Wills

DIGITAL ACCOUNTS AND PLANNING

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

COMMON PROBLEM

There is much talk lately of how to deal with email, facebook, twitter accounts, et cetera of people who pass away. For those of us who have friends or family who passed away and see their facebook account send a reminder to all of their friends on their birthday or some other event, it is nothing short of strange, even ery to see their former friend live into perpetuity in the digital realm. Many people use it as an opportunity to post memories and give a public shout out to the living that their friend or family is still alive in their heart. Others find the matter to be a painful memory.

Facebook instituted a policy whereby a legacy contact can delete your account or transition the account to a memorialized account, whereby your name will be changed to a remembered account (more properly a “remembering account“). Currently, New York does not allow an executor, or anyone else for that matter, to access the emails, online drives and various other digital accounts owned by a person after they pass away. If it was private while the person was alive, shouldn’t it be alive after they pass away? Yet, this is a rapidly evolving area of the law, with private corporations creating their own rules in the absence of legislative pronouncements to the contrary. In the 2012-2013 legislative session, Representative M. Kearns introduced a bill that would address the issue of access to such accounts by an executor.

NEW YORK’S INTESTACY LAWS

Published on: May 9, 2016 | by Ettinger Law Firm

As was outlined in the most recent blog posting, if you compare the costs and benefits of creating a will now versus passing away intestate, there is no doubt that the benefit is huge and the cost is small. It is thus high time to explore New York’s intestacy laws in detail. It is important to note that intestacy laws are important not only because they instruct a probate Judge on how the estate must be divided but it also tells the probate Court what is not permitted as well as what is neither required nor prohibited; in other words the parties can agree to certain final dispositions. The specific statute that defines intestacy and the outlines the specific requirements that a Court must adhere to is found at New York Estates, Powers and Trusts Law (EPTL) Section 4-1.1.

Family Law and intestacy laws are one of the few areas of the law that recognizes and codifies a different treatment of the sexes, insofar EPTL Section 4-1.2 requires that a child conceived outside of marriage (so called and grossly titled “illegitimate” children) must have an acknowledgement of paternity by their father or a finding by a Court that the children in issue are indeed the children of the deceased man before those children can inherit as a child of the deceased. Not so with mothers, since, except in the case of children mistakenly switched following birth, there is no doubt that children are the issue of their mother.

The technical legal term when a person passes intestate is that their estate is administered and a person who passes with a will, called testate, has their will probated. Within the universe of individuals who are material to the probate Court are children, spouses and siblings. Adopted children at treated the same as biological children although unadopted stepchildren are not considered children as far as the intestacy law is concerned. New York has adoption proceedings and recognizes adult adoptions to legally redefine this relationship. Divorced spouses are immaterial, although separated spouse are still considered spouses as far as the law is concerned.

SELF CANCELLING INSTALLMENT NOTE

Published on: April 29, 2016 | by Ettinger Law Firm

CHANGE IN APPROACH BY IRS BUT STILL SOUND ESTATE PLANNING CONTINGENCY

It is obvious that no one knows when they will shake off their mortal coil and pass from this earthly realm. The IRS and the law in general consult their own mortality tables to guide certain decisions. These tables are based on probabilities and generalities, drawn up by bean counting actuarians. They are undoubtedly reliable enough to warrant an individual to make a decision that may take decades to play out or even by institutions to guide their decision making. Insurance companies calculate risk by consulting them and Courts sometimes use them to determine future damages. They can be used by those engaging in estate planning for many things, but, in particular to help calculate a risk premium in a limited set of circumstances. A self cancelling installment note can be a method and means to transmit wealth to the next generation if properly structured. A recent Chief Counsel Advisory (CCA) opinion by the IRS called into question one specific means to calculate risk for a self cancelling installment note but did not question the overall appropriateness of the use of a self cancelling installment note. The self cancelling installment note works by one person selling an asset or loaning a certain sum of money, pursuant to a promissory note, with at least a minimal amount of interest charged.

In addition, the promissory note acknowledges that in the event that the person who holds the promissory note (the lender) passes away while the note is still being repaid, the remaining balance of both principal and interest is considered paid in full. The note must incorporate a specific increased interest rate in light of the increased risk that the note holder/lender may not collect the entire amount. If unfortunately the note holder/lender passes away the money passes outside the estate, without incurring any estate or gift tax liability and without any additional legal obligations for the borrower.

