New York Estate Planning & Elder Law Blog

ABLE ACCOUNT LAW CHANGES BROADENING PROTECTIONS FOR SPECIAL NEEDS PLANNING

Published on: January 12, 2016 | by Ettinger Law Firm

On December 19, 2014 President Obama signed into law a number of tax and financial measures to extend certain tax benefits. More specifically, the legislation enacted the Achieving a Better Life Experience (ABLE) Act of 2013, which amends section 529(e) of the United States Tax Code, to allow for tax-free savings accounts for individuals with disabilities. Almost a year later, almost to the day, both the Federal government and New York state both acted to expand the coverage under the ABLE Act. Prior to the most recent change, ABLE accounts had to be located in the same jurisdiction as the beneficiary.

The law also required state laws enabling such savings accounts. If the state did not have such enabling legislation, individuals in that state would not be able to set up such an account. On December 18, 2015, New York Governor Andrew Cuomo signed the New York Achieving a Better Life Experience (NY ABLE) Act allowing for such savings accounts in New York. On the same day that Governor Cuomo signed the NY ABLE Act, President Obama signed another spending bill that contained, among other things, legislative changes to the ABLE Act. More specifically, sections 302 and 303 of the bill allows for changes in what purchases or expenditures are permitted under the ABLE Act and allowed for beneficiaries to have such accounts in jurisdictions different than the one that they live in.

While one might reasonably believe that the NY ABLE Act is now not necessary, it still has much value as it allows for such accounts to exist within the state and thus subject to the various protections afforded under New York law. It would also draw in capital from other jurisdictions that do not have ABLE Act enabling legislation. All of these measures are part of an expansion of the laws that allow for the financial protections for financial and estate planning for those with special needs. Previous to the PATH Act, individuals with special needs who had savings accounts or other assets over a certain amount (generally, $2,000) would possibly be disqualified from certain governmental benefits. Savings in a PATH Act account will not jeopardize these benefits or eligibility for benefits.

PRETERMITTED OR OMITTED CHILDREN NOT ADDRESSED IN A WILL

Published on: January 11, 2016 | by Ettinger Law Firm

Contrary to the European model, American parents are legally free to disinherit their children, but at the same time, they cannot simply forget or omit their children in their will by mistake. If the child is specifically addressed in the will and, at the same time, the will either fails to pass any property or assets on the child or specifically disinherits the child, there is nothing that the child can do to inherit something from the estate, aside from invalidating the will and potentially inheriting under the intestacy statutes. Children born after a will is created and not properly addressed in the will, via language that is expansive and inclusive that undoubtedly includes even children born or adopted after the specific will is created are referred to in the law by the ungainly term pretermitted children.

Not surprisingly it comes from a latin verb meaning to overlook or forget. New York’s law that addresses pretermitted children and found at NY EPTL §5-3.2, only addresses children born after the creation of a last will and not otherwise provided for by other means, such as life insurance proceeds, a trust or other assets. The children that fall under the pretermitted law protections are entitled to whatever the other children who are addressed in last will. Oddly enough, if the children born before the creation of the will are mentioned but unprovided for, the pretermitted child will not inherit anything. Indeed, the law specifically addresses this possibility, insofar as it indicates that “(1) If the testator has one or more children living when he executes his last will, and: (A) No provision is made therein for any such child, an after-born child is not entitled to share in the testator’s estate.” NY EPTL §5-3.2. Certainly there are many problems with this, insofar as some parents specifically disinherit their children. Anna Nicole Smith disinherited her son in her last will and then had a baby daughter only a short time prior to her passing away, without any change in her will.

RATHER COMMON PROBLEM WITH SIMPLE SOLUTION

DIFFERENCES BETWEEN ABLE ACT ACCOUNTS AND SPECIAL NEEDS TRUSTS

Published on: January 8, 2016 | by Ettinger Law Firm

WHAT IS BEST FIT

Both an ABLE Act account and a special needs trusts try to accomplish essentially the same thing. Both attempt to ensure that a special needs child or person are financially planned for through various legal and financial means so as to enrich the life of the beneficiary. An ABLE Act account as well as a special needs trust also aim to protect the beneficiaries valuable governmental benefits that utilize a means based testing for eligibility purposes. While both products roughly accomplish the same thing, one may be better at accomplishing one thing rather than the other.

