Basic Estate Planning Instruments

basics of estate planning

Why is Estate Planning Essential If You Want to Protect Your Family?

Regardless of where you are in life – whether you are newlywed, a new parent, just recently divorced or somewhere else you should consider estate planning.  Estate Planning enables you to keep the best possible of control over your life and your tangible and intangible assets. If you don’t at least have a will its anyone’s guess what will happen to your assets when you die.  If you still have minor children they may need a permanent guardian.

Or have you thought about what would happen if your doctor says you have to be placed on life support?  It is not enough to tell your family your choices because your doctor will require instructions in a “medical directive”.  What if you are unable to handle your own affairs while you recover from an illness? You should provide a Power of Attorney to someone you really trust.  All of these situations can easily be remedied by a loving member of your family, or a close friend, if you have your estate planning in order. If you don’t have an estate plan of any kind your medical care and final estate distribution could end up being decided by the Probate Court .

An Estate Plan Will Provide You and Your Family “Peace of Mind”

estate planning

Estate planning strategies involve more than just simply creating a Will.  You can prepare for the buildup and handling of your assets while you are alive. Have a trust accounts that will run during your life as well as after your death to protect your properties in order to sustain your children up until they are the age of majority and also to safeguard your estate from taxes; protect your beneficiaries from lenders and also divorce; utilize gifts to individuals or charities to decrease taxes; incorporate life insurance in your plan to supply liquidity; and even more.

An estate plan provides you with satisfaction and an understanding that your long term goals will be met.  Your cherished possessions will be protected for your heirs.  Most importantly, your family will be secure in the event of your incapacity or death. Once incapacity strikes it is too late put your plan in place so your family’s only choice is Probate Court.  You are never too young or old, or have too few assets to put together an estate plan. It is never too early to prepare for the worst.

If you currently have an estate plan, we advise you t0 evaluate your records periodically to ensure that they satisfy your objectives as well as follow changes in the law.  You should make adjustments whenever a substantial life event takes place.  Events that have to be adjusted for are a new birth, fatality of a partner, divorce, serious illness or purchase of a new residence or other major purchases. We would be happy to review your current estate planning documents, summarize their terms for you and make necessary recommendations or modifications.Planning and Implementing Your Personal Estate Plan

estate plan

The first step in implementing your estate plan is to determine what you want to see happen in the event of your death.  If you have no heirs, should you elect your favorite charity?  If you have grown children who have their own wealth,  should you focus on your other children.  Or do you have other children that you have decided to disinherit entirely?  What about your grandchildren?  Will there be enough residual to  help with their education? Have you decided who should be your co-trustee or your executor (person(s) designated to distribute your assets and maybe serve as permanent guardian for your children? What do you want to have happen if you become incapacitated? These are just some estate planning ideas that you should contemplate as there are many other possibilities.

The second action in executing your estate plan is to take an inventory of your property, including your residence, savings account(s), investments like bonds, jewelry, insurance accounts and retirement plans.  A similar inventory has to be taken of your debts and liabilities. This can be done utilizing our detailed Estate Planning Questionnaire, which we will provide when you make your appointment.  After we have received your finished Estate Planning Questionnaire, we will meet with you to help implement your estate preparation objectives. We will consider the tax implications of your strategies, as well as advise you concerning the most effective approaches to reduce tax obligations. We will present you with choices for the very best vehicles to execute your plan, including Wills, trusts and other estate planning products.

Last Will & Testament

last will testiment

One of the most effective ways to direct the distribution of your assets upon your death is to make a Will.  Some Wills can be straightforward, while others can be very intricate, depending upon the wishes and goals of your estate plan.  The primary reason for executing a Will is to provide written instructions regarding how your assets are to be distributed among your beneficiaries. A properly drafted Will accomplishes the following:

  • instructs how your assets are to be distributed, including specific gifts of tangible personal property, such as jewelry, clothing and furniture
  • designates an Executor who is responsible for taking inventory of your property; preserving your estate; paying creditors, administrative expenses and death taxes; and disposing of the remainder of your property among your beneficiaries and,
  • can establish trusts to protect assets.

It is important to be aware that a Will only controls the disposition of probate assets, which are those assets owned in your own name that do not have a named beneficiary (e.g., bank accounts or real estate in your name alone).  On the other hand, non-probate assets pass outside of the Will and transfer automatically to another person or designated beneficiary upon your death. Non-probate assets include:

  • assets held in a revocable living trust
  • assets held jointly with your surviving spouse, or with another person as joint tenants with a right of survivorship
  • proceeds of an insurance policy where beneficiaries are named other than your estate, and
  • balances of retirement plans, IRAs, Keogh accounts and tax deferred annuities, which may be payable to designated persons rather than your estate.

