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Estate and Business Planning Legal Blog

Wednesday, May 11, 2016

Probate: Dispelling the Myths



The mere mention of the word “probate” usually engenders a rather negative reaction. For many people, the word conjures up visions of extensive delays and enormous expense involved in settling an estate.  Seminars promoting living trusts are pervasive and they promote the misconception that probate is an evil to be avoided.

The truth is that the process of “probating” a will is quite simple, at least if the decedent is a resident of the State of New York.  It involves the preparation and filing with the Surrogates Court of a probate petition and other documents which are typically prepared by an attorney.
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Tuesday, April 26, 2016

Taking Stock of Your Business



   Slow business cycles provide a unique opportunity for companies to evaluate important and often overlooked aspects of their operation. In short, this “down” time offers business owners and executives a chance to get their affairs in order.

   Employment policies, such as vacation and leave policies, whether or not contained in a company employee handbook, should be reviewed and updated periodically. Employment termination policies should be looked at carefully if staff reductions are planned.  Obtaining releases from terminated employees, in exchange for severance packages, may help to avoid litigation.
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Tuesday, April 12, 2016

Providing for Minors


  

 

A very common mistake clients make, in their estate planning, is that they name grandchildren, or other persons under the age of 18, as the beneficiary of their retirement accounts, annuities, or other investments.  Since persons under the age of 18 can not legally inherit assets in New York, and in most other states, this creates a serious problem.  Institutions are not permitted to disburse monies to minors; rather, they will normally require that someone be legally appointed as guardian of the minor in order to receive the funds.  That the minor has parents is not sufficient--the parents will be forced to commence legal proceedings in order to be appointed guardian for the purpose of accepting funds.

While it is certainly understandable that one wants to provide for grandchildren, the proper way to do so is by preparing a will that provides for a trust to receive the assets at least until the child attains the age of majority.


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Monday, March 14, 2016

Planning for the Future of Your Business

   It is extremely important, from time to time, to take a break from the rapid pace of business and devote some attention to the future and your long-term goals.  Whether you are at a stage in life where you are just beginning to grow your business, or you are at a point where you are looking to spend less time at work, putting together a plan is essential.

   If your goal is to gradually spend less time working, then you will need to think about your personnel situation and how to attract and retain employees who will be able to provide leadership in your absence.  Perhaps you will need to offer financial and other incentives to employees in order to accomplish this goal.  A written employment agreement may be necessary or desirable, with profit participation provisions.  Alternatively, you may wish to consider finding a  business partner who can share some of the burdens of operating your company, and relieve you of responsibilities so that you can devote more time to your personal goals.  Of course, finding a partner will necessarily involve preparing a shareholder or partnership agreement which spells out each of the parties’ duties and responsibilities.  The agreement should also provide for a mechanism in the event a partner dies, becomes disabled, or wants to leave.

   If you have mature children, you may wish to involve them in the business, with a view toward having them take eventual day-to-day control and responsibility.  Hopefully, this will allow you to enjoy more leisure time.  Passing on the business to them in a gradual fashion may serve the purpose of rewarding them for their work and devotion and providing them with incentives to succeed.  It can also serve the purpose of reducing future estate tax problems.

   Regardless of age, one must make financial and other provisions for family in the event of death or disability.  At an absolute minimum, you need to prepare a will, making clear what should happen to the business, to real property, and to other assets which are owned.  It must be ascertained if an estate tax problem is likely, and if it is, planning needs to occur so that the problem will be reduced, if not eliminated entirely.  Funds need to be made readily available so that taxes can be paid in a timely fashion without family members having to sell off assets quickly in order to meet payment deadlines .

    In summary, it is imperative that we all take some time to sit back and look at where our business is and where it’s going, so that we can achieve our business and personal goals. 

