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I. Introduction: Dealing with Clients
    A. Introduction to an Estate Planning Engagement
        1. Define Scope of Engagement
            a. Meet with client in person
            b. Define in writing
                i. Engagement letter to client
        2. Who will the client be?
            a. Individual or multiple individuals concurrently (Spouses)
                i. Confidentiality – NYRPC §1.6
                ii. Conflict of Interest – NYRPC §1.7
                      o OK to represent spouses or multiple related individuals as long as a conflict does not arise
                      o Withdraw from representation if conflict arise
                            Possible to represent just one client but often not possible with confidentiality rules
            b. Define what will happen if a conflict arises with multiple clients
            c. Share confidential info with spouse and agree it’s ok
        3. Initial Client Interview:
            a. Why a Will:
                i. Explain what would happen if client does not have a will
                      o EPTL 4-1.1: Intestate Distribution Scheme in NY
                            Spouse and issue:
                                50k to spouse, split reminder 50/50 with issue
                            Spouse and no issue:
                                To spouse
                            Issue and no spouse
                                To issue by representation
                            Parents and no spouse and no issue
                                To parents
                ii. Administrative and Fiduciary Roles
                      o Designate executor
                      o Designate guardian of minor children
                iii. More power to control disposition of assets with testamentary trust
                      o Trust for children
                            Terms for ages of distribution, designate, reasons for distribution
                      o UTMA
                            Custodian referenced in will
            b. Questionnaire
                i. Description of assets and fair market value (FMV)
                      o Expected rapid appreciation or depreciation
                            Closely held stocks
                                Buy/sell agreement re: death
                            Artwork
                            Specialized real estate
                ii. Titled
                      o Individual or joint or tenant in common
                      o Trust
                      o Retirement accounts – beneficiary designation
                      o Life Insurance: Owner/insured/ death benefit/accumulated value/beneficiary
            c. Fees
                i. Charging for initial meeting
                ii. Basis for fees
                      o Flat fee for a defined scope of work
                            Will, health care proxy, power of attorney
                            Life insurance trust, etc.
                      o Hourly fees
                            Rate
                            Maximum cap or minimum fee
            d. Engagement Letter (required if fee expected to exceed $3,000 in NY)
                i. Identify client
                ii. Multiple clients

                 o    Outline conflicts/confidentiality ramifications
                 o    Have them all sign
            iii. Outline scope of engagement
                 o Engaged firm to ____
                       Flat fee: be specific
                       Hourly: ok to be a bit more broad, but prefer being specific
            iv. Identify basis for fees and billing practice
                 o When billing and what will client receive
                       Itemized bill or summary statement
                            Flat fee – summary statement appropriate
                            Hourly – itemized bill
            v. Reference client right to arbitrate fee disputes
       e. Notes:
            i. Keep questions open ended style recommended
            ii. Can have engagement letter prepared
            iii. Conflict check with firm
B. Conflicts of Interest
   1. NYRPC §1.6: Confidentiality of Information
       a. NY Rule 1.6(a): “A lawyer shall not knowingly reveal confidential information, as defined in this Rule, or use such
            information to the disadvantage of a client or for the advantage of the lawyer or a third person”
            i. Notes:
                 o Does not include legal knowledge or research, generally known information
                       There is a small amount of privileged information that is not necessarily confidential
                 o Duty not to knowingly reveal and not use such information to the advantage of lawyer, 3rd person
                      (another client), and the disadvantage of another client/former client
                       Note: ABA 1.8(b) only prohibits disadvantage
                 o Confidential communication can be required to be revealed, however, something privileged wouldn’t be
                      (Comment 12)
            ii. Rule 1.6(a): Exceptions
                 o (1) the Informed consent, as defined in Rule 1.0(j) – get it in writing
                 o (2) Impliedly authorized (see comment 5)
                       Reasonable under the circumstance or customary in the professional community and advances the
                           best interest of the client
                 o (3) the disclosure is permitted by paragraph (b)
       b. NY Rule 1.6(b): “A lawyer may reveal or use confidential information to the extent that the lawyer reasonably
            believes necessary:”
            i. To prevent reasonably certain death or substantially bodily harm
                 o Statistics not sufficient
            ii. Prevent the client from committing a crime
                 o Past crime cannot be revealed
                 o Continuing crime - 2002-1
                       Opinion: The criminal act is the very subject on which the client is consulting the attorney and the
                           clients conduct has completed all the elements of ht offense so not a continuing crime
                            May be a continuing crime for purposes of criminal law, but not for confidentiality purposes
                 o Future crimes
                       Reasonable belief that crime will occur
            iii. ‘Withdraw statement’: To withdraw a written or oral opinion or representation previously given by the lawyer
                 and reasonably believed by the lawyer still to be relied upon by a third person, where the lawyer has
                 discovered that the opinion or representation was based on materially inaccurate information or is being used
                 to further a crime or fraud
            iv. To secure legal advice about compliance with these Rules or other law by the lawyer, another lawyer
                 associated with the lawyer’s firm or the law firm
            v. To defend the lawyer or the lawyer’s employees and associates against an accusation of wrongful conduct or
                 to establish or collect fees (to the extent necessary and must give them the right to go to arbitration)
            vi. When permitted or required under these Rules or to comply with other law or court order
            vii. Other Possible??
