You’ve worked hard your whole life to purchase that house, raise your children and even managed to save some money for your “Golden Years”. But are you aware that if you do not properly protect these investments, you can pay a sizable amount in taxes, lose your house and maybe even leave nothing for your children to have. Estate planning is the process of protecting those assets. It is a continuous process. It involves having your affairs handled by someone you love and trust due to illness, incapacity. It means reviewing documents at least every two to three years and having your lawyer revise them to fit your current situation and estate planning goals. It involves thinking about the future and about who is to share in your estate. It also means having the right documents to make sure your wishes are adhered to. Estate planning also includes the issue of health care, the ability to have someone make decisions for you should you be unable to do so and what happens in case you don’t.
Wills and estate plans need to be set up and updated every two to three years for various reasons. For instance the death of a loved one, or the birth of a child can lead to changes in the way your property is distributed. As a general rule, if there has been a significant change in your life, you should review your will and estate planning goals. Changes in the tax law are another reason to evaluate your estate planning and goals. Thus, if you have experienced a “significant change” in your life, or if you haven’t revised your will in quite sometime, or if you don’t even have a will it is prudent to consider your options now, before it is too late.
Estate Planning Documents
Planning for your future has many options to navigate alone. There are money issues, health issues and the ability to make certain your property goes who you so choose.
The essential tools of any estate plan consists of:
- A will. A will allows you, the Testator/Testatrix, to decide how your property is to be distributed upon your death. It can also set up a trust, which can help save taxes. It can also say who you want to serve as guardian for your children if you and your spouse die while they are minors.
- A living trust. It some instances a Trust can help avoid probate, which is the court procedure of administering your will.
- A Trusts is a legal devices that allows you to transfer your property to it, but still retain control. It can help avoid probate because it allows property to be transferred without going through this process. Trusts may also help lower estate taxes. It can be either revocable or irrevocable Trusts can also help to avoid guardianship proceedings if you become incapacitated. In a Trust you have already given someone the power to manage the assets in your trust. Thus, it is not necessary to go to Court to have someone appointed for purposes of managing those assets.
- Life insurance. When you die, this pays money to the beneficiary. The purpose might be to provide money for your loved ones. Insurance proceeds usually do not go through probate.
- Health and disability insurance. Medical care for a serious injury or illness can wipe out a lifetime of savings. Health insurance, whether from an employer program or bought separately, and disability insurance, can help protect your savings if you are unable to work or need costly medical care.
- Retirement plan statements. Your employer may have sponsored a retirement or pension plan. Be sure you have the statement of terms and benefits of each plan, and the statements you received over the years summarizing your contributions, company contributions, and the amounts in your account.
- Records of your other property. Make sure you have copies of the deed to real estate you own, your stock certificates or brokerage account statements, your insurance policies, bank statements for your savings accounts, and documents regarding any other properties. For whoever must assemble your assets upon your death, their task will be easier if records are available. Any property you own that cannot be located, for example, because no one knows about it or if records are not available, will eventually be turned over to the state
- Your bank account. Many people set up their bank account as a “Totten Trust.” This is a legalistic way of saying your bank passbook account is set up to go directly to your heirs if you die.
- A power of attorney. This lets you appoint someone to handle your financial affairs. It authorizes them to sign documents as if they were you.
- A health care proxy. This lets you appoint someone to make your medical decisions if you cannot make them yourself. The decisions can cover a variety of medical matters, including consent for hospitalization.
- A living will. This document lets you specify the types of life prolonging treatment you want – or do not want – if you become terminally ill. It’s called a living will because it takes effect while you are still alive.
Testator: The person who makes the will
Beneficiary: A person or organization to whom property is left in a will.
Executor: The person named in a will who is responsible for administering the estate.
Bequest: A will provision leaving property to a specified person or organization.
Codicil: A supplement to a will which may add to, revoke or amend any of the will’s provisions, but does not completely revoke the will.
Probate: A legal procedure in Surrogate’s Court through which the validity of the will is established.
