Estate planning plays a critical role in ensuring that your assets are managed and distributed according to your wishes upon your death. In New York, two commonly used estate planning tools are wills and revocable living trusts. It is important to understand the difference between these two estate planning tools and compare their advantages and disadvantages before deciding on whether you need (or want) a will or a trust.

What Is a Revocable Living Trust?

A revocable living trust is a legal instrument in which you, as the grantor (the creator), establish the trust and determine the terms for how your assets are managed and distributed, both during your lifetime and upon your death. You, as the grantor transfer your assets such as cash, property, or investments into your trust during your lifetime for the benefit of yourself or your loved ones. Generally, you will also decide to act as the initial trustee so you can manage the assets in the trust during your lifetime. It is possible to appoint another person(s) along with you to act as the initial trustee to ensure that your assets will continue to be managed according to your wishes during your lifetime if something unexpected were to happen to cause you to become incapacitated.

You retain the ability to modify or revoke the trust during your lifetime. Upon your death, the trust becomes irrevocable, and your co-trustee or successor trustee will continue to manage the assets in the trust and follow your instructions on distribution to your beneficiaries.

Benefits of a Revocable Living Trust

Avoiding Probate: By transferring assets into a trust during your lifetime, those assets are not subject to probate through the Surrogate’s Court, which can be a time-consuming and costly process. The Surrogate’s Court has the authority to supervise as the administration of your estate throughout the entire probate process, including from the marshaling of your assets, payment of your final expenses, and to the distribution of your assets to your beneficiaries.

Providing Privacy: Unlike a will, a trust document is not entered into public records, which allows a more private distribution of assets. Only interested parties will be able to see your trust document.

Planning for Incapacity: Besides providing instruction upon your death, the trust can also provide instructions on managing your assets if you are incapacitated during your lifetime. Your assets will continue to be managed by your trustee until you are no longer incapacitated which provides a seamless transition during this precarious time.

Drawbacks of a Revocable Living Trust

Cost: Establishing a trust can be more costly than having a will prepared. For example, if you wish to transfer your interest in a cooperative apartment to your trust, there may be fees required by the board for the transfer application process. Additional legal fees and administrative cost can be incurred in the management of the trust.

Funding the Trust: For a trust to be properly funded, assets must be retitled into the name of the trust, which requires administrative efforts on your part.

What Is a Will?

A last will and testament, commonly referred to as a will, is a legal document that outlines your wishes regarding the distribution of your assets upon your death. You must name an executor, who is the person you trust to carry out the instructions in your will. Your executor will be tasked with managing your estate upon your death, pay any of your outstanding debts, and distribute your assets according to your wishes. The will is only effective upon your death and must be offered for probate with the Surrogate’s Court.

Benefits of a Will

Simplicity and Cost-Effectiveness: Creating a will is generally simpler and less costly than creating a trust as you will not need to transfer any of your assets during your lifetime.

Under New York law, if you were to die without a valid will, your estate will be distributed according to the New York intestacy laws, which may not align with your wishes. A will allows you to easily specify how your assets should be distributed and ensure that your assets go to your intended beneficiaries. It may also help prevent any disputes among your family members as opposed to if you were to suddenly die without a will.

Appointment of a Guardian: If you have minor children or expect to have children, you may designate a guardian in your will. This ensures that if the worst were to happen to you and your spouse or partner, your child will be looked after by someone you trust.

Drawbacks of a Will

Lengthy Probate Process: In order for your executor to perform their fiduciary duties, they must first submit a probate petition asking the Surrogate’s Court to grant them the authority to act on behalf of your estate. Generally, the process of having a will admitted to probate will take at least four to six months for the Surrogate’s Court to grant your executor Letters Testamentary. After the executor is formally appointed, then he or she goes about the task of collecting your assets, paying estate expenses, and distributing the estate assets to your named beneficiaries.

Public Nature: A will becomes a public document and accessible to anyone looking through the court records. On the contrary, a trust can only be seen by interested parties.

What Are the Key Differences Between a Trust and a Will?

A will outlines your wishes regarding the distribution of your assets upon your death and also allows you to appoint a guardian for your minor children. It is only effective upon your death and its admission to probate by the Surrogate’s Court.

