Trusts & Estates FAQ
1. Why should I execute a Will?
The most important reason for executing a Will is that you get to determine who enjoys your property after your death. If you die without a Will, state law prescribes who will receive your property. By executing a Will, you can also personally select your fiduciaries; that is, the Executor of your estate, the Trustees of any trusts you may have created in your Will, and the Guardian of your minor children. In addition, by executing a Will, you can create trusts for some or all of the persons receiving property under your Will.
2. What kinds of property are not controlled by my Will?
Non-probate assets such as joint bank accounts, life insurance proceeds, "in trust for" accounts, "pay on death" accounts, "transfer on death" brokerage accounts and any other assets with a designated beneficiary do not pass under your Will. Generally, these assets pass outside your Will to some designated beneficiary or to a survivor. Since these assets do not pass under your Will, they cannot be used to carry out any tax planning you may have incorporated into your Will or any dispositions you make in your Will.
3. What is a Revocable Living Trust?
A Revocable Living Trust is a trust that a person creates during his or her lifetime to which he or she transfers his or her property. It is revocable because the creator of the trust can revoke it at any time during his or her lifetime and take back all of the property he or she transferred to it. At the death of the creator of the trust, the property in the trust will pass in accordance with the terms of the trust. If the creator of the trust transfers all of his or her property to a Revocable Living Trust during his or her lifetime, there should be no need to probate his or her Will on death.
4. What are some reasons for creating a Revocable Living Trust?
It may be advisable to create a Revocable Living Trust if you own real property in a state other than the state in which you reside. It is also advisable to create a Revocable Living Trust to avoid probate when you have distant or unknown heirs at law. Lastly, a Revocable Living Trust may be a preferable way to manage a person's property during his or her life while he or she is incapacitated.
5. What is the current amount of the federal and New York State estate tax exemptions?
For 2011 and 2012, the federal estate tax exemption is $5,000,000 per person; however, the law is subject to change after 2012. This exemption amount is now also portable between spouses. The New York State estate tax exemption is $1,000,000 per person and will continue at that level indefinitely unless the law is changed.
6. Do I have to pay a tax if I make a gift?
Gift tax is generally paid by the donor. At the federal level, there is an exemption from gift tax equal to the estate tax exemption (currently, $5,000,000). This exemption may be used against gifts made during life or applied against assets in your estate at death. There is currently no gift tax at the New York State level.
For further information about trust planning, please contact our law firm in Long Island at 516-328-2300, Manhattan at 212-279-9200, Brooklyn at 718-272-6040 or Rochester, New York, at 585-218-9999, to schedule an initial consultation.