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Estate Planning

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Key Takeaways

  • An estate plan establishes advance directives on a validly executed last will and testament in the event you become incapacitated or pass away. Estate plans can dictate which of your assets go to the loved ones you name as beneficiaries, as well as give them access to funds while your assets are distributed in probate.
  • Both the IRS and New York State Government impose an estate tax at the time of an estate owner’s passing. The estate planning attorney of Burner Prudenti Law can help minimize or avoid the death tax.
  • Advance Directives are legally binding documents that establish a plan for your medical care and financial affairs and can include a Health Care Proxy, Living Will, and Durable Power of Attorney. New York’s statutory Power of Attorney has many requirements that can be difficult to meet with an estate planning attorney’s help.
  • As part of your estate plan, an attorney at our firm can help you create a Living Will to avoid probate, prepare for incapacitation, provide for minor children, and set up charitable bequests and planned giving.

Estate Planning Lawyers in New York City and Suffolk County

While nobody wants to think about death or disability‚ establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Burner Prudenti Law’s experienced estate planning attorneys, with locations in Manhattan and Long Island, can help you take control of your finances and help your loved ones navigate the complications associated with managing your affairs if your health deteriorates or you pass away.

What Is An Estate Plan?

A basic estate plan includes:

  • Advance directives, in case of incapacity.
  • A validly executed last will and testament.

Every family situation is different. An estate planning attorney can advise you on the variations that can be drafted into your last will and testament.

For example, a simple “sweetheart will” where each spouse leaves assets to the other outright is rarely recommended (for a number of reasons). One reason is to avoid assets returning to a spouse who becomes disabled or incapacitated and is receiving government benefits. By including a supplemental needs trust trigger into your will, you will protect your spouse’s benefits and your assets.

This is one of many examples of why and how you may need an estate planning attorney. But let’s discuss a few more instances.

elderly person writing on a piece of paper

When Do I Need an NYC Estate Planning Attorney?

To understand when you need the assistance of an estate planning attorney, it’s important to understand what they do. Typically estate planning attorneys create and review different types of important documents, such as:

How to Find the Right Law Firm

While the process of finding an attorney can seem intimidating, you can break the entire process down step-by-step to make it easier:

  • List out the potential attorneys near you
  • Get in touch with each attorney on your list
  • Learn about their fees and experience, and view their ratings online
  • Choose the attorney that is the best fit based on the criteria above

How We Can Help You Plan for Your Taxes

The IRS will want to review your estate at death to ensure you don’t owe them that one final tax: the federal estate tax. In addition to the IRS, New York imposes a separate estate tax‚ which is imposed on individuals with relatively modest estates.

  • Whether there will be any tax to pay depends on the size of your estate and how your estate plan works.
  • There are many effective strategies that can be implemented to reduce or eliminate death taxes. That said, you must plan ahead to implement these strategies.
  • Another reason not to simply leave assets outright to a spouse is to capture a spouse’s NYS estate tax exemption with the use of disclaimer planning. Your estate planning attorney can help you with all of this and more.

Other issues to consider:

  • Whether you’d like your beneficiaries to receive your assets directly
  • Whether you’d prefer to have the assets placed in trust and distributed based on a number of factors which you designate‚ such as:
    1. Age
    2. Need
    3. Incentives based on behavior and education.

All too often‚ children receive substantial assets before they are mature enough to handle them properly‚ with devastating results.

As you can gather, there is no one-will-fits-all solution and everyone needs a tailored estate plan, which your estate planning attorney is well equipped to help you create.

man sitting on a couch and looking through paperwork in his lap

What Are Advance Directives?

Advance Directives are legally binding documents which allow you to establish a plan for your medical care and your financial affairs in case of incapacity, namely:

  • Health Care Proxy: allows you to appoint an agent, a family member or close friend, to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself.
  • Living Will: documents your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.
  • Durable Power of Attorney: a document that allows you to name agents who can make financial decisions on your behalf and assist in taking care of your daily financial obligations.

