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Adding to the tragedy of Prince's death, he died without a will

4/25/2016

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Prince was a welcomed and permanent musical fixture on the landscape of my adolescence, and I was as shocked as everyone else when he passed away on April 21. In the immediate aftermath of his death, it was reported by Prince’s longtime attorney that Prince likely died without a will. Unfortunately, this initial report has proved true, and the news, to my ears, is almost as shocking, and almost as sad, as Prince's death itself. It is estimated that Prince was worth about $300 million at the time of his death, and this amount is only likely to grow as sales of his music, etc., soar in the coming months and years. He also had many business interests, wide-ranging intellectual property interests, and other complexities that will need to be addressed.
 
Adding to this is the fact that, to my understanding, Prince had no legal spouse and no children at the time he died (although I've read reports, unsubstantiated at the time I write this, that Prince has a "love child" from many years ago, and if this proves true, it will probably throw the entire estate into even more disarray). Assuming there is no spouse or children, this means that Prince’s estate will go, in its entirety, to Prince’s closest living blood relations, which appear to be one full-blood sister and a number of half-blood siblings (under Minnesota law, as well as New York law and the laws of most if not all other states, half siblings are treated the same for inheritance purposes as full-blood siblings).

Who knows who Prince would have wanted to administer or benefit from his estate, or how he would have wanted it to happen, but since he died without a will or other estate planning instrument like a revocable living trust, the state of Minnesota essentially wrote Prince's will for him in the form of its intestacy laws, which rigidly dictate who, and in what order, surviving family or others can administer a person's estate and benefit from it. All states have their own intestacy laws.

What struck me most about the first article I read about Prince's estate was a comment by Prince’s long-time attorney that Prince thought he would live forever, and could not face the fact of his own mortality, which is likely why he never set up a will or trust. This really hit home for me, because while I understand that basic--and totally understandable--human nature prevents many of us from facing the inevitable, I always try to impress upon people that setting up a will is more about protecting your assets and your loved ones than it is about “planning your own death.” I think that’s the greatest takeaway for me (and hopefully for you) from this sad tale. Perhaps no one and no argument could have persuaded Prince to set up estate planning documents, but had someone tried, and succeeded, in convincing him that even “basic” planning could protect his assets and his loved ones far better doing nothing could, I’m sure those now left behind to tend to the mess would have been spared a great deal of expense, time, and heartache.
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MAJOR changes to New York's estate tax law!

4/8/2014

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As of April 1, 2014, New York has doubled its estate tax exemption amount from $1 million to just over $2 million. Better yet, the exemption amount will continue to increase over the next several years until it becomes linked to whatever the federal estate tax exemption amount is (currently about $5.25 million). This now puts the estates of most New Yorkers beyond the reach of any estate tax. (Perhaps one day New Jersey will catch up. Currently, any estate valued over $675,000 is subject to estate tax in New Jersey.)

However, there is a HUGE caveat to these changes: If the estate is valued at more than 5% over the exemption amount (currently, 5% over approximately $2 million), then the ENTIRE estate becomes subject to New York's approximately 16% estate tax rate. Under the old law (and under federal law) only the portion of the estate exceeding the exemption amount was taxed (at the same 16% rate).

Imagine if you die in New York with an estate that is just one dollar over 5% more than the exemption amount. Then your estate pays 16% of the whole estate rather than zero in estate taxes.

Additionally, the new changes don't include a portability provision like federal estate tax law does. Portability essentially means that if one spouse of a legally married couple dies and doesn't use his full exemption, the surviving spouse can use it when he or she dies, effectively doubling the exemption amount a married couple can enjoy. But again, this is only for federal purposes, not New York state purposes. The good news is that an experienced estate planning attorney can include trust provisions in the wills of a married couple that effectively achieve the same thing, even for New York estate tax purposes.

So, despite this being a great thing for the vast majority of New Yorkers who are not "super rich"--even if some of those people have quite sizable estates--for a certain part of the population perils still exist. 


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They Work Hard for Their Money--Michael Jackson's Executors 4 years later (Part I)

10/1/2013

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I recently read an article at Forbes.com that talked about ongoing legal challenges still facing the Michael Jackson estate more than 4 years after his death in 2009. Being an executor is often rightfully called a thankless task, and the process is usually expensive, drawn out, and frustrating, not only for the executor, but for the beneficiaries of the estate. In most if not all states an executor earns a commission that is based on the value of the probate estate (i.e., assets that are not jointly owned or which do not pass via beneficiary designation, such as life insurance policies and 401(k) accounts), but sometimes the amount of work put into settling the estate far surpasses the amount of the commission.