A trust allows you to transfer your assets to a trustee to hold and manage for the benefit of yourself or someone else. It may be used during your lifetime to manage your assets and avoid probate upon your death thus allowing for the timely distribution of your assets to your intended beneficiaries.

Should You Choose a Revocable Living Trust or a Will?

If you are having a hard time deciding between having a will or a living trust, one approach is to start with a will first and then decide to create a trust at a future date so that you do not find yourself in a position of having no estate planning documents at all.

However, choosing between a will or a trust depends on your circumstances and goals. To explore how these estate planning tools may be tailored for your specific needs and objectives, contact an experienced estate planning attorney.

As of January 1, 2024, MaryAnne F. Santini, Esq., has been promoted to Partner in Holm & O’Hara LLP’s Labor and Employment practice. Ms. Santini has been with the firm since 2018 and specializes in multi-employer benefit plans, public sector benefit plans, retirement plans, welfare plans, and ERISA compliance.

How did you find your way into labor and employment law?

I grew up in a household where both of my parents were in unions. Unions and employee benefits were regular topics of discussion at the dinner table. I’ve seen first-hand the benefits of union membership and skill needed for the work performed. All this to say, my early exposure to the benefits of unions certainly left an impression.

Going into law school, I originally thought I’d pursue a career in corporate law. However, I switched tracks after taking courses in ERISA (Employee Retirement Income Security Act) and employment law. The skills between ERISA and corporate law were easily transferable—drafting contracts, assuring compliance, trusts, and corporate governance.

Today, I work mainly with multi-employer and government plans, which were the same types my parents belonged to. So, you could say I’ve gone full circle.

What do enjoy the most about your career as a labor attorney?

I enjoy working with so many varied clients and the different dynamics of each of the benefit plans. Each union or benefit plan has its own goals steered by what their membership needs and wants. Working with each of the parties involved—employment or union trustees, providers, administrators, and participants—can be complicated.  But at the end of the day, they all need to find a way to achieve their goals and get things done. It is immensely satisfying to work through the issues, parse out what each party wants, and find an agreement.

What has been some of the most surprising aspects of your work?

Although we are a labor-side firm, I work with many employers as trustees of the various benefit plans I represent. It is great to have a different perspective on the issues involved in administering these plans and to see how it shapes the overall outcome.

Another totally unexpected aspect of my benefits work is how much family law is involved. I spend a good amount of time dealing with court orders, called QDROs, regarding the separation of retirement benefits when there is a divorce or reviewing beneficiary status when a member passes away. Not exactly what you would think working in labor law would entail.

You work almost exclusively with trustees and not directly with union members or plan participants; what about your work is most meaningful with respect to your impact on their daily life?

Great communication is key; meaning communication with our clients of course but also in enabling better communication between our clients and their constituents. For example, I regularly review benefit explanations and notices, and if I, who reads these types of documents all day long, have to read something 10 times, that means a participant is going to have to read it 20 times—that’s unacceptable. Participants need to be able to make decisions for themselves and their families with a minimum amount of effort and confusion. Communications about their benefit plans need to be clear, concise, and easy to understand.

There is a delicate balance between saying what you need to say from a legal standpoint, and also ensuring that information can be understood by plan participants. In that sense, one side being an attorney involves storytelling. Not in the sense of fictional stories, of course, but in relating the facts and how they are shaped by rules or policy to reach a determination, all in the clearest terms possible.

What are the most important personal qualities you bring to your practice?

I’m curious, and I like to learn. After finishing my undergraduate studies and before attending law school, I went to my community college to take classes in economics.  In my role now, that expanded to a real curiosity about how benefit plans are structured and a continuous desire to improve upon them. When I am working on questions from clients, they sometimes reveal gaps in coverage and lead to a reassessment of plans by the trustees. I am always brainstorming strategies and arguments for how to address them, and the final outcome may be a change to the plan’s benefits and an expansion of coverage.

I could talk benefit plans for hours. They are incredibly interesting, and each one is so specific based on what it’s trying to achieve for its particular participants and available resources.

What do you like best about working at Holm & O’Hara LLP?

I really like the team that I work with. Our firm’s retired founding partner, Vin [O’Hara], built an incredible labor group with great clients that care not just about their participants but also about doing things right. Our Labor team here operates in much of the same manner, considering not just our legal obligations towards the participants, but striving to produce the most advantageous outcomes for them.

