New York Trusts & Estates

How to Determine Estate Planning Fairness in New City, New York

 

Parents often find it difficult to find the fairest treatment of their children in estate planning.

Dividing an estate equally among children may not necessarily be the fairest way in every case, according to the Wills, Trusts & Estates Prof Blog in "Be Fair to Your Heirs: Treating Children Fairly in Your Will.”

The first instinct of many parents when it comes to dividing an estate is to distribute it equally between the children. However, that may not always be the case, because an estate plan that is fair to the children may be one that considers their different life circumstances.

If one child is independently wealthy and another is not, due to a career in public service, it might fair to give the wealthy child less than the other in an estate plan.

In some cases, this approach might not be fair, as it is possible that the wealthy child could fall on hard times.

Another important consideration is the amount of assistance parents have already given to the children.

If one child has received more from the parents than the other, then that can be rectified in an estate plan.

It is important for parents to think about what is truly fair for their families and it is often a good idea to let them know ahead of time, instead of being surprised at a reading of the will.

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Why Naming the Right Trustee Can Make All the Difference in Yorktown Heights, New York

Setting up a trust to protect your estate and beneficiaries from probate? Excellent! Here’s the next tough hurdle to finalizing your estate plan: selecting a trustee that you can count on.

Naming a trustee is a big sticking point for many, as they go about putting their estate plan in place. It’s often easier to determine what sort of trust will be needed and who the beneficiaries are. When it comes to selecting a trustee, it gets sticky. The skills of the trustee can make the difference between an estate plan that works, and one that becomes embroiled in problems that can take years to resolve. In a recent post, “How to Find the Right Estate Trustee,” The Motley Fool takes a closer look at the factors to consider when naming a trustee.

Fiduciaries. A fiduciary is an individual with a legal and moral obligation to put the clients' interests first. A new fiduciary rule requires that all advisors who work with retirement plans or provide retirement planning advice to consider themselves fiduciaries. However, some financial advisors may or may not act as fiduciaries. If they commit to being a fiduciary and have the necessary knowledge and experience to be a good trustee, any type of financial advisor can do the job.

Qualifications. A trustee may need to make critical decisions about how to manage the assets in your trust. He or she must possess the right background to make informed decisions. Estate trustees should have training in investing and taxes and possibly business management experience, if you are a business owner.

Diplomacy. A trustee takes control in a stressful family situation, so he or she must be sensitive and get along with your beneficiaries. When considering potential trustees, look at their interpersonal skills in addition to their business and financial skills. You might also get your beneficiaries together with the potential trustee to see if they get along.

On the Younger Side. Let’s be candid. You need to pick a qualified trustee who’s going to be around after you're gone. That means they should be people who are significantly younger than you are and in good health. You should also name a "successor trustee" who will assume control, if the first trustee is no longer available. You can also designate a law firm or financial firm as your trustee, but an institutional trustee will be more expensive than individual trustees. They often set their fees at 1% of the value of the estate. An institutional trustee may also be confined by its internal company policies and not your wishes.

Update on a Regular Basis. In the same way that wills and estate plans need to be reviewed every four years or so, you also want to review your choice of trustee. Over time, your perfect pick may have been faced with health issues, might have moved out of state, had a falling out with your family or any of a number of issues that makes them unsuitable to serve. Don’t be uncomfortable about making such a change; chances are that a trustee will breathe of a relief and so will your family.

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Actress Joanne Woodward’s Memories of Paul Newman Stolen by Alzheimer's Disease in New City, New York

One of Hollywood’s leading ladies is suffering from the devastating disease, as the family appears to be enmeshed in the early stages of what may become a bitter estate battle.

Known for their devotion to each other over decades, Joanne Woodward and Paul Newman were an iconic Hollywood couple.  However, a recent report from Blasting News says that “Hollywood star Joanne Woodward can't remember husband Paul Newman anymore.”