New York has adopted a statutory Power of Attorney form with detailed requirements for it to be considered valid. While the statutory form or the form provided by the bank may be accepted by certain institutions, it’s insufficient to convey all the powers needed to a client. Not all power of attorneys are the same. A good estate planning attorney will make numerous modifications to the statutory form based on your particular situation

How Your Estate Planning Attorney Helps You With Trusts

First, there are differences between a will and a Living Trust.

Living Trust, also referred to as an Inter Vivos Trust, is a document developed when an individual is alive, to:

  • Designate beneficiaries to whom they will leave their assets
  • Dictate how their assets are to be distributed before and after their passing
  • It is crucial to understand that living trusts become irrevocable upon the death of the grantor so it must be drafted correctly from the onset.

Your estate planning attorney can help you with trusts in the following ways:

They Help You Use Trusts To Avoid Probate

In case you use a will to leave assets to your family, all your possessions will be assessed in probate. This entire process takes up a lot of time and money and is public knowledge. Until the estate is settled, the probate court (Surrogate Court in New York) oversees the process.

In every county, there is one Surrogate Court. If you have children and a spouse, you would obviously want them to access some funds to sustain their lives when the estate is in the process of settlement.

Often, assets are frozen for many months or even years as the Surrogate’s Court validates the will, hears objections and eventually authorizes the executor to act on behalf of the estate. In case you own a business or an income producing property, this need for easy access to assets is even more important.

Your spouse would need to go through the probate process to access the money required to pay everyday expenses. Delays can be expensive, stressful and inconvenient. However, if you plan properly with your estate planning attorney, your loved ones can avoid probate‚ eliminating probate costs and maintaining privacy.

a judge holding a gavel

They Help You Use Trusts To Provide For Incapacity

Incapacitation comes with the inability to manage your own financial affairs. People often have this misconception that their spouse or children can take charge if they were to become incapacitated.

Unfortunately, other people can only manage your finances after they file a petition in court claiming that you are incompetent in the legal sense under Article 81 of the Mental Hygiene Law. The entire process takes time and money.

If you want your family to take over the finances without delay, you must choose a Trustee, and properly designate them in your legal documents. With your estate planning attorney’s help, they can be legally provided with the authority to:

  • Withdraw money from your bank accounts
  • Pay your bills
  • Take distributions from your IRAs
  • Sell stocks
  • Refinance your home

They Help You Provide For Minor Children

If your children have not yet reached adulthood, you must focus on developing a plan wherein your designated guardian has access to funds to raise your children.

Do talk to your estate planning attorney about what must be done if both you and your spouse pass away at the same time. In the contingency plan, you must not only decide on a Guardian to care for your children, but name the person you would want to handle the assets set aside for your children.

  • It is a good idea to choose different persons, so a system of checks and balances is maintained.
  • If you forget to handle this, the courts will determine who handles your finances and brings up your children.
  • In case the court does choose the people you have listed, they might be obligated by the court to adhere to various obligations, including providing annual accounting.
  • When choosing a guardian, make sure their values align with yours.
  • Consider the financial situation of any potential guardians. Will they be able to afford to assume the mantle of guardianship? If not, be sure to set aside enough money for your children’s care.
  • Also, be sure to take into account the age and health of potential guardians.

Charitable Bequests & Planned Giving

Your estate plan can help you give to charitable organizations and causes.

Moreover, if your charitable estate plan is established in a particular manner, you may:

Contact our estate planning attorneys to discuss your family’s financial situation and objectives.

Our team of experts  will walk you through the different alternatives and draft an estate plan customized to suit your needs.

two women in formal clothing sitting at a table and smiling at the camera with their hands folded

The main purpose of estate planning is to control how your assets are distributed upon your death. Most estate planning attorneys also help you prepare for incapacity by using a health care proxy, living will, and power of attorney. Certain estate planning techniques can protect your beneficiaries from creditors and minimize or avoid taxes.

An estate plan is simply how you wish your assets to be distributed upon your death. It can be as simple as a Will leaving everything to a spouse to trusts that minimize or avoid estate taxes.

