Pennsylvania Estate Planning Lawyer & Attorney : Jakubik Law Firm : Serving Philadelphia, Chestnut Hill, Mt. Airy

The legal wrangling over gay marriage in California in recent weeks has gotten a lot of attention for potentially expanding or limiting the rights of gay couples.

But aside from the cultural benefits that are at stake and the precedent that will be set by the ultimate decision, relatively few stand to receive any financial benefits. Of the more than six million unmarried-partner households, just under 780,000 are gay, according to the Census Bureau. Of those, only 3% are in Massachusetts - the sole state where gay marriage is legal - and 14% are in California, where there's a good potential it will be legal soon.

"We kinda hear this stuff on the news and think these people are getting the same rights as married people, but that's so not the case," says Harlan Levinson, a Los Angeles-based accountant who warns that gay married couples can face a higher tax bill today than if they had remained single. "These people still need to have a living will, power of attorney and to sit down with an attorney or financial planner."

By and large, gay couples - and domestic partners in general - need to protect themselves proactively when it comes to their fiscal health. At the very least, a will, power of attorney and medical power of attorney should be in place, says Loreine Smith, a financial planner with Dallas-based firm Life Plan Strategies.

She also suggests couples make sure assets are titled properly and that arrangements are made for medical issues, retirement, child custody and estate planning. "It becomes very important in case one pre-deceases the other or in case they split up," says Smith. "If it's after the fact, there isn't a whole lot they can do."

Some tips on protecting yourself, regardless of how things play out in court and the legislative halls:

Health Care

More employers have begun extending benefits to domestic partners, but certainly not all. A 2007 Hewitt Associates survey found that 54% of firms offer coverage for domestic partners but only 32% offered benefits to both same- and opposite-sex couples.

If that is not an option, domestic partners should craft legal documents that designate a non-spouse beneficiary.

Partners should also seek out long-term care insurance and government benefits, says Ian Weinberg, a financial planner with Long Island-based Family Wealth & Pension Management. If one person does not have additional coverage, he or she can potentially tap into Medicare or Medicaid and supplement that plan with personal income.

Weinberg also warns against owning a home as joint tenants, because it allows the government to lay claims to the asset if either party is ill and needs government benefits.

"You have to segment out the emotional aspect of it versus the practical aspect," he says. "You want to say, 'We own this home in the Hamptons together; we own this home in the city together,' but technically it's not a good idea to have it set up this way."

Taxes

Even when gay marriage is a state-offered option, it packs a punch with taxes as long as the commitment is not recognized at the federal level.

"They're going to get hammered," says Joan Zawaski, tax director at San Francisco-based accounting firm A. L. Nella & Co., which filed about 60 returns for gay married couples last season.

Costs can be nominal or extreme, depending on the couple's financial position, but it's an important factor to consider. Those with large estates of $2 million or more have to consider hefty estate taxes that come with passing along assets to a non-spouse. Sharing more than $12,000 per year with a non-spouse will also face gift taxes.

For income tax, A.L. Nella found that gay married couples who both earned decent salaries posted higher costs than those with one primary earner. It's also more expensive to have the complicated returns prepared.

Estate Planning

Avoiding a will can be even more dangerous for domestic couples, since the partners don't have the same implicit rights as married couples.

"A lot of people don't like to think about wills," says Zawaski. "They don't like to think about the fact that they're going to die, but it's not fair to your partner or your children, if you have any."

Setting up a living trust with your partner as the beneficiary can ensure that assets will get distributed as intended in case of death. Creating a life-insurance policy in the partner's name can also keep some cash out of the taxable estate, Zawaski adds.

It's important to make sure documents are updated as situations and assets change over time. Having accurate legal documents limits the possibility that unsupportive family members will intrude on your last wishes. Levinson says brutal encounters can occur in court and otherwise if last wishes aren't made official.

