New York Trusts & Estates

Boomers and Millennials Have Different Takes on Prenups in Yorktown Heights, New York

Millennials are more open to the concept and the value of having a prenup in place.

Practical millennials wait much longer than prior generations to get married. As a result, by the time they do say “I do,” many have well-established careers, own property and sometimes, businesses. They don’t see a prenup as a problem. Instead, it is seen as a solution to protect their partners.

For years, prenups have been a sticking point for couples who saw them as unromantic,  signaling a lack of trust or suggesting that one person is planning for the end of the marriage.

The Washington Post’s recent article, “Why you’re more likely to have a prenup than your parents were,” says that over time, the calculations for when and why two people should marry has changed. In the 1970s, about 80% of people had married by age 30, according to a U.S. census report. Last year, that same percentage wasn’t reached until age 45.

Millennials say it’s also important for them to be financially secure before they get married, according to a 2015 survey by Allstate and the National Journal. This sentiment increases the odds that when two people marry,  they will each have a career or business they want to protect. Some couples are now leveraging prenups for each person to protect assets they’ve accumulated, as well as to protect future income.

There’s been an increase in the number of young couples interested in prenups, and they’re talking to their fiancés about it. A 2016 survey from the American Academy of Matrimonial Lawyers showed that 62% of members saw an increase in the number of couples asking about prenups, compared to the previous three years. Fifty-one percent said they noticed more millennials asking for the agreements.

In the 1970s, when couples typically married younger, prenups were mainly used for estate-planning and usually when one partner had significantly more wealth or stood to inherit money.  Since young people now delay marriage until they are more financially secure, prenups are a way for partners to protect their assets and future income. In addition, prenups are a tool for dividing debt loads, especially student loan debt.

There are still people who see a prenup as an exit plan. For these people, even a discussion of a prenup is not acceptable. But if you and your spouse are open to how you can both benefit from a prenup, speak with an estate planning attorney who can help design a prenup that works with an estate plan that will protect you both, for better or worse, in sickness and health.

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Out of Jail and Living Large: O.J.’s Retirement in Yorktown Heights, New York

Florida residents enjoy the protection of homestead exemptions used by some full-time residents as part of asset protection strategies. These exemptions are also used to protect wealth from legal obligations

According to an article in Wealth Advisor, “The Juice Is Loose, Did O.J.'s Kids Hide Millions From Murder Families? O.J. Simpson’s kids are rumored to be snapping up real estate and making cash deals in Florida. Could this be a way to protect his money from the civil lawsuit brought by the families of Nicole Brown Simpson and Ron Goldman?

Experts say that if the Juice had transferred his $10 million fortune into a structure to protect it from creditors, he may not have had to resort to the shady memorabilia sales that landed him in jail.  If he’d also put more thought into his estate planning, he’d have had his attorney draft a prenuptial contract for his marriage. Instead, he had to pay her $2 million in cash and child support in the divorce.

His wife’s death and that of her friend Ron Goldman all but ended his post-football career, as endorsement deals and paid appearances went away. He retired at age 46, which isn’t unheard of for NFL players.  However, when the families initiated a civil suit, his retirement savings became vulnerable to what was to be a $33 million lien on his assets and future earnings.

Simpson’s lawyers tried to find any options remaining. For example, a trust in a certain state could’ve kept his money invulnerable. However, that takes foresight, and that time had passed. O.J.’s lawyers moved $4 million of his money into ERISA-protected retirement accounts and moved his domicile to Florida, so he could keep a house, even in bankruptcy. That worked OK for a while. He didn’t work, and the families seized all the assets they could. But they only clawed back a few million dollars, so his retirement seemed largely assured.

O.J.’s children were permitted to cash his memorabilia checks to make his house payments.  However, they spent the money instead. Therefore, the bank foreclosed on the Florida property, and no one knows if any of the pension money was ever deposited.

The kids purchased $500,000 in investment property in St. Petersburg over the last few years for cash. It’s not clear if the money came from O.J.’s NFL pension checks. If it’s deemed a gift, there’s a chance that the families can’t claim they were cheated, provided the “gifts” were documented and structured correctly.

