Let's use a concrete example. You have not implemented any estate planning during your lifetime. You have no Will and your gross estate is worth $10 million. Your spouse, if you are married, will be entitled to one-half of your estate if you are a resident of New York. Your children will be entitled to the remainder. Your spouse may not appreciate this. Furthermore, if he or she is less grief-stricken than you might wish, your spouse may decide to bestow that $5 million on a new spouse who is considerably less worthy than you might have expected. If your current spouse is the spouse of a second marriage and you have children from a prior marriage, it is likely that your children from the prior marriage will never see a penny of this money. Your children will not appreciate this. There may also be a struggle as to how the respective shares are funded. And as you have left no instructions as to who will manage your estate (an executor would have been appointed in your non-existent Will), it may be years before these important issue are resolved and anyone sees any of your assets.

Additionally, a state and federal marital deduction will be available to protect the value of the property passing to your spouse from estate taxes. But the value of the property passing to your children will not. Your children may be delighted to hear that they will immediately receive one-half of your estate, but they will be less delighted when Uncle Sam and Governor Paterson present them with bills for estate taxes in the amount of $2,500,000, leaving them with a paltry $2,500,000. This is not a tragedy, but you might have done much better for all concerned.

With even minimum estate planning and a Will, here is how these results change: After making annual exclusion gifts to your children during your lifetime ($13,000/yr per child, or $26,000/yr per child if you are married), you might specify in your Will that your children (in trust, if they are minors) will immediately be entitled to property in the amount of the estate tax exemption amount, which is currently $3.5 million, upon which no tax will be imposed. You might make additional gifts of property to your children outside your Will (beyond the $3.5 million exemption amount) through life insurance proceeds from an insurance trust you created during your lifetime. The insurance trust will be structured in such a way as to prevent the imposition of estate tax on the proceeds. In this way, these amounts passing to your children will not be reduced due to the imposition of estate taxes. Your spouse will receive the remainder of your estate in a lifetime trust created under your Will from which he or she will be entitled to all income for life, annually. The trust will ensure that on the death of your spouse, the remaining trust property will be distributed to your children. Guardians will be appointed and trusts can be created in your Will for minor children (those under the age of 18) so that their persons and property are properly cared for until they reach whatever age or ages you determine.

If your spouse does not survive you, failure to appoint Guardians may result in a custody battle between your and your deceased spouse's families who may both want to raise the children. Property can also continue in trust for the benefit of your children if they later prove to be less responsible than you would like, preserving their assets and providing creditor protection.

If all members of your immediate family die in a common disaster, the "ultimate disposition" clause of your Will may determine how your property is to be distributed (siblings, friends, charities, etc.) rather than leaving the determination to state statute.

Survivorship life insurance may be purchased (in trust) to provide for estate taxes at your spouse's death, to once again protect the property passing to your children from estate tax. Fiduciaries of your own choosing will be appointed to manage your estate and the property held in trust for your spouse and children. Does this sound any better? It should.

If you are willing to do nothing more than sign a Will and are married at the time of your death, you can at least ensure that there will be no imposition of estate taxes until the death of your spouse.

Unless causing additional grief and strife among your family members is the goal of your estate planning (or lack thereof), please attend to these important matters now so that your family members will appreciate your thoughtfulness and consideration later.

Questions?

If you have any questions regarding this matter or any other estate planning techniques, please contact a Maurice Kassimir & Associates, P.C. Trusts & Estates attorney or e-mail us: sklawyers@skpclaw.com.