Category Archives: Trust & Estates

Lawyer/Client Confidentiality?

By Louis Pashman, Esq.

You may think it’s a pretty simple thing if you come to your lawyer and tell him that you and your wife want wills.

It’s not.

There are several rules our Supreme Court has established, called Rules of Professional Conduct, that circumscribe how we must do that.

You probably know about lawyer/client confidentiality.  Anything we learn from you relating a legal matter we are handling is confidential and we cannot disclose it.  How then are we to deal with that confidentiality if we are representing both you and your spouse and receiving information from both of you?  We must ask both of you to waive that confidentiality.  The same is true in a parent/child or sibling situation.

It can get more complex if we are representing your business and, individually, multiple owners of the business.  We may know different things from each of the owners about the business.  One owner may tell us he does not want his partner to know something we are told.

Let me give you an example of each.  You and your spouse have two children.  You have two children from a former relationship.  You intend to treat the four children equally.  Your spouse “confides” in me that she thinks your former spouse has made your life with the other children unnecessarily difficult and, consequently,  does not think your two “other” children should be treated the same as the two children you have together.  Those feelings cannot be told to me confidentially because the two of you will have waived confidentiality.

In the business setting, assume I represent the business and I have been asked to do wills for you and your spouse as well as your business partner and spouse.  In my meeting with your partner and his spouse, they “confide” in me that they do not want you to be able to bring any of your children into the business because they do not trust them.  Given the maze of professional relationships, your partner cannot assume confidentiality.

The lesson is—don’t be surprised or offended if we talk to you about these confidentiality issues.

Digital Estate Planning – Who’s Got the Password?

By Joseph L. Goldman, Esq.

As on-line activity continues to grow, so does the importance of digital estate planning.

Digital assets are on-line accounts and information stored electronically.  These include social networking sites, on-line banking or brokerage accounts, on-line consumer transaction sites, video sites, photo storage sites, blogs and more.  Although most people realize how important it is to protect user names and passwords to avoid identity theft during their lifetime, they may not realize that the same protections could result in heirs and fiduciaries being denied access in the event of the death or incapacity of the account holder.

Some on-line sites have started addressing these issues but their policies vary considerably.  Only a few states have enacted legislation covering digital estate planning.  Neither New Jersey nor New York is one of them.

In planning your estate, you should consider the following:

  • Take inventory of your digital assets;
  • Make a list of all your devices and accounts and their user names, passwords, PINs, etc.;
  • Consider giving authority to your agent named in your Power of Attorney to access this information;
  • Give authority to the Executor of your Will or the successor Trustee of your Revocable Trust who will act as Trustee after your death to access this information;
  • Do not put user names and passwords in your Will or Revocable Trust.

Don’t leave digital estate planning to chance.  Instead, make it a part of your regular estate plan.

2012 Estate and Gift Tax Opportunities – The End Is Near?

By Joseph L. Goldman, Esq.

The 2012 election is history. Barack Obama is still President, and the makeup of Congress and the Senate is substantially unchanged. But the estate and gift tax status is still uncertain.  What’s more, time is running out on the unprecedented $5,120,000 federal estate, generation skipping and gift tax exemption available to individuals in 2012.

Unless new legislation is enacted, on January 1, 2013 the exemption is scheduled to fall to $1,000,000 per taxpayer (from $5,120,000) and the top estate tax rate is scheduled to return to 55% (instead of 35%).  That would leave a married couple who has not previously used any of their exemptions with a combined available exemption of only $2,000,000 instead of $10,240,000, and a potential additional estate tax of approximately $3,500,000.  With the lifetime gift exemption also to be capped at $1,000,000, opportunities to make gifts to reduce ultimate estate tax liability would also be significantly limited.

For those of you who have been waiting, for whatever reason, the time to act is now! Time is of the essence!

Don’t Forget About State Estate or Inheritance Tax

By Joseph Goldman, Esq.

As most of you already know, the federal estate tax exemption in 2012 is $5,120,000, an all time high.  The exemption is currently scheduled to return to $1 million (and the tax rate scheduled to increase to 55% from 35%) on January 1, 2013 if no new legislation is enacted.

In a previous blog, I urged taxpayers to take advantage of this unique opportunity by making gifts prior to year end. Gifting can be especially effective when the asset gifted is a limited partnership interest or a membership interest in an LLC which allow taxpayers to take advantage of recognized discounts for lack of marketability and lack of control. Also, if the gift is made to a Grantor Retained Annuity Trust or Qualified Personal Residence Trust, it allows a taxpayer to take into account the value of the retained interest, thereby reducing the amount of the gift.

