New York Estate Planning Lawyer Blog

Like Groundhog Day: Mistakes Retirees Make Over and Over

Fri, 03 Feb 2012 09:56:44 -0500

Yesterday was Groundhog Day--that storied time when a prognosticating animal is supposed to tell us how many more weeks of winter we have left this season. According to most reports, yesterday the nation's most famous groundhog, Punxsutawney Phil, saw his shadow and scurried back out of the cold. Apparently this is a sign of many more weeks of winter to come. Punxsutawney Phil was made a national celebrity in the early 1990s after being spotlighted in the popular Bill Murray movie titled "Groundhog Day." The film has gained legendary status among some, as it chronicles the exploits of Murray who wakes up in Punxsutawney every single morning on February second, forced to relive Groundhog Day over and over.

Our New York estate planning lawyers know a few things about repetition. That is because when it comes to planning for one's financial future, many local families seem to make the same mistakes over and over again. Yesterday CBS News published a Groundhog Day special report listing seven money mistakes that retirees consistently make. Many of the items on the list are quite familiar to the New York retirement attorneys at our firm.

For example, the first mistake is putting off estate planning altogether. The story's author noted that "failing to create a financial or estate plan isn't just a matter of missing out on investment opportunities or tax advantages. It can get you in trouble later in retirement when you're no longer at the top of your game mentally." It is always comforting to push off thinking about potential mental challenges in the future, but failure to account for it only leads to heartache for one's family. Nearly 50% of the nation's population over eighty years old suffers from some sort of cognitive impairment. A host of challenges are created if planning is not done before the problems set in.

Another big mistake that is repeated over and over by retirees is paying too much in taxes. It is vital to learn how withdrawals from retirement accounts, volunteer work, and other issues affect one's taxes. Many seniors fail to create a plan of gradual withdrawals from retirement accounts to minimize tax burdens. In addition, many seniors who do regular volunteer work do not use tax deductions for things like mileage and out-of-pocket expenses.

Far too many seniors fail to take full advantage of the planning tools available under the law to put themselves and their family in better financial shape. All local residents should take the time to visit with a professional to ensure that they do not make the same mistakes that so many others continue to make day in and day out.

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Four Possible Estate Tax Scenarios

Wed, 01 Feb 2012 10:11:38 -0500

Uncertainty is almost always attached to discussions about the estate tax. As our New York estate planning attorneys have often shared, it is vital for those of certain income levels to pay close attention to the prevailing political winds to understand if estate tax changes might apply in their situation. When a New York estate plan is crafted it will take into account the current estate tax scenario. However, what is true now may not be true in the future. It is for this reason that estate planners must remain in close contact with clients to ensure modifications to a plan are made if necessary.

When it comes to the estate tax, many prognosticators make various predictions about what we can expect in the future. For example, a story this week at Producer's Web suggested that the future of the federal estate tax depends almost entirely on what will happen in the upcoming November elections. The author suggests that there are four possible scenarios.

1) If Congressional gridlocked continues after the election then the new law may be allowed to sunset. This means that that there will be a $1 million estate tax exemption and a 55 percent tax rate. This would take effect January 1, 2013.

2) If the legislature remains split between the parties, then there is also a chance that Congress could extend the current law. Under this scenario the exemption would remain near $5 million (though slightly higher after adjusting for inflation) with a top tax rate of 35 percent.

3) Some argue that the political winds are shifting in favor of the Democrats. If the party gains control of the House and retrains power in the Senate (and the Presidency), there may be more room to make widespread changes. While this might lead to a range of possibilities, the preference of the Democrats is likely to craft a plan close to the previous law, with exemption levels near $1 million and rates closer to 55 percent.

4) Conversely, if Republicans take control of Congress then there is a chance that the federal estate tax could be repealed altogether.

It will be interesting to see if any of these predictions actually materialize. In the meantime, it might be helpful to listen to what candidates--Presidential and Congressional--have to say about the estate tax while on the campaign trail. That is likely the best indicator of what might happen if either party gains control of the legislative process and is able to muster enough votes to make changes to the current plan.