What are some changes you’ve seen in benefit law over the past few years?

There have been many changes in benefit law in just the past five years.  Starting with the SECURE Act, which made several changes to laws regarding retirement plans, the age when a participant must start taking distributions from their retirement account changed from 70 ½ to 72 to now 73 and will change again to 75 in another few years. All these changes require updates to plan documents and plan administration, and sending notices to the participants. In addition, federal, state and local governments enacted many employment and benefit laws in response to the COVID pandemic. This affected paid sick leave, timelines for employee benefits, different types of distributions from retirement plans, applications for relief from the government; the list goes on. Some of these laws have since sunset, but some still remain.

On top of all these changes, there have also been large compliance changes for healthcare plans. Now, these plans have several new annual filings and reports related to prescription drugs, mental health and the types of contracts they have. All these changes have made it an interesting time to work in ERISA and employee benefits.

What do clients sometimes misunderstand about your role?

For the most part, we work very well with our clients. However, sometimes they may be quick to reply to issues or complaints with their participants or providers without first consulting us. That quick reply can make a mountain out of a mole hill—even just a matter of wording can unnecessarily prolong or complicate a matter. When clients encounter infrequent or new issues—these should, in particular, be examined by counsel to avoid a future escalation.

We are here to help clients find answers. Sometimes clients are expecting to hear back a “no” from us, so they avoid reaching out. But it’s always advisable for them to do so, even if they are expecting the worst. Although we may have to counsel them that they can’t do something, it is often followed by an alternate solution.

Ultimately, we’re here to try and make our clients’ lives easier; but occasionally things become more difficult in the short-term in an effort to avoid larger future consequences and promote longer-term benefits later.

As of January 1, 2021, Katherine M. Morgan, Esq., has been promoted to Partner in Holm & O’Hara LLP’s Labor and Employment practice. Ms. Morgan has been with the firm since 2014 and has been an integral part of our team supporting organized labor, collectively bargained benefit plans and select employers. In this brief interview, Ms. Morgan reflects on her evolution as an attorney and the practice of labor and employment law.

How did you end up going into labor and employment law?

Although I have always liked the idea of “fighting for the little guy,” I never thought I would want to do anything that involved so much litigation. Litigation (as it is often depicted in movies, books, and sometimes real life) took the “fighting” part a little too literally, and that was never appealing to me. But my 1L Legal Writing professor required everyone in the class to try out for moot court. I made the team and found that I really liked it. It wasn’t fighting so much as analyzing, preparing, crafting. Moot court really opened my eyes to options I hadn’t previously considered. Then an internship during 3L at a plaintiffs-side labor and employment firm solidified in my mind that labor and employment law was definitely the path for me.

What has surprised you the most so far about your career as an attorney?

You often hear that law school does not actually prepare you to be a lawyer. I haven’t found that to be the case for me. Perhaps it’s because I was fortunate enough to have many different practical experiences while in school. I worked for two years before going to law school, and then I had various internships during law school that ran the gamut—I interned for the NY AG’s office, a federal magistrate judge, the Brooklyn DA’s office, and a law firm. I also competed on the moot court team and wrote and edited for the international journal. I have been reminded of every single one of these experiences for one reason or another over my years of practicing law. So for me, in my daily practice I build on the same kinds of nerdy things I was doing in law school—reading, researching, writing, editing, and trying to come to terms with the nuances of the law as it applies to a particular factual situation.

What are the most important personal qualities you bring to your practice?

I would have to say thoroughness. I have a very good memory for both what I read and what I hear. I tend to recall every little thing a client or adversary tells me. So, as I work with a particular client over time, or work on a particularly knotty case, I utilize things I have learned in the past—both in general and specific to a client—and apply them to new situations. I have found it to be very helpful in bolstering arguments, too.

What don’t clients often understand about how you can help them?

The sooner you come to us, the better. People often don’t come to us until a problem is in litigation or litigation is imminent. But, if they come to us earlier, not only can we advise on the situation and perhaps help the parties work things out before litigation becomes necessary, but we can also help lay the groundwork to make a litigation more effective if it does come to that. The earlier you start, the more control you have over the unfolding of the fact patterns, which leads to a more effective litigation and (ideally) a better end result.

