Mullen and Iannarone, P.C.
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families of Suffolk County since 1972

Long Island Elder Law Blog

Including collectibles in an estate plan

When people in New York plan for the future of their family and their assets, they may be concerned about how best to pass on valuable collectible objects like artwork and memorabilia. These items are not the only types of personal property that may have a high financial value; they can also hold significant amount of sentimental value to their owners as well as to others in the family. In a study by Deloitte, over 80 percent of art collectors noted that they considered their collections to be a valuable investment. Just like other types of investments, estate plans need to take proper steps to deal with the distribution of artwork and collectibles.

Collectibles have a special status in U.S. tax law, which can also mean special consideration for these items during estate planning. The IRS classifies artwork, rugs, antiques, stamps, coins and gems, among other items, as collectibles, and special tax laws can apply to these items. In addition to concerns about taxation of beneficiaries, selling these items and receiving a fair market value can be particularly difficult in some cases.

What's missed in estate planning

Suffolk County residents are often encouraged to plan for emergencies or retirement, but planning for death isn't commonly discussed even if it is inevitable. Failing to plan can cause numerous legal troubles, financial burdens and discord in the event of a loved one's passing.

All retirement accounts and insurance policies should have a named beneficiary, and naming a contingent beneficiary is essential. The default beneficiary should be named just in case the original beneficiary passes. Not naming a contingent beneficiary exposes the estate to creditors and probate, which can leave family members insecure. Questions like who should get the property, the children or the family could lead to a legal quagmire and countless legal expenses if not clearly outlined.

Estate planning can be critical for the future

When people in New York plan for the future for themselves and their families, estate planning can be a big part of the picture. However, only 4 out of every 10 Americans over the age of 60 have important documents in place to deal with their finances or healthcare decisions in case of incapacity. These kinds of documents can help to protect people from elder abuse, fraud and other types of negative outcomes. Across the country, 20 percent of Americans over 65 are financially abused; however, only 10 percent expect that it could happen to them.

It is important to have estate plans stored in a durable, accessible location. Online storage can be used in addition to physical storage to help ensure that these important documents are available to family members in case of a crisis. In addition, it can be important to track which estate planning tasks have been completed and which ones need work. Everyone should have a will, a financial power of attorney, a healthcare power of attorney and an advance healthcare directive.

Coming up with a trust solution

New York residents can use a trust to protect assets intended for future generations and as a form of tax management for those assets. However, it is important that the person they select to oversee the trust is able to properly carry out the duties the position entails.

Designating a trustee should involve careful consideration. The person selected has to be able to ensure that the wishes of the creator of the trust will be adhered to. Sometimes, grantors believe that the best person to take on the role of trustee should be someone who is close to the family and will be able to use the intent for which the trust was created to consider requests for distributions. However, the disadvantage of basing one's choice of trustee on their familiarity with the family is that the person selected may not be able to handle the legal, administrative and fiduciary duties that come with being a trustee.

The responsibilities of a will executor

New York residents who are named executors in wills may want more information concerning the winding down of an estate. When the testator dies, the executor assumes legal responsibility for resolving the decedent's outstanding financial obligations. In the event that the person named as executor declines the position, the court may appoint a replacement if the will makes no provision for an alternate executor.

Most testators choose an immediate family member or someone else close to them to serve as executor. Executors are entitled to financial compensation from the estate as determined by state law. Alternately, reasonable compensation might be determined by a probate court in some situations. However, many executors forego personal payment out of respect for their relationship to the deceased.

Options to consider in estate planning

At one time, estate planning consisted of merely a last will and testament. For the very wealthy, it might have consisted of a trust. In modern times, estate planning can and should be much more than just preparing a will. New York residents should consider some of the options available.

Estate planning is a term to describe a prearranged series of documents or actions intended to carry out the wishes of a person who is either deceased or incapacitated. Modern estate planning seeks to make transfer of property and last wishes as least burdensome as possible.

Charitable giving and estate plans

New York residents can include provisions in their estate plan that allow part of their estate to be given to their favorite charities. Changes in federal laws regarding gift and estate taxes are likely to impact the manner in which charity is integrated into an individual's estate plan.

The Tax Cuts and Jobs Act that was passed in 2017 doubled the exemption levels for estate, gift and generation-skipping taxes. The exemption levels for individuals jumped to $11.18 million while couples are able to donate up to $22.36 million free of taxes.

Why trusts may be better for leaving assets to children

New York residents and others may have qualms about leaving assets outright to a minor child. However, it may also be a good idea to leave assets meant for adult children in a trust. The primary reason to leave assets in a trust is that advanced age doesn't necessarily translate into advanced financial skill. As the value of an inheritance increases, it is critical that whoever oversees it has the type of financial skills necessary to manage it properly.

Even if an adult does hire a financial adviser, he or she may make a bad choice when picking someone to provide advice. Putting assets into a trust provides flexibility in how distributions are made. For instance, the trust could limit distributions to income the trust generates or choose to allow the adult child to take distributions after a certain date.

Avoiding the probate process

One of the major mistakes New York residents can make when devising their estate plans is not using a strategy that allows assets to bypass the probate process. Probate, which can be costly and slow, is a legal process through which assets must pass if they are transferred to beneficiaries via a will.

In the last few decades, several states have introduced probate procedures that make the process more efficient and less costly for estates that do not have an extremely high value. However, in other states, the probate process remains full of delays and high costs.

Handling estate planning

People in New York should consider an estate plan with the appropriate legal documents in place so that any financial or healthcare decisions made on their behalf are done according to their preferences. Having an estate plan is not only about planning for assets but also accounting for if an individual is incapacitated and unable to make decisions on their own.

Estate planning should begin as soon as possible, particularly if it is for an elderly person. One of the ideal times to begin estate planning is when one turns 18 years old. Someone who becomes incapacitated without an estate plan makes it more complicated for their family to get the authority to make healthcare and financial decisions on their behalf.