The Basics of Estate Planning

By Evan Rogdakis and John Flouskakos

What is Estate Planning?
 
Estate planning is implementing what your intent is after working, saving, investing, and caring for your family over the course of your lifetime.  After working hard for your assets – like your home, savings, life insurance, investments, and personal belongings – you want to feel secure in the fact that you can pass these things along on your own terms. Without a sound plan and expert advice to preserve, protect, and transfer these assets to your loved ones, your family and friend will be left scrambling and unable to pass on your legacy in a manner satisfactory to you. Without a strategy, your estate’s value may be lessened as a result of estate settlement costs and taxes. This article will provide you with the basics you need to know before making some of the most important decisions of your life. Here at KI Legal, we will guide you through this process and help formulate a plan with a team of expert attorneys in all things estate planning.

Why do you need an estate plan?
 
Estate plans are essential to anyone who wishes to have a seamless transition of one’s property and assets following an untimely death or even loss of mental capacity. Having an estate plan allows you to protect your assets and distribute them as you wish. It allows you to protect and ensure your children are taken care of whether they are minors or adults, and even plan for an elderly parent. Estate plans protect the financial future and stability of your partner and descendants. They can even help establish your legacy through charitable donations.
 
Additionally, estate planning allows you to better prepare for, and cover the costs, after you pass. Before you can transfer your remaining assets, there are several debts that must be resolved, such as: funeral costs, executor’s and attorney costs, medical bills, outstanding debts, and taxes on retirement assets and gifts.
 
What assets are in your estate?
 
An individual’s estate is everything owned at their passing. Things can be included in an estate are, but are not limited to: annuities, bank accounts, bonds, business interests, cash, inherited valuables, investments, life insurance, mutual funds, notes receivable, personal property, real estate, retirement plan, stock, and more.
 
Estate planning components
 
A comprehensive estate plan usually will include: 

A Will
A will is a legal document where you provide directions upon your passing as to how your estate will be divided, and to whom it will be gifted to. It also gives direction as to who will be the executor of your estate, and if you have minor or disabled adult children, who will be appointed as their legal guardian.
 
A Living Will and Healthcare Proxy
This is a legal document which gives direction as to how you will be cared for in the event that you become incapacitated. Meaning that if you are terminally ill or permanently unconscious, it will give direction as to how you will be cared for or give the decision-making power to a trusted individual.
 
Power of Attorney
This allows you to designate financial decision-making power to a trusted individual in the event that you become disabled, incapacitated, or unavailable.

Other strategies
 
Trusts are a useful tool in planning your estate. They offer different benefits depending on the type of trust you wish to establish. The General Benefits of Trusts include:
–          Assets can be managed during or after your life;
–          You can avoid probate delays;
–          Your assets are protected from creditors and from certain estate taxes;
–          You have control over how and when assets are distributed to heirs.
 
There are two main types of Trusts depending on when they are implemented. The first – known as inter vivos – become effective during the individual’s lifetime. An example would be a family trust for the benefit of a surviving spouse and children and would be funding shortly after the creation.  The second type – known as a testamentary trust – becomes effective upon someone’s death. An example of a testamentary trust would be one that is funded for the benefit of a child upon both parents’ passing. 

Estate and Death Taxes
 
Tax rates are always changing, which inevitably leads to a lot of confusion and problems when estate planning. In 2022, the federal estate tax rate is capped at 40%. Additionally, the estate tax exclusion has been raised to $12.06 million, meaning that an estate will not be subject to federal estate tax unless it is valued at that amount upon death. In addition, the New York State estate tax exclusion is capped at a lower $6.11 million.
 
There are several strategies to overcome these problems, but the simplest is utilizing your gifting. The federal gift tax exclusion is currently capped at $16,000 per beneficiary, meaning you can gift anyone that amount in cash or other assets without being taxed by the federal government. These numbers change from year-to-year and get adjusted due to the rate of inflation. Because of the volatile nature of these requirements, it is best to have a trusted and reliable attorneys and advisors on your side.
 
At KI Legal, we can help create the right estate plan for your particular situation, and desires, so you may rest assured that you and your assets are protected. To speak with one of our experienced estate lawyers about your family situation, contact KI Legal at (646) 766-8308.

This information is the most up to date news available as of the date posted. Please be advised that any information posted on the KI Legal Blog or Social Channels is being supplied for informational purposes only and is subject to change at any time. For more information, and clarity surrounding your individual organization or current situation, contact a member of the KI Legal team.  

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