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Famous Feuds and New York Estate Planning Lessons for Every Family

Mon, 30 Jan 2012 10:29:01 -0500

A Reuters story late last week suggested that while estate planning feuds of the famous usually involve millions, the principle issues are the same as those faced by all local residents. Every case must be evaluated individually, but the same main issues are found again and again. That is why our New York estate planning lawyers urge residents to visit with experienced professionals when making preparations because they have likely seen similar issues in the past and can help anticipate problems that might come up down the road. As this latest story explained "anyone thinking about wealth transfer faces the same issues: dysfunctional families, potentially unequal positions in the family business, perhaps multiple marriages with kids from each." This applies whether one has $50,000 or $50 million.

For example, second marriages often create planning problems. When crafting an estate plan, one must balance the needs of the second spouse with the children of the first marriage. If one doesn't do it, as the author notes, "you're basically buying a litigation case." For example, the longest estate litigation case of the last century was that of Anna Nicole Smith. She was a second wife of a billionaire investor. The children from the man's first marriage engaged in a prolonged battle to ensure that Ms. Smith did not receive any substantial portion of the man's wealth. The case was still not resolved with Ms. Smith herself passed away.

Family businesses also present common issues for those in all income brackets. Much family wealth is wrapped up in a business. Often some of the children participate in the business while others do not. This often creates significant estate planning issues regarding who gets what share of the business. One of the most well-known examples of this is that of the Koch family in New York. The patriarch had created a fortune after developing a new cracking method in oil refinement. However, upon his death the man's four sons engaged in a prolonged legal dispute over control of the business. As the article notes, "there are a lot of ticking time bombs in family businesses that creates litigation."

Many judges involved in these sorts of cases have explained that they believe estate litigation is on the rise. The fact patterns of the cases are consistent: second marriage issues, family business struggles, and similar situations. Those involved also report that the size of the estate is often of no consequence. Estate disputes are not only the concern of millionaires.

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Huguette Clark's Only Friend Has Her Own New York Estate Plan Settled

Thu, 26 Jan 2012 08:49:24 -0500

One of the most well-known New York estate planning stories (and mysteries) of recent years is that of Huguette Clark. The extremely reclusive heiress recently passed away, leaving hundreds of millions of dollars with many wondering where exactly the money will end up. Of course, in most cases an inheritance will go to surviving close family members, dear friends, or well-known charitable causes. However, Ms. Clark had very few surviving family members, and it is now being reported that she only one "real" friend, a French woman named Suzanne Pierre.

Ms. Pierre had become somewhat of a liaison between Ms. Clark and the rest of the world. It was alleged that Ms. Pierre was one of the few people who was privy to the heiress's estate planning documents. In fact, according to the New York Observer, Pierre once helped anonymously sell some of Ms. Clark's impressive art collection. She was also the recipient of a $10 million gift of a rare painting from the estranged heiress. Before Ms. Clark's passing some predicted that Ms. Pierre would actually be named heir to much of Ms. Clark's fortune. However, that possibility vanished when Ms. Pierre herself passed away a few months before Ms. Clark moved on.

One of Ms. Pierre's own most valuable assets, her Park Avenue apartment, was recently sold during the disposition of her estate. City records indicate that the unit sold for just under $2 million. The sale comes as many in the real estate world speculate on the prospects of Ms. Clark's own, massive Park Avenue apartment. The 42-room unit is expected to fetch somewhere around $70 million. Many are calling the unit the most sought-after apartment in the entire city and "the listing of the young century."

However, it remains unclear when the unit will actually be listed, because a fiasco still exists regarding the ownership of Ms. Clark's assets.

As it now stands Ms. Clark's estimated $500 million is in limbo. Accusations of fraud and undue influence have already been made. Caregivers, financial professionals, and distant relatives are all locked in a legal struggle to determine what happens to the fortune. Our New York estate planning lawyers always find these drawn-out legal feuds to be quite sad. Of course this sort of situation is almost expected when there is so much money at stake. However, similar in-fighting occurs even when much less is on the line. The emotions of the situation often run high and the focus becomes "winning" as opposed to properly respecting the wishes of the one who passed on. Anything that can be done to prevent such situations ahead of time should always be explored.

