Posts in category: Estate Planning

When it comes to estate planning, you may find yourself questioning whether leaving each of your children an equal share is the right choice. While it may seem like the easiest and fairest option, there are instances where it may not be the wisest approach.

Consider Your Children’s Unique Situations

If you have more than one child, you should be asking yourself the same questions as you build your estate plan. Should you leave each of your children the same amount in your will or trust?

Just like shopping on Black Friday, leaving all your children the same amount can feel like the best approach at first, but there are some instances where it might not be the wisest strategy, or even the fairest.

Factors you might want to consider include:

• One child earns considerably more than your other children
• One child has several children of his or her own, while another child does not
• One of your children serves as your caregiver, runs errands or helps you in other ways much more frequently than your other children

Disappointing Behaviors and Addiction

Sadly, you may have to ask yourself another, more troubling question: Has one of my children disappointed me so often, or behaved so irresponsibly in the past, that I feel like I must disinherit him or her entirely?

In cases where one of your children suffers from drug dependency or severe mental illness, inheriting money may actually do more harm than good.

We understand that this is a tough decision, made all the more difficult by the fact that unequal inheritances can lead to hard feelings and even challenges to your will or trust. If you believe that the best approach is to treat your children differently with regard to inheritances, here are some ways to avoid potential problems:

Avoiding Potential Problems

Take the time to talk to your children about your will (or trust) and its contents. While this can be a hard conversation, explaining your decisions to your children will help them understand why you have made them in the first place. Such a conversation can go a long way toward lessening any shock and the potential for disputes that might occur if your children first learn about the contents of your will or trust after you are gone.

Consider compensating your children who are “there for you” when you need help around the house or running errands while you are still alive. Similarly, if a child is going through a difficult time, such as the loss of a job or a divorce, consider offering financial assistance now instead of later.

You can add various clauses to your will in order to reduce the potential for litigation. For example, you could stipulate that any disputes after you pass away must be mediated rather than litigated. Or a no-contest clause can stipulate that a beneficiary forfeits his or her interests if the will is challenged.

Perhaps most important of all, make sure that you take the necessary steps when you create your will to show you are of “sound mind.” Such steps can include getting an evaluation from a doctor, as well as a psychiatrist, shortly before your documents are signed. If you are making changes to your existing will or trust, this precaution is even more important.

Seek Professional Assistance From a Westchester County Estate Planning Attorney

Emotions can run high after a loved one dies, particularly if your family’s assets include items with sentimental value, and the last thing you want is for your family to start fighting after you pass away.

Defuse Conflict Over Sentimental Items Before You Pass Away

How can you prevent your heirs from fighting over items with sentimental value? Many people believe that a statement in a will or trust that basically says “tangible personal property should be divided as my heirs see fit” will solve the problem. However, this can lead to a host of potential conflicts. A better approach is to put specific items that you believe are of interest to certain family members in writing, and then discuss your decisions in advance with your family. In this way, many emotionally charged disputes can be avoided.

What if you are convinced that a former spouse, one of your children, or the spouse of one of your children will cause trouble no matter what you specify in your will? In this case, you might want to consider a no contest clause. In essence, this clause makes the risk of challenging your will outweigh the potential benefit of doing so. A no contest clause generally stipulates that if a beneficiary contests the will’s provisions or its validity, his or interest in the will is forfeited. It is important to note, however, that you have to leave the heir in question enough of an inheritance to motivate him or her not to challenge the will.

When a Challenge to Your Will is Inevitable

The good news is that, generally speaking, challenging a will isn’t easy. And that’s especially true if there is a valid document in place that was drafted by an experienced attorney, signed by you, and duly executed according to your state’s law. Even in cases without all those dotted “i”s and crossed “t”s, successfully overcoming a will can prove difficult. However, it does happen.

Challenging a will must be done in a formal process called a will contest, or caveat. Caveat proceedings are most common in cases where more than one document exists and the beneficiaries disagree as to which is the “true will.” Contests can also arise when there are holographic (i.e. handwritten) wills, confusing written statements, uncertain verbal statements, surprising or grossly unfair provisions, apparent deathbed revisions, or questions about the circumstances under which a will was made.

