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By Nancy Burner, Esq.

Nancy Burner, Esq.

Not all estates require a probate or full administration proceeding. A small estate proceeding,  also known as a Voluntary Administration, is a simplified Surrogate’s Court procedure. 

What estates qualify?

The  Voluntary Administration is available if the decedent passed away with $50,000 or less in  personal property. Personal property includes cars, cash, stocks — anything but real estate. The Voluntary Administration proceeding is not an option when the decedent owned real  property solely in their own name. It is available if the decedent died with or without a Will.  

Voluntary Administration is not only for decedents who had minimal assets. Sometimes  only certain assets were owned by the decedent in their sole name. This happens often with  married couples with joint bank accounts or who own real estate with rights of survivorship. A decedent may have named beneficiaries on most of their accounts. In such cases only some  property needs to pass through Surrogate’s Court. Other times a decedent conveyed most, but not all, of their property to a trust. If the assets left outside the trust are less than  $50,000, a Voluntary Administration is available.  

How to file

The small estate proceeding is initiated by filing of an “Affidavit of Voluntary  Administration.” The Petitioner is either the nominated Executor in the decedent’s Will or  the closest living relative when there is no Will. The Petitioner is asking the Court for the  authority to collect the decedent’s assets, pay off any debts, and distribute the property to  those with a legal right to inherit. If there was a Will, the beneficiaries named in the Will  inherit. If there was no Will, then the estate passes under the laws of intestacy. 

The Voluntary Administration Proceeding is less complex than a probate or full  administration proceeding. Consent and Waiver is not required from the decedent’s  distributees (heirs who will inherit under the estate). The Court only provides the  distributees with notice that the proceeding was filed. This avoids the expense of costly  litigation over the appointment of a fiduciary.  

Drawbacks

The Voluntary Administration Proceeding has some drawbacks. The appointed  Administrator only has the authority to collect the specific assets listed on the Affidavit of  Voluntary Administration. Such broad authority is only available in a full probate or  administration proceeding. The Administrator does not have the broad authority to collect  and distribute any additional assets. If the Administrator finds assets not listed on the initial Affidavit, they have to go back to the court. 

Further, if the assets exceed $50,000, the Administrator must convert the proceeding to a full probate or Administration. For this reason, when there is uncertainty about the assets, it may be wise to proceed with a full  probate or administration proceeding.  

A small estate proceeding costs only $1 to file. While the Voluntary Administration  Proceeding is simple and inexpensive, mistakes can be costly. It is always a good idea to  consult with an experienced Estate attorney to ensure that a small estate proceeding is the  best way to proceed. 

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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Island Federal Credit Union (Island Federal) has announced a new mortgage program to make it more affordable for first-time buyers to purchase a home on Long Island. For those who qualify, Island Federal’s Cut-the-Cost Mortgage Program reduces closing costs up to $5,000.

“Throughout our history, Island Federal has offered innovative programs to make homeownership possible for more Long Islanders. In 2018, we introduced the Dream it. Achieve it. Mortgage to allow up to 100% financing. We also offer the Heroes Mortgage that waives underwriting fees (approximately $600) for those who serve in the military, education, medical, or other service professions. The Cut-the-Cost Mortgage Program is the latest addition to the suite of products that enable first-time buyers to afford a home,” said Bret W. Sears, President/CEO, Island Federal.

“The Cut-the-Cost Mortgage Program is a terrific program for the first-time buyer as Island Federal provides up to $5,000 towards closing costs for those who qualify. While there are other mortgage programs that claim to offer ‘no closing costs,’ purchasers discover that their programs do not cover all fees. With our program, buyers will know what the costs will be, so there will be no surprises at closing,” added Tim Aaraas, Vice President/Retail Lending.

Aaraas continues, “In addition to specialized programs, Island Federal offers no-obligation seminars that review the mortgage process from application to closing. For Spanish-speaking home buyers, Island has mortgage professionals that are bilingual. To make it more convenient to apply, we have an Island-Easy Online Mortgage application that can be completed in as little as 10 minutes. Most of us dream of owning our own home. At Island, we want to make that possible.”

To learn more about Island Federal’s Mortgage options, visit www.islandfcu.com/mortgage.

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By Michael E. Russell

Michael E. Russell

The state of our economy reminds me of the skit performed by Bud Abbott and Lou Costello in the 1950s. Who’s on first, what’s on second, I don’t know who is on third! What a mess!

