Category Archives: Estate Planning

Major Changes Coming To New York Estate (and Gift) Tax Laws

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Over the last decade, the federal estate and gift tax system has seen numerous changes to both the individual exemptions and tax rates. During that same period, New York state has consistently refused to make changes to its state specific exemptions and rates. After “decoupling” from the federal estate and gift tax system, the state specific exemptions and rates have remained $1 million per individual with a maximum rate of 16% respectively.

In the next few weeks, this is very likely to change. Earlier this year, Governor Andrew Cuomo proposed a series of major changes to the state’s estate and gift tax system. These changes, if agreed to by the State’s Assembly and Legislature, would greatly change both how estates, individuals and trusts are taxed and how estate planners advise their clients with regard to New York taxation.
The proposed changes include:

1) Increasing the individual estate tax exemption and lowering the maximum tax rate-Governor Cuomo’s proposal would, over the next four years, increase the individual estate tax exemption to $5.25 million. The exemption would be indexed to inflation thereafter, similar to the current increases to the federal exemption. The maximum tax rate would be reduced over the same period of time from 16% to 10%.

2) Reinstating the state gift tax-New York has not had a state specific gift tax for well over a decade, but under the governor’s proposal, taxable gifts would be included in a decedent’s estate. This would have the net effect of reducing an individual’s estate exemption by the value of all taxable gifts made during their lifetime.

3) Repealing the state Generation-Skipping Transfer Tax-This is a tax imposed on any transfers from an individual to an individual two or more generations below them (grandchildren and all subsequent generations).

4) Taxing distributions to New York beneficiaries of income accumulated in non-resident and exempt resident trusts-Typically, income accumulated by non-resident and exempt resident trusts is exempt from taxation. However, if the governor’s proposals are enacted, some income to New York beneficiaries of these trusts will be subject to tax.

The response to the governor’s proposals have generally been positive from both houses of the legislature. However, the Democrat controlled Assembly is seeking to tweak the governor’s estate tax proposal by increasing the exemption to $3 million and keeping the current rate structure in place. This difference of opinion is minor in the context of whether or not a change will likely take effect.

The practical effect of these proposals will not be known until the final budget is proposed and ultimately passed by the legislature and signed by Governor Cuomo. Once this takes place, it is important that all New York resident reevaluate their current planning to determine if it needs to be updated to reflect the changes to the law.

For more information, please contact info@levyestatelaw.com

The FYI on DIY Estate Planning

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The advent of the internet has lead to many aspects of life becoming simpler and more user friendly.  In some areas, where a trained professional was needed previously, individuals now have the opportunity to do many things for themselves such as trading stocks, preparing their taxes and finding insurance quotes.  This also became true with preparing legal documents especially with the launch of Legal Zoom in 2001.

Do-it-yourself legal documents are not new and in the estate planning world, both professionals and non professionals alike have turned to self created documents to save time and money.  Programs like Legal Zoom have improved upon this by creating interactive forms that are created by professionals and reviewed prior to execution.  But, are these documents all they are cracked up to be? The key considerations with regard to choosing a DIY legal document are:

Cost-One of the most attractive aspects of DIY planning is the cost.  For individuals who need the protection of a will (or other legal instruments) but lack the funds to pay for a qualified attorney, using a service like Legal Zoom may appear to be a way to have your cake and eat it to.  But, much like many things in life, when you purchase a DIY legal product, you do get what you pay for.  It is not that the will be ineffective or found to be improperly drafted.  Rather, a DIY legal product is meant for mass use and tailored to the most typical situations.  For those whose lives deviate from the typical, a DIY product may not provide the flexibility needed to properly protect your family and property.

Simplicity-In addition to cost, the desire to have a “simple will” leads many to use DIY products.  Even for those who use attorneys, it is extremely common for a client to request that a document be kept simple.  The problem with this approach is that it is a rarity that a person’s life is as simple as they believe it to be for estate planning purposes.  Family issues, tax issues and health issues are just a few of the common reasons that a client’s planning needs to deviate from the simplest path possible.  Using DIY products gives a person control over keeping their documents simple-for better or for worse.