In the case of Michael Jackson's estate, the executors certainly have their work cut out for them because the estate faces a whole host of legal problems:

1) The wrongful death case against AEG. Although the executors have mainly stayed out of the proceedings in which Jackson's heirs are seeking $40 billion (!) for the wrongful death of the singer, there was some drama when an estate consultant testified on behalf of AEG and against Jackson's heirs. The consultant claimed the executors gave him permission to testify, but the executors deny it. Either way, the testimony may cause headaches for the executors because the IRS may use the consultant's lavish estimates of Jackson's earning capacity against the estate in estate headache #2:

2) Estate tax battle with the IRS. Although Jackson allegedly died in debt, his executors have earned more than $600 million for the estate in the four years since the singer's death. While the executors claim that Jackson was only worth $7 million on the day he died, the IRS claims the total is as high as $1.5 billion. The IRS claims that the estate owes $702 million in estate taxes, and the executors have filed suit to challenge the IRS's claims. While the article believes the IRS might be overestimating the estate's value, it also highlights how the executors were probably too aggressive in its estate tax return, and dramatically undervalued the estate. The dispute will eventually be resolved, but at great expense to the estate, which means less money getting into the hands of the beneficiaries.

3) Custody battle for Jackson's children. A woman named Christine Leroux is claiming she was a longtime friend of Jackson's and that her eggs were used for all 3 of Jackson's children. She plans to seek custody of the children, allegedly because she fears for their welfare. Now, this claim may not go very far, unless she has some compelling evidence. Plus, just because you donate an egg doesn't make a "mother" in the eyes of the law. But yet again the executors are going to have to fight the battle in court, at the estate's expense.

4) Family conflict about the work of the executors. Some of Jackson's siblings think the will was fake and that the executors are not doing a good job. They have complained not only about the executors, but about their attorney, and blame them for the IRS dispute among other things. However, the only family member with legal standing to challenge the executors is Jackson's mother, Katherine, and she has not done so, despite alleged pressure by at least some of her children to do so. The article suggests the reason may be because in fact the executors have done a great job by bringing more than $600 million into the estate since Jackson's death, which is more than any living artist made in the same four-year period.

5) Yet another sex abuse claim.  One of Jackson's defenders during his 2005 criminal trial for child molestation now claims he himself was a victim--a "fact" only brought to light in recent years through therapy. A quiet settlement seems unlikely, so here we'll probably see yet another court battle, paid for by the estate.

Obviously, most estates don't face problems of this magnitude. However, settling an estate is rarely without one roadblock or another. A good probate/estate administration attorney can make the process less daunting for the executor and the outcome more lucrative to the beneficiaries, but a good estate planning attorney can help before obstacles arise by developing an estate plan that avoids some or all potential pitfalls in the first place. For example, many of the legal problems currently facing Jackson's executors could have been avoided if Jackson's estate planning attorney had set up and properly funded a revocable living trust, which when done right serves the same purpose as a will, but without having to go through the public probate process (which is when most legal challenges to an estate arise).

All that said, there is yet another twist to the story of Jackson's executors--one that I am sure will spark some heated comments from my readers. Stay tuned for my next post--to be published on 10/8/13.

Until then, be well.
--Mike
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Settling the Estate of a Loved One

11/12/2012

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 “What do I do next?”
“How am I going to take care of everything that needs taking care of?”
“Who’s going to help me do what needs to be done?”

These are questions you might ask a funeral director when someone close to you dies, and when your immediate task is to bring loved ones together to say goodbye. Whatever the circumstances, your funeral director will hopefully work tirelessly to make the process as painless for the survivors as possible, and to put together a fitting memorial to the person who passed.

But what about after the funeral?

One of the most important tasks that needs to be done upon a person’s passing is settling their estate. And when that time comes you might find yourself asking the same questions: What do I do next? How am I going to do everything that needs to be done? And who’s going to help me do it?

When settling an estate, the person authorized by the court to do so—whether that person be called an executor or an administrator—must navigate a complex web of state and federal laws, make vital technical decisions, and try to maintain good relations among all the parties involved. A skilled, experienced attorney with an empathetic manner and an efficient, economical process can make a huge difference between whether the estate settlement process is painful or relatively painless, expensive or affordable.

What is probate and estate administration?

Simply put, probate involves the handling of an estate when someone passes away with a will. Estate administration is similar to probate, except it applies when a person dies without a will. The probate and estate administration processes are handled through a county’s Surrogate’s Court, and are designed to ensure that creditors are paid and that probate assets are distributed to the beneficiaries named in the will or, in the absence of a will, to the descendants of the deceased individual as governed by state intestacy law.

