Estate Planning When You Spouse Isn’t On Board: What to Do
If you are ready to begin estate planning, but are getting resistance from your spouse, you may be wondering if you should go it alone. Although addressing your combined estate and goals is helpful, you can take control of your estate planning on your own.
Open and Honest Discussion
Spouses often complete their estate planning together. However, it is not unusual for one spouse to avoid the topic. Estate planning comes with difficult emotions and important decisions. It’s not surprising that someone may not want to deal with this head-on.
Discuss with each other the reason that one is resisting this project. If the topic is emotionally heavy for your spouse, ask why and what might help to reduce the emotions. Did your spouse experience the aftermath of a difficult estate administration? Are they worried about not being alive at key moments of their loved ones’ lives?
Getting to the heart of their reluctance is important information for you to understand if you will be able to convince them to engage in estate planning with you, or if you need to take on this matter for yourself.
Your Individual Estate Plan is a Gift to Your Loved Ones
Estate planning for a couple may include joint decisions on desired bequests to loved ones, guardianship appointments of minor children, tax benefits and combined legacy goals. If your partner does not want to engage in the process, you can still make many of these key decisions on your own.
We often work with one partner in a couple, usually a woman, whose partner does not want to engage in estate planning. We provide you with an outline of what estate planning powers you have alone and how it might be different if your spouse joined in the planning. You will be aware that you have much ability to direct the disposition of your estate.
Your individual documents will express your wishes to ensure that your loved ones have a seamless plan to administer your estate. By planning ahead, it will allow your loved ones to focus on your shared memories and not on the complexity of administering an intestate estate.
Intestacy is Your Default Estate Plan Where Distribution is Governed by the Law
Without an estate plan in place, you will be considered intestate at your death. The result is that the law will govern who receives your estate, who is your estate’s administrator, and who is your children’s guardian.
In New York, the estate of a person who dies with a spouse and no children passes entirely to the spouse. If the person dies with a spouse and children, the first $50,000 passes to the spouse, plus 50% of the residuary, with the other 50% to the children.
In New Jersey, the distribution is more nuanced. As a comparison, if a person dies with children and no spouse, the children receive the entire estate equally. If a person dies with a spouse and children all born of the marriage, the spouse receives the entire estate.
Intestacy requires additional Court oversight and does not allow for deviation from the law of descent and distribution. Your estate administrator may have to file a costly bond if there are minor children. If most of your relatives are estranged, your estate administrator may have to hire a genealogist to identify which of them are automatically entitled to your estate assets. If you have a taxable estate, your heirs will receive a lower bequest because you did not proactively take steps during your lifetime to create lifetime trusts.
By creating an estate plan, you will be able to override most of the default laws and avoid the extra costs and delays in an extended court proceeding.
Moving Forward Confidently on Your Own
The law does not require that spouses engage in estate planning together. If you have attempted to convince your spouse that estate planning is important to you, and they have not agreed, it may be time to forge ahead on your own.
The process is empowering as you will have the opportunity to discuss your goals with an attorney, understand the options available to you, and improve the outcome for your loved ones. You will feel relieved to know that you have taken control over your estate plan and that your legacy goals will be realized.
At Abelaj Law, PC, we are committed to assisting individuals and families with all of their estate planning legal needs so they can feel confident that their final wishes are honored. Contact our experienced legal team today at 212-328-9568 for a free introductory call to learn more.
Estate Planning For Embryos Under New York State Expanded Bill of Rights
If you are a New York State resident and who has obtained medical care to expand your family via assisted reproductive technology, you should be aware of the revision of New York State’s Equal Rights Amendment. The Amendment expands civil rights for purposes of reproductive healthcare, but leaves ambiguity as to whether stored genetic material is covered under the law.
The recent National election results may also create uncertainty on your individual bodily autonomy and privacy in managing your reproductive healthcare. Without getting into Constitutional law, this article provides insight on how to plan for your genetic material following the new State Civil Rights law and existing statue in New York State. If you need assistance on estate planning for your genetic material, please contact an experienced attorney at Abelaj Law, P.C. at 212-328-9568.
New York State Expands Civil Rights to Include Reproductive Healthcare, but Does Not Address Stored Embryos, Oocytes
On November 5, 2024, New York State voters approved the Equal Rights Act, which expands the definition of individual civil rights within the state to include, in part, “pregnancy, pregnancy outcomes, and reproductive healthcare and autonomy.” Individuals cannot be discriminated against based on these, and other, characteristics. It’s important to note that the language does not provide clear guidance on how it applies to resulting genetic material.
Although the text appears to be clear, the interpretation of what is considered “reproductive healthcare and autonomy” will be determined by the Courts as cases arise to clarify scope and meaning. In order to appreciate the uncertainty, it might be useful to describe ART and the resulting genetic material.
Genetic Material Resulting from Assisted Reproductive Technology
According to the Department of Health and Human Services, in 2021, approximately 2.3% of all infants born in the United States were conceived through the use of ART, which includes in-vitro fertilization (IVF) or intra-uterine insemination (IUI). According to DHS, “the reasons that cause an individual to obtain medical assistance for conception are numerous, including age, health conditions, and for couples who are same sex or individuals without a partner and cannot otherwise conceive. In addition, some couples experience unexplained infertility where tests reveal no obvious causes of infertility.” Among the states with the highest rates of ART are New York and New Jersey.
