Trusts

New Decision on Valuation of New York LLC for Estate Tax Purposes

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

Last month the United States tax court issues a decision in a case which caught the eye of many involved in estate planning matters. The main issues in the case, Tanenblatt v. Commission of Internal Revenue, was the value of a deceased individual’s interest in a limited liability company. As most know, estate taxes are based on the value of the total assets owned by an individual at the time of passing. Consequently, determining the exact value of items like a business interest are critical in determining the tax burden. As you might imagine, there is frequently disagreement between surviving family members and the IRS regarding the overall assessments.

LLC Value

The tax court opinion (viewed in full online here) explains how the case involves a family that received a notice of deficiency from the IRS, claiming that an additional $309,000 in federal estate taxes was due. The discord was caused by confusion over the value of the decedent’s interest in a New York LLC (the 37-41 East 18th Street Realty Co.). As the name implies, the LLC’s main asset was a building on 18th Street in New York City. In preparing their tax return, the family essentially determined the value of the building (using an income capitalization approach), added a few smaller assets, applied “net asset value” (discounts for various reasons), multiplied by the individual’s percent interest and determined the value of the share in the LLC — around $1 million.

The Pendergrass Estate and Control of a Legacy

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

The Times Standard reported on another high-profile estate battle brewing that touches on many common themes, including a divided family and conflicting claims about last wishes.

Legendary R&B singer Teddy Pendergrass is probably best known for his smash hit “If You Don’t Know Me By Now.” Pendergrass dealt with various challenges throughout his life, including a serious car accident in 1982 that left him a quadriplegic. The accident required him to have around-the-clock care, but he survived and thrived until his death in early 2010.

Family Battle

WSJ on Last Minute Will Changes

Published on: November 22, 2013 | by Ettinger Law Firm

A Will is far more likely to be challenged during probate if significant last-minute changes were made to the legal document. This is to be expected considering that the main causes for challenge–undue influence, lack of capacity, improper procedure–are far more likely to occur when an individual is older and nearing death.

But that does not mean that all Will changes should be avoided later in life. Often is is essential to make changes to reflect one true wishes and best protect assets. It is simply critical to made those changes carefully and with an eye toward the ways to minimizing the risk of a Will contest.

Act Prudently with Deathbed Changes

The Estate of New York Musician Lou Reed

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

Celebrity estate planning remains one of the most common ways that local residents are confronted with issues regarding wills, trusts, and other inheritance issues. As the old adage makes clear, the only certainties in life are death and taxes. It does not matter whether one is a billionaire, international celebrity, elementary school teacher, or anything in between. We will all face death and deal the the aftermath of a passing.

In that way, it is useful to take advantage of high-profile deaths as a way to again share information on the value of estate planning.

The most recent celebrity planning story to hit the headlines is that of famed musician Lou Reed. Reed died in late October in Southampton, New York following liver disease complications at the age of 71.

What Matters When Choosing an Executor?

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

Understanding the specifics of the law is just one aspect of successful estate planning. Obviously it is critical that a will is created in a such a way that it will be upheld or that a trust will have legal effect (or that you take advantage of all available trust options to begin with).

But that legal knowledge is not enough to best prepare for the future. In addition, it is critical to understand the social, emotional, and practical considerations that affect these issues. Are certain family members more likely to feel jilted by a specific arrangement? Is there a financial danger that should be guarded against? These and hundreds of other questions must be considered when planning. Memorizing statutes and legal books will only provide so much guidance–experience on these issues fills in the gaps.

Advice for Executor Selection

Back to the Basics: Trusts Are Not Only For the Wealthy

Published on: October 31, 2013 | by Ettinger Law Firm

One of the biggest misconceptions about general estate planning is that a “trust” is something that only rich families need to consider. This perception likely arises from colloquial use of “trust funds” to signify wealthy individuals who are living off substantial earnings preserved for them in a trust.

A better understanding of the legal tool takes away much of the mystique. The bottom line is that trusts are for everyone, serving as an incredibly useful option for middle class New Yorkers to protect assets accumulated over a lifetime for themselves and their loved ones.

The Basics

Tough Legal Questions: Inheriting Digital Media

Published on: September 30, 2013 | by Ettinger Law Firm

It is a cliche to assert that the world of estate planning is ever-changing. Of course, laws are frequently altered by policymakers which affect the best practices for passing on an inheritance and saving on taxes. For example, just this year Congress agreed on new federal estate tax rates, which may influence how some decide to use wills and trusts to best plan for the future.

But it is not only legal changes that impact these issues–technological and cultural changes can uproot estate planning details as well. On the cultural side, consider the changing gender roles. Only a century ago, in many families it was expected that the oldest male would inherit almost the entire estate, with daughter and younger sons receiving only a minimal inheritance. While similar arrangements can be made today, the practice is incredibly uncommon. Cultural changes since then altered how these distributions are normally made.

Technology Changes Estate Planning

Mysterious Will Filed in New York Intestate Case

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

Earlier this year we shared information about a $40 million New York inheritance that was destined to go entirely to the government. 97-year old former NY developer Roman Blum died in January, leaving behind the multi-million dollar estate. Yet, it seems that Blum conducted no estate planning–no trust was created and no will was found. Not only that, but it was unclear if he had any living relatives. As a result, per intestacy rules in the state, the assets would eventually “escheat” to the government. This represented the largest unclaimed estate in New York history.

The case is often pointed to as a vivid reminder of the need to lay out your inheritance wishes ahead of time or risk losing control of the decision entirely.

Will is Found?

State Supreme Court Sends Most of James Brown Assets to Charity

Published on: September 23, 2013 | by Ettinger Law Firm

One common misconception regarding estate planning is that simply getting wishes down on paper automatically means that those wishes will be carried out. Some New Yorkers, for example, may be under the too-optimistic assumption that drafting a quick will designating inheritances is enough to ensure that assets will go where intended.

It may be that simple in theory, but the reality is far murkier.

That is because challenges to wills and trusts are incredibly common. Disputes frequently result in compromises that are far different than what was originally intended. That is sometimes true even in cases where extensive planning was done ahead of time.

Planning Must Consider the Unforeseen Future, Not Just the Present

Published on: September 16, 2013 | by Ettinger Law Firm

It may seem obvious, but it is critical for all of your long-term planning, from an inheritance to a business succession strategy, to take into account potential events that have yet to happen. Far too many New Yorkers engage in estate planning and financial planning that gives short shrift to potential changes in circumstance in the future. It is worth reiterating that all families should make plans that take into account unknown future events, like divorce, disability, a lost job, and more.

Divorce, Disability, and More

A Financial Advisor magazine article from late last month touched on the principle of long-term forecasting. The story is focused specifically on business succession planning, but the basic principles are applicable to many forms of long-term preparations. The story summarizes the potential unknowns as the “Four Ds” — divorce, disability, drugs, and death.