                 o 3rd party present during the communications
                 o Not be in the course of representation
                 o Waiver of confidentiality
                 o Identity of the fee payer

               c.   NY Rule 1.6(c): “A lawyer shall exercise reasonable care to prevent the lawyer’s employees, associates, and others
                    whose services are utilized by the lawyer from disclosing or using confidential information of a client, except that a
                    lawyer may reveal the information permitted to be disclosed by paragraph (b) through an employee”
          2. NY RPC §1.7 – Conflicts of Interest: Current Clients
              a. Rule 1.7(a) Objective test not subjective test
                    i. A lawyer shall not represent a client if a reasonable lawyer would conclude:
                         o Differing interest
                         o Lawyer’s own interest conflict
                    ii. If you have a problem under (a) you try to go to (b)
              b. Rule 1.7(b) Subjective Test:
                    i. A lawyer may represent a client if the lawyer reasonably believes the lawyer will be able to provide competent
                         and diligent representation to each affected client;
                    ii. Not prohibited by law
                    iii. Representation does not involve the assertion of claims between clients represented by the lawyer in the
                         same litigation
                         o Can’t represent both driver and passenger since passenger can sue driver
                         o Can’t represent the owner and the child passenger
                               The disinterested lawyer would sue both the mother and the other driver
                               Should have known about the conflict
                    iv. Client consent, confirmed in writing
          3. People v. Berge (p. 30)
II.   Planning for Incapacity
      A. Consideration
          1. Financial Affairs
              a. Power of attorney:
                    i. An arrangement under which one person (principal) gives another person (the agent/attorney-in-fact) the
                         power to act on behalf of the person executing the power
          2. Health Decisions
              a. Guardianship proceedings initiated by family or state
                    i. Dueling family members
                    ii. Time consuming and expensive (as compared to time it takes to execute a POA or HCP)
                    iii. Accounting must be filed with court
              b. Advance Directives – documents allowing the client some control over the end of life decisions in the even of
                    complete incapacity
                    i. E.g. – Not to resuscitate, remove feeding tubes, stop medication, etc
              c. Living will – most widely known form of advance directive
                    i. Speak directly for the patient to various care givers
                    ii. Anticipate various medical situations which could arise and identify the type of care the patient would want
                         o Usually require will execution formalities
                         o Also referred to as “individual instructions”
              d. Health Care Proxy
                    i. Analogous to a POA except it only deals with health care decisions
                    ii. The HCP can make the decisions on:
                         o Continuation of treatment
                         o Stoppage of treatment
                         o Resuscitation
                         o Removing feeding tubes or breathing apparatuses, etc
                    iii. More flexible than a living will because the principal doesn’t have to speculate the type of medical situations
                         that may arise
      B. Health Care Proxy/Living Will (Health Decisions)
          1. Shiavo (FL)
              a. Feeding tube in an incapacitated person
              b. Souses and parents disagreed on removal of tube
              c. Spouses wish to remove tube was upheld
              d. Long and expensive legal fight
          2. End of life care
              a. Designate a person to act on your behalf with health care decisions
                    i. Single individual with successors (alternate)
          3. Standard of decisions making for proxy?
              a. Attorney’s should generally decline to be a health care proxy

             i.   Possible conflict of interest??
