Thursday, 10 September 2020 13:48
By Stephen Kyne, CFP, Partner at Sterling Manor Financial, LLC | Families Today
Estate Planning Basics

With the Federal estate tax exemption (the amount you can pass estate tax-free) at more than $11.5 million per person, or over $23 million for a married couple, many people may be inclined to believe that estate planning is simply not something they need to concern themselves with. While that may be true from an estate tax perspective, estate planning is a multifaceted concept with certain principles that apply to virtually everyone. 

At the end of the day estate planning is about making sure your assets go to whom you’d like them to, and in the most efficient way possible. One way to do this is to write a will which dictates the distribution of your estate, but a will, alone, can be a very inefficient tool due to a process called probate.

Probate is the public process of certifying your will and distributing your estate. During this process your will can be contested, making the process potentially very long and expensive. You could expect to spend up to four percent of your probatable estate in legal fees and, even after a years-long process, your estate may not be distributed as you would have wished. 

In order to help eliminate these concerns, it is usually recommended that your assets be titled in such a a way as to avoid probate altogether. 

Non-retirement funds can be titled as “Transfer-on-Death” accounts. If held jointly, these accounts can also be titled as having “Rights of Survivorship.” Upon your death, assets in these accounts would be easily transferred to your joint owner first, and then to the named beneficiaries upon the second death. 

Your retirement accounts, including IRAs and employer-sponsored plans can have named beneficiaries. Just as with a Transfer-on-Death account, upon your death your assets can be easily transferred into the names of your beneficiaries. 

Because these types of designations are contractual, they are excluded from probate, and cannot be contested. Avoiding probate means these funds are available to your heirs almost immediately, and privately. 

We recommend reviewing your beneficiary declarations annually, or upon a life event, to help ensure they accurately reflect your wishes.

This certainly isn’t to say that a will is unnecessary. Quite to the contrary. A will is an important estate planning tool for distributing assets which can’t be distributed in a more efficient way. 

Many people mistakenly believe that if they don’t have a will, and don’t utilize beneficiary declarations or joint ownership tools, then their spouse will simply inherit everything. They are often wrong. 

This is called dying “intestate.” In this instance these assets would still be subject to a probate process, but without any documents to dictate your wishes, the State determines who inherits your assets. 

If you die intestate in New York, with a spouse and descendants, then your spouse will receive the first $50,000 of the intestate estate, plus half of the remainder. Your descendants would receive the other half. Nobody will be more surprised than your spouse!

Work with your Certified Financial Planner ® and a qualified estate attorney to help determine the best way to help ensure your estate goals are met. You may not require an intricate estate plan with many moving parts, but you should certainly be aware of the basic steps and tools available to you to help simply the process for your heirs.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret, Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities. This article contains opinion and forward-looking statements which are subject to change. Consult your investment advisor regarding your own investment needs.

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