Grimaldi & Yeung

Update on Death Certificates

You do not have to wait to start death certificate process – death certificates are still being ordered and processed during this current pandemic

From the New York City Department of Health:

Due to COVID-19, funeral homes are experiencing higher than normal requests for burial arrangements. While families might be waiting longer to bury their loved ones during this pandemic, Funeral Directors and families do not have to wait to begin the death certificate process. 

The City is making clearer to Funeral Directors and the public that death certificates can still be processed and delivered to funeral homes or families even if final arrangements have not been made. Death Certificates are available once the death has been reported and the case has been registered. This means if a decedent is being held in a morgue for longer than usual without a set burial or cremation date, a death certificate can still be ordered. 

Today the City posted clear guidelines for the public, medical professionals, and Funeral Directors. This guidance is available on the Health Department's website. The City is also be providing DOHMH contact points for members of the public, medical community, or Funeral Director community who have questions about the death certificate process or concerns about delays. The public can call the Health Department at 347-396-7962, and funeral directors can contact the Burial Desk at 212-788-4545. Questions can also be answered via DOHMH chat or via email at nycdohvr@health.nyc.gov. Certificates can be ordered online

 

Estate Planning Essentials

An estate plan starts with a will, but that’s just the beginning. A true estate plan includes addressing issues that occur while we are living, as well as when we have passed. Everyone needs to have these plans in place, regardless of how much or little one owns.

Having an estate plan means that you and your family are prepared not just for death, but also for illness and incapacity. Distribution of your property according to your wishes, is just one part of an estate plan. Minimizing state and federal estate taxes is another. A complete estate plan addresses many legal, financial and health issues.

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides us with a list of items every estate plan should include:

• A will and/or a trust;
• Powers of attorney;
• Beneficiary designations;
• A letter of intent;
• Guardianship designations;
• Health Directives.

In addition to these documents and designations, a thorough estate plan also should consider the purchase of insurance, like long-term care insurance, income producing investments, and life insurance to pass money to beneficiaries without probate.

Let's look at each item on this checklist to make sure you haven't left any decisions to chance.

Wills and Trusts. A will or trust should be one of the primary parts of your estate plan, even if you don't have a lot of assets. Wills make certain that your assets are distributed according to your instructions.  Your family will appreciate your clear direction on how your personal effects should be shared. Trusts can also help limit estate taxes or legal challenges and costly and slow court procedures.

Power Of Attorney and Health Directives. A durable power of attorney (POA) allows an agent or a person you assign to act on your behalf, if you’re unable to do so yourself during your life when it is most important. A Health Care Proxy (HCP) designates another person to make critical healthcare decisions on your behalf in the event of incapacity.

Beneficiary Designations. Some of your assets will pass to your heirs without being mentioned in your will, such as 401(k) plan assets, annuities, IRAs, etc. Therefore, maintain a beneficiary and a contingent beneficiary on these types of accounts. Likewise, insurance plans should have a beneficiary and a contingent beneficiary, because they also pass outside of a will. Your beneficiaries should be over 21 and mentally competent.  These need to be updated regularly as your life changes.

Letter of Intent. This is simply a document for your executor or a beneficiary to define what you want done with a particular asset after your death or incapacitation. Some letters of intent also contain funeral details and other special requests. A letter of intent isn’t legally binding. It helps inform a probate judge of your intentions and may help in the distribution of your assets, if the will is declared invalid for some reason.  These can be extremely helpful for blended families or when close friends or non-family members are selected as your executor or trustee.

Guardians/Special Needs Provisions. If you have minor children or are considering having kids, naming a guardian is very important. Be sure the person(s) shares your views, is financially sound and willing to raise your children. You should also name a backup or contingent guardian.  Most people don’t understand that if you don’t name a guardian in your will, the decision is made by the court. It is possible that the court choses someone you would never have wanted to raise your children.

There may also be a need to provide for other dependent or disabled loved ones in your Estate Planning documents, such as a disabled adult child.  Your Estate Planning documents can includes special provisions to set up a Special Needs Trust or Discretionary Trust for the benefit of the person who may need help in managing their inheritance.  This can also include individuals who have other financial or spendthrift issues.  Your documents can be customized to include those protective trusts to be created after you pass, as part of their inheritance.  

Meet with one of our estate planning attorneys and prepare a complete estate plan to protect your loved ones.

