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.
It can make sense in many cases for New York residents to use trusts, rather than other methods, to transfer wealth to younger generations. Among the advantages trusts might offer are asset protection, maintaining family control and tax planning. Dynasty trusts may be one of the most useful estate planning instruments for individuals and families who want to preserve wealth for a long time.
Because of the privacy and flexibility provided by trusts, many New Yorkers make them a central part of their estate planning strategies. By using trusts, people can help to refine their gifts to minors, create certain conditions for passing on property and give significant assets to their heirs without going through probate. Many people also hold significant amounts of money in their individual retirement accounts (IRAs). An account holder can name another person as the beneficiary of the account. Many people may name a spouse or child to receive the remaining funds in the account.
Wills can be effective estate planning tools for those who have few assets or don't have children. However, once a person becomes a parent, it can be a good idea to create a trust. The primary benefit is that it prevents a child from directly inheriting money when he or she turns 18. Instead, the assets inside of the trust will be managed by another person or entity.
People in New York who have a chronic illness or have a loved one who is chronically ill should have estate plans that include certain provisions that address health and aging complications. Over 130 million people in the United States are chronically ill, and by 2020, nearly 157 million will have some type of chronic disease.
A comprehensive estate plan in New York might contain any number of specially-drafted instruments, including a will, trusts or powers of attorney. One planning tool that might help keep your heirs out of probate court is a transfer on death account. TOD accounts transfer assets automatically to a beneficiary who is named by the account holder. If a person had a TOD savings account with $50,000 in it and named his or her child as the beneficiary, the funds would transfer automatically to the child when the person dies.
People in New York who are preparing an estate plan might want to consider creating a financial durable power of attorney. This would appoint a family member to take action on a person's behalf if the person becomes incapacitated. Without this document, even a spouse could be prevented from taking care of the person's finances. This would include dealing with things that need a signature from both spouses.
Even people in New York who have already created estate plans may not have taken their digital assets into account. When thinking about what they want to happen to their belongings after they die, people often forget things like online accounts, photographs, emails, subscriptions, and other items.