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Estate Planning

A cohesive estate plan provides instructions regarding how you wish for your property to be managed and distributed when you die. Although most people tend to associate estate planning with the wealthy or the elderly, nearly everyone benefits from establishing a comprehensive estate plan.

A person's estate is made up of all of the property that they own. In legal terms, this includes:

  • Personal items;
  • Bank accounts;
  • Real estate;
  • Stocks and securities; and
  • Other assets as designated by the state in which the decedent lived.

Estate planning is often associated with wills and trusts. While a solid estate plan includes a will and possible trusts, an estate plan can also address many other issues. Some common examples of this include, but may not be limited to:

  • How you wish to receive medical treatment if you become incapacitated and cannot speak for yourself;
  • Whether you are an organ donor;
  • Who is authorized to make legal and financial decisions on your behalf, should you become incapacitated;
  • Who is authorized to care for your minor children should you become incapacitated, or when you die;
  • Who is authorized to take over your business interests; and
  • Your preferred funeral arrangements, as well as any information regarding previously made plans such as a purchased burial plot or a prepaid funeral service.

A clear estate plan can reduce your loved one's tax obligations and the need for probate court proceedings. If you do not create and establish a sound estate plan for yourself, your estate will be distributed according to your state's intestate succession laws. Such laws tend to vary from state to state, and generally result in property distribution that you would not have wanted. This will be further discussed below.

How Does An Estate Plan Avoid Dying Intestate?

When a person dies without leaving a valid will, they will have died “intestate.” Without the estate distribution instructions that are contained in a will, a person's estate will generally be distributed according to their state's probate laws.

In legal terms, intestate succession is taking the rights of another in the capacity of their successor. Succession generally refers to the transfer of rights and obligations of the decedent to their legal heirs. As such, intestate succession laws create a preference hierarchy among potential heirs. Close relatives, such as the decedent's spouse and children, are most likely to receive distributions before any others. To reiterate, the exact laws of succession are determined by the state in which the decedent was living when they died.

An established and legally valid estate plan will determine how a person wishes for their estate to be distributed, and to whom. As such, having an estate plan in place can largely avoid dying intestate and all of the associated issues.

Factors To Consider When Beginning Estate Planning

There are various factors that you will need to take into consideration when you wish to establish an estate plan. Some examples include, but may not be limited to:

  • Your state's specific estate laws;
  • Your life stage, as well as your family stage;
  • Your financial assets; and
  • Your long-term goals.

The specifics of your estate plan may depend on whether you are considered to be one of the following:

  • A Young, Single Person: Those who are young and single may not need an estate plan yet, unless they are considerably wealthy or have a serious illness. Another example of this would be a young, single person who is estranged from their family and would not want them to receive their belongings if they died before getting married;
  • Unmarried With a Committed Partner: Without an established will or trust, your unmarried partner will not receive any of your property when you die. The exception to this would be if none of your family survives you;
  • A Couple With a Small Child: Parents of a small child should create an estate plan that appoints a legal guardian for your minor child. Doing so should ensure their physical, emotional, and financial welfare. Additionally, you should consider purchasing a life insurance plan in order to protect your spouse and child when you die. The details of a life insurance plan should be included in your estate plan, so that authorized parties will know how to access the policy when necessary;
  • Someone Who Is Middle-Aged: As your income and assets grow with you, you will want to establish an estate plan that assists your loved ones in avoiding probate proceedings. An example of this would be how you should consider placing certain property items in a revocable trust. Or, you may consider converting your bank accounts into payable on death accounts;
    The Parent Of a Disabled Child: If you have a disabled child, you should consider including a special needs trust. This trust can provide for your disabled child without disrupting their other benefits, such as disability disbursements; or
  • Elderly or Ill: If you are elderly and/or ill, your estate plan should focus on issues such as the division of your property and avoiding probate, as well as minimizing estate taxes. Additionally, you should consider designating a health care proxy, which allows someone you trust to make your health care decisions for you should you become incapacitated.

What Should Be Included In My Estate Planning Strategy?

