[0:04] Welcome to a State Planning with Bernard Law and Attorney Daniel R. Bernard.
[0:10] Founder of Bernard Law, PC, serving clients across Long Island.
[0:16] Dan focuses on creating customized state plans to protect your assets,
[0:21] minimize taxes, and ensure everything is handled as you intend.
[0:26] I'm Leanne Lyon and today we are talking about
[0:30] when you should update your estate plan in New York
[0:34] and what actually triggers the need for that change.
[0:37] Hi Dan.
[0:38] Hello again, thanks for having me back.
[0:40] It's great to see you again.
[0:42] And the first question I guess is, you know,
[0:46] we had a little conversation before we started this
[0:48] and I'm excited to talk about those things, but first things first.
[0:51] Why isn't an estate plan something that you can create once
[0:55] and leave in place?
[0:57] Because we are lives change things things things change and circumstances change
[1:04] and the laws sometimes change too.
[1:07] So what we tell people with the state planning is it's kind of like getting oil changed.
[1:11] They tell you every 3000 miles, no one listens to that.
[1:14] Maybe no one listens to that. I don't know.
[1:16] But I'm certainly I'm not. But you know, we say every five years
[1:20] or when you hit a major life event,
[1:22] you should take a look at this stuff.
[1:25] What would be those life events?
[1:27] What kind of changes in someone's life tend to trigger that need
[1:30] for an update or a look at the estate plan?
[1:34] So there's some there's positive ones there's getting married.
[1:37] There's having children having grandchildren can affect your estate plan.
[1:42] Maybe if you start a business that we want to do some estate planning around your around
[1:47] the continuation of your business after you pass away.
[1:51] Then there's the negative ones if you get divorced or if your parents passed away
[1:55] and you come into a big inheritance or if maybe based on their estate planning,
[1:59] they've set up trust for you.
[2:01] Maybe you need to do your own estate planning to deal with those trusts.
[2:05] So I would say those are usually the big ones marriage, divorce, having children.
[2:10] Okay. And how do major family changes?
[2:14] Like you said, marriage, divorce, having children affect whether a plan
[2:19] will still work as originally intended.
[2:21] Sure. So I'll start with the negative.
[2:24] So having a getting divorced, we have a statute in New York State that says
[2:29] if you divorced your spouse any beneficiary designations you've made for that spouse,
[2:34] any any appointments of that spouse is a fiduciary.
[2:37] So if you've appointed them as your executor, your healthcare proxy,
[2:40] agent under a power of attorney, all of that automatically revoked.
[2:45] If you've designated anything to a former spouse in your will, automatically revoked.
[2:50] Your will is basically probated as if that former spouse had already passed away before you.
[2:56] So they just skip to the next person they pretend like that spouse died essentially.
[3:01] The problem is, so a lot of people will say, after a divorce, well, I just spent a lot of time
[3:05] in a lot of money with an attorney that usually wears nicer suits than I wear as a
[3:11] matrimonial attorney is they're real, real select, right?
[3:13] I spent a lot of money, a lot of time with, with those guys.
[3:15] And I don't really want to spend any more time with an attorney.
[3:18] And he told me, you know, the statute is everything's revoked.
[3:21] The problem is revokes for your spouse does not revoke for your spouse's family does not
[3:28] revoke for, so if you have your brother-in-law as your healthcare agent,
[3:32] which I see quite often, maybe he wanted to make those medical decisions for you when you
[3:37] were married to his sister, I don't know if I wanted to make my medical decisions
[3:40] when I'm not married to his sister, right?
[3:42] That's not automatically revoked.
[3:44] I've had this come up where maybe you've left assets to your former spouse's family.
[3:51] They're still going to get those assets if you don't, if you don't, if you don't update.
[3:55] So those are the kinds of things I say after a divorce, you know, let the dust settle for a little bit.
[4:01] Don't wait too long, but let the dust settle.
[4:03] Then come see a nice, friendly estate attorney.
[4:06] And let's just have them take a look at your plan and make sure it doesn't need to be updated for those things.
[4:13] And then the positives, right, people, you get married, you have kids.
[4:17] If you, if you're married in, in your estate, your spouse can elect against your estate.
[4:23] They can take one third of the estate, but that may not be what you want.
[4:27] You may want them to have a hundred percent of your estate.
[4:30] So if you have an estate plan that maybe you did when you were young, that your parents just told you,
[4:36] some clients, they get their young kids do the estate planning when they're doing their planning.
[4:40] That just, if you have a, well, since everything's going back to your parents, that's not going to be revoked just because you got married.
[4:46] And we want to make sure you're, that new spouse is getting, getting your, getting your assets under your will.
[4:51] Maybe we want to make sure your new spouse is making those medical decisions for you, rather than who we've already designated under that healthcare proxy.
[4:58] And we want to make sure, besides the estate plan documents, make sure you don't take your beneficiaries.
[5:02] Your 401k makes sense, the moment that as your beneficiary of your 401k when you're 22,
[5:08] and you start that job right out of college, if you're lucky, right?