ART requires a patient to be under the care of a reproductive endocrinologist or medical facility. ART allows a patient to plan and preserve the opportunity to have a child at a later time. The process frequently includes specialist consultations, costly prescription medications, and medical procedures, which are not always covered by insurance, for the important goal of obtaining eggs, sperm or reproductive tissue for purposes of conceiving. A patient may require more than one round (or attempt) of ART before they are able to conceive. One round of ART may result in genetic material that is not initially used but is instead preserved for later use.
The Food and Drug Administration regulates human reproductive tissue and governs disposition of donated genetic material. It does not, however, govern the disposition of genetic material created by the intended parent or genetic material purchased by a potential parent.
Rights to Genetic Material After Death Based on Contract Law
Since 2014, New York State law provides a framework on the disposition of genetic material resulting from IVF and the rights of a child born after the death of an intended parent by the use of ART. Section 4-1.3(j) of the Estates, Powers and Trusts Law provides that disposition of genetic material is “subject exclusively to the provisions of this section and to any valid and binding contractual agreement between such person and the facility providing storage of the genetic material and may not be the subject of a disposition in an instrument created by the person providing such material or any other person.”
To simplify, New York State’s position is that disposition of genetic material is a private matter that is governed by a contract between the “owner” of the genetic material and the facility storing the genetic material. For this reason, it is critical that if you execute the appropriate documents with your storage facility on how to dispose of your genetic material following your death.
Take Charge by Reviewing Your Written Contract and Alerting Your Estate Fiduciaries
Ensuring that your genetic material is disposed of according to your wishes requires that you review the written agreement you signed with the storage facility. If you are unsure of what you initially requested or would like to make a change, contact the storage facility directly.
If you are looking to dispose of your genetic material prior to your death, you must contact the storage facility. Be prepared for a potentially lengthy delay between your request to dispose of, or destroy, your genetic material and the time when it is actually completed. The process usually requires multiple reviews by various doctors and clinicians at the storage facility which may result in a six-month wait before your request is finalized. In order to ensure that your written agreement is honored at your death, consider including a provision in your will that refers to your remaining genetic material. Ensuring that your wishes are honored requires that your fiduciary be aware that you have provided written instructions.
Contact Us for Assistance
At Abelaj Law, PC, we are committed to assisting individuals and families with all of their estate planning legal needs so they can focus on their family and health priorities. Contact our experienced legal team today at 212-328-9568 for a free introductory call to learn more.
Pets And Estate Planning
Pets have become an important part of our families today, many owners putting their love and care a top priority. Whether someone is single or has a family that includes children, pets contribute to our quality of life by providing companionship and unconditional love. They may go along on the family vacation, accompany us on a morning run, or just tuck in on the sofa while watching a favorite movie or television show. Many animal lovers who are passionate about their furry family members are curious about pets and estate planning. Is there such a thing, and what should you know? Those with questions may want to consider reaching out to the experienced estate planning attorneys at Jennifer V. Abelaj Law Firm at 212-328-9568 to learn about all of their legal options.
Pet Ownership in the United States
According to the Insurance Information Institute, Inc. (III) approximately 70% of households in the United States include pets. A survey conducted by the American Pet Products Association found that more than 90 million families owned pets during 2021. This increase is partially due to the COVID-19 pandemic when more people brought pets into their homes for companionship and comfort. Of pet owners, 69% of households had a dog, while 45% had a cat. Many pet owners assume that if something were to happen to them, a family member would take over the care of a pet. Unfortunately, many end up in shelters where they may or may not be adopted.
Why Include a Pet in Your Estate Plan?
Just as people create a Last Will and Testament or estate plan to plan for the future of their loved ones upon their passing, many want to make provisions for their dog, cat, or other pet in the event of their death. It is possible to designate who will be responsible for providing shelter, care, nourishment, and for the other needs of a pet. However, it is important to consider who would be trustworthy and responsible in carrying out your wishes. Surveys conducted in recent years indicate that millennials are significantly more interested than baby boomers in having provisions for pets in their estate plans. Ultimately, when there are no provisions outlined in a will concerning the future care of a pet, it may be considered property. This means the future of a pet may depend on a state’s intestacy laws. The simplest thing to do is designate who you want to care for a pet in a will, however there are other options such as pet trusts.
Pets and Estate Planning Options
There are a few options when it comes to providing for a pet’s future or seeking medical care for a pet in some circumstances. Some of the options include:
- Informal agreements
- Letters of instruction
- Pet trusts
- Durable power of attorney for pet care
Those with questions regarding the various estate planning options for pets may want to consider visiting with Jennifer V. Abelaj Law Firm to learn more.
Informal Agreements
Informal agreements are common and often involve a close friend or family member who is reliable and trustworthy. A person can request that if they become ill or pass, this person will care for the pet. Informal agreements are fine for their purpose, however it is important to consider that whoever is chosen to provide care can do whatever they please. For instance, someone who moves into a retirement home and places the care of their pet to a son or daughter will have no control in what happens once the pet is in their possession. Therefore, it is critical to choose someone who is highly trusted when using an informal agreement.
