New York Wills, Trusts and Estate Planning

WHAT YOU NEED TO KNOW ABOUT WILLS, TRUSTS, ADVANCE DIRECTIVES AND POWER OF ATTORNEY

LAST WILL AND TESTAMENT

DEFINITION OF A LAST WILL AND TESTAMENT

A Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. A person’s Last Will and Testament outlines what to do with possessions, whether the deceased will leave them to another person, a group or donate them to charity, and what happens to other things he or she is responsible for, such as custody of dependents, and management of accounts and interests1.
1See https://www.investopedia.com/terms/l/last-will-and-testament.asp for source

DISADVANTAGES TO NOT HAVING A LAST WILL AND TESTAMENT

If you die without a Last Will and Testament New York State laws and statutes will step into your shoes and decide the person and/or persons that will inherit your assets and property (real and personal). In fact, If you do not want a specific person or member of your family to inherit any of your property and/or assets and you don't have a Will to specifically state that, the State could distribute your property and/or other asset to that family member. Similarly, if you have one child or several children and if the other parent is not able or unavailable to care for their child or children, the State will decide who will raise your children and take care of their property.  Hereto, if you do not want a particular member of your family have legal custody of your child or children (assuming the other parent is not able or unavailable to care for your children) the State could grant that member of your family custody of your child or children and their property.
 

ADVANTAGES OF HAVING A LAST WILL AND TESTAMENT

Simply put, your wishes of the person whom you choose to distribute your assets and property (real and personal) must be followed. Similarly, your wishes of who you do and do no want to be leave anything to will be honored. Finally, how you want your assets and property (real and personal) to be distributed will be followed according to your wishes. For those who have left behind dependents where the other parent is not able to or unavailable to care for your children your wishes as expressed in your Last Will and Testament designating the person you choose to care for your children will be honored. Further, the manner in which you want your assets and property (real and personal)to be distributed will also be carried out pursuant to your wishes. In fact, because your Last Will and Testament must be filed in a special court, known as the Surrogate Court, the court will usually supervise the person (referred to as the Executor) you have designated in your Last Will & Testament to carry out your wishes to ensure that he or she carries out the wishes specified in the will. Finally, in the event there are changes in your life or in your relationships or marital

    

TRUST    

Simply put a Trust is a legal document allowing you or someone you have designated (called a trustee) to hold the right to manage your property (real, personal, financial, etc.) for the good of one or more individuals (called beneficiaries). One of the main distinctions between a Last Will and Testament and a Trust is that a Trust takes effect immediately as opposed to a Last Will and Testament that takes effect after you die. That means with a Trust you can distribute assets and/or income to others while you are alive.

Second, unlike a Last Will and Testament that is required to be probated in Court (which can takes months or years if contested) for your wishes to be carried out, a Trust isn’t required to be probated in Court. That step is omitted and your wishes will be carried out both while you are alive and after you die. There are several types of Trusts. The type of Trust you choose will depend on several factors. For example, whether you want full control to manage the Trust while you are alive, or the tax consequences you are willing to accept, etc. Set-forth below are the types of Trusts.

 

1. Revocable Trust - a revocable Trust is where the person who created the Trust (sometimes referred to as trustor, granter, settlor) retained their right (individually or with the consent of another party) to revoke the trust and reclaim the trust assets. The two most common purposes of a Revocable Trust is to plan for mental disability and to avoid probate of the assets of the person who created the Trust placed into their Trust. The creator of the trust can designate another person ( called a successor trustee) to take over management of the trust in the event they become mentally incapacitated. Doing this allows the trustee to avoid the requirement of having a court name a conservator or guardian to take over their financial affairs in the event that person is unable to manage the Trust themself.

However, because the owner retains control over a revocable trust, the assets in the trusts are not shielded from creditors. Therefore if the person who created the Trust is sued a court can order that the persons trust assets can be liquidated to satisfy any judgment. Further, when the owner of a revocable trust dies, the trusts assets are also subject to both state and federal estate taxes and will not be shielded from Medicare and Medicaid requirements for entitlement to those benefits.

 

2.     Irrevocable Trust -  an Irrevocable Trust is where the person who created the Trust and who owns the assets included in the Trust, cannot can't take their property back once the Trust is in effect. Nor can they undo or terminate the Trust. The common use of an Irrevocable Trust is to move assets out of the trustor’s name and control in order to transfer the trustor’s assets to the next generation.