You need a lawyer for estate planning because a mistake can be costly or stressful to the people you leave behind. Every estate planning attorney can tell you horror stories about an invalid will or trust that ended up causing interfamily strife and costly litigation. If cost is a factor, contact a local bar association to inquire about low income resources.

Advance directives are legal documents stating your wishes regarding medical care and treatment that are to be used when you can no longer make such decisions for yourself. The most common advanced directives are the Living Will and the Health Care Proxy. A Living Will memorializes your preferences regarding end of life treatment. A Health Care Proxy allows you to name an agent to make medical decisions for you when you cannot do so.

two people sitting next to each other at a table with papers laid out in front of them

Your estate planning documents should be secured in a location in your home, preferably in a fireproof lock box. Such documents should never be kept in a safe deposit box because banks seal these boxes at your death and they can only be unsealed with a court order.

A Durable Power of Attorney allows you to name an agent to make a wide range of financial decisions on your behalf. This powerful document is crucial should you become mentally or physically incapacitated. A power of attorney is in effect once signed by you and your agent.

A Health Care Proxy is a document in which you designate an agent to make health care decisions for you in the event you are unable to do so. The Health Care Proxy often contains language allowing your healthcare agent to hire and fire physicians, health care professionals and obtain confidential medical information.

Not to be confused with a Last Will and Testament, a Living Will memorializes your wishes with respect to end of life medical treatment and intervention, such as whether you want to kept alive artificially. The Living Will is only triggered when you are suffering from an incurable illness, with no hope of recovery, and you are incapable of expressing your preference.

Although there is no statute in the State of New York which specifically recognizes living wills, there are both state and federal court decisions that have established the right of an incompetent patient to have his or her wishes respected, as long as those wishes are known. New York law requires clear and convincing evidence of what the patient would want. Of all the various acceptable forms of evidence, a living will is often the best evidence of those wishes.

a person's hand with an IV tube in their wrist and pulse monitor on their thumb, draped in hospital fabric

A Last Will and Testament is a legal document dictating how you, the testator, want your assets to be distributed after you die. If you die without a Will, your assets will be distributed according to state statute, also known as the laws of intestacy. For example, in New York State, if you die with a surviving spouse and children, your spouse will receive the first $50,000 of your estate and then one-half of the balance. The remainder will be distributed equally amongst your children. This is not ideal for someone who wants all their assets to go to their surviving spouse or owns a business.

The Will has functions other than just listing the distribution of assets upon death, such as:

  • Creating a testamentary trust for minor children and thus avoiding court intervention.
  • A will can also distribute assets that are received after your death, such as tax refunds or an inheritance from another estate.
  • Creating a trust to protect beneficiaries from creditors and divorce.
  • A Will allows the creator to waive any bond that the executor would otherwise have to pay in order to administer the estate. Depending on the size of the estate, the bond may have a large annual premium which will be paid out of the assets of the estate.

You cannot disinherit a spouse unless there is a prenuptial agreement in place. New York law states that a surviving spouse has a right of election, that is, a right to receive the greater of $50,000 or one-third (1/3) of their spouse’s assets. That means that even though you might effectively “disinherit” your spouse by distributing probate and non-probate assets to your respective children, the surviving spouse can still elect to receive one-third of your estate.

The federal estate tax exemption, or known colloquially as the “death tax,” is currently so high that it does not affect most people. In 2020, the federal estate and gift tax exemption is $11.58 million dollars. In New York State, the exemption in 2020 is $5.85 million dollars. Although for most people, estate tax will not be an issue, the federal exemption sunsets on December 31, 2025, and there is a possibility that the exemption will be lowered.

a person placing their hand on a closed, wooden casket with flowers on it

When looking to minimize or eliminate estate taxes, we must differentiate between the federal estate tax and the state estate tax. In 2020, the federal estate and gift tax exemption is $11.58 million dollars and the NYS estate tax exemption is $5.85 million. The federal exemption combines gifts made during your lifetime and assets distributed at death. This means that if you live in NYS, ideally you should not have more than $5.85 million at the time of your death – unless you are married. If married, you can double your exemption amount by capturing both spouse’s exemption with a portability election and credit shelter trust.

