Estate Planning

A proper estate plan involves a comprehensive look at your assets, income, values and desires for yourself and your family.  It can involve strategies to minimize potential federal and New York estate taxes and settlement costs as well as strategies to avoid probate.  It always involves a coordinated plan for what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event of death or disability.A good estate plan should include a power of attorney, health care proxy and living will.  A health care proxy and power of attorney authorizes trusted people in your life to carry out your wishes regarding your personal finances and health care matters if you ever are unable to manage your life because of disability.  A living will gives your health care agent specific directions about extraordinary measures in the event that you are unlikely to recover from a terminal illness or are in a vegetative state or brain dead.

Sadly, many families don’t do proper estate planning because they don’t believe that they have “a lot of assets” or otherwise believe that their kids can just come in and divide their assets by themselves.  If you don’t make proper legal arrangements for the management of your assets and affairs after your passing, the state’s intestacy laws will take over upon your death or incapacity.  This often results in the wrong people getting your assets, and very often results in much higher estate taxes, both federal and NY. Estate tax calculator provided on site.

Specifically, if you die intestate, the transfer of your assets is accomplished through a public, court-supervised proceeding called probate that generally takes a minimum of six months, typically a year or more. These public proceedings are generally expensive and time-consuming in nature and tie up your assets for several months. Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs.  Nor is it unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.

Your estate is simply everything that you own, anywhere in the world, including:

• Your home or any other real estate that you own
• Any interests you may have in any business
• Your share of any joint accounts
• The full value of your retirement accounts
• Any life insurance policies that you own
• Any property owned by a trust, over which you have a significant control

If you have children under the age of eighteen, you should designate a person or persons to be appointed guardian(s) over their person and property.  Of course, if a surviving parent lives with the minor children (and has custody over them) he or she automatically continues to remain their sole guardian.  This is true despite the fact that others may be named as the guardian in your estate planning documents.  You should name at least one alternate guardian in case the primary guardian cannot serve or is not appointed by the court.

A comprehensive estate plan should include the following documents, prepared by an attorney based on in-depth counseling which takes into account your particular family and financial situation:

A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your lifetime.  You also designate successor Trustees to carry out your instructions as you have provided in case of death or incapacity. Unlike a Will, a Trust usually becomes effective immediately after incapacity or death. Your Living Trust is “revocable” which allows you to make changes and even to terminate it.  One of the great benefits of a properly funded Living Trust is the fact that it will avoid or minimize the expense, delays and publicity associated with probate.  Read the FAQ section on Living Trust for more information.

If you have a Living Trust-based estate plan, you also need a Pour-Over Will.  A Pour-Over Will is used first to name a guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the trust at the death of the Trustmaker/Owner. It will also invalidate any previous Wills which you may have executed.  Its function is to “pour” any assets left out of the trust into it so they are ultimately distributed according to the terms of your Trust.

A Will, also referred to as a “Last Will and Testament”, is primarily designed to transfer your assets according to your wishes. A Will also typically names someone you select to be your Executor, who is the person you designate to carry out your instructions. If you have minor children, you should also name a Guardian as well as alternate Guardians in case your first choice is unable or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by a probate court.

A “Durable Power of Attorney for Property” allows you to carry on your financial affairs in the event that you become disabled. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you when you are disabled.  This guardianship process is time-consuming, expensive, often costing thousands of dollars and emotionally draining.

There are generally two types of durable powers of attorney: a “present” durable power of attorney in which the power is immediately transferred to your attorney in fact; and a “springing” or future durable power of attorney that only comes into effect upon your subsequent disability as determined by your doctor.  When you appoint another individual to make financial decisions on your behalf, that individual is called an “attorney in fact”. Anyone can be designated, most commonly your spouse or domestic partner, a trusted family member, or friend.  Appointing a power of attorney assures that your wishes are carried out exactly as you want them, allows you to decide who will make decisions for you, and is effective immediately upon subsequent disability.

The law allows you to appoint someone you trust – for example, a family member or close friend to decide about medical treatment options if you lose the ability to decide for yourself.  You can do this by using a “Durable Power of Attorney for Health Care” or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. You agent can then make sure that health care professionals follow your wishes and can decide how your wishes apply as your medical condition changes. Hospitals, doctors and other health care providers must follow your agent’s decisions as if they were your own.

A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. Almost all states have instituted living will laws to protect a patient’s right to refuse medical treatment.  Even if you receive medical care in a state without living will laws this document is useful to a court trying to decide what an unconscious patient would want. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.

Some medical providers have refused to release information, even to spouses and adult children authorized by durable medical powers of attorney, on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases.  In addition to the above documents, you should also sign a HIPAA Authorization Form that allows the release of medical information to your Agents, your Successor Trustees, your family and other people whom you designate.