Articles Tagged with nyc estate planning

Robo-advisers are transforming the investment industry, including the estate advisory and planning segment. Algorithms present cost-effectiveness that translates to further savings for the investor by eliminating the “middleman.” Human advisers charge significantly more than these alternative wealth management services, making traditional services less appealing of an option for younger investors sold on technology and rapid returns. How does this bode for retirement investors, and especially the estate planning segment of the market?

Robo-Adviser Investment Services

The more complex the management of a fund, product, or portfolio of services, the less likely an investor will be fully-satisfied with robo-advisory services one hundred percent of the time. Major investment firms piloting robo platform as part of their consumer services offerings, are finding artificial intelligence to be a support feature rather than an obstacle to delivery of high-quality investment advisory services. Robo-advisers offer the kind of on-demand attention that a “living trust” requires; collecting the current financial position and investing goals of a client without the imposition of human delays. According to industry experts, the best is yet to come. Now that robo-advisers are capable of handling sophisticated tasks like retirement and estate planning, both investors and human advisers benefit from an obsolescence of human error. It is perhaps for this reason that legislators have been laissez faire in creation of new regulatory rules associated with robo-adviser practice.   

When estate planning clients require a legal guardian to perform power of attorney, the process can be complicated. This is especially true when rules of guardianship are involved in distribution of revocable trust assets for purposes of medical care or other life-sustaining care need of the trustee. In some states, like New York, state law allows for the legal guardians of incapacitated parties to withdraw life-sustaining therapies if the former deems the patient’s wishes are met with the decision. While informed consent laws provide for guardian power of attorney in meeting those medical treatment requirements, the payment for those professional services may be beyond a patient’s means without disbursement of convertible trust assets.

Guardianship and Estate Planning

The following is a checklist for representation of a trustee who is an incapacitated party in the estate planning process:    

At the turn of the 21st century, divorce or annulment of a marriage did not automatically revoke any revocable disposition or appointment of property from an ex-spouse at time of a decedent’s death in New York.  Since 2008, with the amendment of the. Existing Estates, Powers and Trusts Law, EPTL 5-1.4, estate law rules to divorce or annulment revocation of inheritance applies to any revocable disposition or appointment of property assigned a former Spouse as a designated beneficiary. New York Law EPTL 5-1.4 revokes any nomination of an ex-spouse as trust fiduciary, executor, agent, guardian, representative, trustee, or attorney-in-fact. Under the prior divorce and annulment revocation rule, the legal termination of a marriage agreement did not automatically revoke an ex-spouse’s power of attorney, or most revocable dispositions (“testamentary substitutes”), including joint tenancies (i.e. joint banking accounts), lifetime revocable trusts, or insurance policies (IN RE: The Estate of Joseph SUGG, Deceased. No. 2013–5055/B, Decided: June 29, 2015).

Amend, Restate or Execute a New Will?

When a couple divorces, changes to a will must be effectuated to an estate. Amendment, restatement, or execution of a new will is required under current New York estate law. Estate planning documents can be changed with the assistance of a licensed attorney experienced in matters of trust document modification and probate litigation. A client undergoing divorce is advised to review existing estate planning documentation at the commencement of a divorce, and at time of finalization. Estate law rules to entitlements provide that a soon to become ex-spouse will automatically lose named beneficiary status in a will or revocable trust. In matters where there is a judicial separation, annulment or final decree of divorce in process, revocation occurs only at the end of those proceedings, regardless of couple or court determined outcome.

In 2018 new legal reforms were implemented that will effectively protect estate trusts from retirement benefit plan asset seizure by creditors.

Reform of the Employee Retirement Income Security Act of 1974 (ERISA) in the past year extends protections to estate trusts, and their assets. The latest ERISA rules cover managed retirement plans and welfare benefit plans held by nearly fifty-four percent of retirement benefits, and fifty-nine percent of insurance benefits associated with those plans. With the new reform, trust assets will be at a lesser risk of court ordered attachment by creditors for the collection of a decedent’s outstanding debts due to fiduciary bonding agreements to nondisclosure.   

Prudential Measure, Fiduciary Reform

In New York, a court will decide if spousal maintenance (“alimony”) should be extended to a former spouse’s estate. Marital property part of a decedent’s estate is only considered an asset of the former spouse if no other heir or beneficiary is designated in a written will. Division of marital property and major assets are a considerable decision in the distribution of resources during a divorce proceeding. Court award of finance and other property assets during a divorce is the result of judicial review. A range of factors are considered before a court issues an order for spousal maintenance. Rules to Special controlling conditions to division of property and spousal maintenance stipulated in New York Consolidated Statutes, Art. 13 §236. The same rule applies to award of estate assets.

New York Estate Laws and Marital Property

The adoption of the Uniform Disposition of Community Property Rights at Death Act of 1971 in New York legislation, recognizes community property rules to addressing equitable distribution at time of one ex-spouses death  (Estates, Powers and Trusts Laws §§6-6.1, et seq.). The Act preserves community property ownership rights of spouses that have moved from a community property state to New York, a non-community property state.

Partnerships, or “limited partnerships” LP, established with individual member capital contributions of money and property in the interest of forming a business are potentially asset that can be a substantial factor in estate planning. The transfer of business and personal capital to legacy capital establishes a trust for grandchildren or other beneficiaries who will benefit from a decedent’s wealth long-term. One of the main challenges is protecting those former business assets from taxation.

“Pass-through” Partnership Tax Rules  

The legal treatment of a LP is one of discretionary liability where partners are concerned. This bodes well for estate planning, as there is little worry of another general partner influencing the actions of an estate. All U.S. states have adopted the Revised Uniform Partnership Act (RUPA) so that all laws are consistent with federal rules to partnership. Partnerships (IRC §761) comprised of two or more members are not considered taxable entities as result.

Probate law demands that an executor must pay the debts and other financial obligations of an estate prior to distribution of assets to a Decedent’s beneficiaries. Although heirs and beneficiaries are not legally responsible for paying off estate debt, the total value of the estate can be greatly reduced as result of debt obligations.

Priority debt obligations.

Living trusts have little protection from creditors while a Decedent is alive. Revocable trusts enable an executor to coordinate debt payments in advance. Claims made against irrevocable trusts can also provide a creditor access to additional funds during the probate process after a Decedent has died. Insolvent estates without adequate liquidity to pay debts and obligations may still be subject to debt obligations after court filing fees, attorney’s fees, and executor costs to administer the estate have been paid. Other priority debt obligations include funeral and burial costs; federal and state taxes; medical bills; child support claims; dependent family support claims; judgments; followed by all other debt.