation, gather and invest the grantor’s assets, notify creditors, pay taxes, and distribute assets per the trust provisions.

Attorney Kraham notes that the trustee who administers the trust has a variety of other obligations. They must remain loyal to all beneficiaries, including the contingent beneficiaries–acting impartially between them at all times. Also, the trustee must ensure that trust property produces income. Therefore it is incumbent upon the trustee not to keep large amounts in non-interest bearing accounts or allow a home to sit vacant. At the same time, all investments must be prudent, and a sound overall investment strategy must be employed. This typically requires diversification which balances both income production and investment safety. Other trustee duties include the filing of tax returns, distribution of trust income, handling of expenses, and the maintenance of proper records.

Many Middle Class Families in New York Use Trusts in Estate Plan

Published on: September 6, 2011 | by Ettinger Law Firm

One of our New York estate planning attorneys, Bonnie Kraham, Esq., recently authored an article that shares information on the increasing use of trusts in the estate plan of many local middle class families. The story was published in this weekend’s Times Herald-Record, and explains the various types of trusts that residents can use and the way that each holds and transfers property. Unfortunately, there remains a misconception among some local community members that creating a New York trust is a project only for the wealthy. That is not the case. As attorney Kraham notes, there has been a “living trust revolution” over the past few decades where many middle class families have discovered the ways in which these legal entities can be used to avoid probate, save taxes, and protect assets.

All trusts begin with a written agreement, and each includes at least three necessary parties. These include a “grantor” who creates the trust, “trustee” who manages the assets, and “beneficiaries” who use the trust assets. For example, the three roles may be filled when a senior couple creates a trust (grantors) to be managed by their lawyer (trustee) to provide for the couple’s children (beneficiaries). The three roles need not be filled by different individuals, however. Often a grantor will also act as beneficiary, so that they can still use those assets while they are alive. Following the written agreement which establishes the trust, assets are transferred into the entity by way of “retitling.” This involves changing the name on accounts, mutual funds, and stock certificates to the name of the trust, and transferring title to property to the trust.

The two main types of trusts are testamentary and living. Testamentary trusts are created only after an individual’s death pursuant to their will, while living trusts are created while a grantor is still alive. Living trusts are an increasingly common way for many families to transfer assets at death. Among other benefits, a living trust can help families avoid probate, saving time and expense in closing the estate.

Season Tickets, Frequent Flier Miles, and Other Unique Assets in Estate Plan

Published on: August 8, 2011 | by Ettinger Law Firm

Local residents visit our New York estate planning attorneys for professional assistance to protect and pass on their assets. Many also expect guidance identifying the items that should be considered an asset and included in the planning. Most area families need to consider things beyond homes, cars, investment portfolios, and similar items when creating their New York estate plan.

For example, what happens to frequent flier miles and rewards upon an individual’s death? Many residents spend years and thousands of dollars in airfare racking up mileages and benefits in airline sponsored loyalty programs. A recent article in Payments News explained how many fliers spend time accumulating these “miles” and rewards only to leave them unused at their death. Some reports indicate that as many as 3.5 trillion miles currently remain unused in these programs. Interestingly, each airline has a different policy in place regarding transferability of loyalty benefits at death. American Airlines specifically allows accumulated mileage credit to be transferred to a person named in a court-approved will or estate plan. Other carriers, such as United Airlines, require that a beneficiary be named with the program, a fee be paid, and require an executor to contact the airline before miles can be transferred.

Another asset which one may wish to leave behind is the option to purchase valuable season tickets. Area residents often spend years waiting for the opportunity to become a season-ticket holder for their favorite teams. A post this weekend at The Faculty Lounge recently discussed this topic. Most teams have policies in place that allow an individual’s decedents to gain the right to purchase. However, it is important to closely examine the team policy related to ticket transferability to understand what issues might arise. For example, there may be conflict over who gains the right if several children share in ones’ assets. Many team policies indicate that there will be no transferability if several individuals share in the right and do not agree on a single transferee. Some teams also expressly prohibit a non-relative from receiving the right to purchase the tickets.