It’s possible that O.J. has not received the best financial or estate planning advice. Florida’s homestead laws protect a primary residence, not investment properties. Buying a new home for his retirement then letting the kids inherit the real estate after he dies, might have been a better strategy.

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When Living Trusts Create More Problems Than They Solve in New City, New York

Ads promoting the use of living trusts seem to be everywhere. They promise to help seniors avoid probate. Trusts are an excellent estate planning tool, but they are not “one size fits all” solutions.

Avoiding probate, or at least minimizing assets that need to pass through probate is a part of estate planning, but every person has a different situation. That is why sitting down with an estate planning attorney is an important step to take. A barrage of ads selling generic living trusts to seniors, may actually cause many families to end up in probate court. This is exactly what they were trying to avoid!

My Primetime News’s recent article, “Hazards of Living Trusts,” explains that many of these living trust programs offer incomplete estate planning packages that don’t take all the steps needed for the proper disposition of assets at death. A living trust may be needed, but there are other components to a complete estate plan. You should work with a qualified estate planning attorney to discuss other needs, such as a will. Every estate plan should include a will which, at minimum, names a personal representative (or executor) and beneficiaries. An estate plan with a trust may include a “pour-over will”—this is a catch-all for any property inadvertently missed in the trust. It designates the living trust as the beneficiary.

A will can be ignored (but should be reviewed regularly) and still be valid, but a living trust requires review and maintenance. All real estate, bank accounts, and other investments must be transferred into the trust. If you miss this step, it’s a trust with nothing in it and there’s no way to fix it. If you do not have a will, your property would pass by intestate succession.

Here are few other major errors made in living trusts that can lead to future disaster:

1. You don’t create a will. Again, this is a big mistake. A will names a personal representative as well as residuary beneficiaries. If there’s no personal representative named in the will, the court may appoint a “public administrator” to be the personal representative. This will likely be a local attorney who bills the estate to act as the personal representative. He or she will likely be a stranger to the family who didn’t know the deceased and isn’t required to follow the family’s wishes.
2. You don’t title the property properly in the trust. This is critical because trust property can be sold and other property purchased, that may be deeded in individual names or held in joint tenancy. If the title isn’t clear, a probate court may need to determine after death what property was in the trust and what wasn’t. Property not in the trust, will pass by intestate succession: state law determines the heirs if there’s no will.
3. You mix up an irrevocable trust with a revocable trust. An irrevocable trust can’t be revoked or terminated by the person who created it, and there are limited situations when an irrevocable trust is the right option.

Unfortunately, many families who get involved with living trusts without the guidance of an estate planning attorney, find themselves spending just as much money and time trying to fix a situation, as if they met with a qualified attorney in the first place.

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Should You Accept An Offer to Cosign a Loan? in Yorktown Heights, New York

Cosigning a loan, especially one for a home mortgage, can be a risky business for both parties. It’s like any other business deal with a relative: there are financial and emotional risks to be considered.

Here’s an example of two well-meaning family members: an individual who is in good shape financially but because he is self-employed, is getting turned down for a mortgage without a co-signer, and the second, a relative who is willing to cosign a mortgage. What could go wrong?

Let’s say the family member has a good job but won’t be contributing any money toward the down payment or mortgage payments. The buyer plans on setting up a separate shared bank account that would cover at least a year to 18 months of expenses for the home, in case something happens to him. Therefore, the relative won’t be burdened. The buyer will also list that person as a beneficiary on the mortgage.  This allows them to sell the house or live in it.

The Los Angeles Times, in its recent article, “How cosigning a mortgage loan can bring big risks,” looks at the pros and cons of cosigning a loan for both people. Some of the issues to consider include the following with a cosigner:

• What’s the tax liability?
• What if the relative lives there and pays the buyer rent?
• What if the buyer refinances in the future to remove the cosigner?
• What about a revocable living trust? Is that a better option?

