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Estate Planning

Estate Planning and Debt

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When deciding how an estate will be distributed to heirs, people spend far more time considering the assets they’re leaving behind, rather than the debts. However, it is equally important to devise a plan that will account for the debts that will remain owing after you pass away, including whether a portion of the gifts you leave will be affected by those debts. Read on to learn more about how debts are handled after the debtor passes away, and speak with a skilled New York estate planning attorney with any additional questions.

With few exceptions, the debts of the debtor will survive that person’s death. One of the executor’s jobs is to pay the debts of the deceased person and to do so in order of priority. This means that taxes, unpaid family court debts, and secured loans will be paid before unsecured debts, such as medical bills or credit cards. In most cases, a debt will solely remain the obligation of the deceased person’s estate and not become the responsibility of the heirs, unless an heir’s name was on the debt (i.e., they cosigned on a loan or their name was on a credit card). In other words, if the estate runs out of money before all credit card bills are paid, then the credit card company will be out of luck.

One exception to this rule is residential mortgages. If a mortgage exists on the deceased person’s home, and the will does not instruct the executor to use estate funds to pay off the loan, the inheritor will be obligated to pay that mortgage to retain the home. If a family member of the deceased person inherits the home and plans to live in it, they have a right under federal law to assume the existing mortgage rather than having to apply for a new one or pay off the old mortgage entirely. That said, if the current mortgage isn’t affordable for the inheritor, they can try to refinance the property or, failing that, sell the home.

While most debts will survive the death of the debtor, some will be erased upon death. For example, federal student loan debt does not survive the death of the debtor. Be sure that, as you plan your estate, you have a plan in place for how your debts will be paid so that gifts remain for your heirs. One way to avoid depletion of your estate is by passing gifts to heirs that are not reachable by creditors. For example, certain retirement accounts and life insurance policy benefits may not be seized by creditors for payment of a deceased person’s debts. Speak with your New York trusts & wills attorney to learn about other ways to maximize your gifts to your heirs.

For assistance with creating an estate plan in New York, contact the dedicated and detail-oriented Poughkeepsie estate planning attorneys at Van DeWater & Van DeWater for a consultation, at 845-452-5900.

Review Your Estate Plan After a Divorce or Separation

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You may be overwhelmed by the number of changes occurring at once when you get a divorce or separate from your spouse—establishing a new household, severing financial ties to your spouse, and handling a divorce trial are all very labor-intensive. However, there’s one more critical step you’ll need to take after a divorce, especially if you’re older: updating your estate planning documents. Read on to learn more about which changes may occur automatically and which changes need to be made explicitly when you get a divorce.

Spouses listed in a will are automatically disinherited after divorce

Under New York law, once your divorce is final, a spouse who is listed as a beneficiary will be treated as though he or she predeceased you. If you listed the spouse as an executor of your will, or as someone designated to make health care decisions on your behalf through a health care proxy, that person will also be eliminated from these documents as well.

Until your divorce is final, however, your spouse will remain a beneficiary of your will. There are countless stories of spouses dying suddenly while in the midst of a divorce trial, resulting in most or all of their estate passing to someone they probably weren’t eager to enrich. You can avoid this outcome by visiting your estate planning attorney to update your will and any living trusts or advance health care directives that include your spouse as soon as you file for divorce or separation.

Automatic changes may not be ideal

In addition to the possibility that you may pass before even automatic changes to your estate planning documents occur, those automatic changes may not represent how you wish your estate to be distributed when you pass. For example, you may still wish to pass some amount of money to your ex-spouse when you die as a way of supporting a child you share. Additionally, if your spouse was listed as a beneficiary on your IRA or another investment account, the account would pass to the secondary beneficiary when your former spouse’s name is removed. This beneficiary might be a young child who is unprepared to inherit a large sum of money. You might want to consider creating a trust that will hold funds from a large account when you pass, which could not only help with any tax implications, but could also allow you to better control how those funds are ultimately paid out. An estate planning attorney can help you plan ahead after a change in your marital status.

For thorough and trustworthy assistance with your New York estate plan, contact the Poughkeepsie wills and trusts attorneys at Van DeWater & Van DeWater for a consultation, at 845-452-5900.

Creating Your Own Will Comes With Pitfalls

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You’ve seen form wills online or in stores, offering the promise of a legally-binding will in exchange for filling in a few blanks. You may have even heard of people handwriting their wills for the ultimate DIY last testament. You may have found yourself wondering, is that a worthwhile way to save some money on legal fees? Read on to learn about what can go wrong when you don’t use an estate planning lawyer to create a will.

Chances are, your handwritten will isn’t valid

In New York, handwritten wills that are not signed by witnesses—known in the legal world as “holographic wills”—are only valid if created by someone in active duty in an armed conflict as a member of the armed forces, someone who has accompanied a member of the armed forces to an armed conflict, or a mariner at sea. Even then, the holographic will is only valid for one to three years after the individual is discharged from the military, or returns from the conflict or their time at sea.

