WELCOME BACK
Schanker and Hochberg P.C. is an Estate Planning law firm. We offer legal services for simple Will planning, sophisticated Estate and Gift Tax planning, Decedent Estate Administration and Probate services, Business Succession Planning, Charitable Giving, Special Needs Planning for persons with disabilities, and all aspects of Elder Law planning including Medicaid planning and applications. Our website, www.schankerandsch.wpengine.com, 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.
As always, we encourage feedback from our readers. If there are any topics you wish for us to specifically address or elaborate on, please email me at: andrea@schankerandsch.wpengine.com.
Trusts and Trustees
THE TRUST INSTRUMENT is the most common planning-method of transferring inheritance to the next generation(s). Trusts provide a mechanism of control and require the obligations of loyalty and due diligence to its beneficiaries. One of the most difficult decisions our clients must make is deciding who to name as a Trustee(s).
It is a fact that well thought out Estate Plans avoid complications added to the grief of losing a loved one. To do this, the planning process requires close attention and focus for decisions such as who manages the estate and when (and how) should distributions be made. This is precisely what a knowledgeable Estate Planning law firm provides.
One of the most important choices you make in developing any Trust is who to select as The Trustee or Co-Trustees. An individual(s) can certainly serve as a Trustee or Co-Trustee of any Trust. This person(s) should be responsible, reliable, honest, and someone that you trust to be able to manage the Trust’s investments and administrate the formal requirements of the Trust. You should communicate clearly with the person you are designating so that they are clear as to what the purpose of the Trust is and how to exercise any discretionary powers they may have. They should be aware that they are also personally liable for any intentional mismanagement or abuse of power they perform while acting as Trustee. Choose carefully and consider if this person(s) has the requisite skill set. For example: good organization skills, investment experience (if not expertise) and will this person(s) invest the necessary time and attention.
Often times, clients consider naming a Corporate (Bank) Trustee to be either a primary Trustee, a Co-Trustee with an individual, or a successor Trustee. There are distinct advantages to using Corporate Trustees including objectivity, continuity, expertise, and fiduciary strength. Corporate Trustees provide a professional distance meaning emotional reactions and the ‘family’ or ‘friend’ element has no influence on discretionary distribution decisions. Corporate Trustees are also continuous because they can not get sick, incapacitated, or die. And if partnered with an individual Trustee, that individual may remove one institution and replace the Corporate Trustee with another (pursuant to the terms of the Trust document). Even the beneficiaries may have the power to do this if the Trust provides it. Corporate Trustees are also experts in managing Trusts and performing the administrative requirements such as preparing and filing timely tax returns and keeping the necessary paperwork in connection with the investments and distributions of income and principal to the beneficiaries. And Corporate Trustees must perform their duties pursuant to institutional policies and procedures subject to regulatory examination (they are held to the highest standard of care). They also maintain liability insurance. You may certainly partner a Corporate Trustee with a trusted and qualified human Trustee.
When you plan your Will or Trust, always be careful who you choose as a Trustee. Be diligent in reviewing your decisions every year or every few years to make sure that your decisions are still appropriate.
Review, review, review.
Schedule a complimentary appointment to review existing Estate Planning documents in our Long Island Office, Manhattan Office, or our New Jersey office. Contact us at our main telephone number at (631) 424-5400.
Please see our website for our exact locations.
Flexibility with Irrevocable Trusts
IRREVOCABLE TRUSTS can be extremely useful in the estate planning process. Family or “bypass” trusts are often utilized to shield assets from estate taxation. Insurance trusts allow life insurance to pass to heirs free of taxes. Dynasty, or “generation skipping” Trusts can help several generations of beneficiaries obtain financial freedom. These are just a few of the ways in which trusts are used.
Individuals, however, are often apprehensive about entering into an arrangement that is irrevocable. They worry that the circumstances of their intended beneficiaries may change over time and that an irrevocable trust will not have the flexibility to meet changes in circumstances. The fact is that a well drafted trust can take changed circumstances into account and provide a surprising degree of flexibility. Following are several ways that this flexibility can be achieved.
First, trustees can be given the ability to “sprinkle and spray” distributions among a class of beneficiaries, taking into account which ones
are most in need of financial assistance at the time. A child who well off need not receive the same distributions as one who is struggling.
As the needs of beneficiaries change, the trustees will be able to readjust the distributions.
