What Are Some of the Major Life Events that Can Affect an Existing Estate Plan?

Estate plans are, by their nature, unique to the estate’s owner. No two estates are the same. One result is that major life events can affect multiple estates in different ways. The following are just some of the life events that can impact estate planning. If something has occurred in your life that you’re worried might affect your estate plan, and it’s not on this list, contact an experienced estate planning attorney to review the situation. There are too many potential changes to put on one list. Given the unpredictable nature of most people’s lives, it is not uncommon to have to update estate plans every few years. 

• Marriage or divorce. These may seem obvious, but they can be more far-reaching than some realize. Of course, if you are getting married or divorced, you should update their plan as soon as possible to reflect your new marital status. It is not only your marriage or divorce that may affect an estate; if your children, grandchildren, siblings, or other inheritors marry or divorce, that may change things, too. 
• Having children or grandchildren. As with marriage or divorce, this can extend through generations and change plans.
• Deaths. Sadly, there are times when a beneficiary of your Will or trust passes away before you. Updating the estate should be done as soon as feasible. 
• Starting or joining a business. This can have a significant impact on your estate plan. 
• Increased financial assets. If you take a much higher-paying job or receive an inheritance or legal settlement, you should update your plan to account for the larger assets.
• Change in life status. This is a catch-all category that contains many situations. Anything that changes a relationship with a beneficiary, such as a falling out with someone or a family member becoming disabled and needing future financial security, can lead to changing the estate.
• Moving across state lines. If your estate was drawn up in one state but you move to another, it’s advisable to have an estate planning lawyer in the new state review the estate to ensure it is consistent with the laws of that state. Each state varies as to requirements and restrictions. 

What Steps Should I Take to Update My Estate After a Major Life Change?

Updating an estate plan is similar to creating one in the first place. In fact, depending on the complexity or number of the changes, many people end up creating a new plan or new components for the overall plan. That can make things cleaner legally without having to resort to reminding executors or trustees that previous plans have been amended.

• Gather plan details. Whether you have them in print or digitally, gather the existing plan to take to your attorney. 
• Compile new records. Whatever the changes are–births, deaths, financial status–bring any relevant paperwork to the meeting. That can include bank statements,  life insurance policies, trust documents, wills, deeds to property, corporate records, etc. 
• Prepare to discuss the changes. You may know exactly what changes you want, or you may want to discuss the legalities of potential changes to receive advice on aspects you might not have considered. Either way, your attorney can work with you to determine what changes make sense and how to implement them.
• Complete the necessary paperwork. Many changes involve multiple documents that all need to be updated. Some will need to be signed and possibly notarized. Your attorney can advise you as to what’s required to make the changes legally binding.
• Communicate. Just as you did when you set up the original estate plan, you should consider informing relevant parties that the estate plans have been updated. If there are trustees involved, you may want to appraise them of the revisions so they understand what’s changed and how it might affect their role. If you prefer, you can inform your nominated executor. Provide changes of healthcare directives to your doctor. As difficult as it is, especially if you’re disinheriting someone, that should also be explained to relevant parties. The more informed the people around you are, the less likely someone can try and contest any of the plans. 

If I Haven’t Had Any Major Life Changes, Is it OK to Leave My Estate Plans As They Are?

Even if nothing has changed–you’re still married, still want your children to receive an inheritance, it’s highly advisable to review your estate plan with your attorney every five (5) to ten (10) years, but more frequently when there have been changes in your life. You may not remember all the details and realize there are small changes you want to make. It’s also possible laws have changed in your state, and the plan should be updated to be legally enforceable.

What Should I Do if I Have an Estate Plan that Needs Updating Because of a Major Life Event?

Call Davidov Law Group as soon as possible at 516-253-1366 to schedule your complimentary assessment. Keeping your estate plan up to date is vital for ensuring your plans are carried out when necessary. Our team of experienced, knowledgeable estate planning attorneys can walk through your existing estate plan to help identify the areas that need to be modified to address the major life change you’ve experienced. What’s more, we have certified financial planners on staff as well for additional expertise and insight. That can help you feel more secure and confident in having your estate current and in order.

How Does New York Law Define Inheritance Rights for Stepchildren?

In New York law, inheritance rights are typically determined by the deceased’s will or, in the absence of a will, by the state’s intestacy laws. These laws dictate how a deceased person’s estate is divided among surviving relatives. However, stepchildren are not automatically included in these provisions. In New York, stepchildren do not have the same inheritance rights as biological or legally adopted children. Unless explicitly named in a will, stepchildren are not considered legal heirs.