MORE ON ESTATE PLANNING FOR THE FARMER

Published on: April 27, 2016 | by Ettinger Law Firm

PASSING THE FARM IS LIKE PASSING ON THE FAMILY CORPORATION

There is no doubt that some modern farmers run large multi-million dollar operations right in their backyard. Maintaining a herd of cows and other grazing stock costs potentially millions to buy or lease (or both) land for the animals to grow on. In addition, the processing equipment for milking cows, labor costs, insurance, veterinarian costs and any number of other costs can run into the millions each year. While most farmers are far from millionaires, most work much harder than many millionaires. Indeed there is more to farming than the land, buildings, equipment, animal stock or orchards and other tangible objects. Tending to corn fields, wheat, soy, orchards, vineyards, sod, tree farms, et cetera are all specific skill sets that require years of training and no small measure of technological investment. The same can be said of a family run saw mill or similar type of business. There is something unique about farmers, however.

Many families are tied to the land. John Mellencamp who was raised in farm country and one of the original founders of Farm Aid wrote about the life of the average farmer, growing up on the same farm that his own daddy did on land cleared by his grandpa, walking along the fence while holding his grandfather’s hand and of being tied to land that fed a nation and made him proud. It is this tie to the land, unique education and training that can start literally while the child is in diapers as well as the emotional bond with families that makes farmers different than most other family run small businesses. There are also unique legal protections found throughout the law for the benefit of family farmer. For all of these reasons transferring a family farm from one generation to the next requires special planning.

WILL DOES NOT REVOKE PREVIOUS TRANSFER OF PROPERTY TO TRUST

Published on: April 25, 2016 | by Ettinger Law Firm

BEST LAID PLANS DO NOT ALWAYS WORK OUT

A case with an interesting factual background came out of Texas recently. While it was based on Texas law and the case is binding in only Texas, the legal principles discussed by the Court are equally applicable to New York or any other jurisdiction for that matter. More importantly, the set of events that gave rise to the case could happen anywhere. It just so happened that it occured in Texas rather than New York or somewhere else. The Texas Court of Appeals case of Gordon v. Gordon revolved around a trust that took ownership of a specific peace of real estate property and how that transaction related to a will signed subsequent to the trust. More specifically, the Court determined that the act of creating and endorsing a will by the testator subsequent to the transfer of the real estate did not overturn or cancel the previous transfer of the real estate to the trust. The will, however, contained language that by endorsing the will, the testator supersedes all previous transactions indicated in the trust documents, such as annuities or certificates of deposit. It never mentioned the real estate.

In 2009 (Mother) Beverly Gordon and (Father) Patrick Gordon executed a trust document which they funded with personal property and real estate. The very terms of the trust indicated that the trust could only be revoked by either Father or Mother and only by following the specific set of instructions laid out in the trust document, namely by signing and delivering a letter to the trustee. The letter had to indicate that they individually or jointly are going to cancel or revoke the trust. The trust further provided that upon the death of either of them the trust become irrevocable. They funded the trust with personal property and real estate. Soon thereafter, their son John sought to reduce the risk of an estate battle by creating a will that specifically stated that the parties want to cancel the terms of the trust. Neither Mr. Gordon nor Mrs. Gordon did anything to transfer their personal property or real estate out of the trust. Moreover, John did not act to convince his parents to move the property out of the trust. Mr. Gordon passed away within a year of signing the new will.

WHAT IS TESTAMENTARY CAPACITY

Published on: April 23, 2016 | by Ettinger Law Firm

SUBSTANTIVE PROOF NEEDED

The issue of consent and state of mind touches upon perhaps some of the most personal and human issues imaginable. This blog explored issues related to the capacity necessary for a person to create a will. Passing on the bounty of your work to your loved ones or charity may be a specifically delineated right noted by Thomas Jefferson, James Madison or any other well known political philosopher, but it can only be denied, for all intents and purposes, if that person is legally or medically incapacitated or unable to make key decisions.

This is an extraordinary legal power that is only exercised after an exhaustive review of the facts. To legally deny someone the right to consent to decisions that directly impact them as a patient or client in a legal setting goes to the core of our humanity and, in some circumstances, requires Solomonic wisdom. As noted in different blog posting, Consent is situationally specific. Consent to intimate encounters with your spouse is different than consent to transfer money to a charity, of which little is known. As to the right to create a will and transfer your personal property, real estate and money to family members, what does New York law consider sufficient mental capacity to create a will? There is much case law on this topic as it is a topic that has to be resolved each generation in light of varying societal norms and advances in both psychiatric and general medicine.

