Wills and Trusts

When a person begins to approach the topic of estate planning, the first thing that usually comes to mind is a Last Will and Testament. Having an attorney prepare your will is always a good idea. An attorney’s supervision of the execution ceremony gives rise to a rebuttable presumption that all of the requirements of the statute of wills were met. (Matter of Kindberg, 207 N.Y. 220, 100 N.E. 789 (1912) (https://casetext.com/case/matter-of-kindberg).

This is incredibly important. Will contests happen all the time. Take a second and think of your family. Now think what would happen if you threw a pot of money in the middle of a room on a day they all happened to be there? When an attorney supervises the will he or she drafted, it helps everyone form an orderly line and walk slowly to the pot, if they are entitled to walk to the pot at all. In essence, this helps a decedent’s wishes actually come to fruition.

A will also gives you the ability to declare exactly who gets what and how much. Individual items you own, like a painting or expensive jewelry, can be specifically given upon death to a certain person.

A will is where a family with minor children will declare who their directed guardians of the property and persons will be in case of their early demise. Although a tough issue to think about and even tougher to talk about, it is imperative for any family with children under 18. This will not only save your estate money, but your children are less likely to be caught in a guardianship battle down the road on the small possibility this tragic event ever occurred.

In today’s growing digital age and the lack of any concrete New York law, every will should also have a digital assets provision. (see Estate Planning for Digital Assets in New York)

Every will should also have a contingent supplemental or special needs trust in it. Sometimes these are called Trigger Trusts. This is imperative in the case of a child or beneficiary with a disability. It will enable that person to continue to receive any governmental assistance while using the inherited funds for appropriate expenses meant to enhance the disabled beneficiary’s quality of life. If a carefully drafted 3rd party supplemental needs trust is put into effect, it allows for the remainder of that money not used by the disabled party to be distributed to any beneficiaries of the disabled person, clear from any liens (i.e. Medicaid). This is ideal in the case of a parent with multiple children where one of them has or may develop a disability.

As part of every estate planning package, there should also be a Power of Attorney, Health Care Proxy and sometimes separate burial instructions.

A Durable Power of Attorney has several advantages. Without one, the only way to take over the affairs of an incapacitated person is to have a guardianship proceeding. Guardianship proceedings, although necessary is some instances, are better off avoided due to the complexity and cost. I think of a power of attorney as a small insurance policy that allows your family a smooth transition to take over your affairs in the event of an incapacitating event. It’s incredibly cost effective, does not require a judicial proceeding, and can save you and your family not only tens of thousands of dollars, but the true value lies in less heartache – being able to move forward where without it you would be in stuck in limbo for a significant amount of time.

The agent must always be someone the principal truly trusts 100%. Modern estate litigation revolves around inappropriate use of powers of attorney.

A health care proxy is another small insurance policy that allows your agent to make medical decisions for you in the case of your incapacity. It’s not an easy conversation to have, but again, none of this is. When you sign a health care proxy and in the unlikely event you become incapacitated, now that agent will be making your health care decisions for you. Accompanying this important document is usually a health care declaration that will help assist your agent in making decisions that parallel what your wishes are in certain circumstances.

Sometimes, a will, power of attorney, and health care proxy are a good start, but an individual may require more advanced planning. This comes in numerous forms: estate tax implications, especially New York State’s estate tax cliff, preventing possible medicaid liens, second marriages, maximizing charitable giving while minimizing taxes, or want of privacy in one’s estate.

Revocable Trusts

Revocable trusts have several benefits. The most highly cited one is that they avoid probate. Probate does take time and does cost money. In a case where a client may own real estate in multiple states, a revocable trust can avoid multiple probate proceedings. The assets don’t need to wait for a decree of probate and they transfer immediately upon the death of the Grantor of the trust. Prospective clients must remember that revocable trusts will usually require the re-titling of all the assets that are placed in the trust and that there are extra filling fees as well as time expense. There are some myths out there that these trusts save taxes, prevent creditors from attacking assets and prevent heirs from challenging the document, but these are just not true.

Irrevocable Trusts

The most common irrevocable trusts I speak to clients about are Irrevocable Life Insurance Trusts (ILITs) and Irrevocable Income Only Trusts (IIOTs or Medicaid Trusts). The main purpose of an ILIT is to avoid federal estate taxes. If the trust is drafted and funded correctly, your loved ones should receive all of your life insurance proceeds fully, without having to pay estate tax. The main purpose of an IIOT is to help protect property transferred to the trust from medical or medicaid reimbursement should you ever require long term care. The grantor must relinquish control of such property, but usually the pros outweigh any of the negatives. See this article for some common questions when it comes to this vehicle for planning.

Everyone’s situation is different and there is no catch all equation for each person’s wants and desires, but the important thing in my mind is that you take some sort of estate planning action. When there is way around a certain issue, attempting to take advantage of it and maximizing your beneficiary’s shares is only logical. Everyone works hard for their money throughout their lifetime and it’s a shame when New York State dictates who gets it or taxes a large chunk of it in taxes when there may have been a way to minimize those negative results.

If you have questions about Wills and/or Estate Planning anywhere in the State of New York, call the Westchester Law Office of Anthony Nigro at (914) 595-6527.