When designing your estate plan, it is important to consider your non-probate assets and to revisit your beneficiary designations on life insurance and retirement plans to ensure your assets pass to your intended beneficiaries. All too often, individuals update a Will, but neglect to update beneficiary designations and inadvertently leave assets to former spouses, predeceased or unintended family members. It is also not advisable to name minors as beneficiaries, as these assets will pass directly to them.

What About Estate Taxes

estate planning

Estates Over 5.49 Million in 2017

For individuals with larger estates (e.g., near or over the federal estate tax exemption ($5.49 million in 2017)) or in states with state estate taxes, like New York, the plan should consider potential estate and income tax issues, including:

Portability.  “Portability” allows a predeceasing spouse’s estate to elect to transfer any unused federal estate tax exemption to the surviving spouse, eliminating the need for spouses to re-title property and create “credit shelter” trusts (“CSTs”) at the first death solely to ensure full use of each spouse’s federal estate tax exemption. Portability, however, has several limitations and should not be viewed as a wholesale replacement to estate and transfer tax planning for married couples.

• Portability does not apply to the federal generation-skipping transfer (“GST”) tax exemption, which is lost if not used.
Federal portability does not apply to state exemptions, so individuals with state estate tax exposure (such as New York residents) may need to fund a CST to use state estate tax exclusions.  Appreciation in CST assets will not be subject to estate tax at the surviving spouse’s death, unlike assets held in a marital trust or by a surviving spouse.

• Note that the surviving spouse has full control over assets left to him or her outright, as opposed to assets left in trust. This is an important concern in blended families or if the surviving spouse remarries.

Increases in the federal estate tax exemption and in federal income tax rates (including the 3.8% net investment income tax and the impact of state income taxes) have created a balancing act between lifetime gifting and holding assets until death, due to the potential income tax liability to recipients of gifted property upon later disposition. Thus, planning for larger estates requires an overall tax analysis of whether and what assets, if any, to gift during life.

Charitable Bequests

estate planning

Charitable deduction planning will be important for philanthropically-inclined individuals. Rather than just making an outright charitable bequest, the estate plan can customize the bequest to impose certain requirements on how the money should be used, or, for more control, make the bequest to a donor advised fund, charitable trust or private foundation, possibly managed by selected friends or family.

Planning for Incapacity


This also is an Elder Law Issue which is extremely important if you have an elderly parent or relative who has never had an estate plan put into effect.  How do you help an elderly parent or grandparent qualify for nursing care.  Will you have to have in home care or move them to a nursing home or adult care center.  Of course, a lot of this planning must be considered years before a triggering event or there may be no resources left.

Health Care Directive or Health Care Proxy is used to appoint an individual (or individuals) to make health care decisions for you in the event that you are unable to do so yourself. In the event of your incapacity or incompetence your health care agent would be authorized to make any decisions regarding your healthcare treatment.   Of course, you want to be sure that your own doctors decide if which you could make the decision on your own first.   For instance, if you wish to have artificial life support terminated in the event that you are unconscious and there is no reasonable hope for your recovery.   If you have a directive your authorized agent can direct medical personnel to stop any treatments unnecessarily prolonging your life. A Living Will can be used to express your wishes regarding your care, and may be used to evidence your intention to have artificial life support terminated.


Trusts are very powerful estate planning tools that can provide asset protection, tax reduction, probate avoidance and many other benefits. Our personal favorite for so many reasons.

A trust is a legal entity that is established by an agreement. Under the trust agreement, you, as the Grantor of the trust, dictate the terms of the trust and decide what assets to put in it. You also select a Trustee or Trustees to hold and manage the property under the terms of the agreement. Finally, you name the beneficiaries of the trust, which may include yourself, family members, charities or anyone else you want to benefit. The Trustee manages and uses the assets in the trust for the benefit of your named beneficiaries.

A trust can be created either during your life (living or inter vivos trust) or at your death according to the terms of your Will (testamentary trust). A trust may also be revocable or irrevocable, depending upon its purpose. A revocable trust allows you, as Grantor, to retain complete control of the assets and allows you the power to change the terms of the trust at any time. If you establish an irrevocable trust, you give up certain rights to the property and have limited ability to change the terms of the trust.

Testamentary Trust

You can establish a testamentary trust under the terms of your Will in order to ensure that your assets are held, managed and distributed in the manner which you specify. You can direct that the Trustee of the trust manage certain assets for the benefit of your beneficiaries, and distribute certain amounts to named individuals at specific times set forth in your Will. For example, some individuals may be concerned about what will happen to his or her assets if the surviving spouse remarries. To deal with this concern, a trust can be created that provides income and principal for the surviving spouse during his or her life but preserves the remaining principal for the testator’s children upon his or her death.  This avoids transferring all assets to the new spouse or the new spouse’s children. Similarly, assets left to children or other minors (such as nieces, nephews or grandchildren) can e held until they reach a certain age.  A trust can also dictate in the trust document that funds shall be used only for certain purposes, such as health, education, maintenance and support.

