July, 2020
Summer 2020 Estate Planning Update

As the tri-state area is slowly reopening, we hope that you remain in a safe place and in good health. The past few months have been sobering and with all of us having been affected in some manner due to the pandemic, either directly or indirectly, it has served as a reminder of the importance to ensure that your estate plan is up-to-date. Since early March, we have been actively holding client meetings via videoconference, telephone and at our office following proper PPE guidance and have, due to recent law changes, been able to execute Wills, trusts and advanced directives via Zoom.

In April, 2020, our newsletter outlined a number of techniques to consider integrating into your estate plan. The link to the newsletter can be found at https://conta.cc/2XAgbtq 
and the following is a brief outline of the preferred topics which many of our clients have been adopting:
 
  • Gifts to Spousal Limited Access Trusts (or SLATs). We discussed this in our Spring, 2019 newsletter and can be found here at https://danzigermarkhoff.com/newsletters/2019/NewsletterSpring2019-ChrisMiehl-SpousalLimitedAccessTrusts%E2%80%93HavingYourCakeAndEatingItToo.pdf  This has been the most attractive technique due to its flexibility. It removes future appreciation from the estate while still giving the spouse access to money. In basic terms, Spouse 1 makes a gift to a trust in which Spouse 2 is the trust beneficiary. Spouse 2 has the right to receive the trust's income (being dividends, interest, rent or K-1 profits from a business) and can have certain rights to principal. Spouse 2 will then create a reciprocal trust benefitting Spouse 1. This way, in essence, both spouses are still benefitting from the trust monies while both are alive. One problem is that these two trusts cannot be implemented at the same time due to a principle called the "reciprocal trust rule". However, if the trusts are drafted so that they are sufficiently different and are separated significantly in time, we can avoid this rule.
  • Grantor Retained Annuity Trusts (also called GRATs). These trusts are used in order to remove future appreciation in a short period of time, such as 2-3 years. The concept with a GRAT is to transfer assets to a trust which pays you an annuity equal to what you put into the trust plus a government interest rate (which now is approximately 1%). For example, if you put $1,000,000 in a 2 year GRAT, it will pay you $509,000 after year 1 and $509,000 after year 2. Then, you ask, why do this if the GRAT repays what you put in with some interest? The benefit is that any appreciation during the 2 year term will be distributed to your heirs without having used any of your lifetime $11,580,000 estate and gift tax exemption.
  • Sale to Intentionally Defective Grantor Trusts (or IDGTs). This transaction involves selling assets to a trust for the benefit of your heirs while taking back a promissory note. Since this is a sale, no estate and gift exemption is used. The benefit is that you, as the seller, have "frozen" the size of your estate by selling soon-to-be appreciating assets to a trust for the benefit of your heirs while your estate only has a promissory note which is fixed in value.
  • Generation-Skipping Trusts. As children are college age or older, our clients become focused on ensuring that their wealth pass to their children and grandchildren and not to sons-in-law and daughters-in-law. See our 2015 newsletter at https://danzigermarkhoff.com/newsletters/2015/fall/Protecting-Your-Assets-From-Your-Children's-Creditors-After-You-Die(00989642).pdf
While our office is now open for in-person meetings, for our clients who prefer to remain at home, Governor Cuomo just extended permission to sign Wills and trusts remotely with virtual witnesses and notaries via Zoom or FaceTime through August 5, 2020.   With all of these options, now is an excellent time to revisit your estate plan and make sure that it is accomplishing your goals.

Please feel free to reach out to the estate planning partners at Danziger & Markhoff LLP, Michael Markhoff, Harris Markhoff or Christopher Miehl, with any of your questions. You can reach us by phone in our office or via email at [email protected], [email protected] and [email protected]


Westchester :
1133 Westchester Avenue, Suite N208, White Plains, New York 10604
914.948.1556

Long Island:
135 Pinelawn Road, Suite 245 South, Melville, NY 11747 
631.501.9800
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