Preparing a Will
What is a Will? A will allows you, the Testator/Testatrix, to decide how your property is to be distributed upon your death. A will can do more than just determine how property is distributed upon death. A will can also set up a trust, which can help save taxes.
If you die without a will, your property will be distributed according to state law, which provides that a fixed percentage is to go to your spouse, children, and relatives, if any. Without a will, the Surrogate’s Court will select a person to administer your estate. That is, the person who is going to collect assets and distribute them.
Making a Will
Any individual over the age of 18 who is of “Sound mind and memory” can make a will. This means that as long as the person understands they are making a will, has an idea of what property they own, and are aware of who would be the people to benefit from the will, they can make a will. For married couples with young children, wills are essential. Each spouse should have a will in order to select a guardian for the children in case both parents die. The guardian will raise the children and manage their money. Without a will, the critical decision of who will be your children’s guardian will be left to a judge.
Changing your Will
It is a good idea to review your will every two to three years to make sure that it is up-to-date with your current family circumstances and tax laws. In addition, you should change you will when one of the following takes place:
- there is a birth or death in your family
- your financial situation changes significantly
- you want to name a new guardian or executor
- you want to change how your property will be distributed
- a change in marital status
- you move to a new state.
Seek legal help in making or changing your will. Laws for making and changing wills are specific, and you will want to be sure everything is done correctly. There are specific procedures for changing a will. So if you want to make a change, do not simply cross out the part you want to delete and write in your changes. Your changes may not be honored, and you could even void the entire will. Changes in a will are not valid if made by erasure, crossing out or attaching handwritten notes. To properly change your will, it must first be revoked. There are specific ways to revoke a will. For this, you should consult an attorney.
Do I need a will or a codicil
It depends. For the most part a codicil is sufficient. However, if it is determined that the codicil is not valid, the will is back in effect and your changes may not followed.
Before Making a Will
Before making a will, you must consider the following:
- Who will be the executor?. This is the individual who will be responsible for administering the estate. Such duties include, but are not limited to submitting the will for probate, distributing the property as per the will, paying the expenses of the estate.
- Funeral Directors: This should not be included in the will because the will may not be located until after the funeral. Directions of this type should be specified in a letter or memo and put in the care of a family member or close friend, or your executor.
- Disinheriting Relatives: If you do not want someone to receive under your will, you should specify this individual and the reason why. Should you not provide a reason, that person could challenge as to why he was disinherited. This could lead to questioning your competency when making the will and the Court may be able to override your wishes and desires. In New York State, you cannot disinherit your spouse.
- You should state in the will what will happen to the property if the person to whom you leave it to dies before you. Should their share go to their heirs or someone else. If the will does not address this issue and the gift is to your children or siblings, it will go to their children, If the gift is to a non-relative, the gift will lapse.
- Executing the Will: In order to execute your will, New York Law requires two witnesses. However, it is preferable to have three. These witnesses should not receive under your will because that individual may lose their bequest. The witnesses do not need to know what is in the will. They merely need to know that you are signing a will.
- Where should I keep my will? DO NOT KEEP YOUR WILL IN A SAFE DEPOSIT BOX. Should you do so, a Court Order is then necessary to retrieve it. You should tell your executor as well as family members where it is kept. This is so they can find it when it becomes necessary to do so.
Living Wills and Health Care Proxys
Health Care Proxy: Is a document that designates an individual who is authorized to make health care decisions for you in the event you become unable to communicate. It gives you the ability to control your medical care by ensuring that someone you trust can decide anything from routine treatments to whether you should receive life-sustaining treatment. Your agent can also decide how your wishes apply as your medical condition changes.
Who can serve as my agent?
Anyone 18 years of age and over. However, this person cannot sign as a witnesses on your Health Care Proxy.
When does the Health Care Proxy go into effect?
Your designated agent can make health care decisions after your doctor decides that you are unable to do so. As long as you are able to make health care decisions for yourself, the health care proxy is not in effect.
What decisions can my health care agent make?