There are many compelling reasons to establish trusts under your Will.  Testamentary trusts can be used to address the following issues:

  • Minor children: Outright bequests to minors will typically require the court appointment of a guardian and court supervision over expenditures for the benefit of the minor children. Establishing a trust for minor children would avoid such court proceedings and supervision.
  • Federal estate tax: Although the 2012 Tax Act lessened or eliminated the burden of federal estate tax for most people, it is still a serious concern for others that must be addressed with appropriate trust planning.
  • New York State estate tax: Trust planning must be utilized in order to mitigate or eliminate the cost of this tax for those with estates in excess of the State Basic Exclusion Amount.
  • Divorce: An outright bequest to a beneficiary who later gets divorced could result in at least a portion of the bequest being lost as part of the divorce settlement. A properly designed trust can eliminate this risk.
  • Re-marriage: The use of a trust (as opposed to an outright bequest) can ensure that, in the event of the surviving spouse’s remarriage, the inheritance of the deceased spouse’s children will not be diverted to a future spouse and/or the children of that spouse.
  • Second marriage: A trust may be used to provide for the surviving spouse during his or her lifetime, while still ensuring the eventual inheritance of children from a prior marriage.
  • Spendthrift provision: Young adults, and sometimes mature adults, may have difficulty managing their financial affairs. A trust can be designed to include spendthrift provisions and other limitations on distributions in order to ensure that the beneficiaries are adequately provided for, without the risk that a new found inheritance will be squandered.
  • Substance abuse: This type of trust can be established for a beneficiary with a drug problem, such that no distributions shall be made until the results of a drug test are clean for a specified period of time.
  • Disabilities or special needs: Beneficiaries with special needs often receive public benefits. Outright bequests can interfere witha beneficiary’s qualification for these benefits and can place the beneficiary’s inheritance at risk. A properly drafted Supplemental Needs Trust may be used to prevent disqualification for benefits.
  • Creditor protection: An outright bequest will be available to the creditors of a beneficiary. A trust may be used to make trust assets available to the beneficiary without exposing them to creditor’s claims.
  • Multi-generation trust: A multi-generation trust can be created to provide for a child during the child’s lifetime, with the remainder passing to grandchildren (or other family members) after the child’s death.
  • Charitable giving: A trust can be designed to provide for a beneficiary during the beneficiary’s lifetime, with the balance paid out to a charity upon the beneficiary’s death.

Revocable Living Trusts

A revocable living trust may be used as a substitute for a Will. It can provide for the management of your assets both during your lifetime and after your death. Like a Will, a revocable living trust dictates the distribution of your assets to your beneficiaries upon your death. The terms of this type of trust may be changed or revoked at any time and allows for the designation of any individual or corporation as Trustee, including yourself, your spouse, an adult child, an attorney or a professional manager. A revocable living trust is beneficial in the event you become incapacitated or incompetent, as the Trustee (or successor Trustee) is able to manage your assets and provide for your needs without court intervention.

A revocable living trust can offer the following advantages over a Will:

  • Manage and protect assets during your lifetime, including in the event of your incapacity or incompetence avoid conservatorship provide continuity in the management of your financial affairs following your death control how, when and to whom assets are to be distributed avoid the costs and delays of probate provide added protection from court challenges, and ensure privacy in the handling of your financial affairs and estate.
  • Revocable living trusts should be prepared in conjunction with a pour-over Will in order to ensure that upon your death any assets that remain in your name and were inadvertently left outside the trust, will be transferred to the trust for distribution in accordance with the terms thereof. In addition, the pour-over Will is used to name your Executor and the guardian(s) for your minor children.

Everyone needs a Will, but not everyone needs a revocable living trust, despite its advantages. Whether or not you need a revocable living trust depends on your age, your wealth, the types of assets you own and whether you are married. As compared to a Will, a revocable living trust is considerably more time-consuming and costly to establish, involves more ongoing maintenance and is more trouble to modify. Such trusts are also typically more complicated than Wills because they require that you transfer your property into the trust. For many items, this can be a relatively simple task. However, items with title documents, such as real estate, must be re-titled so that the owner of the property is the trust. Although not a difficult task, it may prove burdensome. We can help you to decide whether a revocable living trust or a Will is more appropriate, given your circumstances. (Note However:  We almost always lean toward a Trust because the probate process can be even more expensive than creating a Trust in the first place).

Advanced Planning Options

There are a number of sophisticated estate planning techniques that may be used to transfer wealth to beneficiaries, while minimizing estate and gift tax consequences. Please watch our posts to learn about other possible options. However, those outlined here represent the vast majority of the needs of everyday people.  If you have special circumstances we will discuss those in detail before deciding what is in your families best interest. Save