BischofLegal Blog

When It's NOT "Your Call"

Mon, 09 Nov 2009 12:20:45 -0800

A “health care proxy” appoints someone to make medical decisions for you (and review your medical records) when you can’t do so for yourself. A “living will” is a declaration about which life-prolonging measures you do/don’t want when you become terminally ill or incapacitated. (Many instruct against invasive feeding and artificial respiration in irreversible conditions; this was the issue in the Terry Schiavo case.) You absolutely ought to have both of these instruments in your family portfolio! I draft them together in the same document, two pages long, reasonably clear, using state-approved language, and if you call me up, I will be happy to do yours for free. Yes. If you’ve got thirty minutes and will come to my office, I’ll provide the forms, the pens, the two witnesses, and the notary. Supplies are not limited.

Moving Houses Around While They're Cheap

Mon, 09 Nov 2009 12:20:00 -0800

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.

What's Better than Life Insurance?

Mon, 09 Nov 2009 12:18:26 -0800

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.

Death on the Taconic Parkway

Mon, 09 Nov 2009 12:17:02 -0800

What Philip Larkin observed about people's parents in his most famous poem (viz., that they “mess” you up) is often true of our siblings (and in-laws) in lesser-but-still-material ways. Without the guidance of your valid will, the greatest danger in a probate judge's selection of your child's guardian is not that s/he might miss a great-but-not-obvious choice (e.g., your close friend), but rather that s/he might choose someone from your extended family who presents well but would be a very bad choice indeed. If someone in your orbit has personal issues that make you squeamish at the prospect of their becoming your child's guardian, you can solve the problem definitively (without mentioning the issues or naming names) by specifically nominating someone else (and a back-up) as guardian in your will.

Sightings/Writings

Mon, 09 Nov 2009 12:15:09 -0800

“Keep Tabs on Insurance That Covers Estate Tax,” WSJ May 26, 2009, observes that your life insurance trust plan is only as good as the trustee’s ongoing monitoring of the policies s/he’s holding. “Deciding if Your Kid Is Trust-Worthy,” WSJ June 3, 2009, discusses not only the benefits of using trusts in planning for your children but also the factors to consider in choosing the right trustee.

What Would Onan Say?

Mon, 09 Nov 2009 12:13:36 -0800

Developments at the intersection of medical technology and the laws governing estates continue to break new legal ground. A man facing treatment for an illness deposited sperm in a lab; the contract asked about disposition in the event of his death, and he requested that the material be destroyed. After his death, parents/administrators sought the sperm for purposes of artificial insemination; held, the estate had no special right to the sperm. Speranza v Repro Lab Inc., 2009 NY Slip Op 01543.

Special Needs/Supplemental Needs

Mon, 09 Nov 2009 12:12:24 -0800

People with “special needs” and those who provide their support face a variety of hurdles, some literal/physical and some bureaucratic. Unfortunately, the field of estate planning, specifically will and trust drafting, is replete with opportunities for the law of unintended consequences to wreak havoc. A common risk is that a gift or legacy could actually harm a recipient by making him/her ineligible or less-eligible for means-tested benefits (such as Medicaid). Often the cure is simply careful drafting that prevents any intended gifts/legacies from interrupting federal/state/local benefits by making such funds available only as a “supplement” in the absolute discretion of a trustee.

Simple "Asset Protection" for Those-Who-Remain

Mon, 09 Nov 2009 12:11:36 -0800

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.

Sword of a Thousand Truths

Mon, 09 Nov 2009 12:10:37 -0800

Digital estate planning” is increasingly important for people of all stripes, and it’s not just “inventory” in games like World of Warcraft or passwords to not-quite-PG-13 websites. Lots of folks you know have (i) ordinary assets (like money) online (funds at PayPal or at a poker site) and/or (ii) digital assets or rights (domain names; a shop on eBay). As the digital world continues to mainstream, ask yourself: “What would my spouse/executor miss?” Consider listing your online accounts “for the file” – with or without passwords. Suspenders-and-belt types might explore the nascent online services offering to catalog the world of digital property. P.S. - Does your avatar have a will?

Update on NYS Power of Attorney Legislation

Mon, 09 Nov 2009 12:08:40 -0800

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”).

You Could Have a Pet Trust... Who Knew?

Mon, 09 Nov 2009 12:07:35 -0800

Notwithstanding the recent hullaballoo about the late Leona Helmsley’s disputed trust for dogs, the more mundane reality is that NYS law has long provided for such arrangements (EPTL 7-8.1) and the use of such trusts is downright quotidian. Any pet owner who wants to designate someone specific to care for a pet, or to provide funds for a pet’s care (whether long term or just until a new home can be found), or to make any kind of special arrangement, should consider making specific provisions in his or her will. Your pet will thank you!

Kudos to the Tarheels and the Huskies; "Jump Ball" Closer to Home?

Mon, 09 Nov 2009 12:06:10 -0800

In both the men and women’s brackets, this year’s March Madness was a testament to the strength of established programs. How does your plan compare? Will guardianship of your children be a “jump ball” between well-intentioned-but-perhaps-not-so-suitable relatives? Whether or not you have the good fortune to be leaving a taxable estate, your will should nominate fiduciaries (executors, guardians, and trustees) (and keep a few substitutes/successors on the bench – you’re not the only one who’s mortal…) to care for those-you-leave-behind. And it’s not just for the minors – most plans leave funds in trust for beneficiaries up to age 25, 30, or even 35.

You've Filed Your Tax Return, Now Follow Through!

Mon, 09 Nov 2009 12:04:34 -0800

As any devotee of the golf swing, tennis serve, or pick-up line can attest, your “follow-through” is critical. Whether you prepared your own IRS Form 1040 or worked with a professional, you surely chased every dollar of credit and deduction in hopes that your “contribution” to the Republic would be no greater than what you legally owed. Why not follow through with some attention to your estate tax exposure? Advance planning can materially reduce or eliminate your estate’s potential tax burden (particularly for married couples (even those still in the family-building and wealth-building phases)). This is especially true for people living in New York, New Jersey, and Connecticut, where exemptions for state-level taxes remain relatively low ($1,000,000; $675,000; and $2,000,000 respectively). Keep your eye on the ball!

Same-Sex Marriages Recognized in Surrogate's Court

Mon, 09 Nov 2009 12:03:01 -0800

Recent appellate decision Martinez v. County of Monroe, coupled with an executive order from Governor Paterson, should have the effect of causing New York State generally to recognize same-sex marriages performed in other jurisdictions. Last month, in Matter of Ranftle, the New York County Surrogate’s Court extended the analysis to New York’s substantive law of wills, trusts, and estates. Same-sex couples in New York who don’t have the time for a Canadian marriage vacation can achieve most of these goals with thoughtful planning.

New Power of Attorney Legislation

Mon, 09 Nov 2009 11:59:46 -0800

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.