How You Can Use Estate Planning as A Gift
What happens to all your belongings when you die? Where will your finances go? Who will be in charge of carrying out your last wishes, and who will take care of you before you pass away?
Estate planning IS a gift. Consider, you have already taken the effort and invested significant time to meet with an estate planning expert, so your family doesn’t have to. Why did you make this effort?
The reason you made the effort is that establishing an estate plan has the potential to resolve future conflicts and disorientation that your family may experience upon your departure. Estate Planning is a loving gift that you will give to reduce the emotional stress that is attached to your passing and it will provide direction for how your family will need to move on following your death.
In this article, we provide an overview of the essential elements of an estate plan, emphasizing the importance of taking action now to protect your family’s future. At New York Legacy Lawyers, our experienced New York estate planning attorneys are available to offer guidance and support as you begin the process of creating or updating your will and estate plan. To learn more about how we can assist you, please call (718) 713-8080 to schedule a consultation.
A WILL IS A GLUE HOLDING IT ALL TOGETHER
The concept of a last will & testament, or transfer of property after death has been around as long as humans have. In many places, the method of transfer is primarily defined through existing cultural norms. In the US and Brooklyn, however, we use estate law to clear things up a bit more formally.
Fundamentally, your will entails where you wish your possessions, assets, minor children, and more to go when you pass away. Additionally, it will state who will be in charge of distributing those assets and managing any other affairs in your passing or incapacity.
Legal requirements in setting up a will can be intensely specific, but only because ambiguity leads to conflict, especially after a loved one has passed. It is critical that you seek the assistance of an attorney or an estate planning expert to make sure that your will gets drafted correctly.
JOINT OWNERSHIP AS AN ESTATE PLANNING OPTION
Joint ownership means owning your assets jointly with someone else like a spouse, child, or a close relative. The purpose of Joint ownership is to make sure that when you die, those assets go to your spouse or heirs smoothly because they are already owners of the assets. To head off more complicated issues and to make sure joint-owners can access all assets, beneficiary designations are helpful.
SETUP BENEFICIARY DESIGNATIONS ON INTANGIBLE ASSETS
A Beneficiary Designation on your bank accounts, your stocks, and brokerage accounts may be needed to facilitate the transfer of those assets to a joint owner, or another designee. Various kinds of Beneficiary Designations can be acquired through a bank or other financial institutions. Some of these designations are known as “transfer on death,” “pay on death,” or “in trust for account.”
The person or beneficiary that you place on those accounts is not an owner of the accounts, presently. If they have any financial problems before you designate them as a beneficiary on your accounts, their financial issues will not become your problems, and that is a beautiful benefit. When you pass away though, they will gain access to and ownership of the assets within the accounts, however.
A PRIMER ON PROBATE
Probate is the legal process in which a will is proved or tested in a court. Many people find the Probate Process frustrating. When a will is contested, there may be many parties involved in the process. And if a lawyer is involved, there is a cost component…on top of the cost of probate itself.
The purpose of the probate process is to have the will accepted as a valid public document that is the true and last living testament of the estate of a deceased person. Probate is the first step in the legal process that is needed to name the Executor of the estate. This step is essential because the Executor needs to be granted the authority to distribute assets according to the will of the deceased loved one.
If you have questions about probate, please contact us.
WHEN YOU SHOULD CONSIDER A TRUST?
You should consider using a trust if the value of your estate is such that your family might lose a significant amount of your assets in probate or estate taxes. You might also want to consider a trust if you have special needs, like a family member who requires extra care, or a child you’re concerned will not be ready to manage the assets you intend to leave them. In truth, there are a lot of reasons to consider a trust, and many different forms of trust you might consider.
When you set up a trust you actively move assets from your possession to the trust. Usually, you are the beneficiary of that trust while you are still alive, and upon death or another circumstance of your definition – the beneficiary changes.
A trust will sometimes feel scary because you may feel that you could be giving up your assets to a bank or other entity that you have no control over. However, you will make the decisions about how to place money in or withdraw assets out of the trust. Functionally, it shouldn’t interfere too drastically with how you manage your estate now – but when you pass away, it will make a huge difference in how your assets transfer to your loved ones.
When is a Gift Not a Gift
While we often say that the sentiment matters most in gift-giving, the IRS emphasizes that there’s more to it. In specific situations, a gift means more than just kindness; it holds tax implications, prompting the question: “When does a gift cease to be just a gift?”
In 2023, the annual gift tax exclusion is set at $17,000 per recipient or $34,000 for married couples sharing gifts. This means you can give up to these amounts without facing gift tax. However, if your total gifts surpass this threshold, the surplus is no longer seen as a ‘gift’ under tax law – it becomes taxable.