What trends and changes have you noticed in the practice of labor and employment law?

Some trends I have noticed delve a little more into the nuances. For example, much of our work involves representing multi-employer fringe benefit funds (which safeguard the retirement and welfare monies, etc., for the employees themselves). By law, these trust funds have the right to have an auditor review the employers’ books and records to make sure the employers are paying the proper contributions to the funds on behalf of their employees. Increasingly, employers are trying to push back on what the funds’ auditors can review. But only the employers’ books and records would have the evidence necessary to find out whether any funny business is going on. There’s long-standing precedent from the U.S. Supreme Court on this, yet we’ve been encountering more and more pushback on this in recent years.

What do you like best about working at Holm & O’Hara LLP?

Definitely the people and the atmosphere. I remember my interview with Vin O’Hara vividly, as well as the day he called me with the job offer. Vin had really talked up the collegial, collaborative atmosphere at Holm & O’Hara LLP, which resonated with me very much. Over the past 6+ years, the firm—and the labor practice in particular—has lived up to that ideal, and more. Vin and (now co-managing partner) Carol Dell have been great mentors to me, and now they are amazing colleagues—as are MaryAnne (the ERISA compliance associate) and our labor paralegals. Carol and I work together A LOT on the litigation part of the practice and I think we make a great team. I love that we can talk things out, bounce ideas off each other and collaborate to come up with the best strategy. I also love that the collaboration and collegiality extend to dealing with our clients, as well. We work with our clients every step of the way—from consultation on everyday matters, through the whole litigation process. I think such continuity really helps with the end results. It seems to me that this type of collaboration—not only within the practice, but with the clients as well—is rare in the legal world, especially at larger firms where roles and client interactions are more compartmentalized. I personally wouldn’t want it any other way. Our labor practice may be on the smaller side; however, that allows us to be more focused and attentive to our clients’ needs at all times and I think we are better for it.

On June 14, 2019, Governor Cuomo signed into law the Housing Stability and Tenant Protection Act of 2019 (S.B. 6458) (“HSTPA”), which reinforces and fundamentally changes the landlord tenant law surrounding rental properties—especially rent stabilized apartments—throughout New York State, making it very difficult to either remove apartments from regulation or to significantly increase income from individual units.  Many property owners are concerned that HSTPA will lower the value of properties and discourage investment and development of rent regulated residential buildings. Such decline in property values, however, may also provide a significant positive effect for the valuation of estates and clients seeking to make lifetime gifts of New York rental properties in the near future.

Downward Pressure on Property Values

In passing the new rent control legislation, the New York State legislature permanently reestablished rent regulations throughout New York just days before they were slated to sunset on June 15, 2019. The new law places new restrictions on deregulation and changes in rents of over one million preexisting rent stabilized housing units and extends protections to additional units that may be brought into the rent regulation system through favorable tax arrangements or through local government initiatives. The law’s major provisions:

  • Extend regulations from previously covered cities and counties (such as New York City and Westchester, Nassau and Rockland Counties) to any other municipality that declares a housing emergency
  • Remove the ability of landlords to deregulate apartments based upon a tenant’s income—or upon the rent meeting a certain threshold
  • Eliminate the “vacancy bonus,” which often allowed landlords to raise rents beyond the threshold for deregulation
  • Cap rent increases based on renovations to individual apartments and major capital improvements1
  • Increase risk exposure of owners to defaulting and miscreant tenants in a variety of ways, including:
    • Limiting application and background check fees to $20
    • Specifying that only a single month’s rent may be retained as a security deposit and that such deposits must be returned within 14 days of the end of a lease
    • Delineating how eviction proceedings may be brought and expanding the time tenants have to respond to such proceedings

Each of these factors will likely lead to a reduction in value of all rental properties in New York, but especially rent-regulated properties in New York City and the surrounding areas. Long tenancies with tightly-capped rent increases, inability to remove units from regulation and limited ability to rapidly recover capital investments are expected to simultaneously increase the cost of owning and managing rental properties while depressing the prices for rental properties. In fact, some publications have already noted an immediate decline in the sale prices of some multifamily rental properties.2

An Overlooked Opportunity for Gifting

While many investors and owners have lamented the reduction in the value of rental properties in New York, such devaluation offers property owners and the estates of deceased property owners an opportunity to make discounted gifts and death transfers of their investments. Generally, when making a gift or a transfer from a taxable estate after death, the donor or the personal representative of an estate must provide the IRS with a valuation of the real property made by an appraiser or valuation expert.

