Estate Planning

Why You Need an Estate Planning Attorney

Estate Planning is needed so that an individual's estate, regardless of size, is not reduced. It is important for everyone to have an estate plan in place.

A number of factors can severely affect your estate, including:

  • Poor management of wealth
  • Payment of taxes and expenses
  • Business succession issues

The Goals of Estate Planning

The primary goal of estate planning at Schwartz, Fang & Keating, P.C. is to preserve the most benefits during your lifetime, while transferring the largest amount possible with the smallest amount of costs and the greatest amount of ease. Each person has their own individual objectives, so it is important to have a transfer plan tailored to their specific needs and objectives.

When you work with the Estate Planning Attorneys at Schwartz, Fang & Keating, P.C. we will help you to:

  • Minimize Estate Tax
  • Lessen Probate Costs
  • Reduce Property Transfer Costs
  • Sustain Your Net Equity
  • Enrich Your Net Equity

Estate Planning Techniques

Asset Freezing

Certain asset-freezing techniques may be utilized to gift assets at today's value. These techniques will freeze the value of an asset and the full value wil be transferred out of your estate, estate tax free. Preserve your lifetime exemption by using asset-freezing techniques such as a Grantor Retained Annuity Trust (GRAT) or Qualified Personal Residence Trust (QPRT). These techniques gives term of years to a trust, which gives the Grantor an annuity for that amount of time. Provided the grantor survives the term of the trust, the assets are then out of the grantor's estate at a discounted value.

Marital Deduction

The marital deduction is a powerful planning tool in several ways. This provides a deferral of estate tax; there is an unlimited deduction to the surviving spouse. The surviving spouse receives these assets estate tax free from their spouse. Further, when a spouse dies, the value of the assets received by the survivor is stepped up to the fair market value at the spouse's date of death. This provides a tremendous potential savings of capital gains tax if these inherited assets are sold by the survivor.

The marital deduction can transfer assets to a spouse either outright or in further trust. Such a trust can provide income for the life of the surviving spouse and then the principal to another beneficiary after the death of the surviving spouse. A Qualified Terminable Interest Property (QTIP) Trust is such a trust and can be utilized under a will where there is a second marriage and the grantor wants to provide annual income to a surviving spouse for his/her lifetime but also provide the trust balance shall pass to his or her children from a prior marriage after the death of that surviving spouse.

Use of the marital deduction is best when taken into consideration with each person's lifetime exemption for estate taxes. The use of a Credit Shelter Trust can provide a valuable balance when used with the marital deduction, resulting in lower estate taxes for the couple when combined together between both spouses.

Charitable Lead Annuity Trust (CLAT)

There are several ways to utilize asset-freezing techniques in combination with those who are charitably inclined. A Charitable Lead Annuity Trust (CLAT) is one way to reduce estate tax while donating to charity.

Irrevocable Life Insurance Trust (ILIT)

Consideration should be given to how estate taxes will be paid, or to equalize the inheritances given to beneficiaries. Liquidity is needed in either case. For example, if one beneficiary may inherit the family business (which is a significant asset of an individual) and another beneficiary not involved in the business may not inherit the same level of wealth, life insurance could provide that liquidity. An Irrevocable Life Insurance Trust (ILIT) is a technique frequently used to offer that liquidity, while keeping the value out of the grantor's gross estate.

Other Estate Planning Considerations

Power of Attorney for Financial Decisions

This is a fundamental estate planning document that enables and Agent to act on behalf of the Principal and manage their financial affairs. A Power of Attorney may be durable, and be effective upon signing, or it may be springing and take effect at a specific point in the future. The Power of Attorney enables to Agent to act for the Principal even when the Principal becomes disabled or incapacitated.

The Statutory Gift Rider of the current Power of Attorney enables an Agent to make gifts above the personal and family maintenance limit of Five Hundred ($500) Dollars per calendar year, including permitting the Agent to make gifts to himself or herself, if the Principal desires. The 2020 federal lifetime exemption from gift (and estate) tax is $11.58 million. (The current New York State exclusion for estate tax is $5.85 million. Although New York does not have a gift tax, lifetime gifts made within three years of death are included in a decedent’s estate for purposes of determining New York State estate tax). Using the federal lifetime exemption, a married couple can transfer, free of gift tax, a combined total of $23.16 million. In addition, there is no tax on gifts made in 2020, up to $15,000, per person, per year. Such gifts are commonly referred to as annual exclusion gifts, and may be doubled to $30,000 if the gifts are split with a spouse each year.

Healthcare Decision Making

In the event one is not able to speak for themselves with a health care provider, a health care proxy is necessary. It is important to make your wishes known and appoint an Agent to act on your behalf to make health care decisions when you are not able to do so. Most importantly, in appointing this proxy, your proxy would be able to receive all relevant otherwise HIPAA-protected information so that your Agent may make a fully informed decision. The health care proxy appoints such an Agent, and addresses anatomical gifts. A living will defines the circumstances in which life sustaining treatment should be withheld.

Alternates to Transfer Planning

Depending on individual circumstances, there could be reasons to employ a Revocable Living Trust, where property is distributed by a Trustee, and would not be subject to probate. In addition, there are alternate methods of titling assets, such as joint tenants with right of survivorship, where property would pass directly to the survivor.

We recommend each estate plan be periodically reviewed and updated. The tax laws frequently change. The changes could have varying impacts on estate plans, both beneficial and adverse. Therefore, it is important to monitor the effects to your individual estate plan on a regular basis.