November 2012 Newsletter
Andrea Schanker | Nov 01 2012 10:58
Welcome Back
Schanker and Hochberg P.C. is a premier Estate Planning law firm. We offer legal services for sophisticated Estate and Gift Tax planning, Decedent Estate Administration and Probate services, Business Succession Planning, Charitable Giving, Special Needs Planning for persons with disabilities, simple Will planning, and all aspects of Elder Law planning including Medicaid planning and applications.
Our website provides detailed information about our practice and the services we offer. It also is an excellent resource for articles of interest about Estate Planning and Estate and Gift Tax Laws. A copy of each newsletter will always be available on our website.
Estate Planning is so much more than just tax planning. There is a considerable decision-making process. Schanker and Hochberg P.C. has over 30 years of experience in counseling clients for their Estate Planning needs.
Time Is Running Out: The Expiring Gifting Opportunity
2012 is fast approaching its end, and with it, the opportunity to maximize the use of the historically highest lifetime gift tax exemption. On January 1, 2013, the existing $5.12 million lifetime gift tax exemption was scheduled to revert to $1 million, with the Estate Tax exemption also potentially reverting to $1 million and the maximum Estate and Gift Tax rates rising to 55% from the then-current 35%. New York and New Jersey do not have a gift tax, meaning lifetime gifts made would not be drawn back into the Estate Tax valuation at time of death.
There is an array of gifting techniques that can ensure some level of asset protection and even continued asset management for the donor, but time was running out. Sophisticated gifting requires careful consideration with your Estate Planning attorney and always includes necessary documentation. Please schedule a complimentary consultation to discuss whether this opportunity is appropriate for you.
2012 vs. 2013 Estate and Gift Tax Thresholds
| 2012 | 2013 (projected) | |
|---|---|---|
| Federal Estate Tax and GST Exemption | $5,120,000 | $1,000,000 |
| Estate (and GST) Tax Rate | 35% | 55% |
| Lifetime Gift Tax Exclusion | $5,120,000 | $1,000,000 |
| Gift Tax Annual Exclusion | $13,000 per donee | $13,000 per donee |
| Gift Tax Rate | 35% | 55% |
| Annual Exclusion, Non-U.S. Spouse | $139,000 | $139,000 |
| NYS Estate Tax Exemption | $1,000,000 | $1,000,000 |
| NJ Estate Tax Exemption | $675,000 | $675,000 |
New York and New Jersey do not impose a Gift Tax.
Estate Planning for Unmarried Couples and Same-Sex Marriages
There is a large population of couples, heterosexual and same-sex, in long-term committed relationships who are, for all intents and purposes, married, without the legal classification. Absent careful Estate Planning, the incapacity or death of one partner can leave the other without a voice in handling the incapacitated or deceased partner's affairs, and can result in unintended financial consequences for the surviving partner — unmarried couples have no statutory elective share, which otherwise entitles a surviving spouse to one-third of the decedent's Estate or $50,000, whichever is greater.
A basic Estate Plan includes a Last Will and Testament (often with a Revocable Living Trust), a Statutory Power of Attorney, Health Care Directives (Living Will and Health Care Proxy), Guardianship designations for minor children, and HIPAA Waivers. These documents let you choose who represents you when you're unable to do so, sparing enormous unnecessary time and money. For example: without a Will, New York directs that fifty percent of assets go to a surviving spouse and fifty percent to surviving children; if a beneficiary is a minor, a Surrogate's Court proceeding is required to account for those monies; without a Guardianship designation, a Court proceeding will appoint a legal guardian for minor children if both parents predecease them; without a Health Care Directive, a Court proceeding is necessary to authorize communication with doctors or terminate life-sustaining measures; and without a Power of Attorney, a Supreme Court proceeding is necessary to appoint a Guardian for an incapacitated person's personal and financial interests.
The New York Marriage Equality Act: Food for Thought
On June 24, 2011, New York State became the seventh state to legalize same-sex marriage. However, the Defense of Marriage Act ("DOMA"), passed in 1996, meant same-sex marriages were not recognized for Federal Income and Federal Gift and Estate Tax purposes at the time, making planning considerations more important than ever. A few points to be aware of at the time:
- There were special and additional Estate Tax filing requirements for a decedent in a same-sex marriage.
- There were specific rules for Federal Income Tax filing for same-sex married couples.
- You cannot disinherit a spouse in New York State absent a signed waiver (the spousal right of election described above).
- A surviving same-sex spouse is entitled to a full New York marital deduction for assets passing to them.