This means that if a stepparent dies without a will, their stepchildren would not be entitled to any portion of the estate under New York’s intestacy laws.

Consider a hypothetical scenario: John and Mary are married, and John has a son, Tom, from a previous marriage. If Mary dies without a will, her estate would be divided according to New York’s intestacy laws, which would typically mean that John, as her spouse, would inherit her estate. Tom, as a stepchild, would not be entitled to any portion of Mary’s estate unless Mary had specifically named him in a will.

What Can I Do to Ensure My Stepchildren Inherit from My Estate?

If you wish to leave a portion of your estate to your stepchildren, the most effective way to do this is by creating a will or trust.

In your will, you can specify exactly which assets you want to leave to your stepchildren and in what proportions. For instance, in the above example, if Mary wanted to ensure that Tom received a portion of her estate, she could have specified this in her will. She could have left specific assets to Tom, or she could have designated a percentage of her estate to go to him.

A trust is another legal tool that can be used to ensure stepchildren inherit from your estate. With a trust, you can place assets under the control of a trustee, who then manages these assets for the beneficiaries you name, in this case your stepchildren.

What If I Want to Exclude My Stepchildren from My Will?

Just as you have the right to include your stepchildren in your will, you also have the right to exclude them. If you do not wish for your stepchildren to inherit from your estate, you do not need to include them in your will.

Can My Stepchildren Inherit My Retirement Accounts?

Retirement accounts, like 401(k)s and IRAs, are typically passed directly to the named beneficiary upon the account holder’s death. This is true regardless of what is stated in a will. Therefore, if you wish for your stepchildren to inherit your retirement accounts, you must name them as beneficiaries on those accounts.

For example, if Mary wanted Tom to inherit her 401(k), she would need to name him as the beneficiary on the account. Even if her will left all her assets to John, Tom would still inherit the 401(k) because he is the named beneficiary.

Can I Change My Will After It’s Been Created?

Yes, you can change your will after it’s been created. In fact, it’s recommended to review and potentially update your will every few years, or after major life events like a marriage, divorce, or the birth of a child.

For example, if Mary had initially left her entire estate to John but later wanted to include Tom, she could amend her will to include him. An experienced lawyer can guide you through the process of updating your will, ensuring it accurately reflects your current wishes.

What If I Die Without a Will?

If you die without a will in New York, your estate will be distributed according to the state’s intestacy laws. These laws prioritize spouses and biological or legally adopted children. Stepchildren are not included in this hierarchy. For instance, if Mary had not remarried and died without a will, her estate would be divided between John and any biological or adopted children they had together. Tom, as a stepchild, would not be entitled to any portion of Mary’s estate.

What Other Legal Tools Can I Use for Estate Planning?

In addition to a will or trust, there are other legal tools you can use for estate planning. These can include life insurance policies, retirement accounts, and payable-on-death accounts. These assets typically pass directly to the named beneficiary, regardless of what is stated in a will.

For instance, Mary could name Tom as the beneficiary of her life insurance policy. Even if her will stated that her entire estate should go to John, the proceeds from the life insurance policy would go directly to Tom.

What If My Stepchildren Are Minors?

Minors cannot directly inherit assets in New York, so you’ll need to make arrangements for an adult to manage these assets on their behalf until they reach the age of majority. In your will or trust, you can establish a trust for the benefit of your minor stepchildren and appoint a trustee to manage the assets until the children come of age.

If you need assistance with estate planning, call The Davidov Law Group today at 516-253-1366.

How Can I Protect My Assets From Future Creditors?

One of the most effective ways to protect your assets from future creditors is through estate planning. In New York, estate planning involves the strategic organization of your assets to ensure they are distributed according to your wishes after your death. But it’s not just about what happens when you’re gone. Estate planning can also be a powerful tool to protect your assets from potential creditors during your lifetime.

One method to consider is the creation of an irrevocable trust. Unlike a revocable trust, which you can change or dissolve at any time, an irrevocable trust cannot be altered without the consent of the beneficiaries. This means that when assets are transferred into an irrevocable trust, then they are no longer considered your property. Therefore, they are generally protected from creditors.

