Estate planning is not just about having a will; it is an ongoing planning process necessary to manage your affairs in the event of your death. With proper planning done now, you can save your loved ones or beneficiaries from going through additional hardships caused by your death, such as paying estate tax or going through the expensive and time-consuming probate process.
Dying Without a Will
Dying without a will is known as dying intestate. In New York state, various intestate succession laws would come into play and your surviving relatives would have to go through the probate process (in Surrogate's Court) to claim ownership of assets or settle any disputes over such assets. The State uses a formula to determine how property passes to your heirs.
Why You Should Draft a Will
Although a will can help you avoid the pitfalls of dying intestate, a will is still subject to the probate process. Nonetheless, a will allows you to control the distribution of your assets and state your final wishes.
One major advantage of having a will is that it can limit family disputes. Court will allow wills to be contested in very rare circumstances. This usually occurs when there is reason to believe that the will is not completely legitimate, such as in the case of fraud or undue influence by an opportunistic third party. Although there is no guarantee that a relative will not contest the will or sue to obtain assets not bequeathed to them in the document, a well-written and properly documented will can limit family/beneficiary arguments.
Another key advantage of a will is that it allows you to recommend a guardian to care for any minor children or other dependent beneficiaries in the event of your death. Due to the overwhelming responsibility of such a role, you should select your guardian carefully and with their consent before listing them in your will. Although the ultimate decision to appoint a guardian rests with the courts, the courts will supply significant weight to your decision in the will.
Other important items on your will are provisions that clarify the will and explicitly state its purpose. There should be a clause that states your name and address and officially declares the document to be a will. However, be careful that such a clause will null and void all pre-existing wills. Within the will you should also name the executor/administrator of your estate and how you direct that person to distribute your assets, including settling all debts, taxes, and funeral expenses.
How to Start Estate Planning
•· Make a list of all your assets and liabilities/debts
•· If you have minor children or dependents, have a family discussion about guardianship
•· Review the current federal estate tax exemption limits (see below)
•· Review and update your current beneficiaries (for those designated under life insurance, pensions, etc.)
•· Determine how you would like distributions to be made upon your death
•· Discuss funeral arrangements with your family
•· Seek the assistance of an estate-planning attorney
Federal Estate Tax
The federal estate tax is a tax levied on the transfer of a person's property when it exceeds a certain amount at the time of the person's death. If your estate is valued at more than the tax exclusion amount (see below) at the time of death in a particular year, then tax may be significant. As such, you need to consider your assets and decide if it is necessary to utilize estate-reduction techniques, which will help your beneficiaries avoid the estate tax.
The following shows the maximum estate tax the federal government can levy, as well as the amount that can be excluded:
2005: Maximum Estate Tax Rate: 47% Exclusion: $1.5 million
2006: Maximum Estate Tax Rate: 46% Exclusion: $2.0 million
2007: Maximum Estate Tax Rate: 45% Exclusion: $2.0 million
2008: Maximum Estate Tax Rate: 45% Exclusion: $2.0 million
2009: Maximum Estate Tax Rate: 45% Exclusion: $3.5 million
2010: Maximum Estate Tax Rate: 35% (gift tax only) Exclusion: No tax levied for 2010
2011: Maximum Estate Tax Rate: 55% (plus 5% surcharge) Exclusion: $1.0 million
Estate-Reduction
•- Use of trusts to maximize the exclusion and avoid probate process
•- Use of charitable donations to reduce the size of the estate
•- Pay educational and family medical expenses, which are tax-deductible
•- Loan assets to family members to minimize the estate
•- Buy life insurance to help pay estate taxes (but only under limited circumstances)
•- Make annual gifts (up to $12,000 per person per year to avoid gift tax)
•- Establish funeral and burial plans
•- Seek assistance from a certified financial planner, estate planner, or lawyer
Changes in your life, such as serious illness or death, birth or adoption of a child, new marriage (or divorce), can necessitate a reevaluation of your existing estate plan, which may then require revisions or additions.
Power of Attorney
A Power of Attorney (POA) is an authorization to act on someone else's behalf in a legal or business matter. The person authorizing the other to act is the principal, granter or donor (of the power), and the one authorized to act is the agent or the attorney-in-fact. A Health Care Proxy is a type of Power of Attorney. Health care decisions include the power to consent, refuse consent or withdraw consent to any type of medical care, treatment, service or procedure. New York State has enacted a Health Care Proxy law that requires a separate document to be prepared appointing one as your health care agent.
Unless the power of attorney has been made irrevocable (by its own terms or by some legal principle), the grantor may revoke the power of attorney by telling the attorney-in-fact it is revoked.
However, recent changes in New York's Power of Attorney law have resulted in the following: in order to prevent miscommunication and possible fraud, the new law provides that a valid power of attorney must be: (i) legibly typed in no less than twelve-point font, (ii) signed and dated by a principal, (iii) with capacity (as defined within the statute), (iv) in the manner prescribed for the acknowledgement of a conveyance of real property. Furthermore, the new law establishes a so-called "Statutory Major Gifts Rider" (SMGR), a supplemental document in which the principal may "authorize major gift transactions and other transfers" (as detailed in the statute). Gifting powers may no longer be granted to an agent within the context of a durable power of attorney, instead the principal must sign a SMGR to accomplish this.
Another significant change to the statute is that it provides that all previous powers of attorney are automatically revoked upon the execution of a new power of attorney, unless the principal affirmatively states the contrary within the new power of attorney document. This can pose clear problems to a distracted or misinformed client, and extreme caution must be taken to insure that estate planning powers are not accidentally revoked by clients when granting limited powers to another individual subsequently.
Please consult with your attorney carefully as to the latest requirements for a valid and effective power of attorney.
Health Care Proxy
Under the New York Health Care Proxy Law, you are allowed to appoint someone you trust (for example, a family member or close friend) to make health care decisions for you if you lose the ability to make decisions yourself. By appointing a health care agent, you can make sure that health care providers follow your wishes.
Your agent can also 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. You may give the person you select as your health care agent as little or as much authority as you want. You may allow your agent to make all health care decisions or only certain ones. You may also give your agent instructions that he or she has to follow. These instructions can also be used to document your wishes or instructions with regard to organ and/or tissue donation.
Conclusion
Estate planning is an immeasurable benefit for your family and loved ones, making the legal and financial issues easier to handle upon your passing. Thinking about the future and death is not easy and we usually tend to postpone estate planning. However, the problems created by probate, settling debts with creditors, lawsuits, opportunistic individuals, lawyers, and death taxes can all prolong the settlement of your estate and impact your final wishes.
Therefore, every competent adult should have a will drafted, at the minimum. Due to the very legal nature of a will, be sure to consult an attorney prior to drafting or executing the document. A competent attorney, such as the Law Office of Jasleen K. Anand, will tailor a plan specific to your circumstances and ensure that your final wishes are carried out.
Contact Us
We want our clients to have the estate planning tools and advice they need to succeed in life and to impart their success to future generations. Contact our law office in Garden City, New York, to discuss your needs in a free initial consultation.
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