New York Estate Planning Lawyer Blog

What is an “estate” anyway? Many local residents mistakenly assume that they have no use for New York estate planning, because they don’t really have a large cache of assets to pass on or save from being consumed by taxes. After all, when most people hear the word “estate” they think of a palatial home surrounding by lush gardens and filled with shimmering treasures and majestic antiques. Not many have that kind of estate.

But it is crucial to understand that no large “estate” is necessary to get value out of meeting with a legal professional to plan. That is because even if you do not own a big house, virtually everyone has some estate to protect: including personal property, bank accounts, retirement plans, life insurance, and more. Failure to conduct any estate planning means that when you die your estate will pass to others via intestacy laws. These are default rules in each state which essentially give priority to certain individuals regarding inheritance. A recent Forbes article shared a helpful new website (www.mystatewill.com) which outlines intestacy rules in each state. You can visit the site and see how the default laws in the state would divvy your property depending on your family situation.

For example, in New York if you have an estate worth $100,000 and had a living spouse and two living children, then the spouse will receive $75,000 and each child will receive $12,500. However, it is unlikely that the $100,000 is in the form of a big pile of cash that can be easily divided. Instead, it might take the form of a home, retirement plan, or other physical property. That means splitting it up as required will present serious problems. Not only does estate planning allow one to decide what percentage of an estate each person will get, but the exact form of the inheritance can be decided–such as the spouse getting the house, the child getting the second car, or whatever other combination fits in your case.

Family inheritance disputes are legion. In most cases that make headlines, a famous individual passes away without conducting thorough estate planning and various family members publicly feud to get their fair share of the individual’s wealth. Our New York City estate planning attorneys often advise clients that these sorts of disputes are not only for the famous or even the wealthy. Family disagreements regarding an inheritance are quite common, particularly when no planning is done and the matters must be left up to the court-centered probate process.

Not only that, but sometimes feuding occurs even before the family matriarch or patriarch passes away.

For example, a recent Sacramento Bee letter explored a situation where two siblings seemingly isolated an aging mother from other siblings. Claims of undue influence and abuse were made. The three ostracized siblings were left wondering what options were available to ensure they received their share of the inheritance.

New York elder law estate planning is all about putting plans into place to designate inheritances, account for taxes, plan for disability, and otherwise provide peace of mind to account for long-term financial concerns. However, part of the challenge of the process is realizing that the future is unknown. It is impossible to determine with precision how long one will live, what finances are needed, and what care is required as one ages. Not only is speculation inherent in some of this planning, but changing government policy, medical advances, and societal cultural changes must be taken into account when conducting this estate planning.

No More Retirement Age?

For example, a recent Business Times article discussed statements made by representatives from Wells Fargo that the concept of a retirement age “is going the way of the typewriter, another 20th-century relic.” Instead of retiring at 65, say the executives, most won’t retire until age 80 or beyond. The claims were made following a Wells Fargo survey which found that at least ¼ of all respondents did not believe they’d be able to retired until they were 80 years old. On top of that, most thought that they’d never actually be able to stop working with some extra income needed after retirement.

Our New York estate planning attorneys often help clients create “ethical wills.” An ethical will refers to a document left by an heir to pass along intangible assets like morals, lessons, and memories. Creating one of these wills is an important way to clarify the meaning of one’s life to family and friends, sharing gifts of the heart and mind.

Recently, a Time magazine article discussed how, following the recession, the importance of this ethical legacy planning was growing. While no one welcomes a difficult financial climate, some observers note that a positive side-effect is the growing importance of relationships, experiences, and memories for many families. The article author notes:

“Born out of national need, this national (if not global) rethinking of what is most important has had remarkable staying power, even as the economy has started to improve.”

Smart Money published an interesting story this week that lists several things that parents should tell their children about their personal estate plan. This planning is conducted for individuals, but it obviously implicates entire families. It is often challenging to balance the need for parents to make their own choices about these affairs while respecting the fact that many others, especially children, are affected by those decisions. Our New York estate planning attorneys work with many residents who are grappling with these questions–trying to understand what they should or should not tell their children about their plans.

The Smart Money article argued that, generally, parents fail to provide enough information to their children about these affairs. Not every detail necessary need be explained. However, the author argues that it is imperative to share at least four details: (1) Who is the executor/trustee, (2) What is the long-term care pan, (3) Is there a living will, and (4) Where are important documents located.

Who Is the Trustee?

Market Watch reported last month on new research that suggests that many community members are misinformed about the cost of certain types of insurance. As New York estate planning attorneys we understand the importance of life insurance policies in many local resident’s financial planning efforts. Similarly, an important part of an elder law estate plan often involves securing long-term care insurance. Misinformation about the practicalities of these insurance options may leave local residents less legally and financially secure down the road.

The latest research focuses mostly on life insurance and was conducted by LIMRA and the non-profit group, LIFE (Life and Health Insurance Foundation for Education). Most surprisingly, the effort–conducted via surveys–found that consumers often overestimate the cost of life insurance. The confusion about the costs means that some families may have less protection than they need.

The research involved asking respondents to estimate the cost of different types of policies. The average estimates were four to seven times higher than the actual cost. For example, the annual cost of a 20-year, $250,000 life-insurance policy for a healthy 30-year old is about $150, but the average consumer guess was over $400.

This is the time of year when many teenagers and young adults end one chapter of their lives and prepare for the next. It is also a time for many families to consider how far they’ve come and what the future holds for themselves and their loved ones. For those graduating high school, the obvious next step is college. Our New York estate planning attorneys are intimately aware of the challenges of paying for a college education these days–tuitions seem on a never-ending upward spiral.

No matter what the family financial situation, there is benefit to properly planning for these costs and understanding the implications of certain financial decisions. For example, Daily News published a story this week on the way that grandparent gifts to grandchildren heading to college can be properly tailored to meet tax goals. The story noted how the tremendous student loan burden faced by so many college graduates make tuition support one of the best gifts any grandparent (or other loved one) can provide to a young person.

But not only is the gift an act of generosity, it may be a particular prudent financial decision this year. Right now the lifetime gift and estate tax exemption rate is at $5 million. The level is set to drop down to $1 million next year. It may be logical to take advantage of these rates, so that assets can be passed on now instead of through one’s estate.

Local families with disabled children often have added complexities when conducting New York estate planning. Parents of children with special needs have a clear desire to ensure that estate plans are in place so their loved one will have necessary resources throughout their lives–even after the parents are gone. Fortunately, New York allows parents to set up trusts which provide benefits to children without disqualifying them from Social Security and Medicaid programs.

However, it is crucial to work closely with an estate planning lawyer on these “supplemental needs trusts,” because there are very specific rules about what can and cannot be purchased with the funds without risking benefit payments to the child. In particular it is usually best to make distributions from the trust “in kind” instead of direct cash payments to the child.

Military families with disabled children may have even more challenges when planning for the long-term well-being of their children. For example, as reported this week in Forbes, a military retiree can set aside up to 55% of his monthly stipend to provide for family members upon the retiree’s death. Yet, those benefits are counted as income when given to other family members. If the one who receives it is a dependent child with disabilities then the income may risk the child’s participation in Medicaid and Social Security Disability Insurance programs.