THE CLAT – STRANGE NAME, GREAT PLAN

Published on: March 28, 2016 | by Ettinger Law Firm

CHARITABLE LEAD ANNUITY TRUST

There are many great estate planning strategies that allow a person to avoid or lower estate tax liability and give money to charity at the same time. With the large estate tax exemption and portability of estate tax exemptions only a small number of Americans will face the possibility of paying the federal estate tax. For many New Yorkers, however, the federal estate tax is a secondary consideration in light of the lack of right to transfer any unused estate tax exemption from for the first deceased spouse to the next. Instead of a double benefit, New Yorkers face a potential double hit of not only having a lower estate tax threshold, but being taxed on the entire estate amount, sans estate tax exemption. For couples that face this possibility and for those with larger estates, few match the simplicity of the charitable lead annuity trust, often abbreviated as a CLAT. It is also a good fit for those who seek to defer the payout of their trust payments to relatives quite some distance in the future.

The CLAT works quite simply by funding the trust with a certain amount, usually a large amount (since it is generally used by families or grantors looking to reduce their estate tax liability) that is scheduled to be paid out to a charity over of a certain length of time. Once the payout period for the charity is over, a certain sum, plus any additional monies earned (minus taxes and expenses of course) is paid to the remainderman beneficiary of the trust.

WHAT HAPPENS IN MY HEIR PASSES AWAY BEFORE ME?

Published on: March 2, 2016 | by Ettinger Law Firm

NEW YORK ANTI-LAPSE STATUTE

This blog previously discussed what happens if an heir passes away simultaneous with a testator and how the property that would otherwise go to the person who simultaneously passed away with testator ends up getting transferred. An obvious related question is what happens if an heir or beneficiary passes away prior to a testator? This blog also explored this issue in the past. It is now time to reexamine that issue in more detail and in light of the larger legal structure that the law provides for various contingencies that exist in the law regarding property passing via probate when some sort of mistake or event occurred that would otherwise leave the property unpassed to the next generation.

In both cases the law has default, fall back statutes to specifically address these sorts of scenarios. In the case of property or money left to an heir who predeceases a testator, if the property or money passes to siblings or children of the testator, New York’s anti-lapse statute controls and allows for that property or money to pass to that sibling or child’s heirs, almost as if the heir did not predecease the testator. If an heir passes away prior to distribution that bequest is considered to have “lapsed”. New York’s anti-lapse statute, as judged by its name, obviously prevents the lapse from occurring. In the absence of the anti-lapse statute, a bequest that fails to pass to the intended heir that heir predeceased the testator, the bequest becomes part of the larger estate, to be dealt with via other provisions in the will or otherwise dealt with through the application of the state’s intestacy statute. All states have anti-lapse statutes. In a sense the anti-lapse statute provides a substitute heir via statutory decree for the beneficiary who predeceased the testator.

GENERATION SKIPPING TRANSFER TAX

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

CLOSING PERCEIVED LOOPHOLE

Congress created the generation skipping tax almost 40 years ago in 1976 and ushered in an age of increasing complexity for the tax code, always complicated and cumbersome, to fix a problem perceived at the time (and since) of avoiding taxable events by transferring assets to “several generations while avoiding the Federal Estate Tax” via use of trusts and other transfers of property rights. At the time, Congress saw how wealthy families were creating life estates in their kids, followed by a life estate in their grandkids and followed by a life estate of their great grandkids.

Life estates are not subject to federal estate tax. This meant that wealthy families who had the inclination to create these arrangements and the money to pay an attorney to do so avoided paying large amounts of taxes and smaller families and estates were paying more in taxes than wealthier ones. As such, Congress decided to tax any transfer of property or assets from an individual to another individual that is more than one generation away from the grantor, in the case of family members, or from one person to another who is at least 37 1/2 years younger than the grantor, in the case of nonfamily members. The tax applies even if the transfer is via a trust

UNDERSTANDING HEALTH SAVINGS ACCOUNTS

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

GOOD FOR CERTAIN SUBSET OF POPULATION

A health savings account is another way to save your money, tax free, for an inevitable expense that everyone will have to face and deal with eventually. Unfortunately one of the variables of retirement is that you will never know how much you will spend on health care costs. At the same time, as the body ages health invariably declines with more visits to the family doctor or perhaps even more expensive specialists. To further add to the expense, modern medicine has added significantly to the life expectancy of the majority of people who do not meet some unfortunate trauma or accident.

This is often the result of more expensive treatments, more costly medicines and more diagnostic tests or procedures that occur more often. Often these treatments, medicines, tests and procedures are medically appropriate, so any money spent is money well spent. But as with anything in life, the question must be asked, from where did the money come from? Insurance does not cover all medicines, tests and procedures and even when it does, it does not one hundred percent of their costs. You can pay for better insurance plans, with the inevitable higher monthly premiums, which leads back to the original question of where does the money come from for these costs? A more sound approach to these unknown variable but inevitable costs is a health savings account. Health savings accounts are not for everyone, but for a sizable portion of the population they are a good fit.