What is Estate Planning?
Wills and Trusts are the primary tools for estate planning. You have worked hard to save money for retirement and want to insure it will be used for your loved ones when you’re gone. Estate planning is a process designed to assist you in making important decisions that will face you and your family. If you do not decide these things ahead of time, they may be decided by a court according to the law. These laws control what happens if you should become incapacitated without an estate plan or if you die without a Will. In many cases the laws may not align with what you may want. If you plan ahead, follow certain procedures and make your wishes clear, your wishes can be carried out as you want.
What you need to know
A Last Testament and Will (generally referred to as a “Will”) is a commonly used estate planning document to make your wishes known should you pass on. Wills may be very basic or extremely complex depending upon the wishes and assets of the person executing the Will (Testator/Testatrix). An Inter Vivos Trust is an estate planning document which creates a vehicle to receive and administer property once property is transferred into the trust. It is created during the lifetime of the person creating it and may be either revocable (known as Grantor’s trust) or irrevocable depending upon the reason for its creation. Estate tax concerns are generally limited to individuals with assets over $5,000,000. If you anticipate that your estate may be in excess of that amount by the time of your death, estate planning is extremely important in order to protect your assets. Although protecting and preserving your savings is certainly paramount, what is also of importance is insuring that one has the appropriate documents in place to ensure one’s health care and financial affairs are properly handled.
Some of the tools we utilize are:
- Durable Powers of Attorney
- Health care proxies
- HIPAA forms
- Living Wills
- Burial Agent Designation forms
A Will is a written legal document that takes effect after your death. In it, you write:
- How your property and assets (also called your “estate”) should or should not be given out
- Who will give out your property after your death (your “Executor”)
- How any remaining bills/taxes should be paid
- Who should care for your minor children
- What should happen to your body or specific parts of your body
Under New York law, any person over the age of 18 who is “of sound mind and memory” can make a Will. The Will must also meet some other requirements in order for it to be valid:
- The Will must be in writing and signed by the person, the “testator,” at the end of the Will
- It must be signed in the presence of at least two witnesses, who do not receive anything under the Will
- At the time of signing the Will the signer acknowledges to the witnesses that he or she is signing
- The witnesses confirm the signer’s signature and sign their names and write their addresses at the end of the Will
A trust is a document giving a person or an institution the power to hold and manage the money deposited into it for the benefit of the creator of the trust (grantor or settlor) or the benefit of another person. The person managing the money and property is called the “trustee,” and the trustee can be you or someone else. The person who receives the money or property from the trust is called the “beneficiary.” The money and property in the trust are called the “trust assets.” The trustee must follow the instructions in the trust document describing how to manage and give out the trust assets, and how long the trust lasts.A trust can serve many purposes, including estate planning, tax planning, medical planning, and charitable giving. A trust is created by written document in the same way as a Will. However, unlike a Will it can be created during the grantor’s lifetime to manage and invest money and property before and after death. Property placed into a trust can include any personal or real property and does not have to go through probate, which can be a time-consuming, expensive and public legal proceeding.If you are going to own something in the future, you can put your interest in that property into the trust. Your retirement accounts can name your trust as the beneficiary. Trusts may exist in two forms:
- Inter Vivos Trusts – begins to operate during the Grantor’s lifetime and may end at or last beyond death
- Testamentary Trusts – created by Will to begin operating after Grantor’s death
Inter Vivos Trusts may be either revocable (known as Grantor’s trust) or irrevocable. Revocable trusts allow the Grantor to maintain complete control of the trust assets including being able to amend or revoke the trust. They are generally used for asset management and avoiding probate proceedings and usually name the Grantor as the Trustee. Irrevocable trusts cannot be changed or revoked by the Grantor, who may not receive the principal of the trust assets. These trusts are generally used for Medicaid planning and asset protection.
Note: There are also trusts used for specific situations, such as supplemental needs trusts and spendthrift trusts. A supplemental needs trust (or special needs trust) lets you set aside money for a mentally and/or physically disabled person without having that person lose the right to receive Medicaid or other public assistance. A spendthrift trust can be used to limit the funds available to loved ones who cannot manage money well or who have many creditors. Either of these trusts can be set up as living trusts or testamentary trusts.
Durable Power of Attorney
A durable power of attorney is a contract in which you give another person (agent) or persons (agents) authority to make legal and financial decisions for you. It is important for every adult because, if you become incapacitated, you need someone you trust making financial and legal decisions for you rather than a court having to appoint a Guardian. Durable Powers of Attorney are effective the day signed and continue despite incapacity and may be tailored to meet your specific needs and independently monitored to guard against abuse.
A Healthcare Proxy is a document where you name someone (agent) to make healthcare decisions for you if you become unable to do so. Decisions about your care may include which doctor, treatment or hospital is best for you and whether or not to take heroic measures to save your life. It starts operating when an attending physician determines that you lack mental capacity to make health care decisions for yourself and you are unable to dispute that determination. It may be changed or revoked
A Living Will is a document that says what your wishes are regarding whether life-extending medical measures should be taken to prolong your life if you have a terminal illness and are permanently incapacitated or unconscious.It authorizes and directs the attending physician to withhold, withdraw or limit treatment to save or extend a person’s life in these circumstances.