What You Need to Know in Estate Planning

While the vast majority of Americans won't have a taxable estate ($22.4 million per couple under the 2018 Tax Cuts and Jobs Act) when they pass away, a little bit of estate planning with an attorney can go a long way toward avoiding potential issues for you and your family.  A good estate plan accomplishes three objectives: (1) your end-of-life (health care) decisions would be documented in a thoughtful, legally binding document, (2) your assets would be distributed according to your own desires and objectives, and not those of state legislatures, and (3) your family would avoid the time, expense and frustration of probate.

Estate Planning Checklist New York City

What You'll Really Need.  So what do I need exactly?  A basic estate plan should include advanced directives, such as a health care proxy and power of attorney, a “pour-over” will, and a revocable living trust.  You can potentially save some money downloading basic forms of some of these documents online, but to avoid pitfalls and best protect your family it’s best to hire an attorney to make sure a professional knowledgeable about the nuances of trusts and estates law is looking at your specific situation.

Benefits of the Health Care Proxy and Power of Attorney.  The health care proxy, also known as a health care power of attorney, accomplishes two objectives.  First, it authorizes a designated person to make health care decisions on your behalf if you get sick or otherwise cannot make such decisions on your own.  Without this designation, a judge would ultimately decide who has decision making authority in those circumstances.  Second, the health care proxy allows you to make - and document - specific decisions relating to your health care, including end-of-life decisions.  While today it is common for hospitals to provide their own health care proxy form upon being admitted, a legally binding health care proxy drafted and executed with an attorney must be accepted by all health care providers.  Lastly, a good estate plan should include a power of attorney.  This document allows you to authorize one or two individuals to conduct financial affairs on your behalf.  This document would be used if you are not in a position to conduct such affairs on your own (similar to the health care proxy).  By law, all financial institutions are now required to accept the “Statutory” power of attorney form now used in NYS.

Avoiding Probate.  Probate is a legal process wherein the State oversees the distribution of your assets and gives creditors an opportunity to collect on what’s owed to them.  Going through probate can be a hassle for your heirs as there are costs that must be incurred and procedures that must be followed before assets are distributed to his or her heirs.  Moreover, probate records are public; many celebrities have had their private wills shown online because they went through probate.  The good news is that probate can be avoided with the right planning.  

In New York, probate takes a minimum of a month and can be dragged out for over a year in some situation.  Creditors have seven months to file claims against the estate.  You can avoid probate through several strategies.  You can title certain assets like bank accounts, brokerage accounts, and property so that they pass automatically and by operation of law to your heirs, thereby bypassing probate.  Retirement assets are required to have beneficiaries and also, therefore, bypass probate.  Be sure to have contingent beneficiaries so that these assets continue to bypass probate if your beneficiaries predecease you.  

Benefits of a Living Trust.  The best way to bypass probate, however, is to take advantage of a living trust, which functions similar to a will in that it details how you’d like your assets distributed upon your death and is 100% changeable by you at any time.  However, the advantage of avoiding probate through the use of a living trust should not be overlooked.  Here is how it works.  Upon executing the document, you go through the process of retitling your assets from your own name to that of your trust.  Then, when you die, because no assets are owned in your own name (but are instead owned by the living trust), there is no need to go through the probate process.  This result saves your family substantial time and money and keeps all records private.  If you execute a living trust but forget to transfer your assets – no worries.  A good attorney will also have you sign a short, simple will, called a “pour-over” will, which merely states that all assets not transferred to your living trust during your life should nonetheless be transferred to your living trust at death.

Estate Considerations for Parents.  For people with kids, naming a guardian is probably the single most important part of your estate plan, and this aspect is addressed in your will (pour-over or traditional will).  If you don’t have guardians named in your will, and both you and your spouse pass away, the State will appoint a guardian, which can be disastrous for your children.  Note that assets held in joint name and assets that have a beneficiary aren’t included in the will.  Each state has its own rules about where the property goes without a will.  In New York State, the property will go to your spouse and children.  If you have no living relatives, the State will be taking your assets.  

Estate Planning Special Circumstances.  For most people, the above documents are enough to ensure that their affairs are in order.  There are all sorts of circumstances that could necessitate additional documentation and planning.  For example, if you have a business, adult children from a previous marriage, a potential liability against your estate and/or a special needs child, you’ll definitely need to think through those situations with an attorney.  You’ll also want to address estate taxes in your particular state as well as at the federal level.

Digital Assets Estate Planning.  An increasingly important part of any estate plan is how to account for digital assets.  With a multitude of usernames, passwords, websites, and social media accounts, sorting through a deceased digital footprint can be aggravating and time-consuming for loved ones.  You may decide to have a separate document with all digital asset information that would be kept in a safe place with the will and power of attorney.  You definitely don't want to put this information in your will, since the will can become a public document.  Revised UFADAA (Uniform Fiduciary Access to Digital Assets Act) 2015, which has been enacted in most states, allows estate fiduciaries to manage digital assets, including web domains, computer files, and digital currencies.  However, the law does restrict a fiduciary's assess to electronic communications like email, social media accounts, and text messages. 

Many sites now have online tools that allow you to decide what happens with your account after death.  With Google's Inactive Account Manager your account can be deleted entirely after death or the data can be shared with a trusted family member or friend.  Facebook's Legacy Contacts allows you to decide if you want your page "memorialized," deleted or the have a "Legacy Contact" download your data after you pass away.  When a deceased has conflicting instructions in a will versus the terms of service for the website or other documented areas, the order of of precedence under Revised UFADAA is 1) the website's online tool, 2) the estate documents, then 3) the terms of service.  

Estate Planning is an Ongoing Process.  Once your documents are completed, it’s best to keep the documents in a safe place and tell your family members and advisors where they are.  Planning is an ongoing process and we at Planning to Wealth recommend revisiting your estate plan at a minimum of every five years or if you’ve had any major life changes.  The death of a loved one is a stressful, tumultuous time, so having your affairs in order ahead of time can help avoid making things even worse. 


David Flores Wilson, CFP®, CFA, CDFA®, CCFC is a New York City-based CERTIFIED FINANCIAL PLANNER™ Practitioner & Wealth Advisor at Watts Capital, and Editor at Planning to Wealth.  He can be reached at dwilson@planningtowealth.com.

Noam Srolovitz, a Partner at Kanarfogel and Srolovitz LLP in New York City, focuses on all aspects of Trusts & Estates, including estate planning and probate and administration. He develops and implements sophisticated and customized estate plans for individuals and families of varying wealth and backgrounds, including high net-worth, and represents and counsels individuals and families throughout the probate and administration of estates and trusts. Noam also prepares estate and gift tax returns.