Meeting with an attorney to help you create a will allows you to learn of the possible consequences of passing a gift to a particular recipient. For example, should you leave all your assets to a parent, you may push them into a different tax bracket, making their own estate planning process more difficult.

An attorney can also help you pinpoint heirs who may not benefit from an outright gift, and who would be better served by a gift with certain strings attached. For example, leaving thousands of dollars in cash to someone who may still be very young when you pass could be overwhelming and result in poor financial decisions. A lawyer would notice this issue and help you create a trust that would regulate that person’s ability to spend their inheritance. If you intend to leave all your money to an important cause, an attorney can help you structure that gift in a way that is ultimately better for the organization, and which does a better job of effectuating your own wishes.

A lawyer can help you anticipate potential conflicts which might arise from how you leave certain gifts. For example, appointing one sibling as executor could result in another sibling feeling unfairly treated, making the better solution to choose another individual entirely. A lawyer could also point out situations where leaving gifts in unequal amounts to relatives who may fight over the distribution could result in a court battle over the will’s legitimacy.

If you are in need of legal assistance in creating an estate plan in New York, seek the experienced and knowledgeable counsel of the Poughkeepsie wills and trusts attorneys at Van DeWater & Van DeWater for a consultation, at 845-452-5900.

A Will Alone Does Not an Estate Plan Make

By | Estate Planning, FAQs, Health Care Proxy, Living Wills, Wills | No Comments

Perhaps you’re one of the responsible and thoughtful individuals who have taken the time to create a will, providing for your heirs and the causes most important to you after you pass away. While a will is critically important, it is far from the only document you need to have in place as you enter your later years. Read on to learn about the other decisions you should make, and their accompanying documents, to ensure that you have created a complete estate plan, and speak with an attorney about ensuring that you are fully prepared should serious injury, disability, or death suddenly strike.

What will happen if you’re unable to communicate after an accident?

If you’re in an advanced age, you’ve likely already come to terms with the fact that sudden and serious illness such as a stroke or fall could leave you incapacitated, even if only briefly. However, even if you’re younger and in good health, don’t forget that incapacity can strike at any time. In order to ensure that your wishes regarding your physical care are carried out when you’re unable to express them yourself, be sure you have documents in place that explain how you would like your care to look, and the person you wish to make decisions about your care on your behalf.

In order to accomplish these things in New York, you must create two documents: a health care proxy and a living will. A health care proxy allows you to select someone you trust to make health care decisions on your behalf when you are unable to do so. A living will allows you to leave specific instructions on the sort of medical treatments you do or do not wish to receive while you are incapacitated.

Who will care for your children and look after your affairs if you and your spouse are incapacitated?

If you are a parent, it is important that you select a guardian who will care for your children if you or your spouse becomes unable to do so. If you did not designate someone you wished to act as a guardian (other than your spouse) in your will, then you should choose someone you trust to serve in this role. Likewise, in order to know that your financial affairs are looked after, consider creating a financial power of attorney document, allowing you to choose an advisor or trusted friend to make financial decisions on your behalf. In order to ensure that these responsibilities are carried out according to your desires, it is important to work closely with an experienced estate planning attorney to create the financial power of attorney tailored to your own needs and desires.

For assistance with your estate planning needs in New York, contact the knowledgeable and seasoned Poughkeepsie estate planning lawyers at Van DeWater & Van DeWater for a consultation at 845-452-5900.

3 Common Estate Planning Mistakes

By | Estate Planning, Estates, FAQs, Trusts | No Comments

By taking the time to create a will, you’re already avoiding the biggest estate planning mistake of all, which is to fail to create such a plan. However, there are other common mistakes people make when creating their estate plan. Read on to learn how you can avoid these mistakes.

Putting your heirs’ names on the title to large assets

By listing your heirs’ names on the title to assets such as a bank account or home, you can keep that asset from going through the probate process, ensuring it immediately becomes your loved one’s property. However, this may not be the best way to help your heirs avoid probate. Transferring a large asset in this manner could have gift tax consequences. Additionally, if you’re leaving the asset to a young heir, making a direct gift without placing any limits on how the funds are used or distributed could have unintended consequences.

Failing to consider placing your assets in trust

Rather than listing your heirs’ names on large assets, consider placing those assets, and others from your estate, into a trust. Trusts allow your heirs to avoid probate while also providing you with a way to control when and under what conditions the funds are distributed. Trusts may also be a way to avoid certain taxes placed on inherited gifts.