Treasury Secretary Janet Yellen admits to a series of mistakes by her department and by the Federal Reserve. President Biden is now going to Saudi Arabia to ask them to pump more oil while shutting down our own pipelines. I find it difficult to believe that inflation is only up 8.6% year over year, a statistic issued by the Fed. Gas at the pump is up 60%, meat up 62%, vegetables up 55%, air travel up 34%; I just don’t get it.

I feel like a grandparent who tries to help the kids with their math homework. It is somewhat confusing to me that 2 + 2 no longer adds up to 4, etc., etc. I guess our kids are all going to become economists and work for the Federal Reserve.

I do not want to be the bearer of bad news, but I think a reality check would be in order. I will use the Federal Reserve number even though they exclude food and housing. Really! On inflation, there can be no dispute. Friday’s report that consumer prices shot up by the highest number in 40 years cannot be considered a surprise. Reports issued by the University of Michigan’s consumer confidence survey showed the most downbeat sentiment on record, mainly due to historically low unemployment and soaring prices. 

It appears that notes from the Federal Open Market Committee (FOMC) indicate that Fed Chairman Jerome Powell intends to raise rates one-half percent this month and again in July. Futures also indicate another half percent increase in September.

The change in attitude at the FOMC since March is extremely troubling. The inflation numbers caught them completely by surprise.  Why didn’t they just ask people who were filling their gas tanks and shopping for food?  They sure knew that inflation was running rampant. Just a few more statistics, because Washington D.C. makes me crazy.

Larry Summers, who served as Treasury Secretary from 1999-2001, issued an economic research paper this past week. To quote, “In order to bring down core CPI to the 2% range would require the same extreme monetary restraint exerted by former Fed Chairman Paul Volcker which resulted in back-to-back 1980s recessions.” Once again there are plenty of smart people out there who have been stating that the Fed is way behind the eight ball. Example:  former Alliance Bernstein chief economist Joseph Carson has been screaming for more than a year, “The Federal Reserve is missing the boat.”

Let’s talk about stocks. The Standard and Poor’s P/E has dropped from 21 to 16. This number, 16, is normally considered to be a reasonable P/E to purchase stocks. However, if interest rates are still too low and earnings forecasts drop, don’t be surprised if there is more damage done to the stock market. The market is down 10 out of the last 11 weeks. I blame the Fed’s ineptitude in dealing with inflation, plus the war in the Ukraine and the lasting effects of the pandemic.

What do we buy? Drugs! Not street drugs, but great drug companies. The pandemic and the need to stay home and eat and eat and eat have caused a lot of us to get fat. So, let’s look at companies that make insulin. Why?  It manages blood sugar levels which help weight control. Eli Lilly (LLY) just received FDA approval for Tirzepatide for diabetes apparently with good results. Novo Nordick (NVO), a Danish company is the world’s top maker of insulin. Novo’s drug sales for obesity doubled year over year to $480 million. They are projecting a nine-fold increase in sales.

Some news that hit the wire this past week:

1. Twitter agreed to share data on false accounts with Elon Musk, thus putting the $44 billion takeover back on track.

2. Jet Blue airlines increased its offer to purchase Spirit Airlines.

3. Kohls is in talks to be purchased by Franchise Group for $8 billion.

As our parents told us, “if you don’t have anything good to say, stop talking.” On that note, please enjoy our wonderful weather. If any of our readers know how to keep the geese off the front lawn and the deer out the garden, please let me know. 

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Nancy Burner, Esq.

Nancy Burner, Esq.

A key tool in the estate planner’s toolbox is a living trust. The term “living trust” refers to a document created during life that establishes a legal entity which can own certain assets.  The term differentiates a living trust from a “testamentary trust,” which is created after death. A further distinction to be made is whether the trust is Revocable or Irrevocable. Regardless of the title of the trust, the terms of the document will dictate the rules of how the assets in trust are managed and what control is retained by the trust creator.

A revocable trust leaves the creator with complete control over trust assets. The creator can be named as trustee with the power to revoke, amend, and restate the trust. Further, the creator’s Social Security number is used for the trust’s estate and income tax reporting. The main purpose of creating a revocable trust is to avoid court involvement after death. 