Attorney Support–Legal Zoom and comparable programs have marketed themselves wisely by incorporating the use of an attorney to review the client produced work as a selling point.  Having a qualified attorney review your work is significantly better than simply preparing a document with no outside help.  But, it comes with certain limitations in this context.  First, many of the attorneys who work for Legal Zoom and other document preparation software providers are providing their services as a side business to their main clients.  Given the low fees that the document preparation software providers charge, the fees the attorneys receive rarely warrant the same care they give their own clients.  Second, because the goal of using such software is to prepare a legally sufficient document, it is unlikely that a reviewing attorney will give more feedback beyond what is needed to have the document found to be properly prepared and executed.  Finally, and perhaps most importantly, when the document needs to be submitted to court, the reviewing attorney will not be available to guide the client through that process.  In the context of estate planning, this will require finding a new attorney often at a time when other things are more of a priority.

In summary, DIY legal drafting products are absolutely better than not having any planning documents at all.  For some people, it is a blessing to have such a service available.  But, for most, it is likely not sufficient to fully protect your family and property and ensure that you will have the right people available to help you when you need them.  And more than anything, that is the real benefit of using an attorney.

For more information, please contact info@levyestatelaw.com

Estate Planning For Same Sex Couples in a “Post DOMA” World

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It has been two weeks since the United States Supreme Court issued its decision in United States v. Windsor in which the 5-4 majority found that Section 3 of the Defense of Marriage Act (“DOMA”) was unconstitutional.  This historic decision nullified the federal definition of marriage as a union between a man and a woman and qualified same sex married couples for federal benefits that were previously available only to heterosexual married couples.

Windsor specifically dealt with a same sex surviving spouse who had been required to pay over $300,000 in federal estate taxes due to her inability to claim the federal estate tax marital deduction.  This was despite the fact that the plaintiff, Edith Windsor, had been legally married to her spouse under the laws of the State of New York.  The majority’s decision, written by Justice Anthony M. Kennedy, held that DOMA created “two contradictory marriage regimes within the same state” and causes same sex marriages to be treated as “second tier marriages.”   The majority held DOMA unconstitutional for violating the Fifth Amendment due process rights of same sex married couples.

The practical result of this decision is that same sex married couples in the 13 states (and the District of Columbia) which allow same sex marriage are entitled to the same protections and rights under federal law as heterosexual married couples.  With 1/3 of the United States population and ¼ of the states now allowing full marriage equality, estate planning for same sex married couples in these states has changed significantly.  Amongst the new estate planning benefits are the following:

Federal Marital Deduction-The inability to qualify for this deduction was injury that allowed DOMA to be challenged.  Previously, same sex married couples could not protect their assets from federal estate tax using this deduction.  Now, assets passing to all surviving spouses pass free of both federal and state estate tax.

Gift Tax Implications-Prior to Windsor, lifetime transfers between same sex spouses were considered taxable gifts and had to be counted towards a spouse’s annual exclusion and lifetime exemption amounts.  Lifetime transfers between spouses are now considered non-taxable events for gift tax purposes.  Furthermore, same sex married couples can now utilize gift splitting to maximize their annual gift tax exclusion.  Prior to Windsor, this was available only to heterosexual married couples.

Portability-With the 2013 Tax Act, President Obama made the concept of portability, which allows a surviving spouse to claim the unused portion of a deceased spouse’s federal estate tax exemption, permanent.  This benefit will now be extended to same sex married couples as well.  However, it should be noted that portability only applied to federal estate tax and not New York or other state estate tax exemptions.

Qualified Retirement Plans-The Employee Retirement Income Service Act (“ERISA”) requires that the beneficiary of a qualified retirement plan must be the owner’s spouse unless the spouse consents to a substitute beneficiary.  Same sex spouses will now be entitled to the same default treatment.

While these changes are significant, many issues remain.  First, the decision in Windsor did not invalidate DOMA as a whole and did not find that states must allow same sex marriage.  This poses a significant burden on same sex couples in the states that do not allow same sex marriage.  Second, the available options for legally married same sex couples looking to move to other states remain limited.  Finally, because DOMA remains applicable to the states where marriage bans remain, there still remains a possibility that a state where same sex marriage is allowed could eventually reverse course and change its laws to ban same sex marriage.

Nevertheless, this change is welcomed by same sex couples and their advisors alike.  And while Windsor makes estate planning for same sex couples significantly easier, it still requires careful planning and consideration to ensure that their families are protected.

Please contact info@levyestatelaw.com for more information about estate planning for same sex couples.

