How Estate Planning Works in New York City

In this article, we outline the key people, documents, ideas and procedures involved in estate planning. You will need an estate planning attorney to help you in the process.

Key Estate Planning Documents

An estate plan contains several different documents:

• Will

  A will determines who gets your assets after your death. It also names an executor who will follow the instructions in the will and manage your estate.

• Trust

  A trust is a legal entity, like a corporation. It has a trustee, who follows the instructions contained in the trust. A trust has many benefits, as we will explain below. It helps minimize estate taxes. It qualifies for Medicaid. It offers protection from creditors. And it avoids probate.

• Power of Attorney

  In a Power of Attorney, you name a person who will be able to make financial decisions if you become incapacitated.

• Health Proxy

  In a Health Proxy, you name a person who will be able to make healthcare and medical decisions if you become incapacitated.

• Other Documents

  Some estate plans can include other documents, such as beneficiary designations, family limited partnerships and company shareholder agreements.

A Will

A will is great because it accomplishes the basic estate planning goals. It determines who gets your property after your death and names an executor. In your will, you can recommend a guardian for your minor children, in case both parents are deceased. Everyone needs to have a will.

Trusts

Trusts provide extra benefits that are not available with wills:

• Save money on estate taxes

  Trusts can help you save a lot of money on estate taxes.

• Qualify for Medicaid

  Trusts can help you qualify for Medicaid. Medicaid pays for home care and nursing home, which could amount to hundreds of thousands of dollars. This leaves more money for your heirs.

• Protection from creditors and lawsuits

  A trust can shield your assets from creditors and lawsuits.

• Protection from your children’s spouses

  You may not want any of your hard-earned assets to go to your child’s spouse (son-in-law or daughter-in-law), whether in divorce or as an inheritance.

• Protection from your children’s creditors

  You do not want any of the assets you give to your child to go to your child’s creditors. This applies whether in a lawsuit or bankruptcy.

• Avoid probate court

  Probate proceedings can become expensive and delayed. They can take between 9 months to 2+ years. And the assets will be frozen that entire time. Proper planning transfers control from the court back to you. This saves time, expenses, and stress for your heirs.

• Avoid multiple-state probate proceedings

  If you have property in many states, you will have to go through probate in every one of those states. You can avoid that by transferring your property into a trust. Upon your death, the property will pass according to the trust, and avoid all the probates.

• Maintain privacy

  Proceedings in probate court are public records. Not so with trusts.

• Protection from irresponsible beneficiaries

  A trust provides limits on how your beneficiaries can spend the assets. For example, you can specify amounts upon reaching a specified age.

• Avoid interruption of income and use of assets

  A trust provides for the continuity of management of your assets. It avoids interruption of income and use of assets upon your death or disability. Without a trust, your estate or business may be frozen by a probate court.

• Power of Attorney

  A Power of Attorney names a trusted person to handle your affairs if you become incapacitated. You choose someone reliable who can use your money to pay bills, access accounts, and conduct other business in your best interests. Without establishing a durable power of attorney, your family would have to petition the court to appoint a guardian. And that could be a lengthy process, which it’s best to avoid.

Healthcare Proxy

A Healthcare Proxy names a person to make medical decisions on your behalf if you are unable to do so. You name someone who understands your values, priorities, and preferences for medical care. They can interpret your wishes. This provides important peace of mind that you will receive the type of care you would choose yourself.

Business Succession Agreements

Business succession agreements can be an important part of an estate plan. They provide for what happens to your share of a privately held company after your death.

• Shareholder Agreements

  Shareholder agreements allow you to transfer ownership of a privately held company. Shareholder agreements enable a smooth business transition.

• Buyout Agreements

  Buyout agreements determine what happens to your shares after your death. They determine whether the company has the right to buy out the stock, and at what price.

Saving Money on Estate Taxes

Estate taxes can take a big bite out of an inheritance for beneficiaries. In 2023, estates valued at over $6,580,000 are subject to New York inheritance tax. Proper estate planning is crucial to limit this tax burden.

We can put in place several strategies to reduce or eliminate potential New York estate taxes, including:

• Creating trusts

  Certain trusts allow assets to transfer without incurring estate taxes. Credit shelter trusts can shield spouses from taxes on the first estate. Insurance trusts own life insurance policies so payouts avoid taxation. Charitable trusts donate a portion of assets to charity upon the grantor’s death to avoid an estate tax “cliff.”

• Making tax-free gifts during life

  New York residents can gift up to $15,000 tax-free per year to as many individuals as they want. Larger gifts may have tax implications but remove assets from the taxable estate.

• Establishing a family limited partnership

  FLPs limit taxable resources of the estate through discounted valuation of assets. This is an advanced strategy with some restrictions.

• Hedging against future tax laws

  Current estate and gift tax exemptions reduce exposure for many taxpayers. However, laws frequently change and exemptions may revert to much lower levels. Consulting frequently with one’s attorney ensures tax-reduction strategies adapt to law changes.

With proper estate planning, New York residents can minimize or avoid state estate taxes. This means more inheritance for loved ones.

Planning for Your Disability

While we create estate plans, a lot of the planning also relates to your disability. A trust continues to be in force even in the event you become disabled. A Power of Attorney names a person to make financial decisions for you. A Healthcare Proxy names a person to make healthcare decisions for you. This avoids guardianship proceedings. It also ensures that even in disability, you continue to lead a comfortable and independent lifestyle. Read more in Planning for Disability.

As you can see, there are a lot of estate planning options to consider. To find the best estate plan for you, contact an estate planning attorney, we at the Law Offices of Albert Goodwin are here for you. You can call us at 212-233-1233 or send us an email at [email protected]. We are ready to start working on your estate plan.

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