1. Science, Industry & Business Library
Blueprint for Your Business Future Estate Planning Fundamentals for Immigrant Owned Businesses
New York Public Library
Science, Industry & Business Library
Science, Industry & Business Library

2. Disclaimer
All information contained in these pages is for informational purposes only. It should not be considered legal advice. Please consult an attorney before taking any steps based on this information.
Financial Planning Association

3. What is an “Estate Plan”?
LEGAL DOCUMENTS
“Living Documents”
Wills & Trusts
Deeds to Real Estate
GIFTING DURING LIFE
Giving Outright or in Trust
529 Plans & UTMAs
Health & Education Expenses
ACCOUNTS & BENEFICIARY DESIGNATION FORMS
Joint & Individual Accounts
Life Insurance Policies
Retirement Plans

4. Estate Planning While You Are ALIVE
PART ONE
Estate Planning While You Are ALIVE
How to Protect Your Business During Your Life

5. What are “Living Documents”?

6. Why Your Business Needs Them
“Living Documents” allows your agent to handle your business affairs when you cannot
A business partner can handle finances
A family member can handle your health needs
When could you need them?
In a hospital
Out of the country
Too busy to bother with small transactions

7. Power of Attorney
Designate a person(s) to manage your financial affairs.
Business partner  business matters
Family member  personal matters
States specific areas of your finances you are giving control over (can be all areas).
Can allow “Gifting” to others
Beware. This is a blank check. The person you designate could take all your money. They could go to jail, but the money may have disappeared before they are caught.

8. Health Care Proxy A document regarding health care decisions
Names an “Agent”
Gives authority to make health decisions
Grants access to medical records
States Organ Donation desires
Places limitations on treatment

9. Living Will States your desires when:
1. You are in a terminal condition; or
2. You are permanently unconscious; or
3. You are conscious but have irreversible brain damage and will never regain the ability to make decisions and express your wishes.
These conditions are sometimes referred to as "a vegetative state."

10. Estate Planning AFTER Your Life
PART TWO
Estate Planning AFTER Your Life
How to Transfer (or Capitalize) Your Business Upon Your Death

11. Methods to Transfer Your Property
“Operation of Law” Transfers
Probate / Administration
Anything with a “Beneficiary Designation” Because we know who it goes to at death
Jointly Owned Property
Some Business Agreements
Retirement Plans
Life Insurance
“Transfer on Death” [TOD] accounts
Trusts
This is what transfers through your WILL
Because we don’t automatically know who it goes to
This includes all property not listed under “Operation of Law”
(I.e. everything else)
2 Legal Procedures:
If there is a valid Will = “Probate”
If NO Will = “Administration”

12. Non-Testamentary Transfers
This property does not require a Last Will and “Testament” for it to be transferred (so we call it “Non-Testamentary)
Your Business Partnership (sometimes)
Joint Property
Life Insurance
Retirement Plans
Transfer on Death [“TOD”] accounts
Trusts

13. Businesses After Death
Some businesses that are owned by 2 or more people may pass to the survivor outside of Probate
This requires legal documentation
Needs to be discussed with a business attorney and agreed upon by the owners

14. “Buy / Sell Agreements”
A written contract between 2 or more business owners that pays money when one partner passes away
The Survivor receives the business
The family of the deceased owner gets money

15. “Buy / Sell”: Business Insurance
EXAMPLE: 2 partners own a business, the business owns life insurance on the partners
Partner 1 dies
The business receives the life insurance proceeds
The business pays life insurance to Partner 1’s family
Partner 2 now controls the business

16. “Buy / Sell”: Partner Insurance
EXAMPLE: 2 partners own a business, the partners owns life insurance on each other
Partner 1 dies
Partner 2 receives the life insurance proceeds
Partner 1’s family still owns Partner 1’s business interest
Partner 2 now has money to
(1) buy-out Partner 1’s family, or
(2) continue running the business without Partner 1 (but pays some profits to Partner 1’s family

17. Jointly Owned Property
The Survivor needs the other owner’s Death Certificate (that is all)
Can be used for S-Corp or C-Corp stock or LLC ownership
Example: “Martin Chen and Linda Chen, Joint Tenants”
No Probate or Administration needed
Positives
Negatives
Easy access to both owners
Minimal transfer costs
Non-trusted joint owner can empty the account
May have gift tax costs and consequences

18. Life Insurance
Beneficiary needs a Death Certificate and be named on the “Beneficiary Designation Form”

19. Retirement Plans
Includes: IRAs, 401(k)s, 403(b)s, certain pensions, etc.
Beneficiary needs a Death Certificate and be on the “Beneficiary Designation Form”
Owner must begin taking Required Minimum Distributions [“RMDs”] the year after he/she turns 70 ½ (most people do it at 70 ½)

