Estate planning is not a one-time event, and you should view it in this light from the start. Circumstances inevitably evolve over time, and you should react to them so your estate plan is up-to-date at all times.
Life Stages
You should have an estate plan in place as soon as you are a self-supporting adult. Many employers provide life insurance as a benefit, and this is one piece of the puzzle that may be automatically put into place.
An asset transfer vehicle like a will or a living trust should be created, and you should address potential incapacity. A living will is a document that is used to record your life support preferences, and you can name a medical decision-maker in a health care proxy.
You can add a durable power of attorney for property, and if you have a living trust, you can name a disability trustee.
If you decide to get married, you have a new responsibility, so you should review your life insurance coverage. You and your spouse may benefit from the creation of a joint living trust, and this is something you should discuss with an estate planning lawyer.
When children come along, your estate plan will need an update. You should name a guardian for your children in a will, and must have someone in place to manage assets on behalf of minors.
A living trust is a very versatile estate planning tool that provides many benefits. One of them is the fact that the trustee that you name could administer the trust for a minor beneficiary.
Asset Protection
As your life changes, you may recognize the fact that you have to take steps to preserve your legacy. Here in New York, we have a state-level estate tax with a $5.93 million exclusion in 2021. This is the amount that can be transferred tax-free.
There is also a federal estate tax that can take a heavy toll because it carries a 40 percent top rate. During the current calendar year, it is applicable on the portion of an estate that exceeds $11.7 million, but the figure is going down to $5.49 million at the end of 2025.
If you are exposed to either or both of these taxes, there are steps that you can take to minimize your exposure.
Long-term care costs are another potential source of legacy erosion. Most senior citizens will need paid living assistance eventually, and 35 percent of elders will reside in nursing homes.
In the Smithtown, New York area, the median annual charge for a private room in a nursing home last year was over $180,000. One year is the average length of stay, and a married couple may face two different sets of nursing home bills.
Medicaid is a jointly administered federal/state government health insurance program that will pay for long-term care if you can gain eligibility. There is a $15,900 asset limit in New York this year, so you have to divest yourself of assets to gain eligibility.
You can convey resources into an income only Medicaid trust to accomplish this objective. After you fund the trust, you would surrender access to the principal, but you could receive distributions of the trust’s earnings until you apply for Medicaid.
This is a neat and tidy solution, but it is trickier than it appears to be on the surface. There is a 60 month look back period, so the trust must be funded at least five years before you apply for Medicaid.
Since you can receive income that is generated by the trust, you can potentially maintain your lifestyle even if you divest yourself of the assets while you are living independently.
Schedule a Consultation Today!
Our doors are open if you are ready to work with a Smithtown, New York estate planning lawyer to put a plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 631-265-0599.
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