New York Estate Planning & Elder Law

What Is Family Business Succession Planning? / Greenwich, CT & New York, NY

“If you plan to pass your business to your offspring, there is more to keep in mind when creating your succession plan than your descendants—there are also their spouses—especially if they become ex-spouses.”

Many family-owned businesses have had to scramble to maintain ownership when owners or heirs were struck by COVID-19. Lacking a succession plan may have led to disastrous results, or at best, less than optimal corporate structures and large tax bills. This difficult lesson is a wake-up call, says the article “Succession Planning for the Family-Owned Business—Keepin’ it ‘All in the Family’” from Bloomberg Tax.

Another factor putting family-owned businesses at risk is divorce. Contemplating the best way to transfer ownership to the next generation requires a candid examination of family dynamics and acknowledgment of outsiders (i.e., in-laws) and the possibility of divorce.

Before documents can be created, a number of issues need to be discussed:

Transfer timing. When will the ownership of the business transfer to the next generation? There are some who use life-events as prompts: births, marriages and/or the death of the owners.

How will the transfer take place? Corporate structures and estate planning tools provide many options limited only by the tax liabilities and wishes of the family. Be wary since each decision for the structure may have unintended consequences. Short and long-term strategic planning is needed.

To whom will the business be transferred? Who will receive an ownership interest and what will be the rights of ownership? Will there be different levels of ownership, and will those levels depend upon the level of activity in the business? Will percentages be used, or shares, or another form?

In drafting a succession plan, it is wise to assume that the future owners will either marry or divorce—perhaps multiple times. The succession plan should address these issues to prevent an ex-spouse from becoming a shareholder whose interest in the business needs to be bought out.

The operating agreement/partnership agreement should require all future owners to enter into a prenuptial agreement before marriage specifically excluding their interest in the family business from being distributed, valued, or deemed marital property subject to distribution, if there is a divorce.

An owner may even exact a penalty for a subsequent owner who fails to enter into a prenup prior to a marriage. The same corporate document should specifically bar an owner’s spouse from receiving an ownership interest under any circumstance.

A prenup is intended to remove the future value of the owner’s interest from the marital asset pool. This typically requires the owner to buy-out the future spouse’s legal claim to future value. This could be a costly issue since the value of the future ownership interest cannot be predicted at the time of the marriage.

Many different strategies can be used to develop a succession plan that ideally works alongside the business owner’s estate plan. These are used to ensure that the business remains in the family and the family interests are protected.

Reference: Bloomberg Tax (April 5,2021) “Succession Planning for the Family-Owned Business—Keepin’ it ‘All in the Family’”

For more information on asset preservation and estate planning, please visit my estate planning website.

Planning Future for Nontraditional Families / Greenwich, CT & New York, NY

“Some people are concerned that the new conservative 6-3 majority on the Supreme Court will roll back protections for non-traditional families. Regardless of the decisions at the Supreme Court, or the impact on the state family courts, there are many ways that non-traditional families can maintain control.”

Today’s non-traditional family are not just LGBTQ couples, but families undergoing gray divorces, blended families, stepchildren, multinational families and children born through assisted reproductive technologies, referred to as ART, in a recent article titled “How to Plan for LGBTQ, Blended Families, Cohabitation, Other Nontraditional Families” from Financial Advisor.

The key is having an estate plan prepared that is flexible so that last wills, trusts, and all documents reflect the non-traditional family very clearly and do not leave room for courts to make decisions. Here are a few new elements to consider:

Gendered pronouns and definitions. Ideally, your estate documents should use specific names of individuals, not pronouns. We live in a fluid society and using pronouns could lead to unnecessary complications.

Recognize ART and its implications. If there are children conceived by ART, they need to be explicitly included as children of the family. DNA testing can result in a child inheriting assets from a parent they never knew. It may be wise to exclude biological children, parents or siblings who do not have a relationship with the family.

Trust Protector/Trust Decanting. By including provisions that permit trusts to be decanted, that is, transferred from one trust to another, your estate planning attorney will create flexibility to allow a trust protector (a non-fiduciary appointment of a third party) to make changes. The selection of the trust protector is particularly important, as they could have a large impact on the overall plan.

Marriage, non-marital relationships, divorce, remarriage. An estate plan needs to prepare for future changes with precision and flexibility. Protecting the family, its privacy and dignity can be done by limiting the information in the last will, which becomes a public document. While we can’t know what the future holds, we can plan for change.

Prenuptial agreements. State laws vary on what is acceptable and procedurally necessary for a prenup to be enforceable. Typically, the agreement must be voluntary and include full disclosure of both parties’ financial situation. In some states, post-nuptials can be prepared, if the parties can’t agree on the document before they are legally wed.

