If you follow an annual spring cleaning ritual, we suggest you add an estate planning and overall financial review to your “To do” list. Here’s an update on legal changes and common sense reminders to help you get started.
New York State changed the inheritance tax laws in April 2014, increasing the tax-free threshold from $1 million to more than $2 million for persons who die after April 1, 2014. The threshold for taxation will increase again in 2015 to more than $3 million and continue to increase until 2017 when an individual must own more than $5 million before state and federal inheritances taxes must be paid.
For married couples, we recommend you still take advantage of flexible tax planning ‘Disclaimer Wills’ during the ‘transition’ period and maximize what can be passed free of inheritance tax on the second spouse to die. This is still an important part of tax planning.
What is a ‘disclaimer’ clause in a Will or Trust? It allows the surviving spouse to give up the right to assets or property in the estate and to place the income into a tax-shelter trust (called a Disclaimer Trust). When drafted properly, the Disclaimer Trust enables the surviving spouse to receive income from the trust for life and have access to the principal of the trust if necessary.
Remember, too, that Living Trusts do not save inheritances taxes without required tax language, such as the disclaimer language. If you wish to leave money or property to your favorite charity, charitable bequests reduce inheritance taxes. The charity must be recognized by the Internal Revenue Service in order for there to be a Tax Free Bequest in your will or trust.
Review your existing Powers of Attorney for financial management and Health Care Proxies for medical decision making to ensure they are current and your designated ‘agents’ are available and still willing to act on your behalf when needed. These are important advance planning directives. If you become ill or incapacitated to the point where you cannot manage your own financial affairs, you must already have these legal documents in place to legally empower your chosen agents. Only a qualified estate planning and elder law attorney can prepare and customize these documents properly to address your unique personal and family needs. As we frequently remind you, ignore advertisements for loose-leaf binders filled with ‘national’ estate planning documents. These are often not specific to New York State and can be detrimental to the handling of your finances or health care decisions in the future.
Only a qualified special needs attorney can counsel your family effectively on these estate planning matters. Call my office to arrange a consultation with me, as a special needs law attorney practicing on Long Island, to learn how proper estate planning can benefit you and your loved ones.