Archive for the ‘Tax Planning’ Category

National Financial Literacy Month: Six Steps Toward Successful Estate Planning

Tuesday, October 10th, 2017

In support of National Financial Literacy Month (April) and National Estate Planning Awareness Week (3rd week in October), the following estate planning article contains a very important message:

Estate planning is a financial process that can protect you and your family and is a very important component of your overall financial planning. Now is the perfect time to put your estate planning house in order. If you don’t have an up-to-date estate plan and you happen to get hurt or sick and cannot manage your financial affairs, the courts will have to appoint someone to manage them for you. The person they appoint might not be the one you would want to perform those tasks.

Without an estate plan, when you pass away, your affairs will be settled by default through a complex legal system called “probate.” The handling of your financial affairs can turn into a costly and frustrating ordeal for your family and heirs.

The crafting of a good estate plan starts with planning, followed by the proper drafting and signing of appropriate legal documents such as wills, trusts, buy-sell agreements, durable powers of attorney for asset management, and an advanced health-care directive or health-care power of attorney. Having these documents in place saves you and your family a lot of money and time at a very difficult and emotional time.

Your estate planning should also address the coordination of the way you hold title to your various assets, your beneficiary selections, and the possible transfer of certain assets while you are alive.

Regardless of the extent of your net worth, estate planning is important for everyone. Complex strategies may be used by wealthy people to reduce death taxes and costs. Others may only require a simple will and/or trust to pass on property to their heirs and provide for minor children.

Even if a simple will is all you require, an estate plan is an essential part of your financial planning. Everybody will need it someday. The time to address or update your estate plan is now. See the checklist provided below to help update your estate plan:

CHECKLIST — SIX STEPS TOWARD SUCCESSFUL ESTATE PLANNING

1. DEFINE YOUR GOALS: What do you want to happen to your assets in the event of your death or disability? If your beneficiaries predecease you, who are your alternate selections? How will your assets be distributed, and when will these distributions take place?

  • Decisions on distribution of your estate assets should take into account the size of the estate, the ages and abilities of your children, and your personal desires. For example, a distribution to children over time might consist of 10 percent of the estate at age 18, 25 percent at age 21, 50 percent at age 24 or upon completion of college, and the balance at age 30.
  • Choose your appointees for important roles: Who will be your executor and, if applicable, trustee and/or guardians? It is advisable to list at least a first and second alternate for each appointment in case your first choice is unwilling or unable to serve.
  • If you have children who are minors, the appointment of a guardian is probably the most important decision you’ll make. With the court’s approval, this person, or persons, will raise your children. Consider appointing a family member and spouse, or another close couple who’ll care for your children the way you would want.
  • You may want to consider listing multiple executors, trustees and guardians to serve together in handling the details of your estate. This can provide a check-and-balance system for the appointees and help them avoid oversights or misappropriations. Consider appointing family members, friends, professionals, advisers and/or trust companies for this position.
  • There is some risk here: If these people disagree and have problems, they can each be represented in court by counsel paid for by your estate, so be very careful in making your selections.
  • Living trusts have become popular because less administration is required in comparison with a will. Be aware that having a living trust does not eliminate the need for a will and administration at either the first or second spouse’s death.
  • To get the benefits of the trust, certain details must be attended to, and this is the job of your appointees. For example, leaving a trust for the surviving spouse requires that the trust be funded properly and in a timely manner at the first death, or major tax benefits can be lost.
  • Is estate privacy an issue for you? Do you want your estate to be public record upon your death? Do you have any special gifts you want made to charity? Do you want an elderly parent or friend to be financially cared for? All of these circumstances should be noted in your plan.
  • GATHER & ORGANIZE YOUR DATA: There are three basic tasks to be accomplished:
  • Review and update your financial position.
  • Review how you hold title to your assets. Is it consistent with your estate plan?
  • Review your beneficiary selections. Are they aligned with your estate plans?
  • Did you know that how you hold title to assets has a higher legal priority than your will? For example, if you and your best friend held title to an investment club account as joint tenants and you died, the property would revert to your friend even though you had willed your interest to your spouse.