20. Inherited IRAs Everyone else: “Inherited IRA”
Only a spouse can transfer one person’s IRA directly to his/ her own IRA (owner must be dead)
Everyone else: “Inherited IRA”
“The Nancy Smith Inherited IRA f/b/o Megan Smith- Jones”
The beneficiary must take RMDs no later than the year after owner’s death, even if the beneficiary is under 70 ½

21. Transfer of Death [“TOD”]
Also seen as “In Trust For” [“ITF”] or “Payable on Death [“POD”]
Owner retains total control during life
Can change beneficiary, take all funds out, etc.
Future beneficiary has no control until owner passes
After passing, beneficiary needs a Death Cert.
Ex: “Mary Smith Savings Account TOD Patrice Lange”
 Convenient for businesses that are not Corporations or LLCs (some family busnesses)

22. Trusts: Who is Involved?
Assets owned bya Trust pass Outside of Probate
Creator / Grantor / Settlor
> Creates the Trust
> Determines Terms of the Trust
> Funds the Trust
Beneficiaries
> Entitled to the property under the terms of the Trust
Trustee
> Manages the trust property
> Follows the Terms of the Trust
> Entitled to a Commission

23. Revocable Trusts
A person can serve as all three parties at the same time
(1) amend or revoke the trust,
(2) if the Creator becomes disabled a Successor Trustee can continue to use Trust funds for the Creator’s benefit without requiring court approval
(3) upon the Creator’s death the Successor Beneficiaries receive the remaining estate without the need of going through Probate
A Revocable Trust can own S-Corp stock or an LLC, BUT the owners must be US citizens
ONLY US Citizens can own S-Corp shares

24. Revocable Trusts: + & - Benefits Detriments
Can be altered, amended revoked
Creator can transfer funds into and out of Trust whenever they want
Detriments
No savings on estate taxes
** Have to “Fund” the Trust:
Account / Deed Name:
“The John and Mary Smith Revocable Trust”

25. Trusts vs. Wills Wills Trusts Positives Typically cost less to draft
You should have one anyway
No Probate costs for assets transferred by Trust(s)
Private document
Fast distribution of funds / Continuity of control
May provide tax savings / government program access
Negatives
Eventual Probate Costs
All information is public
Longer time to access and distribute funds
You may need a “Testamentary Trust” anyway
More legal fees up front
Time / effort required to transfer assets into Trust

26. Wills: What does a proper Will accomplish?
States who receives what property and how / when
Names an Executor: to administer Probate Estate
Collects assets; appraises valuables; sells property
Pays creditors
Can bring lawsuits
Pays beneficiaries
Can be paid for services
Names a preferred Guardian for Minor Children

27. Probate: When there is a valid Will
A PUBLIC process to validate and administer a Will
Executor brings the Will to SURROGATE’S COURT
Places relevant parties on legal notice
 Court may appoint an attorney to represent minor children (a “Guardian Ad Litem”)
Court appoints a “Guardian of Minor Children” (usually any remaining parent or family member)
Executor delivers an “Inventory of Assets” with the court

28. Executor: Your Business Representative
Your EXECUTOR has the same rights as you
Runs your business like you would until Probate is completed
Can enter contracts
Pays bills, collects funds
Responsible for selling or transferring your business (depending on what your Will wants him to do)
Someone (1) who is competent and (2) that you trust
At least one Executor MUST be a permanent U.S. resident (or a bank / trust company)

29. Guardians Minor children (younger than 18): (1) need a Guardian
(2) cannot own property
(1) If parents are unavailable the Court asks who is a good choice for Guardian (look at the Will to see who parent wants as Guardian)
This is just one of many factors
Asks what is in the “Best Interest of the Child”
(2) If a minor is left property the Court can appoint a “Guardian Ad Litem” – an attorney your estate pays for that represents the child

30. Testamentary Trusts A Trust created in a Will
Example: “My Trustee shall pay for my child’s health, education and support needs until he/she is 25, at which point the rest of the Trust shall be paid to him/her”
A Trustee is named
A different job than Executor (but can be the same person); only concerned with the money in Trust
Choose a Trustee you trust; can have more than one person serve at the same time

31. Who Should I Give To? You can choose who gets what, HOWEVER…
The people listed in the prior slide have the right to contest if you do not leave them your estate
There is no legal obligation to leave money to people not in the order of the prior slide
You can leave money to almost anyone in almost any country (but they may be taxed)
ALSO, certain people have a right in your property even if you leave them nothing…