Joanne Woodward and Paul Newman met in 1958, according to Life & Times of Hollywood, when they co-starred in the classic film "The Long, Hot Summer." They were inseparable from 1958 until 2008, when Newman passed away at the age of 83 from cancer.

Today, it’s reported that Woodward has lost nearly all memories of Paul from her fight with Alzheimer's Disease.

Newman left his billions to his wife and charities, but gave just $5 million to each of his children.

The 85-year-old Woodward has now lost all memories of her years with her husband because of the disease. A source close to the family was quoted as saying her "health is rapidly deteriorating, and only once in a while states that she used to be married to someone handsome."

Shortly after Newman passed in 2008, Woodward started to first exhibit signs of Alzheimer's. The couple’s daughters began noticing that their mother was frequently disoriented. The disease grew worse, and she now requires 24-7 care. She rarely speaks and seldom recognizes her children or grandchildren.

Woodward’s illness has precipitated a family battle over Newman's billion-dollar estate. Just before his death, he gave each of his five daughters, three with Woodward and two from his first marriage, $5 million each for their inheritance. Newman believed that his children were all successful and didn’t need the family money. The majority of his estate was left to Joanne and various charities.

The five Newman children are not happy with their father’s belief that they didn’t need more of an inheritance, and there is concern that Joanne’s will may give the rest of the billion-dollar estate to charity and none to the children. It is possible that they could contest the will after she dies.

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Charitable Donations from an IRA in Yorktown Heights, New York

""Can a charitable contribution be used to satisfy your required minimum distribution and lower taxes?”"

Contributing directly to a charity is a great idea. If you are thinking of giving your required minimum distribution (RMD) from an IRA to one or more charities, make sure that you understand the steps you need to take, so you’re not taxed on the RMD.

Kiplinger’s recent article, “How to Ensure Your IRA Donation to Charity Is Tax-Free,” explains that folks older than 70½ can transfer up to $100,000 annually from their traditional IRAs to charity. This move can satisfy the RMD, but isn’t taxable, if they follow the rules for a qualified charitable distribution (QCD).

The gift is not a part of your adjusted gross income, if you make a direct transfer from your IRA to the charity. That means it will not count as a tax-free transfer, if you withdraw the money first and then make the charitable donation. You should speak with your IRA administrator about the required steps. These procedures are different with different firms.

Some will have several options. For instance, if you have check-writing privileges on your IRA, you may be able to simply write a check directly from the IRA to the charity. You may also have the option to use the IRA’s QCD form and direct the money from your account.

You should be timely in submitting the form or writing the check, so it is processed in the current year. November 30 is a good cut-off to give the IRA administrator sufficient time for processing.

If your IRA sends the money, the check will be written out to the charity and include your name. You should give the charity a head’s up that it should expect your donation. You’ll also want to give them your address, so the organization can send you a receipt for your tax records. Another way to go about this is to have the IRA administrator cut the check payable to the charity and mail it to your home address. You can then forward the donation to the charity yourself.

For example, Vanguard requires you to either complete a form or call them to request the transfer, so the donation will be counted as a QCD. Vanguard will make out the check to the charity and send it to you to forward. You should be certain to make your request with ample time to receive the check and deliver it to the charity.

While there may be no limit on the number of charities you can support each year, be aware that IRA administrators typically have a minimum amount you can transfer to each charity. Check with your administrator for the specific details and take note that you can’t transfer more than $100,000 tax-free from your IRAs in any one year.

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Keep Your Retirement Income in Your Pocket, Not the IRS! in Yorktown Heights, New York

Taxes are often overlooked when considering retirement income and budgeting. Just as you need a tax strategy in place when you are accumulating savings, you also need a tax strategy for retirement.

There’s a serious flaw in many retirement plans, as reported in to Kiplinger’s article, “Keep More of Your Retirement Savings with Tax-Bracket Planning.” People are so busy focusing on saving money, watching their nest egg grow and considering where they want to live during retirement, they forget to address the problem of taxes during retirement.