Inheritance. If the buyer wants the relative to inherit the house if he dies, he could include her as the property’s beneficiary in his estate plan or a transfer on death deed.  It is important to remember that mortgages aren’t assets, so they don’t have beneficiaries. If the cosigning relative inherits the house, she typically wouldn’t owe taxes, provided the home isn’t in one of the six states that still has an inheritance tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania). Those six states have laws that permit closer relatives to usually pay lower taxes than more distant relatives or unrelated friends.

Leaving Money for the Relative. The buyer also could leave money to pay the home’s expenses for a specific time. This is a better notion than a shared bank account (unless the relative insists on access as a condition of the loan). It’s best to minimize financial entanglements with people, if you’re not married to them or legally or morally responsible for them.

Refinancing. Refinancing the loan should be a priority, instead of leaving the relative the loan or inviting her to be a tenant. A landlord-tenant relationship makes for a more complicated situation, and a relative could be tough to evict.

Both the buyer and the prospective cosigning relative should speak with their estate planning attorneys to ensure that the short and long term arrangements will not have a negative impact on either of their finances or the estate plan. The potential for problems will be significantly lessened with proper planning.

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More Reasons Why You Need a Properly Prepared Will and Estate Plan in New City, New York

If you are someone who always likes to be a little different, then your next call should be to an estate planning attorney to have a will created. This would set you apart from most Americans today!

Being a non-conformist may not be the first reason to have a will.  However, if that gets you started, it’s a worthwhile thought. On a more serious note, you need a will to accomplish a number of important tasks. One is to name a guardian, if your children are still minors. Another is to clarify and legally state your intentions about distributing your assets after you pass.

Dough Roller’s recent article, “The Truth About Why You Need a Last Will and Testament,” explains that simply writing up a will isn’t your only worry. You also need other estate planning documents in place.

A will details your wishes for your assets and for the care of your children. There are titled assets that will pass outside of the will, like your checking account with a “payable-on-death” beneficiary specified. If your home is owned in joint tenancy with the right of survivorship, it passes to the remaining owner(s) outside of the will. Similarly, your life insurance policy has its own beneficiaries and  is not governed by your will. You should name beneficiaries on your bank accounts, CDs, and 401(k)s, so they will pass outside of the will.

Some people don’t create an estate plan because they think attorneys are too expensive. There are a few do-it-yourself solutions that you should be beware of. For example, what about a DIY power of attorney document appointing two individuals who are each able to act independently, if the other is unavailable to act? One online document didn’t support this, as one person was required to be specified as primary POA and the other as the contingent, if the primary withdraws. Another online service required that the power of attorney document specify “AND/OR.” In a DIY form, you need to know how to specify contingent beneficiaries. There’s also a big risk of editing an old estate planning document because laws change.

Pennsylvania made some significant changes to its requirements for Power of Attorney documents a few years ago. If you purchased a valid document from an online legal services website in 2010 and edited it last month, you’d be missing any changes because you must buy a new copy from the website. In fact, the edited document, based on the 2010 original, wouldn’t comply with Pennsylvania’s 2014 requirements.

There are attorneys who say they love online legal services because the problems lead people to need in-person meetings with area estate planning attorneys. Remember that laws change, lives change, and estate documents need to be kept up to date in order to be valid and to reflect your wishes.

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Report on Proposed Estate Tax Valuation Rules Due to Oval Office in September in Yorktown Heights, New York

Family business owners opposed to the Estate Tax Valuation rules originally presented by the Obama administration, may fare better this time around.

In an interim report, the U.S. Treasury has found the Estate Tax Valuation rules fall into the category of a tax regulatory burden that could be due for a review following President Trump’s executive order to reduce these types of tax burdens. By September 17^th, a final report from the Treasury is expected to arrive on the President’s desk.

Forbes’ recent article, “Hated Estate Tax Valuation Rules On Trump's Hit List,” reports that the proposed rules, “Restrictions on Liquidation of an Interest for Estate, Gift and Generation-Skipping Transfer Taxes” under Section 2704, would curb valuation discounts and result in increased estate taxes upon the deaths of owners of family businesses.

