A Will is part of an estate plan, but an estate plan is so much more. Individuals, no matter how wealthy, need to plan their estates in a coordinated way. An estate plan includes beneficiary designations on retirement plans, life insurance, the proper titling of assets, powers of attorneys, health care directives and, in some cases, trusts. It is important to plan to ensure that all the pieces of the estate plan work the way you want so that your goals can be achieved.
A trust is not necessary for everyone; however, a trust is a useful estate planning tool and can provide benefits in many situations. Trusts are used in tax planning and to avoid the probate of out-of-state property. A trust can safeguard assets for disabled or special needs family members. A trust can be used to provide for members of a blended family. In addition, a trust can protect assets from the cost of long-term care.
Under current law, a very small percentage of estates are subject to federal estate tax. If an individual dies in 2020, her estate would not pay federal estate tax unless her taxable estate exceeds $11,580,000. The $11,580,000 exemption from tax is portable between spouses, and so a married couple would need to have combined estates of more than $23,160,000 before federal estate tax becomes an issue. The federal estate tax exemption is scheduled to increase with inflation each year until 2026. On January 1, 2026, the exemption is scheduled to revert to the 2017 level, adjusted for inflation. New York state currently has a per-person exemption of $5,850,000. Although most people do not have to be concerned about estate tax at this time, laws do change and the tax law changes frequently. If you do not expect your estate to be subject to estate tax, you still need to make sure your estate is properly planned to minimize the income tax burden on your heirs.
You should review your estate plan at least every five years. You should review it sooner if changes occur in your family situation (e.g. birth, death, divorce, marriage, etc.), your financial situation or in tax laws.