Letters of Instruction
A letter of instruction is not submitted to a probate court and is designed to work in unison with a will, trust, or other estate planning device. Letters of instruction are often left behind for family members, and are information, instructions, or express wishes concerning what you do and do not want. Letters of instruction are not legally enforceable and have little impact on assets or property. Many pet owners use letters of instruction to outline their wishes regarding their pets, how the pet should be cared for, who should take care of it, and more. Letters of instruction can be modified or updated at any time, which makes this option easy for many pet owners.
Pet Trusts
A pet trust makes it possible for a pet owner to name a caretaker that will provide for a pet in the event the owner becomes incapacitated or passes. The designated caretaker is under a fiduciary obligation to care for the pet as outlined in the trust. Pet trusts typically provide funds that will be used to take care of the pet which are disbursed to the appointed caretaker by the trustee. These funds are used for food, veterinary care, and other costs.
Pet trusts also make it possible to designate successive caretakers should the primary caretaker have a change in life circumstances or another event that makes it impossible for them to continue caring for the pet. A pet trust ensures that a pet does not become the legal property of someone who is not trustworthy or responsible, or someone of your choosing. With a pet trust it is possible to maintain control over caregivers. This gives the most peace of mind to many pet owners who want to ensure their pets are in good hands.
Durable Power of Attorney for Pet Care
Some pet owners want someone who can act on their behalf when their pet needs medical care and they are on vacation or away on business. A durable power of attorney for pet care authorizes another person to seek medical care for a pet and specifies the extent to which the agent may act on the pet owner’s behalf.
Consider Visiting with an Experienced Estate Planning Attorney Today
Pets and estate planning are more common than ever before today. Each year more than 500,000 pets are euthanized because their owners could no longer care for them according to the American Bar Association. While humans have many others they can rely on for their needs, pets have only their owners. They rely on their “humans” for food, shelter, love, and care. Those with dogs, cats, or other pets who are considering planning for their pets’ futures may want to consider visiting with Jennifer V. Abelaj Law Firm today at 212-328-9568.
Inherited Property: What is Step Up in Basis? Discussion with Cherie Williams, CPA of The Little CPA
Jennifer collaborated with Cherie Williams, CPA, founder of The Little CPA, on the topic of inheriting assets. Cherie created The Little CPA to empower purpose-driven professionals to make wise financial decisions that build diligent wealth.
Inherited Property: What is Step-Up in Basis? – The Little CPA
(The Little CPA empowers purpose-driven professionals to make wise financial decisions that build diligent wealth.)
Jennifer V. Abelaj, Guest on the Inside BS Show Podcast, hosted by Dave Lorenzo: The Right Way to Plan Your Estate and Gifts to Charitable Institutions (Show 97, originally aired 06-29-2022)
I enjoyed my recent discussion with Dave Lorenzo, who is the host of The Inside BS Show podcast about The Right Way to Plan Your Estate and Gifts to Charitable Institutions.
Dave’s daily podcast includes informative discussions with professionals in the spaces of marketing, sales, business strategy and all the big secrets THEY don’t want you to know. The show will entertain you with great interviews, help you make more money, and give you the inside scoop on all the best secrets most people never share.
I’m so pleased to be a guest on this show and provide information about estate and philanthropic planning. I had a great time chatting with Dave, who is an excellent podcast host and an expert in sales techniques.
Below is a bio for the show, as well as a link to the audio and YouTube. Hopefully you get to learn more about Wills, Trusts and my passion for philanthropic planning. Let me know what you think!
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The Right Way to Plan Your Estate and Gifts to Charitable Institutions
This show is important for anyone who cares about his/her family. Today Dave Lorenzo has a conversation with Jennifer Abelaj, a New York Estate Planning Attorney.
Join us!
Creating A Business Succession Plan
Starting and building a business is a work of a lifetime that requires making unsaid compromises and facing unknown hardships. Yet, when it comes to planning a future for their businesses, most business owners do not have a legal plan in place. The United States Small Business Administration reports that around 70 percent of privately owned businesses, with an estimated worth of $70 trillion, will change hands in the next 10–15 years. Yet, as reported by the National Association of Corporate Directors, only one in four private companies opt to have a formal succession plan in place. If you want to know more about creating a business succession plan for your business and about the legal process involved, consider contacting the experienced New York estate planning attorneys of Jennifer V. Abelaj Law Firm today by calling 212-328-9568.
What Is Business Succession Planning?
In simple words, business succession planning means preparing in advance for a change in the ownership of the business. This involves identifying the events that may cause the ownership change, establishing certain timelines and standard operating procedures, and identifying potential successors or key employees.
Unforeseen and unfortunate events, such as a family feud, death, severe illness, or disability, may require a sudden change in business ownership and management. Having a proper succession plan for a business is like having a will for a person. When a person prepares a will, that person decides what will happen to his or her wealth and property after he or she dies. Similarly, having a business succession plan in place ensures that the business has an exit or a transfer per the owner’s wishes.
