nyc estate planning

Springing and Durable Powers of Attorney

Published on: August 17, 2016 | by Ettinger Law Firm

The Durable Power of Attorney is a powerful estate planning tool that everyone should have. Properly drafted, a Durable Power of Attorney allows for the right person to be able to manage your affairs when you are physically or mentally unable to do so. However, a Durable Power of Attorney goes into effect once executed and generally grants someone else great power to make decisions for you and to enter into agreements on your behalf. Many people may be uncomfortable granting these powers to someone else while they are still capable of managing their own affairs. Is it possible to delay the effects of a Durable Power of Attorney?

What Is A Power of Attorney?

A Power of Attorney is a legal document that is used to delegate legal authority to another. The person who signs a Power of Attorney is called the Principal. The Power of Attorney gives legal authority to another person called the Agent or Attorney-in-Fact to make financial and legal decisions for the Principal. The authority that the Principal grants the Agent can be as broad or narrow as the Principal wishes. It is entirely dependent on what powers the documents grants the agent.

Highs or Lows: Which is Best When Valuing Art and Collectibles?

Published on: August 8, 2016 | by Ettinger Law Firm

Art pieces and collectibles can often be difficult to price. After all, the best and easiest way to price an item is to see what other items like it have sold for. But in these cases, art and collections can be one of a kind and have no comparison. When this happens it can be a headache for a person planning their estate to account for the value of aesthetic beauty and rarity of their art. In this uncertainty though, there is room to maneuver to your advantage when it comes to planning out your estate.

Valuing Your Art

In the United States, if you are attempting to transfer a work of art valued over $50,000, the IRS goes through a process by which it independently evaluates the items. It is the IRS Art Advisory Panel who will have the final say when it comes to evaluating the value of your art, but this does not mean that they will not accept outside opinions. Traditionally art is valued by experts who work in the field, often those with very special niches, sometimes even down the individual artist. When an independent expert values your art, you can submit that assessment to the IRS for consideration.

HOW TO HELP YOUR EXECUTOR

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

CHOOSING THE RIGHT PERSON AND STEPS TO TAKE

As noted in a previous blog, being an executor of an estate can be a thankless job. There are ways, however, that can allow you to make the job and life of an executor easier and less painful. It is a job that carries with it much responsibility, so taking a few proactive steps may help to save the executor a lot of heartache. One of the first steps you need to do, even before helping a named individual is to name the individual. In other words, pick the right person; in fact it is even better to pick a few individuals as successors in the event that the executor passes away before you or is otherwise unable to serve as the executor of your estate. Even better is to pick two people who will serve as co-executors; if you do this, you must make someone the primary person who shall serve and who has the final authority to make whatever decision needs to be made in the event that there is a disagreement.

It is important to keep in mind that the person you chose is going to in charge of your assets that you amassed throughout your life. All other things being equal, it is best to have someone who lives local and in the same state as you. Few things in life provide such a stark choice. It may be more important to you and the heirs, however, that you pick someone who is familiar with you, your wishes and your assets, even if they live further away or in a different jurisdiction. If you choose a professional, such as an attorney, it is important to keep in mind that there will be costs associated with this. If you permit and allocate a specific payment structure into the will or testamentary trust, it may not matter, since even a family friend or relative may also be entitled to a fee. Finally, it is best to speak with that person in advance to ensure that they understand that they are being named as the executor of your estate and that they will do so.

ANOTHER CELEBRITY PASSES WITHOUT A WILL

Published on: May 11, 2016 | by Ettinger Law Firm

PRINCE APPARENTLY DID NOT HAVE A WILL

The world learned recently that Prince joined the long list of celebrities who passed away intestate or without a will. Some of the names on the list are surprising, others not so. The Honorable Salvatore Phillip “Sonny” Bono, Michael Jackson, Howard Hughes, Abraham Lincoln, Pablo Picasso, Martin Luther King are all grouped together with such musical greats as Jimmy Hendrix, Curt Kobain and Amy Winehouse. Pablo Picasso’s estate was valued at approximately $30 million upon his passing in 1973 and is now valued at several billion dollars and took several years to sort out.