It’s not just about how much money you’ve saved for retirement, it’s how much you get to keep after taxes.

To optimize your savings, you need to build a tax-efficient portfolio. It should contain the following:

• Tax-efficient investments. These are investments with the lowest taxes compared to their interest or dividend income;
• Tax-efficient withdrawal strategies. Use differently taxed accounts that offer flexibility for income purposes; and
• Tax-efficient planning. Get a long-term tax plan that focuses on lower taxes over your entire retirement, not a given year.

Don’t Pay Triple Taxes. Retirees who don’t plan effectively for distributions from IRAs or other qualified plan distributions could easily pay three times their tax rate. You can avoid this by taking control over how much income you pay yourself. Your spending needs may be less, so you can keep that amount low by managing your income sources effectively to get the most tax efficiency over your lifetime.

Understand Your Tax Bracket. As a retiree, you need to stay within the 15% tax bracket for the rest of your life. Effective tax planning must begin in your first year of retirement. Don’t assume your tax plan is ideal if you don’t “fill” the entire 15% tax bracket in your early retirement years. The goal is to “fill” every retirement year with taxable income to the upper limit, even if you don’t need that income.

There are other ways that you can minimize your tax liability. A few additional ideas: withdraw cash on a tax-free basis in the form of loans from a universal life insurance policy, if you need more income. Consider a home equity line of credit—the interest is tax deductible. An estate planning attorney with experience in tax law will be able to help you devise a tax-efficient retirement plan that complements your estate plan.

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U.K. May Allow Text to Be Considered a Will in New City, New York

Law Commission recommends changes to requirements for creating a will.

The Law Commission, which is the United Kingdom's official government legal advisors, are now suggesting changes to the traditional procedures for creating a will, according to The Telegraph in "Could a text become your will? The plans to revolutionise 'outdated' legacy system."

In the U.S., laws about what constitutes a valid legal will generally follow the old English law that a valid will must be signed by the testator in front of two witnesses, who must also sign the document.

If this procedure is not followed precisely, then a document is not a valid will that can be considered by a court.

If the changes become effective, judges in the U.K. could look at other evidence to determine what a deceased person intended to do with his or her estate. For example, if the deceased left behind a voice mail or text message concerning the estate, then the judge could take that into consideration and use it in making a judgment.

The purpose of the old rules was mainly fraud prevention.

Judges who did not know the deceased, could rely on the testimony of witnesses to establish whether the will was legitimate.

Digital technology may be on the way to replacing the traditional methods of guaranteeing that a will is valid.

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Some States are More Generous than Others When it comes to Retired Federal Employees in Yorktown Heights, New York

If you have a pension from the federal government, here’s another item to add to your check list when considering taxes and retirement.

Taxes are a big consideration when it comes to deciding where to live during retirement, and according to a recent report from Kiplinger, “States That Tax Your Federal Government Pension the Most,” the difference in how federal government pensions are taxed—or not taxed, as the case may be—varies considerably. Some states treat this kind of income very differently than private pensions.

When you look at a retirement destination, you might consider avoiding states that tax federal government pensions. It could save a federal retiree many thousands of dollars in state taxes every year throughout retirement.

There are some states that will tax all pension income, such as California, Connecticut, Nebraska, North Dakota and Vermont—as well as the District of Columbia. All of these states, except North Dakota, make Kiplinger’s list of “Least Tax-Friendly States for Retirees.”

Wisconsin is also tough on retiree taxes, but does make exceptions for the commissioned corps of the National Oceanic and Atmospheric Administration (NOAA) and the Public Health Service (such as the Surgeon General). Their pensions are exempt along with those of military veterans.

Those collecting federal pensions need to consider four other states: Arizona, Montana, Ohio, and Utah. Like many states, these four states exempt some retirement income from taxation, including income from federal sources. But the difference is that their exemptions are quite limited compared with the average.

