Whether your estate plan consists of a simple will and health care directive or a complex combination of estate documents, it deals with the most important issues in your life – your health and your family. We carefully attend to the unique needs presented by each client’s life, family, and finances.
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Do you have an estate plan? The answer is, “Everyone has an estate plan.” If you do not create a personal, memorialized plan, you are relying on the government to make these decisions for you. Therefore, the real question becomes, “Does your estate plan accomplish your individual goals?”
The Basic Estate Plan
We make it easy for you to create a simple estate plan that will provide certainty about your future and the future of your family. The basic estate plan consists of a Will, Health Care Directive, and Power of Attorney created to suit your individual needs.
The basic plan accomplishes the following goals:
Health Care Proxy & Living Will (also known as an Advance Directive)
You have the right to make decisions concerning your health care in advance, and to appoint a trusted person to see those decisions through. A Living Will, also known as an Advance Directive, memorializes your health care decisions, thereby providing instructions for your health care provider to follow, even if you are not able to make such decisions for yourself. A Health Care Proxy, which is typically included in a Living Will, names a trusted individual to enforce your health care decisions. Your Living Will and Health Care Proxy only take effect if you are no longer able to make health care decisions due to illness or incapacity.
You also have the right to appoint a trusted person to make financial and other non-health related decisions on your behalf, such as handling a bank account or transferring real estate, should you become unable to do so. This is accomplished through the execution of a Power-of-Attorney, in which you appoint an Agent to act on your behalf. The powers granted to your Agent can be as general or specific as you prefer.
Last Will and Testament
By executing a Will, you can increase the certainty that your estate assets will transfer according to your wishes. This is accomplished by making specific bequests (gifts) in your Will and naming an Executor to oversee the administration of your estate, a Guardian to care for minor children, and a Trustee to safe-guard assets for any minor beneficiary.
If you would like to speak with an attorney about your estate plan, please contact us.
Wealth Transfer Taxation Planning
If an individual’s estate or a married couple’s combined estate is worth more than the applicable exemption as of the date-of-death, then the estate may be subject to significant state estate taxes. However, with estate planning techniques, the effect of estate taxes can be greatly reduced. The current New Jersey Estate Tax Exemption is $675,000. For New York residents the exemption is more complicated. The applicable exemption amount depends on the date-of-death as follows:
(Date-of-Death: Exemption Amount)
Prior to April 1, 2014: $1,000,000
April 1, 2014 through March 31, 2015: $2,062,500
April 1, 2015 through March 31, 2016: $3,215,000
April 1, 2016 through March 31, 2017: $4,187,500
April 1, 2017 through January 1, 2019: $5,250,000
Federal estate taxes may be even more significant. The American Taxpayer Relief Act of 2012 permanently extended the estate, gift, and generation skipping tax exemptions to $5 million per person. This exemption is indexed for inflation which provides for a 2014 exemption of $5.34 million. The top federal tax rate for 2014 is 40%.
Surviving spouses still enjoy an unlimited marital deduction, which permits unlimited lifetime intra-marriage transfers tax-free. Transfers at death to spouses are likewise exempt from estate tax. Further, individuals are permitted to give tax-free gifts of up to $14,000 per individual, per year, per recipient, starting in 2013.
Keep in mind, however, there are certain flexible estate planning techniques aimed at minimizing your estate’s tax burden regardless of future exemption levels. One of the major tools for married couples is a Disclaimer Trust, which is a testamentary trust, meaning it is included within a Will.
The purpose of a Disclaimer Trust is to minimize estate tax liability for a couple’s combined estate. This type of trust preserves the tax exempt portion of the estate of the first spouse to die, so such portion may also pass, tax-free from the estate of the surviving spouse. The ultimate recipients of the tax savings are the beneficiaries of the estate of the surviving spouse, usually the children.
Additional techniques to protect your assets from estate tax include strategic gifting, individual life insurance trusts, and other techniques suited to your individual needs.
If you would like to speak with an attorney about wealth transfer taxation planning, please contact us.
Supplemental Needs Trust (aka Special Needs Trust or Medicaid Trust)
A Supplemental Needs Trust, also known as a Special Needs Trust, is an estate planning technique used when leaving assets to a beneficiary who receives government benefits such as Medicaid or Supplemental Security Income (SSI). If assets were left to a such a person outright, the asset could disqualify the beneficiary from receiving certain government benefits. However, a Supplemental Needs Trust can preserve the beneficiary’s eligibility for receiving those benefits.
Supplemental Needs Trusts also often come into play in connection with personal injury settlements. If the settlement recipient receives governmental benefits and wishes to maintain those benefits while having access to the settlement funds, the individual may be able to set up a Supplemental Needs Trust to accomplish this goal.
If you would like to speak with an attorney about a setting up a Supplemental Needs Trust, please contact us.
A Living Will only takes effect upon your incapacitation, i.e. a situation in which you are not able to make decisions for yourself, and provides instructions to those making choices on your behalf concerning your health care wishes, i.e. life sustaining treatment; a Health Care Proxy, which names a trusted individual to act on your behalf if you become incapacitated, is included in the Living Will