                       

Saturday, February 27, 2016

Understanding Trusts

Clients are often understandably confused about the differences between revocable trusts, irrevocable trusts, and testamentary trusts.  Very simply, testamentary trusts are those created pursuant to one’s last will and testament. Such trusts do not get established until the death of the person who created the will, and the provisions which govern the trust are contained in the will itself.  These are usually created for the benefit of minors, spouses and disabled children.  These trusts can be changed by the testator at any time, but they become irrevocable at his or her death.

A revocable trust is created during the maker’s lifetime, by a separate document. Revocable trusts, also commonly referred to as living trusts, can be amended or revoked at any time by the maker of the trust (the “grantor”).  Only upon the death of the grantor does the trust become irrevocable. The primary purpose of the revocable trust is to avoid probate.  In order to accomplish this purpose, all assets of the grantor must be transferred to the trust during the grantor’s lifetime.  Contrary to what is often discussed at revocable trust seminars, these trusts do not accomplish any tax savings, nor do they protect assets in the event one needs long-term health care.  

Irrevocable trusts are also created during the grantor’s lifetime, by separate documents.  There are many types of irrevocable trusts and their primary purpose is to achieve tax savings, prevent disabled beneficiaries from losing government benefits, and/or protect assets from long-term health care costs, while also avoiding probate.  They are often used in the case of second marriages, to allow a surviving spouse to receive income from the assets but ensure that upon the death of the surviving spouse, the assets pass to the grantor’s children.  Irrevocable trusts, by definition, may not be amended or revoked by the grantor.  Moreover, they necessarily entail some loss of control by the grantor over the assets transferred to the trust.  Of course, there are many types of irrevocable trusts.  For example, if one’s primary goal is to avoid or reduce estate taxes, one can establish a qualified personal residence trust, a grantor retained annuity trust, or a charitable remainder trust, to name a few.  Life insurance trusts are extremely useful, as they remove the entire value of life insurance proceeds from one’s taxable estate. As is the case with all irrevocable trusts, the grantor may not act as Trustee of these trusts, nor exert any control over the trusts.

         Prior to establishing any type of trust, one should first give serious thought to what objectives one is looking to achieve. Obtaining advice from an attorney who is knowledgeable in the areas of taxation and estate planning will prove invaluable.

 

 

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IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.


Saturday, February 13, 2016

Using Contracts in Your Business Endeavors

 

While many businesses were, in the past, run on handshakes with customers and suppliers, it is essential today that that these agreements be put to writing.  Certainly, not everything needs to be set forth in a detailed writing.  Very simple, even handwritten agreements, can be used for many day-to-day items.  For instance, a purchase can be documented simply by a written purchase order, detailing the essentials of the transaction, signed by both parties.  In this way, disputes as to quantity, price, and delivery dates can be avoided.  A simple engagement letter can be used by the company to hire services from other firms.  Oftentimes, simply having a transaction documented in writing will often serve to avoid problems that might otherwise occur. 


Sunday, January 31, 2016

The Value of Long-Term Health Care Insurance in New York

 

Long-term health care insurance is essential for anyone who has assets to protect and does not have the financial ability to pay well in excess of $10,000 per month for a nursing home without jeopardizing one's financial stability.  This is especially true when one spouse becomes ill, and the other is able to live at home but also needs to maintain his/her own standard of living.  While no one wants to go to a nursing home, sometimes it is inevitable.  More commonly, a person will go to an assisted living facility or have  a health professional take care of him/her at home, with the nursing home being the absolute last resort.  Unfortunately, while not as expensive as nursing home care, both home care and assisted living are quite expensive.  In New York, where the cost of care is especially high, purchasing long-term care insurance should be a serious consideration for anyone over the age of 50.


Friday, January 22, 2016

Beneficiary Designations for Retirement Assets

 

While it is not necessary, nor necessarily desirable, to name beneficiaries on one's savings, checking and investment accounts, it is essential that retirement accounts have named beneficiaries.  Retirement accounts include IRAs, 401ks, TDAs, 403(b) accounts, and the like.  If one does not name an individual beneficiary or beneficiaries, and these accounts pass to one's estate, income tax will be due almost immediately, at the estate income tax rate.  The tax rate for an estate is usually substantially higher than the individual income tax rate.  If an individual is named as beneficiary, that individual can draw the money out over time, paying income tax over time instead of immediately, and usually at a lower rate. An annuity is also an asset which should have beneficiaries named, as the growth in the annuity is taxed at ordinary income tax rates, rather than being treated as capital gains. 

