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I. Estate Planning Overview

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I. Estate Planning Overview I. ESTATE PLANNING OVERVIEW Program Agenda A. Use of Checklists in Preparation for an Initial Client Interview B. Responsibilities of an Estate Planner C. Post Mortem Estate Planning: An Introduction Program Outlines Estate Planning Overview 3 Fact Gathering — Use Of Checklists Estate Planning Glossary 1 2 ESTATE PLANNING OVERVIEW by JESSICA R. AMELAR, Esq. Principal Court Attorney New York County Surrogate's Court New York City 3 4 ESTATE PLANNING OVERVIEW Jessica R. Amelar Principal Court Attorney New York County Surrogate's Court I. Responsibilities of an estate planner A. Objectives of estate planning include: 1. providing, to the extent appropriate, for the client’s personal care and the management of the client's assets during the client’s disability or old age; 2. arranging for a guardian of the person and property of any minor child (see SCPA 1710); 3. minimizing current income taxes; and 4. effectuating the client's intent to transfer wealth and, at the same time, minimizing estate, gift and generation-skipping transfer taxes, and administration expenses at death. B. It is imperative that an estate planning professional know current estate planning techniques and relevant law, including tax, property, and trusts and estates law. 1. A poorly drafted instrument can dispose of property in a manner not intended by the client. (Consider, for example, the effect of a poorly drafted tax apportionment clause.) 2. A poorly conceived or poorly articulated estate plan can result in costly litigation, such as a construction proceeding, and/or excessive taxation. 3. An attorney may be liable, even after the client’s death, for pecuniary losses resulting from negligent estate planning representation (see Schneider v Finmann, 15 NY3d 306 [2010], in which the Court of Appeals ruled that the personal representative of a decedent’s estate has standing to commence a malpractice action against the decedent’s estate planning attorney.) NB: On September 2, 2015, the Appellate Division (2nd Department) determined that trustees have standing to commence a malpractice action against the grantors’ attorney (Ianiro v Bachman, 2015 NY Slip Op 06709 [2nd Dept 2015]). 5 C. Estate planning operates against a background of complicated tax laws. Accordingly, a client's dispositive decisions must be informed by an understanding of the relevant federal and state tax laws. II. Every prospective client has an estate plan. A. A client’s assets not disposed of by will pass: 1. by operation of law, for example: a. jointly held assets, b. Totten trust accounts (see EPTL 7-5.1 through 7-5.8), and c. transfer-on-death security accounts (see EPTL 13-4.1 through 13-4.12); 2. to a designated beneficiary other than the estate, for example: a. insurance policies, b. retirement benefits, and c. United States savings bonds payable on death; or, 3. if personal property, by the law of intestacy of the decedent's domicile (see EPTL 3-5.1 [b] [2]), and, if real property, by the law of intestacy of the jurisdiction in which the land is situated (see EPTL 3-5.1 [b] [1]). III. An estate planner’s role is to try to improve upon the client’s existing plan. To do so, the attorney must know the relevant facts. IV. Fact Gathering A. Facts to be ascertained from the client include: 1. the client’s dispositive wishes; 2. the nature, extent, situs of, and title to, the client’s assets; 3. the nature and extent of any interest created for the client’s benefit; 4. the nature and extent of the client’s liabilities, if any; 5. any obligation which the client must satisfy by will; and 6 6. personal data. B. The attorney should obtain copies of relevant documents, such as any prenuptial agreement, separation agreement, gift tax return, and the instrument for any trust of which the client is a beneficiary or over which the client has a power of appointment. C. Ascertaining the manner in which a client holds title is critical to an analysis of the probate and non-probate estates. D. Among the relevant personal data are: the client's domicile and the citizenship of the client and the client’s spouse. 1. Under New York law, the law of the client’s domicile at death determines, among other things: a. the effect of a testamentary disposition of personal property (see EPTL 3-5.1 [b] [2]); and b. family rights, such as: i. a family benefit (see EPTL 5-3.1), ii. a spouse’s right of election (see EPTL 5-l.l-A), and iii. community property rights (see EPTL 6-6.1 through 6-6.7). 