New York Estate Planning & Elder Law Blog

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.