[5:12] But it doesn't make sense when you're 37 and you're married in two kids, mom and dad don't need to be the beneficiaries of 401k.
[5:19] So the one updates stuff like that.
[5:21] And if you have young kids, you want to make sure your estate plan is going to take care of those young kids.
[5:26] What happens if God forbid you and your spouse pass away? Who's the guardian for those kids?
[5:31] And what happens with all the money for those kids? I'm sure you don't want, you know, those minor children to inherit maybe your million dollar to million dollar life insurance policy at seven years old, or maybe even at 17 years old, right?
[5:46] So we want to build stuff into into our plan to protect our children from their own youth and experience and guard against, you know, bad things happening to us.
[5:57] What I like to say is, I'm in the God forbid business. God forbid this happens. We want to make sure we have something in our in our estate plan that can take care of it.
[6:05] The former teacher, I was, I learned that the frontal lobe of our brains, the one that makes the decisions, the logical decisions isn't fully developed until our mid even late 20s.
[6:17] So when I developed my estate plan for my children, when they were children, I definitely took that into account.
[6:24] That's, that's the other thing I tell people it's doing a state plan is like when you buy a snowblower, buy a snowblower, it doesn't snow that winter, maybe not where you're, where you're firmly in, but in New York, doesn't snow, doesn't snow every winter here.
[6:36] My parents got me a sled for Christmas when I was 12. I don't think it snowed again until I was 27. So I like my people, you doing a state plan, you're going to, you're going to live forever.
[6:44] But to your point about, you know, the frontal lobe, a lot of times people will tell me, you know, 18, my kids are going to have everything at 18 and I tell them, do you remember what you were like at 18? If I had a million dollars at 18, I would not have a million dollars at 40. It's just not, it's just, I would probably want to have a million dollars at 20. So it's just, you know, we want to protect our kids from themselves and we can put stuff in there that maybe we space out those distributions, maybe say, hey, at 25, when that frontal lobe is supposed to have come in, will they have some of the assets.
[7:13] But in case that hasn't come in yet, we're going to give you the rest at 30 when scientifically should definitely be in by them.
[7:19] For those are the kind of things that we can, to your point, definitely plan for and I will say, I haven't done one estate plan where anyone has told me their kids can get the money at a younger age. Every estate plan I've done, if I tell them, okay, well last time you're here, we said at 25, you're kids can get the money. Every single time it's what 25, no way we got to make that we got to make it older.
[7:42] So my experience, but that's, that's what I've been seeing.
[7:47] How to changes in assets like buying or selling property is growing investments or starting a business impact the effectiveness of an existing plan.
[7:57] Sure. So to me, the biggest thing there would be would be the probate and we want to avoid probate. And if you've been listening to my podcast and watching these other videos, I talk about that a lot. We want to avoid the probate process.
[8:09] So everything you just described buying a house, starting a business, those are adding probate assets to our estate and we're adding probate assets. We want to make sure those probate assets are turned into non probate assets.
[8:22] And the only way to turn those not those probate assets into non probate assets is to put them into some sort of trust, whether that be revocable or irrevocable.
[8:31] But if you're starting a business, we want to make sure that if you pass away, your spouse can close out that business or sell it quickly, not waiting for a court to appoint them as executive six months from now.
[8:43] And then they can sell your business, then they can pay your employees. We want to have that business continuity.
[8:48] If you're buying another house, we want to make sure that your house isn't going to cause a probate for your kids and that they can sell your house.
[8:56] As soon as they have that ready willing able buyer, usually this market in a couple months, rather than waiting eight months to be able to close when the court allows them to.
[9:06] So sometimes people may come in and they're in their early 30s or their 20s and it's just they may they don't own a house. They don't have probate assets yet.
[9:15] They didn't set up a trust. But once they start getting, you know, then they buy a house, have a probate asset. Now you need a trust. Now your estate plan needs needs that update to remain effective.
[9:25] Another thing that I've seen people say is, well, I have the estate plan. It's good. But in New York law, if law or tax rules change, can that out date on a state plan?
[9:38] Absolutely. I've been I've been an attorney since 2013 and New York state laws have changed multiple times since then we've had we've had the state tax exemptions go go up.
[9:50] We had the federal tax laws change. When I first started doing this, there was a lot more people that were going to be subject to a state tax. Those exemptions have gone incredibly high right now.
[10:00] That being said, we're going to have a very big generation of people that are going to be passing away in the coming decades. And what is that going to do to states and the federal finances state states laws certainly can change again.
[10:13] Especially when the federal government in New York state and the other states see how much money they could be collecting from a state tax from people. And that may be something that they look into. I'm not trying to be negative and project that on to people.
[10:27] But if you go the other way to right and that's certainly what I've been seeing so far is the exemptions have only gone up. It's we've seen people that when I first started doing this needed to do a state tax planning don't need to do any state tax planning now. So you may have an estate plan that has some estate tax planning in there.
[10:42] That isn't really necessary anymore. And it can we can simplify things for your family. So that's the laws can change positive or negative effects to your estate plan.
[10:53] And it's also important because you may come in and you're not you're not have a taxable estate. But you're not you may be on the cusp and you know a few good years of investments.