For example, let’s say you’re a successful business owner in New York City. You’ve worked hard to build your business and want to ensure it’s protected from potential future creditors. By establishing an irrevocable trust and transferring ownership of your business into the trust, you create more challenges to creditors interested in seizing your business.

What Are Homestead Exemptions and How Can They Protect My Home?

In New York, the homestead exemption is another valuable tool for asset protection. This legal provision protects a certain amount of the equity in your primary residence from creditors.

Imagine you own a home in Brooklyn, and you’re facing a lawsuit that could potentially result in a large judgment against you. If you have $200,000 of equity in your home, up to $170,000 of that equity could be protected from creditors under the homestead exemption. This means that even if a creditor wins a judgment against you, they would not be able to force the sale of your home to satisfy the debt.

Can I Use Life Insurance or Retirement Accounts to Protect My Assets?

Yes, in New York, life insurance policies and retirement accounts can also provide a level of asset protection. Life insurance policies are generally exempt from the claims of creditors as long as the policy names a specific beneficiary, such as a spouse or child. This means that the proceeds from the policy would go directly to the beneficiary, not to pay off your debts.

Retirement accounts, such as 401(k)s and IRAs, are also generally protected from creditors under New York law. This protection applies to the funds in the account as well as any distributions you receive from the account during retirement.

Consider this scenario: you’re a teacher in Albany with a modest retirement nest egg. You’re concerned about potential future creditors, perhaps due to medical bills or a potential lawsuit. By ensuring your retirement accounts are properly set up and your life insurance policy names a specific beneficiary, you can protect these assets from potential creditors.

What if I Have Jointly Owned Assets?

Jointly owned assets can also be a part of your asset protection strategy. In New York, assets owned as ‘tenancy by the entirety’ (a form of ownership available only to married couples) are generally protected from the creditors of one spouse. This means that if one spouse incurs a debt, the creditor cannot force the sale of the jointly owned property to satisfy the debt.

For instance, if you and your spouse own a vacation home in the Hamptons as tenants by the entirety, and you incur a significant business debt, your creditor cannot force the sale of the vacation home to pay off your debt. This protection applies as long as the property remains in the tenancy in its entirety and the debt is not a joint debt.

Can Transferring Assets to Family Members Protect Them?

While it might seem like a good idea to simply give your assets to a family member for safekeeping, this strategy can backfire. New York law includes ‘fraudulent transfer’ provisions, which can allow creditors to undo asset transfers that were made with the intent to defraud creditors.

For example, if you transfer your Manhattan apartment to your son when you learn about a potential lawsuit, and you don’t receive fair market value in return, a court could potentially rule this as a fraudulent transfer. This would mean the apartment could still be claimed by creditors.

How Can I Protect My Business Assets?

If you’re a business owner, protecting your business assets is likely a top priority. In New York, there are several strategies you can use to protect your business assets from creditors. One strategy is to form a limited liability company (LLC) or corporation. These business structures can protect your personal assets from business debts and liabilities.

Another strategy is to use a buy-sell agreement. This is a legally binding agreement between business owners that outlines what happens to a business owner’s interest in the business if a specified event occurs, such as death, disability, or bankruptcy. A properly structured buy-sell agreement can protect the business and its remaining owners from the potential impact of a co-owner’s personal creditors.

How Can an Experienced Attorney Help Me Protect My Assets?

While these strategies can be effective, estate planning and asset protection are complex areas of law. An experienced attorney can provide invaluable guidance, helping you understand the nuances of New York law and how it applies to your specific situation.

Protecting your assets from future creditors requires careful planning and a thorough understanding of New York law. If you’re concerned about protecting your assets from future creditors, call The Davidov Law Group today at 516-253-1366.

What is the Value of Thoughtful Estate Planning for High-Net-Worth Individuals?

Estate planning for high-net-worth individuals is crucial due to the need to protect and transfer substantial assets while limiting the potential tax implications. High-net-worth individuals making plans for the future of their estate face the challenges of mitigating estate and capital gains taxes, protecting their assets from creditors, and avoiding costly family or business partner conflicts, which require more sophisticated approaches to preserve and safeguard their wealth. Without a carefully crafted plan, you can lose a substantial portion of your estate to taxes during and after your lifetime, leaving less for your loved ones and charitable causes. 

Working with skilled legal advisors to develop a comprehensive estate plan that addresses these tax implications and aligns with your financial goals and objectives is vital. Every estate is unique and requires careful attention and a tailored approach to ensure the best possible outcomes. A New York estate planning lawyer can help you utilize strategies to minimize taxes and costs for your high-net-worth estate, such as gifting, irrevocable trusts, life insurance policies, family limited partnerships, and private foundations. 