Assets that are not in a trust, do not have a joint owner, and do not name a beneficiary, require a court process after death. For those assets, the New York State Surrogate’s Court process is called probate, if the deceased person had a will, and administration, if they died without a will. There are several reasons to avoid the court after death, varying from disinheriting family members or not knowing your family, to owning property in multiple states or having disabled beneficiaries. For these and other purposes, the creation of a trust is often recommended.  

Beyond revocable trusts, circumstances may dictate the creation of an irrevocable trust. Irrevocable trusts are those that are written in a way to limit the creator of the trust in some fashion. The exact limitations will depend on the goals of the trust.  Common reasons to create an irrevocable trust are for Medicaid planning purposes or estate tax planning.  

For estate tax planning, two such trusts are an Intentionally Defective Grantor Trust (“IDGT”) and a Spousal Limited Access Trust (“SLAT”). Assets owned by an IDGT are removed from the creator’s estate, placing the growth outside of their taxable estate while taxing the income to the creator.  A SLAT is an irrevocable trust created by one spouse for the benefit of the other. The SLAT can provide income and principal distributions to the spouse and other beneficiaries. While the contributing spouse makes an irrevocable gift to the trust and gives up any right to the funds, the beneficiary spouse and other beneficiaries are provided immediate access to the gifted funds. Both the IDGT and SLAT are tools for claiming the benefit of the current Federal estate tax exemption ($12.06 million in 2022) before it expires.

Most people do not realize that the death benefit of life insurance is taxable in your estate. Creating an Irrevocable Life Insurance Trust (“ILIT”) and transferring policy ownership to the trust removes the death benefit from the taxable estate. This also provides liquidity to pay any taxes imposed on the balance of the estate.

If the goal is to protect assets while obtaining eligibility for Medicaid benefits, it may be prudent to create a Medicaid Asset Protection Trust (“MAPT”).  Under this type of trust, the creator should not be the trustee.  While the creator can receive income distributions, they are restricted from accessing principal of the trust.  

All trusts, whether revocable or irrevocable, can avoid court process after death so long as the document is drafted and funded properly. The type of trust and exact terms can be determined by an estate planning attorney to ensure the client’s specific circumstances and goals are considered. 

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Michael E. Russell

Michael E. Russell

It has been a tumultuous 90 days. Investors are currently on the path to seeing one of the worst years in stock market history. This statement was made by several strategists at Goldman Sachs on CNBC.

This could be considered a reasonable position to take, but why? Well, to point out the obvious, stocks and bonds are off to a horrible start, while consumer prices continue to increase. Also, no baby formula!

If you extrapolate this bad news to the end of the year-even though we are barely halfway through Spring, diversified investors may see the potential for significant losses after inflation.

I take a less dire view. Big stock downturns are normal. Over the last 72 years, the S&P Index has fallen more than 20% from its high on ten different occasions.

There are many differences about this decline. The current decline is approximately 18% from the January high. The major difference is that the current decline has occurred after a market that never seemed to stop going up.

Another interesting point is that during the career of Warren Buffett, the average Bear market has taken about two years to go back to even, while a few have stretched to four years or more.

How about this statistic: the NASDAQ has been positive every year since 2008 UNTIL this year!

My take is that expectations need to change. Crypto currencies have fallen off a cliff. Some investors think it wise to buy in at these lower prices. I disagree. Until Crypto currencies are regulated, losses could be devastating. A case in point is Crypto exchange Coinbase Global which totally missed earnings estimates. The company stated that customers could lose their assets if it were to declare bankruptcy.  Coinbase CEO Brian Armstrong tweeted a clarification, saying “we have no risk of bankruptcy.” 

Unfortunately, I remember the same statements made by the CEO of ENRON.

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A Georgetown law professor recently spoke of crypto bankruptcy risks. His point was that even though the contracts say you own the currency, you have the potential of being a general unsecured creditor if there is a bankruptcy.

For those with strong stomachs, there are plenty of companies with strong cash flow, good growth potentials and decent dividends. Never flee the market. Historically, the stock market outperforms most other asset classes. Domestic stocks represent the businesses that keep America strong.

An interesting point was advanced by Vanguard. They recently calculated that since 1935, U.S. stocks have lost ground to inflation during 31% of one year time periods, but only 11% of ten-year cycles.

I believe investors could begin to add to their portfolios shortly, with the caveat that this market may still have some downside risk. However, keep in mind that the S&P was trading at a P/E of more than 21x in January while currently trading at 17x earnings. Some technical analysts believe that the bottom line may be 15x.

