Estate Planning Services:
Last Will and Testament
If you want to protect your assets at death, determine who manages and inherits your assets, and name guardians for minor children, you need a Last Will and Testament (a “Will”). A Will can accomplish the following: (1) Determine who will receive your assets at your death (but only those assets that are not jointly owned or do not have beneficiary designations); (2) Appoint a guardian to raise your children; (3) Appoint a person to manage your estate (often called an Executor or Fiduciary); (4) Create trusts for the benefit of your children (you likely do not want your child to have access to a large sum of money before they have the maturity to manage it); (5) Appoint a trustee to manage any trusts you created; (6) Create tax savings trusts (see “Credit Trust” below); (7) Create Marital Trusts that may alleviate issues which often arise from second marriages; and, (8) Create special needs or supplemental needs trusts to ensure loved ones continue to receive necessary governmental benefits and support.
If you do not have a Will, you will not have a say in any of the above stated matters. The government will direct, among other things, who receives your assets, who manages your estate, and who raises your children – although the appointed guardian likely will not be a stranger, it may not be the person you desired. Your estate may be subject to needless estate taxes, your loved ones may lose governmental benefits, and your estate may be required to post a bond, which will delay and increase the cost of administration of your estate, resulting in less of your assets going to your loved ones.
A revocable trust may be helpful to you as an estate planning device in the following situations: (1) You own real estate in multiple States; (2) You have heirs that are difficult to locate; (3) You have privacy concerns; or (4) You want additional protections in the event of incapacity -- though a durable power of attorney will generally suffice in such circumstances. An additional goal in using a revocable trust is that it can avoid probate (where a Court oversees the administration of your estate). Please note however that the revocable trust must be properly funded, i.e. you must transfer the applicable assets to the trust, otherwise probate will still be necessary. For most New Yorkers, a revocable trust is frankly overkill, but if you have some of the concerns expressed above, it may be your best choice.
Financial Power of Attorney
In a financial Power of Attorney you appoint an agent or agents to make financial decisions for you in the event you are incapable of doing so yourself. Using this power of attorney your agent can write checks out of your bank account or mortgage your home, for example. It is thus a very powerful document and is effective immediately once it is signed. It is therefore important that you appoint someone you trust. A financial power of attorney is important part of estate planning because in the event you become incapacitated, you will still need someone to pay your bills, manage finances, sell assets, and pay taxes.
Health Care Proxy and Living Will
In a Health Care Proxy you appoint someone to make health care decisions for you in the event you become incapacitated. Using a living will, you may express your desires to your appointed agent and your physicians regarding the type of care you would like in end of life (colloquially known as pull the plug) situations.
Tax Savings Credit Shelter Trust
The current estate tax “exemption” in New York is over $5 million, meaning if you own more than this amount at your death you may pay estate taxes. The current estate tax “exemption” federally is more than double that at approximately $11 million. If the combined assets of you and your spouse, if any, approach either of these amounts, a Will with a Credit Trust is likely good planning essential to avoid otherwise needless estate taxes.
Life Insurance Trust
Most people do not realize that proceeds of a life insurance policy are includible in your gross estate and therefore subject to estate tax. Thus, if you already have a taxable estate (see the above estate tax “exemption” amounts), and upon death your life insurance policy were to pay $2 million to your children, they may only get a fraction of the expected proceeds because the rest would go to pay estate taxes on the $2 million policy. The solution is to create an Irrevocable Life Insurance Trust (sometimes called an “ILIT”). You would create a trust agreement and fund the trust with your insurance policy; the trust will say to whom to pay the trust’s property (likely to be the life insurance proceeds) upon your death. Once created, you give up control of the trust and of the policy to the trustees that you have chosen (perhaps a close friend of yours and your spouse). You have thereby effectively removed that insurance policy from your taxable estate because you no longer "own" it. Your life insurance beneficiaries thereby receive the full $2 million from the $2 million life insurance policy.
There are many other planning opportunities we can discuss: including direct payments of educational and medical expenses for another person, regularly gifting up to $15,000 per person per year, and charitable gifts outright in trusts. Even more advanced planning opportunities would be GRATs and Sales to IDGTs.