             ii.  Family first
                  o Pick the family member you like the most
             iii. Friend
             iv. Living will
        b. Can change HCP any time
             i. New one revokes prior HCP
        c. Principal’s wishes
             i. Expressed wishes will govern
             ii. If not expressed, what the agent believes is in principles best interest
        d. Client should talk to designated agent
             i. Client should let them know you’ve appointed them
             ii. Talk about your wishes
        e. HIPAA paragraph
        f. Does not act as a DNR
        g. US and Europe – in an emergency situation they will make efforts to keep you alive, then find out who you are and
             find out if you have a heal care proxy
C.   Power of Attorney (Financial Decisions)
     1. Attorney in fact:
        a. Does not need to be an attorney but can be
     2. Statutory form in NY
        a. Sept 2009 – major modifications
        b. Sept. 2010 – additional modifications
        c. Anything executed in the prior form still valid now
     3. Financial institutions must accept the statutory form
        a. Use statutory form!
     4. Power of attorney form
        a. Needs to be notarized
     5. Statutory gifts rider
        a. Separate document that must be executed at the same time as the POA
        b. Necessary to make “gifts” over $500 to any person, including themselves
        c. Needs two witnesses and notary
     6. Agent must sign POA form
        a. Agent can sign at anytime but not effective until agent signs the form
        b. Agent signs stating that they understand what their legal obligations are as an attorney in fact
     7. POA Form:
        a. Ability to designate a monitor
             i. Monitor can require Attorney in fact to confirm that they are acting in accordance with wishes of principal
             ii. Fiduciary duties of monitor are not well defined
        b. Ability to provide for compensation for attorney in fact
        c. Continues in effect
     8. Capacity:
        a. Ability to comprehend the nature and consequence of the act of executing the POA
             i. Talk to client (principal) individually
        b. Durable POA – effective immediately
        c. SGR:
             i. If only annual exclusion gifts only initial (a)
             ii. Initial (a) and (b) OR just (b) to do grater giftd
     9. In Re Ferrara (7 NY3d 244)
        a. The decedent executed a will explicitly stating that he was not making any provision for any family members and
             that his entire estate was to go to the charity
        b. After the decedent's health began to decline, the decedent signed a durable power of attorney making his brother
             and his nephew his attorneys-in-fact
             i. The form used was the statutory short form provided in N.Y. Gen. Oblig. Law 5-1501(1). N.Y. Gen. Oblig. Law 5-
                  1501(1)(M) permitted an attorney-in-fact to give gifts to family members not to exceed the aggregate of
                  $10,000 to each person in any year
             ii. The form executed by the decedent removed the $ 10,000 limitation
        c. The nephew subsequently transferred $820,000 of the decedent's assets to himself

             d.    Where the statutory short form was augmented under N.Y. Gen. Oblig. Law 5-1503 to remove the $10,000
                   limitation, an attorney-in-fact had to make gifts in the principal's best interest, which was interpreted by N.Y. Gen.
                   Oblig. Law 5-1502M as gifts to carry out the principal's financial, estate, or tax plans
             e. The nephew did not make gifts to himself for such purposes
             f. He improperly impoverished the decedent whose will contradicted any desire to give his estate to the nephew
             g. Wasn’t enough evidence to suggest that the gifts were in the principal’s best interest
     D. Revocable “Living” Trust (Financial decisions)
         1. Manage assets if incapacitated
             a. Alternate trustee
                   i. Springing power of attorney equivalent
             b. Probate avoidance
                   i. Some states have % of estate for fees
                   ii. Not a major concern in NY (small fees)
             c. Probate proceedings
                   i. Value and nature of assets disclosed
             d. No estate/gift benefit
             e. Income Tax – grantor trust
         2. Who:
             a. Residents of FL or other high probate cost state
             b. Sophisticated Business Interests
             c. Client who is alone/little family
III. Valuation
     A. §2031 – Fair Market Value at Date of Death
         1. Controls valuation in the vast majority of estates
         2. Requires inclusion in the gross estate of an amount equal to the fair market value of the interest on the date of the
             decedent’s death
     B. Difficult to value:
         1. Closely Held business
             a. Family limited partnership/limited liability company         Expert appraisal reports
         2. Real Estate
         3. Artwork
     C. Easier to Value
         1. Cash
         2. Stock Traded on Exchange
             a. Average on date of death
                   i. 20.2031-(2)(b)(1)
             b. Accrued dividends
                   i. Dividend declared but not pd before date of death
                        o $ amount per share
     D. §2032 – Alternate Valuation
         1. Allows for valuation as of 6 months after date of death
         2. Applies to all assets, can’t pick and choose
         3. (Must sell before 6 months??)