Reference: Investopedia (July 16, 2019) “6 Estate Planning Must-Haves”

Do You Have a Crystal Ball…Will the New Estate Tax Levels Really End in 2026?

The IRS has said that even if taxpayers don’t die until after the tax overhaul expires in 2026, they may still benefit from the higher thresholds for U.S. estate and gift taxes. How will that work?

The estate and gift tax exemptions skyrocketed in 2017, as the result of changes to the tax law. The increases mean that in 2019, individuals may pass on $11.4 million from their combined estate at death and the gifts they gave before they passed. These estate tax exemptions will expire, unless laws change. However, the IRS announced regulations that said individuals who make large gifts while the exemption is higher and die after it goes back down, won’t see the estate tax benefit eroded.

“As a result, individuals planning to make large gifts between 2018 and 2025 can do so, without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025,” the agency said in a press release.

Yahoo Finance’s recent article, “IRS Says Millionaires Can Keep Estate Tax Benefits After 2025,” says that the exemption increase was a big priority for Republicans in the 2017 tax overhaul.

This exemption decreased the number of individuals who’d be subject to the 40% estate tax by about two-thirds.

The exemption was $5.5 million prior to the law change.

If the law is reversed with a new administration and a more balanced tax plan, changes could sweep the House, Senate and White House after the 2020 national elections.

Many current presidential candidates propose to decrease the estate tax exemption so a greater number of wealthy families will be liable for a greater estate tax

The current rules and the potential for tax savings make estate and tax planning important and advantageous.  Our frim invites you to come in and start now!

Reference: Yahoo Finance (November 22, 2019) “IRS Says Millionaires Can Keep Estate Tax Benefits After 2025”

Using Estate Planning to Prepare for Your Future

Planning a vacation is a lot more fun than planning for death, disability or needing long-term care. However, putting off estate planning means missing an opportunity to gather our thoughts on what kind of a legacy we want to leave behind, how we want to be cared for if we can’t speak for ourselves and what kind of end-of-life care we’d want.

It doesn’t matter how much or how little you own, if you have a family, you need an estate plan. It’s a way to document your wishes for what you want to happen, when you die. Some of the big questions that estate planning addresses are outlined in an article from Montrose Press titled “Estate plans can help you answer questions about the future.”

What will happen to my children? As part of your estate planning, you should name a guardian to take care of your children, if you pass away. You can also name a conservator–sometimes called a “guardian of the estate”–to manage the assets that your minor children inherit.

Will there be a battle over my assets? If you fail to put a solid estate plan in place, your assets could be subject to the time-consuming, expensive and public probate process. During probate, your relatives and creditors can get access to your records. They may even challenge your will. However, with proper planning, you can maintain your privacy.

Who will control my finances and my living situation, if I’m incapacitated? You can sign a durable power of attorney. This permits you to name someone to manage your financial affairs, if you’re incapacitated. A medical power of attorney lets the person you choose handle health care decisions for you, if you’re not able to do so yourself.

Will my family feel cheated if I leave significant assets to charities? As part of your estate plan, you have options. You could establish a charitable lead trust. This will provide financial support to your chosen charities for a set period. The remaining assets will then go to your family members. On the other hand, a charitable remainder trust will provide a stream of income for family members for the term of the trust. The remaining assets will then be transferred to one or more charitable organizations.

An experienced estate planning attorney will be able to guide you through these and other questions and create an estate plan that will allow your wishes to be realized. Once that plan is in place, you’ll be able to focus on the future, knowing that you’ve taken care of the ones you love.

Reference: Montrose Press (July 7, 2019) “Estate plans can help you answer questions about the future”

How Does a Spendthrift Trust Work?

There are many different kinds of trusts, including ones designed to safeguard an inheritance. The spendthrift trust is a good tool in the estate planning toolbox for individuals who, for whatever reason, can’t manage money.

In planning for your family upon your passing, you may recognize that despite all of your efforts, some family members simply need help in managing family money, says Newsday’s recent article, “What to consider when creating a 'spendthrift' trust.”

This can happen if a family member has an addiction or gambling problem, a spouse who may not be looking out for their best interests, a difficult divorce, or they are just cannot handle their money wisely, this type of trust may be a solution.

A spendthrift trust—also called an “asset protection trust”—gives an independent trustee the power to make decisions as on how to spend the funds in the trust for the benefit of the distributes.