Preserving the Foundations of Family and Business Require the Right Tools

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“The store was like my grandparent’s house,” said a longtime friend when recalling his childhood visits to his family store in Manhattan  For years, his family’s business was something he considered important, but not essential to his life. However, when the possibility of watching his family’s business disappear came close to becoming a reality, he chose to enter the business.  His intervention proved fortuitous-several years later, the business was more successful than ever.

Many family businesses are not as fortunate when it comes to ownership and management succession.  A recent survey found that nearly half of all family businesses lack a clear succession plan.  Additionally, a third of those with plans have one or more incomplete components which can lead to confusion and conflict over the planning owner’s intent.  This lack of planning threatens not only the existence of the business, but the continued health and closeness of a family.

To avoid such situations, the owners of family businesses must prepare their businesses and families for the eventual transition well before it actually take place.  Consideration must be given to issues of who will own the business and who will manage it.  It is also important to consider the tax implications of transferring a business to members of a younger generation and how to preserve a business’s family ownership structure.  Beyond the actual mechanics of ownership transfer, business owners should also consider how such transfers will affect those not selected to be involved in the management and ownership of the business.  A complete review of the senior family member or members’ estate and financial planning should take place alongside any planning for the business.

The components of a successful succession plan vary depending on the specifics of the family and business involved.  Certain considerations are essential.  First, the plan must lay a groundwork for the transfer of the ownership of the business to the next generation.  Who will own it, when they will take over and how they will pay or not pay for the ownership interests are key questions that must be answered.  Second, the management structure of the business should be determined while the current managers are still in charge.  Preparing the next generation of business managers to take over and illustrating what is expected of them will greatly enhance their chance to succeed.  Finally, businesses should consider using a succession plan as a means to establish a conflict resolution policy and a policy regarding future transfers of ownership interests.

The benefits of preserving a healthy family business are numerous and far outweigh the work that must go into preserving its health.  In financially uncertain times, family-owned businesses provide their owners with stability and protection from outside forces.  Because they are typically not subject to the whims of investors and other outsiders, the business owners are vested with control over their affairs and, being family, they tend to share the same values with one and other.  These shared values greatly reduce the amount of turnover of the management a business can face. Just as important as the benefits that family ownership can bring to a business are the benefits a business can bring to its family owners.  Family-owned businesses become the centers of their families and can serve as a tremendous source of family pride and unity.

As a major component of the world economy, with nearly 70 to 90 percent of the global GDP tied to family owned ventures, the continued health of family businesses is important to all of us all.  For family business owners, the importance is a more personal affair. Proper succession planning allows families to continue to thrive both in the workplace and at home.  Without a solid plan, problems in the business sphere can inevitably seep into the family dynamic.  “It’s difficult sometimes because this is my family,” my friend told me regarding his concerns for the future.  “At the end of the day, I have to have Thanksgiving with these people.”

Please contact info@levyestatelaw.com for more information about business succession planning.

Estate Planning By Default: Let the Non-Buyer Beware!

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For years, it has been well known that at least 50% of all Americans die without a last will and testament.  Following the economic downturn in 2008,  those numbers rose to as high as 70%.  Without a will or other basic estate planning documents, the family of a deceased individual has to rely on a state specific statute known as the intestacy statute.

Intestacy laws were originally the sole way of inheriting property.  In the 16th Century, this changed by King Henry VIII and the passage of the Statute of Wills, which allowed individuals to choose who inherited their property.  The default inheritance laws remained for those who did not draft a will and became the basis for modern intestacy law.  In the United States, the laws of intestate succession differ from state to state.

New York outlines the order of inheritance for family members inheriting through intestate inheritance.   Because there is no will, the Surrogate’s Court administers the property of the deceased individual based of on series of proofs aimed at determined who the next of kind is.  A spouse has the highest priority followed by children.  If the deceased has neither, the property and the right to administer to the property pass to the parents of the deceased, then to the siblings and then to the grandparents.  The line of succession continues until first cousins once removed.  If there are still no successors, the assets are transferred to the state.