"If there's intestacy, there could be a real hassle to disentangle this," he says. "When close relatives are not supportive off the relationship, it can be pretty ugly."

Tracking Down Experts

Partners should find tax, legal and estate-planning experts who have experience with their situation to make sure all aspects are given the proper consideration.

"All of these things have to be balanced very delicately because they all affect each other," says Weinberg.

Getting a referral from a trusted network of people can better ensure that the lawyer or planner is sympathetic and experienced with the situation.

It can be a long and frustrating process to hunt down professionals, pay the extra costs, pore through the paperwork, update information and make tough financial and personal decisions. However, its importance can't be overstated, especially for those with large assets or complicated situations that will require a roadmap in case of emergency or death.

"It's a pain in the neck," says Zawaski. "There are lawyers' fees to draw it up; you have to retitle all your assets. But once it's done, it's done."

Source for post: TheStreet.com

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Francis Morrissey, the now indicted  former lawyer for the late Brooke Astor, preyed upon other elderly clients, as well. In a fascinating, and disturbing, article published yesterday, the New York Times discussed in detail the myriad of elderly clients that Mr. Morrissey and his cronies and accomplices ingratiated themselves with, and in whose wills Mr. Morrissey somehow often managed to find himself included. The article reveals a scheme involving what, to my mind, are appalling breaches of trust and ethics. Morrissey apparently decided that he would do better by not charging for his legal services and trying to charm his way into being named executor of the client's estate, or, even, receiving a bequest in the estate. After reading this article, allow me to offer a word of caution - beware lawyers bearing smoked hams. Or offering to do your estate work for no charge.

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Today's New York Times business section tells us of  the mysterious death in Florida of 44 year old hedge fund manager Seth Tobias this past September 4th. From all appearances, he had suffered a fatal heart attack and was found in his swimming pool. Initially, there were no suspicions raised by the death of this man who had controlled a 300 million dollar hedge fund and whose estate is estimated at about 25 million dollars.

Of course, large amounts of money can lead to king-sized claims. Mr. Tobias' four brothers have already filed a lawsuit against his widow Filomena amidst claims that she had drugged and murdered her husband even though she has not been charged with any crime. The Jupiter Florida police have not opened a criminal investigation --and are not likely to do so until the results of the medical examiner's toxicology tests are known.

Meanwhile, Florida subscribes to the doctrine that one cannot profit by one's own wrongdoing and therefore a killer cannot inherit from his or her victim.The stakes here will be extremely high in all respects --and it looks as if we will be treated to a lurid and exciting wild ride which will, incidentally, provide us with more than a few lessons in the law before it is over.

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From this week's New Jersey Law Journal. It may well be that the lawyer here did not actually do anything improper, but anyone concerned about appearances might have acted differently. Anything that even looks like it might be self-dealing should be inherently suspect and avoided:

A New Jersey attorney and his client, who last May escaped conviction on charges they unduly pressured an elderly widow to name them as executor and beneficiary of her multimillion dollar estate, now are trying to avoid punitive damages.

A New Jersey appeals court ruled last December that although Ronald Casale and his client, Dr. Ronald Sollitto, could not be forced to pay attorney fees to the beneficiary they effectively disinherited, a jury could still assess punitive damages against them.

Last week, Casale and a lawyer for Sollitto argued to the state Supreme Court that to allow such a remedy would clog the courts and drastically alter the law of trusts and estates.

The case, In the Matter of the Estate of Madeline Stockdale, A-121-06, stems from a challenge to a 2000 will drafted by Casale that named Sollitto, his friend and longtime client, as the chief beneficiary of Madeline Stockdale's estate and Casale the sole executor. The challenger was the Spring Lake First Aid Squad, which under an earlier will would have received most of the estate.

Casale drafted the later will for Stockdale, a nonagenarian, while she was in a rehabilitation facility recovering from a hip fracture. It was executed on Jan. 3, 2000, a day before she had throat surgery.

