New York Estate Planning & Elder Law Blog

Estate Planning for Entrepreneurs and Founders

Published on: November 25, 2018 | by Ettinger Law Firm

Entrepreneurs and founders are often faced with the challenge of transferring their enterprise interests to an estate. A licensed estate planner is an attorney, who will assist a client make the important decisions about protecting those assets, including intellectual property assets such as trademarks from loss after death. Estate planners recommend a three (3) part planning process: Part 1: Estate Planning; Part 2: Business Continuity and Financial Planning; and Part 3: Advanced Wealth and Estate Transfer. In this article, we focus on Part 1: Estate Planning to examine the benefits of integrating estate formation as part of business strategy.

Estate Planning is Never Too Soon

When an entrepreneur or founder builds a business, they are working towards a venture that will hopefully pay off in the future. Once realized, the value of a business can be transferred to a personal estate. Entrepreneurs and founders have unique financial planning needs in that they must be proactive about estate planning early in the company formation process. Most owners are prompted by the benefits of federal Internal Revenue Service (“IRS”) tax-exemption for gifts and estates which allow an executive officer to maximize their liquidity options while still living. Even basic estate planning will educate an entrepreneur or business owner about the financial planning, asset protection, and tax-exemption available to them before retirement in their later years.

More Insurers Offering Medicare Advantage Plans to Help Seniors get Healthcare

Published on: November 24, 2018 | by Ettinger Law Firm

When open enrollment begins for Medicare, many seniors across the country will notice an expanded range of health care plan options, including those offered by private insurance companies through Medicare Advantage. With more Americans than ever considering and signing up for these Medicare alternatives, more insurance companies than usual are selling more Medicare Advantage plans for 2019, some offering lower or no premiums and improved benefits.

According to the Centers for Medicare and Medicaid Studies (CMS), an additional 14 new insurance companies will sell 3,700 plans for 2019, an estimated 600 more than offered to beneficiaries in 2018. CMS estimates that total enrollment for Medicare Advantage plans will grow to 23 million people in 2019, a 12 percent increase over the previous year and may grow to serve one-third of all Medicare enrollees in the next decade.

Medicare Advantage plans have been attractive to seniors due to the extra benefits these types of coverage options offer. Many of these private insurance plans can save seniors money because premiums, deductibles, and additional costs are lower than what beneficiaries pay with original Medicare offered by the federal government. One of the main downsides to Medicare Advantage Plans is that they require enrollees to seek care within a restricted network of health care providers.

New York Estate Tax Law Refunds and Future Tax Savings Offered by QTIP Trusts

Published on: November 22, 2018 | by Ettinger Law Firm

In the New York Surrogate’s court ruling of the Evelyn Seiden (Hogan) estate, the 2014 taxation of marital trust rule was overturned to allow for refund on $530,000 in assets, Matter of Seiden (Hogan), 2018 NY Slip Op 32541 (U),. The estate argued that federal Internal Revenue Service (“IRS”) rule IRC § 2044 was inapplicable on grounds that the order of taxation on $530,000 held in her husband’s estate at tie of death in 2010, was invalid after transfer to his spouse. Since the Surrogate’s court decision in 2014, state law has considered the issue of family heirs’ rights to tax refunds and future savings on large estates.

QTIP Trust Tax Deferral

The Seiden estate case illustrates the flexibility of “Qualified Terminable Interest Property.” trusts for remaining spouses. New York estate law allows for spouses to take advantage of marital deduction in tax reporting. Under the current tax law, spouses control the distribution of estate assets at the death of a surviving spouse until their own death or incapacity. QTIP trusts allow for tax deferral, but not tax avoidance according to IRS and state rules.

QTIP Trust Protects the Interests of Inheriting Children from Preceding Marriages

Published on: November 19, 2018 | by Ettinger Law Firm

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.

Trusts and Estates Planning for Same-Sex Couples

Published on: November 15, 2018 | by Ettinger Law Firm

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

What is the Best Trust for Special Needs Planning?

Published on: November 13, 2018 | by Ettinger Law Firm

Caring for a child with a disability creates challenges beyond our lifetime and often takes resources beyond what federal safety net programs can offer in order for our loved one to live the most comfortable and dignified life possible. While rules governing these federal programs place certain income restrictions on disabled persons to qualify, there are sanctioned trusts allowed specifically for special needs planning that allow for first party and third party benefits to supplement federal assistance.

In 2010, Congress passed the Achieving a Better Life Experience (ABLE) Act allowing beneficiaries to have up to $100,000 in a 529 special needs trust and retain Social Security Insurance benefits. Beneficiaries can also retain Medicaid coverage so long as the trust does not exceed the amount for a 529 college savings plan. The ABLE Act allows these trusts to be created so long as the beneficiary’s disability is established prior to the age of 26-years old.

Disabled persons can also create and fund their own first party special needs trusts through a (d)(4)(C). Funds for first party special needs trusts often come from sources such as a personal injury settlement, workers’ compensation award, or an inheritance left directly to the beneficiary. An amount equal to the annual federal gift tax exclusion (currently $15,000) can be deposited annually in the account while still maintaining the beneficiary’s eligibility for Medicaid and Supplemental Security Income

The Reinvestment Benefits of Viatical Settlement

Published on: November 11, 2018 | by Ettinger Law Firm

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.

Why a Life-care Policy is a Value-added Investment

Published on: November 9, 2018 | by Ettinger Law Firm

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.

Jackpot!: Irrevocable Life Insurance Trust Planning

Published on: November 6, 2018 | by Ettinger Law Firm

Estate planners working with clients who have hit the jackpot in Atlantic City or Las Vegas, or have won the lottery, can assist in the formation of an irrevocable life insurance trust (ILIT) to enhance liquidity and pay assigned federal and state estate taxes before the event of their death. The federal Internal Revenue Service (“IRS”) restricts the transfer of lottery future payments, and some state laws also prohibit assignment of cash transfers of winnings without proper estate or gift planning in place. Creation of an ILIT allows for a decedent to protect family members from unexpected gift and estate taxation of winnings, and plan for distribution of any future payment streams resulting from one of these special assets.

Tax implications of a “win”

Federal estate tax rules for gaming and lottery assets are relatively straightforward. The IRS applies a 25% tax rate to all gaming, gambling, lottery or sweepstakes winnings above $5,000. Winnings less than that amount are exempt from federal taxation. An estate that holds a lottery or other gaming win as an asset is valued on basis of fair market value, but also the winner’s original interest in the asset at time of death.

Calculating your Break Even Point with Social Security Benefits

Published on: November 5, 2018 | by Ettinger Law Firm

Figuring out the best time to claim Social Security benefits is an important part of retirement planning that can have long lasting impacts on the type of lifestyle individuals and their spouses can expect to enjoy in their Gold Years. Depending on when individuals decide to take their Social Security benefits, from the ages of 62 to 67, it can mean the difference of hundreds of dollars per month to thousands of dollars of the course of a lifetime.

While the conventional wisdom is to wait as long as possible to claim benefits, and hopefully reach maximum payouts, for many beneficiaries there comes a time known as the “break even point” when the amount of benefits claimed would be essentially the same regardless of the amount received per month. This happens because the program is designed to give individuals more or less the same payout over their projected lifetimes, known as “actuarial neutrality.”

Determining one’s break even point is a fairly straightforward process but should take into account certain other factors that may artificially inflate any projected payout, namely excluding cost of living adjustments. Including projected cost of living adjustments will only create artificially high numbers that may not end up being actual benefits received.