TWO DIFFERENT MEANS TO ONE END

LET GO OF MY INHERITANCE – INTERFERENCE WITH AN EXPECTANCY

Published on: January 6, 2016 | by Ettinger Law Firm

WRONGFUL INTERFERENCE WITH WILL

It is known by many different names, depending on the state and the era. Most recently it made its appearance in news headlines with the name – intentional interference with expected inheritance, sometimes even shortened it IIEI. The United States Supreme Court referred to it as “a widely recognized” cause of action and as the “tort of interference with a gift or inheritance” in the Anna Nicole Smith case. Marshall v. Marshall, 547 U.S. 293, 296 (2006). The matter has surfaced in the news over at least the last century, most famously (perhaps infamously) in the Father Divine case in New York, in 1949. Latham v. Father Divine, 299 N.Y. 22 (1949).

The American Law Institute published the The Restatement of Torts (Second) of Torts in 1979. That was the first time that the tort, known by many names, was formally recognized as such. Prior to this, the principal and concept was recognized but only in the most egregious of circumstances. There are several seminal cases that speak to the larger concept, one of which was the New York case dealing with Father Divine case noted above.

CHARITABLE ROLLOVER OF RETIREMENT ACCOUNT DISTRIBUTION NON-TAXABLE DISTRIBUTION FROM IRA

Published on: January 5, 2016 | by Ettinger Law Firm

On December 18, 2015 President Obama signed the Protecting Americans from Tax Hike (PATH) Act, which made permanent, among other things, three rather popular charitable tax incentives were set to expire January 1, 2016. The most important provision of the PATH Act for estate planning purposes is the continued allowance of rollover of individual retirement account distribution. This particular measure came into law in 2006 as part of the Pension Protection Act as a temporary measure. It expired and brought back to life several times over in the last nine years. The measure has shown itself to be a wildly popular measure, with approximately $140 million in charitable donations in the first two years and hundreds of millions going to colleges and universities in the last nine years. It seems likely that with the permanence of the new law, charitable givings will likely increase.

REQUIREMENTS OF CHARITABLE ROLLOVER

There are some important rules that are necessary to satisfy in order to qualify for the tax deduction benefits. They are:

HOW LONG CAN IRS COME AFTER ME? THE SUMNER REDSTONE CASE

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

Sumner Redstone is an entertainment business mogul with a majority share ownership of CBS entertainment and Viacom, and through Viacom, BET and Paramount Pictures, all through his majority ownership of his family business, National Amusement, which originally started out in the drive in movie theater business during The Great Depression. In just the last few weeks a case against Mr. Redstone by the IRS presents an oddity in the law, which may make many people shutter. More particularly, the IRS issued a Notice of Deficiency for a taxable event from 1972 – over 40 years later.

The nature of the case revolved around a transfer of shares in National Amusement Corporation in 1972 to separate trusts set up for the grandchildren of the founder, Sumner Redstone’s father Michael Redstone. Sumner set up one trust for his kids while his siblings set up separate trusts for their kids. At the time the transfer of interfamily stock was of a insignificant amount that passing them from personal ownership to a trust did not even require a tax return. One can and should ask about the concept of a statute of limitation.

Apparently, as the case against Mr. Redstone shows, the IRS does not have a statute of limitation for unfiled tax returns. 26 U.S.C. § 6501(c)(1) establishes that when a taxpayer files a fraudulent tax return, (c)(2) otherwise attempts to avoid tax liability, or (c)(3) fails to file a tax return, there is no statute of limitation. Mr. Redstone has an impressive educational pedigree, where he graduated from first in his class from the Boston Latin School and then graduated Harvard in only three years in 1944, which was actually common at the time. After graduation he served as an officer in the United States Army, helping to decode Japanese messages. He attended Georgetown Law School after the war and then received his LL.B. in 1947 from Harvard Law. After working for various governmental departments followed by private practice, Mr. Redstone went to work for the family business, which was booming by then.