Proponents contend that the rules would close a tax loophole for the wealthy. The valuation discounts allow a person to pass more on to heirs free of gift tax and estate tax, by putting a lower value on what they’re giving away. However, many didn’t like the proposed rules that were announced last August.  They discussed their concerns in Treasury hearings in December. They claim that there are legitimate reasons for the use of discounts, and that the proposed rules shouldn’t apply to family operating businesses.  However, discounts for family limited partnerships holding securities, by contrast, are said to be riper for abuse and regulation.

The Family Business Coalition says the regulations would “remove important tools business owners use to adjust for lack of control and marketability, when valuing minority shares of a small business.”

However, it’s unlikely the rules will ever see the light of day. It might all be moot if Trump gets rid of the estate tax, but you can’t bet on a repeal being permanent. Most folks are proceeding as usual, doing transactions like sales to defective grantor trusts and GRATs, which are ways to move the wealth forward without a gift tax.

Most are taking valuations based on the way the current law works, and not considering the impact of the proposed regulations (if you take a position on your tax return that’s contrary to proposed rules, you must note it). Therefore, get a qualified appraisal, file a gift tax return and make an “adequate disclosure.”

A word to the wise: business owners should speak with an experienced estate planning attorney, before making decisions about transferring assets. Remember that the IRS could potentially dispute valuations during the course of an audit. If they win the dispute, you’ll have to pay gift tax. If the estate tax is repealed, the whole thing would have been unnecessary.

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Do This for Your Family: Pre-Plan Your Funeral In Yorktown Heights, New York

It’s one of the topics people really steer clear of: their own death, and what they really want to happen after they die to their remains. It may be an awkward conversation, but it is truly worthwhile.

We hear occasionally about the individual who decides to make all of the arrangements for their own funeral without even talking to their adult children about it. They chose the funeral home, select a casket, and sometimes even write their own memorial service. It makes a difficult time a little more bearable for the surviving family members, although it’s not always easy to do.

Hometown Life’s recent article, “Perhaps awkward, preplanning funeral makes sense,” says that no matter how much we ignore it, we’re all going to die. Considering funeral arrangements can only make things easier for those we leave behind. That’s when a family is usually in shock, emotional, depressed, stressed or otherwise not at their best.

Unfortunately, if you do not make your own funeral arrangements, then your loved ones will need to make them. That is probably the absolute worst time to arrange a funeral. It can be hard to think clearly after the death of a loved one, and people absent-mindedly overspend for funeral arrangements.  As a result, the costs add up. A big advantage of funeral pre-planning is that you can make decisions with a clear head and focus more on the expenses. When considering pre-planning your funeral, think about these issues:

• Do you want to be cremated or buried?
• Do you have a specific funeral home you want to use?
• What type of casket do you want?
• What type of service would you like to have?

If you settle these questions and pre-plan your funeral, then you remove the burden from your family, and you’re more likely to have your wishes followed and control the costs.

Pre-planning your own funeral may seem morbid, but it falls in the same category as estate planning. Preparing for your eventual demise is a kindness to your loved ones.

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Protect Your Retirement by Avoiding these 401(k) Mistakes in New City, New York

The younger you are, the more time you have to make all the right moves when it comes to your 401(k) retirement savings accounts.

There’s good news and bad news when it comes to statistics about retirement and American’s use of 401(k) accounts, as reported in Kiplinger’s article, “The 7 Most Common 401(k) Mistakes to Avoid.” The good news starts with a report from the Investment Company Institute: the entire 401(k) system had $4.8 trillion in assets as of March 2016, representing 52 million active plan participants, former employees and retirees. There’s also good news from Vanguard also, which reports that the average 401(k) balance reached $101,650— which is a record high.

 However, there is bad news. Nearly half (45%) of the 38 million working-age households don’t own any retirement account assets, including IRA accounts or an employer-sponsored 401(k) plans.