IV. Income Tax Considerations (w/ Estate Tax)
     A. IRD – Income in Respect of Decedent
         1. §691
         2. Items of income attributable to efforts decedent it hadn’t died
             a. Making a cash basis taxpayer equivalent to accrual basis
         3. Items of IRD are subject to income tax (paid by the recipient)
         4. Also, included in the gross estate
             a. Ex// stock dividends
         5. Recipient can deduct from income tax amount of estate tax attributable to item
             a. Proportional basis
             b. Example:
                   i. $1000 (x .30) = 300 tax (assume tax included in gross estate??)
                   ii. $700 after tax
                   iii. Included in gross in estate and taxed as income, but the recipient can deduct from income amount of estate
                        tax attributable to the item
                        o proportional basis (or not)??
         6. Salary unpaid at death

            a. Deferred compensation
        7.  Dividend paid after death
        8.  Accrued interest and rents
        9.  Gain from installment obligations
        10. Death of seller of a home
            a. §121 Exclusion – can exclude the gain from the sale of the house up $250k worth of gain if the seller lived in the
                 house for 2 out-of 5 years and owned it for 2 out-of 5 year(cannot have used discount in last two years)
       11. Significant gain – if realized after death, IRD but §121 will apply if decedent would have qualified
       12. No pending sale – but heirs sell it after
            a. Heirs would get step up in basis so unlikely to have any gain
            b. §121 would not apply
       13. Value of home included in gross estate
V. Estate Tax Reinstatement – good for 2 years
   A. Law signed: December 17, 2010 [lame duck session]
   B. Effective for 2 years: 12/31/12 [also lame duck session?]
   C. Section 301(a) – As thought 2001 A and E of title V of 2001 Act was never enacted
       1. *Back to the old*
            a. A – repealed the estate tax for 2010
            b. E – Enactment of basis step up limitations/carry over basis
       2. Executor can elect not to have section 301(a) apply for a decedent in who died in 2010
            a. Executor by election can say Subtitle A and E were enacted/effective
            b. 2010 decedent can choose between new estate tax and the 2010 system enacted by the 2001 law
                 i. No estate tax but limits on basis step up
                 ii. 9 months to decide
       3. 2010 under the 2001 Law:
            a. No Estate
            b. Still gift tax with 1m exemption
            c. Limitation on traditional unlimited step up in basis for assets passed from a decedent
                 i. $1.3m limit on step up
            d. FMV: $100m
            e. Basis: $1m
            f. Gain: $99m
            g. Tax on the gain (assuming 10%; note: should be 15%)
                 i. $9.9 million tax
            h. Value
                 i. 89,100,000
                      o (x.50) estate tax
                 ii. Estate Tax: $44,550,000
                 iii. Heir: 44,550,000
            i. Total tax – $54m
            j. FMV: $100m
                 i. Tax: .5
                 ii. Estate tax: 50,000,000 estate tax
                 iii. Now heirs get business with 100m basis so a 0 gain at sale
            k. In 2010 no estate tax but no step up in basis
                 i. FMV – 100m
                 ii. AB – 1m
                 iii. Increase basis to 2.3m (1.3m step up)
                 iv. Gain – 97.7m
                 v. (.1 tax)
       4. [§302(a)] People who died in 2011 and people who died in 2010 who choose it
            a. $5m applicable exclusion for estate and gift tax
                 i. Can pass during life or at death
            b. Indexed to inflation for 2012
            c. Maximum rate is 35%
            d. Calculating Estate Tax
                 i. Add back lifetime gifts to gross estate (valued at time of gift)
            e. Calculate tax at current rate
                 i. Credit any gift taxes paid
            f. Everyone has a total of $5m to give tax free

             i.  Before it was $1m s they were making taxable gifts after reaching the $1m exclusion
                 o Now they have another $4m they can gift tax free
   5. §303 – Portability applicable exclusion
       a. Unlimited marital deduction??