The lifetime limit for tax-free gifts, whether given during one’s life or left after passing, is $12.92 million for an individual, or $25.84 million for a married couple. These figures also apply to the Federal Generation-Skipping Transfer (GST) tax exemption in 2023.
New York residents are exempt from state gift tax. Yet, if you’re considering substantial lifetime gifts, knowing your state’s tax regulations is vital.
For US citizen couples, there’s an unrestricted marital deduction for gift and estate tax purposes. This means limitless transfers can be made to a US citizen spouse during life or after passing, and the gift retains its nature. However, gifts to non-citizen spouses are subject to a $175,000 marital deduction in 2023.
Understanding these tax rules ensures your gift remains a genuine expression of goodwill and generosity, rather than inadvertently becoming a taxable matter.
DRAFT A LIVING WILL & DESIGNATE A HEALTHCARE PROXY
A living will typically accompany a healthcare proxy. However, these are two different documents. A Living will is simply a statement signed by you. It states how you wish to be cared for in case you become unconscious or you are in another situation in which you cannot make decisions for your care on your own.
A healthcare proxy can be established when you appoint an individual to make healthcare decisions for you. In some places, this is called a healthcare power of attorney. Having this document in place will assist your family members and or loved ones if you become incapacitated. Moreover, this document will prevent courts or hospitals from becoming the primary decision-makers regarding your care.
YOUR ESTATE PLAN AND LIFE EVENTS
It’s crucial to keep your estate plan updated in the event of significant changes in your finances, health, family, or relationship status. In the event of your sudden passing, your will and estate planning documents may not reflect your current circumstances.
To ensure that your heirs are not held to the outdated provisions of your will, you should make immediate changes to your estate planning documents after any of the following life events:
Death: In the event that a family member who was designated to manage your estate passes away, it will be necessary to choose an alternate executor, trustee, or guardian to take their place.
New Addition: An addition to your family, such as the birth or adoption of a new child or grandchild, or the responsibility of caring for an ill adult can have an impact on your estate plan.
Health Crisis: If you or your spouse has been diagnosed with an illness, or disability, or requires nursing care, it’s recommended to update your will as soon as possible.
Milestone Birthday: Turning 18 or graduating from high school, may prompt you to consider providing financial assistance to a child or grandchild for their education.
Marriage: You may need to review and update your estate plan to include provisions for your new spouse’s inheritance and any future children. Additionally, you may need to revise any provisions you made for a former spouse.
Divorce: It may be necessary to revise your estate plan and remove your former spouse as an executor or beneficiary.
Significant Purchase: Buying a home, obtaining life insurance or investment, or borrowing a substantial amount of money, can cause disputes over your heirs’ inheritances.
Business Deal: Changes in your career path such as starting a business, selling company assets, or retiring can all affect your family’s future financial plans.
Change in Financial Laws: Any changes particularly federal or state tax laws, may necessitate asset restructuring or lead to the loss of substantial amounts to the government. It is important to stay informed of these changes and consult with an estate planning attorney.
It is important to update your estate plan regularly as your life circumstances change because it is a document that needs to be kept current. Failure to update your estate plan could result in unintended consequences that could negatively impact your heirs’ inheritance. To ensure that your estate plan reflects your current wishes, it’s recommended to consult with a qualified estate planning attorney.
| Life Events for Estate Plan Updates | Impact on Estate Plan |
|---|---|
| Death | Choose alternate executor, trustee, or guardian. |
| New Addition | Adjust estate plan for new family members or responsibilities. |
| Health Crisis | Update will for illness, disability, or nursing care. |
| Milestone Birthday | Consider financial assistance for education. |
| Marriage | Include provisions for new spouse and future children. |
| Divorce | Revise plan to remove former spouse as executor/beneficiary. |
| Significant Purchase | Prevent disputes over inheritances after major acquisitions. |
| Business Deal | Adapt plan to changes in career, business, or retirement. |
| Change in Financial Laws | Restructure assets due to tax law changes. |
ESTATE PLANNING IS ALL THIS AND MORE
We clearly believe estate planning is a gift. But it is not a gift you can grab at the store; it requires meaningful thought and responsible foresight.
In this brief article, we covered the basics you should be thinking about regarding estate planning, but for each section above we could write ten more articles. Help yourself give the gift of planning and connect with a great team of estate planning professionals.
We want to help you prepare for your future and the future of your family. Contact us today to get started on your estate plan.
via New York Legacy Lawyers by Yana Feldman and Associates yanafeldmanlaw.com/how-you-...
