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Lowenstein Sandler LLP

Michael N. Gooen

Michael N. Gooen

Partner
Co-chair, Family Office Practice

Expertise

  • Business Tax
  • Business Tax Counseling & Structuring
  • Corporate
  • Investment Management

WSG Practice Industries

Activity

WSG Leadership

ABA Group
Member
WSG Coronavirus Task Force Group
Member

Lowenstein Sandler LLP
New York, U.S.A.

Profile

Michael designs and implements wealth transfer plans, including wills, trusts, and other estate plan instruments, for families and closely held businesses.

Michael is a fellow of the American College of Trust and Estate Counsel (ACTEC), the preeminent organization of lawyers in the U.S. He has been recognized for his private wealth law and tax practices by Chambers High Net Worth, The Best Lawyers in America, and Super Lawyers.

Many of Michael's clients are successful professionals with first-generation wealth. Unlike "old money" families, for whom estate planning is already an integral part of the culture, these clients are thinking about wealth transfer for the very first time. They frequently face the issue with some discomfort but recognize that taxes, intrafamily conflict, and other factors can lead to financial catastrophe. Michael helps navigate the complexities of business transitions and assists clients in passing their wealth as tax-efficiently as possible, with proper safeguards in place so that assets provide more benefits than burdens to future generations.

Clients with closely held businesses, including companies in the financial services industry, particularly value Michael's substantial experience in transactional tax planning, including domestic and cross-border mergers and acquisitions and partnership formations. He moves at the client's pace, speaks the client's language, and stays attuned to the complexities of each enterprise. Michael is particularly adept at designing complex ownership agreements for closely held entities and then advising the equity holders in their personal wealth transfer planning.

Bar Admissions

    New York
    New Jersey

Education

Stanford Law School (J.D. 1990), Moot Court Board, 1989
Harvard University (B.A. 1987), magna cum laude, Phi Beta Kappa
Areas of Practice

Business Tax | Business Tax Counseling & Structuring | Corporate | Family Office Practice | Investment Management | Tax | Trusts & Estates

Professional Career

Significant Accomplishments

Counsels dozens of families in the optimal use of lifetime gift and generation-skipping transfer tax exemptions, thereby facilitating first-generation access, influencing second- and third-generation financial independence over time, and minimizing taxes.

Counsels international and domestic family offices on U.S. estate and income tax planning both for family members and for associated business entities.

Represents individuals before the IRS in estate and gift tax audits and in seeking private letter rulings relating to generation-skipping transfer tax exemptions.

Develops trust and estate planning strategies integrating philanthropic and tax savings goals.

Develops management and purchase/sale arrangements for family businesses and associated holding companies.



Professional Associations

American College of Trust and Estate Counsel
  • Fellow
Estate Planning Council of New York City
  • Member, Board of Directors
Jewish Community Foundation of MetroWest New Jersey
  • Member, Board of Trustees
  • Chair Emeritus, Grant Review Committee

Professional Activities and Experience

Accolades
  • Chambers High Net Worth - Gooen
  • The Best Lawyers in America (2009-2019) - Gooen
  • New Jersey Super Lawyers (2008-2019) - Gooen

Articles

Effective April 1, 2014, New York has adopted significant changes to its estate, generation-skipping, and trust income tax laws.


Estate and GST Tax


First, the good news: since its “decoupling” from the federal estate tax, the New York estate tax exemption (the amount that each New York resident can pass tax-free at death to beneficiaries other than a surviving spouse or charity) was $1,000,000. Under the new law, the exemption will rise steadily over four years: to $2,062,500 as of April 1, 2014; $3,125,000 as of April 1, 2015; $4,187,500 as of April 1, 2016; and $5,250,000 as of April 1, 2017, through December 31, 2018. Starting in 2019, the exemption will be recalculated every year based on inflation, using $5,000,000 as a base and 2010 as a reference point, so that thereafter the New York exemption amount will match the federal exemption.


However, there are two important ways in which the New York exemption will differ from the federal exemption. The federal exemption is available to every estate, regardless of size. The New York exemption, however, is eliminated for estates exceeding 105% of the exemption amount. (A reduced exemption is applied to estates valued at between 100% and 105% of the
full exemption amount.) This creates a tax “cliff.” In 2018, for example, estates valued at or under $5,250,000 will pay no New York estate tax, but estates valued at $5,512,500 or more will be taxed on every dollar in the estate – not just the value in excess of $5,250,000, as is the case with the federal estate tax. Thus, the new law actually increases New York estate taxes for decedents whose estates exceed the cliff amount: instead of the $1,000,000 exemption previously applicable, those decedents’ estates receive no New York estate tax exemption at all.

On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (the “Act”), which halts tax increases scheduled to go into effect for most Americans as part of the so-called fiscal cliff. The Act generally allows tax rates to rise on higher-income individuals but extends certain favorable tax provisions for individuals and businesses. This alert briefly summarizes some of the key federal income tax provisions of the Act.


