Estate planning involves the preparation and strategic organization of your assets for their orderly distribution. It involves all your possessions, such as tangible assets, intellectual property, investments, automobiles, business interests, real estate properties, and more.
The role of an estate planning lawyer is crucial in helping you minimize uncertainties related to estate management while maximizing the value retained for your heirs. This includes reducing potential taxes, legal fees, and other expenses that could diminish the estate’s value.
Engaging in proactive estate management, both during your lifetime and after, offers numerous benefits. In this article, we will explore the difference between trusts and wills, which are essential estate planning tools, that can provide security and advantages for you and your family, safeguarding the value of your estate. At New York Legacy Lawyers, our team of New York estate planning lawyers may be able to help you navigate this complex process, ensuring the protection of your assets and the fulfillment of your wishes. Contact us today at (718)713-8080 to schedule a consultation.
What is Estate Planning?
Estate planning is the process of organizing and managing your assets while you’re alive and ensuring their efficient distribution according to your wishes after your death. It’s a comprehensive process that involves drafting legal documents, such as wills and trusts, and devising strategies to minimize estate taxes and avoid probate.
At its core, estate planning serves two critical purposes. First, it helps ensure that your assets are distributed to your designated beneficiaries in the manner you see fit. This could mean bequeathing property to family, donating to a favorite charity, or any other form of asset distribution that aligns with your intentions.
It also provides an opportunity to strategize around New York’s estate tax laws. With careful planning, you can legally reduce the estate tax burden and maximize the inheritance left for your heirs.
Estate planning also encompasses other considerations, such as appointing guardianship for minor children, designating healthcare proxies to make medical decisions on your behalf if you’re incapacitated, and assigning power of attorney to handle your financial affairs.
In New York, the estate planning process is governed by state-specific laws, so it’s recommended to consult with a knowledgeable estate planning attorney. They can help you navigate the complexities of New York’s estate laws and ensure your estate plan fulfills your wishes and optimizes your financial legacy.
Estate Planning Starts with a Last Will & Testament
A Last Will and Testament is perhaps the most well-known part of any estate plan. A will is necessary as it helps in making a decision on which your property goes to when you pass on. In addition to providing for the transfer of assets, you can also use a will to name Guardians for your children.
As you consider drafting a Will, you will need to think about the Executor. The Executor will be the person you would like to handle the process of carrying out your will (and working through probate).
If you would like to know more about Wills prior to contacting us, here is a more in-depth discussion on Estate Planning with Wills.
You Can Also Create a Trust
Another way to protect your assets in your estate plan is via a trust. A trust is a tool you place all your assets into and then become the beneficiary of it. When you pass away, the trustee (person who has the authority to manage your trust) distributes your property per your directions.
Here’s why trusts are so valuable to your estate planning. Trust assets do not have to pass through the probate process for the property to be transferred to the people you love. By skipping probate, you avoid a public court process. Where a will becomes a public document, open for others to look through, and even fight over, the assets and contents of a trust are more confidential. A well-crafted trust will likely save your family thousands in probate fees and potential legal costs from infighting.
Here is a short article breaking down the difference between the types of trusts, including:
- Trusts for Minors
- Special Needs Trusts
- Marital Trusts
- Revocable Living Trusts
- Irrevocable life insurance trusts
- Spendthrift trusts
- And more…
What Assets Cannot be Placed in a Trust?
When establishing a living trust, it is crucial to carefully evaluate which assets are appropriate for inclusion. Not all assets are suitable for transfer into a living trust, as they may have specific legal and financial considerations.
There are certain types of assets that are generally not recommended for placement in a living trust. Here are a few examples:
Retirement accounts: Assets like 401(k), IRA, 403(b), and certain qualified annuities should not be transferred directly into a living trust. Transferring these assets may result in income tax obligations since they require withdrawal. However, you can designate the living trust as a beneficiary to facilitate the smooth transfer of funds upon your passing.
Health savings accounts or medical savings accounts: These accounts are designed for tax-free utilization on eligible medical expenses and cannot be transferred to a living trust. Similar to retirement accounts, you can designate the trust as a primary or secondary beneficiary.
Active financial accounts: Unless you are the trustee with complete control over trust assets, it is generally advisable to keep accounts used for monthly bill payments separate from the trust. This is because individuals may have concerns about potential delays in probate and the inability to quickly distribute these funds to heirs. Instead, you can designate beneficiaries for these accounts using options like payable-on-death (POD).
UGMA/UTMA accounts: If the trustee were to pass away before the minor, a trust might be subjected to probate. In such cases, it is advisable to consider appointing a successor custodian for these accounts.
Vehicles: Generally, everyday vehicles such as cars, boats, trucks, motorcycles, airplanes, mules, or snowmobiles are not typically included in a living trust. These assets often bypass the probate process, and unlike collectible vehicles, they do not appreciate in value. Additionally, some states impose taxes during the retitling of vehicles, and certain states do not permit vehicle owners to name beneficiaries after their demise.
| Assets that Cannot be Placed in a Trust | Details |
|---|---|
| Retirement accounts | Assets like 401(k), IRA, 403(b), and certain annuities should not be transferred directly to a living trust due to potential tax obligations. |
| Health savings accounts or medical savings accounts | Tax-advantaged accounts designed for medical expenses cannot be placed in a living trust. Designate the trust as a beneficiary instead. |
| Active financial accounts | Keep monthly bill payment accounts separate from the trust. Use beneficiary designations like payable-on-death (POD) for these accounts. |
| UGMA/UTMA accounts | Consider appointing a successor custodian for these accounts to avoid probate if the trustee passes away before the minor beneficiary. |
| Vehicles | Everyday vehicles like cars, boats, and motorcycles are typically excluded from living trusts. They bypass probate and don’t appreciate. |
Get Help with a Will, Trust, Or Both!
Wills & Trusts are both essential estate planning tools. They can get to be quite complex, however. If you are actively looking into planning for your own future, and for the future of your family, then engaging the services of a highly rated and local estate planning law firm is your best bet.
Yana Feldman & Associates, PLLC would love to help you craft the perfect estate plan. Contact us today to set up your estate planning appointment.
https://yanafeldmanlaw.com/wills-trusts-the-estate-planning-process-in-new-york/
from New York Legacy Lawyers by Yana Feldman and Associates https://yanafeldmanlaw.com/wills-trusts-the-estate-planning-process-in-new-york/
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