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Estate Planning: Tales for the Wary
Estate Planning is the most misunderstood area of our service strategies. As a general statement, individuals spend 40,000 hours of their life working and six hours planning their retirement and estate goals. We say emphatically, Estate Planning is more than just consulting an attorney, fillling out an Estate Planning questionnaire and signing Trust documents naming beneficiaries. Here is the latest "tales of woe'"from one of America's most prominent families, to individuals like us:

NEW YORK TIMES July 18th, 2009
For more than two months, the trial of Brooke Astor’s son has cast a spotlight on how decisions to change wills, especially those made in the twilight of life, can be subject to bitter fights and even criminal charges.

But the Astor case is hardly unique: a review of recent court cases shows that similar disputes have erupted over estates large and small. And as in many such cases, the one witness who might be able to clear things up — the person whose will is being disputed — is dead.

Most are battled in surrogate’s or civil courts, with criminal prosecutions rare because of significant legal hurdles that can hinder the prosecution of these cases, legal experts say. Victims often lack the ability to realize and articulate that they have been wronged, and the laws are not always clear cut. Accusations are sometimes hazy and are made by family members with a financial interest in the outcome.

Irving A. Berk was 100 when he died on June 16, 2006, a day before the first anniversary of his marriage to his caretaker, Hua Wang, known as Judy, then 48. Mr. Berk’s sons, Joel and Harvey, said in a petition filed in Brooklyn Surrogate’s Court that their father suffered from severe dementia that prevented him from understanding what he was doing. Under New York State law, spouses are entitled to one-third of their partner’s estate, even if, as was the case with Ms. Wang, they were left out of the will.

Judge Diana A. Johnson ruled that even if the marriage were obtained through fraud, it would not disqualify Ms. Wang from her stake in the estate.

“While this may appear incongruous and seemingly invite a plethora of surreptitious, ‘deathbed marriages,’ ” Judge Johnson wrote, “this is simply the state of the law.”

Mr. Berk’s sons, who are appealing the ruling, also have accused Ms. Wang in court filings of using her influence over their father to get him to give her more than $1 million worth of assets, including his ownership interest in the Berk Trade and Business School in Brooklyn, which Mr. Berk founded in 1940. A lawyer for the sons has asked the Brooklyn district attorney’s office to investigate; a spokesman for the office said the matter had been referred, but it was not currently being investigated.

Ms. Wang’s lawyer, Jordan S. Weitberg, wrote in a court filing that the accusations against his client were false and motivated by money.

After Mr. Berk hired Ms. Wang to care for him in 1998, Mr. Weitberg wrote, the two quickly grew close, traveling the world and attending family functions together. Mr. Berk repeatedly asked Ms. Wang to marry him, Mr. Weitberg wrote, but she turned him down because she was married (but separated) to a man in her native China and concerned about the reaction of Mr. Berk’s family. In September 2001, they bought each other rings and held an unofficial wedding ceremony, according to Mr. Weitberg. They made their marriage official in 2005 after Ms. Wang got divorced.

“Judy gave Berk a richness to his life that would otherwise be lacking for a man in his 90s,” Mr. Weitberg wrote.

Even over more modest sums, the battles can be intense.

More than three years after she was diagnosed with dementia, Noreen Sander signed a will on May 14, 2004, that made Stoja Rajic, who had been her home-care aide for eight years, the primary beneficiary of her $79,000 estate, according to a decision in May by a surrogate’s judge in Westchester County. In her prior will, Ms. Sander’s nephews and nieces were the primary beneficiaries. But the judge, Anthony A. Scarpino Jr., threw out the 2004 will, citing, among other things, testimony from Ms. Sander’s doctor, who said that she lacked the mental capacity to execute a will.

The judge also questioned tens of thousands of dollars that went to Ms. Rajic from Ms. Sander’s bank account; and he expressed skepticism over the sale of Ms. Sander’s house to Ms. Rajic in 2002. The contract consummating the sale was handwritten and “replete with typographical errors and was clearly written by someone who was not a native English speaker,” Judge Scarpino wrote. Ms. Rajic is from Croatia.

Gregory W. Bagen, a lawyer for Ms. Sander’s family, said he took the matter to the Westchester district attorney’s office, but “they said it’s a civil matter.”

Ms. Rajic’s lawyer, Michael M. Lippman, is appealing Judge Scarpino’s ruling, saying his client did nothing to trick or coerce Ms. Sander. Despite the doctor’s diagnosis, Ms. Sander had the capacity to execute the 2004 will, Mr. Lippman said, citing an independent court evaluator who made that finding in her report.

Some of the most hard-fought cases are between family members.

