Disclaimer Wills

A disclaimer Will is a useful estate planning tool which provides flexibility while estate tax laws remain in flux. Typically married couples want the surviving spouse to have as much wealth as he or she needs throughout his or her lifetime. Most Wills direct the appointed Executor to administer the terms of the Will, terms which are set in stone. Often the Will instructs the funding of a bypass (or credit shelter trust) before giving the balance to the surviving spouse. The bypass trust is funded with the maximum available estate tax exemption (currently $3.5 million). The terms of the trust are usually for the benefit of the surviving spouse and/or children to be paid ultimately to the children upon the surviving spouse’s death.

A disclaimer Will does not force the creation of a bypass trust. Rather, it leaves the entire estate to the spouse but gives the spouse a disclaimer right allowing the surviving spouse to elect to transfer all or a portion of the available estate tax exemption to fund the bypass trust after the death of the first spouse should it makes sense at that time. Upon the death of the first spouse, the surviving spouse has 9 months to disclaim a portion of the estate.

Rising lifetime exemptions mean that traditional Wills which create mandatory bypass trusts are not necessarily what the testator would have wanted. Currently, the estate tax exemption is $3.5 million dollars (it used to be only $600,000). Suppose a husband dies with an estate worth $2.5 million dollars. Under a traditional Will as described in the first paragraph, the entire estate would be held in trust for his wife during her lifetime and she would receive nothing outright. The husband believed the trust would be funded with $600,000 (the exemption when the Will was drafted), and that his wife would receive $1.9 million. A disclaimer Will allows the surviving spouse to decide how much of the exemption he or she wants to use at the time of the first spouse’s death. This is often more practical than forcing the full exemption. Assuming rising estate tax exemptions, forcing the use of the bypass trust may not be what the decedent would have wanted.

A disclaimer is also a flexible way to maneuver around the state estate tax. Many states have de-coupled from the federal estate tax system, and impose a separate estate tax. For example, New York’s exemption remains at $1,000,000. This means that using the entire federal exemption of $3.5 million will result in a New York estate tax of over $200,000 on the additional $2.5 million of federal exemption. If the spouse decides to use only $1,000,000 of exemption, the state estate tax can be avoided.

Whether a disclaimer Will is right for you depends on your individual facts and circumstances.

Questions?

If you have any questions regarding this matter or any other estate planning techniques, please contact a Maurice Kassimir & Associates, P.C. Trusts & Estates attorney or e-mail us: sklawyers@skpclaw.com.

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New York Wealth Transfer Attorneys Providing Customized Estate Planning to Optimize Results in Passing More Assets Down The Generations:

People with significant wealth face potential estate tax rates in excess of 50% when attempting to pass wealth to their children and potentially 100% when passing assets grandchildren. The attorneys of Maurice Kassimir & Associates, P.C. are adept at transferring wealth with the least possible estate tax consequences.

Some of the tools Maurice Kassimir & Associates, P.C.’s lawyer use to maximize wealth transfer include grantor retained annuity trusts (GRAT’s) and intentionally defective grantor trusts (IDGT’s).

With a GRAT, an individual (the grantor) contributes property to a trust and retains an annuity for a term of years. After the retained term ends, the property in the GRAT passes to the children, free of gift and estate tax. The grantor may leverage the gift by retaining responsibility for reporting and paying income tax on any income generated by the GRAT assets.

An IDGT is an irrevocable trust usually created for the benefit of the grantor’s spouse, and/or children and grandchildren. The trust is structured so that the trust assets will not be included in the grantor’s estate. This is typically accomplished by transferring assets to the IDGT via a gift, loan or sale.

Similar to the GRAT, the IDGT is drafted so that the grantor is still treated as the owner of the trust for income tax purposes. Hence it is “defective” for income tax purposes. Because the grantor is paying the income taxes on any income generated by the trust, the trust assets can grow at an accelerated pace, leaving substantially more assets in the trust to pass on to the grantor’s heirs. The income tax paid by the grantor with other assets is not an additional gift for gift tax purposes.

A IDGT can achieve excellent wealth preservation results. Here is an example of one such Maurice Kassimir & Associates, P.C. success story:

The client owned a very successful family business in which three of his children were involved. Maurice Kassimir & Associates, P.C. arranged a recapitalization of the business so that the voting stock represented one percent of the company’s equity and the non-voting stock represented 99 percent of the equity. The 99 percent interest was then sold to an IDGT set up for the benefit of the children.

The full value of the company was $12 million, but under law the non voting stock could be valued at $8 million because of discounts for the lack of control and minority interest. Because the client received an $8 million note in exchange for the sale of the stock, the value of the business was then capped at $8 million. All income and appreciation of the business after the date of sale is not part of the parent’s estate. Only the $8 million note would potentially be included in the taxable estate. The note would be paid down from profits of the business.

Similarly, had the non-voting stock been gifted to a GRAT in which the grantor retained the right to receive an annuity of approximately $1 million per year for a ten(10) year period, all the non-voting stock would be removed from the estate at zero tax cost. The annuity would be paid from profits of the business.