Neglecting to make regular updates to your estate plan

If you create a will when you’re still young and active (as you should), you’re bound to experience a number of significant personal events such as divorce or the birth of grandchildren, and to acquire additional assets you’ll want to pass along to your heirs. In order to ensure that your will remains an accurate representation of your wishes, you’ll need to return to your estate planning lawyer at regular intervals or upon the occurrence of a major life event in order to update your will. Additionally, if you’ve created a trust, you’ll need to ensure that any new property you acquire that you wish to be in the trust is titled with the name of the trust.

If you’re in need of a seasoned and detail-oriented estate planning attorney, contact the Poughkeepsie wills & trusts lawyers at Van DeWater & Van DeWater for a consultation, at 845-452-5900.

Creating a Special Needs Trust In New York

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Life with special needs can be challenging enough without the added challenge of figuring out how to afford the costs related to those special needs. While governmental benefits such as Supplemental Security Income (SSI) and Medicaid can be invaluable life-savers to those with special medical, psychological, or developmental conditions that make them unable to work, the income and asset standards which must be met to qualify for those benefits are highly restrictive. In order to afford the costly rehabilitative, therapeutic, and medical expenses associated with special needs, without risking ineligibility for government benefits, some families have found a solution in the special needs trust.

A special needs trust provides a way for persons with special needs to be supported financially without actually receiving the funds which would otherwise disrupt their invaluable government benefits. If you’ve ever sought to support a family member or loved one with special needs, you may have been confounded by the individual’s inability to receive cash gifts of any substantial amount without impacting their benefits. A special needs trust can be the perfect vehicle to benefit the person with special needs under these circumstances. The person who manages the special needs trust is called the trustee, and he or she is permitted to utilize funds for the benefit of the special needs beneficiary only in a manner that does not interfere with government benefits. The trust funds are to be used to supplement, but not supplant, government benefits. So, for example, depending on the particular circumstances and government benefits of the special needs person, the trustee can expend funds to pay for furnishings, clothing, educational programs, purchase a car for the beneficiary, pay for services not otherwise covered by Medicaid, and even purchase a residence. The idea is to use the trust funds to enhance the beneficiary’s quality of life and provide goods and services to help that person reach his or her maximum potential. The Social Security Administration and Medicaid guidelines are very specific as to certain terminology and provisions in these trusts, and thus, great care must be taken in drafting these trusts in order not to run afoul of regulations.

Special needs trusts can be used to benefit persons with either short- or long-term disabilities, and can be drafted in such a way that the trust can be terminated when the trust ceases to be in the beneficiary’s best interests. It is important to keep in mind that once a trust has ended, either because the beneficiary is no longer disabled, or it is no longer in the beneficiary’s best interests, or because the beneficiary has passed away, the trustee may be required to use remaining trust funds to reimburse Medicaid for medical coverage provided to the beneficiary. A New York trust and estate planning attorney with knowledge of the Social Security Administration and Medicaid rules and regulations can help you determine the best method to create and implement a special needs trust.

If you are in need of experienced, detail-oriented, and effective legal assistance with your will or with the creation of a trust, contact the Poughkeepsie estate planning attorneys at Van DeWater & Van DeWater for a consultation, at 845-452-5900.

The Revocable Living Trust: Is It Right For You?

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When planning your estate, you want to leave your loved ones a gift that will be easily accessible and involve a minimal amount of court involvement to obtain. Using a will for the majority of your assets will necessitate the probate process before certain assets can be distributed to the beneficiaries, a process which can be time-consuming and expensive. To avoid this, consider using a revocable living trust as a way to pass along certain assets or even the bulk of your estate.

Living trusts are a means to convey your property to your heirs without using a will, and thus forcing your heirs to go through probate. Unlike certain irrevocable trusts, revocable living trusts allow you to remain in total control of your assets while you’re alive, with the only difference being that your assets are held in the name of your living trust rather than your own name. Another advantage to a living trust is that unlike a will, living trusts are not public documents. While the contents and beneficiaries of your will become part of a court’s public records during probate, living trusts allow you to make gifts privately, since trusts are not administered through the court. It is important to know, however, that revocable living trusts are not a way to avoid income taxes on income earned from trust assets, nor will they eliminate the estate tax on the assets conveyed through the trust. A New York estate planning attorney can help you find other solutions that can reduce the tax burden on your estate.

Creating a living trust can also make it easier for a family member or trusted advisor to take over the management of your assets while you’re still alive. People are living longer, yet they may not have the ability to handle complex financial management in their later years. Additionally, as you age, the chances increase that a sudden accident or illness could leave you incapacitated. A living trust allows you to designate an individual to make financial decisions on your behalf, either permanently or temporarily as you recover from an injury or illness, and also allows you to leave detailed instructions as to how your assets should be handled when you are unable to do so yourself. This eliminates any future need by your family to seek guardianship over your affairs if you become disabled.

For assistance with any New York estate planning questions you may have, contact the experienced, knowledgeable, and respected Poughkeepsie estate planning attorneys at Van DeWater & Van DeWater for a consultation, at 845-452-5900.