How Does New York’s Estate Tax Cliff Impact Valuable Estates?

New York is one of a handful of states which impose an estate tax on high-net-worth estates. This tax is in addition to the federal estate tax levied on assets at the time of an individual’s passing. The New York estate tax rate ranges from 3.06% to 16%, which could take a significant portion of your heirs’ inheritances.

Estates exceeding the state’s basic exclusion amount by less than five percent will only need to pay taxes on the amount beyond the exemption limit. The exclusion amount is adjusted yearly. In 2023, the basic exclusion amount is $6,580,000. If the value of your assets passing to beneficiaries other than a charitable organization or spouse is above this limit, you will be subject to the New York estate tax.

The so-called New York “tax cliff” comes into play when the value of an estate exceeds the basic exclusion amount by more than five percent. At this point, the entire value of your estate will be subject to taxation at a high rate, as opposed to only the amount over the exemption limit. Avoiding this expensive tax cliff through adequate estate planning is key to preserving your financial legacy for your loved ones.

Which Estate Planning Strategies Could Be Useful for a High-Net-Worth Estate?

You have put considerable effort into growing and maintaining your business endeavors, real estate, investments, and other property during your lifetime. By consulting with your financial advisor and an experienced New York asset protection attorney, you can implement a plan to secure your hard-earned wealth for the benefit of the next generation. Your legal team will likely employ some or all of the following estate planning tools to help you meet your goals and reduce your tax burden.

Charitable Giving

Donating a portion of your estate to charities can help fund causes you believe in while ensuring your estate does not exceed the basic exclusion amount for estate taxes. You may achieve this result through several means, including:

• Irrevocable charitable trusts: Charitable trusts can be a valuable tool for tax planning. Because the assets you place into the trust are no longer considered part of your estate, they are protected from creditors and are not subject to tax calculations. You may also receive an immediate income tax deduction for your donations. Certain types of trusts even allow the grantor to retain some income generated by the trust’s assets during their lifetime.
• Donor Advised Funds (DAFs): A DAF is a charitable investment account you can fund with assets. Your donations are tax-deductible but also irrevocable, meaning the funds can only be used to make grants to IRS-qualified public charities. DAFs are a popular charitable giving vehicle because they are relatively easy to set up and provide significant tax benefits to donors.
• Special terms within your will: It can be challenging to know the exact value of your estate prior to your passing. To ensure you do not go over the tax cliff, your lawyer may add a conditional bequest to your will that donates any assets exceeding the exclusion amount to charities of your choosing.

Gifting

Reducing the value of your taxable estate can help you lessen the taxes your beneficiaries must pay. One way to achieve this reduction is to utilize the annual federal gift tax exclusion. In 2023, this exclusion is $17,000 per recipient, meaning you can give that amount to loved ones tax-free every year. New York has no state gift tax. However, residents must plan carefully when using this strategy because the state has a “clawback” rule on gifts that exceed the federal per-person exclusion amount. Under this rule, any gifts made in the three years before the decedent’s passing that are beyond the exclusion value will be added to the estate’s value for the purpose of calculating the estate tax. Your lawyer or financial advisor can guide you on how to use gifting to your best advantage during the estate planning process.

Trusts

Many varieties of trusts exist for different purposes. Some allow you to structure financial gifts to family members to protect the money from poor spending habits, legal troubles, or other issues that could endanger the inheritance. Other trusts may be set up to provide care for family members with special needs, hold funds you wish to give to charity, or make the transfer of assets to your spouse or family members easier. In all cases, if the trust is irrevocable, the assets placed into it are no longer counted toward your estate’s value, making trusts a valuable tax planning vehicle.

How Can a Skilled Estate Planning Attorney Assist You?

Minimizing tax implications and increasing the value of the estate you pass on to your heirs is critical to a solid estate plan for high-net-worth individuals. Unfortunately, state and federal tax law is ever-changing. Effectively navigating the estate planning process requires detailed legal knowledge and a thorough understanding of every choice’s nuances and long-term effects. Early preparation is often crucial because some strategies take several years to implement effectively. To begin creating a robust plan for your high-value estate with a committed and experienced legal team, contact Davidov Law Group at 516-253-1366 to schedule your assessment.