The only way to avoid or minimize estate tax is move assets out of your name. Aside from spending your assets, an easy method is to simply gift the allowable amount ($15,000 in 2020) each year to as many people as you want, without affecting your estate and gift tax exemption. Gifts for medical or educational purposes also do not count against your lifetime exemption. This lowers the amount you have at death and does not cut into your exemption.

If you have charitable inclinations, a Charitable Remainder Trust (CRT) or Charitable Lead Trust (CLT) qualifies for an estate tax deduction equal to the value of the behest and allows up to a twenty-year income stream to designated beneficiaries.

If you are under the federal amount, but over the NYS exemption, your estate plan will concentrate on gifting during your lifetime up to the allowable $11.58 million. Instead of straight gifting, you can choose to create irrevocable trusts, including: Irrevocable Life Insurance Trust (ILIT), Intentionally Defective Grantor Trust (IDGIT), Qualified Personal Residence Trust (QPRT), Spousal Lifetime Access Trust (SLAT), Grantor Retained Annuity Trust (GRAT), and LLC or FLLC (Family Limited Liability Company) entitiesUsually, clients use a variety of techniques.

When gifting outright or into an irrevocable trust, it is important to consider the type of asset being given away, including its potential for growth and capital gains. As you can see, more sophisticated estate planning tools that can minimize estate tax require the help of an experienced estate planning attorney.

A descendant’s trust is incorporated into a Will or Trust and is the preferred way to leave assets to children of any age. Such trusts can be drafted to protect the beneficiary from creditors and divorce. The trust can allow the beneficiary to be his or her own trustee or name a trustee to manage the assets on behalf of the beneficiary. If drafted properly, the assets left in the trust at the child’s death will also pass tax free to their own children. This same method applies to any beneficiary.

a woman holding a small child in the middle of a field with the sunset behind them

It depends on whether the Trust is drafted to treat a grantor as entitled to the income generated by the trust. A grantor trust is a “disregarded entity” for tax purposes and thus no separate tax return is necessary. However, we often apply for tax identification numbers for the irrevocable trusts we draft.

In New York, a revocable trust can be revoked unilaterally by the grantor of the trust whereas the grantor of an irrevocable trust must either receive permission from the beneficiaries under EPTL §7-1.9(a) or satisfy the decanting requirements under EPTL §10-6.6(b). The key difference between a revocable and irrevocable trust lies in how the trust is administered and what purpose it is to serve.

A revocable trust is mainly used to avoid probate and provide for administration of the assets if the trust creator (also known as trustor or settlor) becomes incapacitated. The creator can be both the Trustee and beneficiary of the trust. Since the creator has complete control over how the assets are spent, it is a “grantor” trust and all income of the trust is taxed to the grantor. Upon the Testator’s death, the assets are disbursed according to the provisions in the Trust, much like a Will but avoiding the hassle of Surrogate’s Court.

An irrevocable trust also avoids probate but is predominantly used for robust asset protection and, in many cases, to move assets outside of an estate to avoid or minimize inheritance tax. The Trustor is prohibited from acting as Trustee but can retain certain powers – such as the right to change beneficiaries and trustees and the right to an income stream. An irrevocable trust can be drafted as either a grantor trust or a non-grantor trust, by including or avoiding certain grantor rules contained in Internal Code §§ 671, 673, 674, 675, 676, and 677.

person sitting across from two women who are showing them paperwork

Just as you would decant wine from one vessel to another, decanting allows the trustee of an irrevocable trust to move the assets to a new trust with more favorable terms- without court intervention or permission of beneficiaries.

