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Estate planning is the process of identifying your assets and ensuring a smooth transfer of these assets to your intended beneficiaries after your death the fastest way possible and at the least possible cost. Estate planning also includes the management of your assets in case of incapacity or disability.
Who Should Plan Their Estate
One should begin thinking about estate planning when they have assets, such as investment accounts, bank savings accounts, retirement accounts, insurance policies, or even equity in a real estate. This is because estate planning may entail costs, which cost might not be worth it if your estate is minimal.
Estate Planning in case of Incapacity or Disability
In case of incapacity or disability, an estate planning lawyer can prepare a health care proxy and a durable or springing financial power of attorney
Healthcare Proxy
The healthcare proxy (or medical power of attorney) is a legal document granting a third person the power to make healthcare decisions on behalf of the principal when the principal becomes disabled or incapacitated and unable to make the decision themselves. The healthcare proxy can grant the authority to make medical decisions with limitations or conditions, depending on the principal’s preference. Examples of these decisions are treatments you may or may not wish to receive in case of terminal illness or brain damage or under a state of comatose, such as artificial respiration, blood transfusion, electric shock therapy, artificial nutrition, anti-psychotic medication, dialysis, etc.
Durable or Springing Power of Attorney
A power of attorney (POA), on the other hand, is a legal document that grants a third party the power to make financial decisions on behalf of the principal. This allows the agent to manage the estate of the incapacitated and avoids the need to file for expensive guardianship proceedings when the principal becomes incapacitated.
When this POA becomes effective depends on whether it is a durable or springing POA. A durable POA becomes effective immediately and does not lose effect when the principal becomes incapacitated. A springing POA, on the other hand, only gives the agent authority to act in behalf of the principal when the principal becomes incapacitated. While the principal is capacitated, the agent does not have the authority to manage the principal’s financial affairs.
Estate Planning for Medicaid Purposes
Estate planning is also used in contemplation of Medicaid eligibility and asset protection.
To be effective, your estate planning lawyer must utilize estate planning strategies before the Medicaid lookback period to ensure there is no penalty. Irrevocable trusts are a usual legal instrument used before the Medicaid lookback period.
During the Medicaid lookback period, an estate planning lawyer will employ several legal instruments to ensure Medicaid eligibility, such as caregiver agreements, Medicaid exempt annuities, transfers to non-applicant spouses, transfer of home to siblings, and debt payments. If above strategies are insufficient to reduce your assets to Medicaid eligibility levels, the estate planning lawyer can employ the gift and loan strategy which violates the lookback period but minimizes the penalty.
Estate Planning in Case of Death
An important part of estate planning is creating a plan on how the assets will be transferred to the intended beneficiaries after death. Couples in their second or third marriages or blended families usually want to ensure that their children from the first marriage receive their fair share, and thus, engage in estate planning. Estate planning can also be used to reduce taxation in the transfer of intergenerational wealth. When structured correctly, estate planning can also be used to reduce capital gains tax.
Estate planning lawyers use a variety of legal instruments in order to achieve the client’s objective for estate planning. These legal instruments usually include wills and trusts, both revocable and irrevocable. Life estate deeds can also be used though these are not usually recommended due to its inflexibility in certain situations.
For example, in New York, spouses inherit more than half of the deceased person’s estate. Couples in their second or third marriages with children from prior marriages may choose to leave a substantial part of their property to their children, rather than their second or third spouse. Estate planning lawyers help these spouses achieve their objectives using a variety of legal instruments.
It begins with identifying the assets of a person and determining the type of strategy to transfer the asset the fastest possible way at the least possible cost upon the person’s death. Trying to do-it-yourself may result to expensive mistakes, which can be irreparable. An estate planning lawyer with expertise, like us, should always be utilized. Should you need assistance in planning your estate, the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
