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Many people have a tendency toward procrastination, and when you do put things off they are usually going to be things that you would prefer not to do. There is no denying the fact that considering the end of your life and possible disability or incapacitation leading up to your death is not the most pleasant way to spend an afternoon. Some people don’t want to “go there” until they absolutely have to, and they may put off creating an estate plan for just that reason.

The financial ramifications of this procrastination/denial syndrome can be profound. For example, the estate tax exemption amount is going down to just $1 million in 2011 unless there is some last minute change to the law. You may have been told years ago that your total assets will fall within the exclusion amount when it stood at $2 million, but that may not be the case now. If you keep your head in the sand, you may never become aware of changes such as these, and it can cost your heirs hundreds of thousands of dollars.

Estate Planning Procrastination

The comprehensive modern estate plan also includes a health care component. It is important to let your wishes be known in terms of which medical procedures you would approve of and deny in the event of your incapacitation via the execution of a living will. It is also advisable to name someone who you would like to empower to make medical decisions for you if you were ever in a position where you were unable to make them for yourself via a health care proxy.

These are just a couple of things to consider, but the best way to meet the propensity toward procrastination head on is to think about your loved ones. After all, planning your estate has everything to do with your family, and if you don’t have a plan in place it will be up to them to sort things out, making a very difficult time in their lives that much harder to handle.

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.

How to Protect Your Loved Ones from Probate Delays and Costs

The probate process can take months—or even years—and often comes with court fees, executor fees, and legal costs that reduce your estate’s value. What’s more, probate proceedings are public record, meaning anyone can access details about your assets and beneficiaries. For families who value privacy and efficiency, avoiding probate can help protect both.

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.

What Is an Estate Tax?

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 both 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 Happens If I Don’t Have a Disability or Incapacity Plan?

If 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 known as 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’s a good idea to speak with this person beforehand. Make sure they will be available to make medical decisions for you and are comfortable making tough choices regarding your health. Obviously, this person should be someone you know and trust.

If you cannot make financial decisions on your own due to 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 you would feel comfortable with paying your bills and overseeing your assets.

While creating your estate plan, be sure that your Long Island estate planning attorney includes a thorough disability or incapacity plan. It’s also a good idea to consider using a Trust as a tool to help you and your loved ones in the event you are unable to make decisions. A Trust essentially moves all of your assets into one place so your loved ones can access and oversee them for your benefit.

Creating a thorough and specific estate plan — including an incapacity or disability plan — will help make life much easier for both you and your loved ones.