However, an Irrevocable trust reduces the value of the trustor’s estate for estate tax purposes. A trustor typically cannot serve as trustee when he/she forms an Irrevocable Trust for this reason. The benefits of an Irrevocable Trust include but are not limited to the following. Estate tax benefits of an irrevocable provide asset protection from creditors and lawsuits. They can help with Medicare and Medicaid eligibility because they avoid the necessity of “spending down” assets. That is because you have already transferred your assets into the trust, ideally well outside of the look-back period2.

Finally, in the event circumstances change after the trust has been funded, including the law, or you have a change of mind about certain provisions of the Trust, New ws you, in certain circumstances to change the terms of the Trust. This is referred to as Decanting.

2The Medicaid look back period is five years from the date of application for Medicaid benefits, and any gifts or transfers made within that five year period are subject to penalty.

 

HEALTH CARE PROXY COMBINED WITH A LIVING WILL

A Health Care Proxy is a legal document allowing a person (referred to as a proxy) of your choice (as well as an alternative person, also of your choice) to carry out your medical decisions and wishes only in the event you become temporarily or permanently incapacitated and are unable to dictate your medical care and treatment. The decision determining whether you are incapacitated is made by a licensed physician.
 
In New York State a health care proxy is often combined with a Living Will, which is defined as an Advanced Directive Document. The combination of a Living Will and Health Care proxy provides a the health care proxy with comprehensive guidance regarding your  medical care and treatment. You can also place restrictions on your what decisions your health care proxy can and can not do.
 
For example, the combination of the aforementioned legals documents directs the person(s) designated as your proxy to follow your wishes regarding among other things, the following areas of health care and treatment:
 
        -    surgery
        -    pain relief
        -    antibiotics
        -    intravenous  hydration
        -    nasogastric or gastric feeding
        -    the use of ventilators or cardiopulmonary resuscitation.
 
These are just a few examples. You can be very specific or general about what decisions your health care proxy can make on your behalf. Further, because the Advanced Directive only becomes active at the time you are deemed incapacitated, you can revoke or change the person or persons you choose to be your health care proxy. However, you must do so in writing.
 
Another important reason to have Advanced Directives is if the people close to you (i.e., husband, wife, children, parents) can disagree with each other about what care and treatment you would or would not want. Spelling out your directives avoids this conflict as well as ensures your wishes are carried out.
    
Perhaps the most important reason to have an Advanced Directive is to maintain your control over your medical care and treatment. If you become incapacitated and do not have an Advanced Directive your doctor can provide you with medical care and treatment that you would not agree to if you were not incapacitated.

 

POWER OF ATTORNEY

A power of attorney is a legal document allowing a person (referred to as an agent) or attorney you designate to act in your place for financial or other purposes in the event you are unavailable (i.e., out of the state or country and can’t be reached) or unable (i.e., you are incapacitated) to act.
The power of attorney can be limited or broad in areas including but not limited to the following:
  • to enter into contracts
  • make business decisions
  • insurance transactions
  • banking transactions
  • financial transactions
  • estate transactions
  • claim and litigation matters
  • personal and family maintenance matters, etc. There are several types of power of attorney.

-Limited - A limited power of attorney gives your agent the power to act on your behalf regarding a specific matter. For example, it allows your agent to sign real estate documents in either the sale or purchase of your home if you are not available (out of state or the country) on the day of closing. Once the closing is complete the power of attorney is no longer in effect because you limited the power for your agent to act only at the house closing.

-General - This  power  is  broad  an all inclusive  giving your  agent  all the powers and rights that you have. For example, your agent will have the right to sign legal documents for you, pay your bills, sign a business contract, start a lawsuit on your behalf, etc.
A general power of attorney can be used even if you are not incapacitated. For example, if you do not know much about business transactions or finances you could designate a general power of attorney to act on your behalf in these areas.
A general power of attorney is also used in the event you are or become incapacitated. When used in this instance, the general power attorney is no longer in effect unless you rescind it before you become incapacitated.

-Durable - A durable power of attorney becomes effective after you become incapacitated unless you rescind it before you become incapacitated. This too can be general or limited in scope, but it remains in effect after you become incapacitated.
If you become incapacitated and do not have a durable power of attorney, a court must appoint a conservator or guardian to act on your behalf.
 

The expert Wills, Trust and Estate Planning attorneys at the Long Island, New York law firm of Doreen J. Shindel Esq. are here to help you.

CONTACT US NOW FOR A FREE CONSULTATION.

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