Basic Tools for New York Estate Planning

– WILLS
Wills promote order
Estate goes to people you designate.
If no will, state laws will determine how the estate is distributed.
Best for young people who don’t want to do planning yet and as a backup tool if you have a sophisticated estate plan

– TRUSTS
What is a trust? A trust is a legal setup that lets you accomplish specific goals. The goals are:
Control of your assets, during lifetime and after death.
Saving money on taxes
Privacy
Keep money in the family

Irrevocable Trust
Tax Saver
Set up an estate during your lifetime
Detriment – Have to give up control of the assets.
Treated as a gift. No gift tax in NJ. So whatever money you transfer into
this trust doesn’t get taxed by a NJ estate tax.
Appreciation stays with the beneficiary

Lifetime Revocable Trust
Privacy
avoid probate – estate stays private, creditors don’t know about estate.
For: people over 70.
Not much tax benefit.

Testamentary Trust
Control
Trust in a will. Advantage – put conditions into a will. Control your money after your death.

Special Needs Trust
Medicaid. If you have disabled children under age 65 who need medicaid and other government benefits.

Bypass Trust
Great if you have a second wife.
Spouse uses money during lifetime, rest to children.

Credit Shelter Trust
No longer needed for most people due to changes in the estate tax law.

Life Insurance Trust
Takes life insurance out of your estate. You pay premiums by an indirect way.

– FAMILY COMPANIES
Take property out of your estate and into a company.
Form a company with your family. A discount of up to 1/3 of the value is applied to the taxable valuation of the company. The reason for the discount is lack of marketability and control. Don’t do this at home.

– More on Taxes
Money have to stay in the trust for 3 years in order for it to work

For Irrevocable trust, have to give up control

Planning for state estate taxes is sophisticated, planning for federal estate taxes is even more sophisticated. This stuff is very subtle.

– Conclusion

Trusts can accomplish the following:
Control of your assets, during lifetime and after death.
Saving money on taxes
Privacy
Keep money in the family