Integrated Estate Planning: A Comprehensive Approach to Asset Preservation and Protection The Law Office of Terrence P. DwyerOffice addresses – by appointment only:141 North State RoadBriarcliff Manor, NY 10509277 Main StreetCatskill, NY 12414Mailing Address:Post Office Box 1996Poughkeepsie, NY 12601TEL 845.849.3706TPDLAW@aol.comwww.tpdlaw.net
ESTATE PLANNING • What is estate planning? • Accumulation, conservation, preservation and transfer of assets and property to heirs and beneficiaries with minimal cost and tax to the estate. • Overall purpose is to draw a plan to maintain the financial security of the of individuals and their families. • Involves lifetime planning that leads to conservation and transfer of assets not only at death but during one’s lifetime.
ESTATE PLANNING • It also facilitates the intended and orderly transfer of property at death. • Takes into account the family unit and structure and the potential costs of different methods of property transfer. • It should be an efficient and inexpensive transfer of wealth.
ESTATE PLANNING • Primary instrument in estate planning is “the Will” • Who can make a will? • Testator/Testatrix • Legal capacity– 18 years of age or older • Testamentary capacity – be of sound mind and body; know the nature and extent of his/her estate
ESTATE PLANNING • Will requirements: • Written • Signed by testator/trix • Witnessed • Dated • Attested to and signed by minimum 2 witnesses • Personal representative selected (Executor/trix)
ESTATE PLANNING • DECEDENT – w/ a will • Testacy – death with a valid will • Testate – any person who makes and dies with a valid will. • Decedent’s property passes to beneficiaries and devisees • DECEDENT – w/o a will • Intestacy – death without a valid will • Intestate – any person who dies without a valid will. • Decedent’s property passes to heirs at law according to state laws
ESTATE PLANNING • Intestacy leads to estate distribution according to state laws known as intestate succession statutes. • NY statute §4-1.1 Estate Powers and Trust Law • CT statute §45a-437 Probate Court and Procedures • Is this an acceptable “fail-safe” method for property distribution? Absolutely not! Why? Let’s look at an example…..
ESTATE PLANNING • Property distribution of John Smith who died w/o a will: • Estate: $100,000.00 cash; $600,000.00 real property (3 homes each valued at $200,000.00) • Survived by 5 daughters: Mary, Martha, Madeline, Maureen, Maxine • Under intestate succession laws each daughter receives $20,000.00 cash (less estate expenses) and a 1/5 interest in the real property valued at $120,000.00
ESTATE PLANNING • What if Mary pre-deceased her father and left two children, Alex and Andy, and no spouse? • Martha, Madeline, Maureen and Maxine each receive $20,000.00 cash and a 1/5 interest in the real estate. • Alex and Andy each receive $10,000.00 cash and an equally divided 1/5 share of the real property, $60,000.00 each.
ESTATE PLANNING • The prior examples assume that there are no other issues that would interfere with this otherwise orderly transfer of Mr. Smith’s property upon his death. • But life does not work that way and real issues and real problems occur in all our lives. • Proper planning helps to alleviate the cost, time and added emotional toll that may otherwise be present without such planning.
ESTATE PLANNING • Back to the Smiths: Assume for the scenario that Mr. Smith died while estranged from his daughter Martha, who he swore during his lifetime he was going to disinherit. Andy, the child of Mary, is a 10 yr old minor while the other son Alex is a 22 yr old drug user who is in and out of rehab. Also, assume Maureen is estranged from her siblings and has not spoken to them in years. Maxine suffers from Down’s Syndrome and had been cared for by Mr. Smith until his death.
ESTATE PLANNING • Mr. Smith died without a will leaving his estate plan to the statutory scheme established by the state. • What would an estate plan have accomplished that intestacy may not? • What are the present problems with intestacy for the Smith estate?
ESTATE PLANNING • What would have advanced planning done for the Smith estate that intestacy will not? • Appoint a personal representative (Executor) to handle the settlement of his estate • Provide for a guardian for Maxine and established a trust for her care • Disinherit his daughter Martha if that was in fact his plan • Create a testamentary trust for is minor grandson Andy • Create a separate spendthrift trust for his older grandson Alex • Each of these prior planning decisions would avoid the expense involved in settling Mr. Smith’s estate, insure the security of his family members and leave more value in the estate.
ESTATE PLANNING • “Let our advance worrying become advance thinking and planning.” -- Sir Winston Churchill • Less than 1/3 of all U.S. citizens have a will. • More than 2/3 die without a working estate plan.
ESTATE PLANNING • A will gives the testator/trix: • the means and opportunity to describe the nature of his/her estate, • to describe the property owned at death, • and to designate to whom that property is to be distributed.
Preparing to Draft the Will • An integral aspect of the estate planning process is not only the post-death distribution of property and assets but the pre-death distribution of property and assets according to a well thought out and drafted plan as well as the client’s control of pre-death health considerations (to the extent they can be exercised). • This is where Health Care Proxies, Living Wills and Powers of Attorney come into play.
Preparing to Draft the Will • Health Care Proxy This is essentially a special form of power of attorney created by state statute restricted to an agent’s authority over health care decisions for the principal. NY – on 07/01/90 the New York Legislature passed a health care proxy law, NY Public Health Law Article 29-C . CT – on 10/01/06 the Connecticut Legislature changed state law and re-vamped the prior health care proxy document used in the state, CT General Statutes §19a-575a.
Preparing to Draft the Will • NY does not allow a health care proxy to contain general power of attorney provisions and does not allow a power of attorney to contain health care agent instructions. They must be separate documents. • CT allows a “health care representative” to be appointed in the same document relating to anatomical gifts and advanced health care directives (as in a living will).
Preparing to Draft the Will • Living Will Legal document expressing an individual’s wishes regarding life-support systems and heroic measures to prolong life in the event the individual is terminally ill or permanently unconscious and unable to communicate. It has statutory recognition in CT, it does not in NY.
Preparing to Draft the Will • Living Will New York does not have a statute so living wills must conform to the requirements of case law – In re Westchester County Medical Center, 72 NY2d 517 (1988):there needs to be “clear and convincing” evidence of patient wishes. Though not established under NY law the courts of NY accept evidence of a person’s health care wishes, as in the form of a Living Will.
Preparing to Draft the Will • Power of Attorney Statutory form in NY and CT, provides for the appointment of an agent to act for an individual when that individual is unavailable to act on their own or unable to act on their own. Different Types: General Power of Attorney Durable Power of Attorney Springing Power of Attorney Springing Durable Power of Attorney
Preparing to Draft the Will • Power of Attorney General Power of Attorney – goes into effect immediately; does not survive the subsequent incapacity of the principal; power of agent terminates upon death of principal. Durable Power of Attorney – survives the subsequent incapacity of the principal; terminates upon death of principal.
Preparing to Draft the Will Power of Attorney Springing Power of Attorney – goes into effect at a future time or upon a future event; terminates upon death of principal. Durable Springing Power of Attorney – survives incapacity of principal and goes into effect at a future time, but also terminates upon the principal’s death.
Setting Up Your Estate Plan • The key to establishing a successful estate and life plan is to first take inventory of your assets. • Next, consider who you would want to serve as your health care agent, power of attorney, personal estate representative. Consideration must also be given, depending on your plan, to the appointment of guardians and trustees. • Do you own a business? Discuss with family the plan for the succession of your business. • Contact a trusted professional who can assist you in your planning. An estate planning attorney will draft the necessary documents and depending on your circumstance will work closely with your other trusted advisors such as you accountant or financial planner.