New York Estate Planning Lawyer Blog

Comprehensive estate planning can be an extensive process, especially if you have many different assets. However, there are also other important considerations when it comes to an effective estate plan, including family members with disabilities. For a long time, special needs trusts were the vehicle of choice in ensuring that a family member with special needs can continue to receive care even after a caretaker passes away. In the last few years, a new option has become available: an ABLE account.

The Basics

ABLE accounts were created by the Achieving a Better Life Experience Act of 2014. While anyone can establish a special needs trusts, only individuals who reside in states that permit ABLE accounts or whose state has contracted with another state to offer such accounts are eligible. New York has an ABLE account program in place, and utilizing it may help you better address your family’s needs.

One of the biggest stories of 2017 is the new legislation that passed in December that drastically changed the government’s tax code. With such sweeping new changes, it is more important than ever to make sure that your estate plan is as comprehensive as possible and still addresses your need effectively. Some of the major changes many individuals with existing estate plans need to worry about are discussed below.

Estate Tax

One aspect of the bill that has a significant impact on estate planning approaches and portfolios is how the estate tax was handled. In essence, the estate tax threshold has doubled. In the past, the exemption hovered around five million dollars for individuals and roughly double that for couples. Now, the exemption has been increased to nearly eleven million dollars for an individual and double that for a couple. As in the past, the exemption threshold is tied to inflation and will continue to increase each year.

We have recently written about various estate planning mechanisms that can enable you to pay for a young person’s college tuition. If you are interested in making those types of arrangements, it is important to understand how they might affect your estate plan. A college savings plan could become an important part of your comprehensive estate planning strategy.

The Basics

College savings plans, or 529 plans, come in a variety of shapes. There are many characteristics that you need to consider when determining the plan that is right for you. One of the most popular 529 plans is the prepaid tuition plan. With this type of plan, you make cash contributions to an account that invests that money and gains interest over the life of the account. The earnings the account makes are tax-free so long as they are used for qualifying expenses related to higher education.

Most people want to help their family members have everything they need. In fact, one of the main reasons to create a comprehensive estate plan is to make sure that you are able to distribute your assets in a way that provides the most security for your beneficiaries. During our lives, there are times when we have family members in need and may be in a position to help them. If we choose to do so with a loan, it is important that the details of that loan are written down and thoroughly understood by all parties involved in the transaction. Otherwise, there could be potential problems when it comes to administering your estate.

Pitfalls of Loans

One of the biggest problems with loans happens when the lender passes away, often unexpectedly. If there is an outstanding loan to a friend or family member, especially one that may also be a beneficiary, there is likely to be some disagreement over the terms of various documents within the estate plan.

There are many different assets that combine to form your overall estate, and there are many different options when it comes to protecting those assets. Your estate can include real estate, stocks, copyrights, bonds, vehicles, and many other types of property. Your estate value also includes the cash you have on hand. In today’s world, it is not uncommon for high-value estates to be low on cash. While the estate itself may be worth a great deal because of many of the holdings within the estate, there is often a lack of ready cash to take care of important expenses like funeral costs or even state and/or federal estate taxes. If you find yourself in that position, a second-to-die life insurance policy could be an important part of your estate planning toolkit.

Benefits

A second-to-die life insurance policy has many benefits for many different types of families. However, they can be especially useful in situations where there is a large estate involved. With new legislation, the federal estate tax exemption has doubled and a lot more people do not have to worry about owing the estate tax as the exemption for an individual has been raised to around $11 million and for a couple to around $22 million. The exemption for New York’s state-level estate tax is currently at $5,250,000. Only estates valued over these amounts will be subject to the estate tax.

Unfortunately, the old adage that death and taxes are unavoidable is true. Unfortunately, they are also both closely related. For individuals with estates that are subject to a federal and/or a state-level estate tax, there exists the possibility of being double taxed if you maintain a residence in more than one state. Unfortunately, this is all-too-common of an occurrence. A comprehensive approach to estate planning can help avoid this unpleasant surprise.

How It Happens

Double taxation typically occurs in situations where individuals have multiple properties spread across different states. It is not uncommon for an individual to have a home in New York and another home in, say, Florida. Potentially, the second home could be even closer – like Pennsylvania. Wherever your multiple residences are, you need to be aware of the potential tax consequences of maintaining property in various states.