Learn more about what our experienced professionals can do in the most complex of cases.
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Drop-and-Swap and Estate Planning Strategy for $8 Million Queens Commercial Property Sale
A family retained FRB’s real estate department in connection with the sale of commercial property in Queens valued at approximately $8 million and the subsequent purchase of replacement properties as part of a like-kind exchange.
Shortly thereafter, the husband, who owned 50% of the entity that held title to the property, unexpectedly passed away. The surviving spouse retained FRB’s estate administration department regarding the husband’s estate and FRB’s tax department to advise on the most tax-efficient strategy in light of the change in circumstances. FRB assisted the surviving spouse in getting appointed by the Surrogate’s Court as the fiduciary of the deceased husband’s estate and in implementing a drop-and-swap strategy. FRB assisted the client in forming a new LLC owned jointly by the husband’s estate and the original entity as tenants in common. The family then moved forward with the sale process and placed the property under contract.
As a result of the step-up in basis at death, 50% of the net sale proceeds passed income tax-free to a trust for the benefit of the surviving spouse, while the remaining 50% was contributed to a like-kind exchange, deferring 100% of the capital gains tax. Following the transaction, FRB’s estate planning department provided the client with coordinated estate planning, including establishing the trust funded with the estate’s proceeds to benefit the surviving spouse during her lifetime and to support longer-term planning for the next generation.
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Bill and Mary: Protected Their Assets from Lawsuits or Attachment
Bill and Mary, a couple with a strong desire to safeguard their legacy and retain control over their resources, sought assistance from Falcon Rappaport & Berkman’s Asset Protection Practice Group. With over 35 years of marriage and three married children, they aimed to protect their assets while accessing them when needed. Bill, a successful business owner and investor, received an appealing offer to sell his business and wished to devote more time to his family and personal investments, including rental properties. He also intended to remain on the board of directors of certain companies. Concerned about potential liabilities, Bill sought advice on restructuring their estate plan. Falcon Rappaport & Berkman provided a solution encompassing comprehensive estate planning and reducing their taxable estate by gifting assets to their children and grandchildren while maintaining control. By implementing this strategy, Bill and Mary achieved their objectives: asset protection, estate tax reduction, control over their properties and investments, and a robust estate plan that would withstand legal challenges in the future. This matter was handled by the attorneys in our Asset Protection Practice Group prior to joining FRB earlier this year.
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Protecting a Son's Inheritance
When an individual dies intestate, his or her property passes to his or her surviving heirs. In one case, the individual who died lived in another state, and his Aunt was appointed as his Administratrix, but she refused to apply for letters of ancillary administration in New York to sell the decedent’s New York property. And we soon found out why. The Decedent’s Uncle had made a claim to her that he was the actual owner of the NY property, and that he and the Decedent had an understanding that the Uncle paid for the down payment and mortgage, but the property would be held in the Decedent’s name. The out-of-state administrator promised the Uncle to send him a deed to the New York property if the Uncle would pay for the Decedent’s father’s mortgage, which was not an estate obligation. FRB obtained ancillary letters of administration for the minor son’s mother and contacted the Uncle to see if he wanted to purchase the NY property. The Uncle then sued our client, asserting that he was the “beneficial” owner of the NY property. FRB obtained a decision from the Supreme Court dismissing the claims against our client, and then obtained an Order from the Surrogate’s Court providing advice and direction to our client, which allowed the Supreme Court to lift its lis pendens (a lien that prevents the sale of the property) against the New York property, and also allowed the son, who is now an adult, to sell the property directly and keep the proceeds (rather than sending the proceeds back to the Aunt/administratrix). Our client’s son now has funding for his college education, as we are sure his father would have intended.
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Dismissal of Bank Lawsuit Based on Statute of Limitations Defense
Falcon Rappaport & Berkman successfully represented clients sued by a major bank for a six-figure consumer credit transaction based upon a promissory note and corporate guaranty executed in 2007, with a final payment due date of October 2012. The complaint alleged a default in 2012 and payments made until 2017, just under six years before the complaint was filed. The promissory note and corporate guarantee were both governed by the laws of California, where the statute of limitations for an action upon a contract is four years from the breach. However, an action to enforce an obligation to pay a note payable at a definite time is governed by a six-year statute of limitations, which begins to run from the due date listed on the promissory note. After confirming the statute’s application to the clients’ specific facts, FRB attorneys quickly had the lawsuit withdrawn against their clients since the complaint was barred by California’s statute of limitations. Had New York law governed the promissory note and personal guaranty, the clients would have achieved the same outcome. The NY Consumer Credit Fairness Act signed into law on November 8, 2021, among other things, reduced the statute of limitations for bringing a lawsuit on a consumer debt from six years to three years. Thus, even under New York law, plaintiff’s complaint was untimely by three years!
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Defensive Estate Planning to Avoid Litigation
Second marriages can pose difficult estate administration issues that can usually be avoided by careful planning. In one case, the Decedent’s daughter from his first marriage arranged for her father to execute a new Will excluding her step-mother, and had her step-mother execute a waiver of her right to serve as executrix or to take an elective share of the Decedent’s estate. When the couple came to FRB for advice, we drafted a Trust and transferred the Decedent’s house into the Trust and advised the couple to change most of their financial accounts into joint name. When the Decedent died, the surviving spouse was able to remain in her home, retain the assets that she and her husband put into joint name, collect retirement benefits, and avoid a Will contest.