Six Steps for Estate Planning In New York

Estate planning is a crucial process that ensures your assets are distributed according to your wishes after your death while also minimizing tax burdens and legal complications for your heirs. In New York State, the estate planning process involves several key steps. Here’s a detailed guide from an experienced Long Island estate planning lawyer to the six essential steps for estate planning in New York State.

Assess Your Assets and Liabilities

The first step in estate planning is to take a comprehensive inventory of your assets and liabilities. This involves listing everything you own and owe. Consider the following:

Assets: Real estate, bank accounts, stocks, bonds, retirement accounts, life insurance policies, business interests, personal property (jewelry, cars, art, etc.).
Liabilities: Mortgages, personal loans, credit card debts, and other financial obligations.

Determine Your Estate Planning Objectives and Goals

It’s important to clearly define your objectives and goals for your estate plan. Common goals include:

Providing for Family and Dependents: Ensuring your spouse, children, and other dependents are financially secure.
Minimizing Taxes: Reducing estate taxes and other potential taxes your estate may incur.
Avoiding Probate: Structuring your estate in a way that avoids the lengthy and often costly probate process.
Charitable Giving: Includes provisions for donations to charities or causes important to you.
Healthcare Decisions: Setting up documents to manage your healthcare decisions if you become incapacitated.

Draft Essential Estate Planning Documents

Several legal documents form the foundation of an effective estate plan. Key documents include:

Last Will and Testament: This document outlines how you want your assets distributed after your death, names guardians for minor children, and appoints an executor to manage your estate.
Trusts: Trusts can help manage and distribute your assets both during your lifetime and after your death. Common types include revocable living trusts, irrevocable trusts, and special needs trusts.
Durable Power of Attorney: This grants a trusted person authority to manage your financial affairs if you become incapacitated.
Health Care Proxy and Living Will: These documents allow you to appoint someone to make medical decisions on your behalf and outline your preferences for end-of-life care.
Beneficiary Designations: Ensure that all beneficiary designations on accounts like life insurance policies and retirement accounts are up to date and align with your overall estate plan.

Understand New York Estate and Federal Inheritance Taxes

New York State imposes an estate tax on estates that exceed a certain threshold. As of 2024, the exemption amount is $6.94 million per individual, but this amount is subject to change. It’s essential to understand the following:

New York Estate Tax: If the value of your estate exceeds the state’s exemption limit, your estate may be subject to New York estate tax. Planning strategies, such as gifting during your lifetime or setting up trusts, can help reduce the taxable estate.
Federal Estate Tax: The federal estate tax exemption is significantly higher ($13.61 million in 2024, subject to inflation adjustments). However, if your estate is large enough to be subject to federal estate tax, additional planning may be needed.
Generation-Skipping Transfer Tax: This tax may apply if you transfer assets to grandchildren or other beneficiaries more than one generation younger than you.

Plan for Long-Term Care and Incapacity

Planning for the possibility of long-term care and incapacity is a critical component of estate planning. Consider the following:

Long-Term Care Insurance: This can help cover the cost of long-term care services, such as nursing home, assisted living facility care, or in-home care, which are not typically covered by health insurance or Medicare.
Medicaid Planning: Medicaid can help pay for long-term care, but there are strict asset and income limits. Proper planning can help protect your assets while still qualifying for Medicaid.
Living Trusts: These can provide for the management of your assets if you become incapacitated without the need for a court-appointed guardian.

Review and Update Your Estate Plan Regularly

Estate planning is not a one-time task; it requires periodic review and updates. Major life events and changes in the law can necessitate adjustments to your plan. Key times to review your estate plan include:

Life Changes: Marriage, divorce, the birth of a child, or the death of a beneficiary should prompt a review and possible update of your estate plan.
Changes in Financial Status: Significant changes in your financial situation, such as acquiring substantial assets or incurring large debts, may require adjustments to your plan.
Changes in Law: Estate tax laws and other relevant laws can change, impacting your estate plan. Regular consultation with an estate planning attorney ensures your plan remains compliant and effective.
Periodic Review: Even without significant changes, reviewing your estate plan every three to five years is a good practice to ensure it still aligns with your goals and circumstances.

Additional Considerations

Digital Assets: With the increasing importance of digital assets (like online accounts, digital currencies, and social media accounts), it’s important to include instructions for managing these assets in your estate plan.
Business Succession Planning: If you own a business, consider creating a succession plan to ensure the smooth transition of ownership and management.
Charitable Giving Strategies: If you have philanthropic goals, consider strategies like charitable trusts, donor-advised funds, or direct bequests in your will.

Davidow, Davidow, Siegel & Stern, LLP is Here to Help

Estate planning in New York State involves a comprehensive approach to managing your assets and providing for your loved ones after your death. It’s important to be thoughtful and mindful as you focus on your goals and objectives. By following these six steps—assessing your assets and liabilities, determining your goals, drafting essential documents, understanding taxes, planning for long-term care, and regularly updating your plan—you can ensure that your wishes are honored and your estate is managed efficiently and effectively.

Working with a knowledgeable Long Island estate planning lawyer can provide valuable guidance and help you navigate the complexities of estate planning laws in New York. At Davidow, Davidow, Siegel & Stern, LLP, we have more than 100 years of experience working with people like you. Contact us today at 631-234-3030.