Divorce creates special estate planning issues. Beneficiary designations need to be changed for life insurance, IRAs and other non-probate assets. Take affirmative steps to ensure that ex-spouses, or soon-to-be exes are removed as beneficiaries on all accounts, including pensions and insurance plans subject to ERISA.

Cohabitating couples. Marital gifts are tax free, but that is not the case for people living together. Estate planning and tax planning needs to be done so the surviving partner is taken care of. This may include the creation of a cohabitation agreement similar to a prenuptial agreement.

Planning for sickness and death. Explicitly stating wishes for end-of-life medical treatments, including feeding tubes, respirators, heart machines, etc., is step one in having an Advance Medical Directive created. Step two is deciding who is empowered to make those decisions. Someone who is unmarried but has a partner or a second spouse needs to be authorized. Note that when an individual is hospitalized, stepparents may attempt to deny access to spouses’ children, or children may block access to a stepparent. There should also be a Do Not Resuscitate (DNR) or Physicians Orders for Life-Sustaining Treatment (POLST) in place with the person’s wishes.

Non-traditional families of all types need to protect the family with estate planning and documentation. Issues about protecting children, making health care decisions for a critically ill partner and control of assets must be addressed in a way that respects the individuals and their families while working within the law.

Reference: Financial Advisor (Feb. 2, 2021) “How to Plan for LGBTQ, Blended Families, Cohabitation, Other Nontraditional Families”

For more information on asset preservation and estate planning, please visit my estate planning website.

Marriage among Seniors Can Create Challenges / New York, NY & Rye Brook, NY

Elder law experts urge seniors to plan carefully when considering matrimony.

Senior citizens are just as likely as young people to get married without thinking everything through and that can create consequences, according to the Hartford Courant article "Fit To Be Tied? Think Twice About Marriage In Your Golden Years."

Senior citizens considering getting married need to think about how marriage will affect all of their other plans, including retirement and estate plans. For example, a retired person might think his well-crafted estate plan to leave his assets to his children is solid and that a new wife with assets of her own will not affect those plans.

In reality, it is almost impossible to cut a spouse out of an estate plan entirely. Consequently, whether or not the couple intends it, the new spouse is likely to inherit something without very careful planning.

An elder law attorney can guide you through the process of discovering the implications of a marriage in later years.

Reference: Hartford Courant (Sept. 24, 2016) "Fit To Be Tied? Think Twice About Marriage In Your Golden Years."

For more information on elder law and estate planning, please visit my estate planning website.

Before You Say “I Do,” Do This / New York, NY & White Plains, NY

People are happy to spend hours and often, incomprehensible sums of money planning weddings, but when it comes to financial planning, they are “too busy.”  Advance planning helps couples as they make the transition from giddy romantics to a financial and legally-bound partnership dealing with the realities of adult life. Working with trusted advisors, including financial advisors, estate planning attorneys and CPAs, helps the soon-to-be-wed couple clarify their goals and plan the big picture: their life together.

Financial planning should be a part of every couple’s wedding planning, whether they are just starting out or if they are coming to the marriage with substantial assets. When the couples are not economic equals, this becomes even more important. In “When financial planning meets wedding planning” from Reuters, experts advise couples to work with an estate planning attorney and financial advisor to objectively evaluate assets, review insurance coverage, discuss retirement goals and analyze estate plans already in place. This should take place before the wedding to prevent larger problems later on. Questions to ask:

• Who is going to pay the bills?
• How will you plan for big purchases?
• When are you planning to retire and where?
• If there are children from a previous marriage, how will inheritances be handled?

If the couple has two advisers or attorneys, things can get overly complicated, so it is best if the couple can agree to work with one advisor or attorney.

Then there is the sensitive issue of a pre-nuptial agreement, which is typically easier to do with those on their second marriage. If you are younger, childless, and in love, you may believe that it’s not necessary. Talk to your estate planning attorney about the benefits of having this, and then think about it.

Whatever the decision is on the pre-nup, make sure you talk to the estate planning attorney about updating or creating your estate plans. Couples should go to that meeting with printouts of all of their financial statements and insurance coverage.

Finally, after the wedding, update beneficiary information. This will include insurance and retirement plans. If a spouse has changed his or her name, your attorney can help you update your social security card, credit cards, and passport.

An estate planning attorney can help with these questions and issues, and working in tandem with your financial advisor, create a sound plan for your future together.

Reference: Reuters (September 4, 2015) “When financial planning meets wedding planning”

For more information on asset preservation and estate planning, please visit my estate planning website.

Before You Say “I Do,” Do This / New York, NY & White Plains, NY

People are happy to spend hours and often, incomprehensible sums of money planning weddings, but when it comes to financial planning, they are “too busy.”  Advance planning helps couples as they make the transition from giddy romantics to a financial and legally-bound partnership dealing with the realities of adult life. Working with trusted advisors, including financial advisors, estate planning attorneys and CPAs, helps the soon-to-be-wed couple clarify their goals and plan the big picture: their life together.

