Asset Protection

WHEN YOUR ATTORNEY IS A POTENTIAL WITNESS IN SURROGATE COURT

Published on: November 16, 2015 | by Ettinger Law Firm

WITNESS ADVOCATE RULE

In New York, as well as perhaps every other jurisdiction, an attorney may not serve as an attorney as well as a witness in the same case. Rules of Professional Conduct, Rule 3.7 is mandatory and not permissive. It does not matter if it is a bench trial, jury trial, traffic court case or surrogate’s court case. In fact, the rule is so important to judicial administration that even partners and members of the same firm cannot act as a witnesses. Courts refer to the issue as the lawyer-witness rule and it comes up often enough in surrogate court cases. The June 2, 2015 case of Will of Lublin, 2015 NY Slip Op 31038(U) is a good example of how estate lawyers face these issues. While the lawyer in Lublin avoided the issue of Rule 3.7, a small change could have made it not so. Very briefly, the decedent, Mr. Irving Lublin, executed a will in 1997 and passed away in 2010. Someone objected, claiming that the decedent did not have sufficient mental capacity to create such a will, the will was not properly executed and that the will was the result of fraud and undue influence. The lawyer who drafted the will was deposed during the discovery phase. If, perhaps, the attorney who created the will also represented the executor, an entirely plausible and even relatively normal scenario, the attorney would be disqualified, as he/she would be a material witness.

UNIQUE POSITION IN THE CASE

FINE ART, ANTIQUES AND OTHER COLLECTIBLES IN ESTATE PLANNING

Published on: November 14, 2015 | by Ettinger Law Firm

SELL NOW OR PASS ON

The issue of how to deal with the collection of fine art that you amassed over the years should be dealt with now rather than allowing your heirs decide for you. Perhaps your heirs do not have any appreciation for your original Ansel Adams or Edward Curtis photo collections. If you view it as an investment, then timing your sale to maximize profit should be the most important criteria. Timing may not be right for several years or it may be right now. If you are looking to maximize profit which will only go to to your estate, you may consider waiting to pass it on. If, you happen to value your art collection because of its intrinsic artistic value, you have another set of criteria by which to make your decision. Perhaps you have a family member you know would appreciate it more than say your son or daughter. Perhaps you should sell it to insure that the artistic value continues to be appreciated. Country Living spotlighted an artistic marble collector who decided to sell his collection to insure that it would continue to be appreciated. In any event, Capital gains tax on collectibles, gift tax and estate tax, both state and federal, must all be considered.

ESTATE TAX

WHAT OF MY ESTATE PLANNING IF MOVE TO ANOTHER JURISDICTION?

Published on: November 3, 2015 | by Ettinger Law Firm

Say you live here in New York and made significant plans to avoid probate. You have a will, own a business that you pass on and even set aside significant assets for your grandchildren. You worked hard to put your financial house in order. Now you find out that you have to move to another jurisdiction for work and will likely be there for some time. More likely than not your will and other plans to avoid probate will survive as legally enforceable documents in the new jurisdiction. Nevertheless, you worked hard for your plans to be finalized and do not want to live with the idea that “more likely than not” your plans will be followed. As such, it is always best to check with a local estate planning and review your plans.

FACTORS TO CONSIDER

There are a few things to keep in mind when it comes to decisions on where to live and changes in law and nuances on how to handle the change. Most laws are relatively uniform throughout the country. Procedure may be different but substantive laws are similar in many cases. Except when they are not. Some issues have two different ways of handling things. A good example is common law states versus community property states. Community property states are generally Rocky Mountain states and west (Louisiana and Wisconsin are the exceptions). There are some important differences in their approach to passing on assets between the two camps. Another factor to address is that you need to clarify your residence or domicile or you may end up paying taxes in two different states, as what happened to the heir to the Campbell’s soup fortune in 1939.

CAN AN HEIR BORROW AGAINST INHERITANCE?

Published on: October 31, 2015 | by Ettinger Law Firm

Perhaps your prodigal child wants to start a law firm or a medical practice and needs start up funding. You have some money set aside for your children’s and grandchildren’s inheritance but agree to loan them the money out of this fund. It’s not uncommon for these monies to be secured by a promissory note, even though many parents would not strictly enforce its terms. If the promissory note is not paid off by the time the parents pass away, it becomes an asset of the estate that must be accounted for. If it is a significant amount of money, the IRS or state tax authority will impute interest. If the parent decides to forgive the loan, that is usually considered taxable income to the child.

LOAN DOCUMENTS AND ESTATE DOCUMENTS CONTROL

The parent controls these issues and to the extent that it can be controlled during his or her life, they should be. Loans should be in writing, with the repayment schedule outlined. Most loans obtained on the open market have extensive outlines of the remedies that the creditor reserves. These are not necessary unless the parent actually intends to exercise these remedies. If no remedies are outlined in the document, the parent always has the right to document his or her intentions on how the estate should treat these loans.

INTELLECTUAL PROPERTY IN ESTATE PLANNING

Published on: October 29, 2015 | by Ettinger Law Firm

Intellectual property is an umbrella term that includes several different specific areas of the law. Trademark law, patent law, copyright laws and trade secret laws are all examples of intellectual property laws. The constitution guarantees that the federal government has exclusive jurisdiction over patent and copyright laws. Patent and copyright laws are designed to “promote the progress of science and useful arts.”

COPYRIGHTS, OWNERSHIP, HEIRS AND ESTATE PLANNING

Copyrights created after 1978 are generally good for the life of the author plus 70 years. When written for a corporation, so called work for hire copyrights, the copyright is valid for 95 after first publication date to 120 years after the work is created. To pass a copyright on to heirs, you must be careful to do it the right way. If a painter passes a painting on to an heir the right to control the copyright of that painting does not necessarily follow. The painter will have only passed on the original painting. To pass a copyright, the trust, will or other document must specifically mention that the copyright to the painting passes to the heir. It is entirely possible for a painter to pass the original work to a friend or partner but pass the copyright on to another person.