3. ANALYZE YOUR SITUATION: Start by determining your current net worth, assuming your death occurred today. This can be done by totaling your current assets and liabilities, and adding the value of any life insurance.

  • Try sketching a picture or flow chart of your existing estate plan. Review your appointees:
  • Executor
  • Guardian of the Person/of the Property
  • Trustee
  • Power of Attorney – Property Management
  • Advance Health-Care Directive or Health-Care Power of Attorney

4. DEVELOP YOUR STRATEGIES: With the assistance of your estate planning advisor(s), identify the legal documents that need drafting or make any necessary adjustments to existing documents. Determine any other actions that must be taken for your wishes to be carried out.

5. IMPLEMENT YOUR PLAN: Do what needs to be done — i.e., create new wills, trusts and powers of attorney, adjust title to your properties, change alternate beneficiaries of retirement plans and life insurance policies to trusts.

6. TRACK & MONITOR YOUR PROGRESS: Check your estate plan annually or any time there are changes in your family situation or net worth. Use your financial planning calendar to schedule your next review.

 

Learn more about National Financial Literacy Month by clicking here. For more information on estate and financial planning content contact v.sabuco@TheFinancialAwarenessFoundation.org.

 

 

 

Is Your Estate Plan Up To Date?

Thursday, May 11th, 2017

By: Amy C. O’Hara, Esq., Littman Krooks LLP

In order to ensure your existing estate plan meets your objectives, it is imperative that it be reviewed at least every 3-5 years and updated when needed.  Here are some issues that might necessitate updating your estate plan:

  • You want to avoid probate;
  • You or a beneficiary become disabled or have a long-term illness;
  • Death of a beneficiary;
  • Marriage, divorce or remarriage;
  • Birth or adoption of a child;
  • Death or change of executor, trustee, and/o guardian;
  • A change in the distribution of your estate;
  • A significant increase or decrease in your net worth;
  • Retirement;
  • Expecting to change state of domicile; and
  • Finally, any time you feel uneasy about any of your documents, making changes and/or speaking with your estate planning lawyer to make you feel comfortable with them.

Never make any changes on your current estate planning documents.  Mark-outs, interlineations and other informal changes are of no effect and will not be honored during an illness or after your death.  It is important to meet with an experienced estate planning lawyer to ensure you estate plan is updated properly to protect you and your loved ones.

 

Learn more about our elder law  estate planning or Medicaid Planning services. Contact us with additional questions.  


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When Not to Claim an Inheritance

Friday, August 26th, 2016

Although it may seem counter-intuitive to turn down an inheritance, there are situations in which it may actually be beneficial to do so. When a person refuses to accept an inheritance, that person is said to disclaim it, and the effect is the same as if the heir had predeceased the person who died. The gift will pass on to the next person in line to receive it.

Littman Krooks elder lawOne reason to disclaim a gift is when the asset is actually undesirable, for instance a piece of real estate with a low potential sale value but high property taxes. Other gifts may come with strings attached, such as a requirement to get married or to take care of the deceased’s pet.

Another reason for disclaiming an inheritance is for the heir to avoid estate taxes while passing wealth on to his or her own heirs, who may be in a lower tax bracket.  Individuals who are already wealthy and potentially facing a significant estate tax may want to disclaim an inheritance, allowing it to pass directly to their children without it ever becoming part of their estate. This may be useful for many types of assets, but disclaiming an inherited IRA may have the additional benefit of passing the asset along to an heir who can stretch out distributions over a longer period.

Disclaiming an asset is not something to take lightly or decided upon spontaneously. Instead, disclaimers can be part of your estate planning process, undertaken only with the advice of a qualified estate planning attorney.

