Estate Planning

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.

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.

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.

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.

Thursday, August 15, 2013

Is it Time to Review and Update Your Estate Plan?

It is a good idea to periodically review your will, health care proxy, living will, power of attorney and trust agreements to see if the contents of the documents still adequately reflect your wishes.

Typically, a change in family circumstances, such as a marriage, divorce, remarriage, or the birth of children, may necessitate revisions to your estate planning documents. If you have moved your residence or purchased property in another state, you should consult with an attorney in order to determine what modifications to your estate plan may be required as a result of the move and/or purchase.

It is also imperative that you keep a current inventory of your assets and that you review the titling of the assets and the beneficiary designations, if any. This is important for several reasons. For estate tax purposes, you need to know the total value of all your assets in order to determine if you have an estate tax problem. Additionally, if something happens to you, your heirs should be able to locate your assets fairly readily, without having to dig through papers and conduct time-consuming searches. Perhaps more importantly, you need to check the ownership of your assets. If you have made any provision for the creation of trusts under your will or pursuant to a revocable living trust, the assets should be titled so that they pass according to the terms of the trust. A common problem is that spouses fail to separate their assets in order to fund testamentary trusts, thus resulting in an estate tax problem.

You should look to see if any of your children are joint owners of any of your assets. If a child is a joint owner, the asset will automatically pass to that child upon your death, regardless of what your will says. Such a joint ownership necessarily means that the child has present ownership rights. If that child were to get involved in a divorce proceeding or other litigation, the asset might be at risk. Beneficiary designa-

tions on annuities, life insurance policies, IRAs and other types of retirement accounts should also be reviewed to make sure they are current and properly reflect your desires and estate planning goals. A frequent misunderstanding is that the terms of one’s will controls the disposition of one’s assets; however, that is not true if assets are jointly owned or list beneficiaries. In those instances, the beneficiary designation or form of ownership actually supersedes the terms of one’s will.

In summary, it is important to take the time to periodically review your estate plan, especially with the guidance of an attorney experienced in estate planning.


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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.

Thursday, May 9, 2013

The Benefits of Establishing A Trust

Clients are often and understandably confused about the differences between irrevocable trusts and revocable living trusts, and the consequences they each have for asset protection, estate planning and taxes.

Those who advocate living trusts commonly lead people to believe that these trusts will reduce estate taxes and protect one’s assets in the event long-term health care is needed. While living trusts serve the purpose of avoiding probate, they do not protect your assets. Since you maintain control over the assets in your revocable trust, they are still considered available to pay for your health care needs. Similarly, unless a living trust creates certain types of irrevocable subtrusts, it does not reduce one’s taxable estate since the person creating the trust maintains complete control. Notwithstanding the foregoing, living trusts are extremely beneficial in certain instances, where, for example, the person creating the trust has disabled heirs, in situations where it is believed that some heirs are likely to protest the estate plan, or where the heirs are distant relatives. In these situations, having a living trust will have the effect of avoiding a more lengthy and costly probate process. Additionally, if one owns real property in another state(s), establishing a living trust will mean that your heirs won’t have to go through a second probate in the other state(s).

The only way to protect assets from long-term health care costs and creditors is to transfer assets to family members or to an irrevocable trust. Putting one’s home into such a trust can be quite beneficial. In most instances, one does not rely on one’s home as an income source with which to pay bills; therefore, transferring ownership to an irrevocable trust usually has no effect on one’s lifestyle. If properly drafted, an irrevocable medicaid trust can protect the home from long-term health care costs and from creditors, while at the same time provide great flexibility. One can retain the right to reside in the home for the rest of his or her life, and also direct that the home be sold and another be purchased in its place. The trust can also be designed to prevent capital gains tax problems and to preserve senior citizen and veterans tax exemptions. Lastly, by transferring your home to a trust you not only avoid probate (in connection with the home) but you also avoid the dangers inherent in transferring your home directly to your children.

Of course, one should consult with an experienced attorney with expertise in estate planning and taxes before embarking on the creation of any trust, and such a creation should be done in connection with developing a comprehensive estate plan.

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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.

Monday, December 31, 2012

The Uncertainty of Taxes: How to Plan Your Estate

We are all tired of hearing about the "fiscal cliff" and Congress's inability to come to agreement on the issue of taxes.  How does one plan one's estate in the midst of such uncertainty?  While estate taxes are, and should be, an integral consideration in the development of an estate plan, there are still important components of an estate plan which can be assembled regardless of the tax laws.  It is essential that people don't put all of their planning on hold, waiting for some clarity on taxes.  It is certainly better to have a partial plan, rather than none at all. 

So what can be done now, in the wake of the uncertainty?  Simple basics.  For example, your will (or living trust) should be reviewed to see if it needs to be updated.  You  should make sure you have an adequate health care proxy/living will and power of attorney in place, in the event you should become disabled.  Do you need a living trust, or is having a will adequate for you? Consider how your assets are structured.  Do you have designated beneficiaries on your accounts?  If so, are these beneficiary designations current?  Have you considered the consequences of having designated beneficiaries in the first place?  Often, clients have beneficiary designations without considering what monies will be available at death in order to pay taxes,  funeral and other expenses.  If there are no funds in the estate, it will be up to individual beneficiaries to contribute monies, something you might not want to rely on.  Additionally, the designated beneficiary designations may result, inadevertently, in some beneficiaries receiving more than others.  Remember that IRAs, 401ks and other retirement accounts should have individual beneficiaries listed, in order to avoid adverse income tax consequences.

For those who have children and no will in place, now would certainly be the time to get started on developing an estate plan. At a minimum, guardians should be appointed for minors, so that a court does not have to step in to name someone to raise your child.  Also, you will likely want to make provision for monies to be held in trust for the minors, until they attain stipulated ages, in order to avoid having a child inherit monies when he/she is too young.  Since minors can not legally own money on their own behalf, one should make sure not to list a minor as a beneficiary on one's accounts; otherwise, legally proceedings will need to be commenced upon your death in order for someone to be able to control these funds for the minor.   It would certainly be a better idea to prepare a will, nominating a person of your own choice for this role.

In summary, while we are waiting for their to be some certainty with the tax laws, we should devote our time and energy to making sure that we have some form of a comprehensive estate plan in place.

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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 you or or anyone else for the purpose of avoiding penalties imposed under the Internal Revenue Code. 


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