James Leong filed a lawsuit in State Supreme Court in Queens last December alleging that his sister, Jean L. Tom, told their mother, Poy Fong Leong, that she needed to sign a document if she wanted to continue to be taken care of. What the document actually did was convey their mother’s Forest Hills home to Ms. Tom, according to the lawsuit, contrary to Ms. Leong’s desire that Mr. Leong have an interest in the property.

Ms. Tom “deceptively and falsely translated communications between” her mother and a lawyer hired to preside over the transaction to deceive the lawyer “into believing the deed reflected mother Leong’s intentions at the time,” the lawsuit read.

Ms. Tom’s lawyer, Ira Cooper, said his client “didn’t pressure anybody,” and that her mother willingly signed over the deed. The two sides were in settlement negotiations, Mr. Cooper said.

Some district attorney’s offices have set up units devoted to investigating the financial fraud of elders.

Last month, the Queens district attorney, Richard A. Brown, announced the indictment of a woman accused of forging her stepfather’s signature to transfer his house in Far Rockaway to herself. The woman, Heather Harper, 42, obtained the home of her 66-year-old stepfather, Reynold Yearwood, through a deed executed in February 2007, Mr. Brown said in a statement.

But Ms. Harper’s lawyer, Michael A. Dreishpoon, said the house never belonged to Mr. Yearwood. The only reason his name was on the deed in the first place, Mr. Dreishpoon said, was because Ms. Harper did not qualify for the credit needed to buy the house, so Mr. Yearwood agreed to let the purchase be made under his name.

The Manhattan district attorney’s elder abuse unit brought charges last year against Robin O. Motz, an Upper East Side doctor, who was accused of stealing his 94-year-old mother’s last $800,000 and persuading her to disinherit his sister and daughter from her will.

Mr. Motz pleaded guilty last June to second-degree grand larceny and was placed on five years’ probation and ordered to pay back the money.

Estate Planning the Right Way
For those of us at a certain age, as we grew up we always thought the words "Trusts" and "Estate Planning" were concepts that only applied to celebrities and the rich. We read of family inheritance wars which were played out in the newspapers, not in our family's living rooms. Smart people at least had a will and all assets upon death went to the surviving spouse and then to the children and grandchildren.

Times have certainly changed. California and the western states, where many new trends develope, became the leaders in providing Living Trusts and LLCs to the middle class in place of the standard will. This trend has spread eastward with the last bastion of traditional will based planning still dominant in the Northeastern states as attorneys there were trained to draft a will for any client in the hope their firm's will be retained for the probate process that MUST ensue when one only leaves a will.

THE NEW PARADIGM: The Rise of the Trust as a Tool for Wealth Management

The explosion in the United States of the use of a Trust to actively preserve capital and assets during the life of an individual or couple while they are alive and after their passing is the single most development in Estate Planning since the end of World War 11 ( when Congress enacted the Unlimited Marital Deduction).

Trusts can be Revocable or Irrevocable. They can manage monies while the person is alive (GRITS, GRATS etc.). They can protect a home (QPRTs) and provide for a surviving spouse while minimizing estate taxes ( QTIPs, ILITs). They can fend off creditors domestically (DAPTs) and internationally ( FAPTs). They can be created off shore or in the state where you may or may not reside.

The Cornell Group realizes the above trusts and their acronyms are confusing and complex. In fact, it can be said the average attorney who is not a specialist in estate planning will usually refer a client to a firm such as ours (or do a "free" will in the hopes of probating the estate and receiving hefty legal fees). As such, we are here to advise and assist you in forming the right trust for your family's needs.

From a simple Living Trust Package (includes a POA, Pour Over Will, Living Will etc.) to more complex strategies, we are dedicated to providing a comprehensive estate plan that will meet your intent and minimize Federal and State Taxes ( if applicable) so your loved ones can enjoy the fruits of your labors.
Contact us today.

Roth IRA and Your Choices
You’ll be hearing a lot in the next six months about Roth Individual Retirement Accounts — but not as much as you should about a long-term threat that hangs over them.

Starting Jan. 1, you’ll be able to take a regular I.R.A., say, one that you have in a brokerage account after having rolled an old 401(k) into it, and turn it into a Roth. You’ll be able to do this no matter how much money you make, though you’ll have to pay income taxes at your current rate on whatever you move. Currently, you can’t make the conversion at all if your household has more than $100,000 in modified adjusted gross income. (That’s a technical Internal Revenue Service term, which it defines in Publication 590, available on its Web site).

Why would you want to make such a swap? Because you think you or your heirs could end up with more money over the long haul by investing in a Roth instead of a regular I.R.A.