Benefits of Having a Business Succession Plan
Creating a succession plan for one’s business has many benefits. Some of these benefits include:
- Smoothing the transition
- Maximizing value and minimizing loss
- Training future leaders or employees
- Identifying weaknesses
- Retaining key employees or creating roles
Smoothing the Transition
If the business is to be transferred to a family member, a succession plan enables a smooth and clear transition and avoids a potential family feud. Rather than leaving it to the court to decide what happens to the business, the decision is made by the business owner in advance when a plan is in place.
Maximizing Value and Minimizing Loss
If the business is to be sold or transferred to a third party, a pre-determined plan about how that transition will be handled helps to maximize the value of the business. Having a succession plan in place also helps to avoid a last minute or sudden sale below the market or fair value.
Training Future Leaders or Employees
Whether the business is to be transferred among family members or to a key employee, identifying the potential successor or successors allows time for sufficient training.
Identifying Weaknesses
While planning in advance, the owner may identify loopholes or inefficiencies in the business and will be able to make a plan to address those weaknesses.
Retaining Key Employees or Creating Roles
Certain employees are important to the success of the business. Further, a business owner may want to involve certain family members in the business. With succession planning, the business owner has the opportunity to retain those employees and create roles as needed for family members.
If you have been thinking about creating a business succession plan but are not sure about the best options for your business, a skilled estate planning attorney at Jennifer V. Abelaj Law Firm can help you better understand the steps involved in creating a sound business succession plan.
Steps To Create a Business Succession Plan
Creating a business succession plan involves considering multiple factors. Some of the most important steps involved in creating a business plan include the following:
- Identifying future goals
- Identifying potential successors
- Conducting a business valuation
- Completing estate and tax planning
- Making necessary changes to governing documents
- Selecting an exit option
- Selecting a team of professionals
Identifying Future Goals
While creating a business succession plan, the business owner needs to identify personal goals are and desires for the business. This includes retirement planning and, if the business is a family business, choosing whether to transfer the business to family members or opt for an exit strategy.
Identifying Potential Successors
A business owner must initiate an honest conversation with family members and identify who is most capable of running the business. Additionally, determine whether the family member is actually interested in running the family business in the future. Sometimes, however, a key employee may be best suited to run the business through an Employee Stock Ownership Plan. If there are no potential candidates, the business owner may consider selling the business.
Conducting a Business Valuation
Conducting a business valuation through an appraiser is important to the process of creating an appropriate business succession plan. A business valuation is done on the basis of revenues, potential incomes, debt, assets, pending litigation, and current market value.
Completing Estate and Tax Planning
Estate and tax planning is one of the most important steps in a business succession plan. Failing to plan these well can lead to unnecessary expenses. However, proper planning can minimize taxes.
Making Necessary Changes to Governing Documents
Making corresponding changes in the organization’s governing documents will ensure that those documents align with the succession plan. Any contrary terms or clauses in the company’s partnership agreement or shareholder agreement may later create a hurdle if not changed accordingly.
Selecting an Exit Option
Typically, business owners select one of four modes of exiting their own business:
- Transferring to a family member
- Making a sale deal with a key employee or a business partner
- Selling the company to a third party
- Closing and liquidating the company
Selecting a Team of Professionals
A good business succession plan addresses the multiple factors that impact the value and longevity of the business. Therefore, it is important to select a team that can handle the many aspects of succession planning.
Contacting a Business Succession Planning Attorney
Creating a business succession plan is a challenging and multidisciplinary task. One needs to consider family relationships, personal future goals, taxes, and other legal matters involved while making a solid succession plan. To learn more about your legal options and how you can create a succession plan for your business, consider contacting an experienced New York estate planning attorney at Jennifer V. Abelaj Law Firm today by calling 212-328-9568 to schedule a consultation.
Valuation Of Hard To Value Assets
It is difficult to determine the value of hard to value assets, hence their name. Hard to value assets, also referred to as HTVAs, can make appraisals in estate planning and business valuation more complicated and time-consuming. There are different methods for valuing hard to value assets, but the appropriate methodology depends on the type of asset and the circumstances surrounding the valuation. A consultation with a knowledgeable estate planning attorney may be beneficial for a proper and accurate valuation of hard to value assets. At the Jennifer V. Abelaj Law Firm, we assist clients in New York with a wide range of estate planning needs. You can request more information by calling 212-328-9568 and scheduling a consultation.
Methods for Valuing Hard to Value Assets
The methods for valuing HTVAs differ from one case to another. Choosing the appropriate methodology requires a thorough understanding of appraisal regulations and available valuation approaches. When selecting the method for a valuation of hard to value assets, it is vital to consider the purpose of the valuation, the asset’s competitive properties, and the nature of the local market. When valuing HTVAs, appraisals need to apply a comprehensive framework, follow the accepted guidelines, use professional judgment, and consider all factors to ensure an accurate valuation.
