The Critical Importance of Estate Planning 

Andrea Gray, Esq., Vice President, Estate Strategies

In this episode of StreetSmarts with Howe & Rusling, Andrea Gray, Esq., Vice President, Estate Strategies focuses on estate planning and why it is so important for everyone to have.

Hi, I’m Andrea Gray, Vice President, Estate Strategies at Howe & Rusling. In today’s Street$marts, I’m going to focus on estate planning and why it is so important for everyone to have. 

When the singer Prince passed away in 2016 at age 57, he left behind an estate worth about $200 million dollars. He was twice divorced and unmarried at the time of his death and had no children. Prince had numerous full- and half-siblings. Two of the siblings predeceased Prince, one of whom had a child. These individuals and others claimed to be rightful heirs to part of the estate. However, the situation was made even more complicated by the fact that Prince did not have a will!

Since he didn’t have a will, Prince didn’t exercise his right to determine who would and how much they would inherit.- Having a will would have resolved much of this controversy.

Basic estate planning, and the main documents produced, are essential to avoid that kind of scenario. Even small estates warrant thoughtful planning. Estate planning is for everyone who has personal belongings, a home, property, financial accounts, or other items, and would like them to be distributed a certain way after death. Today, I’m going to give you an introduction to the basic estate planning documents and why they’re important.

A will instructs what to do with your estate, or your income, assets, personal effects, and real property, upon your passing.

It dictates who your beneficiaries are, who will handle the legal affairs for your estate, and who will care for minor children. If you do not have one, it is likely the laws of your state and the court will decide those matters for you. In New York, for example, if you are married and have children and die without a will, the default is that $50,000 and ½ of your estate will go to your spouse, and the balance will go to your children. 

One of the most profound decisions a will memorializes is who you’d like to care for your minor children if you have passed away and no other parent is living or able to take custody. Often, Families are left debating who is best for the child and who you would have wanted, and often the scenario has to be played out in Court with a judicial determination naming a guardian. With a will, you decide who that person will be.

On another level, a properly drafted will can also help you save on estate taxes. Specific techniques used to draft what’s commonly referred to as tax-planning documents can save your estate from paying a “death tax” to your state. New York State has an estate tax “cliff” that, if triggered, can cause your entire estate to become taxable. Wills, and trusts, which are a topic for another day, can be used to mitigate and resolve many issues including reduction of estate taxes, taxes for non-citizens, leaving benefits for a person with disability, charitable giving, and business succession, to name a few. 

The next basic document is the power of attorney (POA) in which a person, also referred to as the principal, designates another person, called an agent or attorney-in-fact, to make decisions for the principal and carry out acts in specific matters if the principal is unable to.

The main role of the agent is to make decisions on the principal’s behalf if he or she is unable to due to illness, hospitalization, or loss of mental capacity. The agent can be given extensive or limited authority to make legal decisions for the principal. Some of the powers the agent can be given are access to pay bills, file taxes, make investments, and manage property. Importantly, the agent has a fiduciary obligation to act in the principal’s best interest. A power of attorney completed ahead of time ensures personal and financial affairs are attended to when the principal cannot handle his or her own affairs. Having a power of attorney in place often obviates the need for a guardianship upon a later incapacity. A guardianship involves a court of law making a decision of who will be designated and what powers will be given a person to act on behalf of the incapacitated person. By completing a power of attorney, a person keeps control of who an agent will be and what powers will be given him or her. 

Next is the Health Care Proxy, in which you are appointing someone to handle your medical decisions for you if you are no longer able to.

Typically, your proxy will make treatment decisions whenever you are incapacitated and unable to communicate due to a temporary or permanent illness or injury. With a properly executed health care proxy and HIPAA release, you are controlling who can access your medical information and carry out your wishes as it pertains to medical treatment. Your proxy will be able to make decisions for you only if you are unable to. 

Lastly, a living will is a document in which an individual records end-of-life and critical health care decisions.

In the event of vegetative state or a terminal illness, when you can no longer talk or make decisions for yourself, your wishes are pre-recorded. Your health care agent or proxy is required to follow your wishes within the living will document. Often, people select to have comfort care over ongoing life-sustaining treatment or extraordinary measures. 

To summarize, estate planning is about making sure your family understands how you want your assets and affairs to be managed in the event of your death or incapacitation.

We understand that starting the process can often seem overwhelming or daunting, but we believe it is like trading pennies for dollars when it comes to well done estate planning with a qualified attorney that you trust. Your belongings and estate are what you’ve worked your whole life for, and equal respect should be given to their distribution. Peace of mind is often the greatest outcome estate planning offers, and working with a good estate attorney will ensure that your plan is customized in accordance with your goals and desires.  

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