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Protecting Assets When Facing Uncertainty

Mon, 23 Jan 2012 17:38:30 -0500

NuWire News published an interesting blog post last week that runs down a few ways that community members can use estate planning techniques to protect assets in "uncertain times." Of course, our New York estate planning lawyers realize that uncertainty exists at all times, because no one knows for sure what tomorrow might bring. However, there are always some circumstances when future financial trouble seems particularly likely--such as when one might need long-term care either at home or a long-term care facility. The article authors note that it is always beneficial to shield assets before they become a target, otherwise, depending on the circumstances, there are a range of penalties that may attached to the conveyance. For example, when it comes to applying for New York Medicaid, it is vital that asset transfers be made at least five years before applying. Strategies exist to protect assets even when on the nursing home doorstep (without five years to wait), but there is much more than can be done the earlier one takes the time to plan for these issues.

Outside of the long-term care context, there is similar benefit from protecting assets well ahead of time, before they may be targeted by a creditor. The article discusses ten different techniques that may be applicable, depending on one's circumstances. For example, the story discusses spousal gifting trusts. These are special trusts (also known as irrevocable grantor trusts) that allow married couples to protect assets from creditors and estate taxes while still retaining control and use of the assets.

Obviously insurance considerations are also important for protecting assets in uncertain times. After all, insurance is all about having security in the face of potential problems down the road. Long-term care insurance is clearly helpful to account for senior care costs. Unfortunately, that particular insurance is often out of reach for middle class community members. However, even basic life insurance should not be forgotten when thinking about estate plans. For younger families with children life insurance provides security in the case of untimely death. For wealthier families the insurance can also be important to protect assets from estate taxes.

At the end of the day there is a seemingly endless array of combinations that may work in each individual case to protect assets from the uncertainty of the future. In many cases a combination of trusts, gifts, donations, insurances, and other strategies combine to protect assets from taxes, long-term care costs, and creditors. Sadly, many community members fail to take advantage of these options until it is too late, when the adverse event--death, divorce, lawsuit--has already occurred.

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Golden Globe Winning Film Explores the Trust Industry

Thu, 19 Jan 2012 10:52:11 -0500

Estate planning usually doesn't come to mind when one thinks about award winning Hollywood movies. Most popular films are about great adventures, tragedies, and disasters. Planning for one's long term financial and medical well-being, on the contrary, is all about prudently working to avoid major crisis or drama. However, a film that many movie buffs believe has the inside track to win this year's Academy Award for Best Film actually involves estate planning, with a trust and a trustee at the center of the action. This weekend the movie won the Golden Globe Award for Best Dramatic Film.

"The Descendants" tells the tale of a man who is dealing with the impending death of his wife who suffered a traumatic injury and is on life support. The film's protagonist, played by George Clooney, is the victim's husband. As his wife slips away he is forced to deal with the consequences of handling her estate. She had come from a very wealthy family, and the couple (along with their two children) had lived on acreage of land in Hawaii that was held in trust.

Clooney, as the husband, is the trustee of his wife's multi-generational estate worth billions. The other trust heirs (his cousins) want to sell the land to generate income to meet their personal needs. However, Clooney remain unsure of the best long-term decision. He knows that the original intent of the family was to preserve the land for succeeding generations.

After calling the movie "the best trust film ever released," writers at The Trust Advisor noted that the film echoes many real-life situations faced by trustees debating the wishes of those who have passed with the needs of those still living. They explained "every multi-generational trust is a balancing act between the living and the dead, with the trustee in the precarious position of having to weigh the wishes of the vanished grantors against the priorities of their heirs."

Our New York estate planning attorneys were not surprised to learn that the movie was based in large part on the real life situation faced by the Campbell family--heirs to a billion dollar Hawaiian estate. For one hundred and seven years a trust held title to thousands of acres of land on the big island. In 2007, after the last of the heirs who was alive when the trust was created passed away, the trustees were forced to decide how best to handle the situation. Eventually some of the remaining beneficiaries took large cash disbursements. A few of the others chose to roll over their interests into a new real estate corporation, meaning that the family still controls thousands of acres on the island.

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Common Estate Planning Mistakes

Tue, 17 Jan 2012 10:09:35 -0500

Last week an article in the Mansfield Patch listed "Five Vital Estate Planning Mistakes" made by local community members. The list touched on a few issues that each New York estate planning lawyer in our firm has seen time and again. Like history, these errors tend to repeat themselves. Being aware of the common problems is the best way to ensure you don't make them yourself.

