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Basics of Estate Planning

When you hear Estate Planning, what are you picturing?

Do you see the word: Trust or Will anywhere? Perhaps you are envisioning an elite family (of British ancestry) figuring out ways to game the system and stay rich? Maybe you are thinking about a "trust-fund" baby who has all of his families money set aside for him to live off for the rest of his life...maybe.

And while these images are a reality for a select few, Estate Planning should be a reality for EVERYONE. In this article, we are going to lay out the basics of Estate Planning and why you should be considering your own Estate Plan sooner than later.

Estate & Property. Section 1-2.6 of New York Estates, Powers & Trusts defines 'Estate' as either: (a) The interest which a person has in property or (b) The aggregate of property which a person owns. They go on to define Property, under Section 1-2.15, as "Property is anything that may be the subject of ownership, and is real or personal property."

So what?

Estate Planning is simply the process or plan created by a person to manage one's assets during one's lifetime and the disposition of those assets upon death.

And really there are two buckets with regard to Estate Plans...You either have a plan in place during your lifetime (and at the time of death) or you don't. By not having a plan at all, your assets, your health, and your family members and loved ones may be greatly impacted. For example, there can be severe tax implications, legal costs, and even critical care decisions made or not made on your behalf if you do not have a proper plan in place.

More Than Assets. But here is the kicker, and why we started the article by asking you to envision "Estate Planning" above. Estate Planning is much more than just protecting assets and transferring them upon a specific event or time...For example, Estate Planning can help (1) prepare you for incapacity, (2) make custody arrangements for minors or handicap children, (3) provide financial support for your loved ones, (4) implement business succession plans, (5) donate property to charitable causes you believe in and much (much) more.

OK, I am Interested. Now What? You need to call Snider Law, PLLC right now...just kidding!

There are many steps you can take if you are interested in coming up with an Estate Plan. Here are a few to consider:

  1. Identify your goals.

  2. List out all your assets.

  3. Identify the loved ones you want to support and protect.

  4. Identify risks to your assets and think about ways to mitigate.

  5. Come up with plans for potential heirs and beneficiaries, hand-holding allowed.

  6. Want to contribute to charity, great, find out how.

  7. Determine your tax liability, if any.

  8. Determine the legal tools required to achieve all the above.

Identify your goals. This is a crucial first step because it allows you to think about the goals for your estate plan. No assets? No problem. Goals like: "who will make decisions on my behalf if I become incapacitated?" or "if put in an unfortunate situation, do I want to be put on a ventilator or feeding tube?" are other decisions that you can plan for with an Estate Plan. And other than personal well-being, you could have a goal to avoid probate court all together or have specific bequests in your will etc. etc.

That is why it is critical to identify your goals early on so you can communicate with your attorney(s) who will act as the "legal vehicle" in helping you achieve those goals.

List out all your assets. It is important to list out ALL your assets because if an asset is not covered under a legal tool (discussed further below), then it may be subject to Probate Court. Working with your spouse, accountant, financial advisor may be helpful as you begin outlining every asset you independently or jointly own that may be subject to your Estate Planning.

Identify the loved ones you want to support and protect. At this point, we now know an Estate Plan is more than just asset protection and transfer. Loved ones you may identify include, but are not limited to: spouses, children, parents, pets, friends, business partners. How can they be protected? In some scenarios, you may have minor or handicap children...who will care for them if you or your spouse or both of you pass away? Since minors cannot inherit money directly, you will need to consider a legal tool like a trust to provide the funds necessary over a specific period of time (outlined in the instrument).

Identify risks to your assets and think about ways to mitigate. Alive or dead, your assets are always subject to risks from creditors and third-parties. It is important that you identify these risks and begin thinking about ways to mitigate. Suppose you own a business but are not incorporated...your personal assets may be subject to liability. Or perhaps you need to go to a nursing home, which is EXPENSIVE and generally not covered under private health insurance or medicare. Therefore, you may want to consider long-term care insurance as a supplement or maybe you qualify for a Medicaid Plan (need to be careful how this is structured and may want to look into a Medicaid Asset Protection Trust). The risks are numerous and you need to think through ways to mitigate.

Come up with plans for potential heirs and beneficiaries, hand-holding allowed. Some scenarios may require a bit of hand-holding as it relates to heirs and beneficiaries. Let's face it, some heirs and beneficiaries are not responsible with money. So having a fear that benees and heirs will burn through their inheritance quickly is not a new concept. That is why you determine when and how assets are transferred. Yes, even after you are long gone, your wishes can still be upheld through, for example, a trust with a designated Trustee following every order you previously laid out - bitter sweet!

Want to contribute to charity, great, find out how. Giving money to charity can be done while you are alive and/or at the time of death. For example, you could create a charitable remainder trust, make a direct gift to charity at the time of death through your will or you could create a foundation that donates to charity. Of course, it is always important to work with your attorney(s) to figure out the best method/plan for doing so.

Determine your tax liability, if any. In 2021, the federal estate tax exclusion amount is $11,700,000 individually or $23,400,000 jointly (with your spouse) - transferring your exclusion amount at the time of death to your spouse is a term called portability. Of course, this does not include any and all State-level taxes that are imposed on your Estate (in NY, its $5,930,000) - no portability allowed. If you determine your estate will exceed these thresholds, it is important to work with an attorney who can help limit or even minimize your estate and potential tax liability through several different legal methods.

Determine the legal tools required to achieve all the above. And lastly, work with an attorney who is your "legal vehicle" to achieving your goals. Tools such as, but not limited to: trusts, a last will and testament, advance directives (e.g. healthcare power of attorney or living will), pay-on-death accounts are all important to talk about and consider when you begin building your Estate Plan.

And remember, Estate Planning is not static!! It should be reviewed and updated as property is transferred into or out of the Estate during your life or other major life events that occur (marriage, divorce, death - just hopefully not in that order).

Lastly, this is a primer article...meaning, we have not touched on HALF of the topics, issues, or items that should be discussed with your Estate Planning Attorney (e.g. what insurance policies to get, how pets receive financial support, non-citizen spouses and tax implications, the parties involved in a Trust and how a Trust is created etc.)

Please reach out to Snider Law, PLLC if you have any questions or as you begin thinking through your Estate Planning needs...we are always here to help you succeed!


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