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THE IMPORTANCE OF A WILL
AND AN ESTATE PLAN |
You spent a lifetime building and gathering your assets. It's up
to you to make sure your assets get distributed the way you want.
A will is a tool that must be utilized to foster this goal. Proper
drafting of the Will as well as Comprehensive Estate Planning will
ease your mind knowing that your loved ones will be taken care of
pursuant to your wishes. It will also maximize your distributable
estate so your family and loved ones will receive the majority of
your estate as opposed to the Federal and State Government. It will
designate guardians and trustees for your children so that your
children will be raised by the person or people who you believe
will be the best for your children. Without proper Estate Planning,
you may be diminishing your Estate, both financially and socially,
thereby denying your loved ones of the life and lifestyle that you
believe they are entitled.
Despite the importance of the will in an estate plan, it is estimated
that seven out of ten Americans die without a valid will. Unfortunately,
creating a will forces you to come face to face with your own mortality
- and dealing with death is difficult. But, it may be much more
difficult for your loved ones after you are gone if you don't prepare
a will.
Comprehensive Estate Planning involves the preparation of a Last
will and Testament. If you pass away without having prepared a last
Will and Testament, your assets will be distributed according to
the laws of New York State. These laws make certain assumptions
regarding the distribution of your estate - assumptions which you
might not agree.
Comprehensive estate planning will also enable you to state your
preferences regarding the medical care you wish to receive or wish
not to receive, as well as enable you to designate a person who
will be responsible for making decisions concerning your health
care, should you no longer be able to do so yourself.
Comprehensive estate planning also involves the creation of trusts,
either within your will, outside of your will, or both.
WHAT IS A WILL ?
A will is an instrument used to distribute your probate assets to
your loved ones (heirs) after you are gone. (Probate assets generally
refer to those assets in your name only that do not pass to another
at your death by operation of law.) Think of your will as the financial
blueprint of your probate assets. Your will clearly states who will
inherit your probate assets, when they will inherit your probate
assets, and any conditions that must be met for them to receive
your probate assets.
At death, the court rules on the validity of your will. If the will
is valid, the court instructs your executor to carry out the terms
of the will according to your wishes. (This act is known as a decree
of probate.) The executor is the person appointed by you in the
will to supervise the distribution of your probate assets.
The very first thing that your attorney should do is help you compile
a very detailed and complete list of all of your assets, liabilities,
income and expenses. This information is absolutely critical in
determining the assets that you will need to maintain your current
life style for the rest of your life, as well as your potential
Federal and State Estate Tax. This information will also help you
to determine if it is desirable or possible to transfer any of your
assets to protect them from being wiped out to pay for nursing home
costs or uncovered medical expenses.
What Are the Consequences of Not Having
a Will?
By "dying intestate" (without a will), you lose the ability
to direct the distribution of your estate. The State in which you
resided at your death makes the decisions for you, according to
the distribution schedule set forth in its intestacy statutes. The
State's decisions are designed to pass property to those who would
most benefit. Unfortunately, the State's decisions may not conform
to your wishes or to what is best for the people closest to you.
Intestacy usually means outright payments. This can cause a multitude
of problems and misunderstandings, not to mention tying up your
assets in the probate process for months or years. Also, it is more
likely that without a will, your estate tax liability will be much
greater than with a will and a some simple estate planning.
Non-Financial Issues in Your Will
Most parents will agree that children are the most precious and
important aspects to their life. Providing for your children during
your lifetime is a twenty-four (24) hour job which requires hard
work, dedication and love. Upon your death, it is vital that your
children are cared for, both financially and socially. The financial
aspects are provided in your Estate Plan. This Plan will designate
trustees for your minor children who shall designate when and how
your children should be financially provided for, pursuant to your
wishes. However, your will must also contain who shall act as guardians
of your children in the event that both you and your spouse die.
The failure to execute a valid will can have vast repercussions
on your children. For example, without the designation of guardians
for your children, petitions must be filed with the Court to determine
who would be best suited as guardian for your children. The petitions
may lead to arguments, and Court battles which could only result
in negative influence on your children. Additionally, the person
who is designated as the guardian of your children may not be the
person who you would want as guardian.
Here are some of the more common rationalizations
for not creating a will, and the facts that quickly dispel those
"myths."
Myth: "My assets are so small that a will is not
necessary."