For example, in Montana, only $4,110 of income can be exempt, and the retiree’s adjusted federal gross income (AGI) must be less than $34,260 to qualify.

In Arizona, the exemption is even lower at $2,500, but it’s not limited by income.

Ohio offers a tax credit. However, the most you can deduct is $250. Utah is a tax-credit state. Their maximum credit is $450. Ohio and Utah limit this credit based on income.

Another thing to keep in mind: in some states, even those who are not great about traditional federal pensions, railroad retirement benefits and military pensions receive special exemptions.

This should be part of a conversation with your estate planning attorney, when looking into retirement and estate tax responsibilities and how your state or a state you are considering relocating to, treats different kinds of pensions and assets.

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Sensible Planning for Long Term Care Costs in New City, New York

Most think of long-term care as taking place in nursing homes.  However, in actuality, most long term care takes place at home. Changes in the insurance industry might lead to cost-effective ways to address this expense.

If you ask the average senior about long-term care (LTC), they are just as likely to throw up their hands and say that both nursing home care and LTC policies are just too expensive. If they haven’t already got a plan in place, they aren’t likely to start investigating one at this stage of their lives.

But that could change. If the long-term care insurance industry focuses more on helping people cover home-based services, policies would be more affordable and more appealing, says Kaiser Health News in its recent article, “How To Get Long-Term Care At Home Without Busting The Bank.” Most people see long-term care as a home care problem, and they can see a benefit to insuring people for the likelihood of where care is going to be needed first: at home.

However, people are using home care, and a smaller percentage are using nursing home care. People think they may begin needing care at home but eventually will need care in a facility. Research shows that is not true. People are usually able to stay at home for the entire time.

 There are currently more than 6 million older Americans who have a “high need” for long-term care, according to the U.S. Department of Health and Human Services. That’s defined as requiring daily assistance with at least two activities (eating, bathing, toileting, dressing, continence or transferring from a bed to a chair) that lasts at least 90 days or a need for substantial assistance due to severe cognitive impairment.

It’s estimated that about 52% of adults reaching age 65 today will need these services, with half needing it for two years or less, 12% for two to four years and 14% for more than five years. However, fewer than 10% of older adults have purchased long-term care insurance. It’s dropped in popularity, as premiums increased and insurers left the market. No one knows if the industry can fix its major problems.

It may be your goal to cover several years of home-based care—not nursing home care. If so, you could buy a less expensive policy with fewer features. The average annual cost for care provided by a home health aide was about $46,000, compared to $82,000 for a semiprivate room in a nursing facility. That’s about six hours of care, seven days a week. Although it is not enough for seniors with serious, disabling illnesses, it could work to relieve an unpaid family caregiver who is on-call 24/7.

If you end up needing nursing home care, you could look at a “qualified long-term care partnership policy.” It’s available in every state except Alaska, Hawaii, Illinois, Massachusetts, Mississippi, New Mexico, Vermont, and Washington, D.C. These little-known insurance products are designed to help seniors preserve their assets, if they become seriously ill, require nursing home care and want to be eligible for Medicaid. That program pays for about 50% of nursing home costs in the country.

To qualify for Medicaid, most states have strict assets limitations.  However, with a partnership policy, every dollar received in long-term care benefits is exempted from Medicaid’s asset test and protected from seizure by the state.

There are a number of unknowns about partnership policies. There does not appear to be any reliable statistics on how many people who own them eventually turn to Medicaid to pay for nursing home care, nor is there information on the number of partnership programs that have been sold or the size of benefits that have been paid to policyholders.

To start preparing, seniors are advised to get a clear picture of the average home care and nursing home care costs in their state, so they have a better understanding of what kind of coverage they need. Consult with an elder law attorney to talk about options and make LTC planning part of your overall estate plan.