Of course common mistake number one is putting off estate planning efforts entirely. Passing on is usually not a topic that most enjoy thinking about. Estate plans inherently involve some considerations and preparations in the event that one is no longer alive, and so many simply avoid the idea altogether. This delay ultimately serves no purpose. As the article author remarks tough-in-cheek, "If you don't die before retirement, chances are pretty good you'll die sometimes afterwards." Considering that death is inevitable, there is simply no logical reason to do no planning and risk paying more in taxes, the uncertainty of the probate process, or the potential squabbling of family members.

Second on the list was failure to consider naming guardians for one's children. While most local residents conducting New York estate planning have adult children, planning is important for younger community members as well, particularly those who have young children. When crafting an elder law estate plan for clients, we always take into account the family dynamics involved. When young children are present it is important to make plans for those children in the event something happens to you, the parent. This is another task that is often put off, because it is not pleasant to think about orphaned youngsters. However, at the end of the day failing to name a guardian only means that the buck will be passed to some other decision maker if anything happens--usually the court. No one is better positioned than a parent to name a potential replacement in case of tragedy, and so it is always prudent for parents to do so.

Another common mistake includes failing to update policy beneficiaries. Single parents or those who are divorced are more susceptible to this error. For example, when their children are young a single parent may name a grandparent as a beneficiary on things like an IRA, 401(k), or life insurance policy. They then fail to change that designation down the road, after their children have grown. Similarly, divorced spouses often forget to change each other as named beneficiaries after the divorce.

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The Sociology of Giving Back in Inheritance Planning

Thu, 12 Jan 2012 08:35:17 -0500

On Tuesday we discussed a few ways that our New York estate planning lawyers incorporate charitable giving into strategies to reduce taxes during inheritance planning. Of course, for most local families who want to give some of their wealth away, the motivation is not just to save tax money for themselves or their heirs in the process. Instead, as an interesting new article discussing the matter in Financial Planning noted, there are many emotional connections behind giving back. A mix of empathy, gratitude, and the desire to make an impact for others are often behind philanthropic efforts included in New York estate plans.

One sociologist suggests that empathy is at the root of most charitable giving--the ability to actually experience the struggles faced by others. Many donors providing support to certain charitable causes see much of themselves, their children, parents, or other family members in those that they are helping. The ability to care for others as an extension of ourselves is one of the most valued human abilities, and many of our clients share that attribute, wanting to incorporate it as part of their long-term planning.

The time that many are conducting estate planning is usually a time when they are winding down their efforts to collect more wealth. As a result it is a natural opportunity to consider other objectives, goals, and wishes. A sociologist familiar with this time in life explained how residents "then face the question of how to live next and impart to their children a moral biography. Most will want to give back because giving is a natural source of happiness." When reflecting on how far one has come in life, many consider that they themselves were helped along the way. Giving aid to others (financial and otherwise) is a way of returning the help one personally received at a time when it was needed most.

Another consideration is the effect that particularly large inheritances might have on offspring. Researchers have found that many wealthy individuals fear the effect of a large inheritance on their children. Increased charitable giving seems like an appropriate action in those situations.

At the end of the day, providing help to others is perhaps the single most important way that any of us can shape the world around us. At the same time it is a way of meeting our own needs as well. The Greek word from which we derive philanthropy, "philia," actually means "mutual nourishment."

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Adding Charitable Giving As Part of Your Estate Plan

Tue, 10 Jan 2012 11:33:51 -0500

New York estate planning is primarily concerned with passing on assets to family members and saving taxes in the process. While the inheritance planning portion of the effort may seem straightforward, there are many considerations involved. It is much more than simply saying that John gets the house and Jane gets the car. When done right, the process should include consideration of many issues like what legacy one wishes to leave, how they'd like their children to remember them, and what values they wish to pass on. For many families this process involves leaving some assets to a charity of choice.

A story in this weekend's Western Farm Press emphasized how charitable giving is an important part of estate planning for many families. It was a follow up to an article that had been recently written about the value that farm families have in visiting an estate planning attorney to keep a farm alive in the future. The latest story noted that including valued charities in one's inheritance is a helpful way do some good while saving on taxes in the process.

It was explained how using these charitable donations in combination with estate tax exemptions can go a long way to pass along assets to desired family, friends, and causes without losing it to the government. Many assets that have appreciated significantly in value can be given to charity which may allow them to avoid being eaten up by capital gains taxes. Also, retirement savings, like IRAs, can be included in estate planning efforts to benefit charity. This often helps to reduce or eliminate tax liabilities. When done properly it can increase the funds that are going to heirs while also increasing the amount provided to a charity.