Appraisers valuing rental real property for estate and gift tax purposes must focus upon the fair market value of the property either at the time of the decedent’s death or at the time of the gift in order to determine the proper value for tax purposes. Typically, appraisals of rental property—whether they are focused expressly upon the rental income generated by property, the cost of replacement or a comparison with similar properties in the area—are strongly influenced by an analysis of the rental income which the owners are able to command from their tenants. The new rent laws, which have already caused a decline in the fair market value of rental properties and which are likely to cause incomes on rent regulated properties to decline and to make the costs of managing rental property more expensive, will certainly reduce the value of rental properties for estate and gift tax purposes. Such a reduction of value provides an important opportunity for taxpayers and estates to transfer their rental properties to their beneficiaries and heirs while using less of their estate and gift tax exemption amount (currently $11.4 million for federal estate and gift taxes).

What’s It Really Worth: Alternate Valuation for Estates

The Internal Revenue Code provides some relief for estates when the value of the decedent’s assets has declined within six months after the decedent’s date of death. The personal representative of the estate has the option of choosing to value the property at the decedent’s date of death or six months later. However, in order for alternate valuation to elected, the total value of the assets in the deceased person’s estate, as well as the estate tax due on the alternate valuation date, must be less than their value on the decedent’s date of death. Thus, the decline in the values of rental real property due to the enactment of HSTPA may provide some basis for electing an alternate valuation discount if the estate contains large amounts of New York rental property affected by the new laws.

Summary

While the new landlord tenant laws will contribute to the decline in the profitability and valuation of rental properties in New York, this decline in valuation may provide an important opportunity for donors and estates to reduce the values of donors’ and estates’ gift and estate tax liabilities. In determining whether the reduction in value for your rental property may be utilized for making gifts or reducing the value of an estate, it is essential to consult with a trusts and estates attorney or a tax planning professional. For answers to questions or concerns regarding your assets, the trusts and estates attorneys at Holm & O’Hara LLP would welcome the opportunity to discuss your goals and concerns.


1 The law caps rent increases for improvements to individual apartments by a much lesser percentage of the cost of labor and materials (i.e., 1/160th or 1/180th depending upon the size of the building), and the landlord is limited to $15,000 in the aggregate on no more than three apartments in a fifteen-year period. HSTPA also restricts increases in rent for major capital improvements to the owners’ buildings to 2% and prohibits such rent increases for capital improvements in rental buildings whose regulated apartments comprise 35% or less of the building’s total units.

2 Kathleen Howley, WSJ: Rent control law sends New York building values tumbling, June 25, 2019 (available at https://www.housingwire.com/articles/49413-wsj-rent-control-law-sends-new-york-building-values-tumbling/).

On September 1, 2018, Anthony T. Simari, Esq., joined Holm & O’Hara LLP as a partner in our real estate group focusing on multifamily properties. Anthony is a seasoned professional; in each of the last five years, he has closed transactions for properties collectively valued at more than $200,000,000. After his first six months with the firm, we had a conversation about some of the most important—and interesting—aspects of his work.

What drew you to work in real estate law and especially on transactions involving multifamily properties?

When I first got out of law school, I wanted to be a trial attorney, always in a courtroom and never in an office. I got part of my wish and ended up doing foreclosure work as a litigator. It was stifling, with strict instructions not to make changes to the documents or be creative. Fortunately, I was assigned some closings and then was able to join a group of three attorneys responsible for about 150 commercial closings per year. There was plenty of room for creativity—as long as I was persistent. In this field, some new issue comes up every day and it’s so easy to say, ‘that’s not going to close’. My duty to my clients is to find a way to make things happen. It might be a daunting-looking package of 19 buildings with over 30 different commercial tenants and 7 different loans. On the surface, it’s incredibly complex; once you start to break it down into smaller parts, it’s manageable. Everything gets done by staying focused and taking one piece at a time.