Trying to time the bottom line is futile.  Keep in mind that the average annual return for the S&P since 1988 is 10.6%; 34 years of growth.

The view espoused at Morgan Stanley is that there may be a little more downside risk. But Lisa Shalett, Chief Investment Officer, states that segments of the market are priced. For upside surprises, these include financials, energy, healthcare, industrials and consumer service companies.

We still must be concerned about Russia/Ukraine and China/Taiwan.

In my next article I will mention some stocks with good growth potential. Hoping for a market bottom soon!

Until then, enjoy the rest of Spring and stay healthy.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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By Nancy Burner, Esq.

Nancy Burner, Esq.

The legalities surrounding a Last Will and Testament stem from Roman times, when six witnesses affixed their personal seals to a will. The will was later validated by examining these seals to make sure they remained intact. 

Today we use staples instead of seals, but, because the probate process remains so formal, many misconceptions exist. Let’s discuss some of the more prevalent myths surrounding probate that we encounter.

Myth: If I have a will, my estate doesn’t have to go through Probate.

While a will documents where your assets go at death, a will does not avoid probate. Probate is a Surrogate’s Court proceeding whereby a decedent’s Last Will and Testament is validated and given effect. 

In New York, a will is admitted to probate after the Executor files a petition. The probate petition includes the original will, as well as a death certificate and funeral bill. Proper notice must be given to the individuals who would have inherited had the decedent died without a will. 

The court issues “letters testamentary” which give the executor the authority to act. The executor opens an estate bank account, pays the debts of the estate and then makes distributions to the beneficiaries.

The only way to avoid probate is to place all assets into a trust or die owning only “non probate assets.” Non-probate assets are those held jointly or that list beneficiaries. Common non-probate assets with beneficiary designations are retirement accounts and life insurance policies. Not all types of accounts allow designated beneficiaries or transfers on death. Naming others as joint owners can have catastrophic drawbacks, such as capital gains tax and creditor issues. A revocable trust is the gold standard in avoiding probate.

Myth: I don’t need a will because my spouse will inherit everything.

The only way your spouse inherits everything is if you do not have children or grandchildren. People are often surprised to learn that if they have children, their spouse does not inherit all their assets. 

In New York State, if someone is married with children and dies without a will, their spouse gets the first $50,000 and half of the remaining assets. The children split the other half amongst themselves. This means that without a will, minor children or children from a previous marriage inherit almost half of your assets. 

This is not what most people expect or want. The only way to make sure your spouse inherits 100% of your assets is to draft a will or trust. 

The probate process can be avoided if the couple owns all assets jointly. Joint ownership has its own problems — especially considering estate taxes or if there are children from a previous marriage. 

The probate process may sound confusing, but the procedure is easy and orderly with the help of an estate attorney. One of the kindest things you can do for your family is to draft a well-thought-out estate plan so that your assets pass in an orderly manner. At Burner Law Group, we charge flat fees so that clients fully understand their options and receive an estate plan custom tailored to them.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As an investor, you can easily feel frustrated to see short-term drops in your investment statements. But while you cannot control the market, you may find it helpful to review the factors you can control.

Many forces affect the financial markets, including geopolitical events, corporate profits and interest rate movements — forces beyond the control of most individual investors. In any case, it’s important to focus on the things you can control, such as the following:

Your ability to define your goals: One area in which you have total control is your ability to define your goals. Like most people, you probably have short-term goals  — such as saving for a new car or a dream vacation — and long-term ones, such as a comfortable retirement. Once you identify your goals and estimate how much they will cost, you can create an investment strategy to help achieve them. Over time, some of your personal circumstances will likely change, so you’ll want to review your time horizon and risk tolerance on a regular basis, adjusting your strategy when appropriate. And the same is true for your goals — they may evolve over time, requiring new responses from you in how you invest.

Your response to market downturns: When the market drops and the value of your investments declines, you might be tempted to take immediate action in an effort to stop the losses. This is understandable.  After all, your investment results can have a big impact on your future. However, acting hastily could work against you. For example, you could sell investments that still have solid fundamentals and are still appropriate for your needs. If you can avoid decisions based on short-term events, you may help yourself in the long run.