How does the process work?

Probate begins with a petition to open the estate and name a personal representative (such as an executor when there is a will or an administrator when there is not), who is responsible for the disposition of the deceased person’s property. The court requires a great deal of specific and detailed information in order for the petition to be granted. Sometimes compiling the required information is quick and simple. Sometimes it takes weeks or longer.

Once the petition is granted and a personal representative is named, the deceased person's assets are marshaled, debts are paid, and whatever is left over is distributed according to the will or state intestacy laws. Then the estate is closed.

Although that all might sound easy enough, in actuality settling an estate is a complex,  time-consuming process. And when there are complications, such as questions about or difficulty proving the family tree, or if someone wishes to challenge the validity of the will, the process becomes even lengthier.

Even in straightforward situations there are still numerous steps that must be taken, rules that must be followed, requirements that must be met, and deadlines that must be strictly adhered to. A personal representative who fails to do something correctly, and which results in any harm coming to estate assets, may be held personally liable for any damage to the estate. That is why while an attorney is not technically required to help settle an estate, practically speaking only a probate attorney can help ensure everything is done correctly and on time by advising the personal representative throughout the entire process.

What does a personal representative do?

Once empowered by the court to act, the personal representative must:
  • notify all the people named as beneficiaries in the will, as well as all family members who have legal standing to inherit, whether they are named in the will or not 
  • locate and protect the deceased person’s property
  • prepare an inventory of all estate assets
  • follow the provisions of the will or State intestacy law
  • file estate tax and final income tax returns
  • pay all estate debts from estate assets
  • comply with all state and federal requirements
  • distribute the property to the heirs after all proper procedures have been followed
  • prepare a final accounting.

 How can I get help doing all this?

 Acting as a personal representative to the estate of a loved one is not only complicated, but often mentally draining as well. That is why personal representatives are empowered to hire an attorney of their choosing—whether or not the attorney prepared the will, in cases where there is a will—to help them settle the estate. A personal representative can also hire other professionals as needed, such as accountants and real estate brokers. Estate assets are used to cover all such expenses.

I have experience with estates of all sizes and levels of complexity, and my continual investment in efficiency helps to ensure the smoothest and most economical process possible. The process is also designed to meet each personal representative’s needs. For example, I can play an active role—essentially performing some or even many of a personal representative’s tasks—or a more passive role, handling only strictly legal tasks myself, and then advising the personal representative of what other tasks need to be done and by when.

If you have been designated as a personal representative, or need help in getting an estate administrator appointed by the Surrogate's Court, I am here to shepherd you through the process.

Additionally, if you have any questions or concerns about the probate or estate administration process, you are invited to contact me anytime, no obligation or charge, to discuss whatever you wish to discuss. I can be reached at:

Michael Bond, Esq.
Law Office of Michael Bond
515 Madison Avenue, 40th Floor
New York, NY 10022
T: 646-535-1529  |  F: 646-390-6763
mike@michaelbondlaw.com  | www.michaelbondlaw.com

 
DISCLAIMER: THIS IS ATTORNEY ADVERTISING. The information provided here is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Review of this document does not in any way constitute legal representation. Contacting Michael Bond or the Law Office of Michael Bond by telephone, fax, e-mail, or any other method does not constitute legal representation, nor is any information you provide protected by attorney-client privilege until otherwise advised.


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What does marriage equality in New York mean for you?

6/25/2011

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If you’re anything like me, then last night, on the eve of Pride Weekend, you were jubilant when the New York legislature passed a bill legalizing same-sex marriage in the state. Indisputably, it is a huge step forward, and one that will hopefully improve the lives of thousands of New Yorkers and also set the stage for victories elsewhere in the country.

My law practice has a special commitment to protecting same-sex couples and trying to equalize their relationships in the eyes of the law to the extent possible in the absence of marriage equality, so naturally I have given a lot of thought recently to what this legal sea change will mean for my New York clients and all same-sex couples in the state.

For same-sex couples who live in New York and who choose to get married, they will be treated as equals to their heterosexual counterparts under the laws of New York. However, thanks to the federal Defense of Marriage Act (DOMA), these same marriages will not be recognized in the vast majority of states. Until DOMA is repealed or otherwise removed from the books, married same-sex New Yorkers will be treated as unmarried in most other states, and will not be afforded the benefits and rights that heterosexual married New Yorkers will receive in those same states. Therefore, it remains very important that any same-sex married New Yorkers who leave New York, whether permanently or just for a weekend getaway, have certain legal documents that will hold up and be honored in other states.