The beneficiary of this type of trust can get trust benefits as regular payments, like an annuity, or may be set up to allow the trust beneficiaries to ask for permission from the trustee to access funds at certain times.

A spendthrift trust is a kind of property control trust that restricts the beneficiary’s access to trust principal (the money) and income by giving the trustee the rules for distribution and discretion about extra expenditures.

This restriction protects trust property from a beneficiary who might waste the money, or allow these funds to be subject to beneficiary’s creditors.

In planning, consider these other issues about asset protection trusts:

• Understand the tax ramifications of a spendthrift trust who will be liable for the income tax.
• If the trust is the beneficiary of retirement accounts, the trust must be designed to have the RMDs (required minimum distributions), at a minimum, flow through the trust to the beneficiary.
• If the trust accumulates the income, it could be taxable. In that case, the trust would have to pay the tax at a trust tax rate. That is substantially higher than an individual rate.

Consult with your attorney and tax accountants in these issues.

It's critical that you choose your trustee carefully. They must be able to work well with the beneficiary and carefully manage their expectations and encourage their cooperation. You may think about using a professional corporate trustee to achieve independence especially when the beneficiary has legitimate needs and the family trustee might refuse to give them the money, based on a history of bad decisions. This eliminates the risk of judgments.

Your estate planning attorney can help you work through the trustee selection process, as well as creating the trust.

Reference: Newsday (June 23, 2019) “What to consider when creating a 'spendthrift' trust”

Why Your Will Needs to Change Again

Some people change their wills every time there’s a small family skirmish. However, most sign their wills and shove them in a drawer and try not to think about death. This is a mistake, for them and their families.

Even if your own life never changes, there are changes in the law and changes in the lives of the people around you that merit a review of your will and your estate plan every three or four years. If there are major changes in your family, like death, divorce, birth or marriage, you definitely need a review. However, if you don’t remember who you named as executor or who you want to make health care decisions on your behalf in a while, you need an estate plan review.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago, may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

The first task is locating the will, while the second is making an appointment to meet with your estate planning attorney. There may be opportunities for tax savings that didn’t exist when the will was first created, or strategies that are no longer necessary.  The recent tax law changes have radically impacted estate plans.  The elaborate trust planning in older wills may no longer be needed and can unnecessary.  With the estate tax exemption rising to over $5 million in New York State, many people no longer need to design their planning to avoid taxes and can concentrate on other important family or legacy issues.

Contact our firm today to update your estate plan and redraft your will and trust.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

Why Should I Continue to Have Life Insurance After My Divorce?

If you have children and you purchased a life insurance policy to protect them, then you still need a life insurance policy. But you may want to make a few changes.

Life insurance needs to be addressed during the process of a divorce. If there are children, the beneficiary may continue to be the ex-spouse, if they are going to be the person raising the children if the key breadwinner dies. But there are alternatives.

Investopedia’s article, “How Life Insurance Works in a Divorce,” explains that addressing life insurance is a critical issue in the divorce process, especially for divorcing couples with children. Maintaining life insurance protects the financial interests of both parties and their dependent children. This involves making the necessary beneficiary changes, accounting for the cash value in whole or universal life policies, protecting child support and alimony income, and—most importantly—making certain that any children involved are financially protected.

Most married couples with life insurance list their spouse as the primary beneficiary. Life insurance protects a family from financial devastation, if you die and your income is lost. For a married person, naming your spouse as your beneficiary makes certain that he or she can continue to pay the mortgage, put food on the table and possibly bring up the children without your income. Life insurance is especially critical, if you provide the majority of the income.

In a divorce, especially an acrimonious one, odds are good that you’ll no longer want your ex-spouse profiting from your death. If there are no children are involved, most life insurance policies let you change the beneficiary at any time.

Some life insurance policies, such as many whole life and universal life policies, accumulate cash value over time. Each month when you make your premium payment, some of the money is deposited into a fund that grows with interest. This is the policy's cash value, and it’s your money. Any time while the policy is active, you can forgo the death benefit and take the cash value. This is called “cashing out” your life insurance policy.

Since the cash value from a life insurance policy is part of your net worth, you should list the policy, including its cash value, as a marital asset to be divided. Frequently, when marital assets are divided evenly, half the cash value from the policy goes to each spouse.

