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A costly mistake New York residents may make when planning their estate is not designating the correct beneficiary for their IRA. This can result in hefty expenses and frustration for surviving family members.
It is not unusual for people who have IRA to leave the beneficiary designation blank or fail to update their beneficiaries. If a beneficiary is not designated, the IRA is automatically transferred to the decedent's estate, which can result in an expensive tax assessment.
People in New York who have blended families may want to consider a trust instead of a will for estate planning purposes. A will that leaves everything to a spouse could result in the spouse later cutting out the children from the previous marriage. This may happen because of malice but not always. Over time, the spouse and stepchildren might fall out of touch. The spouse might even remarry.
A trust could be set up that benefits the spouse for the remainder of the spouse's lifetime and then passes to the children on the spouse's death. A trust would also protect the assets if the spouse remarries. Choosing the right trustee is important. This should be someone who has the financial expertise to manage the trust correctly and who can also manage any conflict between the spouse and children. A person does create this kind of trust may want to leave some assets for the children so they are not left waiting for a stepparent's death.
Any information that a New York resident stores online could be considered a digital asset. It is estimated that the average American has $55,000 in assets that are held online. At any given time, a person can have up to 100 or more accounts that are secured by a username and password. Examples of online properties include email accounts, bank accounts and social media profiles.
There could be many problems associated with not accounting for digital assets during the estate planning process. For instance, a decedent may be tagged or mentioned on social media accounts. Each time this happens, it could trigger sadness or grief among close friends and family members. Social media or other account credentials could also be accessed by thieves who use them to accrue new charges on a credit card or take money out of a bank account.
Many New Yorkers might think that a will is a sufficient document for passing on assets to loved ones. However, a trust may be a better instrument in some situations. With a revocable trust, the creator has a lot of flexibility. An irrevocable trust gives the creator, or grantor, less control. However, this instrument may have uses not provided by a revocable trust.
A trust is private because it does not have to pass through probate. This also means that assets can go immediately to beneficiaries. However, a grantor might also specifically create a trust to keep the beneficiary from getting assets right away. This could be the case if the beneficiary is young, likely to be irresponsible or has issues with creditors. The trust might only allow the beneficiary to receive assets after reaching a certain age. Distributions could also be left up to the trustee. Creditors may be unable to get assets that are in a trust.
Creating an estate plan can be an intimidating process. You may not understand how estate planning works because of widespread misconceptions and myths. Without the right advice and knowledge, you can make mistakes that result in financial and legal issues.
When you make an estate plan, you must make sure you follow all the laws and make decisions that will benefit you and your heirs the most. Here are a few mistakes you should avoid during the estate planning process.
Many people living in New York have taken the time to write a will and make end-of-life preparations. However, there may be one area that these individuals have overlooked: beneficiary designations.
When an individual purchases a life insurance policy, or enrolls in a retirement plan, he or she names beneficiaries. On a life insurance policy, this is the individual who will receive the insurance money after the policyholder dies. When it comes to retirement or other investment plans, one or more people may be named as beneficiaries of the funds in these accounts after the plan participant dies.
New York residents might know the late Lee Radziwill as a style icon, princess, socialite or the younger sister of Jackie Kennedy. The way she handled her estate could be used as an example for others.
Radziwill used a will, which is subject to probate administration under New York law, and a revocable trust. Trusts are commonly used for distributing assets and not subject to the probate process. This could provide more privacy for a decedent's family. A revocable trust can be changed while a grantor is alive but turns irrevocable upon his or her death.
You may not know a lot about the probate process. After all, it is not natural to want to learn about things that happen after we or our loved ones die. That said, it is helpful to know the basics about how probate works, so you know what to expect.
Unfortunately, plenty of myths abound regarding probate and wills that make it difficult to know what is true. Here are some debunked misconceptions about probate.
Parents in New York who have children with special needs may face particular challenges when it comes to estate planning. Parents have a few different options, but in most cases, a trust can be useful.
Those who are wealthy enough to be certain that their child will not need government support might set up a discretionary trust. This can be managed by a trustee who makes distributions to the child. For less wealthy families, a special needs trusts ensures that a child can still receive government benefits while having a trustee manage assets in a trust for additional support.
If the value of a person's gross estate in New York exceeds the federal estate tax exemption, it will be necessary to pay taxes on the estate. However, with the passage of the Tax Cuts and Jobs Act, the exemption increased to more than $11 million per person and twice that for couples. This means that most people will not have to be concerned about estate tax.
Determining the gross value of an estate involves taking all assets into account, including stocks, bank accounts, real property both in and outside of the United States, annuities, some proceeds from life insurance, annuities and joint assets with rights of survivorship. The gift tax exemption along with adjustments for taxable gifts must also be accounted for. If the gross estate is worth more than the federal exemption, the executor usually has to file form 706 with the IRS even if no estate tax must be paid.