 

Learn more about our services by visiting www.littmankrooks.com or www.elderlawnewyork.com.


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It’s Time to Protect Your Family and Your Future – 2015 National Financial Literacy Month

Tuesday, April 14th, 2015

In support of the 2015 Improving Financial Awareness & Financial Literacy Campaign built around National Financial Literacy Month (April) and six month later during National Estate Planning Awareness Week (3rd week in October) the following estate planning article contains a very important message.

Over 50% of our adult population does not have a current or up-to-date estate plan to protect themselves and their family’s assets; that’s half your family, friends, and associates.

6-2-Graphic-FPArticle
Estate planning is a financial process that can protect you and your family and is a very important component of your overall financial planning. Now is the perfect time to put your estate planning house in order. If you don’t have an up-to-date estate plan and you happen to get hurt or sick and cannot manage your financial affairs, the courts will have to appoint someone to manage them for you. The person they appoint might not be the one you would want to perform those tasks.

Without an estate plan, when you pass away, your affairs will be settled by default through a complex legal system called “probate.” The handling of your financial affairs can turn into a costly and frustrating ordeal for your family and heirs.

The crafting of a good estate plan starts with planning, followed by the proper drafting and signing of appropriate legal documents such as wills, trusts, buy-sell agreements, durable powers of attorney for asset management, and an advanced health-care directive or health-care power of attorney. Having these documents in place saves you and your family a lot of money and time at a very difficult and emotional time. 5-2-Graphic-EPArticle
Your estate planning should also address the coordination of the way you hold title to your various assets, your beneficiary selections, and the possible transfer of certain assets while you are alive.

Regardless of the extent of your net worth, estate planning is important for everyone. Complex strategies may be used by wealthy people to reduce death taxes and costs. Others may only require a simple will and/or trust to pass on property to their heirs and provide for minor children.

Even if a simple will is all you require, an estate plan is an essential part of your financial planning. Everybody will need it someday. The time to address or update your estate plan is now.

For more information on estate and financial planning content, contact
V.Sabuco@TheFinancialAwarenessFoundation.org.

 

Learn more about our services by visiting www.elderlawnewyork.com.


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Should You Consider a Trust for Your Child’s Inheritance?

Monday, August 4th, 2014

An update has been made to the NY Estate Tax. To read our update, please click here.

This conversation comes up a lot with our estate planning clients: “So, you’re leaving your entire estate equally to your three kids,” we say to our client. “Do you want to leave it outright or would you consider putting it in a trust for them?”

The two most common responses:

  •  “No, my kids are all OK. They can manage money and would be insulted if their inheritance was left in trust.”
  •  “No. If they can’t manage their inheritance then I can’t help them. I don’t want to try to control things after I’m gone.”

Then, we explain that creating a trust is actually a good thing for the kids but it’s usually hard to convince clients. So let’s try it here, and then we can just hand them this article.

Why consider a trust for your child’s inheritance? It may be a real benefit to them, protecting their inheritance from their creditors, spouses, even estate taxes. Let’s look at each of those concepts briefly:

One common concern we hear: “we love and trust our daughter, but though we like her husband we wouldn’t want him to inherit our assets if something happens to our daughter.”   By creating a trust for your child’s inheritance, you make it easier to keep the property separate from spouses and more likely to pass to your grandchildren on your child’s death. Sadly, divorce is very common: you can help keep the inheritance from being considered as part of the property to be divided if your daughter does divorce.

Let’s consider creditors. “Our son is a doctor,” you say, “and he has plenty of money.” Ah, but professionals are vulnerable to future malpractice lawsuits, and anyone can have even a substantial estate drained by an auto accident or medical crisis. Creating a trust for your son can help protect the inheritance from lawsuits, creditors, and bankruptcy.