The employer-sponsored 401(k) plan started in 1978.  Therefore, it’s been available to millions of workers who are now 65-years-old and who could’ve been using it to save for retirement and save on their taxes. However, only half of Baby Boomers have more than $100,000 in a 401(k) or other retirement plan.

The good news is that younger workers have much of their working lifetime to accumulate a retirement fund. They also have the advantage of participating in 401(k) plans that have become far more sophisticated. This means that it’s a little bit more complicated for participants to understand all of the plan choices. As a result, some will make mistakes. A good goal is to save $1 million over your career to allow you to withdraw $5,000/month for 30 years with a 6% annual investment return.

Here are some common mistakes that retirement plan participants make and what they should be doing to avoid them.

Not Saving Enough. Simple math, right? To accumulate $1 million in monthly increments, you need to defer about $1,000 per month, every month, for 30 years with a 6% annual return.

Starting Too Late. Time and the power of compound interest must be worked to your advantage. The more time you have to accumulate savings, the more time the returns will have to work in your favor. Start to save right out of college, even if it’s a small amount, to make saving easier on you down the road.

Not Maxing Out. You need to “max out” your employer match. For example, if you make $75,000 per year and put away 3% ($2,250), and the employer matches, your total annual contribution is $4,500. That won’t even get you halfway to that $1 million. But on that same salary, if you defer 13% into the retirement plan ($9,750 or $812.50 per month), and your employer matches the first 3% of your contribution, that’s an additional $2,250, for a total of $12,000. The employer match is like getting a 23% return on your contribution!

Priorities. Many people don’t pay themselves first. Most 401(k) plans have an option to set an increase in your contribution rate annually, until you’re making maximum contributions. If you’re a single taxpayer, a $9,750 contribution will save you at least $2,437 in federal income tax.

Taxes. There are tax savings that are possible. How about $200 per month? Your paycheck won’t go down quite as much as the entire contribution to the plan, because there are fewer withholding taxes. In our example, we assume a conservative 6% annual return. Two factors affect returns in a retirement plan. They are fund selection and asset allocation.

Doing Nothing. This means not taking advantage of the plan’s available tools to develop an allocation plan. Spread your contributions over a variety of funds that represent a broad selection of asset classes. A large percentage of plan participants don’t even take the time to change their fund selections from the default fund the plan offers.

Monitoring and Rebalancing. Things change over the course of time, and your portfolio should also. That means rebalancing, which is sometimes offered as a feature of the account. Another is keeping track of account balances. It’s your retirement, so you should be aware of how your money is growing.

Today’s 401(k) plans are loaded with features to help you understand your investments and how to make saving for retirement easier than in the past. If you haven’t reviewed your 401(k) in a while, now would be a good time to do so!

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Subtle Change to HUD Reverse Mortgage Rules Could Spell Disaster for Surviving Spouses In Yorktown Heights, New York

Two years ago, a victory for the elderly occurred when advocates succeeded in having more rights and protections put into place for the surviving spouse of a senior with a reverse mortgage.

Protections put into place two years ago, could now be at risk as a direct result of a very subtle language change from the Trump administration’s proposed budget request for the Department of Housing and Urban Development (HUD). The most vulnerable person—a surviving spouse who did not sign the mortgage documents—could be put in a terrible position and face foreclosure on the family home.

The New York Times recently published an article, “2 Senators Question Effects of a Reverse Mortgage Proposal” that two U.S. Senators sent a joint letter to Ben Carson, the Secretary of HUD and Mick Mulvaney, the Director of the Office of Management and the Budget. They sent the letter two months ago to get some clarity on the proposed wording in the budget request. Senator Marco Rubio (R-FL) and Senator Catherine Cortez Masto (D-NV) asked whether the agency was seeking to reverse the previous change in policy.

