Legal Matters

Estate planning is a four-step process. It's important that you understand all of the elements involved in a comprehensive estate plan to protect your legacy for your heirs. In this article we'll review these steps and learn more about important aspects of your estate plan that may have been missed.

The First Step

The first thing you'll need to do is to meet with your financial planner or attorney to determine what you want your plan to look like. What are your goals, aspirations, concerns for family members, gifts, charities, and your overall legacy? All of these should be discussed at your initial meeting.

The Second Step

After you have laid out a clear vision for your estate plan, your attorney will need to prepare and execute the appropriate documents that will put your plan in place (i.e., wills, trusts, health care proxies, living wills and powers of attorney).

The Third Step

The next step is to make sure your plan is properly funded. This means retitling assets into your trust, reviewing transfer-on-death designations, title to your bank accounts and most important, the beneficiary designations on your IRAs and 401(k) plans.

An Often-Missed Important Step

For most people, other than their home, their retirement plans are their largest asset. Regardless of the language in your will or trust, these assets, considered non-probate assets, will on your death go to whomever you have selected on the beneficiary designation form associated with these assets. Do you want these assets going to children from a prior marriage or do you want these assets going to a trust you have prepared for the benefit of grandchildren? If you have designated your estate as the beneficiary of your retirement benefits, it will greatly complicate the administration of your estate. If you have created a living trust to avoid probate, you may have just increased the cost of administering your estate as you will now have a trust estate administration plus the cost and expense of a separate probate estate proceeding.

A thorough review of your beneficiary designations is a very inexpensive way of making sure your estate plan works the way you intended it to. New beneficiary designation forms can usually be downloaded from the plan administrator’s website. This simple step is very important in ensuring that your estate plan works the way you intended it to.

The Last Step

Now that you have a solid estate plan in place, it's important that you review it every 3 to 5 years to make sure it is still in line with your overall plan, the nature and extent of your assets, new tax laws, and most importantly, any changes in your family situation.

Ron Axelrod – Estate Planning Attorney in Rochester, NY

Ronald J. Axelrod and his legal team understands the sensitivity of these issues and will carefully guide you through the estate planning process to insure that you fully understand all of the details outlined in your customized plan. Call our office today to set up an appointment at (585) 203-1020.

Regardless of your political persuasion, the Biden, Pelosi, and Schumer spending plans will cause Congress to find new ways to “tax the rich” to pay for them. The easiest place for them to look is at the estate tax and income tax provisions that affect estate planning.

Since President JFK, all of our Presidents have been looking at the elimination or reduction of the stepped-up basis provisions of the Internal Revenue Code. When an individual dies their tax basis (or what they PAID) for the property being handed down to the next generation is its date of death value not what they paid for the property. This means that unrealized capital gains escape income taxation. Because of this, a very significant amount of income from appreciated assets avoids capital gains taxes. While various tax proposals may provide some exemption from this tax, the dollar amount of these exceptions goes down on a regular basis.

Another proposed change is that transfers to an irrevocable trust would now be a taxable event. That is why, if you are of thinking of creating an irrevocable trust, you should do it sooner than later in order to avoid the new tax on these transfers. Normally, any new taxes of this type are prospective only, meaning do it now and any changes you make won’t affect your planning objectives later on.

Also proposed as an integral part of this new tax law are plans to lower the current estate tax exemption from $11,700,000 to $3,500,000 (New York State is currently $5,930,000). With the recent rise in the stock market and the reduction in the exemption amount, more people will need to incorporate estate tax planning into their wills or trusts. This means marital deduction planning, greater QTIP trusts, renunciation trusts, and greater balancing of assets are all now back in vogue.

Because of these proposed changes, along with many others, estates that we assumed would be estate tax free may now be subject to estate taxes and even income taxes. Proper planning can reduce or eliminate most of these taxes.

How We Can Help

Ronald J. Axelrod, an estate planning attorney in Rochester, NY, can assist you in navigating these recent changes to protect your investments. Please contact our office for a free review of your current estate planning documents.

Ronald J. Axelrod

Tel. (585) 203-1020

An Important Estate Planning Document

A letter of instruction is a cheat sheet for anyone involved in settling your affairs. Unlike a will, this letter has no legal authority. However, it can provide an easy-to-understand explanation of your overall estate plan to your executor and lay out your wishes to your family for things not covered by the will.

When it comes to estate planning, we highly recommend that everyone, regardless of the size of their estate, prepare a letter of instruction for their surviving spouse or other family members. This letter amounts to the keys to the castle. While you are living, it is important that your spouse and children know where important estate planning documents are located and how to access them in the event of your disability or other medical or financial emergency.

Your instruction letter may include:

  • The location of legal estate planning documents such as a Living Will, Living Trust, Health Care Proxies, and Powers of Attorney

  • The contact information for your attorney, accountant, financial advisor, and personal contacts who should be notified in the event of your death

  • Access to all necessary networking or digital information to access social or financial records, including account numbers, user names, and passwords

  • A detailed list of monthly payments and from which account payment is coming from

  • Instructions as to who should get items that aren't necessarily valuable but might be sentimental

  • Any personal wishes or messages to your family

As with any other estate-planning document, your letter of instruction should be updated annually and kept in a safe place that is easily accessible by your relatives or heirs. At Ron Axelrod & Associates, our office stores all legal documents relating to your estate electronically and can forward them in an emergency. Our firm’s goal when planning estates is to make sure the plan works.