When you decide that you are going to dig into the estate planning process in earnest, it can be hard to know where to begin. Of course, you are well aware of the fact that you must state your wishes in writing with regard to the distribution of your resources after you are gone. But how should you go about it, and is there anything else to consider?
We fully understand this dynamic, and we will share a basic outline in this post to provide some clarity.
Inventory Your Assets
The first order of business will be to inventory your assets so you know exactly what you will be passing along to your loved ones. When are doing this, you may want to consider the sentimental value of family heirlooms. For example, if your grandson has always beamed whenever you brought out your Babe Ruth autographed baseball, he may be the ideal recipient.
There is a very practical reason why you should determine the total value of your estate. We have a state-level estate tax in New York, and it is relevant to you if the value of your estate is in excess of $5.74 million. This is the exemption amount in 2019, but there are annual adjustments to account for inflation.
Though fewer people will be exposed to it, there is also a federal estate tax. This death levy can be applied on postmortem asset transfers that exceed $11.4 million.
Whether you are exposed to estate taxes or not, if you have a rather diverse store of resources, the inheritance planning process can be quite complicated. This is one of the reasons why you should discuss everything in detail with a licensed estate planning attorney.
Asset Transfer Vehicles
In addition to the last will, there are various different types of trusts that can be part of your estate plan. The right course of action will depend upon the circumstances. If you have estate tax concerns, there are tax efficiency strategies that can be implemented.
Revocable living trusts are the right choice for many people that are not faced with estate tax exposure. If you have someone with special needs on your inheritance list, you may want to consider the creation of a supplemental needs trust. The point is, each case is different, so your estate plan should be custom crafted to suit your needs.
Long-Term Care and Incapacity Planning
When you are planning your estate, you should consider the eventualities that you may face toward the end of your life. Many elders ultimately require nursing home care, and these facilities cost approximately $177,000 annually. Medicare does not pay for custodial care, so this is something to take very seriously.
Medicaid will pay for living assistance, but there are low income and asset limits. With proper advanced planning, you can preserve the substantial majority, and maybe even all, of your assets and still qualify for Medicaid. This type of planning is complex, and should only be undertaken with the help of an experienced Medicaid planning attorney.
A well-constructed estate plan should include an incapacity planning component, because many elders become unable to make sound decisions at some point in time. With a living will, you can state your wishes with regard to the utilization of artificial life-sustaining measures.
There can be some health care decisions that must be made that revolve around the use of life-support. To account for this, you can add a health care proxy. The agent that you name in the document would be empowered to make medical decisions on your behalf.
There is also the matter of financial management in the event of your incapacitation. To be fully protected, you can execute a durable power of attorney that names a financial representative.
Download Our Free Estate Planning Worksheet!
We have provided a solid overview here, and you can tie it all together if you download our estate planning worksheet. It it being offered free of charge right now, so there’s no reason not to take advantage of this learning opportunity. To get your copy, click this link and follow the simple instructions.
Michael Robinson, Estate Planning Attorney
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