Perhaps the most common way that our attorneys work with clients on charitable giving is via use of charitable remainder trusts. These legal entities are unique tax-exempt irrevocable trusts that often provide the best avenue to transfer cash or assets to a charity of choice. Upon the trust's creation, assets are transferred into it. The one who created the trust is then allowed to receive income from that trust (either for life or a set number of years). Whatever is remaining at the end of that income collection period is then given to the named charitable cause. In fact, in certain circumstances the trust income may be paid over the life of one's spouse or children. There are limits on payout rates and other tax implications, and so it is always important to have experienced legal advice to explain whether or not one of these devices in useful in your specific situation.

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News Years Resolution: Finally Take the Time to Create (or Update) Your New York Estate Plan

Fri, 06 Jan 2012 13:06:18 -0500

To ring in 2012, many New York estate planning attorneys urged local residents to use the holiday as a reminder of the importance of preparing for inheritance and disability. A humorous Huffington Post article yesterday walked readers down the same path. The story noted that even conducting the most rudimentary planning puts one ahead of the curve, as anywhere from 58-65% of Americans have done no planning whatsoever. In explaining her own reluctance to plan, the story's author quipped, "I got a trust together a few years ago but haven't really planned for life two years from now, never mind when I'm in the Great Beyond, since I'm too busy planning for the Great Here and Now."

The author rightly notes that estate planning is linked to death--an unpleasant connection that makes many put off thinking about it. Children are often the difference maker. It was explained that "when children come into the picture parents often enter the Kingdom of Anxiety, and concerns about what we leave behind are harder to sweep under the carpet." For the author, her wake-up call came when she realized that not visiting an estate planning lawyer to figure things out ahead of time meant that if anything happened to her, decisions about who would care for her children would be decided by then-anonymous decision makers in the probate court system.

Obviously all parents have an interest in ensuring their children are cared for properly no matter what the future holds. So what prevents many from conducting even basic planning? The author believes that part of the problem is the word "estate." Many hear the word and assume that "estate planning" is only for those with large portfolios, several homes, and valuable possessions. Sadly, many community members never realize that one needn't have vast wealth to gain immensely from estate planning. Besides deciding who will care for children and divvying up assets, planning also helps loved one's deal with the traumatic time after a passing.

Also, unpleasant as it might seem now, many have reported that the estate planning process forces one into the incredibly worthwhile task of thinking about where one's life is now, where it is headed, and what is still left to accomplish. The Huffington Post story references the irreverent book "A Lively Guide to the Bitter End," which explains, "of all the traits that distinguish humans from other animals...perhaps the most fundamental is our awareness of our inevitable deaths...What we do with that awareness is another story entirely."

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Estate Planning Mistakes (and Lessons) of the Rich and Famous

Wed, 04 Jan 2012 10:29:20 -0500

Most local residents will nod in agreement when one explains the importance of conducting New York estate planning as soon as possible. It is easy for most to understand the value of planning an inheritance, saving on taxes, and preparing for alternative decision makers. Yet, all estate planning lawyers know that there is a difference between recognizing the importance of a task and actually taking the time to get it done. Psychologists have found that when it comes to making the leap from knowing that a task should be completed to actually doing it, personal examples are usually the most effective motivators. It is one thing to learn about the value of planning, it is another to hear about a specific case of proper planning that helped an actual person. In fact, experts have also found that even more effective than stories of positive benefits are stories of plans gone awry. The stick is often more persuasive than the carrot.

That is where the estate planning misadventures of the rich and famous can be useful. Unfortunately, recent history is replete with stories of many well-known figures who did not take care of their affairs properly (or at all) before their passing. This week the SM Mirror ran down a quick list of some of the more well-known cases of celebrity estate planning blunders. A few included examples:

Jimi Hendrix
The great young guitarist passed away tragically at the age of twenty seven. As is common for those around that age, Mr. Hendrix did not have a will. Possession of his estate was disputed for decades, with Mr. Hendrix's father officially taking ownership twenty years after the death. Upon the father's passing, everything went to the father's daughter from a second marriage. The father had adopted the daughter who was his second wife's child from her former marriage. That means that Mr. Hendrix's nearly $80 million fortune (which continues to grow) is owned by someone he never knew. This is the case even though there remain many family members who are still alive and were much closer companions to Mr. Hendrix during his life.

