USA – NEW YORK Law and Practice Contributed by: John M Teitler, Nancy A Murphy, Constance E Shields and Von Sanborn, Teitler & Teitler LLP
4.2 Succession Planning Several techniques can help family businesses transfer wealth to the next generation. One method involves utilising discounts for gift and estate tax planning, which typically requires the engagement of a professional valuation specialist. Other options include establishing family limited partnerships and A discount is usually applied to the fair market value of the transfer of a partial interest in an entity. This is a technique commonly used by US estate planners. 5. Wealth Disputes 5.1 Trends Driving Disputes Disputes arise from a wide variety of issues, including: • testator/donor capacity; • interpretation/language construction of instru - ments; • implementation/administration of a trust/estate; • management of corpus; and • guardianship proceedings, among many others. Disputes may be between and among fiduciaries, beneficiaries, third-party creditors, and/or govern - mental taxing authorities or law enforcement agen - cies. Recent trends include: implementing buy-sell agreements. 4.3 Transfer of Partial Interest • increasingly aggressive enforcement proceedings by federal and state tax authorities against high net worth individuals and trusts; • divorce-related litigation against trustees, grantor- spouses and/or beneficiary-spouses; and • “know-your-customer” and related fiduciary risks associated with connections to sanctioned indi - viduals. 5.2 Mechanism for Compensation The remedies available to claimants are extremely wide-ranging and include money damages, declara - tive judgments, rescission, trust reformation, injunc - tive and other equitable relief, and appointment of a guardian (over person and/or property), among other forms of relief.
ily trusts. Further, New Hampshire and Wyoming have laws permitting the use of civil law-style foundations. 3.2 Recognition of Trusts Trusts are routinely used in the United States, par - ticularly in New York. Properly structured, they can be very efficient estate planning vehicles. Additionally, non-US trusts may be recognised in New York and the United States. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation Both the United States and New York have exten - sive reporting requirements. The tax implications are generally similar to those for US-based trusts, except regarding accumulated income and gains, which are subject to punitive taxation. In general, the US taxes US situs trust assets and foreign trusts are not taxed based on the citizenship or residency of the fiduciary. Each state enacts its own income tax reporting regime, and the citizenship or residency of the fiduciary may be relevant. For New York income tax purposes, there may be tax planning options by looking at removing New York resident beneficiaries or fiduciaries. 3.4 Exercising Control Over Irrevocable Planning Vehicles There are several ways to change trust terms; how - ever, these are quite fact-specific and require detailed review by a qualified professional. Notably, New York law permits a trust to be “decanted” subject to fair - ly rigorous rules. Other jurisdictions, such as New Hampshire and South Dakota, have substantially fewer requirements. In some circumstances, New York permits amendments or reformations to trusts.
4. Family Business Planning 4.1 Asset Protection
A number of jurisdictions in the United States have expressly adopted broad asset protection rules for trusts, albeit New York is not one of those jurisdic - tions. That being said, there are other asset protection vehicles, such as limited liability companies, which can be quite effective.
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