A will, trust, power of attorney, and other documents all work together to help protect your assets, as well as distribute them according to your wishes. While all estate plans will be different based on the specific estate, some examples of general elements include:

  • Your family and stakeholders understand your wishes, as well as any recent changes to your estate plan, in order to help minimize legal disputes;
  • Your estate plan clearly states your wishes and avoids vague language which may cause unnecessary disputes;
  • You have a valid will which transfers your property to your named beneficiaries, and names a suitable legal guardian for your minor children;
  • You have health care directives that cover your end-of-life medical treatment and other medical decisions; and
  • You have a financial power of attorney so that if you become incapacitated, a trusted family member or friend will make important legal and financial decisions on your behalf.

Questions An Estate Planning Lawyer Will Ask

Estate planning is a difficult subject to think about. It forces people to think about financial matters that will occur while they are living and after they have died. It's extremely important to ensure your assets are managed correctly and that your next generational family members will receive their inheritance without any issues.

There are several questions that need to be answered when drafting a will. Because estate planning varies greatly from person to person, it would be nearly impossible to prepare for every question an estate planning lawyer will ask. Most estate planning lawyers will provide you with paperwork to fill out prior to any consultations.

Although most lawyers can draw up a will for straightforward situations, such as naming the beneficiary of one's 401(k), expert trust and estate lawyers can help clients navigate more complicated legal situations involving several trusts and multiple heirs.

Who Are the Important People in Your Life?

This is probably the most important question an estate planning attorney will ask you. Family set up greatly affects the estate planning process. In fact, some states have laws that won't let a person write certain relatives out of a will. Are you married? Most states protect spouses from being written out of a will. Absent a spouse, the rest of your estate is generally fair game. Do you have someone that you wish to leave out of your will? An estate will be distributed either according to the will or, by law, in the absence of a will.

To plan for your estate, a lawyer needs to know about those people in your family tree because, even if you want to leave someone out, if there's a missing piece within your will, rules of state law will take over to fill in the gap.

Children aren't typically financially protected as spouses are, but you still need to be specific. How many children do you have? What are their ages? Do you have stepchildren that you want to be treated with, like your biological children, with respect to estate distribution? Who will take care of your children in the event something happens to both parents?

This question doesn't have to be restricted to family members either, as many wish to leave part of their estate to those that aren't related by blood.

What Do Your Finances Look Like?

Putting together a list of your finances will help your estate planning attorney make the best decisions for your financial future. Since most states have estate and gift tax laws for assets that exceed certain amounts, you'll need to make your attorney aware of every asset and liability to your name. Are your banking accounts joint accounts with your spouse? What goes into an estate is entirely dependent on the owner of the property.

Do you own your home, or is it mortgaged? If you plan to leave your home to your children, whether or not it is owned or mortgaged through a bank makes a difference. Do you have credit card debt? What about medical expenses? Do you owe the IRS? Paying off medical expenses and any federal or state tax debts will always take precedence (minus very few spousal exceptions). The same rules apply to other debts.

Do you Want to Create a Comprehensive Estate Plan that Includes Wills, Trusts, and Life Insurance?

You may have multiple types of wills, trusts, and life insurance plans. A comprehensive estate plan can include all of them. It's important to hire a knowledgeable estate attorney in all of these areas. Your estate attorney can help you understand the nuances of each estate-planning tool and determine which ones might be right for you.

What is your Budget?

Many estate-planning attorneys charge flat rate fees instead of billing by the hour. Some attorneys do both, charging fixed rates for standard services like establishing a trust and then charging hourly rates for special research tasks.

It's wise to inform your attorney about your budget to make a compensation model ahead of time and avoid surprises.

What Do You Want to Give Away?

Once you take out any spousal shares and pay off the estate's liabilities, it's time to talk about personal bequeathments. Do you want to leave a sum of money to your favorite niece? Do you want to set up a trust fund for your children? How about those heirloom pearls your mother gave you?

How Quickly do you Need your Estate Planning Project to be Completed?

There are generally no extreme rushes in estate planning projects, but you may wish to discuss aspects of your estate plan with accountants, retirement planners, or money managers. An estate planning attorney's expertise may overlap with these fields, but attorneys are generally not tax experts or investment advisors. Give yourself enough time to gain a broader, big-picture perspective on your estate plan, the logical practicalities of implementing it, and your long-term needs.

What Documents do you Have?