How about taxes? If your daughter is a successful professional, she might well have a taxable estate on her death. That could be true even though she is not particularly close to that figure today. If estate taxes do kick in, they start at a very high 40% on the federal level. New York currently has an estate tax on estates over $1 million.  If you leave your daughter’s inheritance in trust, you can fairly easily arrange to keep it out of her “estate” for tax purposes.

So there are good reasons to leave an inheritance in trust, even though all your children are responsible and your estate is modest. But aren’t there some serious downsides? Doesn’t it mean a lot of additional costs and imposition of a bunch of difficult rules? Not really.

Depending on your family circumstances, you might even name your son trustee of his own trust. Or make your son trustee of the trust for your daughter, and make her trustee of his trust. Or make your daughter (you know, the one with her CPA who works for the bank) trustee for all the kids’ trusts. In other words, creating a trust does not mean you have to incur professional trustee fees though it might actually make sense to name a non-family trustee. We can talk about those options.

The trusts for your children will have to file tax returns each year. That will in fact mean a small additional cost. But the total amount of income tax paid need not increase. It should be fairly easy to assure that each trust’s income is taxed to its beneficiary, rather than paying taxes at the (often much higher) trust rates. We can talk about those issues, as well.

What about your son’s access to the money? Do you think he might want to use his inheritance to pay off his mortgage, or to allow him to put more away for retirement, or to send your grand kids to college? You can give him the power to demand money from the trust, or give the trustee direction to follow those kinds of requests. Let’s talk about how much control you want to give each of your children over the trust while they are alive. And on their death, you can even give your children the power to name which of their children (or spouses, or charities, or whomever you want to permit) will receive the remaining trust’s assets.

Cost? Setting up a trust for each of your children will likely increase the cost of your estate planning but by a pretty small number, in most cases. These principles apply even (perhaps especially) if you are leaving your estate to grandchildren, nieces and nephews, or anyone other than your children.

As you can see, there are many benefits of using a trust in your estate planning.  Keep in mind, however, that one size does not fit all and it is important to have your documents tailored to meet your specific needs.

An update has been made to the NY Estate Tax. To read our update, please click here.


Learn more about elder law and estate planning by visiting www.elderlawnewyork.com

 

 

How Divorce and Remarriage Affect Social Security Retirement Benefits

Tuesday, March 11th, 2014

People considering divorce as their 10-year wedding anniversary approaches should know that delaying the split until after the decade mark can result in higher Social Security retirement benefits for a spouse with a lower earning record.

Taking the example of a divorced couple where the ex-husband had a higher earnings record, if the couple was married for 10 years or more, then the ex-wife can receive higher benefits based on his record, provided she is age 62 or older and has not remarried.

Even if the ex-husband has not applied for retirement benefits, the ex-wife may receive benefits based on his record, provided they have been divorced for more than two years. If the woman remarries, then she would no longer be able to collect the benefits unless the later marriage ends.lawyer-or-notary-with-cl

Recent years have seen a rise in both marriages and divorces later in life, and statistics suggest that divorcing couples may take retirement benefits into account, as there is a measurable increase in divorce after the 10-year mark. As might be expected, the effect is most pronounced for couples nearing retirement age. A recent study found that for people 55 and older, there is an 11.7 percent increase in the likelihood of divorce at about the decade mark. For couples age 35 to 55, that drops to a 6 percent increase in likelihood of divorce at 10 years, and for people under age 35, there is almost no effect.

Other researchers are skeptical that many people take retirement benefits into account in their divorce decisions, pointing to studies that show that only 13 percent of people are very knowledgeable about how Social Security benefits are calculated.

Whether divorcing couples currently consider retirement benefits in timing their divorce, many advisers agree that they should. Divorcing just short of the 10-year mark could result in thousands of dollars in lost benefits, so it may be worthwhile for some to delay the process.

Financial considerations are often part of making decisions about divorce, so it is important to be aware of how Social Security benefits can be affected.

