Category Archives: Wills

The Aftermath of Hurricane Sandy: Figuring Out Your Next Steps, and We’re Here to Help!

As the flood waters start to recede here in NYC, it’s useful to think about all of the different ways the storm may have had legal ramifications for you and your family.  One of the major considerations is housing: if your home was damaged, or if you are without required services for an extended period of time, you may have a claim against your landlord, utility provider or insurance company.  Likewise, if you had possessions damaged during the storm, you may need to make an insurance claim to protect or replace your interest.  In natural disasters such as this, often insurance companies, landlords and other responsible parties resist paying what you may be entitled to under your lease, policy or other agreement, because of the sheer number and value of claims.

Other areas of concern are in the employment and educational spheres.  Are you being penalized for your inability to work during the extended power outages and transportation suspensions?  Are you unable to work due to child care obligations?  Are you receiving less of an education than you bargained for because of school closures or delays, or the cancelation of important programs you were counting on?

There are many ways that individuals and businesses can be impacted by the storm.  Most of us would be smart to take stock of our homes, jobs and property to see where we might need to fight a little harder to get what we’re entitled to receive.  Also, for those who braved the storm without basic estate documents, including guardianship designations, living wills, power of attorney forms and sufficient life insurance planning, now would be a good time to think about how you would need your property and rights to be allocated should, next time, the truly unthinkable happen.

If you are having any issues getting back on your feet, and feel you could benefit from a legal advocate in your corner, don’t hesitate to contact us.  We are experienced in dealing with landlords, insurance companies and creditors, and we can offer great advice to help you be prepared for any future disasters.

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Death and Taxes: the Uncertainty of Inevitability in 2013

In 2001 and 2003, then-President George W. Bush enacted legislation increasing federal estate and gift tax exemptions to unprecedented levels.  These tax breaks were originally scheduled to expire in 2010; however, President Barack Obama temporarily extended them through the end of this year.  As things currently stand, each taxpayer is allowed a $5,000,000 exemption for 2011 and a $5,120,000 exemption for 2012 (these are also the current exemptions for generation-skipping transfer and gift taxes).  Additionally, the maximum federal tax rate for estates greater than the exemption is 35%, and the concept of portability was introduced to estate planning: for decedents dying in 2011 and 2012, if the first spouse to die lacks sufficient funds in his estate to claim the entire exemption, then the unused portion of the exemption can be transferred to the surviving spouse.  The gift tax exemption is also portable between spouses; however, the generation-skipping transfer tax is not.

So, what does this mean for those of us who, knock on wood, won’t die before the new year?  President Obama extended these tax breaks once – he’ll do it again, right?

Not necessarily.  These questions are largely unresolved due to the upcoming presidential election, and it is unlikely we will have any action before then.  President Obama’s current proposal is to reduce the estate and generation-skipping transfer tax exemptions to $3,500,000 and the gift tax exemption to $1,000,000.  Under the President’s plan, the top estate, gift and generation-skipping transfer tax rates would be 45%.  However, the President would make the ability to port unused exemptions between spouses permanent.  Mitt Romney, on the other hand, favors repealing the federal estate, generation-skipping transfer and gift taxes entirely.  The direction these laws take will depend, in large part, on the outcome of the November election.  If President Obama and Congress fail to act prior to December 31, 2012, then the exemptions will revert to pre-2001 levels, meaning an exemption of only $1,000,000 and a maximum tax rate of 55% on any excess over the exemption.  Perhaps, if Romney wins the election, none of this will matter – but it’s certainly risky for Americans to wait out these uncertain times without considering the impact on their estates if they were to die during a lapse in the tax breaks.

These ever-changing tax implications are one of the biggest headaches for estate planning practitioners.  Considering that these particular taxes generate a relatively insignificant amount of revenue for the country, at times it hardly seems worth the effort to draft estate plans to accommodate every possible legislative whim.  However, at least for the time being, such careful planning is necessary to ensure that your family, friends and other beneficiaries reap the greatest possible benefit from your estate plan.