The default nature of the intestate succession is the sole advantage that intestacy has over preparing your own estate plan.  There is no cost, no work that must be done by the deceased individual prior to death and the question of who inherits/administers the estate are known.  However, the cost to the family of a deceased individual far outweighs the benefits.  An intestate administration can be more costly than a probate administration.  In addition, by relying on the intestacy statute, an individual gives up their personal rights to decide how their property passes, who it passes to and who will be responsible for administering the property.  Losing these rights can have a significant adverse effect on your survivors and create family conflict.

The costs of intestate succession are borne by all families who have a relative who dies without an estate plan, but certain groups bear an even greater burden.  They include:

1)   Married couples with children-If a deceased individual leaves behind a spouse and children, then the children and spouse share the estate almost equally (the spouse receives an additional $50,000 before the remainder is split).  The consequence of this is that property meant for a spouse will end up in the hands of children.  If the children are not of a suitable age, the property can be quickly wasted and lost.  Furthermore, property passing to children rather than a spouse cannot be protected from estate tax by using the unlimited marital deduction.

2)   Non-Marital Children-Children born outside of a marriage may face additional headaches if a parent dies intestate.  Under New York law, a child is automatically considered to be the child of their biological mother for inheritance purposes.  However, if a father dies intestate, a non-marital child may be required to prove paternity before being allowed to inherit.  This may require writings from a deceased father, affidavits from friends and family of the father and even DNA testing to prove that the child was, biologically or socially, the child of the father.

3)   Domestic Partners-The intestacy statute does not allow a domestic partner or a ‘common law spouse’ to inherit from a deceased individual.  Even if the partners had lived together, raised children together or treated each other with the same regard as a married couple, the domestic partner is left out of the intestate succession.  New York does not recognize common law marriage, so for a domestic partner to be protected, there must be a will naming them a beneficiary or they must officially marry.

4)   Single Parents-While a single parent will be able to pass property to their children, the lack of a clear substitute for them if they die may cause tremendous headaches.  Without a guardian appointment, several family members may be left to decide who will care for a minor child with no guidance from the deceased parent.

5)   Taxable estates under New York or Federal Estate Tax laws- The ability to utilize the estate tax exemptions and marital deductions under New York and Federal Estate Tax law may be compromised without an estate plan.  Besides property passing to the wrong people, failure to prepare an estate plan can expose an estate to unnecessary or premature taxation.

The Latin expression ‘caveat emptor’ warns buyers to be cautious before purchasing property.  When it comes to estate planning, it is actually the persons who choose not to have an estate plan prepared who should be aware of the potential dangers and dilemmas that their failure to plan may yield.

Please contact info@levyestatelaw.com for more information about preparing an estate plan.

An Englishman (Or Other International Citizen) In New York: An Introduction to International Estate Planning

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New York is an international city in every sense of the term.  Every year, people from every corner of the world come to New York to work and live.  While some return to their home countries in short order, others stay for longer periods of time while others decide to make this their permanent home.

Once an international citizen decides to live here on a long-term basis or if they purchase significant assets in the United States, it becomes important to determine how their property would pass if they die.  In order to determine this, it is important to first understand what their legal status is in the United States.

There are three classifications that international citizens are grouped in for estate planning purposes.  A non-US citizen who considers the United States their permanent residence is considered a resident alien.  On the other hand, if the non-citizen is here temporarily or maintains a permanent residence outside the Unite Status, they are considered non-resident aliens.  A final classification to consider is persons who hold one or more additional citizenships beyond US citizens.  For each of these classifications, unique issues arise as it relates to estate planning, namely:

Estate Administration

Property is primarily administered by the jurisdiction where the decedent was domiciled.  For resident aliens, this means that their estates would be administered where they lived when they passed away.  The main exception to this rule is for real and personal property, which must be administered in the jurisdiction where it is located. For non-resident aliens, as well as other individuals owning property outside of their domicile, the estate administration process becomes complicated by the involvement of multiple jurisdictions and the need for additional proceedings known as ancillary estate administration. For this reason, persons who own property in multiple jurisdictions and non-resident aliens often utilize trusts and entities like limited partnerships and LLCS to avoid ancillary probate.

Estate Taxes

The status as a resident alien versus a non-resident alien can have significant estate tax implications.  Resident aliens retain the current $5.25 million federal estate tax exemption while non-resident aliens can only exempt $60,000 from estate taxes.  While the types of property that are included in a non-resident alien’s estate are limited, owners of significant real and personal property may be subject to a significant tax bill if they do not plan properly.

