Estate Planning

Taxes & Withdrawal From Retirement Accounts

Published on: August 7, 2013 | by Ettinger Law Firm

Planning for retirement is rarely a simple task. For one thing, a resident must carefully ask the basic question: How much do I need? Sophisticated models and projections exists to help make educated guesses about this answer. But it is never an exact science. That is because it is impossible to say with certainty how long the retirement will last or what the future financial world will look like.

On top of that, however, there is also significant complexity regarding the accounts, trusts, and other tools used to provide the assets and income needed in retirement. It is critical to understand tax issues with retirement accounts and investments to appreciate exactly how much money will be available for you to live in your golden years.

Take, for example, the issue of taxes and individual retirement accounts (or any other tax-deferred plan). Do you know how much of the account will be taxed on withdrawal?

GRATs – A Good Idea in this Low Interest Rate Environment?

Published on: August 6, 2013 | by Ettinger Law Firm

A post over at Think Advisor last week provides some helpful insight into one financial and estate planning tool which might be appropriate for some New York residents. The tool is know as a GRAT – Grantor Retained Annuity Trust. As with many other trusts, one key purpose of the GRAT is to minimize tax liability, particularly for those with significant assets.

How It Works

The basic concept behind the GRAT is straightforward. Assets are placed in trust. The grantor (person creating the trust) then retains the right to receive fixed payments from the trust. Those payment can last either for a set period of time designated in advance or over the grantor’s life. At the end of the trust’s life the assets placed in the trust then fall to the beneficiaries.

Think Twice Before Disinheriting A Child

Published on: August 2, 2013 | by Ettinger Law Firm

Families are complicated. No matter how well intentioned, virtually all family histories include some situations, dynamics, and incidents that cause immense disagreement, tension, stress, and frayed relationship. Virtually all families have some level of “dysfunction,” and no family is perfect.

Estate planning attorneys are acutely aware of this reality, as we worked with every manner of family on issues which must take into account their unique situations. Simply “splitting everything between the children” is not an ideal option for many. In certain cases parents have serious concerns about their child’s ability to manage an inheritance or the fairness of dividing things equally.

In the most extreme cases, some parents consider disinheriting a child altogether. This may be based on many different reasons: the child is estranged, they have significant means and do not need an inheritance, or perhaps they have drug and alcohol problems.

Understanding “Portability” in Estate Planning

Published on: August 1, 2013 | by Ettinger Law Firm

The last major piece of federal tax legislation was the American Tax Relief Act (ATRA). It was signed by President Obama on January 1st of this year and was passed in order to avert to so-called fiscal cliff (we went over that cliff a few months later anyway). The tax rules made permanent in ATRA have significant effects on estate planning. One such issue relates to the concept of “portability.” A recent Forbes article provides a helpful primer of some of basic portability concepts.

The first question: what is portability?

Essentially, the principle of portability applies to the estate tax exclusion amounts between couples. Right now an individual has $5.25 million that is excluded from estate taxes. That means, as a couple, two individual have $10,5 million in exclusion available. But what often happens is that one spouse dies first and transfers most (perhaps all) of their assets to the surviving spouse. Transfers to a spouse are entirely exempt, and so there is no estate tax burden.

“Funeral Shopping” – The Basics

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

Last week Forbes dove into a topic that families give little attention until the task is thrust upon them: picking burial and funeral vendors. For obvious reasons, most of us have little direct experience evaluating different options for quality or negotiating to receive the best value.

For starters, as the story points out, it is important to have a specific idea of what you want at the services before calling any funeral parlor director. That is because, without an idea ahead of time, you may be persuaded to purchase many different things that you do not truly need or want. Having detailed plans in place as part of a comprehensive estate plan ahead of time can help narrow the focus.

There is a lot of pressure in any sales situation, and it can be made worse when it comes to funeral services. When a certain item is offered by the funeral parlor, a family may feel as if not agreeing to the most expensive options reflects on the value of the one who passed away. Of course this is not true, but the pressure is there. Having one’s wishes laid one with clarity ahead of time takes away much of that burden from the surviving family.

Are “Stretch IRAs” Going to be Phased Out?

