September 2014 Newsletter
Andrea Schanker | Sep 01 2014 11:45
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.
Don't Leave Your Estate Plan to Chance
Dying without a Will is also known as dying "intestate," where your assets go to your closest relatives under state "intestate succession" laws. Here's what happens in New York:
| If you die with: | Here's what happens: |
|---|---|
| Children but no spouse | Children inherit everything |
| Spouse but no descendants | Spouse inherits everything |
| Spouse and descendants | Spouse inherits the first $50,000, plus 1/2 of the balance; descendants inherit the rest |
| Parents but no spouse or descendants | Parents inherit everything |
| Siblings but no spouse, descendants, or parents | Siblings inherit everything equally |
New Jersey and Florida are not exactly the same as New York, but they are similar when it comes to rules affecting distribution of assets without a Will.
Did you know that if you die without a Will in New York, your half-blood-related siblings are treated the same as full siblings? That may or may not be the outcome you'd want — one of many reasons it's important to have a Will, so you, not the State, control who gets what. Other critical reasons to have an Estate Plan, regardless of your net worth, include designating guardians for minor children, getting property to beneficiaries quickly, minimizing expenses, easing the strain on your family, planning for incapacity, ensuring your business continues smoothly, and reducing taxes on your estate.
If death suddenly comes tomorrow, would you be confident that your planning reflects your intentions? If you or someone you know would like to schedule a complimentary consultation, please call us at (631) 424-5400.
New York State Estate Tax Alert — Revisit, Review, Revise
New York. New York State no longer has a traditional Estate Tax Exemption. As of April 1, 2014, there is an "exclusion" amount of $2,062,500, scheduled to increase by approximately $1 million each year until 2017, when it reaches $5.25 million. As of January 1, 2019, the exclusion amount will match the Federal Exemption going forward.
| For date of death as of: | New York State exclusion amount |
|---|---|
| April 1, 2014 and before April 1, 2015 | $2,062,500 |
| April 1, 2015 and before April 1, 2016 | $3,125,000 |
| April 1, 2016 and before April 1, 2017 | $4,187,500 |
| April 1, 2017 and before January 1, 2019 | $5,250,000 |
| After January 1, 2019 (projected) | $5,900,000 |
The most significant change is that for estates exceeding 105% of the exclusion amount, New York imposes an Estate Tax on the entire gross estate — the "New York Estate Tax Cliff." For example, if you die on July 1, 2014 with an Estate valued at $2.17 million, and the exclusion is $2,062,500, your Estate exceeds the 105% threshold, so the entire $2.17 million is taxed with no exclusion or exemption applied. The top tax rate remains 16%, and if a married couple's first-to-die spouse doesn't use their exemption, it is lost forever (unlike the Federal rules, which permit portability to the surviving spouse).
Lifetime gifts made within three years of death: the value of any gifts made on or after April 1, 2014 and before January 1, 2019 (while the donor was a New York resident) will be "clawed back" into the value of the gross Estate for New York State Estate Tax purposes. New York has also repealed its Generation-Skipping Transfer Tax.
The New York Estate Tax rules are vastly different from the Federal rules; notably, New York continues to offer no portability of any unused exclusion amount after the first spouse dies.
New Jersey has both a State Estate Tax and an Inheritance Tax. The New Jersey State Estate Tax exemption is $675,000 (with a proposal to increase the threshold to $1 million). The Inheritance Tax imposes a graduated tax ranging from 11%–16% on the transfer of assets to certain beneficiaries (siblings, parents, cousins, for example); notably, if married after 2007, a surviving spouse may also be vulnerable to the inheritance tax.
Florida has no State Estate Tax, but you must establish legal domicile in Florida to enjoy this treatment.
It is important to review your existing Estate Tax planning to ensure that no unintended estate taxes result from recent changes to the Federal and New York State Estate Tax rules.
Meet Ana Rodriguez, Paralegal
Ana Rodriguez is one of our three Paralegals, exclusively responsible for coordinating "asset transfers" as part of the Estate Planning or Estate Administration process. Asset transfers can serve an array of purposes, including avoiding Probate, protecting assets from creditors and potential liabilities, or settling an Estate. Ana dedicates her time to collecting asset information and acting as intermediary to get the appropriate documentation signed so title is correctly changed, following up with financial institutions and real estate contacts as your agent.
Recent United States Supreme Court Decision Affecting IRAs and Retirement Assets
On June 12, 2014, the United States Supreme Court, in a landmark case with far-reaching implications, ruled that inherited IRA accounts are no longer creditor-protected in a bankruptcy proceeding. IRA owners frequently designate their spouse as beneficiary, with children or grandchildren named as contingent beneficiaries. In light of this decision, doing so exposes those inherited IRAs to the claims of creditors.
IRAs are Individual Retirement Accounts that allow individuals to direct pretax income, up to specific annual limits, toward investments that grow tax-deferred. Because of their tax advantages, IRAs often accumulate significant growth and become one of the largest assets people have at death.
Since IRAs offer creditor protection while the owner is alive, most people assume inherited IRAs will be similarly protected for their children. However, the Supreme Court's ruling states otherwise (an inherited IRA is one acquired by a non-spousal beneficiary of a deceased IRA owner). It is now more important than ever to consider establishing an IRA trust as beneficiary, rather than naming an individual outright, since Trusts can protect these assets from beneficiaries' existing or potential creditors while ensuring ongoing management and flexible distribution.
Action Recommended: Anyone with beneficiaries or contingent beneficiaries other than a spouse should consider trusts as beneficiaries, and should never name a minor or person with disabilities as an outright beneficiary. Schedule a meeting to discuss whether a trust is appropriate in light of this ruling; we offer these meetings at no fee.
Families and Business: Blood May Be Thicker Than Water, But Can It Hold a Business Together?
By Ari-Zev Anolic, Ph.D.
Families that build successful businesses can be fortunate indeed, passing on wealth, skills, and pride to their children, and honoring the legacy of past generations. Yet only one in four family businesses make it to a second generation. Given the already high failure rate of small and medium businesses generally, family businesses clearly face unique dynamics.
Family relationships run on powerful emotional forces, which, when expressed in the activities of a family business, can undermine both the business and the family. Combining love and work makes family business enormously complex, since families and businesses are different systems with different values and rules. Addressing these tensions requires family members to work together, talk about differences, and face conflicts openly and constructively — skills that can be developed while also making the business's roles and practices as effective and rational as possible.
Taking a proactive approach through good planning and professional support, rather than waiting for unbearable tension or dysfunction, can reap great benefits. Each family and business is unique, requiring a tailored process drawing on psychological, strategic, and financial expertise, often alongside additional professional support in succession and estate planning strategies.
Ari-Zev Anolic, Ph.D., president of PsyEd Solutions Ltd, provides psychological and educational services to individuals, families, and organizations. He is a licensed psychologist, certified strategic planner, real estate developer, and partner in a real estate brokerage and management company.
Schanker and Hochberg, P.C. Is a Premier Estate Planning Law Firm
After nearly four decades in practice, we continue to strive for excellence on behalf of our clients. Being extremely hands-on, with the philosophy that we are our clients' trusted counsel, allows us to form and maintain long-term relationships. Our valuable services include a complimentary initial consultation, a written summary following all meetings, quarterly newsletters, alerts and updates for significant tax or legal changes, flat fees for Estate Planning, complimentary annual review and family meetings, and coordinated asset transfers to ensure titling matches your intent.
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. He has been retained by several large financial institutions, including life insurance companies and stock brokerage firms, and 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.