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Denis A. Kitchen, P.C. Attorney at Law
Estate Planning, Probate Law, Debt Relief And Other Issues In Williamsville, New York

FAQ About Estate Planning

Why should I have a will?

The obvious reason is to say who should receive your property upon your death, but there are other reasons. You may be able to avoid some estate taxes. If you have children, you may designate a guardian to care for them and set up a trust to provide for their future. And you may name the executor of your will who will administer your estate. Finally, if you do no other estate planning, your will is the sole expression of your intentions.

What if I don't have anything to leave?

Hopefully, that won't always be the case. But even so, the circumstances of your death, such as an accident, may create a claim for pain and suffering that could be part of your estate.

If we own everything jointly, do I still need a will?

What if you both die at the same time? Having no will leaves no direction as to who will care for your children. There may be disputes over who will administer your respective estates. Joint ownership for the typical couple is a good idea most of the time, but not always. Business debts, tax considerations and other reasons may make joint ownership an opportunity for joint problems.

What if I don't have a will?

Actually, everyone has a will...sort of. New York State provides laws for the estates of people who die intestate (without a will). For example, if you leave a spouse and no children, your spouse gets everything. If you have a spouse and children, the first $50,000 of estate property goes to the spouse; the rest of your net estate (minus the debts, funeral and administration expenses but not the taxes) is divided 50-50 between spouse and children. If you're unmarried, your property goes to your children in equal shares; if no children, then to parents; if no parents, to brothers and sisters; if no siblings, to aunts, uncles and cousins. Of course, nothing goes to friends, charities, churches. If this is not what you want, you should have a will.

Can I disinherit family members?

Yes, but you cannot totally disinherit your spouse or your children under 21. Although you can make a will which leaves your spouse or children little or nothing, New York law protects spouses and dependent children. See "Does a will cover all my property?" and "Does a spouse have any special rights?"

Does a will cover all my property?

Some property passes outside the estate and is not affected by your will. This includes most jointly owned property, life insurance (unless payable to your estate), property in trust for others, and exempt property. The last one, exempt property, applies only if you are survived by a spouse or by children under 21. Exempt property includes: (1) All housekeeping utensils, musical instruments, sewing machine, household furniture and appliances, home computers and electronic devices, fuel, provisions and clothing of the decedent, up to $10,000; (2) The family bible, family pictures, video tapes, and computer tapes, discs, software and books, up to $1,000; (3) Domestic animals and their food for sixty days, farm machinery, one tractor and one lawn tractor, up to $15,000; (4) One motor vehicle up to $15,000; (5) Money or other personal property up to $15,000, (as long as the funeral bill is paid) All of this can total $56,000.

Does a spouse have any special rights?

In addition to the exempt property as noted above, New York law gives a spouse a right of election which allows him or her to elect to receive $50,000 or one-third of the net estate, whichever is larger, regardless of what the will says. Then, it gets complicated. The law recognizes that someone who wants to disinherit a spouse will not be frustrated just by a law that limits what a will says; therefore, the law has expanded the definition of "net estate" to include non-testamentary dispositions (property passing outside the probate estate), including jointly held property, gifts causa mortis (property given away in contemplation of death), bank accounts paid to others on death, and even 401(k) accounts. A spouse who believes they are getting less than their one-third can challenge not only the will but many other transactions and dispositions of property.

What is "probate?"

Probate means literally "proving" that a will is valid. A decedent's will is filed in the Surrogate's Court (what New York calls its probate court) with a petition, asking that it be accepted as the decedent's will and appointing the executor named in the will to administer the estate and carry out (execute) the will. If there is no will, the petition asks for appointment of an administrator.

Don't I want to avoid probate?

The idea of avoiding probate was made popular by a book which advocated planning your estate with trusts and joint property arrangements so that everything passes outside the estate and there is nothing to administer by the executor. Sometimes, it can save some court fees, legal fees and administration costs. The problem is that sometimes the costs of planning to avoid probate can be even more costly. Also, a will can be changed, whenever you change your mind. Jointly owned property can't be changed so easily. And even if you do plan to keep property out of your probate estate, you still need a will to deal with property not otherwise planned for.

How do I select an executor or a guardian for children?

The typical couple names each other as primary executor and an adult child or children as the secondary executor in case the primary executor can't do it. Two persons can be selected to serve as co-executors, which, depending on personalities, may or may not be a good idea. An executor must be over 18 and capable of managing your estate assets, pay bills, distribute the estate to the heirs and make an accurate accounting. The assistance of the attorney for the estate, and, if necessary, an accountant, can make this simpler than it sounds. Executors are entitled to commissions for their work based on the size of the estate with a sliding scale running from 5% down. You could select a trust company as executor, but they will decline unless the estate is of sufficient size. The will usually states that the executor(s) serve without bond; otherwise, a bond must be purchased from an insurance company, an added expense to the estate.