Up to Date With Changes in the Laws Affecting Estate Planning. . .

Family limited partnerships (FLPs) have been useful for estate planning purposes, but are vulnerable to IRS scrutiny if not constructed for a legitimate business purpose. The attorneys at Maurice Kassimir & Associates, P.C. are always current on the latest legal developments and tax rulings affecting estate-planning devices, and can advise you to navigate through changing conditions.

The attorneys at Maurice Kassimir & Associates, P.C. are adept at figuring out creative ways within the structure of the tax laws to help preserve wealth for your family members. Contact them for sophisticated state of the art planning to preserve your wealth.

New York Succession Planning Attorneys with the Experience and Savvy to do Sophisticated Work in Creative Planning Solutions to Solve Unique Problems:

An important consideration in estate planning is to direct your assets and wealth to the person or persons (or entity or entities) you choose, while minimizing the amount the government takes in estate taxes. Who will be your successor in controlling your wealth? The attorneys at Maurice Kassimir & Associates, P.C. are masters of designing and implementing a variety of techniques and strategies that will make your wishes come true, before and after you pass on.

What can you do if your child is getting married and does not want to ask his or her fiancée for a pre-nuptial agreement?

Consider the following example, where the lawyers at Maurice Kassimir & Associates, P.C. found a solution:

The Maurice Kassimir & Associates, P.C. estate-planning client had worked long and hard to build closely held family businesses. In addition to the businesses, the client owned real estate and substantial liquid assets. The client’s child announced he was getting married. He was encouraged to have his fiancée to sign a prenuptial agreement that would limit her rights to family assets in the event of a divorce. The son declined to seek a “ pre-nup.”

The client wanted to keep family wealth in the bloodlines, and away from the future spouse. The attorneys at Maurice Kassimir & Associates, P.C. set up an indirect prenuptial agreement. This was accomplished by creating trusts in which to place family assets, with a flexible distribution plan for the benefit of the son. A friend of the family was appointed as trustee. In this way, his son can enjoy the benefit of the assets without exposing the trust assets to being lost or dissipated, if the son’s marriage were to end in divorce.

Maurice Kassimir & Associates, P.C.’s philosophy generally is to promote family harmony through equalization of assets to heirs. This reduces the chance of hurt feelings, family squabbles, as well as unwanted and expensive litigation.

There are occasions when a client wishes to transfer wealth upon death, not to his or her children–who may already be well situated– but to charity. The following is an example of an efficient method to transfer wealth to charity, while serving the couple’s needs while they were still alive.

A company executive had 80 percent of his net worth in his company’s publicly traded stock. He was 60 years old, but not yet ready to retire. Maurice Kassimir & Associates, P.C. created a charitable remainder trust for the client. The trust was funded with a portion of the client’s publicly traded stock, which was sold in order to diversify the trust assets. The sale of the stock did not result in immediate income taxation due to the structure of the CRT.

The husband and wife retained an annuity for their joint lives, and benefited from an increase in cash flow and a diversification of assets. The trust provided that at the end of the second to die, the remainder of the assets would be transferred to the couple’s favorite charity without any estate tax consequences. The annuities received were taxed like ordinary income, but the couple also received an income tax deduction at the time the trust was created for the present-day value of the assets designated for charity.

The attorneys at Maurice Kassimir & Associates, P.C. know how to find creative solutions to your particular estate planning problems, and provide the proper follow-through to implement the solutions. Contact them now to see how they can meet your estate planning goals.

New York City Attorneys providing sophisticated estate plans using life insurance:

The attorneys at Maurice Kassimir & Associates, P.C. use insurance not only for traditional purposes, but also as a tool in an estate plan to preserve and direct distribution of assets.

Helping clients maximize insurance benefits. . .

The firm’s lawyers also analyze policies to make sure their clients are getting the maximum benefit they deserve from their insurance policies. For example:

Maurice Kassimir & Associates, P.C. attorneys reviewed a new client’s already existing life-insurance policy, and realized he had bought an extremely high-commission product in which the commission actually exceeded the first-year premium. At the time the policy was purchased, the same insurance company had another available product with a substantially lower commission. Maurice Kassimir & Associates, P.C. negotiated an agreement with the insurance company to infuse an additional $200,000 of cash value into the policy to make up for the disparity.

Another client was paying $170,000 per year in annual life insurance premiums. An insurance analysis discovered this premium was far in excess of the market. A tax free 1035 exchange resulted in a new policy for the same death benefit with guaranteed premiums of less than half of the previous premium ($80,000).

Recommendations regarding life insurance is not a cookie-cutting operation at Maurice Kassimir & Associates, P.C.. It is a matter of finding solutions that best meet the needs of an individual client. For some people, an inexpensive term life insurance policy best fits their needs. Other clients require permanent life insurance.

Using Insurance Trusts to Preserve Assets. . .

Maurice Kassimir & Associates, P.C. knows how to maximize the benefits of life insurance. A life insurance trust can be a helpful tool in this regard.