If a will does not surface, which seems likely, the local probate Court will follow Minnesota’s intestacy laws to divvy up at his estate which is initially estimated at at least $100 million and very well likely be worth several hundreds of millions of dollars. While Prince was no doubt a creative genius on par with others who were considered truly great, his creativity did not go into the realm of financial planning, as a will is the most basic of all legal documents. No doubt he could have afforded the most well paid team of lawyers to easily and without much interference value his estate and develop a legal strategy to help prevent public drama which could cost millions in legal fees as well as untold emotional costs to his family members and very well may cause an irreparable rift in family relations. Prince and the other above celebrities, however, are in the majority, as the American Bar Association estimates that approximately 55% of Americans pass away without a will. Forbes estimates that the number may be as high as approximately two out of three Americans.

ESTATE PLANNING FOR NEW YORK’S ESTATE TAX

Published on: April 13, 2016 | by Ettinger Law Firm

GOOD NEWS AND BAD NEWS

Most people are aware that April 15 is tax day. That simply means that you have to have your taxes filed and paid by that date and that the year that those taxes are due for are from January 1st to December 31st of the previous year. New York, however, takes a slightly different approach to estate tax liability. Estate tax liability rates are set from April 1st to March 31st. So, if you are administering an estate, wherein the deceased passed away on March 30, the estate tax liability will be different and lower than if they passed away on April 2 of the same year. As this blog discussed in the past, New York state amended its estate tax in 2014 so that it will be on par with the federal estate tax rate in 2019. Prior to 2014, New York had an estate tax exclusion of one million dollars. As of April 1, 2016 the estate tax exclusion is $4,187,500. As such the good news is that with the passage of the changes to the estate tax laws, more estates will not have to pay any estate tax at all. The bad news is that the majority of the estates that exceed that value will likely have to pay a higher tax rate than before and maybe even more than the federal tax rate.

Starting in 2019, New York’s estate tax rate exclusion will mirror the federal amounts. Since both are pegged to inflation, they will grow year to year. That is where the differences will end. Under the federal estate tax, only the amount above the federal tax exclusion is taxed. So, just to make the example easy, if the federal tax exclusion is $5,000,000 (it is not), an estate worth $6,000,000 would only be taxed by the federal government on $1,000,000. New York’s estate tax requires that if the estate is greater than 105% of the exclusion, the entire estate is taxed. So, with the same example immediately above, the entire estate (6,000,000) would be taxed. If the estate was say $5,249,999 (one dollar less than 105%) instead of 6,000,000, the entire amount would not be taxed, since the estate has to exceed 105%. If the estate was $5,250,001 (one dollar more than 105%), the entire estate would be taxed.

ESTATE PLANNING FOR THE ARTIST

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

INTELLECTUAL PROPERTY IN ESTATE PLANNING

This blog explored the generic topic of intellectual property in estate planning in the recent past, which is worth reading for a discussion on the larger topic. Estate planning for the artist or even the art collector is certainly related but worthy of its own discussion. With respect to intellectual property, copyrights are provided to protect in an original work of authorship fixed in any tangible medium of expression, which can be replicated, perceived or communicated. To put that in plain english, the law protects those an artist who creates new forms of expression in established media, whether it be paintings, sculpture (including welded sculptures), photography, writing literature, screenplays or plays, music and even choreography. Artists such as Christo certainly make classification of art more difficult, but that is probably the point of the art. What happens, however, when an artist or art collector passes away and they have a substantial amount of artwork. Transferring a recording of a song is not the same as transferring the copyright to that song. Transfer of intellectual property must be in writing.

CREATING AN INVENTORY, DECIDING WHO GETS WHAT OBJECTS AND WHO GETS WHAT INTELLECTUAL PROPERTY RIGHTS

THE GRAT – GRANTOR RETAINED ANNUITY TRUST – NOT JUST A TOOL FOR THE UBER WEALTHY

Published on: February 26, 2016 | by Ettinger Law Firm

Grantor retained annuity trust (GRATs) are tremendous tools not just for the ultra wealthy, such as Mark Zuckerberg and the other founders of facebook, it is an estate planning technique that allows for a trust grantor to avoid paying gift taxes on the assets that they place into the trust with the intention that they will pass that asset on to the next generation. They are ideal for any asset that will likely quickly appreciate in value and that will also pay a dividend. Most people automatically think of stocks, which makes sense, but it could also include real estate, patents, trademarks or other intellectual property or even a valuable piece of art or perhaps even valuable machinery or some other object that can be rented.