- There is no New York Gift Tax, but the Federal government had an annual gift tax exemption of $13,000 per donee and a lifetime exclusion of $5,120,000 (scheduled to revert to $1,000,000 on January 1, 2013) — important for transferring assets between spouses during life and mitigating Estate Taxation.
- For Medicaid planning purposes, DOMA was actually helpful to same-sex married couples, since the well spouse had no financial obligation to the Medicaid applicant.
- Life insurance is a particularly powerful tool for providing liquidity to pay Federal Estate Taxes if the couple has significant assets.
- Planning with Trusts can enable a same-sex couple to take advantage of the unlimited marital deduction, and such Trusts could qualify for recognition for Federal Estate Tax purposes if DOMA were repealed.
The State and Federal Statutes are all a "default" in lieu of good planning. Schedule a complimentary initial consultation or annual review to discover what strategies are available for you.
What to Know About "Digital" Estate Planning
In today's world, nearly everyone has internet access — email accounts, online banking, scheduled bill payments, investment portfolio access, and social media accounts. What happens to our digital footprint upon incapacity or death?
For someone to step forward and manage your online presence, they need access, and in today's world, we're constantly reminded to avoid writing down passwords and to use different passwords for different accounts. Consider the following to organize your online existence:
- Take inventory and identify where your accounts are and what the passwords are.
- Provide instructions along with this inventory if appropriate — for example, if you keep an online photo journal, you may want the person with access to be able to share it with particular friends or family for sentimental use.
- Provide for access by a trusted confidant. You could keep the inventory in a home safe accessible to your spouse or children, or entrust it to your Estate Planning attorney. Schanker and Hochberg P.C. regularly stores critical information for clients in confidential client files and in our fireproof, waterproof, locked Will safes.
An Executor or Trustee does not necessarily have authority or access to your digital universe by default. Discuss this issue at your complimentary Estate Planning consultation or annual review meeting.
Insure Your Legacy
Life insurance is a valuable Estate Planning tool. The performance, purpose, and adequacy of each life insurance policy must be regularly reviewed to ensure these valuable devices remain beneficial.
It is a basic Estate Tax Planning technique to create an Irrevocable Trust as owner and beneficiary of a life insurance policy, excluding the death benefit from the taxable estate at time of death. Other advantages of using an Irrevocable Trust this way include: certain asset protections (the death benefit can never become a marital asset upon remarriage of the surviving spouse, or an issue for an in-law child); Probate avoidance (saving time and money, and seamless availability of liquidity); the grantor selects Trustees and Successor Trustees; and the grantor directs how and when money is distributed — critically important when considering minors as possible beneficiaries.
The Trustee of an Irrevocable Trust, whether an individual or financial institution, has a fiduciary duty to manage the Trust for the beneficiaries, including a legal obligation to ensure premiums are paid and each policy remains functional. Whether policies are used for income replacement, estate liquidity, or business succession, it's important they coordinate with your other Estate Planning. A well-planned, regularly reviewed plan avoids unnecessary costs, time delays, and avoidable taxation. Forensic reviews of life insurance policies are usually complimentary through a trusted insurance professional.
Extensive Services at Schanker and Hochberg P.C.
- Complimentary Initial Consultations for Estate Planning, Probate, and Estate Administration matters
- Complimentary Annual Review meetings for existing clients
- Complimentary Family meetings for existing clients
- Tax alert services for existing clients
Our main office is housed in an elegantly restored Victorian structure in the heart of Huntington Village. Here, we welcome you and your family into a relaxing, warm setting where we will work together to improve your circumstances and achieve your goals. To better serve our clients and their families, we also have convenient office locations in Midtown Manhattan and New Jersey; we also offer our services to clientele in Florida.
Highlighted S&H Attorney: Steven Schanker, Esq. (Partner)
Steven Schanker received a Bachelor of Arts degree from the University of Rochester and his Juris Doctorate from St. John's University School of Law. He is admitted to practice before the Courts of the State of New York, the Eastern and Southern Districts of the U.S. District Courts, and the Supreme Court of the United States.
Mr. Schanker is an accomplished public speaker and has lectured before both lay and professional audiences nationally, and has been retained by several large financial institutions, including life insurance companies and stock brokerage firms. He is an active member of the Society of Chartered Life Underwriters Speakers Bureau and the Estate Tax Planning Council of Long Island, among other affiliations, and a quoted author, including articles in Forbes and Fortune magazines.
Mr. Schanker resides in Huntington with his wife, Carol, an accomplished artist.
GENERAL DISCLAIMER: While we hope this newsletter provides useful information, please know that this newsletter does not predict or guarantee the outcome or result in any particular situation, and no attorney-client relationship exists or is established as a result of this newsletter or its receipt.