Post By George in Estate Planning - Documents
A “qualified personal residence trust” (“QPRT”) lets you have your cake and eat it too: owners can make a gift of their residence (usually to their children) in trust, while retaining an indefinite right to live there. The transfer is subject to gift tax (for most people, that means using the gift tax credit, not paying out of pocket), but with a valuation substantially below the likely value in your estate (partly because of low values right now, mainly because of the “retained life estate”). It’s not simple, but for folks who are planning stay put and want to get appreciated bricks-and-mortar out of their estate, low interest rates and depressed pricing levels make this tool very powerful right now. I can probably assess in a short call whether it’s a potential fit for you and yours, so let’s discuss.
Post By George in Estate Planning - Documents
Your beneficiary getting 100¢ of every $1.00 of benefits. An “irrevocable life insurance trust” (“ILIT”) is the best deal going, after the estate tax exemption itself. Just as “Roth IRA” distributions are the IRA distributions you don’t pay tax on, and municipal bond interest is the bond interest you don’t pay tax on, your estate won’t pay any estate tax on life insurance proceeds if the policy was owned by a properly structured and maintained ILIT. If you can afford the premiums, you can almost certainly afford to shield the proceeds from estate tax. Having enough coverage is smart; permanently shielding it from state and federal estate tax is wicked smart.
Post By George in Estate Planning - Documents
Followers of this newsletter know that a properly-structured-and-fastidiously-maintained irrevocable life insurance trust (“ILIT”) is a proven structure for shielding insurance proceeds from estate taxes. A less-touted advantage is the way an ILIT (funded by insurance proceeds following the grantor’s demise) can shield the corpus from the ruinous calamities that can befall even the most careful: plaintiff’s lawyers, general creditors, bankruptcy trustees, and the surviving spouse’s subsequent divorce proceeding. “Credit shelter trusts” can serve a similar purpose, but consult an expert for advice on how the choice of trustee and other factors bear on their relative effectiveness.
Post By George in Estate Planning - Documents
The effective date for the legislation materially modifying New York’s provisions regarding powers-of-attorney has been pushed back to September 1, 2009. Statutory language (including the text of a “safe-harbor” short form at §5-1513) can be found online at www.titlelaw-newyork.com/Chapter644.pdf (not for the casual reader), until commercial publishers make a standard form readily available (Blumberg says “late August”). Please be mindful not only of the new formalities of execution, but also of the new statutory duties imposed upon attorneys-in-fact (including, significantly, a duty to “account”).
Post By George in Estate Planning - Documents
On January 27, 2009, Governor Paterson signed legislation significantly modifying New York’s provisions regarding powers-of-attorney; the effective date is September 1, 2009. For most families, powers-of-attorney should be included in your portfolio of important documents. Powers currently in effect will be “grandfathered,” but if this is an area you’d like to review/update, be sure to be mindful of these new provisions.
Post By George in Estate Planning - Documents
The federal gift tax exemption rose to $13,000 for calendar 2009; the estate tax exemption rose from $2,000,000 per person to $3,500,000. The consensus among those-who-watch-closely is that likely estate tax legislation will retain the $3,500,000 exemption in coming years, and the federal estate tax will not be repealed for the year 2010. Conversely, it appears likely that New York State will NOT make any changes, so New York’s estate tax exemption will remain at only $1,000,000. The state tax rates range from 6% to 16%, so for folks with home equity, some retirement savings, and life insurance, an “involuntary contribution” to Albany’s coffers could be more of an exposure than you realize. In many cases, especially regarding life insurance, sound planning can minimize or even eliminate the impact of estate taxes.
Post By George in Estate Planning - Documents
You reviewed your will and concluded that some provisions need to be updated, and you’re curious how best to do so quickly and cost-effectively. First, do not ever write on your will, either to strike out or to add text. Just don’t – it doesn’t count and it invites litigation. Changes can be made (i) by a new written “codicil” (an amendment that must be executed with the same formality as a will (e.g., at least two non-beneficiary witnesses)) or (ii) by executing an entirely new document. In this era of word processing and changing estate tax laws, it’s usually wiser to re-draft the whole document (especially if you’re working with a new attorney), but sometimes a quick codicil is appropriate.
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