Services and Terms to Know
Business Succession Planning
Business succession planning relates primarily to closely held businesses, such as S Corporations, Limited Liability Companies, or Family Limited Partnerships. Every business owner needs to make sure that their estate plan takes the business operations into consideration. Where some but not all of the next generation of family members are involved in the business and contributing to its success, it is especially important to create clarity regarding administration of the business and distribution of its profits in any estate proceeding.
Estate Administration Proceedings
Estate administration is the process by which an estate is managed and distributed at the time of death. Depending on the situation, this process may occur with or without a will. An estate administration proceeding will take place if the validity of a will is not established or a person dies without a will, in which case the courts will appoint a relative of the decedent to serve as administrator of the estate in most cases. In terms of heirs, the New York laws of intestate succession will apply, and the administrator will refer to those laws in identifying the decedent’s heirs.
Estate / Gift Taxation
Lifetime gifts and estates are regulated by both state and federal tax law. The New York State Estate tax credit is over $5.5 million dollars, but it is known as a “cliff” tax, because if an estate exceeds the exemption amount by a certain percentage, the exemption is lost and all estate assets are subject to a New York estate tax of up to 16%. Careful planning needs to be done to avoid this New York State tax cliff, especially for individuals in the range of $5-6 million dollar asset range. The federal exemption presently exceeds $11 million dollars, though it will be reduced by the amount of any taxable lifetime gifts. At the federal level, only assets above the exemption amount are subject to tax, though the tax rate is much higher at 40%. The attorneys at Hollis Laidlaw & Simon help clients with these tax issues and returns, assisting in the completion of estate tax returns (Form ET-706) and gift tax returns (Form ET-709).
Fiduciary Accounting and Taxation
Estates and trusts are subject to their own accounting and tax filing responsibilities. Fiduciaries can protect themselves from personal liability by obtaining legal counsel to help comply with these obligations. Hollis Laidlaw & Simon regularly prepares trust and estate accountings and tax returns for both individual and corporate fiduciaries.
Guardianship for adults or persons with special needs can be obtained in New York in one of two ways. For adults who have lost capacity and have no advance directives giving authority to someone to help manage their affairs, an Article 81 proceeding in New York Supreme Court can be commenced. If the court agrees that guardianship is appropriate, then a court order will issue whereby another person or entity will have the legal right to make decisions for the incapacitated person. The need to obtain adult guardianship usually arises when the incapacitated person maintains no power of attorney or advanced directives for healthcare. A guardian can have guardianship over different aspects of a person’s life: a guardian of the person is given the power to make decisions regarding health and welfare issues; a guardian of the property handles decisions about financial and property issues as directed by a judge. When a person is born or becomes developmentally disabled before the age of 22 (or at any age if caused by a traumatic brain injury), the court offers a streamlined guardianship proceeding through Surrogate’s Court known as a “17A” Guardianship. Proceedings brought pursuant to 17A of the Surrogate’s Court Procedure Act (“SCPA”) are typically far less expensive and have less onerous reporting requirements thereafter than Mental Hygiene Law (MHL) Article 81 Adult Guardianship proceedings. Families should always explore with counsel whether a 17A Guardianship might be available to them.
Healthcare and Disability Planning
All good estate plans consider what a person will need if their health is compromised. At Hollis Laidlaw & Simon, we help families consider and plan for these issues in advance, as well as help families who are presently facing difficult health issues.
An estate of a person who dies without a will is defined as “intestate.” New York State laws of intestacy determine the division of an estate when there is no will, which may not conform to the decedent’s wishes.
Limited Liability Companies (LLCs)
LLCs are a type of company created primarily to isolate other assets of the company owner(s) from potential business risk or debts. LLCs have members instead of shareholders. Membership units may be held by one person or multiple people or even other entities. In our estate planning engagements, we are often recommending the creation of LLC’s to hold investment real estate in particular, though there are many reasons and purposes to utilize this entity structure.
Multi-Generation Succession Planning
With proper estate planning counsel, families have the ability to secure the inheritance for not just the next generation, but the generations after. For clients interested in multi-generational planning and even asset protection for the next generation, the attorneys at Hollis Laidlaw & Simon can help develop estate plans to safeguard those assets for years to come.
Power of Attorney
Power of Attorney is a form set by state law that grants financial and property powers. The New York legislature significantly amended its power of attorney statute in 2009 and again in 2010, dramatically altering the required form. Without an effective power of attorney form and appropriate powers granted to an agent, family members are forced to seek authority over incapacitated loved ones from a guardianship court and are supervised by guardianship court for the rest of the person’s life.
Principal / Agent
A person signing the power of attorney form and granting the power is known as the “principal.” The person who receives the power is called the “agent.”
Probate and Accounting Matters
Probate is the process whereby the Surrogate’s Court examines a will to ensure its validity. The goal of probate is to have the will declared valid. Once the will is declared valid, the court appoints the person named in the will as the executor and grants that person “Letters Testamentary,” giving the executor the legal right to gather and collect estate assets, pay debts, pay estate taxes, and distribute any remaining assets to beneficiaries according to the will. In New York, that part of the estate proceeding is supervised by the Accounting Department of Surrogate’s Court.
Retirement and Deferred Compensation Planning
Every estate plan should take into consideration a person’s retirement accounts or deferred compensation plans. The inheritance of these types of assets is often controlled by the beneficiary designations on file with the plan administrator or financial institution. When a person makes changes to an estate plan, it is really important that these designations also be reviewed and modified if needed.