- General or specific power of attorney,
- Health Care Proxy and
- Will, and sometimes, especially if one wants to avoid probate proceedings, a Trust.
Also, in some cases, establishing an irrevocable life insurance trust can be an effective way to reduce estate tax liabilities and optimize the value of the inheritance.
According to New York law, if a deceased person did not leave a will, their estate will be inherited by the spouse and descendants: the wife/husband takes the first $50,000 and ½ of the remaining estate, and the children receive the rest.
However, for many, dying intestate has very unfavorable results because:
- Estate tax implications and also those for the heirs are not taken into account.
- The estate cannot be directly accepted by minors or disabled persons who receive city benefits and who would lose them if they inherited even a not-so-significant sum of money,
- Furthermore, it does not protect heirs from their creditors.
Proactive estate planning, in addition to a properly prepared will or trust, includes transferring ownership to heirs during one’s lifetime through a gift, which is better to consider earlier than waiting until the last moment to avoid negative tax consequences. Currently, in New York, gift tax and generation-skipping transfers are taxed at 40%. Additionally, transferring property through a gift placed in a trust provides protection against creditors of the heirs while giving the creator or “trustee” control over the trust and its investments. Also, planning a gradual rather than a one-time transfer of fortune to heirs by placing it in a trust allows for reducing or completely avoiding tax obligations and provides access to the gifted asset without transferring ownership.
We encourage you to consult us for answers to any additional questions regarding your specific factual situation and topics not covered in this article.
