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Syracuse Elder Law Blog

Charitable contribution considerations for estate planning

Anyone who owns property in New York can benefit from considering how they want to handle estate planning. Estate planning involves how a person wants their assets distributed upon their death as well as protection of assets during the person's lifetime. A common mistake that many people make when planning their estate is not properly allocating estate proceeds to charity.

One important consideration for charitable contributions is how the proceeds will be affected by taxes. When the charity receives the money, it will not be required to pay taxes on the income. By allocating funds donated to charity to come from a source such as an IRA rather than the after-tax funds in an estate, beneficiaries of the estate may be able to save money on taxes.

3 risks of DIY estate planning

Estate planning is an important responsibility. Too many people underestimate the urgency of the process and put it off until it is too late. According to the AARP, only 40 percent of American adults have planned their estates. If you are thinking about drafting a will or establishing a trust, you are on the right track, but you should proceed with caution.

Many DIY services have emerged that promise customers the resources needed to complete estate planning independently. While affordability and convenience are surely appealing to many, there are many risks associated with DIY estate planning that you should not overlook. Consider the following three reasons why DIY estate planning may be a bad idea:

How the new tax law affects cost seg/Section 1031 exchange combos

Savvy real estate investors in New York may prefer to explore potential tax saving options like combining cost segregation and Section 1031 exchanges. Due to provisions in the Tax Cut and Jobs Act, or TCJA, this particular strategy may be even more important for investors. The TCJA has modified rules that apply to Section 1031 exchanges and expanded applicable depreciation rules. These changes present new opportunities that some investors may not know are available.

One newly available tax planning strategy involves IDing short-life assets that will be fully depreciated with a cost segregation study. Because these no-value assets are not part of the Section 1031 exchange, there is no depreciation recapture that has to be reported as income. With a cost segregation study, tax-paying real estate owners may be able to reclassify some assets as Section 1245 properties instead of 1250. Doing so allows for depreciation over a shorter period of time.

No estate plan left by Aretha Franklin

New York fans of singer Aretha Franklin might not know that she died without leaving a will or any kind of estate plan. She had four sons, and they have filed as interested parties. Her niece has filed a request to be named executor of the estate.

Franklin's longtime lawyer said he tried to get her to set up a trust. If she had, the details of her estate, which has an estimated worth of $80 million, could have been kept private and the process might have been faster. The result is that the state of Michigan will decide what happens to her assets based on state law. Franklin is one of a number of celebrities who have died without creating an estate plan. Singer James Brown is another, and his estate has been tied up in litigation for 11 years.

Should your parents have living wills?

Over the years, one or both of your New York parents may have indicated to you what they want and do not want when it comes to end-of-life medical care. Maybe their respective wishes coincide, but maybe each of them has different preferences. In addition, not only has medical technology changed in the past several decades, but palliative and hospice care also have become available. Consequently, the end-of-life care either of your parents said they wanted when they were younger may not be what they want now.

All of this makes it difficult for you and your siblings to know what to do if and when the time comes when your parents can no longer make these decisions for themselves. You may wish to suggest to your parents that each of them execute a living will. Unlike a “regular” will, your parents’ respective living wills do not state to whom they want their various assets to go when they die. Rather, these documents state the types of medical care each of them wants and does not want if and when they become terminally ill or suffer an injury or illness that leaves them in a permanent vegetative state.

Learning the basics of estate planning

As people in New York consider retirement and their futures, they may also begin to think about estate planning. Over 70 percent of Americans do not have an updated will or other estate documents, including a number of people who are reaching retirement age. These documents can help provide peace of mind to the people who create them as well as make the practical aspects of death much easier for family members and other loved ones.

Everyone should have several key estate planning documents in place. Even people without significant assets or young individuals who expect to live many years into the future should have these key documents in place to avoid confusion, turmoil and extra costs to their beneficiaries. A will is a means to lay out how a person's property should be passed on after his or her death. A lawyer can help people create legally valid wills at an affordable and accessible cost that meets each person's individual needs.

How to account for digital assets in an estate plan

Since there are now many new types of assets available to New Yorkers, it's important to know how to account for them in an estate plan. For instance, those who have digital coins will need to find a way to grant access to executors and other designated parties. Currently, 42 states have laws allowing digital assets to be managed in a similar fashion to physical assets.

Ideally, digital assets will be stored in one location for easy access. In fact, one could keep a copy of a digital currency wallet on a USB drive that is kept in a secure location. Individuals should update their cryptocurrency holdings on a weekly to annual basis depending on how often they trade. To further organize a digital estate, it is a good idea to keep a list of passwords and other information needed to access a given account.

Is it a good idea for spouses to have the same wills?

In long-term marriages where both spouses have the same assets, they tend to be invested in passing these assets on to the same family members. So, it may seem logical for their wills to look exactly the same.

Logical, perhaps, but is it a good idea?

Estate plan best practices for any political climate

New York residents may know that changes to the tax code could have an impact on an estate plan. However, there are steps that individuals should take to protect their wealth regardless of whether or not there are any significant changes on the horizon. For example, it can be a good idea to review a plan regularly to check whether beneficiary designations or terms of a trust need to be changed.

It can also be a good idea to sell off assets such as a family business and move them into a trust. Ideally, assets will be sold at as low a valuation as possible to ensure that growth takes place outside of the estate. While the asset is in the trust, its original owner can still benefit from revenue that it generates. If an asset is in a trust when a person passes on, it may reduce estate taxes owed.

Deciding when a child can have his or her inheritance

Parents in New York may have many issues to consider when creating an estate plan. If they intend to leave money to their children, it is important to think about when they should be able to access that money. Individuals have the option of making distributions from a trust dependent on certain events taking place or on a predetermined timeline. There is also the option of making distributions based on other criteria a grantor deems appropriate.

In many cases, a trust will allow for both discretionary and mandatory distributions to be made by a trustee. For instance, it could call for distributions to be made when a person turns 30. However, distributions could be made earlier than that to pay for a college education or for a medical bill.