HOW IT WORKS

To create a GRAT, a person places their property into the trust and pays tax on the property at that time, with the lower value. The trust is structured such that during the life of the trust the grantor received an annuity payment from the corpus of the trust. If the grantor is alive at the end of the trust term, the beneficiary receives the property tax free. The grantor sets the term for a number of years for the GRAT to exist in advance. Basis is a tricky and can be a very beneficial advantage to use of the GRAT because the GRAT allows the grantor to substitute two different assets of the same value but different basis amounts at any time. Since the grantor paid from an annuity during the life of the trust, the grantor still enjoys largely the same benefits.

INHERITING A ROTH IRA ACCOUNT

Published on: February 17, 2016 | by Ettinger Law Firm

ROTH IRA ACCOUNTS ARE FUNDAMENTALLY DIFFERENT

This blog explored the topic of inheriting an individual retirement account (IRA) in a previous blog. It is necessary to explore the topic of inheriting a Roth IRA, as a Roth IRA is fundamentally different from a traditional IRA. Some of the differences between a Roth IRA and a traditional IRA:

Taxing event – The money going into a Roth IRA is taxed prior to going into the account, while a traditional IRA is generally deposited as pre-taxed income and only taxed after withdrawal from the IRA.

HOW TO WRAP UP THE AFFAIRS OF A SPECIAL NEEDS TRUST?

Published on: February 13, 2016 | by Ettinger Law Firm

TRUST SETTLOR GIVES UP CONTROL

When a settlor creates a trust, he/she passes title of the property or asset to the trust or gives cash money to the trust, wherein the trustee invests the money as a fiduciary or manages the asset or asset in issue for the best interest of the trust beneficiary. It is true that in some circumstances the settlor, or the person who created the trust and most likely provided the seed capital, asset(s) or property for the trust, is or can be the trustee. The settlor is also known as the grantor, trustor or even donor; the terms can be used interchangeably. Often enough also, the settlor may not give up complete control of the money, asset(s) or property that he/she otherwise gives to the trust, for the trustee to manage, by, for example, providing for a life estate of the property in the settlor or his/her spouse.

There are a great many types of trusts that are permitted with a great variety of factual scenarios imaginable. For some special needs trusts, however, the trustee must receive assets, properties or monies from a third source, for the sole use by the beneficiary. Many rules apply for the funding and ongoing management of a special needs trust in order for the trust to maintain its privileged position, being excluded from the assets of the beneficiary for government benefits qualification. This blog has already discussed the various elements of special needs blogs, here, here and here. It is important to note that there are important restrictions on trusts, such as what the distribution of the funds can be used on as well the method and manner of initial funding and ongoing funding of the trust. The question should also be asked, how does a trustee wrap up the affairs of a special needs trust? What if the beneficiary uses up all of the funds? Is legally unable to recieve the funds? For any number of reasons. What if the beneficiary passes away and there are still funds in the trust? What then?

UNDERSTANDING CELEBRITY BONDS

Published on: February 11, 2016 | by Ettinger Law Firm

DAVID BOWIE BONDS

As the world learned, David Bowie passed away on January 10, 2016. Mr. Bowie was always on the leading edge of creativity, an advocate for meaningful social change and a musical genius to boot. He started his musical career at the same time as the Beatles, Rolling Stones and the Who and remained just as socially relevant, if not more so, compared to his contemporaries. As well as being a singer and songwriter, Mr. Bowie was also an accomplished actor and painter. More pertinent to the topic of estate planning, Mr. Bowie was a trailblazer in financial or investment products. In 1997, Mr. Bowie issued Bowie bonds, the first of any celebrity bonds. Since their initial offering, many credit agencies downgraded Bowie bonds status to just one level above junk bond status. True to form, Mr. Bowie was a first, with many other talented artists following suit.

BACKGROUND TO MR. BOWIE’S FORTUNE