As a general rule, if your beneficiaries wish to start a caveat process, they must successfully allege one of the following claims:

Lack of Testamentary Capacity — The testator (i.e. the deceased) was not of sound mind when the will was made, did not know the value of their estate, or otherwise did not understand the consequences and effects of the will.

Invalid Execution — The will was not executed according to the laws of your state. This argument is raised when there are questions about the capacity and/or signatures of either the testator or the witnesses. The court will typically presume that the will was properly executed, so the caveator (the person challenging the will) must overcome that presumption, usually with the help of their attorney.

Negligent Execution — A clerk or attorney made a mistake when drafting or executing the will, thereby accidentally contradicting your intentions.

Undue Influence — The caveator claims you were coerced, wrongfully pressured, or subjected to duress when making the will.

Fraud — The will is fraudulent or a forgery. Caveators may also argue that your intentions were colored by fraud. For example, let’s say you disinherit your nephew because your niece falsely accuses him of stealing your money.

A Second Will — The caveator believes there is another document that supplements or supersedes the purported will.

Perhaps you have considered selling your current home, buying a smaller one, and using the difference to help fund your retirement. A recent article on Investopedia.com explores this approach and details the mistakes you must avoid.

Here are some of the highlights.

Overestimating Your Current Home’s Value

Many people overestimate how much their current home is actually worth because of what friends and neighbors say they received for the sale their homes. To get a realistic sense of your home’s value, visit websites like Zillow.com and Realtor.com to learn the prices of recently sold properties in your area. Online “estimators” from banks like JP Morgan Chase and Bank of America will also provide useful information. Bear in mind that prices and estimates shown on these and other sites may not take into account the specific features sought by prospective buyers. Consulting local real estate agents or independent appraisers can address this problem. You should also ask these real estate professionals about inexpensive spruce-ups that will increase your home’s curb appeal and value. Most experts agree that the cost of major renovations will not be recouped unless your home is in extremely poor condition.

Underestimating the Cost of Your New Home

You can use the online tools and real estate professionals mentioned above to get a sense of what you’ll have to pay for the type of home you want to buy. If you plan to move to a new area, such as a place you’ve always enjoyed visiting, it’s important to spend a significant amount of time there. This will give you a feel for what it’s like to actually live in the area. Renting a property for a year or so before buying may be the wisest approach.

Ignoring the Tax Implications of Your Move

Most couples are currently able to exclude up to $500,000 in gains from the sale of their home, while singles can typically exclude up to $250,000. Your tax bracket and the length of time you’ve lived in your current home could impact whether taxes will be due upon its sale. You can find detailed information about this issue in IRS Publication 523.

You should also consider factors beyond income taxes on your home’s sale, particularly if you are moving to a different state. Lower property taxes in your desired destination could be offset by higher sales and income taxes. Similarly, pensions and withdrawals from retirement accounts could be taxed at a higher rate than where you live now. A particular state’s revenue or tax department website is a good source for this important information.

Ignoring Closing Costs

If you haven’t bought or sold a home in quite a while, you may have forgotten about all of the closing costs involved. Title insurance, recording fees, legal fees… the list of miscellaneous charges can seem endless. In addition, if you use a real estate agent, commissions can be as high as 6% according to Realtor.com. In addition, don’t forget about the cost of moving your belongings to your new home.

The bottom line is this: Do your research and run the numbers carefully before downsizing. You may find ways to save a significant amount of money on your move, or perhaps you’ll realize that you should stay where you are for now.

A spendthrift trust is typically used to prevent a beneficiary from receiving his or her inheritance all at once. There are several reasons why a grantor (the person who creates the trust) might want to consider such an approach. The most obvious reason is that the grantor believes the beneficiary will quickly squander the inheritance. That is, the beneficiary is a spendthrift.

Other reasons to consider a spendthrift trust include:

• The beneficiary (or the beneficiary’s spouse) has many debts and, consequently, the inheritance could be lost to creditors
• The beneficiary’s marriage is troubled and seems likely to end in divorce
• The beneficiary’s friends are spendthrifts (or worse) and have undue influence over the beneficiary’s behavior
• The beneficiary is simply “not good with money”
• The beneficiary suffers from alcohol or drug addiction

How does a spendthrift trust protect the beneficiary’s inheritance in situations like these? First, the beneficiary cannot access the assets in the trust, or promise them to someone else. Thus, creditors and other threats cannot reach the trust’s assets either. In addition, since the beneficiary’s inheritance can be distributed in specified amounts over time, the entire inheritance cannot be lost all at once. Of course, the portion that is distributed would be vulnerable unless other protective measures are taken.

