Asset protection is a key consideration in estate planning.   Most people seek to protect their assets through liability insurance – but what if you no longer have liability insurance in place?

A standard homeowners insurance policy typically includes some form of general liability insurance – like if a guest falls down the stairs or a friend slips in your kitchen.  Liability insurance is designed to protect you from claims made when you are in some way considered to be at fault.

That’s great – but say you or your parents decide to move to a retirement community or apartment.  Once the home is sold homeowners insurance is no longer in effect… but you could still be at risk of claims or even lawsuits.

Liability insurance policies tend to be relatively affordable.  Shop around and take the time to fully understand the terms, the situations that are covered, and the limits of the coverage you will receive.

Downsizing is a great financial move for many people; plus it can make daily life a lot simpler.  Just make sure you take care of the details:  Sometimes downsizing in one area requires a little bit of upsizing in another.

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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Life insurance can play a valuable role in estate planning, from providing cash to the trustee or executor to pay off debts and final expenses, to pay off a mortgage or provide for college, or to produce income for a surviving spouse and children. Sometimes it is used to infuse cash into a business upon the untimely death of a key shareholder or partner, or in larger estates, to provide the liquidity needed settle up any estate tax liability while avoiding the liquidation of estate assets.

However, when it comes to taxes, it is important to remember that in the estate planning arena, we are often talking about two different kinds of taxes: Income taxes and Estate taxes. Life insurance is normally income-tax free to the beneficiary.  (There are a few exceptions, particularly if the policy is used in business partnerships).

The key to remember is that while life insurance in most instances is income-tax free, but it may still be taxed under the Federal and New York State  estate tax rules, because the federal and NYS estate tax is a transfer tax.  This transfer tax is assessed on the assets you leave to the next generation. Because of this, the proceeds of all the life insurance that you own or control is included in your taxable estate for purposes of calculating your taxable estate, even if the proceeds did not come into your estate.

There are, however, estate planning tools that can address the issue, such as an ILIT, an Irrevocable Life Insurance Trust, that may be used if an estate is facing a tax burden.  Work with an estate planning attorney to determine the best tools to meet your specific needs.  We have worked with many families on Long Island to escape the burden of hundreds of thousands of dollars of estate tax.

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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Deciding how to divide assets among heirs in an estate plan can be difficult, especially when real estate is involved.  Why?  Here’s a quick example – and a reasonably simple solution to the problem.

Say you own a home worth $500,000.  The mortgage has been paid off.  You have two children and you want each child to receive an equal share of your estate.  One of your children lives nearby, and would like to move into your home after you pass away.  Your other child lives across the country and is not interested in owning or living in the house.  So far so good – but what if you only have $200,000 in assets aside from your home?  How can your estate divide your assets equally without having to sell the house?

One solution is life insurance.  You have at least two options.  One, you can purchase a policy equal to the value of the house.  One child gets the house, the other the proceeds of the life insurance policy, and the remainder of your estate can be divided equally between your two heirs.  Or, you could purchase a policy with a value of $300,000, leaving the policy and the remainder of your estate to one child and the home to the other child.

Keep in mind asset values naturally change over time.  A home worth $500,000 today could be worth $600,000 in a few years – or only worth $400,000.  A good estate plan provides flexibility and takes into account changes in asset value.  If you want to leave assets equally among your heirs, call us to make sure your estate plan will accomplish your goals – and provide a reasonable amount of flexibility in the process.

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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Dealing with the unexpected death of a loved one is hard enough. But if a loved one did not leave his or her estate planning affairs in order, dealing with practical tasks like locating bank accounts, investment accounts, insurance policies, and other documents can seem impossible. In some cases following the “paper trail” is relatively easy – but what if you don’t know whether (or where) an account or policy even exists? It happens more often than you might think – every year billions of dollars in unclaimed assets are turned over to the government.

Knowitification.com, a new web-based service, might make the sleuthing process easier. Here’s how it works. Provide basic information like the person’s name, address, date of birth, date of death, and Social Security number. The service then lets the three major credit bureaus know the individual has died, which helps to prevent identify theft.