[11:05] Now you have a taxable estate and your kids are paying some estate tax when we could have done some real simple estate tax planning and saved your kids thousands of dollars.
[11:15] What is some of the warning signs that in a state plan no longer reflect someone's current situation.
[11:22] So I would say some of these state plans. I've seen that when the paper when the paper started starting to get yellow. I'm a little concerned. This might be might have been around for a while, right.
[11:33] But if you look at your state plan and you say, well, I have three kids and this is a state plan only talks about two kids.
[11:40] Or you look at your state plan, you say, well, my executor was my uncle. He died 20 years ago. I need I need to move different people into these fiduciary roles.
[11:48] Because when I tell people when they're picking their executives picking their healthcare proxies, we want to pick the best person for today. A lot of times people are thinking, well, who's going to be around what I'm 80.
[11:59] And it would be my cousin, but he's a mess right now. He couldn't be my healthcare agent today. You're right. He couldn't. So let's pick the best person for today. And then you can always update these documents as time goes by.
[12:11] And you can always have as many backups in these documents as you feel comfortable with. And I always encourage my clients, the more backups we put in these documents, the stronger they're going to be the less need for an update because we have those contemporaries in place, maybe behind the people that makes sense now.
[12:27] So that God forbid, like I told you man, the God forbid business God forbid we don't we don't get an update here. At least we may have someone appointed to make to make things go a little smoother.
[12:39] Can you walk through an example where someone waited too long to update their plan and it caused problems.
[12:46] So a recent one within the last few years I had a client that did their state planning, probably 20, 20, 30 years ago.
[12:56] And now, you know, God's got some bad health news made an appointment to for me to update the estate plan.
[13:03] And then how to cancel the appointment and unfortunately passed away a few a few weeks later before we're we're able to meet and update the plan.
[13:11] So then a few months ago, but so now rather than me doing a state planning for this person, I ended up having to do probate for this person, whereas had I done the state planning, we wouldn't have had to do probate at all.
[13:22] And we wouldn't have had to spend that that that money, the court cost, the the attorney fees on on the probate and this, you know, sometimes we can have a taxable estate.
[13:35] And we didn't have, you know, some the best tax planning we can do is often before you pass away, so we missed out on doing some estate tax planning, you know, before this client passed away, which could have been beneficial for the family moving forward.
[13:52] So it's, you know, that that's a monetary one where we saw, hey, this didn't go the way I wanted it to go.
[14:00] I have another example I had a client come in she was very happy because her, her, her spouse had her former spouse had just passed away and everything in the will was going to her, but unfortunately he had not updated that a state plan.
[14:16] Although, and I believe this, he would have wanted everything to still go to her, they it was not a man, they weren't getting divorced for, for, you know, no laws between them, but he did not update that a state plan to ensure that the assets still went to her before he passed away and the state plan did not, I don't think his estate went the way he would have wanted it to go because he waited on making that update.
[14:40] And as soon as we wrap up here, I'm going to go make sure the color of the pages of my trust, oh wait, but while I look through it, what are some of the key things as we wrap up here that people should be looking at what should be reviewed or updated to make sure that a plan is actually current and effective.
[15:01] So number one thing I would look at is my fiduciaries, who have I picked as my executor, who have I picked as my healthcare agent, who have I picked as my agent under my power of attorney, because oftentimes it's, as time goes by it's not the people we would have wanted maybe our typically our spouse first that's okay.
[15:19] Usually our backups are not the people we want very rarely in my updating people's estate plans and using the same fiduciaries.
[15:27] The other thing you want to look at is make sure does this have all my kids in it, make sure does this is this is this covering all my assets, is this really how I want things to go.
[15:38] And then the biggest thing is a lot of times I tell people when they're doing the planning when they have younger kids even you know teenagers, I tell them this isn't going to be a less estate plan because at some point you're going to update this and bring your children into these fiduciary roles.
[15:52] So that to me is maybe if you have a little bit of updating your estate plan, think about well, let's let somebody did this and well, how old are my kids now, you know, when I first did this, I was thinking, who's their guardian.
[16:03] Now I'm thinking they can be my healthcare agent, they can be they can be my executor and I don't need people to take care of that necessarily.
[16:10] Now they are at that age where they can take on those roles.
[16:13] And frankly, they're going to want to take on those roles. They don't want your oldest state plan where their aunt is making the decisions and voting over them at 40 years old.
[16:21] They want to they want, they want to be your executor and they want to handle this stuff.
[16:25] And you just lit another fire underneath. Thanks a lot. Well, that is it for today's episode. I have to go and no, that is it for today's episode of a state planning with Bernard Law.
[16:37] If you'd like to learn more about Daniel Bernard and how to keep your estate plan current and aligned with your goals, visit Bernard estate plan.com.
[16:47] Thanks for listening and don't forget to like, leave a review and subscribe to the show so you catch every episode. Thank you Dan.
[16:57] Thank you.
[16:58] Thanks for watching. Be sure to hit that like and subscribe button and leave us a review in the comments.