Individual Provisions


Extension of Certain Individual Ordinary Income Tax Rates and Introduction of New High-Income Bracket


The Act preserves the 25%, 28%, 33% and 35% brackets, which were set to rise at the beginning of 2013, and adds a new 39.6% bracket applicable to taxable income exceeding (i) $450,000 for married individuals filing jointly or (ii) $400,000 for individual filers. The income thresholds for each bracket will now be adjusted for inflation. Note that the Patient Protection and Affordable Care Act imposes additional Medicare taxes, also effective on January 1, 2013, of (i) 3.8% upon certain investment income and (ii) 0.9% on certain employee wages and selfemployment income, each of which were previously subject to a 2.9% tax, including the employer portion of the Medicare tax on employee wages. Generally, the additional Medicare tax on investment income applies to the extent that modified adjusted gross income exceeds $250,000 for married individuals filing jointly and $200,000 for individual filers, and the additional Medicare tax on wages and selfemployment income applies above a threshold of compensation income of $250,000 for joint filers and $200,000 for individual filers.


Who doesn’t love a good cliffhanger — especially one with a (relatively) happy ending? After considerable nail-biting and handwringing, on January 1 Congress passed the American Taxpayer Relief Act of 2012 (the “Act”), extending much of the estate, gift, and generation-skipping transfer (GST) tax law developed over the past 12 years and preserving favorable opportunities for individuals and families planning the transfer of their wealth.


Key Provisions of the Act: Estate, Gift and GST Taxes


The maximum exemption from federal estate, gift, and GST taxes on December 31, 2012 was $5,120,000 per donor/decedent ($10,240,000 per married couple). As of January 1, 2013, those exemptions increased for inflation (the new exemption amount is anticipated to be $5,270,000, pending official confirmation from the IRS) per donor/decedent and will continue to increase annually.


On December 31, 2012, the estate, gift, and GST tax rate applicable to nonexempt transfers was 35%. As of January 1, 2013, those rates increased to 40%.



The Act is a fundamental game changer for many families. Had Congress not acted, the gift, estate and GST tax laws would have reverted to the 2001 rules: a $1,000,000 exemption per donor/decedent and a 55% maximum rate. The preservation of the GST exemption and the associated administrative rules is particularly good news for families engaging in multigenerational gift planning, as the Act permits ongoing flexibility and eliminates considerable uncertainty.

The recent changes in the federal estate tax laws were supposed to make estate planning easier. The “permanent” increase in the federal estate tax exclusion, combined with the “portability” of that exclusion between spouses, ideally should have eliminated tax considerations for all but the very richest American taxpayers. However, for many New York residents, the substantial—and growing—gap between the federal and state estate tax exclusions (presently $5.25 million and $1 million respectively) involves multifaceted choices and necessitates careful planning.


No one strategy will optimize the use of federal and New York estate tax exclusions in all circumstances. For some married couples, it may make more sense to pay New York estate taxes at the death of the first spouse, minimizing federal and New York taxes at the death of the survivor. In other cases, it may make more sense to minimize or eliminate New York taxes at the first spouse’s death and risk exposure to higher federal and New York taxes at the survivor’s death.

David Richman: The new version of The Charismatic Advisor presentation that I’ve been introducing around the country talks specifically about the difficult topic of having deeper conversations with patriarchs and matriarchs about multigenerational estate planning. Your ability to be a source of strength for your affluent clients can be showcased best by engaging in these deep conversations. The challenge is in how you approach the topic and begin to have this difficult conversation with your clients.


I’m joined by Michael Gooen from the law firm Lowenstein Sandler and Dr. James Weiner, cofounder of Inheriting Wisdom, a specialty consulting firm that designs strategic legacy plans that maximize a family’s human capital. Michael’s practice focuses on wealth preservation and transition for private clients and business entities with an emphasis on tax planning. He has been named to Worth Magazine’s list of top 100 Attorneys, which recognizes the nation’s leading attorneys specializing in trusts and estates, philanthropy and other private practice areas. Dr. Weiner, the author of The Legacy Conversation, is a clinical psychologist and a recognized speaker and trainer. He has spent over 35 years coaching and counseling individuals to successfully respond to personal and professional obstacles.

In Crummey v. Commissioner, 397 F.2d 82, 88 (9th Cir. 1968), the Ninth Circuit held that a gift in trust qualified for the gift tax annual exclusion because the trust’s beneficiaries had the power to withdraw a portion of the gifted assets. Since then, including such withdrawal powers in trusts has become standard operating procedure for estate planners. Despite their advantages, such “Crummey powers” complicate trust drafting and can cause tax problems that extend beyond eligibility for the annual exclusion. Common mistakes include (i) conditioning Crummey powers on the beneficiaries’ receipt of written notice; (ii) unclear descriptions of the powers; and (iii) failing to address adverse tax consequences caused by releases of such powers.

GRATs are hot. Given today’s low interest rates and volatile markets, they afford tremendous opportunities for shifting asset appreciation free of gift and estate taxes. GRATs are seemingly noncontroversial. The GRAT technique is blessed by statute, regulations and case law. The basic GRAT format is simple: (i) a grantor contributes an asset with meaningful appreciation potential; (ii) the grantor receives a fixed payment (typically a percentage of the asset’s initial fair market value, computed so that there is virtually no present gift) over a set term; and (iii) the designated remainder beneficiaries receive any value remaining at the end of the term — gift tax free. However, the GRAT format is tightly regulated, so proper care in drafting, funding, and ongoing administration is essential to the success of any GRAT. This article covers several of the most important considerations in designing and implementing GRATs.


WSG's members are independent firms and are not affiliated in the joint practice of professional services. Each member exercises its own individual judgments on all client matters.

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