Then, Knowtification.com sends letters to financial institutions requesting information about any accounts your loved one may have held. There are two levels of service: The basic service requests information from around 200 different financial institutions, while the premium service notifies approximately 400 financial institutions, including 401(k) plans, insurance companies, and banks.

Financial institutions that respond to inquiries do so directly to you – Knowtification.com cannot access personal or confidential information regarding any accounts or policies uncovered.

While we have no direct experience with this service, in principle it sounds like a great idea. If you are trying to determine if a loved one owned accounts or policies and don’t know where to start, check it out.

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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Earlier this year, Congress passed a 2,500 page healthcare reform package with literally hundreds of new provisions. These included the sort of insurance provisions you might expect, like mandating that college grads can remain on their parents’ policies, as well as dozens of tax changes in support of the Act’s goals, like imposing a tax on so-called “Cadillac plans” that cost above a certain amount.

Many of the Act’s provisions have come under fire. But arguably the biggest controversy surrounds the “individual mandate.” Under the Act, by 2014 everyone must carry “minimum acceptable coverage” or pay a penalty:

• 2014: The penalty is $95 or 1% of income, whichever is less
• 2015: The penalty is $325 or 2% of income
• 2016: The penalty is $695 or 2.5% of income
• 2017 and beyond: The $695 penalty is adjusted for inflation

There are exceptions to the rule, of course. If your taxable income is under the federal poverty line, or the cost of coverage is more than 8% of your household income, you won’t have to pay. And if your taxable income is less than four times the federal poverty limit, you should qualify for tax credits to help pay for coverage.

Twenty state attorneys general have challenged the mandate as unconstitutional, and the issue appears headed for the Supreme Court. If the Supreme Court agrees the mandate really is a constitutionally-protected tax, it could amount to the biggest “tax increase” in history. (Keep in mind the average employer-provided family insurance premium now costs over $13,000 – and that cost will only increase by the time the mandate applies in 2014.)

Of course, this “tax” will be different than most other taxes. Typically, tax dollars collected go to the government. Funds from the insurance mandate will go directly to insurance companies in exchange for the required coverage.

Either way, the healthcare reform package will change how you pay taxes and could affect your estate plan, so we will pay close attention to how it eventually shakes out. In the meantime, don’t hesitate to call our office with any questions. Just think of us as your tax doctor – we’re always on call!

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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Last month President Obama officially signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. A major provision of the Act is that the standard maximum deposit insurance amount covered by the Federal Deposit Insurance Corporation (FDIC) has been permanently increased to $250,000. While you may not have been aware, the standard maximum was $100,000 per depositor; the amount had been raised temporarily until the end of 2013. FDIC insurance coverage limits apply on a per-depositor basis.

What does this mean to you? If you have savings accounts or Certificates of Deposit worth more than $100,000 and less than $250,000, FDIC coverage is assured. (That is, unless the laws are changed at some time in the future, of course.)

If you have liquid assets over $250,000 and want to enjoy FDIC protection, you have a couple of options. One is to spread your deposits across multiple FDIC-insured financial institutions. As long as the value of your account at each institution is not greater than $250,000, you’ll be fine. Another option is to create one account in your name and another in your spouse’s – doing so may allow both accounts qualify (as long as the value is less than $250,000.)

Different rules and limits may apply for Trusts. In general Trusts allow for even more FDIC coverage. For instance if your Trust provides for your 3 children at death your FDIC coverage is $750,000 per institution or 3 times the typical amount. For more detailed information you can visit the FDIC website at www.fdic.gov/deposit/deposits/insured/ownership4.html Even the FDIC website advises you contact a qualified estate planning attorney to review this information. You can contact us to determine how to make sure your savings accounts, CDs, retirement accounts, and assets in Trust are as safe as possible either info@myestateplan.com or 631-265-0599

Mark S. Eghrari & Associates, PLLC is a member of the American Academy of Estate Planning Attorneys.

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