       b. First to die spouse’s exclusion not lost even if you bequeath all your assets to your surviving spouse (outright or
            QTIP) and marital deduction applied
            i. The unused exclusion amount - filing an estate return on the first to die spouse’s death
                 o – Don’t need to actually have any assets, just didn’t use the exclusion (First to die spouse can be destitute)
                 o Must file even if not require to have available to surviving spouse (to have a combined 10m exemption)
                 o Can only use your last spouse’s unused exemption
                 o Can save 1.75m
                 o Sham marriages
D. Exempt Property – 56k max
   1. Items set aside for surviving spouse, in none, surviving children, receive following before creditors
       a. 10k – housekeeping utensils, musical instruments, sewing machine, household furniture and appliances, including
            but not limited to computers and electronic devices, used in and about the house, fuel, provisions and clothing of
            the decedent
       b. 1k – family bible, family pictures, video tapes, and computer tapes, discs, and software used by such family, and
       c. 15k – Domestic animals with their necessary food for sixty days, farm machinery, one tractor and one lawn tractor
       d. 15k – Motor vehicle
       e. 15k – money
       f. Total – 56k
   2. EPTL §5-3.1
       a. exempt property is included in the gross estate for federal estate tax purposes
       b. Most of the time will qualify for the marital deduction
            i. Passes outright to the spouse, no trust involved (US citizens)
   3. Not exempt from estate tax – exempt from creditors claims
   4. Must go to the surviving spouse, if no spouse then to minor children
   5. Sometimes want exempt property to others
       a. Gift or life
       b. Alternate bequest
E. Right of Election – of a surviving spouse
   1. A surviving spouse has a right to the greater of 50k, or 1/3 of the net estate outright
       a. Outright regardless of the provisions of wills, trusts, and even certain testamentary substitutes
       b. How do we calculate the net estate
            i. Gross Estate (mostly) for Fed. Estate Tax purposes
            ii. Gifts made w/in 1 yr of date of death
            iii. (exempt property)
            iv. (Debts, funeral expenses, admin expenses)
            v. = Equals net estate
   2. Example
       a. Property:
            i. Real property in CA – 100k
                 o CA community property state
                 o Assume didn’t live in CA
            ii. Home subject to retainer life estate – 200k
                 o Remainder to child
            iii. Joint account with child with right of survivorship – 100k
                 o Goes to child
                 o Who contributed the money within the account
            iv. 401k – 50k
                 o Included in gross estate
                 o Pass to beneficiary
                 o Assume someone other than the spouse
            v. Gift to child 9 months before death – 200k
            vi. Gift 2 months before death to 2 grandchildren – 26k
                 o Annual exclusion
       b. Probate Asset:
            i. Real Property in CA

          c.  Domiciled:
              i. In NY
              ii. NY not a community property state
          d. Family
              i. Spouse
              ii. Child
              iii. 2 grandchild
          e. Will or intestate
              i. Will – ½ to child and ½ to surviving spouse
          f. Net Estate
              i. 650k
              ii. (subtract except property if any)
              iii. Total = 650k
              iv. (77k) debts, admin, funeral expenses
              v. Net estate = 573k
          g. Elective share = 1/3 of net estate
              i. 190k
          h. Through Will
              i. Spouse receives 50k + 50k = 100k
          i. Elective share – amount received by spouse
              i. 190k – (100k) = 90k
                    o Deficit of 90k
              ii. Deficit is funded prorate by beneficiaries of the net estate (here child)
          j. Ideas to reduce amount left to spouse
              i. Divorce
              ii. Determine marital status
              iii. Waiver of right of election
                    o Pre-nup or post-nup
              iv. Sell assets that are appreciating to family members
              v. Spending your money
              vi. Pay tuition/prepay §529 plans
              vii. Medical expenses
              viii. Trust:
                    o Life estate trust to spouse??
                    o Trust formed for you not part of gross estate
                         Decedent is a beneficiary of trust
                    o Can’t provide for elective share in trust
                         i.e. can’t provide elective share in trust since they can get the elective share outright
     3.   Example 2
          a. Gross estate: 60million
          b. (5m)
          c. Roughly 55million subject to estate tax
          d. Take 5 million in trust for children and grand children
          e. 55million – qualify for marital deduction
              i. Trust QTIP (waiver of right of election)
                    o Income distributed to wife for life
                    o Remainder to children and grandchildren
          f. Assume 20m –right of election
          g. If right of election invoked, waiver was invalid, balance goes to other beneficiaries
              i. 55m
                    o 20m marital deduction??
F.   Marital deduction –

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