Marlon Brando
Marlon Brando supposedly explained to his long-time housekeeper that she would be able to keep the home in which they lived following his death. She had been living there for years beforehand. However, the promise was never committed to writing. Oral promises are easily contested and often invalid. Upon Mr. Brando's death the housekeeper lost her bid for the home and received only a small settlement.

Anna Nicole Smith
The model and TV reality star died without updating a will she had written six years earlier. The old will left everything to her son Daniel. However, Daniel had died several months before Ms. Smith. Therefore, the probate court will likely have to apply default rules to determine how her assets are distributed. However, the case remained unresolved five years after her death, because Ms. Smith herself was involved in a fifteen year battle for a share in the assets of her billionaire former husband after his own will was contested.

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Thinking Beyond the Paperwork--Creating an Ethical Will

Fri, 30 Dec 2011 14:51:45 -0500

When local residents consider creating a New York estate plan they are likely thinking about establishing a trust, drafting a Power of Attorney, and making similar preparations. Taking stock of assets, deciding how to distribute them, creating plans to do so legally, and saving on taxes is the cornerstone of most of these plans. Our New York estate planning attorneys have been helping families do just that for years. But we also help with much more.

For one thing, we have aided in the creation of "ethical wills" as a way to pass on intangible assets. Individuals accumulate much more than bank account funds, real estate, stocks, bonds, or personal property over the course of their lives. In many ways it is "moral assets"--lessons, experiences, and wisdom--which are much more important to pass on to children and grandchild. That is why our New York elder law estate planning lawyers often help families create ethical wills to share these assets, occasionally passing them on while one is still alive. Not only can these wills prove invaluable to family members, but creating them is often a fulfilling exercise for the author. It allows one to learn about themselves, reflect on their life, and affirm their convictions. In many ways it is a spiritual task that provides a sense of completion in addition to helping loved ones "let go" when the time arrives.

A story from the Family Wealth Planning Institute on the same topic talked about things that one should consider when drafting an ethical will. A few of the highlights include:

1. Values: What principles do you hold dear and wish to emphasis to those left behind? How do you balance money and health? In your lifetime, what accomplishments do you hold the most dear and why?

2. Personality: What are the strengths and weaknesses of each of your children? What do you wish for each of them? Were there lessons that they taught you?

3. Community: Do you take pride in a connection to the community? How do you interact with those around you? Are there community traditions that you'd like your children to carry on?

4. Spirituality: Are there any religious or spiritual traditions that are particularly important to you? Are there any tenets which you'd like to see preserved?

5. Legacy: Do your children and grandchildren know about their family history? Are there family stories that you want to take the time to share? What do you want your family to remember most about your time together?

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Farm Assets Protected By Estate Plan

Wed, 28 Dec 2011 09:31:10 -0500

Western Farm Press published a story yesterday reminding readers of the importance of conducting proper estate planning. The publication, geared toward those in the agricultural industry, explained that many farms had been saved that otherwise would have been split up because of savvy planning ahead of time. The story reminded readers of a basic principle that ourNew York estate planning lawyers wholeheartedly endorse. It noted that planning is important regardless of the size of one's estate so that "if something happens to you today, your assets will go where you want them to go, to the people you want to have them."

In the context of farms, it is particularly important to consider the tax implications of asset transfers upon death. It was explained that many farms have been lost when one party in the operation dies, leaving others unable to pay the taxes that come due. Estate taxes are hard to pay without selling the very property that one acquires. Farmers are often asset and land rich, but cash poor. That means that those who inherent a farm are often required to sell the land itself to come up with the cash needed to pay the tax bill. Estate tax issues may not be a problem for those in certain income brackets, but there remains constant volatility in the area. For many families their tax liability could change dramatically from year to year depending on what the laws happen to be at the time that one passes on.

Regardless of estate tax concerns, however, there are many basic estate and inheritance planning issues that are important for farmers to consider. The story suggests that it is helpful to think of one's estate as in either accumulation mode, conservation mode, or transfer mode. The younger generations are often still acquiring assets, while older community members are likely to want to preserve what they have or pass it along. Estate planning helps most clearly with preservation and transfer.