The same day, Stockdale also signed a real estate contract -- drawn up by Spring Lake, N.J., solo Thomas Foley on instructions from Sollitto -- by which she agreed to sell Sollitto her Spring Lake home for $1.3 million. The contract required only a $1,000 initial deposit, followed by a second deposit of $56,000, with Stockdale taking back a purchase money mortgage for the rest. The will drafted by Casale excused Sollitto's obligation to pay off the mortgage, since as residuary beneficiary the money would go to him anyway.

Stockdale also gave Sollitto power of attorney over her affairs. Stockdale died three months later.

Superior Court Judge Ronald Reisner of Monmouth County, N.J., refused to admit the 2000 will to probate, saying it appeared to be the product of "sharp dealing" by Casale and Sollitto. He also refused to enforce the sale of the house.

Reisner denied the squad's claim for punitive damages but awarded it $1,193,726 in counsel fees against Sollitto and Casale, relying on In the Matter of the Niles Trust, 176 N.J. 282 (2003). That case held that an estate executor or trustee who benefits from undue influence to the detriment of the estate may be required to pay counsel fees.

The Appellate Division reversed, holding Niles did not apply because Sollitto was not an executor or fiduciary, neither he nor Casale had depleted the estate and there was no attorney-client relationship between the squad and Casale.

However, the court remanded for reconsideration of punitive damages, finding Reisner apparently had mistakenly thought the fee award was the equivalent of a punitive award. Casale and Sollitto appealed.

On Oct. 9, Sollitto's lawyer, Frederick Dennehy, urged the state supreme court to reject the squad's claim for punitive damages and counsel fees.

"The question of fee shifting hovers like a ghost over all settlement negotiations" in disputes over wills and estates, said Dennehy, of Woodbridge, N.J.'s Wilentz, Goldman & Spitzer.

"Punitive damages are a much larger issue," he added. "We have the possibility that in ... virtually every will contest, there will be an application and a claim to entitlement for punitive damages."

The result, said Dennehy, would be to clog the courts with estates that cannot be settled because of the possibility of fee shifting and punitive damages.

"Why are you so fearful?" asked Justice Roberto Rivera-Soto.

"This would be a seismic change in the law of estates and trusts," Dennehy replied.

Rivera-Soto wasn't convinced, asking Dennehy why rules concerning fee shifting and punitive damages should not apply in will contests the way they do in tort claims.

Dennehy said those rules could apply if there were clear indications of fraud, but not of undue influence.

"Undue influence covers a very wide spectrum," Dennehy said.

Casale, arguing pro se, said Niles did not apply here because there was no diminution of the estate as in Niles. "In Niles, the Court had to send a message out," said Casale, a former head of the New Jersey State Bar Association's Real Property and Probate section.

Rivera-Soto asked about the circumstances under which punitive damages might be awarded. Casale said they could be available if there were compensatory damages, but since there were none in this case, punitive damages cannot be awarded, he said.

Casale added that there is no evidence he exerted influence over Stockdale.

"There was not a single finding that I exercised any undue influence," he said. "I couldn't have. I didn't know the woman long enough." On May 11, a Monmouth County jury hung on conspiracy and theft-by-deception charges against Casale and Sollitto for allegedly bilking Stockdale out of her fortune.

Casale told the justices they would send a bad signal to the bar by ruling in favor of the rescue squad.

"I know a lot of practitioners who will stop doing wills and estates," he said. "It will just be too risky."

The rescue squad's lawyer, Spring Lake solo William Gearty, said the two did exert undue influence over an elderly woman in ill health.

"They were the 'driving force,'" said Gearty, quoting Reisner, even though Sollitto was not a fiduciary. By persuading Stockdale to change her will, they engaged in a "pernicious tort."

Several justices suggested it may not be possible to rule in the rescue squad's favor because there is no indication it suffered financially.

