Basic Estate Planning
Regardless of the stage of life you are in - whether a newlywed, a new parent, recently divorced or otherwise, you need to establish an estate plan. Advance planning allows you to retain the greatest degree of control over your life and your assets. If you neglect to create a Will, appoint a guardian for your minor children, designate a person to care for your finances or execute a healthcare directive, decisions regarding your estate, your children's guardians, your finances and your medical care will be made by the government and the courts, without regard to your personal wishes. An estate plan offers you peace of mind, knowing that your long term needs will be met, that your assets will be protected for the benefit of the person or persons whom you choose and, most importantly, your family will be protected in the event of your incapacity or death. Once incapacity strikes, it is usually too late to implement these mechanisms and your only option is a court proceeding. You can never be too young, be too old, or not have enough assets to put together an estate plan. It is never too early or too late to prepare.
If you already have an estate plan, we recommend that you review your documents periodically to ensure that they continue to meet your goals and comply with changes in the law, and whenever a significant life event occurs (e.g., birth of a child, death of a spouse, divorce, serious illness or purchase of a new home). Lara would be happy to review your current estate planning documents, summarize their terms for you, and make any necessary recommendations or changes.
Estate planning strategies involve more than just creating a Will. You can plan for the accumulation and handling of your assets while you are alive and upon your death; draft trusts that will operate during your life and after your death to manage your assets in order to support your children until they are of age and to shelter your estate from taxes; protect your heirs from creditors and divorce; utilize gifts to individuals or charities to reduce taxes; incorporate life insurance in your plan to provide liquidity; and more.
The first step in implementing your estate plan is to determine what your goals are with respect to your estate. For instance, to whom do you want to leave your property upon your death? Do you want a portion of your assets to go to charity or for your child's education? Who would be a good person to serve as your Executor (individual(s) appointed to marshal assets, pay bills and distribute your estate) and as the guardian of your minor children? Who do you want to designate to make medical decisions for you in the event you become incapacitated?
The second step in implementing your estate plan is to take an inventory of your assets, including your home, bank accounts, stocks and bonds, jewelry, insurance and retirement plans, and to note how they are owned. A similar inventory must also be taken of your debts and liabilities. This can be done using our comprehensive Estate Planning Questionnaire, which we will provide to you.
After we have received your completed Estate Planning Questionnaire, we will meet with you to help implement your estate planning goals. We will consider the tax ramifications of your plan, and advise you regarding the best methods to minimize taxes. We will present you with options for the best vehicles to carry out your plan, including Wills, trusts and any other estate planning tools.
Last Will and Testament
One of the most effective ways to direct the distribution of your assets upon your death is to make a Will. Some Wills can be straightforward, while others can be very intricate, depending upon the wishes and goals of your estate plan.
The primary reason for executing a Will is to provide written instructions regarding how your assets are to be distributed among your beneficiaries. A properly drafted Will accomplishes the following:
instructs how your assets are to be distributed, including specific gifts of tangible personal property, such as jewelry, clothing and furniture
designates an Executor who is responsible for taking inventory of your property; preserving your estate; paying creditors, administrative expenses and death taxes; and disposing of the remainder of your property among your beneficiaries
appoints Guardians for your minor children in the event of the death of both parents, and
establishes trusts to protect assets.
For individuals with larger estates (e.g., near or over the federal estate tax exemption ($11.58 million in 2020)) or in states with state estate taxes, like New York, the plan should consider potential estate and income tax issues.
Probate is the judicial process of administering the estate of a deceased person. During this process, the Surrogate’s Court decides the legal validity of the deceased person’s Last Will and Testament and grants its approval for the executor to act on behalf of the estate. After probate is granted (which can take months), administration of the estate can take place, including the resolution of all claims and distribution of assets under the Will. The probate of an estate is often an onerous, lengthy and costly process, as those who have experienced it will undoubtedly attest. The best advise that I can give to a prospective client: get out of probate.
A revocable trust may be used as a substitute for a Will and is often favored as a mechanism to avoid the probate process upon an individual’s death. The revocable trust can also provide for the management of the assets of an individual (called the “grantor”) both during his or her lifetime and after death. Like a Will, a revocable trust dictates the distribution of the grantor’s assets to his or her beneficiaries upon the grantor’s death. The terms of this type of trust may be changed or revoked by the grantor at any time, and allows for the designation of any individual(s) or corporation(s) as trustee, including the grantor, his or her spouse, an adult child, a close friend, an attorney, a trusted advisor or a corporate trustee. A revocable trust is beneficial in the event the grantor becomes incapacitated or incompetent, as the trustee (or successor trustee) is able to seamlessly and immediately manage the grantor’s assets and provide for his or her needs, without court intervention.
A revocable trust can offer the following advantages over a Will:
manage and protect assets during the grantor’s lifetime, including in the event of incapacity or incompetence;
provide continuity in the management of the grantor’s financial affairs following his or her death;
control how, when and to whom assets are to be distributed;
avoid the costs and delays of probate;
provide added protection from court challenges (such as Will contests); and
ensure privacy in the handling of the grantor’s financial affairs and estate (a Will is a public document; a revocable trust is not).
Revocable trusts should be prepared in conjunction with a pour-over Will to ensure that, upon the grantor’s death, any assets that remain in his or her individual name, or were inadvertently left outside the trust, will be transferred to the trust for distribution in accordance with the terms thereof. In addition, the pour-over Will is used to name the grantor’s executor and the guardian(s) for any minor children of the grantor.
While a revocable trust does offer significant advantages, successfully creating and funding such a trust does require that the grantor transfer his or her property into the name of the trust. For many assets, this can be a relatively simple, yet slightly burdensome task. Items with title documents, such as real estate, must be retitled so that the owner of the property is the trust.
Health Care Proxy / Living Will
Health Care Proxy. The health care proxy is used to appoint an individual (or individuals) to make health care decisions for you in the event that you are unable to do so yourself. In the event of your incapacity or incompetence, as determined by your physician, your health care agent would be authorized to make any decisions regarding your healthcare treatment which you could have made yourself if competent. For instance, if you wish to have artificial life support terminated in the event that you are unconscious and there is no reasonable hope for your recovery, you may authorize your agent to direct medical personnel to discontinue any treatments which would unnecessarily prolong your life.
Living Will. A living will is used to express your wishes regarding your healthcare, and may be used to evidence your intention to have artificial life support terminated.
Power of Attorney
A power of attorney allows you to appoint another individual to transact business in your name. A power of attorney gives an agent (called your attorney-in-fact) the authority to make banking, real estate and all other financial transactions on your behalf. There are two primary types of powers of attorney: the durable power of attorney and the springing power of attorney. With a durable power of attorney, the authority you grant to your attorney-in-fact becomes effective as soon as you sign the document, and continues to be effective upon any disability or incompetence you may suffer. Thus, if those events do occur, you have an individual in place to manage your financial affairs. By contrast, a springing power of attorney is so called because it “springs” into action if you become incapacitated.
A power of attorney is particularly important, as it may allow you to avoid the costly and complicated Guardianship procedure which may otherwise be required when an individual becomes incapacitated for any reason, including accident, disease or age. In addition, it can prevent any difficulties involved with the management of your financial affairs while a Guardianship proceeding is pending and before a Guardian has been appointed by the court.