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A MUST-READ REPORT ON RISKY DIY WILLS & TRUSTS

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If you go online you can find instructions on how to do various things. In many cases you have to pay a premium price to obtain this information, and who knows how accurate or useful it may be?

That having been stated there are websites out there that sell do-it-yourself estate planning documents like living trusts and simple wills.

Is it wise to arrange for the transfer of everything you have earned throughout your life to your loved ones using a worksheet or download that you found on the Internet?

The magazine Consumer Reports tackled this subject last year. They came away advising against do-it-yourself estate planning for a number of different reasons.

One of the problems with DIY estate planning notions is the fact that you may choose a last will or living trust when in fact a different legal device may have been better for you given your unique circumstances. In addition to this, there are other things to consider when you are planning your estate.

These would include making preparations for possible incapacity as an elder. Preparing for potential long-term care costs is another consideration.

If you’re interested in gaining an in-depth understanding of the dangers of DIY estate planning we can help. Our firm is offering a free special report that explains everything in detail.

Take a moment to download this report and review it at your convenience. Arranging for asset transfers to your loved ones after you pass away is a serious matter, and you should not take it lightly.

To download the report, click here: DIY Estate Planning Dangers.

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There are a lot of different legal devices that are used in estate planning. People sometimes harbor misconceptions about them based on assumptions. We would like to shed some light on three common estate planning instruments here.

The most common estate planning device is the simple last will. This document is typically used to arrange for future asset transfers and to name a guardian for minor children. The thing that is less than ideal about this arrangement is that probate enters the picture when you transfer assets using a last will.

Probate is the legal process of estate administration that takes place under the auspices of the Surrogate’s Court. There is nothing inherently wrong with this process. However, from a purely practical perspective the heirs to the estate don’t receive their inheritances until this process has run its course.

There are ways to arrange for asset transfers outside of probate, and some people prefer this efficiency.

Living Trusts

A living trust is a very commonly utilized probate avoidance tool. You convey assets into the trust and name a trustee who would manage the funds after your death along with a beneficiary or beneficiaries who would receive financial distributions.

These distributions would be made in accordance with your wishes as stated in the trust agreement. These transfers take place outside of the probate process.

Living Wills

This is where the confusion sometimes enters the picture. Some people hear about the things that a living trust accomplishes. They know that a simple will can be used to transfer assets, so they assume that living wills do the same.

In fact, a living will is an advance health care directive. With this document you state your preferences regarding whether or not you would want artificial life-support measures utilized to keep you alive in the event of your incapacitation.

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The Supreme Court recently ruled on a case that centered around an estate planning matter. Regardless of how you feel about the subject of same-sex marriage this is a ruling that is certainly of interest to people in the estate planning community because it has practical implications.

A New York woman named Edith Windsor was presented with an estate tax bill after she inherited assets from her same-sex spouse Thea Spyer back in 2009. The two were married in Canada a couple of years prior to Spyer’s death. It should be noted that they had been together for decades prior to the marriage.

The bone of contention is the fact that there is an unlimited marital estate tax deduction. If you are heterosexual and you are legally married you can leave any amount of money to your spouse without facing any estate tax liability.

Here in New York same-sex marriages are legal as we all know. There is an estate tax on the state level here. People who are legally married in the state of New York enjoy an unlimited New York State estate tax marital deduction regardless of the gender of the spouses.

Because of provisions contained within the Defense of Marriage Act the federal government did not acknowledge same-sex marriages.

That is, until this recent Supreme Court decision was handed down. A slim majority of the justices found in favor of Windsor. As a result, the federal government will now recognize same-sex marriages that are sanctioned in states that allow them. Federal benefits that are afforded to spouses will now be available to same-sex spouses as well as heterosexual married couples.

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Intelligent retirement planning is going to include anticipating the expenses that you may incur during your twilight years. It is not uncommon for people to require living assistance late in their lives, and this can be quite expensive.

So you think that you will be eligible for Medicare when the time comes and you’re not worried about it? The fact is that Medicare won’t pay for long-term care.

A very good source of information on long-term care costs is the annual survey that is put out by the MetLife Mature Market Institute. The 2012 survey found that in the state of New York the average daily charge for a private room in a nursing home was $368.

If you multiply this figure by the number of days in a year you’re looking at an annual expense of over $134,000. The reality is that most people spend multiple years in nursing homes.

Long-term care communities are quite expensive as well. In New York in 2012 the average monthly charge for an assisted living facility was $4011, which is over $48,000 per year.

When you are budgeting for the future it is important to take these potential expenses into account. According to the United States Department of Health and Human Services the majority of people who are fortunate enough to reach the age of 65 will need living assistance eventually.

If you are interested in exploring your options with regard to how you may be able to address these costs, you should discuss your personal situation with a licensed elder law attorney.

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People sometimes envision a hypothetical scenario. After a funeral family members gather in private and someone very close to the deceased somberly reads the last will.

This person will distribute inheritances and everything is settled.

The Probate Process

In fact the above is a myth. The estate must pass through the process of probate before anyone will receive an inheritance.

During this process the executor or executrix conducts business on behalf of the estate. Depending on the complexity of the overall situation this can take varying amounts of time.