A Guide to Valuation of Hard to Value Assets
As mentioned, the appropriate method for valuing hard to value assets depends on the type of asset and reason for the valuation. For example, is the valuation necessary as part of a sale, gift or death. What follows are general guidelines for valuing these HTVAs:
- Real estate and automobiles
- Stocks
- Bonds
- Life insurance
- Annuities
- Business
- Personal property
- Debts
Real Estate and Automobiles
Often, people seek the help of an experienced real estate agent to estimate the value of their real property. An agent who knows the local market will be able to provide a rough estimate. However, this approach may not work with hard to value real estate. Similarly, certain automobiles, such a collectibles or rare versions, may have a value which depends on whether it is part of a collection. If the asset requires a more thorough analysis, the owner of the property will most likely have to hire an appraiser and collect all available information about real estate and any automobiles in order to obtain an accurate valuation.
Stocks
Valuing closely-held stocks often involves computing the company’s price-to-earnings ratio. However, an amateur may not be able to determine the value of stocks accurately. If the owner of stocks dies, the personal representative of the decedent’s estate may choose to get in touch with the company that managed the decedent’s stocks or consult with a financial expert well-versed in stock valuation. Title 26 of the Code of Federal Regulations (CFR) § 20.2031-2 provides guidelines for the valuation of stocks and bonds based on selling, bid, and asked prices.
Bonds
The approach to valuing bonds is similar to the method for valuing stocks. Determining the value of a bond usually involves calculating the bond’s cash flow and face value. The individual or firm performing a valuation of a bond may also need to add accrued interest that has not been paid after the decedent’s death.
Life Insurance
When determining the value, the appraiser may calculate the policy’s face value and cash value. The policy’s face value is the amount of money beneficiaries of the policy receive upon the owner’s death. The cash value, on the other hand, is the accrued amount that can be accessed outside of the death benefit. For life insurance that is part of a gifting transaction, sometimes the value is based on the interpolated terminate reserve (ITR). The ITR is similar to the cash value, but the calculation is based on various other factors.
Annuities
A valuation of hard to value assets may also include valuing annuities if the decedent owned any. In order to determine the value of annuities, the personal representative of the decedent’s estate may need to contact the company that sold the annuities to valuate them as of the date of the owner’s death.
Business
Often, determining the value of a business is the most challenging part of valuing hard to value assets because businesses may include both tangible and intangible assets and liabilities. A business is also difficult to value if the deceased person was not the only owner of the business. In this case, the personal representative of the estate may need to contact a certified public accountant to estimate the value of the deceased person’s interest. However, business and other valuations may be easier if planned in advance. At the Jennifer V. Abelaj Law Firm, we offer estate planning and business succession planning services tailored to each client’s needs.
Personal Property
Certain types of personal property may be considered hard to value assets. Common examples of HTVAs among personal property include cryptocurrency, digital assets, works of art, jewelry, and antiques. While many people choose to visit eBay and similar platforms for estimating how much personal property is worth, it may be necessary to reach out to an auction house, art museum, gemologist, or other expert who specializes in valuing antiques, artworks, and jewelry.
Debts
According to the Federal Trade Commission, the personal representative of the estate is responsible for settling the deceased person’s debts. Once the valuation of hard to value assets is complete, it is essential to identify all debts that the debtor owes and determine their value. Common types of debt include mortgages, credit cards, loans, and debts associated with the deceased person’s medical treatment prior to the death.
Is an Appraisal Necessary for a Valuation of Hard to Value Assets?
An appraisal may be necessary for some of the hard to value assets mentioned above. Usually, people choose to hire a professional appraiser for an accurate appraisal. It is recommended to request the appraisal as soon as possible after the decedent’s death. A valuation of hard to value assets can become even more difficult if a significant amount of time has passed after the owner’s death. The Date of Death Appraisal is necessary for several purposes, including taxes. The appraisal will be used to establish whether an estate tax should be paid to the Internal Revenue Service (IRS) and to determine the amount of estate tax if any.
Contacting an Estate Planning Attorney
For assistance with the valuation of hard to value assets, consider seeking legal guidance from an estate planning attorney at the Jennifer V. Abelaj Law Firm. We help executors and personal representatives of estates in the efficient settling of the decedent’s affairs, including valuation of the assets. We also assist people with creating a comprehensive estate plan that takes into account the hard to value assets in order to protect them and minimize taxes. To schedule a case review, call 212-328-9568.
Estate Planning for a Single Person
Many people believe that estate planning for a single person is not a priority, but this approach fails to understand how comprehensive estate planning can actually be for an individual. In fact, if you are a single person, your estate plan may be even more important in terms of guaranteeing that your legacy is dealt with in accordance with your wishes and that your healthcare decisions are honored in the event you are not able to address them yourself. If you are single, your estate plan matters, and the experienced estate planning attorney at the Jennifer V. Abelaj Law Firm (212-328-9568; abelajlaw.com) in New York has the experience and legal insight to help.
Recognizing Decision-Making Authority
If you are single (unmarried and without children), you are unlikely to have anyone whom the State of New York will readily recognize – absent an advance directive – as having the authority to make healthcare decisions on your behalf (in the event you are incapacitated). The same is also true of any financial decisions that need to be made in the course of your incapacitation. While a spouse or child can fill this role for married individuals, you face unique challenges in terms of estate planning for a single person. This makes establishing both a financial power of attorney (as defined by the New York State Bar Association) and a healthcare proxy paramount for those who are single. If you cannot make primary decisions regarding your health and/or finances on your own (due to incapacitation), you want someone whom you trust to do so on your behalf – in accordance with your wishes and with your best interests in mind – and this can be addressed in your estate planning efforts.