Protecting child support or alimony income is really important for the spouse who takes primary custody of the children after the divorce. These child support funds are for feeding and clothing the children and saving for college. If the noncustodial parent isn’t around anymore, this income goes away and it could put the custodial parent in a bind. If you have custody of the children, the best way to protect yourself from this situation, is to keep a life insurance policy on your ex-spouse with a benefit amount high enough to replace your child support or alimony income at least until the last child is 18. Being the custodial parent, if your ex is irresponsible or untrustworthy, you may just purchase the policy and pay the premium yourself, since coverage stops if payments lapse.

A life insurance policy becomes more important, if an ex-spouse is no longer involved with the children and if the custodial parent is the only source of income for the family. There should be a guardian named in your estate plan and another person named to handle finances on your children’s behalf. Estate planning and life insurance are both important to protect children, when there is a divorce.

Reference: Investopedia (June 25, 2019) “How Life Insurance Works in a Divorce”

Welcoming a New Member of the Family Means You Need an Estate Plan

Welcome to parenthood! Your baby is dependent upon you for everything. That includes naming a guardian to raise her, if something unexpected should happen to you.

The birth of a baby is a wonderful time in a family’s life. One task that isn’t usually at the forefront of new parents’ minds is estate planning, but it should be a priority. Young and healthy people with dependent children need to ensure that their offspring are protected, and that is what an estate plan does.

Motley Fool’s recent article, “If You're a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they've protected their child, no matter what the future holds.

1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will, is to name a guardian for your children. If you designate a guardian, you will select the person you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you'll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death.
4. Consider Creating a Trust. If you die prior to your children turning 18, they can't directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. This trust could be included in drafting your Last Will and Testament or it could be a free standing Trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on when your children could receive a direct transfer of assets. For example, delaying direct ownership of their inheritance until your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children, after they've passed away.

Take the time now to speak with an experienced estate planning attorney about your new family and your estate plan. You’ll feel better knowing that you have taken yet another step to protect yourself and your children.

Reference: Motley Fool (September 28, 2019) “If You're a New Parent, Take These 4 Estate Planning Steps”

Preparing for a Baby Includes an Estate Plan

Parents-to-be are busy with juggling doctor’s appointments, preparing a nursery, picking out names and getting ready for their lives to change. However, there’s more.

When expecting a new addition to the family, parents need to address the more serious aspects of this milestone. That means taking care of legal, financial and insurance matters to protect the family.

U.S. News & World Report’s recent article, “Financial Steps to Take When You're Pregnant” reminds us that pregnancy is a terrific time to review your financial life. It's a great time to assess your budget, emergency savings, estate planning documents and insurance needs to see if anything needs to be refreshed.

Here are a few things to do to prepare for a new baby:

Employee Benefits. Take a look at your employee benefits or have a conversation with HR to determine how much time you can take off and whether you'll be paid your salary, while on parental leave. This is important because many families are faced with higher living costs by the presence of a new baby, as well as taking parental leave that may cut their take-home pay. New parents may have to use the Family and Medical Leave Act (FMLA), which offers eligible employees 12 weeks of unpaid leave; or tap short-term disability insurance, which typically only replaces a portion of your salary. The amount you receive in short-term disability will also be impacted by whether you pay premiums with pretax or post-tax dollars. If you pay with pretax, your benefit will be subject to taxes, which will decrease the overall amount received.

While reviewing these policies, look at your health insurance and see whether prenatal visits and pediatric care are covered. You could be liable for health insurance premiums if you're taking leave from work. Remember that you'll need to add your baby to your medical insurance within 30 days of the birth.

Budget. Calculate new baby expenses, such as childcare.

Life Insurance. Determine if your current life insurance will meet your needs. If you need more, look at term life insurance. It’s usually affordable and expires after a set term, typically anywhere from 10 to 30 years. This policy payout would help a surviving parent or a guardian care for your child.

Estate Planning. Consider who would care for your child, if both parents were to die before he or she turns 18. Talk to family or close friends about who you'd like as guardian of the child. Talk to an estate planning attorney to update (or create) a will and guardianship choices. In addition, ask about formulating a plan for how inheritance, insurance, and other assets will be handled and disbursed, if you die while the child is a minor. A testamentary trust is a way to direct a future inheritance. You can designate your child as the beneficiary and a relative or close friend as the trustee. The trustee will help decide how the money is spent. This trust is usually included in the will and activates after the death of the person who created it.

Beneficiary Designations. Update any beneficiary designations on your retirement and insurance accounts.