Your commitment to investing: The financial markets are almost always in flux, and their movements are hard to predict. If you can continue investing in all markets — good, bad or sideways —you will likely make much better progress toward your goals than if you periodically were to take a “time out.” Many people head to the investment sidelines when the market tumbles, only to miss out on the beginnings of the next rally. And by steadily investing, you will increase the number of shares you own in your investments. And the larger your ownership stake, the greater your opportunities for building wealth.

Your portfolio’s level of diversification: While diversification itself can’t guarantee profits or protect against all losses, it can help to greatly reduce the impact of market volatility on your portfolio. Just how you diversify your investments depends on several factors, but the general principle of maintaining a diversified portfolio should govern your approach to investing. It’s a good idea to periodically review your portfolio to ensure it’s still properly diversified.

The world will always be filled with unpredictable, uncontrollable events, and many of them will affect the financial markets to one degree or another. But within your own investment world, you always have a great deal of control — and with it, you have the power to keep moving toward all your important financial objectives.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Spring is here and so is tax season. The income tax filing deadline this year is April 18, 2022. You have likely been gathering your documents or filing an extension. Since you are already working on putting your affairs in order, this is the perfect time to finally check estate planning off your to-do list. Why is now the best time to do estate planning when you are already stressed out about your tax documents?

You are already organized

You are already organizing your financials — expenses, bank accounts, 1099s. This is the same information you need to disclose to an estate planning attorney. Your estate just means “everything you own.” Your estate includes real property, bank accounts, retirement accounts, stocks and bonds, life insurance, business interests and any other valuables assets such as jewelry and art.

Maximize gifting next year 

If your income taxes are high or you regularly give money to family members, there may be a better way to maximize gift tax benefits. In 2022, individuals can gift up to $16,000 per year to as many people as they wish without incurring estate or gift tax. The recipient isn’t taxed on the amount received either. Individuals can also pay for other’s education and medical expenses estate and gift tax free. Although the federal exemption is very high right now at $12.06 million, it is set to sunset to $5.9 million in 2026. Estate planning attorneys can help you leverage this historically high exemption before it goes down.

Business succession planning 

If you own a business, you have likely already completed your returns. But have you thought about what would happen to your business if you became ill or passed away? Business succession planning is an integral part of estate planning — especially for small businesses. If you have any questions about your business structure, key person insurance or tax efficiency, now is the time to set up a meeting.

Save on income taxes

If your income taxes are too high, there are efficient ways to lower them. You can make donations to charity or transfer certain income generating assets to family members.

Changes in the law

Now is also a good time to review existing wills and trusts in light of upcoming changes in estate law. Do your beneficiary designations on your retirement accounts still make sense after the passing of the SECURE Act? If it has been more than a few years, you will want to make an appointment to review your documents with your attorney.

Protect your family 

Doing estate planning is one of the kindest things you can do for those you leave behind. Taking the time now to protect your family eases their burden later. If you have minor children or beneficiaries with special needs, estate planning is crucial.

An estate planner can draft an estate plan tailored to your situation — from simple wills and revocable trusts to asset protection planning — and organize your estate planning documents so everything can be kept safely in one place. We cannot know the future, but we do know that there is no way to avoid death or taxes.

Nancy Burner, Esq. is the founder and managing partner at Burner Law Group, P.C with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

You might enjoy owning your home — but the mortgage? Not so much. In fact, you might want to do everything you can to pay it off as quickly as possible. But is that always the best strategy?

In one sense, your mortgage can be considered a “good” debt because it’s backed by a tangible asset — your home — that has real value and may even gain further value. Furthermore, by historical standards, you’re probably paying a pretty low interest rate on your mortgage, so you’re getting a lot of benefit — a place to live and a potentially appreciating asset. And if you itemize on your taxes, you can possibly deduct some, or maybe all, of your mortgage interest.

Nonetheless, despite these benefits, a mortgage is still something you have to pay, month after month and year after year. And for some people, it may feel good to pay it off. After all, there may well be a psychological benefit to being free of this long-term debt. But is it really in your best financial interest to make extra payments?

Suppose, for example, that you need a large sum of money quickly for a new car, a new furnace or some other unexpected, significant expense. Or, in an even more serious scenario, what if your job ends and you need money to tide you over until you get a new one? In these situations, you need liquidity — ready access to available cash. And your house may not be the best place to get it. 

