Estate planning protects your property and assets if you become incapacitated or die. It guides your family about your wishes for health care and finances when you can’t make those decisions anymore. If you don’t have a written estate plan, the state may make these decisions for you. When you’re remarrying, it’s time to update your estate plan to ensure your family receives your assets as you wish. This page will explain the common estate planning mistakes to avoid.
1. Forgetting to Change Your Named Beneficiaries
You may have started your retirement plans years ago, but now that you’re remarrying, it’s time to update them. Assets such as life insurance and individual retirement accounts typically name a specific beneficiary. The beneficiary is the person who will receive the funds from the plan after your death. According to federal law, funds from certain plans, such as 401(k)s, automatically go to your spouse if you don’t sign a beneficiary form. If you want your children to receive your 401(k) funds at your death rather than your spouse, the law requires your spouse to give consent in writing. Other retirement plans may go through probate court (known as Surrogate’s Court in New York) if you have not named a beneficiary.
2. Failing to Update Your Health Care Plans
A durable power of attorney appoints a person who will make financial decisions for you if you become disabled. Your healthcare proxy specifies who can make healthcare decisions for you, and a living will explains your wishes regarding life-extending measures if you are unable to express your choices. It’s important to revisit these documents with your new spouse and ensure that you still want the named person to make these decisions for you.
3. Overlooking Protections for Your Current Spouse
Updating your named beneficiaries is one way to ensure your new spouse will get funds from your retirement accounts. You can also specify how your assets are left between your spouse and children when planning your estate. You may want to ensure your spouse gets to keep your marital home, rather than the value going to your estate. To do so, you can specify in your will that your spouse gets a life interest in the home. Doing this allows your new spouse to keep the home for the duration of their life.
4. Failing to Care for Your Children
If you die without a will, the probate court automatically distributes your assets between your spouse and children. For inheritance purposes, the law treats your adopted children like your biological children. Children that your spouse legally adopts do not lose their right to your inheritance simply because they are adopted. However, your spouse’s children that you never legally adopted will not automatically receive a share.
You can name your children and stepchildren as heirs in your will, but a will must go through probate court. A will can spend months or years in probate. To avoid court proceedings, you can create a trust for your children and a marital trust for your spouse. These trusts are called “living trusts” because you create them while you’re alive.
A typical estate plan contains a revocable living trust. Usually, you’ll be the trustee of the trust while you’re alive. As the trustee, you’ll control the trust and can revoke it at any time. You’ll name a “successor trustee” in the trust document who will control and distribute the trust’s assets when you die. According to its terms, the successor trustee can distribute the trust’s assets almost immediately after your death.
5. Treating All Heirs Equally
The law does not require that you pass your assets on to your heirs equally. Often in a marriage, spouses do not bring equal finances. For example, one spouse may move into the other’s home, or one spouse’s job brings in more money. As a result, you may want to ensure that your children receive more than your stepchildren. Or, perhaps one of your children has special needs, and you want to leave more to that child after you pass. Thoughtful estate planning is one way to care for these wants and needs.
6. Hesitating to Give Financial Gifts When You’re Alive
New York taxes estates with a value over $5,930,000 for deaths in 2021. The IRS taxes estates over $11,700,000 for 2021. While this is a large amount of money, consider the value of New York real estate that could quickly raise the value of your estate.
The IRS adds gifts given during a person’s life to the taxable estate if they exceed the annual exclusion. However, New York adds gifts to the estate’s taxable value only if given within three years of a person’s death. The annual federal exclusion for 2021 is $15,000 and rises to $16,000 for 2022. Under these requirements, you can gift assets to your children and you won’t pay taxes on them so long as the gifts do not exceed $15,000 (or $16,000 in 2022). In addition, you can give to your children each year without paying gift taxes, as long as the gift is less than the annual exclusion.
The Law Office of Andrew M. Lamkin: Helping New Yorkers Avoid Estate Planning Mistakes
Planning your estate can be complicated, especially when you’re considering the needs of multiple marriages and blended families. It can be a massive weight off your shoulders to know that your assets will be distributed the way you want them and that your family will be cared for after your death. When you’re ready to plan your estate, contact Andrew Lamkin, principal lawyer at the Law Office of Andrew M. Lamkin, P.C. Andrew has experience with complicated estate plans. He can help you decide whether a will or a trust is the best option for your estate. As an expert in probate law, Andrew can help you avoid the most common estate planning mistakes and provide security for your new spouse and children. Contact us today for help with your estate planning needs.