For example, it has always been important for a committed couple, whether heterosexual or homosexual, married or unmarried, to have health care proxies and powers of attorney, which authorize one partner to make health care decisions and conduct business transactions for the other partner should the first partner become unable to. In the absence of these documents, a court needs decide who is able to make such decisions for the incapacitated person. For married couples, a court will often (but by no means always) decide that the spouse with capacity has the power to make decisions for the incapacitated spouse. For married (or unmarried) same-sex couples, however, courts in most states won’t deem the relationship as being on par with the relationship of a heterosexual married couple. Nevertheless, with a health care proxy and power of attorney, whoever the incapacitated person names in those documents (even a same-sex partner) will automatically have the power to make those decisions, regardless of how the law, or a particular judge, views that couple’s relationship.

Another thing that unfortunately won’t change for same-sex married New Yorkers is their treatment under federal tax law, in particular with respect to the estate and gift taxes. My earlier post highlighted some positive changes that marriage equality will bring to same-sex couples when it comes to state taxes, but under federal law same-sex married New Yorkers will still be treated as single. This can have terrible consequences for same-sex couples who fail to plan accordingly.

In short, marriage equality in New York is a huge legal victory, and arguably an even greater moral victory. Within New York’s borders, same-sex married people will now enjoy the hundreds of benefits that have been granted to heterosexual married couples for ages. But outside the state’s borders same-sex married New Yorkers still face inequality and potential heartache without taking additional steps to protect themselves.

As I write this I can’t help but feel like I’m being a bit of a gloomy Gus on a day that calls for celebration. And I don’t mean to. I’m very happy. Ten years ago I would have scoffed at the notion that same-sex couples would be allowed to legally marry in New York, or anywhere else for that matter. Now, same-sex couples can marry in several states, including the one I call home. But that doesn’t change the reality that there is still a ways to go before same-sex couples enjoy truly equal status in the eyes of the law, even within the state of New York.

So let’s rejoice at this exciting victory--but never lose sight of the work still to be done, or waver in our commitment to making sure same-sex couples everywhere will one day feel as happy as we New Yorkers feel today. 

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Marriage equality has major tax consequences for same-sex couples in NY

6/20/2011

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The New York City Bar Association's Estate and Gift Taxation Committee just issued a short but powerful memorandum highlighting the inequities same-sex couples face when it comes to taxes in the absence of marriage equality. The report has two main points:

First, when one half of a heterosexual married couple dies, the deceased spouse's assets transfer tax-free to the surviving spouse, and no tax is due (if at all) until the death of the second spouse. However, no such benefit exists for same-sex couples--not even for same-sex couples legally married in other states. Many people incorrectly believe that NY recognizes same-sex marriages performed in other states. Granted, in many ways NY does recognize such marriages, but thanks to DOMA it does not recognize married same-sex couples when it comes to estate taxes.

Second, same-sex couples are treated unfairly when it comes to the generation skipping tax (GST). In a nutshell, the GST is levied against assets that pass from one generation to a generation two or more levels below the original generation (i.e., gifts from grandparents to grandchildren). The general purpose (put very succinctly to avoid your eyes from glazing over) is to avoid assets transferring tax-free. The main point here is that heterosexual married spouses can transfer assets tax-free between them, regardless of their age difference (i.e., even if they're more than a generation apart in age). However, for same-sex couples, due to the GST, if the age difference between the same-sex partners is 37.5 years or more, the GST will be levied against the surviving partner. This scenario might not apply to the majority of couples, but it is an unacceptable inequality nonetheless.

Tax equality might not be a glamorous reason for why marriage equality is necessary, but it's a very important one.  Without marriage equality there are two classes of (otherwise nearly identical) tax payers New York. If marriage equality doesn't happen today (the last day of the legislative session) then the battle must go on when the legislature reconvenes.
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    These posts have been provided by the Law Office of Michael Bond for general educational purposes and do not constitute legal advice or create an attorney-client relationship. For more information about the contents of these posts, or if you have any other estate planning questions, please contact Michael Bond at
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DISCLAIMER: THIS IS ATTORNEY ADVERTISING. The information you obtain at this website is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Review of this website does not in any way constitute legal representation. Contacting Michael Bond or the Law Office of Michael Bond by telephone, fax, e-mail, or any other method does not constitute legal representation, nor is any information you provide protected by attorney-client privilege until otherwise advised. Michael Bond, Esq., is licensed to practice in the states of New York and New Jersey, and this website is directed only to individuals or entities who may need legal information or representation in those two states.