Three estate planning strategies for middle class New Yorkers

These three top estate planning tips are beneficial to those in the middle class living in New York.

Estate planning is beneficial for individuals and families in every tax bracket. Those who fall in the middle class can take advantage of a number of strategies to reduce tax burdens and help better ensure assets are distributed according to their wishes. Three of the more helpful legal strategies include:

  • Will. Likely the most commonly known legal document used in estate plans, a will provides instructions for the distribution of assets. A recent article in U.S. News reports that an estimated 64 percent of American adults do not have a will. Without a will, estates are generally transferred through probate. Probate is a court process that can be both time consuming and costly. An estate plan can help reduce or even avoid the need for probate.
  • Trusts. These legal tools are not only useful for estate plans during the transfer of assets, but also offer benefits to the creator during his or her life. Depending on the creator's wishes, a number of types are available. Some examples include AB trusts, living trusts, special needs trusts and charitable remainder trusts.
  • Beneficiaries. It is also wise for individuals to regularly review their beneficiary designations. Beneficiary designations can be present on a number of accounts including insurance policies and retirement accounts. A beneficiary is the person that the assets transfer to and allows the transfer to take place outside of probate.

These are just a few of the considerations to take into account when putting together or updating an estate plan. Another issue to be aware of is the impact of taxes.

Estate taxes: Federal and state

The transfer of estates can be taxed at two levels: federal and state.

Federal estate taxes take the fair market value of all assets of the estate into account. The total of items like savings accounts, retirement accounts, property and personal items is referred to as the "gross estate." This value is determined by considering the fair market value of these items. Estates with a value of $5,430,000 in 2015 and $5,450,000 in 2016 are subject to this tax.

In New York, a state estate tax can also apply. This tax applies on estates over $3,125,000 in 2015 and $4,187,500 in 2016. This amount takes into consideration both the federal gross estate as well as any includible gifts. An example of an includible gift is one that is given in the three years prior to the giftor's death.

Importance of legal counsel

Putting together an estate plan can lead to financial security both for the creator in the present and the creator's family in the future. Contact an experienced estate planning lawyer to discuss your options.