For both resident and non-resident aliens, the standard marital deduction is limited.  In order to qualify for this deduction, property passing to any non-US citizen must pass into a special type of marital trust called a qualified domestic trust (“QDOT”).  The beneficiary of a QDOT receives income free of estate tax, but any principal that is distributed will potentially be taxed.  In addition, a QDOT must have a US citizen as trustee at all times.

Individuals with multiple citizenships must also be aware of how each of the countries in which they claim citizenship tax assets at death.  Many countries have estate tax treaties with the United States to prevent individuals from being taxed by multiple jurisdictions.  For countries without estate tax treaties, it is important to understand which assets and which individuals are subject to their tax system.

Guardianship

Selecting a guardian to serve if both parents die is never an easy process.  For non-citizens, the process becomes more complicated by the potential lack of suitable options domestically.  The question becomes even more difficult if the child is an US citizen.

To ensure that their children are cared for as they choose, non-citizens must be explicit in terms of where they wish for their children to live and whom they wish to be their guardian.  If they wish for their children to leave the US, they may wish to speak with an immigration attorney to ensure their citizenship is preserved.  In addition, they should consider a ‘temporary’ or transitory guardian who is a US resident or citizen to assist with the appointment process.

The opportunities for international citizens in New York and in the United States will continue to attract the world’s best and brightest.  Proper estate planning, with focus on both local and foreign issues, ensures that their stays here will not be compromised by their unique issues.

Please contact info@levyestatelaw.com for more information about international and multi-jurisdiction estate planning.

A Tale Of Two Business Owners

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The following is a true story of two businesses.  Two professionals owned their respective businesses and successfully built them into thriving practices.  Each professional decided to bring a partner on board to share the burden and benefit of ownership.  And, unfortunately, each professional died while still engaged while still practicing their respective trades, leaving their business partners and family members to pick up the pieces.

Professional A had entered into a buy-sell agreement with his partner.  The agreement was fully funded by having each partner buy a life insurance policy on the life of the other.  When A passed away, his partner submitted a claim to his life insurance policy.  Three months after A’s death, his partner received the proceeds from the insurance policy, and used them to buy out A’s widow.  The partner had complete ownership of the business and A’s widow received the full value of her husband’s hard work.

Professional B hemmed and hawed about preparing a buy-sell agreement with his partner.  A draft agreement was prepared, but never signed.  No funding mechanism was ever decided upon or implemented.  When B died, his partner decided that it was his hard work that created the value in the practice, not B’s.  B’s widow tried to buy the partner out, but the partner refused.  Lawsuits commenced with neither B’s widow nor the partner receiving the proper value for their hard work.  Three year’s after B’s death, the lawsuit is still not resolved.

The difference between the end results for A and B’s families illustrates how a properly executed and enacted business succession plan can be the difference between finding a way to move on and being mired in a conflict that outlives our relatives.  It is not enough to just have a succession plan for your business, but the plan needs to consider five important issues, namely:

  1. Who will own the business-Business owners must decide if their business will continue by transferring ownership within the company or to parties outside the company.  For family businesses, having children and other relatives who are divided between active and inactive participants in the business can complicate this issue.
  2. Who will manage the business-Many business owners focus solely on the ownership question without considering who will actually manage the business once they are gone.  Failure to name a successor and prepare that successor for the tasks he or she may face is a common reason for a business succession plan to fail.
  3. How will the buyout of the departing owner be paid for-Regardless of whether a funding mechanism exists, the departing owner or his or her estate will be taxed for the value of their business interest.  By preparing in advance for how a buyout will be paid for is crucial to not only maximize the value the departing owner or his or her estate receives, but also to prevent taxes from being paid from non-business related assets.
  4. For family businesses, what about non-owner family members?  In some instances, not every heir of a business owner will inherit a piece of the business he or she built.  This may create jealousy or resentment if the non-owner heirs are not equalized in some form.  Dividing non business assets more favorably to non owner heirs, purchasing life insurance for the benefit of non owner heirs and providing a non ownership income stream from the business are some examples of how to equalize the non owner heirs.
  5. Special issues for professional businesses (professional corporations and professional LLCs)-Under the New York Business Corporation Law, a professional business cannot be owned by individuals not engaged in the specific profession that the business is engaged in (medicine, law, etc.).  The family of a deceased professional will be able to receive a redemption of the deceased professional’s business interests.  However, without a defined valuation clause or buyout provisions, this may provide the family with only a fraction of the true value of their family member’s interest.