Financial planning should be a part of every couple’s wedding planning, whether they are just starting out or if they are coming to the marriage with substantial assets. When the couples are not economic equals, this becomes even more important. In “When financial planning meets wedding planning” from Reuters, experts advise couples to work with an estate planning attorney and financial advisor to objectively evaluate assets, review insurance coverage, discuss retirement goals and analyze estate plans already in place. This should take place before the wedding to prevent larger problems later on. Questions to ask:

• Who is going to pay the bills?
• How will you plan for big purchases?
• When are you planning to retire and where?
• If there are children from a previous marriage, how will inheritances be handled?

If the couple has two advisers or attorneys, things can get overly complicated, so it is best if the couple can agree to work with one advisor or attorney.

Then there is the sensitive issue of a pre-nuptial agreement, which is typically easier to do with those on their second marriage. If you are younger, childless, and in love, you may believe that it’s not necessary. Talk to your estate planning attorney about the benefits of having this, and then think about it.

Whatever the decision is on the pre-nup, make sure you talk to the estate planning attorney about updating or creating your estate plans. Couples should go to that meeting with printouts of all of their financial statements and insurance coverage.

Finally, after the wedding, update beneficiary information. This will include insurance and retirement plans. If a spouse has changed his or her name, your attorney can help you update your social security card, credit cards, and passport.

An estate planning attorney can help with these questions and issues, and working in tandem with your financial advisor, create a sound plan for your future together.

Reference: Reuters (September 4, 2015) “When financial planning meets wedding planning”

For more information on asset preservation and estate planning, please visit my estate planning website.

Estate Planning Lessons From Lauren Bacall and Humphrey Bogart's Marriage / Greenwich, CT & White Plains, NY

Bacall's loss of her husband when her children were young does point to some of the issues surviving spouses face when there is a difference of age of 20 years or more. Of course, May-December marriages don't only happen in Hollywood, and the resources and circumstances can be very different.

In recent article titled "Bogie and Bacall: Iconic May-December romance", Market Watchdiscussed the estate planning issues that come up with marriages when one spouse is much older than the other.

Humphrey Bogart was 25 years older than Lauren Bacall when the two got married. At the time he was already a Hollywood legend while she was still a younger actress just coming into her prime. One obvious implication of this marriage is that she was likely to outlive him, which she did by a half century.

The biggest estate planning issue brought to attention by this Hollywood couple is that the younger spouse is likely to live much longer than the other. This creates issues of the older spouse possibly needing to provide assets for the surviving spouse and preserve an inheritance for any children. This is especially true if the older spouse has children from a previous marriage. The article lists a couple of ways that this issue can be handled, such as a QTIP trust, which provides for the inheritance to be used by the surviving spouse as long as he or she lives with the remainder going to the children. The article also suggests incorporating life insurance into the estate plan as another possibility.

These are not the only two ways to deal with this particular problem in May-December marriages. Estate planning attorneys have many other tools at their disposal that might be more appropriate in a given family situation. In Bacall's case, it appears that it did not matter too much. She left behind a large estate of her own and was able to provide for her children, grandchildren, and even her dog.

Reference: Market Watch (August 27, 2014) "Bogie and Bacall: Iconic May-December romance"

 

For more information on asset preservation and estate planning, please visit my estate planning website.

From Wedding Planning to Estate Planning / Rye Brook, NY

Taking the time to sit down with your spouse and update your estate plans will ensure that, should the worst happen, your new family is prepared to handle the unexpected.

A recent Motley Fool article, titled "Estate Planning for Newlyweds," says newly married couples should start their estate planning out small by changing their account beneficiaries. This should be automatic now that you have a spouse. Talk it through, weigh the options and your preferences, and then update all of your insurance policies, any existing will or trusts, bank and investment accounts, and your 401(k) and other retirement accounts.

The two of you should discuss how you want your assets to be divided in the event that one or both of you passes unexpectedly. When you are comfortable with your decisions, talk to your estate planning attorney and create a will that documents your intentions.

While you are in your estate planning attorney's office, ask him or her to set up a durable power of attorney, so that your spouse will have the ability to handle your individual financial affairs if you are incapacitated. The original article also suggest that you check with your banks and financial institutions to see if they require their own forms—some are hesitant or will not recognize your spouses' authority unless it is their “approved” paperwork.

You should also have an advance medical directive, so that your new wife or husband understands what you would want to occur in specific medical situations. Also, be sure you nominate each other as health care proxies. These two documents will set out your medical care preferences and allow each of you the authority of power of attorney to access medical records and make health care decisions.