What is the most unusual thing you have ever encountered in a deal?

Fairly early in my career, a partner in my firm assigned me to manage a “refinance” that turned out to be anything but. Our client was buying out his partner, who had just done a stint in federal prison for selling fake insurance policies and had to satisfy a $20 million judgment. The seller’s attorney had already walked away with the contract deposit and the referee appointed to conduct the sale had to leave the closing with a check. While it was a potentially heated situation—with a lot more issues than I had been led to believe—we stayed nice and cool and leveraged our position to negotiate hard. In the end, our client was able to acquire full title for less than the property’s value. The referee thanked me and said the property would never have closed without my work.

How can brokers ensure that their transactions go smoothly and what mistakes do brokers typically make?

First, I would say that the common animosity between brokers and attorneys is not worthwhile. I understand where it comes from; in most views, the broker works to get the client to take risks, while the attorney works to protect the client from risk. So there’s always a fear that, in the three or so months an attorney is working on a typical closing, they can blow up a deal it may have taken the broker two years to put together. The fact is, everyone needs to take risks; good attorneys help their clients manage those risks, not simply walk away from them. To make things go smoothly, brokers can make sure that at least one person at the table is a commercial real estate attorney with a track record of closing. Another thing brokers can do to avoid late complications is to make sure all the details get brought into the open. There are nuances like unresolved violations or the ability for a seller to pass along mortgage tax savings by assigning the existing mortgage. These are all valid points of negotiation that can impact the way the deal eventually comes together and closes. Rather than gloss over them, brokers would do well to bring them up earlier in the process.

What is the single most important piece of advice you can give to a prospective buyer of a multifamily property?

Without doubt, it is 100 percent due diligence. You have to assume that a seller may not know certain things or may not be entirely truthful about them. Never ask the seller for something you can verify for yourself. Rather than viewing due diligence as needless work, buyers and their attorneys should look at it as a powerful negotiation tool. I’ve had circumstances where the seller says the building has a certificate of occupancy for 83 units, but the actual C of O clearly says 80. If you know that ahead of time, it affects the sales price. Also, sometimes buyers agree to buy a property with the violations intact if the seller agrees to pay the penalties. Without exhaustive due diligence, the seller could propose a cap on those penalties and the buyer could be out significant money post-closing.

What do sellers of multifamily properties frequently overlook?

Most sellers overlook the full scope of tax and financial consequences. Mortgage prepayment penalties and the 3.025 percent New York City transfer tax add up. Also, the type of entity that took title can make a huge difference; if the property is vested in a C-corporation, you will lose a lot of value in the sale to taxes. One client who tried to sell a building ended up with tax consequences bordering on 70 percent. When a new client comes to see me about selling a property, my first question is, “did you speak to your accountant?” It normally leads to discussion of costs and possible tax deferring mechanisms such as 1031 exchanges or investments in opportunity zones.

What do you think sets you apart from others in your industry?

I’ve worked with a lot of good attorneys on both sides of the table. While I wouldn’t say it absolutely makes me unique, I always try to show up on behalf of my client projecting that we want the deal, that we want it to be equitable and that we are not there to hurt anyone. Depending on the circumstances, if I have more experience, I might offer to draft the closing documents, even if I’m representing the buyer. It just creates a better atmosphere of trust and cooperation so we can get something accomplished. The other thing I like to do is encourage my clients to talk to me without worrying that I am going to bill them for every minute. Clients don’t pay legal fees; they pay for results. They’ll pay double for the results they want, nothing for the results they don’t want. I’d rather have a client bend my ear about a $2,000 problem which we may be able to solve with a quick chat (and not bill them for it), than have it become a $60,000 problem with commensurate legal fees later on.

We vigorously represent our business, individual, and estate clients in a wide range of legal actions, whether they are the plaintiffs or the respondents

The attorneys in our labor practice collaborate closely with our union clients, their business managers and members in a broad spectrum of areas

Holm & O’Hara LLP’s Trusts & Estates practice is dedicated to crafting effective estate plans that honor your wishes and safeguard your assets

Holm & O’Hara LLP’s attorneys have decades of experience representing purchasers, sellers, and borrowers in commercial and residential real estate matters