Effective Navigation Through Probate

Probate doesn’t have to be a problem. If you work with an experienced probate lawyer who understands the New York laws thoroughly you can navigate through the process in the most efficient manner.

Most people have never dealt with the probate courts, so this professional guidance is going to be the key to an efficient passage through probate.

Download Your Free Probate Report

Our firm has prepared a special report on the topic of probate. It will provide you with a basic understanding of this legal process, and you will be able to go forward in an informed manner once you digest this information.

We are currently offering this report free of charge to our readers. If you’re interested in obtaining your copy of the report we invite you to click this link and follow the simple instructions: New York Probate Report

If you want to take the next step and speak with an attorney after reading the report you can contact our firm to set up a free consultation. We can be reached by phone at 718-793-7000.

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It is important to be completely honest with your attorney and share all relevant details with the possibility of an estate challenge in mind.

If you have any reason to believe that someone could step forward to challenge your wishes after you pass away you should definitely let your attorney know about it. There are things that he or she could do to dramatically reduce the likelihood of a successful challenge. However, your lawyer can’t act appropriately if you don’t share all the relevant facts.

A good example of the type of thing we are talking about here is exemplified by the case of the actor Sherman Hemsley who passed away last year. Hemsley was famous for portraying George Jefferson on The Jeffersons, and he was certainly an extraordinary comedic talent.

Hemsley was not close to any family members and he was never married. He didn’t have any children, and as a result he left everything that he had to a woman who was a close friend, someone that he considered to be family.

As the estate was being probated in El Paso, Texas a fellow from Philadelphia named Richard Thornton turned up to challenge the will. He said that he was Hemsley’s brother.

It turned out that he was in fact Hemsley’s half-brother after DNA testing was conducted. However, that in and of itself had no bearing on the validity of the will so it was ultimately upheld.

However, Hemsley died in July and he wasn’t buried until November.

As you can see from this case you should certainly let your attorney know about any long-lost relatives that may arrive on the scene after your passing.

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Imagine the good that $40 million could do. If you had this kind of money you would be able to do amazing things for your family.

Of course, there are people who don’t have any living family members. However, if someone has ever showed you any kindness, you could repay this person in an absolutely unbelievable manner. You could also do incredible things for charitable organizations or institutions that mean something to you.

Making sure any or all the above takes place requires the execution of an estate plan. If you had no family and you didn’t leave behind a last will the assets that were in your possession at the time of your death could be consumed by your state of residence via escheat rules.

This is a scenario that is in play right now in New York.

The case of Roman Blum is not the first intestacy case that the state of New York has ever encountered, but it certainly is the largest. Blum, a Holocaust survivor who died in January of 2012, left behind a fortune valued at around $40 million.

He died without a will, and nobody has come forward claiming to be a relative. Efforts by the state to locate a living relative or relatives have come up empty to this point.

Under the New York statutes if the money goes unclaimed for a period of three years the state assumes ownership of these funds.

This is what can happen to your resources if you have no family and you fail to execute a last will. Even if you aren’t a millionaire, you can probably find better uses for the money.

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With a generation-skipping trust you can keep more of your hard-earned resources in the family for a longer period of time.

Why would there be any need to utilize an estate planning device like a generation-skipping trust to preserve your wealth? The answer can be broken down to three words: the estate tax.

We have a federal estate tax that is imposed on assets that you are transferring that exceed $5.25 million. The maximum rate of this tax is 40% in 2013. While New York estate tax is imposed on assets being transferred that exceed $1 million, with a graduated tax rate that caps at 16%. This tax is often criticized because people say it is an instance of double taxation. They say that the estate tax is levied on assets that are left over after taxes have been paid on earnings.

In fact, this description may not go far enough. The estate tax can be imposed over and over again as assets are passed from generation to generation, so the same assets can be taxed multiple times.

By conveying assets into a generation-skipping trust you can slow this process down considerably. With these devices you skip a generation and name your grandchildren as the beneficiaries.

Your children can benefit from assets that have been placed into the trust, so you are still providing something for them. However, they never own the assets outright so there is no estate tax imposed on that generation.

When they pass away the beneficiaries of the trust assume ownership of the assets. This transfer is taxable, but you facilitated the avoidance of one imposition of transfer taxes by creating the trust.

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Some people who are in a position to give life-changing amounts of money to their loved ones may take pause. If you were to give a young person a significant gift or inheritance he or she may see no reason to get an education and make an individual mark on the world.

One thing you could do if you felt this way would be to convey assets into a 529 college savings plan for the benefit of a future college student. And, if it is an issue you may actually be able to gain some estate tax efficiency in the process.

The way that it works is you put money into the account in much the same way as you would a 401(k) account. The assets that have been placed in the account are invested, and the growth is not subject to taxation as long as the student does wind up using the funds for college expenses.

From a tax perspective you are reducing the value of your taxable estate as you place money into the 529 account. However, you have to concern yourself with the gift tax because your contributions into the account for the benefit of another are considered to be taxable gifts.

The good news is that there is a $14,000 per year, per person gift tax exclusion that exists outside of the lifetime unified gift/estate tax exclusion. As a result you could fund the 529 account with $14,000 contributions each year to stay within this exclusion amount.

Ultimately you would be transferring assets out of your taxable estate for the benefit of a loved one in a tax-free manner