Fact: Think again. Few people are worth so little that
a will is not necessary. Add together the value of your home,
car, furniture, jewelry, savings account, and investment portfolio.
Subtract from this total your personal debts. The bottom line
is that you are generally worth more than you think. Even if
some items do not hold great monetary value, they could hold
an enormous amount of sentimental value. Failing to indicate
who receives these treasures in your will can cause friction
between family members that lasts for decades.
Myth: "When I die, my spouse will get all of my
assets."
Fact: If you and your spouse own assets jointly, at death
your share of the assets will automatically go to the surviving
spouse. But, what happens when your surviving spouse dies? What
will your children receive? Does your spouse have the financial
know-how to manage the family wealth? If your spouse remarries,
some or all of your spouse's assets may wind up in the hands
of his/her new spouse.
Myth: "I can create a will on my own and save the
legal costs."
Fact: "Do-it-yourself" wills often do not contain
all of the necessary components as required by law and are frequently
ruled invalid by the courts. A vaguely-worded clause can result
in lengthy legal battles. Anyone who might benefit from the
invalidation of your will can contest it, and if the courts
decide in his or her favor your estate may be required to cover
all legal costs. Remember, the few dollars you save now can
cost your loved ones thousands of dollars later.
Myth: "I don't want my final wishes to be set in
stone. I'll create a will later in my life."
Fact: A will is an extremely flexible document whose
terms can be changed as often as needed. In fact, any legal
expert will tell you that a will should be re-examined periodically
to make sure it is up to date. A will should receive a checkup
whenever there is a substantial change in your life. Remember,
the terms of a will only become effective at death. |
WHAT IS ESTATE TAX ?
Estate tax, in simplistic terms, is a tax on the transfer of property
at death. The person who dies is called the decedent and the person
who receives the property is called the beneficiary. Estate Tax
differs from Inheritance tax because estate tax is on the transfer
of property from the decedent while inheritance tax is a tax on
the receipt of the property by the beneficiary. Proper estate planning
calls for the minimization of both Estate and Inheritance Taxes.
"Terms" such as Gross Estate, Federal Unified Credit,
New York State Unified Credit, Credit Shelter Trust and Marital
Deduction are common everyday terms for an attorney who practices
Comprehensive Estate Planning. For example, assume a couple has
$1,300,000.00 worth of assets in their estate (including all policies
of life insurance). With a "basic" will which does not
encompass Comprehensive Estate Planning, the Estate Tax on the property
upon the death of the second party (ie: Husband dies and then Wife
dies), would be roughly $280,000.00 (utilizing the combined Federal
and New York State rate of 43%). With the proper Estate Plan, and
utilizing some of the "terms" listed above, a Last Will
and Testament can be drafted to save almost the entire Estate Tax,
thereby allowing your loved ones more of your assets for their future
as opposed to the Federal and State Government.
WHAT IS A TRUST ?
Trusts are tools utilized by Estate Planners in order to
protect your assets from nursing home costs, expenses, as well as
to reduce your estate taxes and provide for the management and future
distribution of your assets. They are documents which are drafted
during your lifetime to ease obligations which may occur during your
demise and after your death. The proper Estate Plan may or may not
include a Trust, based upon your circumstances. However, utilizing
an attorney who has extensive knowledge of Trusts can aid a person
and his family by distributing a portion of their assets during their
lifetime, rather than completely upon their demise.
WHAT IS A LIVING WILL ?
A Living Will is a document that dictates your preference for medical
treatment in the event that you are permanently unconscious or in
a irreversible physical condition. There are certain medical situations
and procedures that may severely alter an individual's existence,
yet keep that individual technically alive. By having a living will,
you can communicate your desire concerning life saving or prolonging
procedures in case a situation arises when you no longer are able
to communicate your desire
WHAT IS A HEALTH CARE PROXY ?
A Health Care proxy is an extremely important document
which designates and appoints another person to make all health
care decisions for you if you are unable to make them for yourself.
A Hospital or nursing home does not have to allow family members
to make health care decision for you if you are disabled to the
point of legal incompetence. They can force your family to go to
court to have a court appointed legal guardian put in charge of
your health care decisions. The guardian may not even turn out to
be a member of your family, simply the person who gets to the Courthouse
first. Certainly this is not an issue that should be left for when
it arises.
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