Davidov Law Group

Estate planning involves the tangible, things like asset transferal and health care preparations, but there is something far more significant at play when you are planning for the end of your life. When you inventory your possessions you may find that the sentimental value of some of the things that you are passing on means far more to you to than their monetary value. Indeed, the things that we hold dearest can’t be bought or sold.

The path that you have taken is unique, and each of us has a story to tell. If you would like to leave a truly lasting legacy that will touch the hearts of your loved ones, consider writing your life story and making it part of your estate. Doing this has enormous value on many different levels. For one thing, the backdrop of your story is going to span the times within which you lived, from childhood through to your twilight years. This in itself is a valuable, instructive historical chronicle written from the perspective of a fair witness.

On a more personal level, you are a link between those who came before you and succeeding generations. When you pass away that link remains in the memories of those who survive you, but it weakens over time. When you write your autobiography and pass it along to your loved ones, they will always have that connection to their roots that you embodied while you were alive. And indeed, those who are born after you are gone will also be privy to the details of how their family tree branched out across the generations.

Leaving instructions for the distribution of your assets when you pass away is one thing. But passing along the knowledge, wisdom, and experience that was necessary to be able to accumulate these assets is something else entirely.

Anyone who has been successful in business knows that you need to set goals and work toward achieving them, both short term and long term. This is also true in the realm of estate planning, because you have to identify what you would like to accomplish with your estate early on to work toward making your intentions a reality. Estate goals are a personal matter, and there are those who concur with the “I’m busy spending my kids’ inheritance” approach. But there are others who care a great deal about providing for their loved ones upon their passing, and this can take intelligent planning that guides your decision making along the way.

Goal Planning for Estate Planning

After setting your initial estate goals it is always a good idea to revisit your plan as life events come along that can have an impact on your wishes. When your children get married, and grandchildren appear, it can change the way you look at your estate. Depending on your means, it can take careful planning and financial discipline to facilitate your ability to meet your goals. Something as simple as restructuring your budget ever so slightly for perhaps a ten year period could make a big difference, but you have to recognize the need beforehand.

Of course, estate planning is something that can be first addressed after your working days are over and your assets are in place. Some people are perfectly capable of providing for their heirs in the manner that they would like to without planning ahead. Others, however, may need to identify their estate goals, formulate a plan, and actualize it over a significant period of time.

Many of us would like nothing more that to provide some advantages to our loved ones after we are gone, and most of us can make this intention a reality with some advanced planning and financial discipline.

Most people want to help their beneficiaries by sparing them the time and stress associated with having to go through the probate process after their death. Probate is a process enacted by the court which oversees the distribution of your assets and the settling of your estate upon your death.

If you die intestate (in other words, without a Will), the process of settling your estate will be handled by a court. A court-appointed administrator will be in charge of distributing your assets and paying any remaining debts. This person may or may not be the person you would have wished to administer your estate. It is unlikely in this event that your estate will be settled and assets distributed as you would have wished. If you would like to have control over establishing not only who will be the fiduciary of your estate, but also who will receive the proceeds from your estate, creating a Will is critical.

During the administration proceeding, an administrator will be in charge of paying any outstanding debts you owe, such as your mortgage balance, credit cards, and taxes. If there is money left over in the estate after paying all debts, the remaining is generally distributed to the surviving spouse or the next of kin.

Due to the time and resources involved, probate and estate administration can be expensive and time consuming for your estate. And, the court documents are made available to the general public. Your Will can be viewed by anyone who may be interested. On the other hand, avoiding probate allows the details of your estate to remain private.

It is important to note that even if you have created a Will your estate could still be subject to probate. Living Trusts are not subject to probate and are therefore commonly used as ways to avoid the probate process. However, any assets or property left out of your Living Trust could be subject to probate. So, it is critical to designate everything you own in your Living Trust when you create it.

It is almost always in the best interest of your beneficiaries to create a clear plan in the form of a Will, Trust or both. By doing so, you will save your loved ones a great deal of frustration, time, and money by avoiding the probate process.

