When it Comes to Estate Planning

When It Comes to Estate Planning, Don’t Assume –

By Nancy J. Brady, RN, Esq., Partner, Brady & Bader, LLP

Estate planning is the area of practice having to do with planning the ultimate distribution of your belongings and assets.  The planning involves the titling of assets, completion of pertinent documents (Will, Power of Attorney and in some cases Trust documents) to preserve one’s assets during one’s lifetime as well as arranging for the quickest, least costly means to transfer assets when one passes.  Estate planning can also minimize estate tax consequences for your loved ones if planning is done during your life. 

In NY, the law provides means to appoint someone to manage our finance and health care decision making should we become incapacitated.  If valid Power of Attorney documents and Advance Medical Directives are completed when someone is well, taking these steps can avoid complicated and costly court proceedings to have someone appointed to take those roles.

Having summarized the goals of estate planning, it is important to address some common misconceptions.  First, married couples often assume they can access their spouse’s assets/property.  While it is true that one spouse can access all of the funds in a joint account (if the account is titled properly) just because one is married, he/she cannot access assets in which they are not joint owner, and cannot make transfer of real property even if they are joint owner. 

In completing a Power of Attorney, one can select the representatives they would want to make financial decisions for them and represent them in all financial and real property transactions, avoiding the need for Guardianship proceedings in an emergency.  For these reasons, the Power of Attorney is a very valuable document to have in place.   We therefore recommend that all clients have this document in place, including married and unmarried clients. 

Many people assume they don’t need a Will, or that everything they own at their passing will transfer automatically to their surviving spouse.  While it is important to name beneficiaries on financial assets so that these assets pass outside of the Will, and thereby avoid probate (the process required to prove a Will valid, or in the absence of a will who is entitled to the estate).  For those assets titled in one’s name alone with no beneficiary designation, or “payable on death” designation, your Will is the document that spells out who should inherit from you. 

People sometimes mistakenly assume they don’t need a Will because they have beneficiary designations on all their financial assets.  While it is true that assets that allow for beneficiary or joint owner designations can avoid probate, it remains important to have a Will for many other reasons- there may be an old unclaimed account, of lawsuit proceeds if one dies as the result of an accident, negligence or malpractice.  Assets left without beneficiary designations, payable on death designations, or joint owners will pass to the persons delineated by the intestacy statute in the state of New York.  This order of persons who will inherit (known as distributes) may be different that what the deceased would have intended.  For example, if you have no Will, and are single, with no children, assets that are titled in your name alone when you pass away would pass to your parents via the intestacy statute.  If your parents are elderly, they may lose government benefits if they inherit from you.  If your parents are wealthy, inheriting from you could bring their estate value higher, resulting in tax consequences for their beneficiaries.  Another example is if one of a married couple passes with no Will and assets in his own name, the surviving spouse is NOT entitled to the entire value of the asset passing through probate, but to the first $50,000.00 plus half.  So – if a house valued at $500,000.00 is titled in only one spouse’s name, if that spouse passes away without a Will, the surviving spouse is entitled to $50,000.00 and then half of the remaining value which is $275,000.00—all together, and the children are entitled to the remaining $225,000.00.  This (perhaps) unintended consequence can be avoided by completing a Will leaving everything to one’s spouse. 

Having the basic estate planning documents in place can accomplish many goals, besides the examples given.  Estate planning can allow young parents to designate guardians for minor children, trusts for any age disabled person can be included in a Will, and the Will can provide for the people you want to inherit from you, rather than be confined to the plan delineated in the NY State intestacy statute.  Beyond the basic estate planning documents, based on individual circumstances, trust planning can be used as part of estate planning. 

In conclusion, in today’s ever-changing world, it is more important than ever to take an active role in your own estate planning.  In New York, we all have a “default” estate plan as laid out by the intestacy statute.  That plan is not often the plan we would choose for our families.  The most difficult hurdle in completing your own estate planning is the decision to go forward and just do it.  You, your family and your loved ones will be glad that you did.  The attorneys at Brady & Bader LLP would be happy to assist you with your estate planning, we can be reached at 1-718-945-7777