Dying Intestate (Without a Will)
If you were to pass away without a will in place, your assets, which amount to your financial legacy, will be distributed by the court in accordance with state law. If you are married with children, this distribution is likely to align with your basic wishes, but if you are single, this is not necessarily the case. New York intestacy laws, which guide how assets are distributed when there is no will or estate planning document, dictate that the assets of single people who have no children are distributed as follows:
- Your assets (in their entirety) will pass to your parents.
- If you do not have a living parent, your assets (in their entirety) will pass to your siblings.
If neither of these applies in your situation, your estate will likely be divided between your mother and father’s relatives, including distant cousins. In other words, estate planning for a single person is exceptionally important, and the practiced estate planning attorney at Jennifer V. Abelaj Law Firm in New York is well positioned to help you address your unique estate planning needs.
Taking Important Steps Forward
It is easier for single people to ignore the matter of estate planning, however taking the time to solidify your wishes now can provide you with considerable peace of mind moving forward. Further, if you are inching toward retirement age, the time for estate planning for a single person is now. In addition to setting up a financial power of attorney (POA) and a healthcare proxy, there are a variety of important steps you should take.
Make Your Will
One of the most important aspects of your estate plan involves making your will, which names your estate’s executor – who will be imbued with the authority to engage in all the following:
- Attending to your affairs (in accordance with your wishes) after your death
- Probating your Will (if the need arises)
- Paying both your income and estate taxes
- Allowing for estate tax planning
In order to streamline the process of passing your assets on, the best course of action is generally making a revocable trust (created during your lifetime) the beneficiary of your will.
Create a Revocable Trust
Over the course of your lifetime, you may have built a financial legacy that continues to grow, and upon your death, you want your assets to flow to your loved ones – and/or to charities that are meaningful to you – in accordance with your wishes. A revocable trust provides you with the tools necessary to do so. For example, if you have a significant other to whom you are not married, including his or her name as a specific beneficiary of your trust will ensure that he or she receives those assets that you want him or her to have. Further, you may want him or her to remain in your home until his or her passing – when the property may move on to a relative (or someone else of your choosing) – as identified in your revocable trust. Setting up a revocable trust is an excellent way to specifically address the unique challenges that are often part of estate planning for a single person.
Fund a Trust Today
The importance of funding a trust throughout your lifetime cannot be overstated. If you are incapacitated at a later date, your trust’s successor trustee can use the funds therein to pay for your healthcare needs (in accordance with your specific wishes). If you have not successfully completed the steps of setting up a trust and funding it, those who are closest to you may be required to have a guardian or conservator appointed on your behalf, which can be a lengthy and complicated process. By funding your trust now, you accomplish both the following:
- You control who will be managing the assets you have included in the trust.
- You ensure that the assets you have included in the trust avoid the probate process.
Estate Tax Planning
For a single person who has assets that have a total value that is greater than the New York State or Federal Estate Tax Exemption, they must take deliberate steps to address minimizing estate taxes. A married person may take advantage of the unlimited marital deduction for assets that pass to a surviving spouse. However, a single person does not have this deduction available. This is most pressing for single persons who have a partner (or children), and who will bear the estate tax burden. Options might include charitable bequests, gifting during life, or creating irrevocable trusts that remove assets from your estate. This can only be done with advanced estate planning.
Reach Out to an Experienced New York Estate Planning Attorney Today
Estate planning for a single person is extremely important. In fact, you could be facing challenges that married individuals with children do not. Whatever your unique estate planning needs are, the experienced New York estate planning attorneys at the Jennifer V. Abelaj Law Firm can help. To learn more, please do not wait to contact or call us at 212-328-9568 today.
Estate Planning And The Holidays: A Checklist For Your Family
While enjoying time with your family this holiday season, you might want to consider broaching the subject of your estate plan. Since this may be one of the few times when you are around a larger group of loved ones and you have a chance to take stock of your current family situation, estate planning and the holidays can go together. You can give your family the most important gift of all this holiday season: the gift of peace of mind. Telling your loved ones about your wishes and the plans you have made can prevent misunderstandings and unburden your loved ones from having to make difficult decisions. Consider the following checklist for your family as you begin to broach the subject of estate planning during the holidays.
Property
A large part of many estate plans is what will happen to a person’s property after they pass away. Many people draft a Last Will and Testament (will) to provide clear instructions regarding the distribution of their property after their death. As the New York State Bar Association explains, the laws of intestacy will apply to how a person’s assets are distributed without a properly executed will. These are the default laws that favor a person’s nearest relatives to inherit their property after their death. In order to avoid having your property distributed to family members against your wishes according to intestate laws, you may want to consider visiting with an estate planning attorney to ensure your property is passed on to the loved ones you choose after your death.
Another option to distribute property following your death is with the creation of a trust. The New York City Bar Association defines a trust as a financial plan that protects and manages a person’s property while they are alive. After a person’s death, a trust can prevent the need for court proceedings (probate). A person can place various types of property in a trust, control the property during their lifetime, and leave clear instructions on how the property should be managed after their passing.