With a Roth I.R.A., you pay no taxes on your earnings in most instances when you take money out; distributions from regular I.R.A.’s are taxable the same way that income is, though the basic I.R.A. does offer a tax deduction when you first deposit money into the account. The Roth offers no such deduction when you contribute money to it.

So if you think your tax rate will be higher during retirement than it is now, say if you’re fairly young for instance, making the conversion early in 2010 looks sensible.

It all seems pretty simple, until you consider this: The tax laws might change substantially, throwing all of your careful planning into utter disarray. We’re currently staring down years of federal budget deficits and decades of looming Medicare and Social Security obligations. If wealthy people convert their retirement funds to Roth I.R.A.’s in large numbers, won’t all of that newly tax-shielded money look tempting to government officials years from now?

There is no way to know, and admitting the futility of making a specific prediction is where you have to begin this analysis. After all, if you get serious about your money at 40 and live until you’re 90, that’s a half-century for which you need to plan.

Still, many financial planners are concerned enough about the possibility of huge changes in the Roth rules that the looming opportunity in 2010 has inspired an orgy of spreadsheet creation and client outreach. Think all of this activity is simply an attempt to stoke fear among investors and charge fees for alleviating it? That would make you as cynical as all of the people who are certain that Roths are a big lie and the tax-free earnings simply cannot stand for more than another few years. Neither is likely completely correct, so let’s take a quick look at both arguments before trying to figure out what to do with your own I.R.A.

HOW ROTHS MIGHT CHANGE At the most extreme end, the federal government might try to tax the earnings on a Roth after all, say through the capital gains tax, which is currently at 15 percent for long-term gains but could go up in the next few years. Or it might levy some sort of an excise tax on excessive balances, however those might be defined.

Roths are especially useful for estate planning purposes. Regular I.R.A. holders have to start taking money out once they reach the age of 70 and a half, but Roth owners don’t have to take money out during their lifetimes. Heirs of Roth holders, meanwhile, pay no income taxes when they cash out of the inherited account and can spread those distributions over an entire lifetime, allowing for decades more of tax-free growth thanks to the wonders of compound interest. Some part of this could certainly change.

WHY ROTHS WON’T CHANGE Those who think the taxes on Roths won’t change anytime soon point first to politics. Given the trouble that President Obama is already having getting parts of his agenda through a Congress controlled by his own party — Democrats have big majorities in the Senate and the House — it’s hard to imagine him successfully making substantive changes to the Roth. After all, many of the lawmakers who voted for it are still there.

Others make a fairness argument (It would be double taxation!), or a legal one (The no-tax promise of Roths is a contract!) or a practical one (No one, including the I.R.S., would want to be the record keeper or track the details, because grandfathering everyone would be so complicated!).

WHAT YOU SHOULD DO Even financial professionals who are certain that radical changes in the tax laws are in the offing don’t advocate ignoring the transfer opportunity altogether. “I can’t as a tax attorney and C.P.A. ever tell people not to do something based on what I think the law will become,” said Leon LaBrecque, the managing partner of LJPR, a financial planning firm in Troy, Mich.

If you’re considering a conversion — and just about everyone who has an I.R.A. ought to think about it — start with a handful of basic questions. First, can you afford the income taxes you’ll have to pay on whatever amount you convert? If you can’t come up with the money, you can stop right here. Taking it out of the I.R.A. before turning it into a Roth is a terrible idea, given potential penalties and the loss of tax-free future growth that would result from using some of your I.R.A. savings to pay for the taxes.

If you can get over that hump, how much money do you think you’ll have come retirement? How much do you think you’ll need to live on? How much might you want to pass on to heirs? And are you close enough to retirement to have any clarity on how the answers to these questions might affect the amount of taxable income you’ll have?

This is simply a starting point, and it can quickly get more complicated for any number of reasons. If you want to fiddle with your own numbers, there’s a decent calculator at rothretirement.com (click the “Calculator” tab), though it doesn’t allow you to adjust for possible Roth tax changes. But given the size of the balances involved for many people, this would be a good moment to get some professional advice, preferably from a certified financial planner with deep tax knowledge who agrees to work as a fiduciary (i.e. in your best interest).

Even with possible tax changes, the path may be clear for some investors, especially older ones who might be spared any big alterations that occur two decades from now. For everyone else, however, it’s best to think about tax diversification in the same way you think about asset allocation. It’s about spreading your risk — and your money.

One common strategy is to put clients in a blend of regular taxable investments, where they pay long-term capital gains taxes; tax-free municipal bonds; tax-deductible and tax-deferred retirement accounts like 401(k)’s or regular I.R.A.’s; and Roths, where the earnings currently come out free of taxes altogether. Whatever happens with tax rates, at least those clients will have choices, once they need the money, about the most tax-advantageous place to take it from at that moment.

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