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Actor Philip Seymour Hoffman’s Will Reflects His Life in Yorktown Heights, New York

Hoffman’s estate is expected to be settled soon, and while avoiding taxes may not have been his first priority, he did make a plan that put his family first, while protecting a professional legacy.

Large estates take time to settle, as all of the property needs to be distributed and the executor’s responsibilities are carried out. Actor Phillip Seymour Hoffman’s will took a slightly different tack than most, and demonstrated his values and trust in the mother of his children,  without the legal stamp of marriage.

Wealth Advisor’s article, “Posthumous Philip Seymour Hoffman Buzz Reveals: Big Estates Have A Life Of Their Own,” notes that for people like Hoffman, who accumulate recurring income or intellectual property, such as movie residuals, the probate process may keep going without actively liquidating those assets and obligations or winding them down, even when an estate plan is well-done. For those that are not, lawsuits can last for decades.

Philip Seymour Hoffman left $35 million behind.  He wrote a will that assigned ownership of that wealth to his partner, who’s also the mother of his children. That’s not a perfect solution because they weren't married. As a result, his millions didn't pass to her tax-free. However, it’s still much better than no will at all, like the estate of the late rock musician Prince.

Hoffman didn’t ensure that his kids would inherit every asset legally permitted by the tax laws. He knew that their mother would use the money to care for them. However, these decisions have financial consequences. Hoffman’s estate didn’t receive the unlimited marital deduction which would have reduced the risk-free Treasury interest the family money could’ve generated from $1 million to $700,000 a year, without touching the principal.

Unmarried partners are really hit hard with taxes in this situation. Hoffman’s estate paid a sizeable tax to pass on his wealth to his girlfriend. With current tax laws, she’ll pay again to pass it to the kids, reducing the ultimate inheritance by 65% in two steps.  This will put a dent in possible current income.

Hoffman’s kids and their mother will be fine, even with the large tax bill. But for families who measure their wealth in hundreds of millions, lifestyle decisions and estate planning can make a big difference in how many generations get to enjoy the legacy of their ancestors. For the rest of us, estate planning is necessary to manage taxes on a lesser, but still important, scale.

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Can You Avoid Your State’s Inheritance Tax? In Yorktown Heights, New York

If you live in a state that still has an inheritance tax, there are some steps you can take to avoid the tax.  However, they must be done carefully, so that you don’t create any other issues.

Here’s what people often don’t know about inheritance taxes: in states like New Jersey, the inheritance tax isn’t based on the size of the estate. It depends upon who is receiving the proceeds. A recent article from NJ.com, “How to avoid the inheritance tax,” provides all of the details.

New Jersey doesn’t impose an inheritance tax on transfers to a parent, grandparent, spouse, domestic partner, child, step-child or grandchild. These are all Class "A" beneficiaries. However, an inheritance tax is imposed on transfers to a niece or nephew, who are considered Class "D" beneficiaries. The tax rate is about 15 or 16%, depending on the amount transferred.

An important point to remember is that all transfers made within three years of death, are presumed to be “in contemplation of death.” These transfers may also be subject to inheritance tax. In addition, transfers designed to take effect at or after death are included in a person's estate for inheritance tax purposes.

One way to get around some inheritance taxes is to gift funds to your relatives during your lifetime. You can make outright gifts or pay for a family member’s medical costs or educational expenses. Inheritance taxes can also be avoided with an irrevocable trust in some situations. With this type of trust, you must give up control and use of the assets placed in a trust.

An individual can make annual gifts of $14,000 per person without any gift taxes. If the annual gift exceeds $14,000, the excess amount will utilize a portion of the individual's estate and gift tax exemption of $5.49 million.

If someone wished to pay for medical or educational expenses, there are no limits on gifts, as long as payments are made directly to the medical provider or educational institution. Your estate planning attorney will be able to help you plan for your state’s inheritance tax for yourself or your heirs.

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