During this holiday time, consider carefully all of your property (real estate, stocks, bonds, cash, cryptocurrency, valuable possessions, collectibles and more) and who you would want to receive this property after your death.
Financial Accounts
Another important consideration for estate planning is what will happen to your financial accounts after you pass away. If another person is named as a joint tenant with rights of survivorship on the account, they will be able to access and control the funds in the account. However, if only one person is on the account, the account owner can often designate a beneficiary who will receive the funds upon their death by completing a beneficiary designation form that outlines this information.
A person can designate various types of accounts and benefits through beneficiary designations, including:
- IRAs
- 401(k)s
- Pensions
- Stocks
- Bonds
- Investment accounts
- Checking accounts
- Savings accounts
- Life insurance policies
Oftentimes, a trust can be named as the beneficiary of such accounts, which can be a useful way of providing for minor beneficiaries.
Power of Attorney – Medical Decisions
A thorough estate plan will not only address what happens after a person’s death but also what happens in case of a medical crisis. Individuals have the right to create a living will that outlines end-of-life treatment they want and do not want. This document states whether life-saving medical measures should be taken to prolong a person’s life. A person can also create a healthcare proxy that names a trusted person to make medical decisions on their behalf if they are unable to make these decisions themselves. Consider who you would want to make these important medical decisions if you suffer an illness or accident that leaves you unable to make these decisions for yourself.
Power of Attorney – Financial Decisions
A person’s estate plan can also create safeguards in the event they become incapacitated and can no longer effectively make decisions regarding their personal and financial affairs. A durable power of attorney can help manage the financial and legal details of a person’s life. Consider who you would want to make these important financial decisions if you suffer an illness or accident that leaves you unable to make these decisions for yourself.
Long-Term Care
Many people will ultimately need to turn to a long-term care facility for care at the end of their life, or if they suffer an illness or injury. As such, they may need to financially prepare for this possibility. An experienced estate planning attorney can discuss Medicaid eligibility, long-term care insurance, and other strategies that can effectively plan for long-term care.
When to Make Changes in Your Estate Plan
While estate planning and the holidays can sometimes go hand in hand, there are other times when an update to an estate plan may be necessary, such as in the case of:
- A new marriage
- Divorce
- Birth or adoption of a child
- Separation from a spouse
- Death of a beneficiary or fiduciary
- Change in relationship to beneficiaries or fiduciaries
- A significant change in the value or character of assets
- Acquisition of real property
- Purchase or sale of a business
- Relocation to another state
- A new need to care for a loved one with special needs
- A change in tax laws that might impact the estate plan
The Jennifer V. Abelaj Law Firm can review your existing estate plan and explain when it might be necessary to update your plan.
Practical Tips for Mixing Estate Planning and the Holidays
If you are planning to bring up your estate plan this holiday season, here are some practical tips for achieving the outcome you want:
Talk About It
The holidays should not be the only time your family hears about your plans and wishes. Make the conversation an ongoing one so that they are never left in the dark. Also, plan ahead of time and let your loved ones know that you want to set aside some time during your family visit for this important conversation. Consider whether or not it would be more appropriate to have the conversation before the festivities or after your holiday events as a family.
Approach the Subject with Sensitivity
It can be difficult for adult children to see their parents age or not be as active as they once were. It can also be difficult for people to confront their mortality and talk about death. Additionally, many people feel uncomfortable talking about money.
For these reasons, it is important to approach the subject with sensitivity and to be prepared for an emotional response. The person should focus on wanting to provide peace of mind and ensure their healthcare values are known.
Ask for Help from a Professional
Having a professional available for the conversation can be a helpful buffer. A professional can discuss the issues matter-of-factly and provide an objective perspective. He or she can also explain the purpose of an estate plan and the benefits of being proactive about creating one at any age. You may have the ability to consult with an estate planning attorney during the holidays by phone or even a video call to ensure that all of your loved ones have an opportunity to understand your wishes and even ask questions.
End on a Positive Note
Talking about your estate plan need not be a morbid or negative experience. Emphasize your desire to have your wishes known and respected so your loved ones have peace of mind.
Contact an Estate Planning Attorney to Learn More
The holidays are a time for families to get together and enjoy each other’s company. However, these types of events also present a perfect opportunity to discuss with family your wishes regarding your estate plan. Consider contacting your family ahead of the holidays and let them know your intentions to have this important conversation. If you need help devising a plan regarding your discussion with your family with respect to estate planning and the holidays, contact the experienced estate planning attorneys at the Jennifer V. Abelaj Law Firm at 212-328-9568 today.
Time is of the Essence for High-Net Worth Estates
Potential Changes in Estate Tax Laws
You may have heard about the most recent House proposal in September, 2021 that addresses changes to the tax law, which will cover the costs of a massive ($3.5 trillion) proposed spending package. There have been various proposals since President Biden was elected that target an increase in various taxes. Until now, none of the prior proposals have successfully passed. This might be a different scenario.