What is a trust?

In its simplest terms, a trust is made when you (the trustor, settlor, grantor, or donor) give to another person or institution, (the trustee) the title to certain property (the corpus, trust fund, or principal) for the benefit of yourself or somebody else (the trust beneficiary). A trust can either be created in your will (a testamentary trust) or during your lifetime (a living trust or inter vivos trust--see "What is a living trust?" below). Trusts can be revocable (changeable) or irrevocable (not changeable). Trusts can be set up for a short term and for a specific private purpose, such as a trust to manage your property and affairs while you are out of the country, or it can be a long term trust created for a broad, charitable purpose and last for up to 21 years after the lifetime of a specific individual. Trustees can be individuals, such as the person you name in your will to be the executor, or can be an institution such as a trust company. Some typical specialized trusts include life insurance trusts, marital deduction trusts, special needs trust, spendthrift trusts. A will often includes a testamentary trust for the benefit of children, or it might provide that the executor turn a minor's property over to the minor's guardian.

What is a living trust?

Also called an inter vivos trust, it can be any trust set up while you're alive, as opposed to a testamentary trust which is one made in a will. In theory, the typical living trust puts all of your property into the trust and appoints a trustee to administer it. It is meant to eliminate the need for any estate proceeding, i.e. you don't leave anything because you don't own anything-the trust owns it all. The trustee you appoint simply administers the trust, distributing assets and income as the trust instrument dictates. The trust is usually revocable, so you can change it at any time, but at death it becomes irrevocable. Numerous planners have been advocating the living trust in recent years, pointing out that it saves on probate costs and keeps your financial affairs private. There are disadvantages, however. Some of the probate cost saving just moves the expense to the front end: a typical living trust may cost over $2,000 while a simple will (or pair of wills for a couple) would typically cost under $300. Privacy may be important to a you, but you won't necessarily keep nosy relatives from finding out who got what.

What is a health care proxy?

You can appoint a representative, a "proxy," to make health care decisions in the event you are unable to make them yourself. If you check into a hospital, you may be asked to sign one, but if you go to the hospital through an emergency room, you should have one signed ahead of time.

What is a power of attorney?

A power of attorney is a document in which you appoint one or more relatives or friends as your agent or attorney-in-fact to act on your behalf. The standard form lets you select the types of activities in which your agent can represent you.

What is a living will?

The living will gives your doctor and others specific instructions about whether you want to be kept alive on life support systems and under what circumstances such life support should be disconnected. New York offers no statutory guidance for living wills, and there are very few cases interpreting them. It will give some assistance to your doctor, loved ones, and your health care proxy and help them make decisions if you are unable to.

What about estate taxes?

Two government entities collect estate taxes: the IRS collects federal estate taxes and the New York Department of Taxation and Finance collects New York estate taxes. The good news is that many estates escape taxation altogether. First of all, there is an unlimited marital deduction: everything left to a spouse, no matter how much, is not subject to any estate tax, either federal or NY. Secondly, for estates not passing to a spouse, there is a federal exemption of more than $5,000,000 and a NY exemption of more than $3,000,000 , so if your estate is worth less than those figures, there is no estate tax. Some of these taxes can be avoided. For example, a couple may own property exceeding the $5,000,000 federal limit ($3,000,000 NY). Because of the unlimited marital deduction, there would be no tax payable when the first individual died, but then the surviving spouse would have assets which could be subject to hefty estate taxes when he or she died. The solution might be to have wills in which the couples assets are split, with half of the couple's assets going to the surviving spouse and the other half placed in a trust with the income being paid to the surviving spouse and the principal paid to children after the surviving spouse's death. Individuals with estates larger than $5,000,000 ($3,000,000 NY), and couples with estates over $10,000,000 ($6,000.000 NY) should consider lifetime gifts. An individual can give away $14,000 per year per recipient without any gift taxes, so a couple with 2 children and 5 grandchildren for example, could give away $196,000 (2 donors x 7 recipients x $14,000) tax free every year.

What about income taxes?

Estates are subject to income taxes, just like individuals or corporations, but it is only on the income earned by the estate, not the assets coming into the estate itself. However, some assets come into an estate with tax due. Examples include, US Savings Bonds, IRA's 401(k)'s and other deferred assets whose income was deferred during the decedent's life. Additionally, income includes interest earned on money the estate holds in a bank account, or dividends on stock held by the estate, or rent from real estate that the estate owns. The executor or administrator of the estate usually also has to file the decedent's last individual federal and state income tax returns.

PLEASE NOTE: You should not rely on this very brief collection of questions and answers. They neither cover all relevant questions nor do they cover any subject thoroughly. Specific issues should be discussed with a lawyer. This information pertains only to New York law. (07/15)

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