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Syracuse Elder Law Blog

How to account for an IRA in an estate plan

New York residents can generally leave funds within an IRA to whoever they feel deserves it the most. If there is no person worthy of receiving the money, it may be possible to donate it to a charity. However, how an IRA is transferred generally depends on who is receiving it. For instance, if an IRA is left to a spouse, he or she could simply roll that money into his or her own account.

If a child or other family member is named as a beneficiary to an IRA, he or she may roll the money into an inherited IRA. This may be beneficial because those recipients would be able to stretch out the tax benefits for their entire lives. However, this may be moot if the child who receives the money needs it immediately. It is also important to note that the stretch provision isn't available if the child was not named as a beneficiary.

The use of trusts to protect assets in an estate plan in New York

Investors and others with many assets who are creating an estate plan may need to use trusts to protect those assets. This can be important because without effective estate planning, as much as half of an estate's value may be lost to taxes when assets pass to beneficiaries.

It may be best to work with a professional to create an estate plan and trust to avoid errors. One common mistake is failing to fund the trust. After creating the trust document, it is necessary to title the assets in a way that makes them the property of the trust.

The importance of choosing the right trustee

When New Yorkers are planning their living trusts, they will need to consider who to name to serve as their successor trustees. This decision is important because administering a trust is a complex and technical process, and the trustee must also be someone who can be trusted to work in the best interests of the beneficiaries.

Initially, people who draft living trusts will serve as the initial trustees. Married trustees will normally pass on the role of the trustee to their spouses when they die. If an unmarried person writes a trust, he or she will need to think about who to name as a successor trustee. Similarly, if a spouse of the initial trustee also dies, a successor trustee must be named to carry on the trust duties.

3 reasons you should avoid a DIY estate plan

With so many tools available online today, it can be tempting to create an estate plan on your own. While you might think you will save a lot of money and hassle with a DIY approach, it can come back to bite you or your heirs. The truth is, bypassing an attorney to get your estate planning documents can result in a plan that does not work or follow the proper laws. 

Due to varying laws in each state and the unique needs of each person, DIY kits do not accomplish what you need. Here are the main reasons you should avoid using online tools to create a will or trust

What to consider when creating a power of attorney

New York residents may be able to plan for what happens to assets after they die by creating a will or trust. However, there is also a way to plan for what happens if an individual becomes mentally incapacitated while still alive. By adding a power of attorney, an individual can appoint an individual or entity to manage his or her financial affairs.

Typically, this person is a spouse, child or close friend, and it possible to give more than one person power of attorney. It is important that an agent is given durable powers of attorney as opposed to nondurable. Nondurable powers of attorney are no longer valid if the person who gave that power becomes incapacitated. Individuals are urged to use an attorney to create a power of attorney document as do-it-yourself forms may not be adequate.

Understanding the duties of a New York executor

Selecting an appropriate executor for your will ranks among the many important decisions you need to make as you plan your estate. Understanding the duties of an executor in New York can help you make the right choice.

Briefly, the executor bears responsibility for the technical and practical aspects of managing the estate after the testator passes away. Similar to a trustee, an executor is considered a fiduciary who owes a special duty to carry out the decedent's wishes.

Funeral trusts for estate planning

New York residents might like to know about funeral trusts. Planning one's own funeral ahead of time by using a trust will make the process much easier down the line for surviving family members. A funeral trust also allows a person to arrange a service based on personal preferences.

A funeral trust could be used if one's wishes have not been communicated to family members or an estate executor. If one does express his or her wishes, a revocable trust could be dissolved. An irrevocable trust is different. Money in an irrevocable funeral trust must be used for funeral expenses and cannot be refunded or withdrawn.

Deferring taxes with 1031 exchanges

New Yorkers who own portfolios of real estate holdings as investment properties may feel that they can't sell them because of the capital gains taxes that they might face. These portfolios can be optimized, and the people can use the 1031 exchange to sell their properties without paying capital gains taxes while moving into more passive management roles.

In addition to the capital gains taxes, planning should also include a consideration of the depreciation recapture and state taxes that can also impact the sales of investment properties. These added taxes may potentially eat up as much as 33 percent of the sales prices.

Managing a residence in a QPRT

While a qualified personal residence trust may be less necessary for people in New York and others throughout the country today because of the large exemptions for estate and gift tax, many people will still have these as part of their estate plan. A QPRT works by removing the home from a person's ownership and placing it in a trust for a fixed amount of time. This reduces taxes on the home at the person's death. If the person dies before the end of the fixed term, the benefits are lost. Neither the grantor nor the spouse can repurchase the home at the end of the fixed term.

There are several options for the home once the term is up if the grantor is still alive. The initial beneficiary might be the spouse, and that person could be allowed to use the residence without paying rent. The home could go into a trust for the benefit of the children or it could go directly to the children.

Getting married again? 4 estate planning tips to reduce conflict

As you prepare for your second marriage, it is imperative to take another look at your estate plan. Entering another marriage means you will have a blended family. Without proper preparation, there can easily be inheritance conflict once you pass away. You should take certain preventative steps to keep the peace among family members.

How do you reduce conflict? Here are some actions you can take as you make changes to your estate plan.