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Estate and Business Planning Legal Blog

Sunday, July 5, 2015

Important Estate Planning Considerations For Dual Residents

   

               It is quite common for people to have two homes, usually one in New York and one in Florida or some other southern state.  While a will prepared in one state is usually valid in all other states, if done in accordance with the law of one's residency, that is not the case with health care directives.  Each state usually has their own laws and forms regarding  health care proxies and living wills, and is is quite common for institutions not to honor or recognize forms prepared in another state.  This is usually also the case with power of attorney documents, since they are state-specific.  It is highly recommended, then, if one spends a good deal of time in another state, to have a second set of these documents prepared by an attorney licensed to practice law in that state.

 

 

 

 

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.

 

 

                                     


Sunday, May 31, 2015

Guardianship of Disabled Children

If you have a child who suffers from a type of disability which makes it impossible for the child to make his/her own decisions, then you will need to obtain legal guardianship of that child once the child nears the age of 18.   At eighteen years old, a child is considered an adult and, so, the parent is not able to make decisions for the child unless the parent has been appointed the legal guardian.  Of course, the guardianship can be done after the child's 18th birthday, as long as it is clear that the disability began before the age of majority.

   New York has made it relatively easy for the parents of disabled children to become the legal guardians.  It is accomplished through an Article 17A proceeding, and is done through the Surrogates Court.  This is a simpler, less expensive procedure that is specifically for disabled children.  There are several forms required to be filed with the Court and then a hearing date is set when the parents and child appear personally.  One of the many advantages of the procedure is that the parents can list other family members or persons to step in as legal guardian in the event they become unavailable. 

   Guardianship will permit the parent (or other guardian) to make all decisions for the child, including health care decisions, and to manage the child's income and assets, if any.  While the proceeding can be done without an attorney, it is highly recommended that a lawyer experienced in handling these proceedings be retained for this purpose.


Thursday, May 14, 2015

Long Term Health Care Planning: How To Protect Your Home

                                 

It is a well-known fact that nursing care, whether rendered at home or in a nursing facility, is extremely expensive. Even if one possesses substantial assets, those assets will be eroded quickly as a result of spiraling health care costs.  Often, the most significant asset owned by the person needing such care is the family home.  Therefore, it is important to take steps to ensure its protection.

A common method of financing long-term health care costs is the utilization of benefits available under the federally funded Medicaid program. Unfortunately, in order to qualify for benefits, the value of the assets which you own (including your residence) must be minimal.

A properly drafted irrevocable trust can preserve your home, and at the same time, avoid adverse gift tax and capital gains tax consequences.  It can also provide you with a great deal of flexibility and some degree of control. For example, the trust can be designed to provide you and your spouse with the right to reside in the home for the remainder of your lives.  If you later decide you want to move, you can require the trustee to sell the home and either buy another home in its place or invest the proceeds of the sale in order to provide you with income.  Lastly, such a trust can provide for disposition of the home upon your death without the necessity of your heirs going through probate.

 

 

 

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.


Sunday, May 3, 2015

How to Improve Your Company's Collections

Unfortunately, not getting paid promptly, or at all, for services or products supplied is a common problem experienced by businesses.. There are a number of simple steps a business owner can take in order to decrease the occurrences of such non-payment, without resorting to litigation.   

       Of course, it is always better to be paid in advance, but most customers are not  willing to do so.  
One of the first things a business owner can do in order to improve collections is to make sure that detailed invoices are promptly sent  to the customer, with the total owed shown clearly and boldly, along with a prominently displayed statement that payment is due within a certain, short time period, and that interest will accrue if the invoice is not paid promptly.  Putting this additional language in your invoices may invoke a negative response from customers, but it also shows customers that you are serious about getting paid. 

                           It is also extremely important for a member of the Company's staff to be in charge of quickly following up with customers who do not pay in a timely fashion, whether it be by sending out a second invoice, or by calling the customer.  The longer one waits to pursue payment,  the less likely collection will be successful. If  the call and/or second invoice doesn't yield positive results, a letter from the company demanding payment should be sent out on company letterhead.  As a last resort, the business owner should have his/her attorney send a collection letter to the customer, threatening litigation.