Strategies designed to reduce a taxpayer’s estate can often result in estate tax savings even when a taxpayer’s estate is under the federal estate tax exemption.  This is because many states have “decoupled” their own estate tax rules from the federal estate tax.  In New Jersey, the estate tax exemption is currently only $675,000.  In New York, it is currently $1 million.  Although a married taxpayer is generally able to defer the estate tax on account of the marital deduction, an unmarried individual or a surviving spouse who dies in 2012 with a taxable estate of $5,120,000 could pay a state estate tax in New Jersey or New York that exceeds $400,000. Additionally, New Jersey imposes an inheritance tax on transfers to someone other than a surviving spouse or lineal descendant, even if no New Jersey estate tax is due.

As a further inconvenience, New York requires a federal estate tax return to be prepared in order to calculate the New York estate tax return even if no federal return is required.  New Jersey requires a 2001 federal estate tax return in order to calculate the New Jersey estate tax using the “706” method (as an alternative to the simplified method).

Additionally, although under current law “portability” allows a surviving spouse to benefit from a predeceased spouse’s unused estate tax exclusion, neither New Jersey nor New York permit “portability” for state estate tax purposes.

So what can you do to reduce your state estate tax liability?  You could move to another state, one that doesn’t have an estate tax, like Florida.  But you have to be careful to sever your ties to New Jersey or New York or they can claim that you’re still “domiciled” here and subject to estate tax.  And if you continue to own real estate or other tangible property in New Jersey or New York you will be subject to estate tax on that property even if you don’t live here anymore.

Perhaps a better way to avoid or at least minimize state estate tax brings us back to gifting.  Neither New Jersey nor New York currently impose a gift tax.  In these states, you can even make a “death-bed” gift and drastically reduce your New Jersey or New York estate tax.  New Jersey does have a look-back period for inheritance tax purposes, but it doesn’t affect a gift to a spouse or lineal descendant.

New Jersey and New York residents should be conscious of state estate tax consequences and not just federal estate tax consequences when considering their estate plans.  The gifting strategies touted for 2012 for federal estate tax purposes can also result in significant state estate (and inheritance) tax savings.

January 1, 2013 will be here before you know it.  So get to gifting now!

Don’t Forget the Basics

By Joseph Goldman, Esq.

It’s April 2012 and the clock is ticking.  The federal estate and gift tax exemption is $5,120,000, the highest amount ever, but only until December 31.  Add an environment of low interest rates and relatively low market valuations and the time is ripe for estate tax planning.  But while you’re watching the estate tax bottom line, don’t forget the basics.

You need a Will, a Power of Attorney and a Health Care Proxy and Directive.  If you don’t have these documents – get them as soon as possible.

What’s more – communication is the key!

Does your family know that you executed estate plan documents and where to find them?

Does your family know your assets?  You should keep a list of bank accounts, credit cards, stocks and bonds, investments, real estate and mortgages, IRAs, pensions and other retirement plans.

Do they know your key advisers – attorney, accountant, investment and insurance – and how to contact them?

You should provide your family information about safe deposit boxes, combinations and keys.

Especially important in the digital age, you should provide them with your user name and password(s).

If you own a business, have you made plans for business succession?  This can be especially important if some of your children are involved in the business but others aren’t.

I often recommend that clients write a letter to family explaining their wishes, financial and otherwise, to supplement their estate plan documents.  This letter can provide useful guidance and a degree of comfort.

Estate planning should not be a secret.  Let your family in on the process and they will thank you for it.

Ring in the New Year with a Review of Your Estate Plan

By Joseph Goldman, Esq.

The Tax Relief Act of 2010 (TRA 2010) made major changes to the federal estate and gift tax laws. These include increasing the exemption amount to $5 million ($5.12 million in 2012) for estate tax, gift tax (no more $1 million limit on lifetime gift tax), and generation-skipping transfer tax, decreasing the tax rate to 35% and adding “portability.” The changes allow taxpayers to take advantage of gift-giving strategies that could result in substantial tax savings for their families. Even for individuals who have a Will, failure to review their estate plan may cause their estate to be disposed of contrary to their wishes and may also result in unnecessary tax liability. Individuals should also review their estate plan in light of changes to their family and financial situation that have occurred since their estate plan documents were executed. But time is of the essence! The changes made by the TRA 2010 are currently set to expire at the end of 2012. As of January 1, 2013, the exemption is scheduled to decrease to $1 million and the tax rate is scheduled to increase to 55%.