Because there is a great deal of uncertainty surrounding the future of the federal estate, generation-skipping transfer and gift tax exemptions, Americans with potential taxable estates greater than $1,000,000 should review their estate plans with their professionals and carefully consider whether changes should be made.  Some options worth consideration are making gifts (within the current gift tax exemption) to beneficiaries before the end of the year, whether outright or in trust; investing in real estate during the down market; prudently investing in marketable securities; and making estate documents as flexible as possible to accommodate fluctuating tax rates.

The good news: the yearly federal gift tax exemption should rise from $13,000 to $14,000 in 2013.  However, don’t expect much of a break with your paychecks: income and capital gains taxes are set to increase significantly, to go along with new Medicare taxes.  Also, the social security tax cuts we currently enjoy will expire at the end of the year.  Taxpayers in every bracket would be wise to consider these issues throughout the fall by reviewing their estate plans, making adjustments with their employers concerning withholding amounts, adjusting retirement and college savings plans, tweaking monthly budgets and carefully considering the impact of federal, state and local elections on their financial bottom lines.

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Where There’s a Will, There’s a Way: Why Your Way Might not be the Best Way

“Why do I need a lawyer?”

I often get asked this question because much of a lawyer’s work is deceptively simple.  For instance, a bankruptcy petition looks pretty straightforward:  you fill in your name and essential information, make a list of your assets and liabilities, sign it and file it.  Boom.  You’re done.  Then, several months down the line, you find out that the bankruptcy petition is a sworn statement under oath, and the seemingly insignificant omission of a source of income from the Statement of Financial Affairs is perjury, and you’re not only being denied your bankruptcy discharge, but you’ve also possibly committed a crime.  Oops.  Boom.  Now you’re really done.

The same is true with many other legal matters that seem simple and straightforward, but can result in harsh consequences for seemingly trivial mistakes.  Nowhere in the law is this more true than in the drafting and execution of wills.  The internet is full of will templates purporting to give you all the legalese you need to plan your estate.  It seems like a great idea, because it will save you a few hundred bucks for you to do it yourself.  Who needs a lawyer?

One of the organizing principles of American jurisprudence is that property owners have the nearly unrestricted right to dispose of that property as they see fit.  The law, when it’s working, curtails this freedom of disposition only to the extent that a person attempts to make a distribution to another person that may be prohibited or restricted – say, because the distribution is promoting illegal activity, infringes upon spousal or creditor rights, or otherwise runs afoul of the law.

Writing the will itself can be fraught with danger for people who choose to go it alone without help from a legal professional.  A will-writer who sets out to disinherit his entire family (wife and children) in order to leave his entire estate to his mistress and charity would be disappointed to learn that, after his death, the probate court invalidated his will, and gave his sizable fortune to the spouse that he could not disinherit completely and the children he could, but didn’t, because he did not consult an attorney to craft an estate plan that would come as close as possible to his intentions without violating the law.

One of the biggest pitfalls for those who write their own estate plans is the will execution ceremony.  In New York, the formalities of the will execution ceremony are particularly ritualistic, serving several functions: (1) to ensure consistency, and predictable results, in the inter-generational distribution of wealth; (2) to ensure that sufficient evidence of a person’s intentions is preserved in order to prove his intentions to the probate court after his death; (3) to ease the determination of a person’s wishes at death by channeling those wishes into a will with standardized formalities; and (4) to safeguard a testator (person making the will) against any undue influence or fraud at the time of the will execution.  In serving these functions, even tiny mistakes can be costly.

A lawyer can help guide you through these rituals in a way that a template or book on will drafting can’t.  The pages of a will must be fastened together in a particular way.  The testator must actually read and understand the will and its contents in the presence of witnesses, who must be disinterested (a legal term of art).  If anyone enters or leaves the room in the middle of the will execution, it might affect the validity of the resulting will.  The testator must answer certain questions, and sign the will in particular places and particular times.

Many testators who choose to draw up their own estate plans also omit one very important document which competent lawyers generally annex to a will:  the self-proving affidavit.  A will may be valid without one, but if a will contains this affidavit, it makes it much easier to probate the will.  Hopefully, testators execute wills when they still have a lot of life left to live.  Their witnesses may not be so lucky.  If there is no self-proving affidavit, and witnesses pre-decease the testator, or even just move away, it is much more difficult to successfully probate the will, because the witnesses are unavailable to testify that the will was properly executed.

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