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Given the recent enactment of the Economic Growth & Tax Relief Act of 2002, which includes drastic changes to the estate tax rules, many individuals are reviewing their existing estate plans. Legislative promises for "estate tax repeal" have been fulfilled in the form of a 10 year phase-in program. Unless extended by Congress in the future, the full benefit of estate tax repeal will only occur for those dying during the year 2010! Saving taxes, however, is but one objective of a comprehensive estate plan. Estate planning, generally, is designed to ensure the orderly and efficient lifetime and post-death management and distribution of assets and property in a manner consistent with individual wishes. There are six common mistakes often made by individuals which can easily be avoided through proper planning: 1. More than 50% of Americans do not have a Will. We are generally not comfortable exploring issues of our own mortality. If you die without a Will, your savings will be distributed according to State law, which is generally not consistent with your intentions. 2. It is poor planning to write a Will without also making provisions for the lifetime management of investments in the event of a disability. This type of "lifetime self-determination planning" can be accomplished through the use of documents referred to in NYS as a Durable Power of Attorney, Health Care Proxy and Living Will. Durable Powers of Attorney, Health Care Proxies and Living Wills are not age-specific. Therefore, an estate plan which does not include these documents may be inadequate - even for younger couples. These documents are state-specific, however, and existing documents should be periodically reviewed to ensure compliance with governing New York State law. It is far easier to consider issues of lifetime self-determination when one is healthy, with no foreseeable need or use for the documents - than it is to make difficult decisions when a family member has been diagnosed with an illness which requires immediate action. 3. An existing Will or estate plan may be insufficient if it is not prepared based on full financial disclosure. Full and complete disclosure of all assets will allow your legal and/or tax advisor(s) to incorporate appropriate estate or tax planning strategies to minimize taxes, and otherwise protect your estate. Without full and complete financial information, your legal advisor may mistakenly provide a "simple" Will, when a more comprehensive and tax-effective instrument is really warranted 4. Another common mistake is failing to consider assets which pass outside of the Will. Joint ownership is a useful estate planning tool only if the account-holder is aware of the risks as well as the benefits. For this reason, the manner in which title to all assets is held should be disclosed to tax and legal advisors as part of the estate planning process. The surviving joint account holder will inherit 100% of the jointly-owned assets, regardless of the Decedent's wishes or intentions. 5. It is important to plan for all contingencies. An estate plan is generally insufficient if it does not include some type of "contingency plan" to accommodate future changed circumstances, such as fluctuations in asset values, the future need for long-term care, and the designation of one or several "alternates" - i.e., alternate Agents on the Durable Power of Attorney and Health Care Proxy, as well as Successor Executor(s) and Trustee(s) in a Will or Living Trust Agreement. 6. Failing to consider the potential advantages, as well as possible disadvantages of a Revocable Living Trust is also another common mistake. Unlike a trust under a Will, which only becomes effective at death, a Living Trust is a means by which an Individual may control his or her own assets during lifetime, while at the same time specifying (in a carefully-prepared Living Trust Agreement), provisions to govern the post-death distribution of trust assets upon the death of the creator or"Grantor". While Revocable Living Trusts are certainly useful estate planning tools in appropriate cases, they are definitely not for everyone. |
For many individuals whose holdings consist primarily of a primary residence and modest savings, together with perhaps an IRA account or some life insurance, barring extraordinary family or other circumstances, a Revocable Living Trust may not be needed as part of an overall estate plan. Revocable Living Trusts are marketed as a means of "avoiding probate" or processing the estate through the local Surrogate's Court Promoters of Living Trusts portray the "probate process" as potentially time consuming and extraordinarily expensive. These are over-generalizations of true fact. In Central New York, generally, if all of the parties to the probate proceeding (typically, the surviving spouse and children or other surviving "next of kin"), are alive, adult and competent, and if there are no challenges to the Will sought to be probated, the probate process can be accomplished in as little as two weeks - generally without great difficulty. Additionally, the cost of the probate proceeding is based on the size of the Decedent's individually-owned estate, exclusive of all jointly held property, or property for which there is a named beneficiary. Probate fees range from $10 to $1,000, depending on the size of the Decedent's individually-owned estate. Individual factors which may "tip the scales" in favor of establishing a Revocable Living Trust, including the following:
Revocable Living Trusts are aggressively marketed to senior citizens and others as a "one size fits all" solution to an overall planning dilemma. Promoters of Living Trusts often lure individuals to "free seminars", where they predict incredible expenses, delays and frustrations for everyone in the room. The trust promoter then promises that all of the problems of "probate and estate administration will be "solved" if you purchase their package of forms and services. Typically, these "form Trust Agreements" are mass-produced from standard forms or software and are not tailored to individual needs and circumstances. The generic Trust Agreements which are marketed and "sold" to senior citizens and others are often overpriced, the trust promoter is charging what amounts to a "flat fee" for a preprinted form Agreement. This "flat fee" is often higher than what would have been charged by a qualified lawyer for a customized document which is accompanied by individual and highly-specific tax or estate planning advice. In many cases, the "flat fee" is more than the filing fee which would be imposed at the time of any probate proceeding. Finally, it is important for individuals to consider that the attorney who works with them to prepare their updated Wills, Living Trust Agreements (when appropriate) and lifetime self-determination documents, is often the attorney whom the family will call upon in the event of a crisis - for example, if the client is diagnosed with a major illness or requires hospitalization and/or nursing home care. Perhaps this is the single most important reason why there should exist a relationship of trust and confidence between the estate planning attorney, his client(s) and the family of those client(s), and also, why the family's legal advisor should possess specific knowledge of estate and tax planning, trust and estate administration and planning for the elderly or disabled client. In conclusion, don't be misled into thinking that the enactment of "estate tax repeal" legislation eliminates the need to engage in estate planning. As the examples cited in this article demonstrate, there are many personal or financial reasons to review an existing Will or estate plan, which are completely unrelated to estate taxes. |
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Denise P. Cambs, Esq. is a Fellow in the American College of Trust & Estate Counsel (ACTEC), and a Partner/Owner of The Cambs Law Firm, LLP. For the past 24 years, Mrs. Cambs has practiced exclusively in the areas of estate planning, trust & estate administration and "elder law." The Cambs Law Firm, LLP is conveniently located on 3208 West Genesee Street, a short distance east of Wegmans in Fairmount. Mrs. Cambs may be reached at 315.484.1200 or dcambs@cambslaw.com. Copyright 2001-2010 The Cambs Law Firm, LLP |
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