  

 

 

 

 IRS Circular 230 disclosure: We inform you that any tax advice contained in this communication is not intended or written to be used, and may not be used by your or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code.


Saturday, January 9, 2016

Negotiating the Commercial Lease

Business owners often believe that the commercial lease is standard and that the services of an attorney are not necessary.  While commercial leases are usually in a somewhat standard form, there are many important items that deserve special attention and can be negotiated. For example, it is important to obtain from a landlord the ability to assign the lease or sublet space, in the event the business owner experiences financial difficulties. Additionally, provisions dealing with repairs, the condition of building systems, annual rent increases and personal guarantees are not etched in stone and can be modified.  In short, there are many concessions that can be obtained from a reasonable landlord, concessions which will save the business owner a good deal of money.  It certainly behooves one, then, to obtain the services of an attorney who is skilled at negotiating leases. 


Friday, December 4, 2015

How to Avoid Probate

 

A very common misconception is that probate is to be avoided at all costs.  While the probate process in some states can be long and arduous, probate in New York, if handled by a competent attorney, is usually quite simple.  One advantage of going through probate is that the Courts oversees the process, to some extent, and so it forces the parties involved to do the right thing.  Having a will which goes through probate also allows the easy creation of trusts for minor children and it can provide for the distribution of assets in the event of the death of a beneficiary.

If one desires to avoid probate, preparing a revocable living trust is one option.  Another option is to make sure that all of one's liquid assets have beneficiaries listed on them, so that at death the assets will pass directly to the beneficiaries without court intervention.  Clearly, this can not be done with real property. One should take care, however, in naming beneficiaries, to make sure they are all competent adults.  One should never list minor children as beneficiaries, as that causes a good deal of legal complications.  Moreover, problems are created when a beneficiary listed on an account predeceases the owner.  


Thursday, November 19, 2015

Acquiring Computer Technology: The Need to Negotiate Your Contract


Many business owners and managers feel comfortable negotiating the general terms of computer agreements. Often, the purchase or rental of computer equipment or software seems like any other acquisition of office equipment.  The stakes, however, are dramatically higher when computers are involved.  

Whether you are leasing or purchasing the software or hardware, having software developed for you, or simply seeking a service contract for an existing system, one or more contracts will be offered for your review and signature.  The contracts are often lengthy, detailed and technical, yet appear to be quite “standard”.  Generally, the company seeking to sell its product or service will give you the impression that the form of contract is one which is universally employed, that review and execution is a mere formality, and that the provisions are not negotiable.  This may be especially true when the company offering the contract is a large and established one.

There are many reasons for seeking the advice of an attorney prior to the execution of a computer contract.  Clearly, if your business depends or will depend heavily on computers, then any malfunctioning of the system will seriously affect your operations.  Moreover, the acquisition of computers often entails a large outlay of capital.

Certain topics covered by the typical computer contract are crucial, and the manner in which they are handled can either save you a good deal of money, time and anxiety, or they can cost you dearly.  For example, the commencement date of the contract or the time at which the system is “accepted” by you should not occur unless and until the system has been installed and is operating properly.  The time period for implementing the system should be specified, as well as your recourse if the schedule is delayed.  Perhaps more importantly, you should be assured that technical assistance will be provided.  If you should experience a problem with the system, you do not want to rely on a company which simply offers telephone assistance that is offered on a “best efforts” basis.  You want to know that you will receive assistance within a 24-hour or 48-hour period.

In summary, computer contracts are not as standard nor simplistic as they may first appear.  Even a cursory review by an attorney knowledgeable about computer contracts can save the business owner a great deal of money, time and trouble.


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