529 College Savings Account. It’s hard to imagine how fast a newborn turns into a child packing for college, but it happens in the blink of an eye. Once the child is born, open and begin funding a 529 college savings account, and encourage grandparents to make contributions as well.

Reference: U.S. News & World Report (August 29, 2019) “Financial Steps to Take When You're Pregnant”

What You Need to Know About Inheritances and Taxes

Don’t spend it all at once: no matter how big or small your inheritance is, learn about the tax consequences, before you begin enjoying or investing any funds.

Depending on what kind of asset you inherit, you may have no taxes, a whopping tax bill, or something in-between. If you inherit a retirement account like an IRA or a 401(k), you’ll want to be especially careful, says U.S. News & World Report in the article, “Tax-Savvy Ways to Manage an Inheritance.” Making a mistake with these accounts could consume a huge amount of your inheritance.

IRAs or 401(k)s. If a deceased relative, spouse, or friend passes along an IRA or employer retirement savings account, you should understand how it will be taxed. The options for the account are based on your relationship to the deceased person. A spouse may be able to roll the funds into their own account. That’s an option that other beneficiaries don't have. A spouse can also open an Inherited or Beneficiary IRA account. This account has both partners' names on it. This is useful for a younger spouse who needs ready access to funds, avoid with the 10% early withdrawal penalty.

Other heirs of the benefactor, such as a child, nephew, niece, or grandchild, do not have the option to deposit the money in their own retirement account. However, they can hold it in seperate Inherited IRA account. The rate at which spouses and other heirs decide to withdraw the funds can have significant tax implications. If they decide to take out all the money in a lump sum, they may experience a tax bill. The substantual lump sum would be treated as taxable income in the year received. Beneficiaries could pay roughly 40% in taxes if they live in a state that also charges income tax. This large distribution also could push them into a higher tax bracket, causing them to pay more taxes on their other income.

The better move for heirs is to spread out the distributions over their lifetime. This is often called a "stretch IRA," because it allows investors to stretch out the time during which earnings can grow.

The specific rules regarding how beneficiaries manage Inherited IRAs are determined by whether the deceased person was older than 70½ at the time of death. Generally, heirs who want to keep their tax bill as low possible, must take required minimum distributions (RMDs), based on their life expectancy, within about a year of inheriting the account. They won't see the 10% early withdrawal penalty, but they'll be taxed on the amount they take out. However, the RMDs will generally be smaller than a lump sum and less apt to push them into a higher tax bracket. Recipients who want to take minimum distributions, must take the first one before the required date, or they may be forced to liquidate the account within five years.

Inherited Roth IRAs have already been taxed and don’t have the same tax burden. However, that’s not a good reason to immediately withdraw a lump sum. As long as you take RMDs, IRA funds can stay in the account and grow tax-free.

Stocks or Mutual Funds. An inheritance may also consist of investments outside of a retirement account, like individual stocks or mutual funds. Remember the "step-up basis," which is important to reduce taxes on the sale of these investments. When the owner dies, regardless what they paid for that stock or mutual fund, the cost basis “steps up” to whatever the price of that stock or fund was at the date of death. For example, if a grandfather bought IBM stock for $5 per share, and when he dies, it's worth $100. The heir's basis is the stock’s value when he died, rather than the price at which he bought the stock years earlier. It’s a critical difference when it comes to how heirs calculate and pay capital gains taxes, upon the sale of an asset.

Remember that these assets may have to go through probate. Assets like mutual funds and houses that don’t have a beneficiary designated, may go through probate.

Real Estate. Similar to stocks and mutual funds, an inherited house enjoys a step-up basis. For tax purposes, the cost basis is what the market value was when the benefactor died. Try to have the home appraised immediately after the benefactor's death, to gain an understanding of what the basis is now. If it's not being passed along to a spouse, an inherited house will usually need to go through probate.

Life Insurance. Life insurance is tax-free, but you still need to do good financial planning when deciding how to invest the life insurance payout.

Cold, Hard Cash. While a cash inheritance is not taxable from a federal tax standpoint, there may be state tax implications, depending upon the state where you reside.

Whatever the kind of asset you inherit, it would be wise to meet with our attorney to review the assets and determine what kind of a tax situation has been created by the inheritance, and start working on your estate plan. You may now have assets that you need to protect, and that’s best done through an estate plan.

Reference: U.S. News & World Report (October 18, 2018) “Tax-Savvy Ways to Manage an Inheritance”