The Role of the Trustee

It is crucial to choose one’s trustee carefully because the terms of the trust give the trustee control over trust assets and their distribution to the beneficiary. Similarly, it is extremely important to outline the trustee’s authority in detail. Here are some examples of factors to consider when setting the terms of the spendthrift trust:

• Should the trustee be instructed to make fixed payments according to a specified schedule, or does the trustee have some discretion to choose the amount and timing of distributions?
• Should the trustee make distributions in cash or provide the beneficiary with goods and services instead?
• Can the trustee withhold distributions if the beneficiary behaves inappropriately? If so, what types of behavior would trigger the withholding of assets?

Given the importance of the trustee’s role in administering the trust and managing the beneficiary’s inheritance, the choice of trustee should not be taken lightly. The decision to serve as trustee should not be taken lightly either. In certain situations, the trustee could very well be performing the role of mentor, or disciplinarian, or even parent. In addition, the trustee can be held legally and financially responsible for failing to follow the mandates of the trust.

Other factors to consider when creating a spendthrift trust include how and when the trust will end, what will happen if the beneficiary “grows up” and develops the maturity to manage the inheritance, and what should be done with trust assets if the beneficiary passes away.

Contact an Estate Planning Attorney

If you want to leave a loved one an inheritance but are concerned about his or her ability to manage it, we can help you determine whether a spendthrift trust is a good solution.

Approximately 3 million Americans move to another state each year, while last year alone the number was 4.7 million. Given the stress and myriad changes that come with such a move, it’s not surprising that many people forget to review their estate plans. However, differences between states regarding taxes, ownership of property, inheritance, and more make it extremely important to review, and if necessary, update your planning documents with an attorney who focuses on estate planning.

Let’s look at some of the legal issues involved when moving to a new state and the changes that may have to made to your plan.

Estate Taxes

With the current exemption on federal estate taxes set at $11.7 million for individual filers and $23.4 million for married couples filing jointly, most of us don’t have to worry about federal estate taxes (at least this year). Unfortunately, as of 2021, 11 states levy their own estate taxes, and exemption amounts are considerably less than the federal level. In addition, six states levy an inheritance tax and Maryland imposes both. The good news is that with proper planning, you may be able to minimize or even eliminate your estate’s vulnerability to state “death” taxes.

You can find a complete list of states with estate and/or inheritance taxes here.

Key Planning Documents

Contrary to what many people believe, a will that is valid in one state may not be valid in another state. The same is true of other important legal documents, including living wills or advance directives, health care proxies, powers of attorney, and more. (It is worth noting that the Uniform Power of Attorney Act, which was designed to help eliminate conflicting laws between states regarding powers of attorney, has not been enacted in all 50 states.)

Consider, for example, what might happen if health care providers in your new state won’t recognize and accept the medical power of attorney or health care proxy you made in another state? Your agent or attorney-in-fact might not be able to make the decisions you empowered him or her to make on your behalf in a medical emergency. Your loved ones might even need to take the matter to court to enforce a document’s validity so that your wishes will be carried out. A medical emergency is not the time to be worried about, or trying to enforce, the validity of key legal documents.

Your “Helpers”

When moving to a new state, it is not realistic to expect your helpers, such as your agent, attorney-in fact, or executor, to continue to serve in this capacity. We’ve mentioned the issues surrounding powers of attorney. In addition, the vast majority of states do not allow a non- resident to serve as an executor, and of those that do, the executor must be related to you directly. Other states have additional restrictions as well.

Finally, states differ with regard to the laws governing community property, titling (which could impact your trusts), tenants by the entirety, and joint tenancy with or without right of survivorship.

Contact a New York Estate Planning Attorney

The bottom line is this: If you are planning to move to another state, or you’ve already done so, be sure to speak with a qualified estate planning attorney to review and update your plan. Contact Amoruso & Amoruso, LLP for a personal meeting.