There’s been no response from HUD about its intent for reverse mortgages, which allow the elderly to use the equity they’ve built up in their homes. That is causing concern, because reverse mortgages are seen as crucial in helping an aging population plan for retirement. Before the change in policy two years ago, a surviving spouse who hadn’t signed the mortgage frequently had to pay what was left on the loan in full or risk being evicted in a foreclosure. The two senators say the old policy is a “loophole” that had “compounded the stress faced by widows and widowers at a time when they were already grieving the loss of their spouse.”

The specific language in question is a proposed change in the National Housing Act that says, in regard to reverse mortgages, that a mortgagor “shall not include the successors and assigns of the original borrower under a mortgage.” The phrase is in a section of the Act providing the types of reverse mortgages eligible for insurance guarantees from the Federal Housing Administration, a division of HUD.

The revised wording can be read as suggesting that a surviving spouse isn’t necessarily entitled to stay in the home.  However, at the same time, Trump’s budget proposal includes a new line that would give the Secretary of HUD broad discretion to determine if a loan is payable after the death of the borrower.

“HUD’s proposed changes to reverse mortgages included in the last budget raised concerns that the administration may be seeking to undo hard-fought existing protections,” Senator Cortez Masto said in an emailed statement on Tuesday. “I hope the administration can make clear that they’re not looking to push seniors out of their homes after the death of their spouse.”

The senators have not yet heard a response from the housing agency about its intention for the language change. One expert noted that even if this is simply a case of bad drafting, it could lead to a bad law that would harm many seniors.

The increase in home prices, along with the enormous number of baby boomers who are reaching retirement age without sufficient savings in place, point to a potential surge in the number of reverse mortgages. Clarifying this issue to protect the elderly from facing an even larger upheaval at an already challenging time in their life is paramount.

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Bipartisan Legislation on Elder Financial Exploitation Passes in the Senate in New City, New York

The number of instances of elder financial abuse is growing dramatically, in every state.

If it becomes federal law, a piece of bipartisan legislation passed by the Senate is expected to dramatically reduce the number of financial crimes against senior citizens.

The Elder Abuse Prevention and Protection Act of 2017 was introduced by Judiciary Committee Chairman Chuck Grassley (R-IA) and Senator Richard Blumenthal (D-CT). The bill passed by a voice vote, reports kiow.com in its article, “Senate Passes Bipartisan Bill Curbing Crimes Against Seniors.”

“This legislation will enhance our response to the cowardly criminals who try to exploit America’s seniors. Families across America, including in my home state of Iowa, have been victimized by such crimes, and as the population ages, we can expect more and more victims if we don’t act. The Elder Abuse Prevention and Prosecution Act takes meaningful steps to equip law enforcement, seniors and caregivers with additional tools so they can deter these crimes and hold perpetrators accountable,” Grassley said.

“Our bipartisan legislation will help prevent the utterly unconscionable scourge of elder abuse and hold its shameful perpetrators accountable. Far too many seniors in our country are abused or exploited by the very people who are supposed to care for them. This issue hit home in Connecticut with the tragic case of Purple Heart recipient Robert Matava. A national hero, he deserved the best care during his golden years. Instead, he was defrauded and left penniless by those he trusted most. Abuse of our country’s elders is too often overlooked, and we must do everything in our power to ensure their financial security and physical safety,” Blumenthal said.

Research shows that financial exploitation may be the most widespread form of elder abuse. It costs seniors in the U.S. over $36 billion annually. The legislation will expand data collection and information sharing to help prevent and respond to all forms of elder abuse and exploitation, including financial crimes against the elderly.

The bipartisan Elder Justice Coalition called the bill “one of the most comprehensive and meaningful bills ever developed to address the rapidly increasing problem of elder financial abuse in America.” It also has the backing of Consumers Union, SIFMA, the 60 Plus Association, the Alzheimer’s Association, the National Center for Victims of Crime and many others.

Hopefully, the number of senators cosponsoring the bill from both political parties will make it more likely to proceed through the legislative process with no impediments. Senator Grassley has been involved with this issue for many years, chairing a Judiciary Committee hearing in 2016 that examined solutions to elder financial abuse, as well as initiating a number of inquiries on the issue.

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