Life insurance benefits are includable in a taxable estate if the insured is the owner of the policy or retains any material control over the policy. But if the insured gives up his right to control the policy, which is instead owned by a trust, the benefits can flow to his children, without the imposition of any estate tax.

Advising on Private Placement Insurance

A typical permanent life-insurance policy will often generate a return of 5 or 6 percent per year (assuming normal life expectancy). However, private placement variable insurance policies can generate more growth if the insurance funds are invested more aggressively, for example, in mutual funds or hedge funds. The cash value of the insurance policy can grow at a faster rate, and is not subject to annual income tax.

The attorneys at Maurice Kassimir & Associates, P.C. can find creative solutions to your particular insurance and estate planning problems, and implement them accordingly. Contact them to see how they can meet your estate planning goals.

Skilled New York Lawyers Assisting Clients with Charitable Contributions

Few things offer as much fulfillment as giving to a worthy cause. Including donations to charitable organizations in your succession planning can require careful preparation in order to make the most of your contributions.

Maurice Kassimir & Associates, P.C., provide assistance to clients who wish to leave part or all of their wealth to charity:

Donating Outright – A client can make outright donations of assets to a charity during their life or after their death. They can also take advantage of income and estate tax savings.
Designation as a Beneficiary – Naming a charity the beneficiary on a life insurance policy allows clients to include the policy’s value in their estate. More favorable tax advantages may be possible by also naming the charity as a policy owner.
Charitable Lead Trusts – Also called charitable income trusts, this irrevocable trust allows a designated charity to receive interest income, while the remainder returns to the client or their designated beneficiary.
Charitable Remainder Trusts – This trust allows individuals to benefit from the trust by receiving an annuity during their lifetimes, and to transfer trust assets to a charity after the death of the surviving spouse.
Private Foundations – Clients can set up their own charitable foundation that qualifies as a charitable organization under Section 501(c)(3) of the Internal Revenue Code. They receive a full income tax deduction for the fair value of assets contributed to the foundation. Timing gifts during high income tax years offers even greater saving advantages.
Donor Advisor Funds – Contributions can be made to this type of foundation which will administer the donations for a fee. Although clients lose some control over management of the funds, they save the headaches associated with running a foundation.

Charitable Giving

Contributing to a charity can help a worthy cause and serve non-monetary family interests as well. For example:

An elderly client’s spouse died of lung cancer and they wished to donate a portion of their wealth to cancer research. They also wanted to actively engage their children in charitable giving. Maurice Kassimir & Associates, P.C. discovered the client had about $2 million in an IRA account that would have been subject to taxation at approximately 80 percent upon death. We helped the client place the IRA money into a private foundation exempt from income or estate taxes, created for the benefit of the American Cancer Society. The client was able to optimize the impact of their donation and create a vehicle for charitable giving by their children in the fight against cancer.

Whether it involves a straight donation or contributions to a charitable remainder trust, the skilled attorneys at Maurice Kassimir & Associates, P.C., take pride in helping clients make thoughtful, informed wealth transfer decisions.

Contact Maurice Kassimir & Associates, P.C., for advice from a charitable planning lawyer tailored to your estate planning goals.

New York City Lawyers Offering Assistance with Shareholder Agreements

Multiple shareholders in a closely held business have special concerns regarding management, ownership, and the transfer of ownership. Shareholder agreements, also called buy/sell or partnership agreements are a critical business tool that can help avoid or minimize potential conflicts between owners.

When clients contact Maurice Kassimir & Associates, P.C., we can provide assistance drafting shareholder agreements that explicitly define how their interests in a closely held business are addressed while they are alive, and at the event of their death.

Providing legal advice for disputes and ownership transfers due to:

Shareholder deaths
Departure or retirement
Unexpected disability
Employee/owner terminations
Divorce or legal separation
Individual bankruptcy

Shareholder agreements involving such sensitive business planning matters also include tax concerns and family issues that are unique to each closely held business. The experienced attorneys at Maurice Kassimir & Associates, P.C. take pride in helping clients define succession strategies that satisfy the desired outcome for each shareholder. We study the unique fact patterns to ensure that the agreement is drafted properly.

When an owner’s interest in a family business is passed on, the tax consequences can be significant. Estate, gift, and inheritance taxes can be half, or more, of the value of an owner’s portion. Tax issues can also make it difficult for ownership to pass to the new shareholder. Our lawyers recognize the complex issues involved in these transitions and are skilled at helping family business owners address them effectively. In addition, a family’s dynamics can affect business plans and the transition of ownership. Maurice Kassimir & Associates, P.C. provide shareholders with the legal tools to deal with the human factor that can impact a shareholder agreement.

For thorough legal assistance with shareholder agreements designed to help your closely held business continue its success from generation to generation, contact Maurice Kassimir & Associates, P.C., today. We are available to conveniently serve clients in the entire New York Metro area, including Nassau and Suffolk County on Long Island, southern Connecticut, and the northern New Jersey area.

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