Even if you're working with an experienced attorney, you should review all documents and forms together to avoid miscommunications. Be clear about what you'd like to be changed.

What's Your Retirement Planning Look Like?

Retirement funds will go to a listed beneficiary and will not flow into a decedent's estate. Rules regarding the distribution of retirement funds fall under contract law rather than estate law. If there is no listed beneficiary for some reason, then retirement funds would flow into an estate and be probated according to the terms of the will.

Do You Have Life Insurance?

Life insurance also falls under contract law, which means it will be distributed according to the life insurance policy. You can, however, list a trust as a beneficiary on a life insurance policy, and the terms of a trust can be contained within a will.

Have You Gone Through a Divorce?

Believe it or not, this question matters. Depending on the terms of a divorce settlement agreement, your estate planning attorney will need to know if your ex-spouse has any claims to child support, alimony, retirement accounts, or life insurance proceeds.

How Do You Feel About a Revocable Living Trust?

Putting assets into revocable living trusts can avoid the costly and timely probate process of filing a will with the court. However, a revocable living trust may not be the best move for everyone. Revocable living trusts don't void inheritances, estates, or income taxes. Some lawyers recommend these structures.

What Other Issues Would You Like to Address?

As the human life expectancy increases, so does the probability of long-term physical problems and mental health issues. Estate attorneys exist to help clients financially prepare for the possibility of disability or dementia by drawing up powers of attorney, healthcare instructions, and living wills.

All the Questions No One Wants to Answer

Unfortunately, estate planning means answering tough questions. Are you aware of any life-threatening illnesses? What are your wishes for after you've passed? If you have any specific wishes or religious requests, these are things your estate planning attorney will want to know. 

Common Disputes in Estate Planning

Estate planning disputes arise when an estate plan, articulated in a last will and testament, is executed, following the death of the owner of the estate (the “decedent”). Sometimes a dispute may come up during the planning of the estate. In either case, it is important to have a solid estate plan.

A complete estate plan should cover all the details of a person's assets and reflect careful thought. Of course, circumstances can change and they may not be reflected in the estate plan. However, it is still important to try to create an estate plan that allows for adjustments if there are changes in a person's life.

Despite good estate planning, there is still the possibility that disagreements will develop. Below are some of the types of disagreements regarding an estate that are seen more frequently:

  • Disputes over property distribution:
    • For instance, disputes can develop when the decedent expressed an intention to change a last will and testament or other document so that a certain person would receive certain property, but did not in fact change the documents to reflect their changed intentions;
    • Conflicts where the beneficiaries of assets in a will believe that the assets have been distributed unequally or not as expected by certain parties;
  • Disputes as to the validity of a will or the estate plan: For example, interested parties may claim that the will was not made or executed properly;
  • Conflicts with the estate executor or administrator:
    • An executor is the person appointed by a court to manage an estate and effect the plan as provided in a will or other relevant documents after a person passes away. Conflicts may come up because the executor engages in some form of mismanagement of the estate, including possible fraud;
    • Some interested parties may be dissatisfied with the executor and the manner in which the executor was chosen;
  • Issues involving sudden incapacitation or disability on the part of the decedent:
    • An interested party may allege that the decedent was coerced into making a change to their will by someone exerting undue influence; or
    • An interested party may allege that the decedent in general did not understand what they were doing when they made their estate plan or changed it, because they were not competent.

There are certain types of family issues that can cause disputes during the execution of the estate plan. Rivalries among siblings and later marriages of the decedent can cause disagreements among the various parties who stand to inherit or believe they should and someone else should not. Adult children may be dismayed if a sizable bequest is left in a will to a later spouse who is not their mother or father. Also, some siblings may believe that those mentioned in a will, and those who are not, have not been treated as the decedent wanted.

A decedent's last will and testament often provides for how much of the decedent's estate is to be distributed, but a will is not the only instrument of estate planning. Many issues of distribution can be managed through means other than a written will. Planning how to make good use of other financial instruments and tools can be part of a good estate plan.