Gearty disagreed. "It's difficult for the squad to accept the fact that it was not harmed at all," he said. Stockdale's property is now worth about $5 million and, under the terms of her original will, the rescue squad was to be given the property after she died.

"They still don't have title to the property seven years after Mrs. Stockdale died," Gearty said.

Justice Virginia Long asked Gearty to respond to Dennehy's assertion that a ruling in the rescue squad's favor would jam up the Chancery Division with contested claims.

The court's ruling in Niles has not led to that result, said Gearty, and there is no reason to believe it would happen if the court ruled in the rescue squad's favor. "I don't see the floodgates opening in any fashion," he said. "This case is identical to Niles."

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Courtesy of the Wills, Trusts and Estates Prof Blog comes this post about a court decision from the United Kingdom in which a testator's bequest of 8 million pounds sterling (more than $16 million) to the British Conservative Party was challenged and found to be void on the grounds that the testator was of unsound mind when he made his will. Of course some might say that the mere act of leaving such a vast sum of money is in and of itself per se evidence of a lack of testamentary capacity. Just saying.

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Recently we were having some work done at our home. The contractor is a great guy, a true craftsman and a perfectionist. He is also expensive, but his work is so good that he is worth the price. While finishing up the job, he asked me one day about some estate planning questions that had been bothering him. We chatted for a few minutes, and I suggested we meet to have a more detailed discussion. "Can't I just download some stuff and do it myself?" he wanted to know. I asked him what he thought would have happened if I had tried to do the job he'd just finished for me by myself. "Total mess..." was the response. Exactly. And this case from Massachusetts is a typical example of what happens when youtry to do your estate without any professional input.

Thanks to The California Estate Planning Blog for this post on the subject.

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Recent news reports concerning Leona Helmsley's $12 milllion pet trust have spurred many discussions about decedents sometimes undestandable, and sometimes bizarre, efforts to influence from the grave the behavior of their heirs. In this regard, the follwoing is borrowed from Investment News:

Despite widespread incredulity from the public about the weird details of hotel empress Leona Helmsley’s will, some advisers know that bizarre bequests are not uncommon, having watched their own clients seek to rule their families from beyond the grave.

Ms. Helmsley, who died Aug. 20, left her dog, Trouble, $12 million. That made the pooch seem like a higher priority than

Ms. Helmsley’s own grandchildren, two of whom received $5 million each and two who were disinherited.

To collect their fortune, the two favored grandsons, David and Walter Panzirer, must visit their father’s grave at least once each calendar year, preferably on the anniversary of his death. Should they miss a visit, they will be cut off from the money left in the trust.

The other two grandchildren, Craig and Meegan Panzirer, were disinherited for “reasons which are known to them,” according to the will.

Advisers and attorneys say they have seen families torn apart as clients disinherit children or grandchildren or require family members to change religion or sign postnuptial agreements before receiving bequests.

Although it’s difficult not to be judgmental, Jason M. Cole, the managing director of Abacus Wealth Partners LLC in Philadelphia, believes it’s his job to ensure that his clients’ wishes are met.

One of those clients directed that all assets be left to a pet shelter. Anotther forbade paper plates and plastic forks and knives at the memorial-service spread.

“We do try not to judge,” Mr. Cole said. “We need to remain as objective as possible about the estate planning process.”

Clients on ice

In the annals of posthumous micromanaging, surely few compare with a client of Rick Van Der Noord’s, a registered investment adviser and certified financial planner with Van Der Noord Financial Advisors Inc. in Greer, S.C.

He helped a divorced man draft a will in which his sons could use the inheritance only for health or medical care — and then only if the costs exceeded $12,000 a year. The sons could get 10% of the inheritance if they completed four-year college degrees, an additional 10% if they received master’s degrees and 10% more should they earn doctorates.

And there’s more. Each son gets a 20% distribution of the trust if he postpones marriage until age 27. They earn another 20% distribution if they are married to their first spouses for five years, and they earn an additional 20% for every five years of marriage until they’ve been married 15 years.