 


Saturday, April 18, 2015

Planning For When Your Child Attains The Age Of Majority


Parents are usually relieved when their child turns eighteen (18) years old. One reason is that they no longer need to worry about having a guardian for that child in the event something happens to the parent(s).  By the same token, however, once the child becomes an adult under the law, the parent may experience difficulties in making medical and financial decisions for the child, and even in trying to obtain information regarding the child.  It is essential, then, for the parent to have a health care proxy, living will and power of attorney prepared for the child.  These documents need to be properly executed, thus giving the parent the ability to make health care decisions and assist with financial matters, notwithstanding the fact that the child is now an adult under the law.


Friday, March 27, 2015

Choosing Between A Limited Liability Company and A Corporation




New business owners are often concerned about liability, and rightly so.  Once a business begins operations, or even before it, one should consider what type of legal entity should be formed in order to protect the owner(s) from personal liability.  The two most common choices are corporations and limited liability companies.  There are two types of corporations: an “S” corporation, which avoids double taxation, but which has restrictions on the number and type of shareholders, and a “C” corporation, which does not contain restrictions but usually results in two layers of taxation, one at the corporate level and another at the individual level.  A limited liability company is another consideration.
Read more . . .


Saturday, March 14, 2015

The Importance of Establishing A Supplemental Needs Trust

                         

                       It is extremely important for the parents of a child with special needs to embark on estate planning early on in the child’s life. First, in order to permit the child to collect government benefits, assets should not be held in the child’s name.  Perhaps more importantly, the parents should establish a special needs trust, to enable them to leave monies to their child upon their death without jeopardizing those benefits.  The monies in the trust will also be available to the trustee in order to enhance the quality of the child’s life.  While many parents expect that their other family members will look after the special needs child, financially and otherwise, there can be adverse tax and other consequences if they provide financial assistance without the benefit of such a trust.

 

 

 

 

 

 

 

 

 

 

 

 

 

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 28, 2015

Protecting Inherited and Gifted Assets in a Divorce

 

In New York, as in many other states, gifted and inherited assets are considered “separate” property for matrimonial purposes.  Essentially, this means that you need not share those assets with your spouse in the event of divorce.  However, it is extremely important that you keep those assets in your own name, and do not use them for marital purposes, mingle them with other assets, or add your spouse’s names to the titling of those assets.  If you do, they lose their separate character and are subject to equitable distribution in a divorce proceeding.




Thursday, January 29, 2015

Buying & Selling Commercial Real Estate: Some Practical Tips


More and more business owners are deciding that purchasing a building for their business use is a better option than leasing space.  While real estate prices are currently at a high level, there has been a renewed confidence in the strength of the real estate market in general. 

Once you have decided on a parcel of commercial property you are interested in buying, it is absolutely imperative that an environmental assessment be done and a professional engineer be engaged to inspect the building.  Ideally, these assessments should be done prior to contract, but the seller will typically insist on having a signed contract beforehand.  At a minimum, the contract of sale should provide the purchaser with a reasonable due diligence period, during which environmental and other assessments can be made.  Additionally, the purchaser should have the unqualified option to terminate the contract in the event these assessments uncover problems.  In the event unfavorable conditions are detected, you will at least be in a good position to negotiate a lower price if you should decide to proceed with the deal.  

It is likely that the purchaser of commercial real estate will find it necessary or desirable to finance the deal with a mortgage loan. It is important for the buyer’s attorney to negotiate a liberal mortgage contingency clause, so that if the loan application is not approved, you can get out of the deal without losing your contract deposit.  It is generally advisable to form a new corporation or limited liability company to take title to the commercial property, one which is separate from your operating company.  In the event someone is injured on your property, it is desirable to limit your liability to the value of the property and not subject the value of the business to any loss.

The seller of commercial real estate may wish to consider utilizing a 1031 exchange, in order to defer capital gains.  In order to defer the gains, you must purchase a like-kind piece of property within a limited period of time.  You need to employ the services of a 1031 intermediary in order to accomplish this objective.  

Even if you are not interested in purchasing commercial real estate for use in a business, you may wish to use the real estate as an investment vehicle.  In these instances, it is still imperative that the appropriate inspections and assessments be made.  Whether purchasing commercial property for use in your business or as an investment, one should retain experienced counsel in order to negotiate the real estate contract and provide guidance in due diligence matters.
 