Published on: July 17, 2013 | by Ettinger Law Firm

Structuring an estate plan to account for taxes can be a complex task. While state and federal estate taxes make up the majority of discussion about taxation, there are other issues to consider. For example, there are ways to structure disbursement of various assets–insurance policies, retirement accounts, and more–so that Uncle Sam takes as small a bite as possible.

Adding to the complexity is the fact that laws frequently change which either open up more opportunities or take away previously available tax-saving options. For example, last week Forbes discussed a U.S. Senate vote that may eliminate a commonly-used tax strategy.

Stretch IRAs

Update: Gandolfini’s Estate Faces Huge Estate Tax Liability

Published on: July 15, 2013 | by Ettinger Law Firm

Last week we discussed the recently unearthed will of former Sopranos star James Gandolfini. The document was filed with a Manhattan court late last month, with the actor’s assets being left to a wide range of people including his two children, wife, sisters, and several friends. Those earlier reports noted that Gandolfini’s assets including life insurance, real estate in Italy, and more. All told he allegedly had more than $70 million in assets.

With fortunes of that size, estate taxes are obviously an immediate concern. There are both federal and state taxes that apply to inheritances. The rates for each are different and they take effect at different income levels. Federal estate taxes apply to non-exempt assets over $5.25 million with a top rate of 40%. Alternatively, New York’s separate tax kicks in at assets over $1 million with rates between 5% and 16%.

Considering there are two levels of taxation and rates that are not trivial, it is critical to account for these potential taxes in an estate plans. Attorneys working on these issues for local residents must be intimately aware of all legal options to guard against the largest tax bills.

Estate Planning Tips from the Stars – James Gandolfini’s Will Filed in Manhattan

Published on: July 9, 2013 | by Ettinger Law Firm

Last month many in the entertainment world were shocked and saddened by the sudden death of New Yorker James Gandolfini at the age of 51. His passing from an apparent heart attack is a somber reminder that none of us know for sure what the future holds.

This week reports were released discussing some of the estate details. Gandolfini’s will was made public and filed with a court in Manhattan. Wills are public documents when filed with the court. The only way to keep these matters private is by using trusts and other devices which transfer property automatically without the need to go through the probate process–Gandolfini did make some arrangements outside of the will that are not known publicly.

Gandolfini Will

Michael Jackson Estate Saga Continues — $500 Million in Debt Paid Off

Published on: July 2, 2013 | by Ettinger Law Firm

When someone passes away, the basic principles of settling the estate seem straightforward: collect assets, pay off debts, and distribute what is remaining per the deceased’s wishes. While that cursory sketch appears easy enough, in practice, dealing with these matters can take years, have a significant cost, and result in prolonged disagreement, destroyed relationships, and even legal battles.

As always, a high-profile celebrity example offers a helpful look at how it plays out in the real world.

The Las Vegas Sun recently reported on the latest in the prolonged battle related to famed pop star Michael Jackson’s estate. The singer died over four year ago, but from most reports the matter is nowhere near being resolved. For one there, there is still pending litigation related to the billion-dollar tour production Jackson was set to complete just before his passing.

Per Stirpes – What Is It?

Published on: July 2, 2013 | by Ettinger Law Firm

If you read a bit about estate planning you may come across the term “Per Stirpes.” It is an awkward phrase to say, and there is little reason to use it outside the context of inheritance planning. It comes up when one lays out their inheritance designations, perhaps with a phrase like, “Fifty percent of the estate to Bob and Tom per stirpes.” Similarly, it may be written as “by representation.” This usually refers to the same thing.

So what is it? The short answer: Per Stirpes is Latin for “by the roots.” But that translation doesn’t help much. What it means in estate planning terms is that if the beneficiary dies then their descendants will get their share of the estate.

For example, say that the estate is worth $100,000. Per the terms of the will 50% of the estate should be split between Bob and Tom, with each getting $25,000. But what if Tom is not alive when he is set to receive that inheritance? Does Bob get his share instead? If the will stated that Bob and Tom were to receive their share on a per stirpes basis then the answer is No. Bob would not get the extra share. Instead, that share would go to Tom’s descendants–his own children. If Tom had one child, that child would get $25,000. If he had two children, then those children would split the $25,000.