Articles Posted in Estate Planning

New York estate planning lawyers are often tasked with advising their clients as to how to choose the proper people to administer their estates. The people they designate are put in positions of immense trust and responsibility. Whether the client is designating an executor/executrix, a trustee, or a power of attorney, the client must exercise extreme caution as to whom they entrust with these duties.

In many cases, the natural choices for these estate administration positions are the family members of the decedent. After all, the decedent’s family members are most likely to be in touch with the decedent’s wishes and to have an idea as to the decedent’s assets. It is not uncommon, however, for a decedent’s own family member to abuse his or her position of power over the estate administration. As the following case demonstrates, impropriety is always possible where there is a financial gain at stake, even amongst family.

In re Goodwin, NYLJ, Apr. 10, 2012, at 31 (Sur. Ct. Suffolk County) involves a dispute between a brother and sister over the administration of their mother’s will. Mildred Goodwin, the decedent, appointed her daughter, Maureen Burns, as executrix of her estate and executed a durable power of attorney to entrust Burns with acting in the best interest of the estate’s finances. Before Mildred Goodwin died, Burns opened several bank accounts that were jointly titled in hers and Mildred’s names. Burns consulted a New York elder law estate planning attorney to help execute an inter vivos transfer of estate assets from Mildred’s estate to the jointly titled bank accounts. The transfers were characterized as gifts, and there was little doubt that Burns was to be the sole beneficiary of the funds.

The probate process is public, and so most families whose estate planning includes only a will usually have the details of the document laid out to anyone in the community who chooses to examine it. Yet, that rule is usually best exemplified by looking at the exceptions. While a will is generally a public document, a family can try to have the will “sealed.” Most of the time this is not successful. In fact, the few cases where it is allowed often related to the death of celebrities or high-profile individuals. For example, Joe Paterno’s will was sealed earlier this year.

Similarly, Financial Planning just reported that the family of Monkee’s band member Davy Jones also successfully petitioned to have his will sealed. Jones died last February after a heart attack at age 66.

In this case, Jones’s eldest daughter–the representative of the estate–argued in court documents that the will should be sealed because “public opinion [after reading the will] could have material effect on his copyrights, royalties and ongoing goodwill.” Our New York estate planning lawyers appreciate this request is a good example of why most community members cannot have a will sealed. It is not sufficient to request these planning documents hidden from public view simply because one is a “private person”–there usually has to be real, demonstrable material reason to do so.

Properly naming beneficiaries in things like Individual Retirement Accounts (IRAs) is obviously a crucial component of all New York estate plans. One of the most common planning mistakes is failing to update these beneficiary designations. These mistakes are serious, because assets in these accounts usually transfer at death automatically–outside of the probate process.

One common concern with IRA designations involves a beneficiary dying before you do. What happens if the beneficiary is deceased when the account holder (owner) dies?

If a contingent beneficiary is not named and the primary beneficiary is not alive, then the IRA may go to the account holder’s estate. This can have serious adverse consequences, because the estate cannot “extend” the life of the account which will result in significant probate costs and potential tax-free growth lost. For planning purposes it is often the worst case scenario.

What happens to all of the money that you owe at death? Does someone else pay for it or does it just disappear? Our New York estate planning attorneys know that many local residents have questions about these sorts of issues when thinking about their long-term financial and inheritance issues. All of these preparations require understanding about the effect of debt after a passing, because that debt must be taken into account when figuring out inheritances, disability planning, and similar details.

In general, upon one’s death all of their debts are paid off by their estate, and the remaining assets are split according to inheritance wishes spelled out in legal documents If one’s debts are larger than available assets, then some creditors are likely to receive less than they are owed. Yet, there are a few special circumstances where survivors may be hit with obligations on that debt. It is crucial for estate planning to be done to identify all of these issues ahead of time to avoid an unwelcome surprise.

For example, take credit card debt; many residents have it. When one dies with a balance, their estate must pay that debt. If there is not enough in the estate, then the credit card company may eat the balance. But not always.

Some estate planning concepts may seem so straight-forward that community members try to go it alone. After all, a will is just a document that clearly spells out one’s wishes and lists who gets what on a piece of paper. Other assets, like retirement funds, just need a beneficiary named. What could be complex about that?

The answer, of course, is many things.

Take the retirement funds. It may not be as simple as just picking someone. A New York estate planning attorney knows that sometimes special steps have to be taken to guarantee that the desired beneficiary actually receives the funds in as hassle-free a manner as possible. For example, there may be problems when one wants to name children as the beneficiary of an employer retirement plan–like a 401(k). The rule in most cases requires a spouse to give their consent when anyone other than the spouse is named beneficiary This is true even if the named beneficiary is someone like a child– a stepchild, adopted child, or even a natural child.

