On this blog, we typically provide basic, broad-based information about estate planning topics, because most people are not very well informed at all. In this piece, we are going to come from a different approach in an effort to provide some tips about some more savvy concerns that lie just beneath the surface.
Don’t Underestimate Estate Administration
Far too many people are completely unprepared from an estate planning perspective. Time flies, and this is not something that many people really want to consider, because mortality can be intimidating. When they finally take action, they focus on stating their wishes in writing, and this is all well and good.
At the same time, you should place an emphasis on exactly how your wishes are going to come to fruition after you are gone. If you use a last will to state them, you would name an executor to act as the administrator. Depending on the complexity of your estate, it can be a big, time-consuming job.
It is not necessarily a responsibility that you bestow upon someone as an act of love and/or respect. There are important business-related tasks that must be completed, and you should certainly keep this in mind. If you do nominate someone that you know personally, there can be real or perceived conflicts of interest, and longevity concerns can creep into the picture.
There are no particular formal qualifications that are required by law, but you should certainly make sure that the executor is willing to accept the position. If you don’t know the right person personally, there are financial institutions that provide executor services. We generally recommend you nominate an individual who will respect your wishes, someone who is a good communicator, and someone who can make decisions in a very difficult time.
The same thing is true with the trustee if you decide to use the trust as an asset transfer vehicle. With a living trust, you would act as the trustee and the beneficiary while you are alive. However, if you become incapacitated or upon your death, a successor will take over these tasks. Many people will choose a professional fiduciary like a trust company or the trust section of a bank.
Consider Estate Tax Responsibility
Very few people are exposed to the federal estate tax, because there is a rather high credit or exclusion. This is the amount that can be transferred before the estate tax would be applied on asset transfers. On the federal level, the exclusion is $11.4 million this year, and the maximum rate is 40%.
There are some states in the union that have state-level estate taxes to contend with as well. Our offices are in Albany, New York, and Essex Junction, Vermont. As luck would have it, there are state-level estate tax in both of these states, and the exclusions are much lower than the federal exclusion.
In New York, the exclusion is $5.74 million in 2019, and the exclusion in Vermont’s is just $2.75 million. Clearly, it is plain to see that you can be exposed on the state level even if you are exempt from the federal estate tax. You should certainly inventory your assets carefully to find our you stand, because there are steps that you can take to mitigate your exposure.
Prevent a Guardianship
Unfortunately, a significant percentage of elders become unable to make sound decisions at some point in time. The state could be empowered to appoint a guardian under these circumstances, but you can proactively plan ahead to prevent a guardianship.
This is done through the execution of documents called durable powers of attorney and health care proxies that you use to name agents that would act on your behalf in the event of your incapacitation. You can also add a living will to state your wishes regarding the utilization of life support.
Download Our Free Estate Planning Worksheet!
We would like to invite you to download our estate planning worksheet. You can learn a lot if you go through it, and it is being offered free of charge right now. To get your copy, visit our worksheet download page and follow the simple instructions.