By Ellen L. Baker.
If you have not prepared an estate plan or have not recently updated your plan, ask yourself the following questions:
- Do you want to determine who will inherit your assets and how, outright or in trust?
- Do you want to take steps to reduce estate tax?
- Do you want to avoid probate and reduce the cost of administering your estate?
- Do you what to protect your assets if you need nursing home care?
- Do you want to insure that someone can make health care decisions if you cannot?
- Do you want to make sure that someone can pay your bills if you cannot?
If you answered “yes” to any of these questions and your current estate plans do not address these questions, you need to plan.
Examples of what may happen if you do not plan:
- A man dies survived by his wife and son. He owns $500,000 and he has no Will. Who inherits? The wife gets $275,000 and the son inherits the balance. If you have no Will, New York State writes your Will.
- A woman has a Will and by the terms of her Will everything is to be divided equally between her two daughters. She has a brokerage account and her bank account with one of her daughters as a joint owner. When she dies everything will go to the daughter who is a joint owner.
This illustrates the danger of informal estate planning. You need to make sure that you have designated beneficiaries in a manner which is consistent with your overall estate plan. - A husband and a wife have combined assets of $6,000,000. The husband owns $5,000,000 and the wife owns $1,000,000. The husband dies and according to his “simple Will” all his assets are distributed to his wife. His estate will not be subject to estate tax because of the unlimited marital deduction. An individual can leave an unlimited amount of assets to a US citizen spouse without incurring estate tax. However, in this case when the wife dies, her estate will be subject to New York State estate tax. If the husband’s Will had provided that his assets were to be paid into a bypass trust for his wife’s benefit there would have been no estate tax payable upon the wife’s death.
Current estate tax exemption amounts are $5,250,000 in New York State and $11,200,000 Federal. - A man dies owning a house in New York State, a house in Florida and a condo in North Carolina. He has a Will, which has to be probated in all three states. If he had established a Revocable Living Trust to hold title to the properties, the cost of multiple estate administrations would be avoided.
- A woman becomes disabled such that she cannot manage her own affairs. She never signed a Power of Attorney. Her spouse, adult child or other family member will have to bring a court proceeding to be appointed her guardian. The process is expensive and time consuming.
- A woman has a Will leaving everything to her children equally. One of the children is disabled and is collecting government benefits. If the child inherits assets free of trust, the child’s eligibility for benefits will be jeopardized. Instead, the mother could have created a Supplemental Needs Trust for the child. The monies would be available to enhance the quality of the child’s life and upon the child’s death the remaining monies can go to other family members, friends or charity.
These are just a few scenarios which highlight the importance of estate planning.
When you decide to commence the estate planning process, the first step is to assess your goals, review your assets as to value and the manner of ownership. In addition, beneficiary designations should be verified. Your financial advisor and your attorney can help you with this step. The next step is for your attorney to prepare the necessary documents for your review and signature.