With so much attention focused on the future of the estate tax rate and exemption levels, it is easy to forget about other tools to save on taxes while passing on assets. Perhaps the most easily understood is the “annual gift tax exclusion.” Each New York City estate planning lawyer at our firm knows that this is a very helpful way to transfer property tax free–and it will likely remain in effect regardless of what Congress does in the future.

The exclusion exists above and beyond the estate tax exemption. It allows each taxpayer to give up to $13,000 per year to anyone tax free. Because the exemption applies to individuals, couples have two bites at the apple and are able to transfer $26,000 yearly to each individual they chose. In fact, due to inflation the annual gift exclusion level is likely to jump to near $14,000 next year according to a recent Wall Street Journal article.

Estate planning lawyers often advise that, considering the uncertainty of the federal estate tax next year, it is helpful to use the annual gift exclusion now to transfer assets beyond the reach of taxes at death. This is especially true in states like New York with state estate tax exemption levels below the federal rate. Therefore, even if one currently has an estate below the federal exemption level ($5.12 million per individual), there will be a state tax so long as the estate is above the state exemption level ($1 million).

Forbes posted earlier this month on the continued squabbles over the estate of civil rights pioneer Rosa Parks. Unfortunately, our New York estate planning attorneys appreciate that the higher the profile of the individual (and the more assets at stake), the more common an inheritance fight is to arise. That is true no matter who is involved, including a beloved icon like Rosa Parks.

This case is also a testament to the drawn-out nature of these disagreements. Parks died nearly seven years ago, in mid-October of 2005 at ninety-two years old. In 1998 she created a will and trust indicating that she wanted all her belongings given to a charitable endeavor she created. A close friend and judge were named executors, with the friend to receive 90% of subsequent royalties. Parks nieces and nephews were set to receive the remaining 10%.

The relatives contested the will and at one point the friend was removed as executor by the probate judge over claims of undue influence. Shortly before trial the parties were able to settle the matter, re-appointing the friend in her role as head of the charitable organization–the Rosa and Raymond Parks Institute for Self-Development.

The possibilities to tailor an estate plan to one’s exact specifications is virtually endless. That is perhaps most evident in the various ways that heir’s can be required to meet certain guidelines as part of a gift or inheritance. The Wall Street Journal dove into this idea last week with an article on “controlling heirs from the grave.” While that phrasing likely conjures images of busybody relatives, the basic concept of securing one’s wishes after death is entirely prudent

The story explains that many consider adding “strings” when passing on assets to others. The conditions can be placed both on inheritances and gifts given while still alive. Our New York City estate planning lawyers appreciate that many community members are strategically making sizable gifts this year in order to take advantage of favorable exemption levels and tax rates that are set to expire at the end of December.

One common concern about large gifts is the requirements that one give up control of the asset entirely–they are usually given as part of an irrevocable trust. Yet, it is important to realize that some strings can still be attached to those gifts. In general, gifts can be given with any requirement attached, even when the requirement seems silly–like demanding that family members spell their name a certain way. One of the most common provisions are “spendthrift clauses” which strive to protect a gift given to one who is known to have poor financial acumen.

Ken5 News reported on a unique estate planning case this week involving a man who left a fortune to his favorite canine.

The report explains how the man amassed a large collection of various valuables over his lifetime, from fine china to antique furniture. His possessions were enough to fill ten homes. Wanting to ensure his wishes were carried out after his passing, the man contacted an estate planning lawyer to ensure legal documents were in place. Trusts were used to protect the valuables and delineate ownership in the event of death or disability. Our New York estate planning lawyers know that all of this is similar to steps taken by local families (of all net worths) when planning for the future.

What was different in this case, however, was who was set to receive all of these valuables at the man’s death. Interestingly, the man’s will left everything to his dogs–only one of which, named “Lucky,” was actually alive when the man passed away.

Designating inheritances is not the only purpose of a New York estate plan. Some local residents may feel like there is no rush to have a plan in place, because they do not have many assets to pass on or have no particular wishes about their possessions. But inheritances are just a part of the planning. For one thing, all families with children–regardless of their net worth–need to have a plan in place to designate alternate caregivers for their children in the event of death or disability.

Naming an appropriate guardian is one of the most important preparatory steps that a parent can take to ensure their child’s well-being no matter what the future holds. If the parents do not make their wishes known in appropriate legal documents, then the decision is left to the court. While the court will work to make the best decision with the information in front of it, there is obviously no replacement for a parent’s choice.

In our area it is crucial to have a New York estate planning lawyer guide your family through this process. That is both to ensure the legal formalities are met and also to have an experienced third-party involved in the event of disagreement.