By age 45, the two sons will be paid the full remainder of the trust.

“He was trying to help parent and direct his heirs from the grave,” Mr. Van Der Noord said. “As his adviser, my job is to help him get whatever he wants, and if that’s what he wants, that’s what we’ve got for him.”

Although some clients try to exert control after death, others plan on coming back to life — hence “cryonics estate planning,” in which advisers manage money for clients who have had themselves frozen in the hopes of being revived years, or perhaps centuries, later.

“It’s an emerging field, one that I’m helping to create,” said Rudi Hoffman, a certified financial planner and chief executive of Hoffman Planning in Port Orange, Fla.

“Obviously, there’s no guarantee it will work,” he said. “It’s a best effort.”

Although Gary Altman, an estate planning attorney and owner of Altman & Associates Inc. in Rockville, Md., hasn’t had any clients make plans for their afterlife, he’s had many clients donate their bodies to science at the University of Tennessee’s Forensic Anthropology Facility in Knoxville, which has been nicknamed the “Body Farm.”

Martin M. Shenkman, an attorney in his eponymous Teaneck, N.J., law firm, draws the line when he thinks the fallout from a will could devastate a family. Recently, he refused to work with a client who wanted to give 80% of her fortune to two of her eight grandchildren while ignoring the others.

“I told her I can’t participate,” Mr. Shenkman said. “She’s going to destroy her family.”

Mr. Shenkman also had a client who wanted to leave someone $50,000 to care for an extensive tropical-fish collection. “I told him there’s a problem with that, and it’s one word,” Mr. Shenkman said. “Flush.”

Instead, Mr. Shenkman directed his client to leave the fish in a trust and to be taken care of by a trustee.

But some clients take a more expansive approach when it comes to estate planning. Several years ago, Jeff Sprowles, an adviser with Jeff Sprowles & Associates LLC in Langhorne, Pa., handled the distribution of a will for a childless husband and wife.

The couple directed that the trust be divided between a brother, three nieces and a nephew, but there was a catch: Each of them had five years from the date of the funding to spend their bequest. Anything left at the end of five years would go to charity.

Additionally, the beneficiaries were allowed to use the money only for activities that would generate immediate enjoyment.

They weren’t allowed to gamble or buy anything of permanent value, such as a vehicle or a house.

“It was pretty cool,” Mr. Sprowles said. “It had to be basically blown. They had a hell of a good time.”

However, the brother thought the idea was frivolous and refused to spend his portion of the money.

“I could almost hear him saying, ‘Bah! Humbug!’” Mr. Sprowles said.

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A post by Paul Trudelle at the Toronto Estate Law Blog regarding some brewing problems with the rather generous trust that Leona Helmsley established for her dog in her will provides an opportunity to address one of the most fundamental estate planning issues, and an easily avoided problem. It seems that the primary trustee that The Queen of Mean designated for her faithful companion does not wish to serve. It is, as Paul notes in his post, unclear as to whether the substitute trustee is willing to serve. Should the substitute be likewise unwilling, the result is predictable - costly, asset consuming litigation. It is a fundamental precept that, before you designate a trustee you confirm that that person (or institution) is willing to serve. Failing to take this simple step can, as Ms. Helmsley's family may well discover, lead to needless litigation and the waste of time and assets. These problems are easily avoided by having a short conversation with your intended trustee. I would add, parenthetically, that this is especially important if you are considering what some might consider exotic or unconventional estate planning tools, such as pet trusts.

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When my children were little, one of their favorite expressions was, “But it’s just not fair.” And I often hear the same protest from a potential client who wishes to object to a loved one’s will on the grounds that they were either promised something, the will was supposed to have been rewritten, or the terms are not fair.

Unfortunately, in most cases, the message that I have to give in response is, “You are right, but the law in will contests is such that you don’t have a case.”

I

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