You could apply for a home equity loan or line of credit, but these typically require approvals (which might be difficult if you aren’t employed), and you’ll be using your home as collateral. A home equity loan or credit line isn’t always bad — under the right circumstances, it can be a valuable financial tool. But that doesn’t change the basic fact that your home is essentially a non-liquid asset.

So, instead of making extra house payments, make sure you have built an emergency fund containing several months’ worth of living expenses, with the money kept in a low-risk, accessible account. After building an emergency fund, you should weigh extra mortgage payments against other uses of your money. For example, if you have other types of debt — such as credit cards or student loans — you might want to work on paying those off more quickly, as these debts may also carry higher interest rates.

You might also consider increasing your contributions to your 401(k), IRA or other retirement/investment accounts. You could spend two or three decades in retirement, so it’s important to save as much as possible for those years.

As you can see, you do have some good reasons for using any extra money you may have for purposes other than making additional mortgage payments. Ultimately, though, it’s a personal decision. In any case, think carefully about your choice. You may want to review the various tradeoffs with a financial professional, who can possibly recommend the most advantageous strategies. And you may also want to consult with a tax professional. By understanding all that’s involved in the “extra payment” decision, you’ll be better prepared to make the right moves.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Nancy Burner, Esq.

Nancy Burner, Esq.

Although cryptocurrencies like bitcoin have gone mainstream, non-fungible tokens (NFTs) were relatively unknown until 2021. You may have heard about “Bored Apes,” “Crypto Kitties” or that artist Beeple sold an NFT for $69 million. If you do not exactly understand what an NFT is, you are not alone.

Unlike cash, which is interchangeable, non-fungible items are one of a kind. An NFT is a unique digital asset built on a blockchain that comes with the right to use it. An NFT can be a photograph, animation, graphic image, video, meme, tweet, or anything digital. The value of the NFT lies in its uniqueness, which is attributable to its traceability on the blockchain.

The easiest to understand use of NFTs is when they represent real-world assets or serve as certificates of authenticity. For example, Nike distributing an NFT with every sneaker to protect against counterfeiting. Owning a multi-million dollar digitally generated avatar is a bit harder to grasp. But 1 out of 10 Americans invested in NFTs in 2021, so even if the appeal escapes you, the concept of scarcity should be familiar.

What to do if your grandson gifts you an NFT for Christmas or grandma sends an NFT as a birthday present? Keep the password safe! NFTs reside in “digital” wallets, which are stored on a computer, flash drive, or an app on your phone. You must have the private key or seed phrase (at least 12 unrelated words) to access the wallet. This private phrase is the only way to retrieve the NFT.

Whether you buy the NFT or it is gifted, the basis in the asset is the purchase price. Just like stock or real estate, the basis (purchase price) is used to calculate the capital gain or loss for tax purposes when the item is sold. Likewise, the NFT gets a step up in basis to fair market value at the owner’s death.

NFTs pass like any other asset at death — if you can find them. Unless the private key is known, there is no way of accessing and gaining ownership. We recommend redundancy. Write the phrase down and store it some place safe, keep it in a password protected file on a computer and flash drive. Since there is no central repository to verify ownership of an NFT, we advise clients to make specific bequests of an NFT in their wills. Calling attention to it ensures that the Executor at least knows of its existence. Do not include the password of course, since a will becomes public after probate!

You can also hold an NFT in a Trust or Limited Liability Company (LLC). An NFT cannot be retitled in the name of a Trust — but you can transfer the NFT on paper, much like we do with stocks and LLC interests. Some practitioners champion using an LLC because it is easier to transfer compared to transferring the NFT on the blockchain. However, avoiding recording the transfer on the public ledger defeats the purpose of transparency and authenticity. There are other advantages to an LLC to consider, such as transfer tax discounts and asset protection.

The future use, value, and regulation of NFTs is unknowable. Perhaps one day your Last Will & Testament will be stored in a digital wallet. For now, just make sure to disclose NFTs to your estate planning attorney, so she can incorporate them into your estate plan.

Nancy Burner, Esq. is the founder and managing partner of Burner Law Group, P.C. focusing her practice areas on Estate Planning, Elder Law and Trusts and Estates. Burner Law Group P.C. serves clients from Manhattan to the east end of Long Island with offices located in East Setauket, Westhampton Beach, NYC and East Hampton.Visit www.burnerlaw.com.

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