There are many reasons you might consider giving your adult children a portion of their inheritance now, while you’re alive and well. Maybe you’ve seen your nest egg grow thanks to a robust stock market, and you have more in savings than you thought you would at this stage of your life. Perhaps you and your spouse enjoy excellent health and have received nothing but good checkups for years, so you’re not overly concerned about medical expenses. Or maybe just want to be there to experience how your financial assistance helps your children pursue their dreams and achieve their goals.

While many parents would like to help their adult children financially as much as possible, before acting on your generous inclinations you should consider a number of potential problems.

For instance, what if one of your children could use some help right now, perhaps with paying off student loans or starting a business, while your other children don’t need any help? If you give one child money, are you required to give the same amount to each of your children, regardless of need? Your other children may very well think so. Do you really want to set the stage for the family drama that could unfold by violating the “fairness principle?”

Of course, you could tell the recipient of your gift, along with your other adult children, that the gift will be deducted from the recipient’s inheritance when you pass away. This might solve the problem, but then again, it might not. As you’ve no doubt learned by now, your “kids” may be grown up but that doesn’t mean sibling rivalries and other powerful emotions from childhood simply disappear.

Another factor to consider, particularly with respect to large gifts, is whether your children are mature enough to handle a sizable amount of money on their own. It’s one thing to watch your children make sound financial decisions and achieve success as a result of your generosity, but quite another to watch them squander the money you worked so hard to attain and preserve. If your children use your gift in ways you never intended, will you resent it? Will they resent you for having “strings attached” to the gift?

Finally, while you and your spouse might be healthy now, people are living longer than ever before. The majority of us will require long-term care at some point in our lives. Long-term care is already expensive, and costs are expected to increase significantly in the future. Even basic services are expensive: According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2021 may need approximately $300,000 saved (after taxes) to cover health care costs in retirement.

We never really know what the future holds. Change is the essence of life, and your situation could change dramatically in the years ahead, hopefully for the better but maybe for the worse.

The last thing you and your spouse want is to discover five, ten, or twenty years down the road that you no longer have the money to support yourselves, let alone afford the lifestyle you have now.

What you do with your money is your business, of course. Just think long and hard before giving your adult children a significant financial gift. As always,  we are here to help.

For generations, the children in your family have learned to swim by jumping off of the dock of your family’s vacation home. It’s a rite of passage for each grandchild to learn how to bait a hook from grandpa while fireflies flicker in the summer heat. The legacy of a vacation home is the pinnacle of the American Dream. Many people work their entire lives to afford a home in their dream destination. While you dream of passing down this home (and the memories) for generations to come, have you thought of how to protect this family legacy?

Leaving the family vacation home directly to your children may be the simplest way for transferring ownership, however, when multiple children are involved, they would all need to agree with how the property is managed and maintained in the future. These decisions are proven to be challenging not only for your children to agree on, but also their future spouses.

An LLC is often used by families, in which each family member would have a certain membership interest in the home or to give away in a controlled manner. If the home is rented at certain times of the year, the LLC can help limit the liability of the family and profits could be used to help maintain the property.

Trusts are another tool used to protect a family home. This legal agreement allows you to specify how you would like the property to be managed once you die. You can use the trust to identify who will own your vacation home, when they will have access to it, and what they will be allowed to do with the property.

One of the many benefits of placing your vacation home in a trust is to avoid probate. When you pass away, assets that legally belong to a trust will be passed on to your beneficiaries without going through probate. There are several trust options available to align with your specific needs. I few most common trusts are:

IRREVOCABLE TRUST

The house can be placed into an irrevocable trust with your children named as beneficiaries. The terms of the trust would outline the management and use of the home. An irrevocable trust helps to protect the family from possible creditor liens.

REVOCABLE TRUST

A revocable trust can be used to transfer the property to family members at the time of your death. This option can set up what is called a subtrust to manage your vacation home after your death. There is usually a set amount of money set aside in the trust to help care for the property for a period of time.

QUALIFIED PERSONAL RESIDENCE TRUST

This allows you to gift the property at a reduced value, while allowing yourself to use the property for a set amount of years, after that time has expired the home can transfer directly to family or to a trust for future generations.

Contact a New York Estate Planning Attorney

For many, an estate plan is created and never looked over again – until it’s necessary to do so. But did you know that you should really look at your estate plan as something that grows and changes with you?