For example, some of the following are instruments for passing certain kinds of property outside of a will:

  • Life insurance: The proceeds of life insurance policies pass directly to named beneficiaries and not through a will;
  • Annuities: With an annuity, the owner can designate a beneficiary and whatever remains of the annuity passes to the designated beneficiaries upon the owner's death;
  • Bank accounts POD: A person can set up their bank accounts, checking, savings, money markets, CDs and savings deposits so that named beneficiaries receive the money in the account upon the death of the owner;
  • Investment accounts TOD: Comparable to bank accounts that are POD, investment accounts can be set up so as to transfer upon death (TOD). Again the owner designates beneficiaries for stocks, bonds and brokerage accounts and the assets in these accounts transfer to designated beneficiaries upon the death of the owner;
  • Property held as joint tenancy: Married couples often own their primary residence as a joint tenancy with the right of survivorship. This means that upon the death of one spouse, the other becomes the sole owner and there are no tax or other financial consequences. Any number of people of any relationship can own property in joint tenancy, not only married couples;
  • Living trust: The assets in a living trust also pass directly to the designated trustees and are not governed by a will. Remember, however, that if a person makes a living trust the beneficiary of other assets, such as IRA and 401(K) accounts, the details must be worked out for each type of asset, because, for example, the IRAs and 401(K) accounts must have beneficiaries that are real people and not a trust.

Remedies for Estate Planning Disputes

There are a variety of possible remedies for the disputes and disagreements listed above. It will depend on the particular dispute. It may also depend on who is involved. There are likely to be a number of parties to any dispute over the will, because there may be multiple inheritors interested in the outcome.

Some commonly used remedies for estate planning disputes may include the following:

  • Removal of the executor: In the case of a dispute involving the executor, it may be necessary to have the executor removed by the court and replaced with someone on whom the parties agree. It can be challenging to find an executor with whom none of the interested parties are dissatisfied. A neutral third party can be a good choice, someone who does not stand to inherit;
  • Litigation of the will dispute: In order to do this, a person must have standing, or be listed as one of the inheritors of the decedent in their will or otherwise have grounds in law for making a claim. Litigation may result in:
    • An award of damages: A party may receive monetary damages if they can prove they have experienced a financial loss because of mismanagement of estate moneys, or some other issue;
    • Redistribution of property: In the event that property was incorrectly distributed, a court may rule that it should be distributed again correctly, according to the wishes of the decedent as laid out in their will or other controlling documentation;
  • Elective Shares: If one spouse leaves another spouse out of their will, the spouse who was left out can file with the Probate Court for an elective share of their spouse's estate. This does not make the entire will invalid. But it does mean that the spouse will still be able to claim a share of the estate.
    • In North Carolina, for example, a spouse who takes an elective share will get a percentage of the estate based on the length of the marriage. The spouses of marriages that lasted for 5 years or less will get a smaller share. The spouses of marriages that lasted more than 15 years get the maximum share allowed by law. This type of resolution is a matter of state law and the law varies from state to state, but most states make some kind of similar allowance for spouses who are disinherited in the wills of their partners;
  • Mediation: Mediation is an alternative dispute resolution process that is increasingly popular for resolving disagreements. A neutral third-party mediator is selected, possibly by a court or executor and the mediator holds a meeting of the interested parties. Hopefully, the parties work out a resolution that is universally acceptable.

It may be possible to resolve a dispute in an informal manner. Sometimes lawyers talking on behalf of clients can negotiate resolutions that are acceptable to all parties. This kind of resolution may be faster and less expensive than a mediation or lawsuit. This, of course, may be more likely to work when the dispute is fairly minor.  

How Can a Lawyer Help Me with an Estate Planning Case?

If you want to prepare a will or an entire estate plan, or if you are named as an executor or a beneficiary in a will and have any questions or concerns regarding potential claims, it may be helpful to consult an experienced local estate lawyer for further assistance.

An experienced estate lawyer will be able to provide legal guidance about the law that applies to your situation and processes that pertain to estate planning and probate, and can also determine whether or not you have a claim that requires legal action to be resolved.

Additionally, should you need to appear in court or participate in a mediation session, a lawyer will be able to provide representation or assistance for these procedures as well. These are technical and complicated areas of the law, so you want to consult a qualified estate lawyer in order to get the best possible result.

Call our office today at 212-994-7777 or complete the convenient online contact form to set up a consultation.