Your agent can be given as little or as much authority as you want. It may also limit what health care decisions your agent can make. It can also be used to document your wishes or instructions with regard to organ and/or tissue donation. However, your agent cannot make decisions for you about organ and/or tissue donor. It does not require you to make any specific treatment decisions in advance. It is important that whomever you choose know your wishes, values and preferences.
Is a Health Car Proxy the same as a Living Will?
Absolutely not. A health care proxy allows you to choose someone you trust to make health care decisions on your behalf. Unlike a living will, it does not require you know in advance all the decisions that may arise. Instead, your agent can interpret your wishes as medical circumstances change and can make decisions you could not have known would have to be made.
Where should I put my Health Care Proxy?
You should give the original to your agent. Give a copy to your doctor, your attorney, your spiritual advise and any family member you choose. You should also keep a copy in your wallet or purse. Under no circumstances should you keep it in a safe deposit box. If you live alone, you should keep a copy in an open area, like a refrigerator.
Living Will/Medical Directive: Is a written declaration that allows an individual to state in advance his or her wishes regarding the use of life-prolonging medical care if he/she becomes terminally ill and unable to communicate. This document does not appoint an agent. It ensures that your instructions and wishes are made clear to your doctors. As the individual making the declaration you can address issues like feeding, hydration, and other measures in the event or irreversible illness and the inability to communicate those wishes.
It is important to have both a Health Care Proxy and Living Will. If your agent is unwilling or unable to make a decision for you, then your wishes will be known.
Where to keep a Health Care Proxy and Living Will?
You should give a copy to your agent, your doctor, your spiritual adviser, and one to a close friend and family member.
Power of Attorney
A Power of Attorney is a legal document that allows an individual, called the “principal”, to appoint another individual as an “agent”/ “attorney in fact”. The agent/attorney in fact may perform certain specified acts on behalf of the principal.
Why do I need a Power of Attorney?
It is a good idea to have a power of attorney if you are elder, if you are going to be away from home and need certain transactions handled for you, if you become too physically ill.
Who can sign a Power of Attorney?
Anyone who is over the age of 18 who has the capacity to understand the nature of the document they are signing and the powers it designates.
Does the Power of Attorney become revoked upon my death or incapacity?
This depends. A Power of Attorney goes into effect immediately, which means that the agent can exercise the powers granted by the principal. With a Durable Power of Attorney, the powers are not terminated by the disability or incapacity of the principal. With a Non-Durable Power of Attorney, if the principal becomes incapacitated, the power terminates.
What is a “Springing Power of Attorney?”
It is a Durable Power of Attorney that becomes effective at a Future Time when a certain event occurs. This event is usually when the principal becomes incapacitated and is unable to make decisions about property matters. The principal may also specify any other event that will make the power effective.
Can I appoint more than one person to be my agent?
Yes. When two or more agents are appointed, the principal is to determine if they are to act separately, or together. If the principal fails to choose, then it is deemed that the agents must act together. In addition, if the agent or agents are unable to serve, the principal may appoint an alternate agent to act. If the principal states that the agents may act separately, each agent can act on behalf of the principal without discussing the decision without the other. When the principal wants the agents to act together, each agent must agree and authorize every act to be taken on the principal’s behalf. Thus, if one agent dies or cannot act, the power of attorney is no longer valid.
For more information on this very important document, consult an attorney.
The above steps can help prevent problems which may arise in the future. As people get older that begin having problems making decisions and handling their financial affairs. However, in some cases, the person needs so much help that a guardianship is necessary.
A guardianship is usually a last resort. In a guardianship a court appoints someone to be the “guardian” of a person declared legally incompetent (the “ward”). The guardian gets the power to make some or all decisions for the ward (including financial and medical matters). As a result, the ward loses many rights. In some cases, a guardianship is essential. It involves a court hearing, and usually begins with the potential guardian filing a petition. At the hearing, medical evaluations are presented so the court can decide if the person is incapacitated. If the court makes this finding, a guardian will be appointed. Guardianships are often considered a drastic step. But through proper planning, people can avoid guardianships and help assure that if they ever become incapacitated, their business and other affairs will be managed how they want.