Think about what has happened in your life since the last time you looked over your estate plan. Maybe you bought a new home, got married, or welcomed your second child. Each of these events demonstrates exactly why keeping your plan up to date is just as important as creating a well-designed plan in the first place – because life is full of beautiful changes.

And life will continue to offer these changes, especially as you grow older. Your health, financial situation, income, and the overall value of your assets continuously change with you and over time. Plus, the needs of your loved ones will change over time as well. After all, people get divorced, remarry, have children, buy and sell homes, start a business, change jobs, and sometimes they suffer unforeseen financial difficulties like bankruptcy or personal problems like alcoholism.

By having an established schedule to review, and, if necessary, revise your estate plan on a regular basis you’ll be able to account for every change life brings your way, and better protect both you and your loved ones in the process. But, if you believe any recent life events may have impacted your estate plan’s effectiveness, we urge you to have your plan reviewed immediately.

On top of that, the law is constantly changing. Over the years, new laws may take effect and others may be repealed which could make some options for protecting assets less attractive than they were previously or offer new opportunities for wealth preservation and growth. Working with a knowledgeable estate planning attorney as you update your estate plan will ensure you have a strategy in place that will take advantage of every legislative update.

So, whether or not you and your loved ones have experienced any recent life changes, it’s best to have your plan reviewed at least every two years to make sure your existing strategy takes into account any changes to the law, tax code, or financial landscape. It’s a great feeling to know you have thoughtfully prepared for your and your loved ones’ future financial, physical, and emotional well-being with your estate plan. Now, it’s simply a matter of keeping your plan up to date so that the same level of carefully considered protection lasts for years to come.

When most people think of estate planning, usually writing out their will comes to mind. While a will can help you accomplish a number of important planning goals, it’s certainly not a complete plan to protect your future.

Many people know that a will allows you to control how your assets are distributed after you pass away. And, that without a will, your assets would simply be distributed in an action carried out by the state. Known as intestate succession, the state acts in an objective, and simply procedural, manner because your assets are required to be distributed. The process of intestate succession will completely ignore your wishes because what you “would have wanted” is simply irrelevant to the state without a formal will in place.

A will is also critical when you have minor children. The terms of your will can give you control over how your minor children are raised should you and your spouse pass away. In your will, you can name a trusted person to serve as a guardian, someone who will raise and care for your children when you cannot. However, without a will, a court decides who will raise your children; a decision that may appoint a person you never would have selected yourself.

In sum, yes, a will is an important document to create so you can rest assured your wishes will be respected after you’ve passed away. Yet, it’s important to consider the limitations of a will as well. For instance, your will does not allow you to manage your affairs should you become incapacitated.

Working with an experienced estate planning attorney to establish a durable power of attorney and advanced medical directive will ensure that you retain some control over what is done on your behalf if you become incapacitated. Each of these documents empowers one or more individuals to make decisions about your assets or medical care when you are unable. If you do not have either document in place, a court will decide who to appoint to fill these roles for you. Again, leaving the decision open for the court to decide could lead to the appointment of someone you would not have chosen for yourself; someone who would then have the power to take actions they believe are in your best interest regardless of your personal preferences.

Further, many financial accounts require a beneficiary designation, instead of a will, to determine how the assets will be distributed. Ownership of assets such as life insurance, annuities, retirement accounts like IRAs and 401(k)s, and jointly-owned property all look to the beneficiary designation form for guidance on how the asset is to be distributed after the owner’s passing. In fact, many IRS rulings and court cases have concluded that the owner’s statements and intent in his or her will do not matter if they contradict what was written on the beneficiary designation form. This is why it’s important to also review your beneficiary designations periodically to ensure they reflect your wishes now, and not what you wanted when, for example, you opened the IRA 20 years ago.

A trust is another estate planning tool families can utilize to provide a greater level of flexibility in how their future is managed. For example, a revocable living trust allows your estate to avoid probate entirely—and the public scrutiny that accompanies it. Trusts can also protect your assets against creditors and other threats while protecting your heirs’ inheritances against creditors, predators, remarriage, and even their own poor decisions if they are not yet mature enough to handle an inheritance on their own.

Contact a New York Estate Planning Attorney

In short, while a will can help you accomplish important goals, additional estate planning tools and strategies are available to protect you and your loved ones both after you pass away and in the event of tragedy while you are still alive. An experienced estate planning attorney can help you determine the best tools and strategy for you.