Beneficiaries and Ownership Archives - Page 2 of 3

3 Ways An Irrevocable Trust Really Isn’t Irrevocable?

Posted on April 25, 2017

As I have discussed in the past, https://www.investopedia.com/advisor-network/articles/only-3-reasons-why-you-should-have-irrevocable-trust/ there are three reasons to create irrevocable trusts. The word “Irrevocable” usually implies no ability to change, and most people believe that a Trustee is required to adhere to the language contained in the irrevocable trust, even though times and circumstances may have changed. Nonetheless, in many circumstances, irrevocable trusts may actually be legally changed, modified or revoked in New York State. ALL PARTIES AGREE TO MODIFY: The first circumstance exists when the Grantor of the Trust is still alive, wants to make a change and ALL the beneficiaries of the Trust agree with the proposed change. In this case, an amendment of the Trust or a revocation can be done –

5 Reasons to Avoid Giving Small Gifts in Your Will

Posted on April 18, 2017

If you have immediate family members whom you love, it is assumed you will leave most of your estate to them. In this case, leaving a few hundred dollars to a distant niece or friend is rightly viewed as an unnecessary sign of respect and kindness. But beware: The amount of time, legal fees and other costs associated with giving a $1,000 bequest in your Will can cost as much as leaving a $50,000 to that beneficiary. In fact, leaving small gifts to people using your Will is a sure way to increase your legal fees in New York, oftentimes incurring more expenses to send the gift than the amount of the gift itself: Cost of Mailing Notice (Required):

3 Times Your Retirement Plan is Not Protected from Creditors

Posted on April 4, 2017

Many people know that IRAs and 401(k) plans have creditor protection. However, most people do not know the limits of that creditor protection. It may come as an unwelcome surprise, but if someone is suing you: (1) if you owe money to the IRS or to an ex-spouse, (2) if your retirement plan is of a certain type, or (3) if your beneficiaries are under creditor attack, your retirement funds may not be protected at all. First, if you owe tax dollars to the IRS, or are late on alimony or child support payments, your retirement plan is almost never a safe haven. The IRS, an ex-spouse, and minor children act as “super creditor” against your retirement plans. Ex-spouses

UTMA Accounts: The Good, Bad and Ugly

Posted on March 21, 2017

Uniform Transfer to Minors Act accounts allow a person to leave funds to a minor beneficiary without a court’s interference. In general, minors are not legally able to own property. If a minor comes into possession of a bank or investment account or proceeds from a life insurance policy or retirement plan, a court may have to appoint a guardian over the property. UTMA accounts sidestep this requirement by naming a custodian over the funds: the custodian oversees and invests the funds until the minor turns 21 years old. However, just because UTMAs avoid court oversight, does not mean they are devoid of other problems: Poor Investment Decisions: A custodian who invests the funds poorly relies on state

Naming Beneficiaries: When to Start (and Stop) Asking “What If?”

Posted on February 17, 2017

My mentor was a meticulous, forward-thinking attorney. When she retired from private practice I succeeded her and took over her client files. As a result, I had the pleasure of reading many of the wills she had drafted (not a recommended activity for narcoleptics who don’t want to fall asleep). She was absolutely scrupulous when it came to naming contingent beneficiaries to an estate. For some of her clients, and indeed for me too at times, it seemed like a maddening process. Here is a common scenario: I imagine going to an attorney to draft my Will, create beneficiary designation forms, and consider creating a trust. Now comes the moment of truth: When I pass away, who gets what?

IRAs v. Roths? Choose the “Absolute Benefit”

Posted on February 14, 2017

No one knows their financial future with certainty, but when given the choice, I almost always suggest taking a sure thing now (an “Absolute Benefit”) over risking an uncertain future (an “Uncertain Benefit”). In this regard, I tell all of my clients to take a tax deduction now and invest in a tax deductible IRA or 401(k) instead of contributing to a Roth IRA or Roth 401(k) plan, in order to optimize the certainty of income tax savings. Remember that you take an immediate income tax deduction on a 401(k) or most traditional IRA contributions; you only pay taxes when you withdraw funds (usually after you are retired, and your tax bracket is lower). In contrast, Roth accounts require

How a Grandparent Should Gift Money to a New York 529 Plan

Posted on January 27, 2017

Funding a grandchild’s college education can be a beast: The amount of money that may have paid for your child’s four year undergraduate education may only pay for one year’s worth of tuition for your grandchild. This coupled with increasing housing costs and other relentless modern-day living expenses, make it hard for your children to adequately fund a 529 Plan to pay for your grandchildren’s college education. Here are a few ownership and funding choices a grandparent may want to consider when funding a 529 Plan for a grandchild: Open a 529 Plan as the Owner: Funding a 529 Plan is unlike most gifts. For most transfers, once you make a gift you have no way to get

Leaving the Right Gift to the Right Person

Posted on September 30, 2016

I meet several clients who, upon death, want to automatically give their daughters their jewelry and split their remaining property equally between their children. This is also the default position suggested by general practitioner attorneys who will draft a two page Will for their lifetime client, and avoid the consultation time needed to truly understand their client’s desires. My experience suggests that serious consideration must be given to distributing the correct amount of property, and the right type of property, to each beneficiary. Most people leave property first to their spouse, then to their children equally – they have equated equally loving their children with bequeathing them equal amounts of property. It goes without saying that even in “healthy” families this may not be

Simple Dos and Don’ts of Gifting for College Education

Posted on August 1, 2016

Higher education is usuriously expensive. The fact that a child’s education may cost as much as you paid for your first house should highlight the importance of gifting these funds in the correct way. You can pay an unlimited amount of money for a child’s education expenses, provided you pay the money directly to the educational institution. Qualified education expenses are looked at as a benefit to public policy, and therefore do not require the donor to fill in a gift tax return. The funds are also not deducted from your lifetime gift tax exemption, meaning you can continue to gift additional funds without having to assess a tax. Paying a child back for their student loan payments

Cain and Abel: When Siblings Despise Each Other

Posted on July 17, 2015

There are no perfect families. Even the first biblical family had an extreme sibling rivalry (with some rather bad results). And while most of us don’t have to worry about such an extreme outcome, many parents do worry that their children will not play well in the estate sandbox as their parents age and pass away. The worries: One child helps mom and dad as they age, is given a lot of money prior to and after their passing, and the other child brings a lawsuit for absconding with the money that they feel is one half theirs. One child helps mom and dad as they age, is given the same amount of money as the child who did nothing,