New York Estate Planning & Elder Law Blog

More and more people are taking it upon themselves to prepare for the future with an estate plan. While some take it upon themselves to craft an estate and succession plan for their family, it is always a good idea to work with an estate planning attorney to ensure that there are no holes in what you have created. This case illustrates how even the best intentioned estate plans can still have issues that could cause a lot of unintended problems if not corrected now.

Discovering Errors in the Plan

For example, one doctor had built a small specialized practice over the last fifteen years that grossed $1.7 million annually. He had crafted a will and trust for his family that included a wife and children in addition to the creation of a succession plan for his thriving medical practice. However, when the doctor reviewed his plan with an estate planning attorney, a large hole was discovered in his succession plan.

A contentious case for estate planners has been reversed, allowing attorneys and clients both to breathe a sigh of relief. The case revolved around whether creditors could go after assets left to a beneficiary in a spendthrift trust. The issue arose in Bankruptcy Court and was recently reversed in the Northern District of Illinois federal court.

Facts of the Case

In the case of Safanda v. Castellano, Faith Campbell created a living trust in 1997 for the benefit of her four children. The trust provided that at her death the assets of the trust would be divided equally among her four children. In addition, the document provided a spendthrift clause that was meant to shield the assets of the trust from any creditors. She passed away in 2007 and one of her children, Linda Castellano, along with her husband filed for bankruptcy in 2011.

Like something out of a made for television movie, last week a woman was sentenced to 23 years in prison for the murder of her eighty year old mother-in-law for the inheritance. It is one of the rare times that a set of laws known as the “slayer statutes” has been applied to a criminal case but serves to highlight the importance of these laws. These statutes prevent a person who has murdered another from inheriting from their victim’s estate.

Facts of the Case

In this case, Diana Nadell was arrested and convicted of the murder of her mother-in-law, Peggy Nadell. The reason behind the killing was that Diana wished to obtain the inheritance from Peggy’s estate, which was worth a little over $4 million. Diana and her husband were expected to inherit half of the estate, but Diana could not wait for her mother-in-law to pass away naturally.

Estate planning for ranchers and farmers is incredibly important because of the nature of the assets in those estates. Most farmers and ranchers do not have many liquid assets, such as bank accounts and other forms of cash. Instead, most of their estate is invested in their ranch or farm and in order to perpetuate those endeavors a comprehensive estate plan is necessary. These are some of the most common estate planning mistakes of ranchers and farmers as well as how to avoid them.

Failing to Create or Update Estate Plan

Farmers and ranchers typically have more complex estate planning needs than in the typical estate planning process. In many cases, a farmer or rancher will have some children who want to continue the business and others that do not. The types of assets in a farm or ranch can also make splitting an estate much more difficult if you are trying to keep things equitable among your heirs.

The White House recently released its budget proposal for 2016, and one of the major aspects of the plan is to restrict the use and effectiveness of a common estate planning tool: grantor retained annuity trusts (GRATs). The administration has proposed limitations on the use of this estate planning technique in the past, but this is the first time that real change may be enacted in the way that people can use GRATs in their estate plan.

What is a GRAT?

A grantor retained annuity trust is an irrevocable trust that is designed to distribute assets from the trust with little to no gift tax attached. In order to properly establish a GRAT, the creator of the trust places assets into the trust that he cannot touch in exchange for receiving a small portion of those funds through annuity payments over a number of years. The distributions are kept just under the federal gift tax limit so that no federal taxes apply to the distributions.

One of the main challenges for families with wealth is planning for more than a single generation. With the uncertainty of the world, advances of technology, economic upheaval, and more many people are concerned about how to plan for decades or even a century down the line. However, there are ways to plan your estate that can provide for children, grandchildren, and subsequent generations as long as you are willing to plan with some level of flexibility.

Issues with Multigenerational Planning

“People, especially the first generation to have wealth, do have concerns about the future and they aren’t used to thinking in multigenerational terms.” Many legal and financial planners have found that it is difficult for people that have first generation wealth to think past giving to the next generation. This is because they first must adjust to managing that kind of wealth on their own before thinking about transferring it to their children, let alone passing it to subsequent generations.