An estate tax is imposed by the federal or state government and can be as much as 46% of the value of the estate.

Who Pays Estate Taxes?

Estate taxes are usually only imposed on ‘affluent’ estates, meaning only the wealthy are subject to this tax. Currently there is no federal estate tax, but next year the federal estate tax is likely to return, and most people estimate it will affect estates valued at $1 million or more. Additionally, since 2004, New York State has imposed its own estate tax for estates valued at $1 million or more.

Estate taxes do not apply to the transfer of an estate to a spouse or a charity. However, any other transfer is subject to taxes.

How Are Estate Taxes Different from Gift Taxes?

Estate and gift taxes are not the same, but they are imposed in the same manner by the government. Estate taxes are imposed by the federal government and also by some states, including New York State. A federal gift tax also applies to estates valued at over $1 million. Sometimes these taxes also go by the term ‘inheritance tax’ or even ‘death tax.’

How Is My Estate Value Calculated?

There are several factors that go into calculating the value of your estate. The starting point is taking the total value, called the ‘gross estate.’ This includes your real property, property owed to you, annuities, some life insurance policies, and any property that might become yours if you survive someone else.

Next, certain subtractions are made from the gross estate to arrive at the ‘taxable estate.’ This is the value which will be subject to tax, hence the name ‘taxable estate.’ Subtractions may include funeral expenses, anything being transferred to your spouse and any charitable contributions.

Beware of Loopholes

None of us want to surrender our money to the government in the form of taxes, even after our death. Some people choose to pass along their estate to their grandchildren in hopes of avoiding the estate tax through a generation skip. Unfortunately, this may be a big mistake because doing so can nearly double the amount of taxes owed on the estate.

Another common practice to avoid paying an estate tax is to gift or deed your estate to your loved one(s). However, the federal government imposed a gift tax to apply to these instances too, making it an estate tax in disguise.

How Can I Avoid Making Costly Mistakes for My Loved Ones After I Die?

Taxes are a complicated matter, so unless you have a background in law, you probably won’t have much success on your own. For help on estate planning and to make sure your loved ones pay as little tax as possible upon your death, consult an estate planning attorney.

Incapacity or disability planning is an important part of your estate plan. It is vital to the well-being of yourself and your loved ones that your estate plan effectively guards against the possibility of disability or incapacity.

Most people think about estate planning and create a plan based on their eventual death, but they overlook the possibility of becoming disabled. Yet, becoming disabled could take away your ability to make decisions on your own regarding your health and your estate. In this case, you will need someone to make those decisions for you.

What if I do not have a Disability or Incapacity Plan?

In the event you do not have a specific person designated before you become incapacitated or disabled, the court will appoint one for you. This is called Guardianship, and the person making decisions for you is called the guardian.

Who would you rather have making your personal decisions: Someone you know and trust or someone appointed by the court?

How do I Create an Incapacity or Disability Plan?

Start by completing an Advance Medical Directive including a Health Care Proxy. This will legally designate someone to make health-related decisions on your behalf. This person is known as your Proxy. It is a good idea to talk in detail with this person beforehand. Make sure they will be available to make medical decisions for you. Also, they should be comfortable making tough decisions related to your health. Obviously, this person should be someone you know and trust.

In the event that you cannot make financial decisions on your own as a result of your condition, you also need a Power of Attorney. This document designates someone of your choosing to make all financial decisions on your behalf. Choose someone who you would feel comfortable paying your bills and overseeing your assets.

While you are creating your estate plan, be sure that your Nassau County estate planning attorney includes a thorough disability or incapacity plan. It is a good idea to use a Trust as a tool to help you and your loved ones in the event you are unable to make decisions on your own. The Trust essentially moves all of your assets into a Trust so your loved ones can access and oversee those assets for your benefit.

Creating a thorough and specific estate plan, including an incapacity or disability plan, will help make your life and that of your loved ones much easier.