Many people ask me whether a Will is the proper way to pass on their assets to others when they die. The answer depends of the individual circumstances of each person. This blog entry provides some basic information about estate planning using a Will. Future posts will discuss Revocable Trusts, Medicaid Trusts and other important considerations.
Whether you have a Last Will and Testament, a Revocable Trust or you have not put any estate plan in place, you already have an estate plan. New York State provides anyone who has not created their own estate plan with its statutory scheme of distribution. Under the New York State plan your assets are distributed to a close relative or spouse, depending on who is still living when you pass away. For instance if you are survived by a spouse and two minor children and did not create your own estate plan, your spouse will inherit the first $50,000 of your estate and one-half of the remainder of the estate. Your children will receive the remainder of your estate. Under the New York State plan money that is inherited by your children or grandchildren will be distributed to them outright at age 18. There is no provision in the statute for tax planning or special needs planning for disabled family members who may inherit.
The New York State statutory scheme may not be what you had in mind. It may not be the best way to protect your family members if you should pass away. By creating your own estate plan you can more precisely direct your assets in the manner you desire in order to meet your loved ones needs and circumstances. By creating your own estate plan you can address potential tax, disability or personal family issues that put your family’s financial health at risk.
When you create a Will you decide who shares in your estate and what they get. When you create a Will you need to designate who will be the Executor of your estate. The Executor is the person, who collects your assets, pays the bills and distributes the remainder to your named beneficiaries according to your written instructions. The Executor has another important role. The Executor files a petition with the Surrogates Court for the probate of your will and later files an accounting showing what assets were collected and what was paid out.
Frequently a Will names a Guardian for minor children, someone who will take care of your children if you pass away before your children reach the age of 18. The Guardian can be a family member or a friend who will be responsible to raise the child in your absence.
Frequently a Will names a Trustee of any trusts that are created in the Will. The Will may empower a Trustee to set up a Supplemental Needs Trust or Special Needs Trust for a beneficiary under the Will who is disabled and receiving government benefits. The purpose of this type of trust it too permit the beneficiary to continue to receive government benefits and use the money that goes into the trust to supplement the benefits that are received. For example, the trust funds may be used to pay for medical needs not covered by the government program, vacations, personal items that are wanted.
Another trust that may be contained in a Will is a Marital Trust. A Marital Trust is often used to provided estate tax savings. Another possible trust in a Will is a Spendthrift Trust that provide a means to handle and protect the inheritance of a beneficiary under the Will who is unable to handle funds well. The Trustee has control of the money held in the Spendthrift Trust and thus provides protection from creditors of the beneficiary and prevents the assets in the trust from being wasted.
Some clients feel that children who are 18 years old do not know how to handle money well and that an inheritance should not be paid out to a beneficiary at that age as it will be squandered. A trust can be included in the Will to hold and manage the assets of a beneficiary until the beneficiary has reached a specific age set by the Testator, the person who makes the Will. Frequently Wills state that funds are to be held in trust for a beneficiary until the beneficiary has reached the age of 18, 21, 25 or 30 years old.
A Will is an important part of an estate plan. If provides direction on how your assets are to be distributed when you pass away. It provides you with the opportunity to choose the people who will act on your behalf after your death to put your estate plan into effect in order to protect your family and loved one.