The failure of a business owner to plan for their eventual exit from their business, whether for retirement, death or disability, can wreak havoc for their business and family alike.  Planning ahead, as with all forms of planning, provides a business owner with their best chance of allowing both to thrive once they are gone.

Please contact info@levyestatelaw.com for more information about business succession planning.

Protecting Their Assets, Preserving Your Planning: Why Estate Planning Is A Key Tool For Other Advisors

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The question of why an individual or a family needs an estate plan is often asked and answered in a typical fashion.  Issues regarding proper distribution, the minimization of taxes, who controls assets and cares for children and how a person’s assets and family are protected from disability and incapacity are always part of my answer when it comes to stressing the importance of estate planning.

An additional concern that I raise is important not only to individuals who I work with to prepare estate plans, but also to the other advisors they work with.  Estate planning provides a prophylactic veil over the work of other advisors to ensure that their work is not compromised.  Many advisors recognize the importance of an estate plan to their specific planning and understand the consequences of their clients’ failure to plan.

Some examples of advisors who benefit from their clients’ establishing estate plans include (but are not limited to):

Financial Planners/Investment Advisors-Financial plans and investment portfolios are created with specific goals in mind and allocations based on the advisor’s strategy to achieve those goals.   Without an estate plan, a portfolio may be divided or distributed to persons that were not intended by the client and the advisors.  In addition, without a plan to delay, reduce or eliminate estate taxes or, alternatively, a way to pay for estate taxes, a portion of a portfolio may have to be liquidated prematurely.

Life Insurance Advisors-Life Insurance can be a great source of liquidity when someone dies since the proceeds of the policy will typically be paid prior to any estate taxes being due.   However, without consideration of a person’s assets, life insurance may create an estate tax where none would be due otherwise.  By working with an estate planning attorney to purchase or assign a life insurance policy to a trust, the full value of the death benefit can pass to the intended beneficiaries estate tax free.

Accountants-With many accountants serving as the “quarterback” for their clients over planning, having an estate plan in place ensures that the problems improper distributions or excess taxation harm their clients.  Some accountants will be responsible for the estate, gift and generation skipping transfer (GST) tax returns of theirs clients as well as fiduciary income tax returns for trusts and estates.  Having an estate plan in place makes the tax preparer’s job easier and less complicated.

Other Attorneys-Attorneys who practice in areas such as family, matrimonial and tax law will often be aware of the trusts and estates related issues that may complicate their work.   Real Estate and Corporate attorneys can also benefit from ensuring that their clients’ work with them is not compromised by estate related issues.   In some litigation matters,  having an estate plan in place can expedite the commencement or settlement of a lawsuit with a sick or deceased client.

In a similar vein, estate planning attorneys rely on our clients’ other advisors to help ensure the best results possible.  Advisors working together for the benefit a client enhances the client’s planning and the advisor’s reputation with the client.

Please contact info@levyestatelaw.com for more information.

Windsor, DOMA and the Future of Estate Planning For Same-Sex Couples

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This past Friday, the United States Supreme Court decided to hear two cases related to the treatment of same-sex married couples.  One of the cases, Windsor v. United States, was brought as a challenge to the Defense of Marriage Act (“DOMA”) which was enacted in 1996.  Under DOMA, regardless of any recognition by states or other jurisdictions, the federal definition of marriage is limited to a marriage between a man and a woman.  This has been detrimental to same-sex married couples seeking equality with their heterosexual counterparts in numerous areas including estate planning and estate tax.

In Windsor, Edith Schlain Windsor sued the United States as the executor of her wife’s estate.  Windsor and her wife were New York residents and married in Canada in 2007.  While New York did not recognize same-sex marriages performed in New York until 2011, it did recognize marriages performed in jurisdictions where same-sex marriage was recognized.  Despite having her marriage recognized by New York, Windsor was denied the federal estate tax marital deduction by DOMA.

In June, the United States District Court for the Southern District of New York held that the section of DOMA defining marriage as being only between a man and a woman was unconstitutional because it violated the equal protection clause of the Constitution.  In September, the United States Court of Appeals, Second Circuit, affirmed this finding and further held that classifications based on sexual orientation are subject to a higher level of scrutiny than previous courts had held.

