Estate planning is a multifaceted process. In this post we will break down the anatomy of a typical estate plan.
Wills & Revocable Living Trusts
The facilitation of future asset transfers is at the core of estate planning. This can be done in a number of different ways. The optimal course of action will vary on a case-by-case basis depending on a number of different circumstances.
Most people are aware of the fact that you can arrange for the distribution of your assets through the creation of a last will or last will and testament. This can be a satisfactory choice for some people, but there are other options that may be more appealing.
For example, revocable living trusts are very popular. When you use a last will to facilitate the transfer of your assets, the will must be admitted to probate. This is a legal process that takes place under the supervision of the probate court.
Probate can be time-consuming and expensive. When you use a revocable living trust to transfer assets, the beneficiaries receive their inheritances in a more timely manner outside of the process of probate.
Estate Tax Efficiency
Some people have estate tax concerns. There is a federal estate tax, and the federal estate tax exclusion is $5.34 million in 2014. If the value of your estate exceeds this amount, you must take steps to gain estate tax efficiency.
In the state of New York there is also a state-level estate tax to contend with, and the exclusion is much lower at the present time. At the time of this writing in May of 2014, the New York state estate tax exclusion is $2,062,500. It is scheduled to rise by about $1 million each year until it matches the amount of the federal estate tax exclusion.
Asset Protection
Estate planning can involve the implementation of asset protection strategies. People who are involved in businesses often use family limited partnerships or limited liability companies to protect personal assets.
Incapacity Planning
A comprehensive estate plan should also include an incapacity planning component. While a revocable living trust is a superior instrument for incapacity planning, you also should execute a durable power of attorney to name a representative who would be empowered to handle your affairs which may fall outside the scope of your trust in the event of your incapacitation.
Another document that you should include in your incapacity plan is a health care proxy. With this instrument you name someone who would be able to make health care decisions on your behalf.
A third device to include would be a living will. With a living will you state your preferences regarding the utilization of life-sustaining measures such as artificial hydration and nutrition and mechanical respiration.
Free Estate Planning Consultation
In this post we have provided some very basic information. If you would like to discuss your estate plan with a licensed attorney, contact us to schedule a free consultation.
To learn more, please download our free Revocable Living Trusts in New York here.
Michael Robinson, Estate Planning Attorney
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