 

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Retirement Benefits: How Social Security, Medicare and Retirement Accounts Change in 2014

Thursday, January 30th, 2014

Medicare, Social Security retirement benefits, and individual retirement accounts all change in small but important ways in 2014, and people too young for Medicare will have new health insurance options. Here is what is changing.

First, thanks to the Affordable Care Act, people retiring before age 65 can now purchase health insurance on the new state health insurance exchanges. People can no longer be denied health insurance because of a pre-existing condition, and subsidies may be available for low and middle income earners.

For people on Medicare, the Part D prescription coverage gap has lessened in effect. Once a Medicare beneficiary has spent $2,850 on medication, then there is a gap until catastrophic coverage kicks in after $4,550 in costs for medication. In that gap, beneficiaries were required to pay 79 percent of drug costs, but that decreases to 72 percent in 2014.

Social Security benefits go up by 1.5 percent in 2014, due to the annual cost-of-living increase. The average increase will be $19 per month for individuals and $31 per month for couples who are both receiving benefits.

Social Security taxes increase for some in 2014. Workers usually pay 6.2 percent of their income into the system until they reach the $113,700 tax cap for the year. For 2014, that cap rises to $117,000.

Finally, the income limits for those eligible to contribute to individual retirement accounts (IRAs) and 401(k)s have increased. Investors who have workplace 401(k)s and also want an IRA can claim a tax deduction for IRA contributions until their adjusted gross income (AGI) reaches between $60,000 and $70,000, an increase of $1,000 over last year. For married couples, the income limits are now between $96,000 and $116,000. The income phaseout range for investors whose spouses have a 401(k) is up $3,000 from last year, to between $181,000 and $191,000. For Roth IRAs, the income phaseout range increased by $2,000, to between $114,000 and $129,000, or for married couples between $181,000 and $191,000.

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Sharing Caregiving Responsibilities Among Siblings

Thursday, November 14th, 2013

Caring for an elderly parent in declining health is a big responsibility, and one that can have a significant effect on the caregiver’s financial and emotional well-being. Having a sibling to share in that responsibility can make things easier, but it can also lead to conflict and resentment. It is important to understand the issues that may arise when two or more adult siblings are caring for an elderly parent, and the best ways to resolve problems.

One question that usually comes up at the outset is who will be the primary caregiver. If only one sibling lives close to the parent who needs care, that is often the deciding factor. When two or more siblings live close by, then the decision often depends on work schedules. If none of the siblings live close to the parent or have time available, then the question becomes how to divide the expense of hiring an in-home health aide or perhaps an assisted living facility, depending on the circumstances.

Good communication is probably the most important factor in making these decisions. Ideally, responsibilities will be divided in whatever way feels fair to everyone involved, and arriving at the best outcome depends on communication. Siblings should be encouraged to share exactly what they feel they should contribute and why. Factors such as an individual’s family income or work schedule are legitimate concerns that may play into decision-making. Feelings about this should be stated plainly so that later resentments can be avoided. Siblings should try their best not to let old sibling rivalries get in the way. Adult siblings caring for an elderly parent are taking on new roles, and they are best served by not replaying old ones.

In addition to family income and work schedules, siblings should consider each other’s particular skills. If one sibling is a more frugal money manager, it may make sense for him or her to hold the power of attorney for the parent. Someone with experience as a caregiver may do the best job handling day-to-day care. One fact that should not be forgotten is that caregiving is valuable and important work. Siblings who are not involved with day-to-day care may not be aware of just how much work is involved. The caregiving sibling should not be afraid to speak up and share with the others how much time goes into giving care for their parent. It can be easy for a sibling that is contributing more time or contributing more money to feel that his or her contribution is unfair or is going unrecognized. Full and frank discussion is the best solution.

Finally, as with most things, careful planning will save a lot of headaches. Just as mom or dad’s schedule of doctor’s appointments and daily medications needs to be kept track of, so should the finances be kept in careful order. An estate planning attorney or financial adviser can be invaluable in preparing a budget that accounts for the cost of different types of care that may be needed.