Second, ages set forth for the distribution of assets in a trust do not have to be strictly adhered to by the trustees. Typically, a trust will provide for distributions at 35, 40 and 45 or for some other staggered payout over time. The rationale behind this is that the beneficiaries be given an opportunity to become acclimated with assets of an estate and also guard against an entire inheritance being dissipated as a result of bad fortune or some other calamity. However, a trustee can be granted the discretion to make distributions prior to those ages if the trustee believes that it is necessary of support, health or education.
Third, a trustee can be given the ability to continue to withhold distributions in the event that a beneficiary is in serious financial or matrimonial difficulty or is facing a drug or alcohol abuse problem. This assures that the assets will not be squandered and gives a beneficiary the opportunity to get a new start in life prior to receiving substantial assets.
Fourth, a beneficiary can be giving a power of appointment that will allow him or her to
direct assets to those individuals who he or she determines among a class that you have named (typically children and grandchildren) and who are best suited to receive them. A surviving spouse, for example, can direct the assets of a trust that was created primarily for his or her benefit to one child to the exclusion of others as he or she deems advisable upon death.
Fifth, Trusts can include the power for a Trustee to change who the acting Co-Trustee is. Beneficiaries can also have the power to change a Trustee if they are dissatisfied. This often occurs when there is a Corporate Trustee involved and the beneficiaries wish to work with a different bank or financial institution.
Lastly, the New York State Legislature has recently enacted a new law giving a trustee of an irrevocable trust greater leeway to change its terms. Among the powers that are granted are to create a special needs trust for handicapped beneficiaries, to change the ages of distribution to beneficiaries under certain circumstances and to change the law governing the trust. All of this can now be done without having to seek court permission.
As can be seen, irrevocable trusts can be of tremendous use and still be flexible enough to adapt to changes in circumstances. Should you have any questions regarding this important issue, please do not hesitate to contact us.
“ It is never too soon to learn what options are available. ”
The Aging Population
Benjamin Franklin has said that “nothing is certain but death and taxes.” Also true is the fact that as we age, the likelihood is that we will require some form of prolonged care and possibly a prolonged higher level of care. Whether this means that a home aid provides care in the home or nursing home care is required, the costs can be astronomical. Costs of this type of care are typically provided for in one of three ways; (1) Long Term Care Insurance, (2) out of pocket, or (3) Medicaid.
Medicaid is a welfare program and not an entitlement; it is commonly referred to as the ‘payer of last resort.’ Eligibility is rigid and strict. It is imperative that consideration be given to Long Term Care Insurance to provide leverage, if not full coverage, for the costs of care.
Please contact Andrea B. Schanker, Esq. for a consultation to discuss pre-planning for the costs of prolonged care as well as contact information for a reputable and knowledgeable professional in regards to Long Term Care Insurance. It is never too soon to become educated as to what options are available.
Review, review, review.
Schedule a complimentary appointment to review existing Estate Planning documents in our Long Island Office, Manhattan Office, or our New Jersey office. Contact us at our main telephone number at (631) 424-5400.
Please see our website for our exact locations.
I Have an Estate Plan; Now What? Top Tips to Maintain Your Planning
ONE
MAKE SURE someone other than yourself (and your significant other) know who to contact first. For example, most of our clients keep their original, signed Wills in our Will safes. If Probate is necessary, the original Will must be produced. A copy of a signed Will is not sufficient. The Executor and/or Trustee should know who your Estate Planning Attorney is and where to find your original Will.
TWO
KEEP a “critical information” list. It should include the name and contact information for your Estate Planning Attorney, your Accountant, your Financial Advisor, your Life Insurance Advisor, and a list of where your accounts are. It should also include whether you have a safe deposit box and especially information about any accounts you manage online. Who should be contacted if there is art, antiques, and collectibles to sell? Please see www.schankerandsch.wpengine.com for our critical information worksheet. You may wish to keep a copy of the completed worksheet with your Estate Planning binder as well as with your client file at your Estate Planning Attorney’s office.
THREE
SCHEDULE a Family Meeting. Sit down with your Estate Planning Attorney, your family, and those people who you have appointed as Fiduciaries and discuss what responsibilities each person may have when it comes time to act, whether it be as a Trustee, Executor, Attorney-in-Fact, Health Care Agent, or Guardian.
FOUR
REVIEW your Estate Plan regularly. Schanker and Hochberg P.C. offers complimentary annual review meetings for our clients so that the documents may be reviewed to ensure that your decisions are current.