Brief Summary of Recent Estate Tax History
Most of the current popular tax concerns, such as income, estate, gift, and corporate taxes, are governed by the Tax Cuts and Jobs Act (TCJA). The TCJA was effective as of January 1, 2018 and is set to sunset on December 31, 2025. The sunset provision means that the tax laws that were in effect on December 31, 2017 will again govern beginning in 2026.
The current (i.e., 2021) estate tax exemption is a whopping $11,700,000 per person, which can be doubled for married spouses with intentional planning for a total of nearly $24,000,000. The estate tax exemption generally increases each year for inflation. Under the TCJA, the increased exemption will revert back to 2017 exemption of $5,490,000, adjusted for inflation, or approximately $6,000,000, beginning on January 1, 2026.
What is important in the House Proposal for Estate Tax Planning?
I. Capital Gains Taxes Increase
The rate of capital gains will increase to 25%, which is 5% higher than the current 20%. The 25% is closer in line to what it was prior to the TCJA. Capital gains taxes are an important consideration when transferring or selling assets during life. The 5% increase may be substantial for assets that have significant built-in capital gains. Two common scenarios are real estate and small businesses.
For example, if someone purchased real estate 30 years ago with an adjusted cost basis of $150,000, and the property is now worth $2,000,000 (i.e., built-in gains of $1,850,000), the 5% increase in capital gains results in $92,000 more in capital gains tax, for a total capital gains tax of $462,500. This is only FEDERAL capital gains tax. If you live in an area such as New York City, you can add up to 25% to the capital gains tax without taking advantage of other estate planning tools (i.e., Delaware Asset Protection Trusts, 1031 Exchange, Charitable Trusts, etc.).
What to do: Discuss with your attorney or accountant whether certain assets might benefit from being sold this year while the capital gains tax is still at the lower rate.
II. Federal Estate Tax Exemption Reduced Sooner than 2026
As summarized above, the current estate tax exemption is set to expire December 31, 2025 and reduced to 2017 levels of approximately $6,000,000. The Proposal would accelerate the effective date to January 1, 2022.
For estates that are greater than $6,000,000, they will essentially lose an equivalent amount that can be given away estate tax-free during life or at death.
What to do: Discuss with your attorney how to reduce your estate by making gifts or otherwise transferring portions of your estate while the exemption is still $11.7 million.
III. Grantor Trust Rules for Income Tax Purposes will be Eliminated
Trusts which are treated as owned by the Grantor for income tax purposes (i.e., Grantor Trusts) will be deemed as owned by the Grantor for estate tax purposes as well. This means that most common trusts used for estate tax planning purposes will be included in the Grantor’s taxable estate. This includes Grantor Retained Annuity Trusts (GRAT), Irrevocable Life Insurance Trusts (ILIT) or Spousal Lifetime Access Trusts (SLAT), just to name a few.
Explanation of Grantor Trusts
Grantor Trusts are a great tool for estate planning in that it allows the Trust assets to grow without the Trust assets being utilized to pay the Trust’s annual income tax. In addition, as the Grantor pays the Trust’s income tax annually, the Grantor’s estate continues to be reduced. Any assets in the Trust are excludible from the Grantor’s estate as it is considered a completed lifetime gift.
Under the Proposed rules, any Grantor Trusts created after the effective will be included in the Grantor’s estate for estate tax purposes. In addition, existing Grantor Trusts that receive additional contributions will also be included in the Grantor’s estate. The timing is for any trust that is created after the EFFECTIVE DATE, which is the date the proposal is approved (could be in 2021).
What to do: Discuss with your attorney whether you should URGENTLY CREATE AND FUND certain trusts before the EFFECTIVE DATE. Remember, under the current rules, the effective date might be earlier than January 1, 2022. Any delay can create a significant impact in the amount of estate taxes that your estate might have to pay when you die.
IV. Other Proposals that Might Impact Estate Planning
Valuation Discounts May be Eliminated
Many individuals have an interest in a corporation or limited liability company for purposes of liability protection and not for running an operating business. Under the current rules, discounting for these types of assets may be eliminated.
What to do: Make an inventory of your current holdings and determine with your attorney or accountant which ones are operating a business and which are being held for non-operating purposes. Determine if any changes can and must be made.
Back-Door IRA Conversions May be Limited
Current law does not allow individuals to make contributions to a Roth IRA if their income exceeds a certain level. However, these same individuals can get around the limitation rule by first contributing to a non-deductible traditional IRA and then converting to a Roth IRA. The primary benefit of a Roth IRA is that any increase in value over time is not includible in the annuitant’s income taxes when withdrawals are made during retirement. The Proposal would disallow Roth conversions for taxpayers whose taxable income exceeds $450,000 for married taxpayers filing jointly or $400,000 for single taxpayers or married taxpayers filing separately.
What to do: Discuss with your financial advisor your options in converting certain traditional IRA account to Roth IRA accounts and with your accountant the tax impact of the conversion.
Take Action Now
There are many other proposals that impact various areas of the tax law. Some have more chance of being adopted than others. However, it is very likely that a change will affect and limit estate tax planning options.
If you have any questions on the areas of the tax law that impact your estate and asset planning, please do not hesitate to contact me.