Who do you want to inherit your property? When will they receive it and under what conditions? What if they are a minor? If you do not have an estate plan, your property may pass through intestacy. Intestacy is where the State of New York will decide where your property goes. Generally, property that is distributed through intestacy will be based on whether you are married, or who among your decedents is still living.
Creating an Estate Plan is important because you can direct who your property should be distributed to, appoint a guardian for your minor children and plan for how your beneficiaries will receive their inheritance.
Probate is the formal, open to the public, court supervised process to identify and distribute assets owned by a deceased person (a “decedent”) in their name alone, at the time of their death. Moreover, this process involves identifying creditors, beneficiaries and to distribute assets according to a Will or by intestacy. Probate is generally a time intensive process because at a minimum it can take at least 9-12 months and may be an expensive process (court filing, administration and attorney fees).
Regardless of the size of your current estate, everyone should have the following core estate planning documents: Health Care Proxy, Power of attorney, Will and Trust.
Each document serves an important purpose in your Estate Plan. During your lifetime and while you have capacity, you may update your Estate Plan as circumstances within your life change.
A Health Care Proxy appoints an agent to be able to make medical decisions on your behalf, if you become incapacitated and can no longer make decisions.
A Power of Attorney appoints an agent to make financial decisions for you, including paying bills and moving money for your benefit.
A Will is a document that tells the probate court and public where your assets will go upon your death and who will oversee the distribution.
A trust is also known as a Will substitute and explains how your assets be distributed upon your death and who will oversee the distribution. A trust avoids probate and is a private matter.
A trust is known as a Will substitute and you can distribute your property in a similar way. A trust includes many advantages over a Will because property being distribute through a trust avoids the expensive and time intensive process of Probate.
A trust requires more time, effort and may be expensive to establish. When you establish a trust you must fund your trust by transferring legal ownership into the trust. Some assets may be left to your trust by a beneficiary designation called a “payable of death (‘POD’)” or “transfer on death (‘TOD’).” Assets in your name alone and without a beneficiary designation at the time of your death may transfer through Probate so it is important to carefully retitle assets into your trust during your lifetime.
Additional alternatives to a Will and trust include titled property owned as joint tenants and tenancy by the entirety. Property held within a tenancy pass automatically outside of probate to the surviving owner upon the death of the first owner.
Additional alternatives to a Will and trust include Payable on Death and Transfer on Death beneficiary designations.
Although alternatives to a Will or Trust exist, there is no substitute for a trust because within a trust you can establish how your beneficiaries will receive property from the trust, at what ages and what conditions, and what percentage of the property will pass to each beneficiary. Trusts allow you to distribute property effectively, efficiently and at a savings over probate.