When New York residents think about estate planning, they may want to consider the future of their assets for generations to come. Proper estate planning can ensure that wealth passes on over generations in a way that reflects the testator's wishes for the future. In addition, many people want to make sure that the vast majority of their assets reach their beneficiaries rather than being lost to taxes and fees. There are some major issues that estate owners may consider during the planning process to help them achieve their goals.
Between 1996 and 2018, the number of unmarried couples throughout the country who were cohabiting grew from 6 million to more than 19 million. This is only one example of the rise in nontraditional family structures. People in New York may be more likely to live as part of blended families or to be divorced or single parents than in previous generations. This can mean that much estate planning advice, which is structured for more traditional families, may not apply.
When people in New York decide to plan for their future, they may think about creating wills, trusts and other estate documents. However, there are other concerns to keep in mind when planning an estate. In particular, one of the most important, yet often forgotten, parts of developing an estate plan is ensuring that beneficiary designations are correct and up to date. Many of the largest parts of an estate do not pass through the probate process or are even funneled through a trust. For example, bank accounts, investment accounts, 401(k)s and life insurance policies are often distributed to a specific beneficiary named by the account holder.
When structured properly, trusts can be powerful estate planning tools for New York residents. In 2017, the Tax Cuts and Jobs Act was passed, and it increased the estate tax exemption until at least 2025. While that could be a good thing for many people, it is also worthwhile to plan for the possibility that the rules change again after the legislation expires.
Many people living in New York understand the importance of estate planning. These individuals will write and regularly update their wills. They may also regularly review beneficiaries on insurance policies and investment accounts. However, some do not consider the possibility that they may become incapacitated before they die.
Estate plans in New York and around the country usually include a last will and testament and, in some cases, at least one trust. The majority of the estate will usually be distributed according to the provisions of one of these documents, and they both have advantages and disadvantages. Trusts are often used for this purpose because the assets placed into them are not subject to probate, which saves both time and money. Avoiding probate also allows estates to be administered more discretely as trust documents are not filed with the court and are thus not available to the public.
When an estate plan isn't put together correctly, it can lead to legal battles, tax bills and other problems for New York residents. One of the biggest mistakes that people tend to make is failing to name a beneficiary to a retirement or other account. In the event that beneficiaries are named, individuals may fail to review those designations after they are made. This can be problematic because a person's needs may change over time.
The mention of trust funds may evoke thoughts of privileged children from wealthy families in the minds of New York residents, but trusts can be extremely useful estate planning tools even for those of more modest means. While the affluent do use trusts to reduce their estate tax exposure and transfer generational wealth, they are most commonly drafted to avoid probate, protect assets from creditors, prevent children from inheriting large sums of money at a young age and to ensure that heirs continue to qualify for federal benefits like Medicaid.
When New York residents neglect to draft an estate plan, they create a situation where others will be tasked with making important decisions on their behalf. Many people put off estate planning because contemplating end-of-life scenarios can be emotionally difficult, but resolving these matters can put an end to gnawing anxiety and provide peace of mind.
Despite the fact that people often know it is important to plan for the future, many adults in New York do not have wills, trusts or other estate documents in place. There are many reasons why people put off making decisions about their estates: They may not want to think about death, there may be complicated family situations to consider, or they may just think they have more time to deal with the issue later. However, in an emergency situation, people may not have the plans in place they need to help their own peace of mind as well as that of their loved ones.