FIVE
CONSIDER writing a ‘Letter of Intent’ to be kept with your original Will. This can be a letter to your loved ones directing where you wish specific personal items (jewelry, art, specific household items and memorabilia) to go.
SIX
HAVE a discussion with the person(s) you name as Trustee of any Trusts you establish. Trustees often have certain discretion under the terms of the Trust to invade the principal for the benefit of beneficiaries and also to withhold distributions from beneficiaries. Having a discussion with your named Trustees will enable him/her to understand how you wish that discretion be applied.
SEVEN
HAVE a discussion with your Health Care Agent so that person understands your medical preferences. This person should also know who your primary care physician is and how to contact him/her.
Estate Tax Update
THE NEW YORK STATE Estate Tax Exemption is still $1 million per person. The New Jersey Estate Tax Exemption remains at $675,000 per person. The Federal Estate Tax, Gift and Generation Skipping Tax Exemptions are $5,120,000 per person (having been increased due to indexing for inflation). On January 1, 2013 the Federal Estate Tax, Gift and Generation Skipping Tax Exemptions are scheduled to revert to $1,000,000 unless Congress passes new legislation. It is possible that Congress will not act this year due to preoccupation; it is also an Election year.
Portability is NOT an effective strategy for Estate Tax Planning. ‘Portability’ is a provision under the 2010 Tax Act that allows the surviving spouse to transfer any unused portion of their late spouse’s Federal Estate Tax Exemption to themselves thus adding to the surviving spouse’s allowable exemption. Portability provides no asset protection for the exempt amount that is transferred and it does not shelter appreciation in the surviving spouse’s taxable estate. An Estate Tax return must be filed with the IRS in order to use Portability. Before relying on ‘portability’ as an Estate Tax Planning method, it is imperative that you evaluate tax planning with an Estate Planning professional.
Schanker and Hochberg, P.C. attorneys regularly deliver seminars to clients and professional client advisors on current Estate and Gift Tax hot topics.
Gifting Opportunities
The lifetime gift tax exemption is $5,120,000 per person which, for the time-being, makes it an opportune time to make large gifts. This can mean front-loading large life insurance policy(ies), or partnering with the current historically low Applicable Federal Rate to maximize the use of Grantor Retained Annuity Trusts (“GRATs”).
Popular gifting techniques that exceed the annual $13,000 gift tax inclusion include Irrevocable Gift Trusts, Gifting of limited partnership interests in a Family Limited Partnership, GRATs, and Qualified Personal Residence Trusts (“QPRTs”).
Lifetime gifting reduces the taxable estate and removes appreciation on the asset. There are methods so that the Grantor can retain some element of management or enjoyment once the asset is gifted (Family Limited Partnership, GRAT, QPRT).
It is still an opportune time to consider the use of gifting to reduce Estate Tax vulnerability. If you are charitably inclined, then Charitable Remainder Trust can be an excellent tool to reduce the size of the taxable estate, retain an annuity interest based on your charitable contribution, and fulfill your charitable objectives.
Time is running out until the end of 2012. Be sure to schedule a consultation to consider taking advantage of the lifetime gifting strategies.
Extensive Services at Schanker and Hochberg P.C.
1. Complimentary Initial Consultations for Estate Planning, Probate and Estate Administration matters
2. Complimentary Annual Review meetings for existing clients
3. Complimentary Family meetings for existing clients
4. 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 and California.
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.
Highlighted S&H Attorney:
Andrea B. Schanker received her Bachelor of Arts degree in Clinical Psychology from University of Rochester in 1999. She received her Juris Doctorate from New York Law School in 2002. Andrea is a licensed member of the New York and New Jersey Bar Associations. She is a Trustee and Member in the Huntington Lawyers’ Club, a member of the Suffolk County Bar Association, a member of the New York State Bar Association, and a member of the American Bar Association.
Ms. Schanker joined Schanker and Hochberg P.C. in 2004, specializing in Estate Planning, Estate Administration, and Elder Law. She regularly delivers Estate Planning presentations to professionals in the financial industry and their clients. Ms. Schanker also regularly advises accountants, financial advisors and insurance advisors in connection with estate tax issues.
Andrea lives in Huntington with her husband, Michael Abruzzo and their daughter, Patricia Gertrude Abruzzo who was welcomed into this 
world in November of 2011. Andrea has returned to Schanker and Hochberg on a full time basis.
andrea@schankerandsch.wpengine.com