LONGEVITY INSURANCE – DEFERRED INCOME ANNUITY

Published on: December 29, 2015 | by Ettinger Law Firm

Deferred income annuities are a financial product that, by definition, are paid in one premium and payout after at least one year after purchase. While they have been around for quite some time, although they are only beginning to come into their own as a part of a sound retirement strategy. Deferred income annuities are more colloquially known as longevity insurance, especially when purchased by retirees for when they reach 80 to 85 years of age. Much of the increase in sales for longevity insurance can be tied to an IRS bulletin formally published in The Federal Register on July 21, 2014 that allows for the recipient of the deferred income annuity to defer taxation until the age of 85. As with any formal federal rulemaking determination, there is a long period of time for study and public comment. As such, on February 2, 2010 the Departments of Labor and Treasury publicly requested comment on the issue of allowing for use of these annuities, with a second round with a specific regulation tied to it, that commenced on February 3, 2012.

HYRBRID ANNUITY

Traditionally there were generally two types of annuities. The first is the variable annuity with guaranteed benefits and the second type is the immediate annuity. The variable annuity with guaranteed benefits is wildly popular, with $39.8 billion in sales in just the first quarter of 2011 alone. Often these annuities do not encourage or sometimes even permit the beneficiary to tap into the annuity until years after the initial purchase.

HOW REVOCABLE IS MY IRREVOCABLE TRUST

Published on: December 27, 2015 | by Ettinger Law Firm

IRREVOCABLE TRUSTS COSTS AND BENEFITS

Trusts are valuable estate planning devices that allow for the transmission of wealth with lower tax liability. When proper estate management is picked, they also allow for the creation of future income, potentially allowing for the life of the trust in perpetuity. Trusts also allow for the beneficiaries to benefit from the income of the corpus of the trust, yet insure that their creditors cannot obtain the income producing assets itself. The same also applies for a financially irresponsible beneficiary, in that it provides income but prevents the financially irresponsible beneficiary from squandering the income producing asset. One of the most popular types of trusts is the irrevocable trust. As with anything in life, there are upsides and downsides; one of the downsides to an irrevocable trust is that in most circumstances, and, more particularly, most states, an irrevocable trust is usually irrevocable. Unwinding an irrevocable trust when it no longer functions as it should, due to, for example, a major change in the estate and gift tax law is possible but must be done correctly, whereby the assets from the trust may be transferred or gifted to the beneficiaries or the settlor if still alive.

WHY TO MODIFY OR REVOKE?

INVALIDATING A WILL

Published on: December 21, 2015 | by Ettinger Law Firm

WHAT HAPPENS IF A WILL IS INVALIDATED?

Wills are perhaps the most basic and simple form of passing on property and the transmission of wealth from one generation to the next. It allows the testator to give away the property and money that they own and have on hand as they see fit. A person can write a person out of a will, with certain limitations, include another non-child in the distribution and treat them as if they were a child or even leave it all to a charity. While the vast majority of wills are honored and respected without question, there is always the possibility that a potential heir may contest a will. In the event a will is invalidated a Surrogate’s Court must still resolve the issue of how and to whom shall the property be distributed. One possible way of dealing with issue of distributing the property if a will is invalidated is to utilize the state’s default, intestate distribution scheme. Another means is to revive a previous, otherwise valid will. This latter method is called the doctrine of dependent relative revocation.

DOCTRINE OF RELATIVE REVOCATION

NURSING HOME RESIDENTS’ BILL OF RIGHTS

Published on: December 14, 2015 | by Ettinger Law Firm

THE BASICS – FEDERAL LAW

In 1965 federal law enabled the federal government to license nursing homes, under two categories; skilled nursing homes and intermediate care facilities that required less medical care and more personal care. In 1980 Congress enacted the Civil Rights of Institutionalized Persons Act which covered any state facility or institution that provides nursing, intermediate or long term care that is residential in nature or which has custody over the residents. Soon after Congress investigated larger issues involving the quality of life and services provided, or the lack thereof, provided in short, intermediate and long term care facilities. Part of that investigation included a request for a comprehensive study on the matter. By 1986 the Institute of Medicine published an exhaustive investigation of nursing homes in the United States. By 1987, Congress enacted the Nursing Home Reform Act. The animating factor of the Act was to insure that all nursing home residents receive care to help them achieve their best level of mental, emotional and physical care.

PROTECTIONS IN PLACE