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Long Island Elder Law Blog

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.

Compelling reasons to have an estate plan at any stage of life

It's not necessary for anyone in New York weighing their estate-related options to have substantial assets to benefit from this type of proactive planning. Yet, according to the American Association of Retired Persons (AARP), more than half of all adults and millennials do not have basic documents like a will or living trust.

Some people justify putting such plans on the back burner by saying they're too young, or they don't have children. However, there are many compelling reasons to consider estate planning at any stage of life. For instance, a living or revocable trust allows a designated individual to make decisions on behalf of someone if he or she is incapacitated or unreachable. Such documents can also determine the distribution of property upon a person's death. Should an individual become physically or mentally disabled, a durable power of attorney can name a responsible party to make medical decisions on his or her behalf.

Why establish Medicaid trusts?

Many New Yorkers will need long-term care at some point in their lives. Unfortunately, it is prohibitively expensive for most people and can cost thousands of dollars per month. It is possible for some older adults to qualify for Medicaid to pay for the cost, however. One way that middle- and upper-income adults can potentially qualify for Medicaid for long-term care is through Medicaid trusts.

The rules for Medicaid eligibility vary from state to state. Eligibility is determined by reviewing the assets and income of the people who need long-term care. If they are over the threshold, they will not qualify for Medicaid. However, people can conduct Medicaid planning so that they can qualify for Medicaid when the time comes.

Estate planning basics for New York art collectors

Wealthy art collectors in New York are usually very passionate about their art, and art aficionados who can afford to amass impressive collections aren't too concerned about disposing of any of their prized possessions. This usually means that when an affluent art enthusiast passes away, they have a sizable stash of valuable works of art. Unfortunately, another thing that wealthy art collectors have in common is a lack of proper estate planning.

If estate planning wasn't a priority during an art collector's life, the first major issue for heirs will likely be significant estate taxes. There may also be an unfair division of art that results in squabbles among surviving family members or even lengthy and costly legal battles. With a well-structured estate plan, however, art can be left to designated loved ones or donated directly to charity or a specific museum in a way that's as tax-efficient as possible.

What to consider in estate planning

The end of the holiday season and transition into a new year is an ideal time to prepare an estate plan. New York residents should start by inventorying their assets both large and small. It is critical that a person doesn't forget to leave behind a list of online passwords or other instructions related to digital assets. It is also important to have a conversation with other family members to articulate that plan once it is made.

A family member or other trusted individual will ideally be granted a power of attorney. This allows that individual to pay bills, sell assets or otherwise manage a person's financial affairs while he or she is incapacitated. Generally speaking, a spouse can't access accounts or sell assets unless they are jointly owned. The use of a living trust can specify what happens to assets that don't have a beneficiary designation attached to them.