Estate Planning Basics
Although it can be difficult to get around to putting together the right estate plan for you and your family, when you have one in place, you have peace of mind that your family is provided for.
What is Estate Planning?
In a nutshell, estate planning is the process of documenting how you want your assets to be handled in the event of your passing or incapacitation. It also provides for the protection of your minor children. While this typically involves a will, it also frequently involves accompanying documents, such as a trust, planning for life insurance policies and beneficiaries on retirement accounts, titles, and more.
Some of the most common estate planning documents include the following:
- Financial power of attorney
- Healthcare power of attorney
- Living will/advanced medical directive
- Revocable living trust
- Simple/complex will
How Can I Prepare?
In order to properly assemble and draft your estate plan with your attorney, you will first need to gather specific information concerning what your assets are and what their value is. This includes but is not limited to:
- Assets
- Employee benefits
- Insurance policies
- Any funds that you are owed
- Loans
- Contact information for any and all entities connected to these assets and more, such as financial advisors and accountants
It is also critical that your estate plan is updated every few years as your life circumstances change. For example, if you have obtained a divorce, you will likely need to make changes in order to ensure that neither your ex-spouse nor their family members are named in your documents or on beneficiary designations. Changes will likely also need to be made with respect to any jointly owned assets with an ex-spouse.
What is a Will?
A will is a set of instructions dictating what becomes of your property after your passing. It also names key individuals involved in this process, such as your executor and a guardian for minor children.
However, contrary to what some may believe, not all instructions for asset distribution are included in a will; for example, 401k and IRA assets are typically distributed in accordance with specific forms filled out pursuant to starting those funds.
What is a Revocable Living Trust?
A number of individuals and couples rely on the use of a trust because it can offer more privacy and control than a will and is more appropriate in some estate planning capacities, especially where flexibility is needed or there is a likelihood that an estate plan will be contested.
Trusts are frequently used in a variety of circumstances, such as:
- Blended families
- Children with special needs
- Individuals without children
- Planning for continuity of management during incapacity
- Passing assets amongst a variety of inheritors
- Tax planning purposes
Powers of Attorney (POAs)
A power of attorney is put in place in case you become incapacitated and cannot make decisions for yourself. The Power of Attorney document designates an individual to act on your behalf, and there are POAs for financial matters as well as healthcare POAs for medical decisions.
Advance Medical Directive and Living Will
A living will specifically outlines what you want to happen concerning medical circumstances that are terminal. It can be distinguished from a healthcare POA in that the POA covers all other healthcare situations, while the living will only covers end-of-life care and mandates specific actions by your healthcare provider.
If You Have Minor Children
If you have minor children, you will want to nominate a guardian in the event of their parents’ incapacity or death. You can name one or multiple individuals in this capacity; in fact, it is wise to name back-up choices in the event that your first choice is not available to serve. Note that the guardian(s) you choose will have all the authority that you have with respect to your child, such as medical decisions and what school(s) they attend.
Updating Estate Documents
If you already have your estate planning documents in place, it is critical to regularly review and update them to ensure you have the right beneficiaries selected, given any new circumstances, such as a new birth in the family or a divorce. We typically advise our clients to revisit their documents at least every three-to-five years to see if updates are warranted and any changes to tax laws incorporated, as well as any major life events addressed.
Federal and New York State tax law changes may also warrant changes to your estate plan. This could involve:
- Reallocating assets to exploit increased exemptions
- Maximizing potential gifts to loved ones
- Utilizing annual gift allowances without gift tax implications
- Making charitable donations
- Contributing to a 529 college savings plan to avoid federal gift taxes
- Paying someone’s tuition or medical bills
- Converting retirement plan assets to a Roth IRA
- Establishing a trust
- Integrating a pre or postnuptial agreement into your estate plan to safeguard your loved ones and ensure asset distribution according to your wishes
- You may want to set up a trust
- You may want to integrate a pre or postnuptial agreement into your estate plan in order to help protect your loved ones and ensure that your assets are distributed in accordance with your wishes
Contact Our Manhattan, New York, Estate Planning Attorneys
At The Village Law Firm, our estate planning attorneys recognize that this process is not simply about a few legal documents. It is about ensuring that you create a plan for your lasting legacy that fits your particular needs. Having these conversations now ensures peace of mind later on. Schedule an initial call with our New York City team today to find out more.