32. YOU HAVE A WILL WHETHER YOU HAVE WRITTEN ONE OR NOT
Guess What…
YOU HAVE A WILL WHETHER YOU HAVE WRITTEN ONE OR NOT

33. Administration: When there is NO Will
An Administrator is named and MUST deliver your property to these people:
Who Gets What?
1. Spouse only - 100%
2. Spouse & Children - $50,000 to spouse +
50%/50% split between spouse and children
3. Children only - 100% divided equally
4. Parents only - 100% divided equally
5. Siblings only - 100% (Nieces and Nephews)
6. Grandparents only - 100% divided equally
7. Aunts + Uncles only - 100% divided equally
8. Cousins only - 100% divided equally
9. The State of New York
Who Gets Nothing?
1. Life Partners
2. Friends
3. Those relatives not “in line” (see left)
4. Pets
5. Organizations and Institutions
6. Business Partners
7. Specific Gifts to Specific People
8. Charities

34. What Happens to my Business if there is NO Will
Your family needs to submit a Petition and Waivers from all relevant family members
Pay a Court fee and drop off all paperwork
If there are minor children beneficiaries: Court appoints an attorney to represent them
This takes 2-6 months
During this time:
 If No Partners (I.e. you are the only owner): your business CANNOT legally function
 If Partners: your partners run the business on their own as they think it should be run

35. Spouse & Family Rights
Your Spouse is entitled to One Third (1/3rd) of your estate by law
Even if you leave them nothing in your Will
This is call the “Spousal Right of Election”
Different than Administration (where this is NO Will)
Your Spouse and children are also entitled to approximately $96,000 of various property
$25,000 in cash
A car with a nominal value
Certain household belongings

36. Executor / Administrator Compensation (if not stated in Will)
ONLY paid for money passing through Probate or Administration:
5% for the first $100,000 probated ($0 to $100,000)
4% for the next $200,000 probated ($100,001 to $300,000)
3% for the next $700,000 probated ($300,001 to $1,000,000)
2 ½% for the next $4,000,000 probated ($1,000,001 to $5,000,000)
2% for all additional assets probated ($5,000,001 and Above)
Co-Executors may each be entitled to a full commission

37. SPECIAL ISSUES for Non-US Family Members
PART THREE
SPECIAL ISSUES for Non-US Family Members
What are the rules for people living outside of the US

38. Non-Citizen Issue: Your Business
REMEMBER: A foreign citizen CANNOT own S-Corp stock – ALL owners must be US Citizens
If you leave them your business, even a small portion, they may have to change the corporate entity or sell the business
It is difficult for people in other countries to run small businesses from outside of the US
Most US banks are NOT international
Small businesses are typically local, require lawyers in local areas
US attorneys are licensed by States, not the country
US banks scrutinize foreign money transfers

39. Non-Citizen Issue: Non-US Executors
A foreign citizen who does not live in the United States CANNOT be an Executor alone
Need at least one person who is residing in the United States
IDEA: You can name more than one Executor
One person can be a person not a US citizen living outside of the County (trusted family member)
The other person can be a US citizen you trust who is getting nothing from your Estate

40. Non-Citizen Issue: Leaving Money to Non-US People
You may leave your money to people in other countries
They have to sign a Waiver in front of a Notary (usually at a US Embassy or Consulate)
Your Executor may have to file paperwork with the Consulate of that person’s country
If you cannot find all beneficiaries or one has died the Court appoints a Guardian Ad Litem
People in your close family and others you leave money to must consent to Probate in writing OR be given the chance to show up in Court

41. Non-Citizen Issue: What if I Have a Will From Another Country?
If the Country has certain treaties with the United States, then a valid Will from that Country is valid in the US
Varies depending on the Country, but most are valid in the US
The Country’s Consulate in New York may have to receive notice of the death

42. Non-Citizen Issue: How does my US Will Affect Property in Another Country?
If you have a valid Will in New York and a Treaty with the other Country exists, then you should be able to use the US Will to collect that property in the other Country
ALL property worldwide is subject to US Estate Tax if you are a US citizen
New York usually does NOT assess estate taxes on real estate owned in foreign countries
You may need another attorney in the other Country to collect the property for your estate

43. What Transfers are NOT Taxable? US Residents
Transfers Between Spouses
Any US Person’s Health and Education Expenses
The Annual Exclusion
Gifts of $14,000 (in 2014)

44. What Transfers are NOT Taxable? NON-US Residents
Transfers Between Spouses:
- At Death: $60,000
- During Life: Only “Annual Exclusion”
Any US Person’s Health and Education Expenses
The Annual Exclusion
Gifts of $14,000 (in 2014)

45. Resident Reporting Requirements for Gifts From Out of Country
(1) if ALL foreign gifts received total more than $100,000 per year, OR
(2) transfers from foreign entities exceeding $10,000
Failure to Report: 25% penalty (and if fraud is involved there can be criminal charges)

46. Drafting Legal Documents
See a lawyer who focuses on Estate Planning before drafting documents

47. Questions & Answers Daniel Timins, Esq. dan@timinslaw.com
477 Madison Avenue
Suite 240
New York, NY 10022