Estate Planning & Elder Law: What You Should Be Aware of If You Live in New York and Florida

Thursday, October 10th, 2013

Many New Yorkers retire in Florida, and many others choose to spend the winter months there while maintaining a residence in New York. As part-time New Yorkers and part-time Floridians, retirees have the best of both worlds. But living in two different states can present certain complications when it comes to estate planning and elder law.

One important consideration is where your legal residence will be, which can be important for purposes of estate taxes. Where you spend the most time may not be as important as where you are registered to vote, what state issued your driver’s license, and what address you list on tax documents.

Your will and any trusts should be tied to the state where you are a legal resident. However, if you own real estate in another state, you should have your estate planning attorney make sure that you do not need additional documents to transfer the property when you die or to manage it if you become incapacitated.

It is also important to make sure that documents such as a living will and health care power of attorney are valid in both states. If you happen to be traveling through another state and are hospitalized, out-of-state documents will probably not cause a problem. But if you spend a significant amount of time in another state, it is advisable to be sure that such documents comply with the laws of both states. If you spend a good deal of time in a state far away from close family members, then you may also want to consider naming a local family member or trusted friend in health documents, so that someone can get to a hospital quickly in the event of an emergency.

Littman Krooks is well-positioned to help you with these matters. Because so many of our clients live both in New York and Florida, we have partnered with Solkoff Legal, P.A. a leading Florida elder law firm, to offer superior estate planning and elder law services to residents of both states. Contact us for more information. Click here to read more about our alliance with Solkoff Legal.

 

For more information about our legal services, visit www.elderlawnewyork.com.

 

Elder Law Attorney Bernard A. Krooks to Speak at Heckerling Institute

Monday, January 7th, 2013

White Plains, New York (January 10, 2013) – Bernard A. Krooks, Esq., a founding partner of Littman Krooks LLP, will be a guest speaker at the 47th Heckerling Institute on Estate Planning on January 14, 2013, at the Orlando World Center Marriott Resort and Convention Center, in Orlando, Florida.

Mr. Krooks will be speaking about the “graying” of Baby Boomers and their need for elder law services. Mr. Krooks will also discuss “Later Life Law” and how elder care attorneys can assist their clients with Medicaid options as well as other areas of elder care planning including retirement accounts, long-term care insurance and tax considerations and the use of trusts in elder law and special needs planning.

The Heckerling Institute on Estate Planning is known as the premiere U.S. conference for estate planning professionals, including attorneys, accountants, trust officers, insurance advisors and wealth management professionals. The program offers lectures and special sessions with comprehensive coverage of estate planning techniques and strategies, designed to allow attendees to customize their educational experience.

Mr. Krooks has been included among The Best Lawyers in America® for each of the last six years. He has been selected as a “New York Super Lawyer” since 2006. Krooks has received his AEP accreditation from the National Association of Estate Planners & Councils. He is a member of the Real Property, Probate & Trust Law Section and Tax Section of the American Bar Association. He is a sought-after expert on estate planning and elder law matters and has been quoted in leading publications such as The Wall Street Journal, The New York Times and Forbes, among others.

About Littman Krooks

Littman Krooks LLP provides sophisticated legal advice and the high level of expertise ordinarily associated with large law firms along with the personal attention and responsiveness of smaller firms. These ingredients, which are the cornerstone of effective representation and are necessary to a successful lawyer/client relationship, have become the foundation of the firm’s success.

Littman Krooks LLP offers legal services in several areas of law, including elder law, estate planning, special needs planning, special education advocacy, and corporate and securities. Their offices are located at 399 Knollwood Road, White Plains, New York; 655 Third Avenue, New York, New York; and 300 Westage Business Center Drive, Fishkill, New York. Visit the firm’s website at http://www.elderlawnewyork.com.