Using Beneficiaries as Part of Your Estate Plan – Part II: Considerations

Published on: October 13, 2015 | by Ettinger Law Firm

An earlier post on this blog provided an overview of using beneficiary designations as part of your estate plan. Recall that beneficiary designations are a way to transfer property automatically upon the death of the asset owner outside of the probate process. This post is part II of that discussion, and include some of the pros and cons of using beneficiary designations, as well as a few special considerations related to certain forms of beneficiary designations.

Pros and Cons of Using Beneficiary Designations

Beneficiary designations can be a simple and effective mechanism to transfer your property in much the same a will or trust distributes your property. The advantages of beneficiary designations include the ease in which it can be set up and the speed and in which the beneficiary receives the asset. Also, the owner of the asset has flexibility to designate any of combination of shares to any number of primary and contingent beneficiaries. Beneficiaries may be individuals, trusts, charities, or the property owner’s own estate by way of its personal representative.

Using Beneficiaries as Part of Your Estate Plan – Part I: Overview

Published on: October 9, 2015 | by Ettinger Law Firm

One of the essential functions of an effective estate plan is efficiently distributing your assets upon death. Using a beneficiary designation on assets that transfer on death can be a tool to efficiently transfer certain assets with ease if properly completed. Assets that can be transferred to a designated beneficiary upon death include insurance policies, bank accounts, retirement accounts, or other investment vehicles that feature a transfer or payable on death designation.

Types of Beneficiary Designations

Beneficiary designations include primary, contingent, and sometimes default beneficiaries. Upon the death of the owner, the asset will be transferred or disbursed to the primary beneficiary. If the primary designation fails, then the contingent beneficiary will receive the transferred asset. The default beneficiary will receive the transferred asset in the event there are no other primary or contingent beneficiaries designated to receive the asset. In some cases the default beneficiary may be a trust established by the owner of the asset, or the owner’s estate.

Early Withdrawals from Qualified Retirement Plans

Published on: October 8, 2015 | by Ettinger Law Firm

Are you not quite at retirement age, but in need of early access to your qualified retirement plan account? If you are not close to retirement, are you thinking about taking a withdrawal or loan from your qualified retirement plan account to help out with the care of your aging parents or relatives? Whatever the reason may be, whether you will be able to withdraw or borrow funds from you qualified retirement account before the age of 59 ½ depends on the rules contained in your specific qualified retirement plan. Many qualified plans allow you to borrow up to one half of the fund balance as a loan, which you will typically have to pay back within 5 years at a modest interest rate to cover your loss of investment growth. An early withdraw will generally trigger tax penalties under the Internal Revenue Code (“IRC”) and leave you with a hefty tax bill, including a 10 percent penalty on the early withdrawal. You can avoid the 10 percent penalty in a variety of situations, including the following common circumstances.

Rollovers. Under section 72(t)(1) of the IRC, rollovers from a qualified plan or individual retirement account into another individual retirement account within 60 days from the date of the withdraw will not trigger the 10 percent penalty tax.

Beneficiary Distributions. If the owner of a qualified retirement plan or individual retirement account passes away, section 72(t)(2)(A)(ii) of the IRC provides that the penalty shall not apply if the distribution is to a beneficiary.

Back to the Basics – Demystifying Probate

Published on: September 27, 2015 | by Ettinger Law Firm

Are you being told to avoid probate at all costs? The probate process is characterized as a long and tedious process of endless red tape and expense. In many cases avoiding probate can be a worthwhile goal; however, a closer look at the probate process may reduce the angst that is often associated with a sometimes inevitable end to the best laid plans.

Some Basic Vocabulary

If you have been exposed to the probate process in some capacity in the past in connection with a deceased relative or friend you may have had heard some terms not often used in everyday life. Here are a few basic terms you should know:

Establishing a Charitable Trust as Part of Your Estate Plan

Published on: September 25, 2015 | by Ettinger Law Firm

Trusts can be used as a useful tool in your estate plan to accomplish a variety of goals. One example is establishing a split-interest charitable trust. These charitable trusts are an irrevocable trust established for a charitable purpose of your choosing, while at the same time featuring a benefit to a non-charitable trust beneficiary. In addition to tax benefits received under federal law, charitable trusts offer the person establishing the trust, also known as the “settlor,” a controlled process to effectuate their gift to a selected charity. Examples of charitable trusts include a charitable remainder annuity trust (CRAT), charitable remainder unitrust (CRUT), and a charitable lead trust (CLT).

CRATs, CRUTs, AND CLTs

Establishing a charitable remainder annuity trust includes the transfer of property to a trust that first distributes a fixed annuitized portion of the trust property to non-charitable trust beneficiaries, followed by a distribution of the remainder to the tax-exempt charity selected by the settlor. Similar to the charitable remainder annuity trust, a charitable remainder unitrust also includes the transfer of property to a trust that first distributes an annuitized portion of the trust property to non-charitable trust beneficiaries, followed by a distribution of the remainder to the tax-exempt trust beneficiary; however, the amount of the annuity fluctuates with the value of the trust assets. A charitable lead trust differs from the charitable remainder annuity trust and charitable remainder unitrust in that the settlor will designate that the charitable beneficiary will first received a distribution of trust assets at least annually for a set period of time, after which the non-charitable trust beneficiary will receive the remainder of trust property. Each of these three split-interest charitable trusts offer dual benefit to a designated charitable purpose and the settlor’s non-charitable trust beneficiary.