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Tuesday, January 13, 2015

Living Trusts: Are They For Everyone?


The mere mention of the word “probate” usually instills fear in people, conjuring up images of estates dragging on for years and incurring enormous expense. Seminars and books promoting living trusts are pervasive and they foster the misconception that probate is always an evil to be avoided.  Living trusts are touted as devices which avoid estates taxes and protect assets from long term health care costs.

The truth is that living trusts do not generally avoid taxes, nor do they preserve assets. The only type of trusts which can serve this dual function are irrevocable trusts.  Establishing a living trust can accomplish the purpose of avoiding probate, if you are successful in transferring each and every of your assets into the trust.  If you forget or are unable to transfer an asset into the trust, probate will still be required.  Moreover, certain assets, such as items of personal property, furnishings, jewelry, and works of art cannot be placed into a living trust.  If you own a cooperative apartment, you will need to obtain the permission of the coop board in order to transfer the apartment, which permission is commonly denied.  Lastly, funding a living trust can be an arduous process.  The deeds to your real property will need to be changed, and your bank and brokerage accounts will have to be closed and re-opened in the name of the trust. 

While probate can be a long and costly process in some states, that is not generally the case in New York.  As long as the executor and attorney for the estate perform the work promptly, and there is no contest by a disgruntled family member, probate can be accomplished within weeks.  Much of the delay encountered in the administration of an estate is caused by the need to transfer assets into beneficiaries’ names, and by tax issues, neither of which can be avoided by having a living trust.

While a living trust is not appropriate for everyone, it is advisable in certain instances.  If you own real property in more than one state, creating a living trust for that property will avoid the need for a second probate proceeding.  This is especially true if your property is located in a state where probate is a lengthy and expensive process.  If you are or become a resident of another state where probate is difficult, you may wish to create a living trust for all of your assets.  Moreover, if your only next of kin are distant relatives who may not be easily located, or where it is  expected that a family member may contest your will, having a living trust would be beneficial.

In short, if one is interested in avoiding delays in the settlement of one’s estate,  having your affairs in order is essential.  Selecting a responsible Executor and attorney who can handle matters competently and efficiently is an important part of the process.
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Friday, January 31, 2014

What to Do When Your Spouse Becomes Ill

 

Knowing what to do when a loved one becomes ill can alleviate some of the uncertainty and anxiety that normally follows. Oftentimes, people panic and start making changes to their estate plan without first consulting with an experienced attorney or tax advisor. Family, friends, and others who want to help, tend to give well-meaning advice. They may suggest putting assets into the name of the well spouse alone, transferring assets, and/or adding or changing beneficiaries to accounts. Following such advice without considering the tax and other consequences can have unintended, adverse consequences. One should not begin to make changes to bank accounts and other investments unless and until all of the tax implications have been examined.

One of the first steps one should take when a spouse becomes ill is to visit with an attorney experienced in the areas of estate planning, tax and elder law, to make sure that you have all of the legal documents which you may need. For example, a health care proxy/living will and power of attorney are essential legal instruments. Making a detailed list of all of the assets owned by you and your spouse, and locating important financial information is also essential, so that tax planning can be properly undertaken. If one has a safe deposit box, it may make sense to consider emptying the box in advance, if the illness is severe, or at least making sure a deputy is appointed and has access to the box.

In the event of death, surviving spouses should not begin to collect life insurance proceeds or the decedent’s IRA or other retirement funds, nor should the spouse begin to remove the decedent’s name from assets, until legal advice from an estate planning attorney has been obtained. If a potential estate tax problem exists, a surviving spouse may want to "renounce" his or her interest in certain assets (i.e., not accept them), thus allowing the assets to pass to children or into a credit shelter trust created under the decedent’s will. One may not renounce if one has already exerted some control over an asset; thus, it is very important not to take any action with respect to assets until one is certain that a renunciation is not beneficial. In order to be valid, a renunciation must be done within nine (9) months of death.

In short, there is much to do when faced with the illness and/or death of a loved one. Knowing what to do during these difficult times can reduce stress and uncertainty and provide some comfort to the family.

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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.


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