2. The client’s domicile at death determines the jurisdiction that will tax the estate (see Tax Law 952; see also Tax Law 605 [b] for the definition of a New York State “resident,” which includes a New York State domiciliary). a. NB: There is an exception under New York law with respect to real property and tangible personal property having an actual situs outside New York State (see Tax Law 954 [a] [1]). b. NB: Any change in the client’s domicile must be clearly established so that the client’s estate will not be subject to transfer tax in more than one jurisdiction. 3. Citizenship of the client and the client’s spouse is significant because: a. The disposition of certain property of an alien may be subject to laws of forced heirship in the country of which the alien was a citizen. b. An outright disposition to a spouse who is not a citizen of the United States does not qualify for the unlimited marital deduction (see IRC 2056 [d] [1]; but see IRC 2056 [d] [2]). 7 E. A checklist may be useful to an attorney gathering information from the client during an initial interview (see "Fact Gathering - Use of Checklists," by Michael M. Mariani, included in this course book). V. Some precepts in formulating an estate plan A. An attorney should be wary of potential conflicts of interest. B. An estate plan should provide for sufficient liquidity to meet anticipated administration expenses and transfer tax obligations. (Consider, for example, a client whose only asset is a business.) C. An estate plan should provide for reasonably foreseeable contingencies, such as: 1. the death of an individual, named in a client’s will as sole executor or residuary beneficiary, either contemporaneous with or prior to the death of the client; and 2. a relevant change in the character of a client’s assets. 8 FACT GATHERING — USE OF CHECKLISTS by MICHAEL M. MARIANI, ESQ. Managing Director and Deputy General Trust Counsel Fiduciary Trust Company International New York City 9 10 FACT GATHERING — USE OF CHECKLISTS Michael M. Mariani, Esq.* Managing Director and Deputy General Trust Counsel Fiduciary Trust Company International New York, New York I. OBJECTIVES CHECKLIST To determine client’s main objectives for estate plan and the relative importance of each of these objectives. A. Objectives for Client and Client’s Spouse 1. Personal care during disability or old age. 2. Managing assets during disability or old age. 3. Securing advice for current management of assets. 4. Minimizing current income taxes. 5. Arranging for guardians for any of the client’s minor children. 6. Arranging for disposition or continued management of family business after disability, retirement or death. 7. Changing residence to another jurisdiction—double domicile problems. 8. Making gifts to family members. 9. Establishing asset management for children. 10. Providing financial care for client’s parents and adult dependent children. 11. Ensuring that family assets remain in family. 12. Making gifts to charities. 13. Purchasing additional life insurance. 14. Purchasing insurance to supplement income in case of disability. 15. Concern for health care decisions if gravely ill. 16. Concern for funeral arrangements and donation of bodily organs. 17. Minimizing estate and inheritance taxes and administration expenses at death. * Copyright 2015 Michael M. Mariani. All rights reserved. 11 B. Objectives under Client’s Will 1. Selection of executor, trustee and successor fiduciaries. 2. Disposition of valued personal effects to spouse. 3. Disposition of valued personal effects to children, other family members or friends. 4. Authorizing spouse to make gifts to other family members during spouse’s lifetime. 5. Authorizing spouse to make gifts to other family members under spouse’s will. 6. Protecting assets left to spouse or child from present or future creditors. 7. Reduction of estate taxes at client’s death regardless of estate tax consequences at death of surviving spouse. 8. Arranging for care of child with mental or physical handicap. 9. Arranging for care of parent or other family member. 10. Selection of guardian for minor children. 11. Arranging for the retention of the family home for the surviving spouse and the children. 12. Cash dispositions to family, friends, and employees. 13. Arranging for disposition of any professional practice assets and other business interests. 14. Dispositions to any charity. 15. Disposition of digital assets. 16. No contest clause. C. Objectives under Power of Attorney 1. Enable attorney-in-fact to act for the client should the client become disabled, or for any other reason. 2. Enable attorney-in-fact to make tax-free gifts up to the amount of the annual gift tax exclusion ($14,000 in 2015), per year for each intended donee. 3. Allow attorney-in-fact to make unlimited tax-free gifts for medical and 12 tuition expenses for each intended donee. 4. Empower the attorney-in-fact to act concerning all tax matters for the client. 5. Enable the attorney-in-fact to pay for all health care expenses for the client.
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