However, it is often more difficult for those goals to be met that some realize. One advocate in the agricultural community explained that "many successful farm families often do a poor job of estate planning." In particular, many of the families fail to ensure that they have proper documents in place and ready to go when they might need them, such as a Power of Attorney and Health Care Proxy. Others fail to keep a plan updated. A sophisticated effort to save on estate taxes one year may be futile if not altered to account for changes in the law down the road.

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Digital Assets May Seem Unimportant, But Families Will Want Access

Mon, 26 Dec 2011 06:00:57 -0500

Modern New York estate plans require consideration of a range of issues that were unheard of even a few decades ago. Of course some of the core aspects remain the same, such as deciding how to pass on tangible assets like the house, car, and personal property. But in this digital age, our New York estate planning lawyers know that complete preparation now must take digital assets into account. Many researchers who have looked into the subject have found that even when an individual does not place any value in their own digital assets, the surviving family members usually have great interest in accessing them.

A story this week from KHAS TV explored the issue. Many community members--including a growing number of older residents--have a wide range of digital data. Interpersonal communication is tracked on Facebook, photos are stored on Flickr, articles are written on blogs, and a range of other information is stored on personal laptops. When a loved one passes on, having access to these sentimental items is something that many grieving family members deem very important. As the story explained, "those things that we sort of use as a vehicle to remember each other by, those things have now become digital." These days many more items are viewed on a screen than a piece of paper.

But when proper steps are not taken, it is not always easy for family members to access those digital items. As many estate planners are realizing, it is increasingly important for access to these digital assets to become integrated in long term plans. Stories continue to accumulate of widows and children who are desperately searching for information about computer passwords in order to get access to important photos, videos, stories, recipes, and other information that exists only in digital form.

To help deal with these issues there are two basic approaches. First, a list of all access information can be kept in a safe place with instructions included in estate planning documents (wills and trusts) indicating how the information can be found. Alternatively, a "digital executor" can be established, which acts just as a regular estate executor in safekeeping the information and dispersing it appropriately when one passes on. One advisor suggests asking "a trusted friend, or maybe even the executor of your estate, to serve as a digital executor, someone that would be digital savvy enough to take care of those assets for you."

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Preparing Children for Wealth Transfers

Wed, 21 Dec 2011 06:00:42 -0500

Our New York estate planning lawyers ran across a Forbes article last week that began with the provocative claim that "70% of intergenerational wealth transfers fail." The story was discussing a new Williams Group study which examined the long-term effects of wealth transfers in 3,250 families. "Failure" in the study was characterized as situations where wealth was dissipated by heirs, often with the family assets becoming a source of disagreement and friction.

The researchers were quick to note that poor professional assistance was not to be blamed; estate planning attorneys, financial advisers, and tax experts were not found to play a role in the wealth transfer problems. In fact the researchers noted that "these professionals usually did well for their clients." Instead, the transfers that ended with problems were usually caused by poor family transition planning. In other words, the authors explained that "no one in the unsuccessful transferring families was preparing their heirs for the multiple kinds of responsibilities they would face when having to take over the reins."

To combat the problems that arise when large sums of wealth are given to unprepared children and grandchildren, it is important to identify long-term lessons and values that must pass on along with the assets. Some suggest identifying a "family mission" and a strategy to ensure that the family mission is carried out. The heirs should understand that mission and be aware of ways to honor it. For example, it is likely that the mission would include a range of philanthropic goals, family business development plans, and other targets. It is helpful for the heirs to have experience practicing those family duties well ahead of time, perhaps by assisting with a few family business matters or charity efforts.

The report suggests that at the center of all successful wealth transfers--beyond proper estate planning--is open and honest communication between families. Many wealthy seniors worry that there will be undesirable consequences if they talk openly with their children about their business, assets, and attitudes about wealth. There is a fear that if children know what is coming to them they will become lazy, take advantage of the situation, or begin feeling entitled to more. However, many experts have found that secrecy breeds problems down the road. This is true for all families regardless of their overall financial situation. It is almost always beneficial to have conversations about family assets and long-term legacies. The holiday season is perhaps a perfect time to do so.

See Our Related Blog Posts:

Now Remains a Good Time for Baby Boomers to Conduct Estate Planning

Estate Planning May Be A Family Decision