Mullen and Iannarone, P.C.
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Long Island Elder Law Blog

How chronic illness can impact an estate plan

A chronic illness such as cancer or Alzheimer's disease could have a significant impact on a person's life. It can also influence how a person constructs his or her estate plan. Ideally, an individual who has a chronic illness will create a medical power of attorney as well as create a Health Insurance Portability and Accountability Act (HIPPA) release. This will allow another party to access an individual's health records and make medical decisions on the incapacitated person's behalf.

It is important that the HIPPA release clearly states that it was created voluntarily and by someone of sound mind. It should also clearly state what types of records can be accessed by a designated third party. Those who are living with a chronic illness may benefit from creating a living will. The will can further explain what the illness is and how it could impact the maker.

TOD accounts may simplify estate planning process

An estimated 57 percent of adults in New York and throughout the United States don't have a trust or will. When these individuals pass away, family members must go to a probate court in order to sort out the finances of the deceased. Even those with wills must often go through probate. This can cause contention and hostility between family members and friends. A transfer on death (TOD) account may be the solution to these issues.

A TOD account will automatically transfer the assets to the named beneficiaries upon the death of the account holder. Multiple beneficiaries can be named, and the account can be divided up evenly between these beneficiaries. For example, those with $300,000 in a savings account who name their three children as beneficiaries would be able to give each of the children $100,000 upon their death.

Mistakes in estate planning

It is not uncommon for people to make mistakes with estate planning. One way New York residents can avoid making estate planning mistakes is to consult with an attorney.

One mistake to avoid is not having an estate plan at all. People who die without a will leave what happens to their estate to the courts. The courts will determine who will act as executor and how the decedent's assets will be disbursed. It is also not unusual for married couples to not have a will in place because they believe that all assets will be automatically passed to the surviving spouse. However, this is incorrect.

Avoiding high-profile estate planning issues

The estate planning practices of many celebrities can serve as a guideline for what New York residents should not do. Unfortunately, lots of celebrities do not create wills, trusts or other key estate documents. This leads to their assets being tied up in years of litigation after they pass away. It was originally reported that Aretha Franklin, the famed singer who passed away in August 2018, did not have a will. Her estate has been in probate court since her death.

Now, three different handwritten wills have been found and filed with the court in an attempt to determine if any of them represent her legally expressed wishes. Because there was no clear will, a significant amount of her estate is being consumed by legal fees as well as exacerbating family conflicts over the future of the money. In the end, the probate court will distribute her estate, but the results may be dramatically different from what she would have wanted. All estate owners, even those with relatively few assets, can help to prevent similar outcomes by preparing for the future.

What to consider when choosing an IRA beneficiary

Anyone in New York or any other state who has an IRA will ideally name a beneficiary to that account. This is because failing to do so means that it goes into a person's estate when he or she dies. That may increase the potential tax bill that the estate has to pay. In addition to naming a primary beneficiary, it may be necessary to name alternate beneficiaries. Doing so can be helpful in the event that the primary beneficiary dies.

Deciding who should be the primary beneficiary depends on a variety of factors, and there isn't necessarily one best or right choice. Those who are married may want to strongly consider leaving an IRA to their spouses. Doing so can extend the period of time over which distributions can be made, which can reduce the tax burden on the beneficiary.

Estate planning mistakes related to benefit plan designations

Many people who start new jobs in New York don't think much about the assortment of paperwork they first get from HR. Some of these documents, such as life insurance forms, company stock purchase plans and retirement plans, require beneficiaries to be named. But when it comes to who gets what when it's time to pass along assets, there's a common assumption that details of this nature will be covered by a will.

This isn't always the case. Listed benefit plan designations for beneficiaries are not part of a deceased individual's probated estate. Most people name a spouse as a primary beneficiary and kids as contingency beneficiaries. Therefore, if a spouse predeceases an employee with benefit plans, the plan's proceeds could automatically be passed along to children when they reach the age of maturity, which is 18 or 21.

Accounting for passwords in an estate plan

New York residents often use passwords to secure devices or limit access to bank or other accounts. When a person passes away, it is important that an executor or other authorized agent knows these passwords or where to find them. There are many different strategies that an estate owner can use to keep the necessary information organized and easy to find after passing.

For instance, an individual may want to store passwords on an app or software program. The information is stored in the cloud, which means that it could be accessed from any device with an internet connection. That can come in handy if an individual forgets to write down the password to a personal computer or smartphone. Of course, it will be necessary to let someone know the password to that account. Another strategy is to write passwords down and put the list in a secure spot such as a safety deposit box.

How to tell if an estate plan needs work

New York residents and others may not like the thought of estate planning. However, reviewing a plan on a regular basis can help to ensure that it does what an individual wants or needs it to do. For instance, a review session can help to identify whether there are critical components that need to be included. These components could include a will and powers of attorney, and those components should be updated at least once a decade.

If a person has a life insurance policy, it should also be reviewed every few years. This could prevent a policy from lapsing or provide an individual with the opportunity to improve the coverage that it provides. An estate plan will be carried out by an executor or trustee, and a person has the right to appoint a person to this role.

Family conflicts pose estate planning challenge

When New York residents make plans for the future, they may run up against entrenched, emotional family conflicts. According to a survey conducted by one banking institution, family conflict outweighs market volatility and tax reform as the major challenge to estate planning. The survey included 105 participants in an annual conference on estate planning that involved professionals throughout the sector such as attorneys, insurance advisers, accountants and trust officers. Almost half of the respondents said that family issues posed the biggest problem to completing an estate plan.

There are a number of factors that can exacerbate family conflicts during the estate planning process. The designation of beneficiaries, especially for valuable and desirable properties, is the most common source. In other cases, difficulties with blended family relationships or communication between family members can also lead to ongoing disputes. Blended families may face their own unique challenges when it comes to making an estate plan, especially when the two sides of the family have substantial disparities in wealth. When people remarry later in life, there may be few expectations that wealth will be combined, but these questions can become more complex when a plan is not communicated in advance.

What decanting is and how it may help trust holders "fix" trusts

There was a time when someone in New York with significant assets that they wanted to pass along to their children in a controlled manner would likely be advised to set up an irrevocable trust. The problem is that such trusts are close to impossible to amend. This can present further issues for trust holders with adult children who not quite ready to responsibly handle regular disbursements.

There is a way that irrevocable trusts may be amended with a fairly new concept known as "decanting." Several states have enacted so-called decanting statutes to allow trust grantors to essentially have a do-over to address issues that didn't exist at the time the trust was drafted. This means grantors can transfer or "pour" assets from an existing irrevocable trust into a new one with more appropriate and relevant provisions.