Under New York’s decanting statute, EPTL § 10-6.6, the allowable changes to the trust terms depends on the “authorized” trustee’s discretion in the original trust. A trustee with unlimited discretion over distributions of principal can appoint the assets to a new trust that excludes the original beneficiaries. Although a new beneficiary cannot be added, the trustee can give a beneficiary a power of appointment, allowing the beneficiary to leave assets to anyone of his or her choosing at death. A trustee without unlimited discretion may appoint the principal into another trust but the beneficiaries and the original power of appointment, must remain the same.

Written notice must be given to the trust settlor, any party with power to remove trustee, and any “interested parties” in the original trust. The notice must provide whether a portion or the entire trust is being decanted and copies of the original trust and new trust. The new trust becomes valid 30 days after notice is given. The noticed parties may object and conceivably seek judicial intervention before the 30 days run. However, the statute is straightforward and if the authorized trustee has the requisite power to decant – a beneficiary can be removed and the dispersal terms can be changed, without recourse. A trustee can also seek judicial approval prior to decanting.

Additionally, authorization to decant can be written into the trust instrument with less stringent requirements than those mandated by EPTL § 10-6.6.

An intentionally Defective Grantor Trust (IDGT) is an irrevocable trust that is a completed gift for estate tax purposes but incomplete for income tax purposes. It is drafted as a Grantor trust so that the income derived from the trust is taxed at the grantor’s tax rate (instead of the compressed trust rates), but the income, and eventually the principal, is left to designated beneficiaries. The income generated therefore goes gift-tax free to beneficiaries.

Assets can also be sold to an IDGT in exchange for a promissory note. The sale is not recognized as a taxable event because of the grantor trusts status. The assets are thereby removed from the estate without using any gift tax. Annually the IDGT pays interest payments to the grantor at the applicable federal rate (AFR) established by the IRS.

Often IDGTs are combined with LLC interests when businesses are involved and especially for valuation discounts. A big draw is the expectation that the assets will grow within the IDGT and thus that growth is transferred to beneficiaries’ tax free.

a pile of different colored presents

A Charitable remainder trust (CRT) is used to qualify for an estate tax deduction equal to the value of the gift, minimize capital gains, and, of late, a vehicle to stretch IRA distributions after the SECURE Act.

A Charitable Remainder Trust can be created during a person’s lifetime or upon death. The term of years for a CRT is capped at 20 years. During that time period, the designated beneficiary (which can be the grantor of the trust) receives payments which can be to income only, an annuity or unitrust amount. The assets compound tax-free, in the same manner as a qualified pension fund or an IRA. The income stream must take into consideration that at least 10% of the trust’s initial value must pass to the charity.

Most often, appreciated assets, those with a low-cost basis, are placed into a CRT. The transfer to the trust is a non-taxable event and the CRT can sell the assets without recognizing capital gain.

At the grantor’s death, or the end of the 20-year term, the remaining principal goes to the designated charity. The estate gets an estate tax deduction for the bequest.

A Charitable Lead Trust (CLT) works in reverse: the charity receives income payments and the remaining principal is left to designated beneficiaries.

Many clients are plan for their eventual long-term care needs while they are still healthy by purchasing long term care insurance and through Medicaid planning. Medicaid is a joint federal-state program that provides medical long-term care assistance to individuals needing nursing home care, who are 65 or older‚ disabled or blind. Applicants can generally have no more than $15,750.00 in available resources, however, certain assets are considered exempt and do not count toward eligibility. The income guidelines depend on whether an applicant needs home care or nursing home care. Since anyone needing homecare must remain in the community, his or her income can be preserved using a pooled income trust. For nursing home care, all but $50.00 of the applicant’s income must go toward the cost of care. Medicaid planning using an asset protection trust must be done several years before care is needed, 2.5 years for home care and 5 years for nursing home care.

Whether you would benefit more from a Will or a Trust depends on what you are trying to accomplish with your estate plan. A Trust avoids probate, which is especially important if you are disinheriting a natural heir, own out of state property, have a business or income producing property that needs continuity, or value privacy.

You cannot find out if you are a beneficiary in a Will until the Testator dies or the Will has been filed in the Surrogate’s Court.