The arguments for each side at the Supreme Court(scheduled for Spring 2013) will likely track those made at the Court of Appeals level.  The proponents of holding DOMA unconstitutional will likely focus on the heightened scrutiny required for laws based on sexual orientation.  They will also seek to show that marriage is generally decided at the state level and that DOMA, by interfering with a power reserved to the states, overstepped federal authority.   Proponents of retaining DOMA will continue to make the case that sexual orientation is not a suspect class and that the Federal government has a rational basis to legislate the definition of marriage.

If the Court upholds the Second Circuit ruling, the benefits to same-sex couples will be significant.  First, whereas New York couples are currently only entitled to a marital deduction on their New York estate tax, they will be entitled to the same deduction at the Federal level.  Secondly, lifetime transfers between same-sex spouses will no longer be subject to federal gift tax (or use up a portion of a spouse’s lifetime gift tax exemption.  Finally, assuming estate tax portability is retained, same-sex spouses will be able to utilize the remaining portion of their spouse’s estate tax exemption.

It is premature to predict an outcome and the ruling may be limited or broad.  Nevertheless, it appears 2013 will be, at the very least, an interesting year for preparing estate plans for same-sex married couples.

Please contact info@estatelaw.com for more information about estate planning for same-sex couples.

Thanksgiving Food For Thought: Talking To Your Parents and Grandparents about Estate Planning

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Tomorrow, families across the United States will gather to celebrate Thanksgiving.  Both immediate and extended families will be spending a significant portion of the next few days with each other and inevitably, interesting discussions will emerge.  One discussion point that will be less likely to emerge than most is about estate planning, specifically the plans parents and grandparents have in place. But while talking about this topic may not be the happiest way to spend your holiday, having a conversation with your older relatives is essential to protecting them, their assets and your own planning.

There are several reasons why a child (or grandchild) should be concerned with their parents’ and grandparents’ estate plans.  First, knowing what your senior relatives plans are will allow for a smoother transition and administration of their assets if they die, become severely disabled or incapacitated.  Second, with nearly 75% of all adults over 65 having some form of a long-term care event during their lifetime, children and grandchildren may have to coordinate the payment of their elder relatives long-term care expenses.   Third, in the event of death, severe disability or incapacity, children and grandchildren may be asked to serve as fiduciaries for senior family members as executors of their estates, trustees of trusts or agents under power of attorneys and health care proxies.  Finally, children and grandchildren may be named as beneficiaries of their parents’ and grandparents’ estates.  An inheritance can raise issues for the inheriting children and grandchildren including tax and creditor related problems.

Understanding why you should speak to your parents and grandparents about estate planning is significantly easier than actually speaking to them about the subject.  Each family member has their own temperament when it comes to discussing financial and other personal matters, so an awareness of how a relative will react is key to avoiding unnecessary conflict.  If they are open to having a discussion about estate planning, explain that you are coming from a place of concern.  Inquire about what they have and have not done in terms of their planning.

If, like many parents and grandparents, they don’t want to discuss this issue, there are other ways to ensure that they are protected.  If they have already worked with an estate planner, encourage them to check in with their advisor to ensure their plan is up to date.  If they have not prepared an estate plan, offer them the names of attorneys, financial planners and accountants that you work with and with whom you trust.   While some older relatives may not want to openly discuss their planning with their younger relatives, many will appreciate the opportunity to speak with a professional with no personal connection to them.

Once you are able to begin the discussion, by yourself or through a professional, there are certain subjects that should be discussed.  Among them:

1)   Nature and location of the estate planning documents;

2)   What assets do they own and where are they located;

3)   Who are their professional advisors;

4)   How are they planning to pay for any long-term care expenses;

5)   Who are the beneficiaries of their estate; and

6)   Who are the fiduciaries that will be in charge of their affairs if they die, become severely disabled or incapacitated.

 Having an estate planning conversation with your parents and grandparents will be difficult.  Even if they are completely transparent and willing to talk, the subject matter can be difficult to think about.  Nevertheless, as a loving relative, it is important that your relatives are protected and that their ultimate wishes as to their estates and well-being are known and able to be fulfilled in a timely and proper manner.

Please contact info@levyestatelaw.com for more information about multi-generation estate planning.