The Motley Fool article discusses several other estate planning matters newlyweds should discuss. Once the two of you are one—as far as your estate planning ideas—sit down with an experienced estate planning attorney and draft all of the necessary documents. Planning for the worst, the article cautions, will give your family security, solidity, and protection.

Reference: Motley Fool (July 13, 2014) "Estate Planning for Newlyweds"

For more information on asset preservation and estate planning, please visit my estate planning website.

Can a Prenup Mess Up Your Estate Plan? / White Plains, NY & Greenwich, CT

"Just because you have an extremely restrictive prenup doesn't mean you can't leave money to your wife," Mr. Bishop says. "The prenup protected the client's assets from being taken against his will, but he was still free to give them at his discretion."

How do prenuptial agreements and estate plans mix? Will your spouse be provided for in the event of your death, or will the prenup halt financial circumstances?

Take a lesson from a recent Wall Street Journal article, titled "Creating an Estate Plan Around a Prenup." The article chronicles how an estate planning attorney worked with a client to ensure the needs of the client were addressed. After thoroughly understanding the estate planning goals of the client, the attorney created a plan that provided for the client’s family after he passed away. This plan preserved the terms of the prenuptial agreement that kept his wife from taking his assets and business in a divorce. The adviser suggested using family limited partnerships. This type of entity gave the client a way to provide for his wife with income from the business—without giving her control of the enterprise.

Under the family limited partnership structure, the client had 99% limited partner ownership in the two companies. When he died, his will would set out some of the limited partner interest to his wife. These shares would be given to a testamentary trust with the wife as trustee and beneficiary. As a result, the wife would receive income from the business through the trust; however, she would not get a controlling stake in the company.

The estate planning attorney created the partnerships and transferred ownership of the business assets into them. The WSJ reported that the client and his wife have been very happy with the results for more than 15 years now, with both a strong business and marriage.

Reference: Wall Street Journal (July 11, 2014) "Creating an Estate Plan Around a Prenup"

For more information on asset preservation and estate planning, please visit my estate planning website.

Kasem Family Feud Provides Valuable Lessons According to Michael J. Amoruso, Esq.

Recently, we were forced to watch a painful family feud play out in the media over how Casey Kasem should be cared for in his final days.  This type of internal family strife is not uncommon even among non-celebrity  blended families who may not have considered the consequences of naming one child, a new spouse or family member to make health care decisions on their behalf.

Click on the link below to learn what went wrong and how elder law and estate planning attorney Michael J. Amoruso counsels you to use advance directives to prevent you and your family from the same strife at an already difficult time in your life.

http://www.reuters.com/article/2014/06/16/us-casey-kasem-advance-directives-idUSKBN0ER2A920140616

Estate Planning for Same-Sex Unions / Rye Brook, NY & Greenwich, CT

While 19 states recognized same-sex unions, as of the end of May 2014, 31 still didn’t. The rift means that couples must take special precautions to have the right estate and emergency-health care legal documents in place – and often on hand.

Whether already married or planning to tie the knot soon, same-sex couples need to make sure they have reviewed where they stand on several issues. There are a few "must-dos" that need to be addressed financially, as pointed out in a recent Investopedia article titled "Must-Do Financial Moves For Same-Sex Marriages."

The IRS made it clear only weeks after the Supreme Court decision came down: On a federal level, same-sex marriages now get the tax benefits and, in many cases, the biggest headaches that come with tying the knot. The good news is that same-sex couples now enjoy many of the privileges that were previously out of reach. They include:

• Employee benefits, such as employee health insurance, can be shared tax-free and are no longer treated as taxable compensation;
• It’s now possible to use one spouse’s loss—investments, income or others—to offset the other spouse’s gains;
• Couples with a large gap in incomes—when one spouse stays home to tend to children while the other works—can also potentially lock in a lower tax rate on a joint return (the “marriage benefit”); and
• Federal estate taxes no longer apply to assets that pass to one spouse when the other dies, up to a threshold of just over $5 million.

The change also makes it possible to file amended forms for up to three years back to claim refunds, Investopedia notes. You may now be eligible for taxes you paid for health coverage or marriage benefit breaks you previously missed out on, if you were married and based upon on how you filed. You may also have grounds to file for a refund on federal estate taxes you paid on what you inherited from your same-sex spouse—provided you were married.

These new guidelines mean you may find yourself experiencing the marriage penalty, especially if both earn high incomes. In addition, if you live in a state that doesn’t recognize your marriage and whose taxes do not conform to federal guidelines, you may have to file your federal return under one status and your state return under another. To be sure, ask your estate planning attorney to review your estate and health crisis documents. You may need to draw up an entirely new set of legal documents.

Reference: Investopedia (June 3, 2014) "Must-Do Financial Moves For Same-Sex Marriages"

For more information on asset preservation and estate planning, please visit my estate planning website.