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Is an Estate Planning Attorney Mandatory for Setting Up an Estate Plan?

by David Cutner, Elder Law Expert
January 29, 2015

Question: Can I set up an estate plan without an estate planning attorney?

Answer: From an attorney’s point of view, I think the “knee jerk” reaction would likely be “of course not, that would be foolish.”  However, upon reflection, I think the correct answer is that it depends on your circumstances and goals.

Let’s remove a common concern at the outset – estate taxes.   Only about one-tenth of one percent (0.1%) of estates pay federal estate tax.  This is because the lifetime exemption from federal gift and estate tax is currently $5,340,000 ($10,680,000 for married couples) for 2014, and will increase in future years.  So, unless you are very wealthy, federal estate taxes are unlikely to be a consideration in your planning.  Of course, you will still want to check on whether your state collects an estate tax or an inheritance tax.  In New York, for example, there is no gift tax, and the estate tax exemption is $2,062,500 and will rise to $5,250,000 by April 1, 2017.  As another example, Pennsylvania collects an inheritance tax that depends on the status of the beneficiary, with tax rates ranging from 4.5% to 15%.

For most people, the principal estate planning issues are (a) how best to transfer my assets to my beneficiaries, and (b) how to avoid disputes among my heirs?

When an estate is relatively modest or the proposed plan is relatively simple, the “do-it-yourself” estate planner might consider holding his or her wealth in non-probate assets.   In many cases, these make a Will superfluous, and may avoid probate or administration in a court.  Here are some simple and effective estate planning tools that may avoid probate or administration:

Banks and financial institutions that hold checking and savings accounts, retirement accounts, or securities accounts, permit the account owner to name a beneficiary who will receive the account directly upon the death of the owner.  Typical beneficiary designations that you will see on the title to such accounts are:  I/T/F (in trust for), POD (pay on death), or TOD (transfer on deathInsurance policies and some annuities have named beneficiaries who receive a death benefit upon the death of the insured or annuitant.

Real estate that is titled as “joint with right of survivorship (JTROS),” or as “tenancy by the entirety” for married couples, will pass to the survivor directly.  Note that, if property is titled as “tenants in common,” each owner’s share will go to his or her estate, not to the survivor on the deed.

As you can see from these examples, many people might be perfectly able to put together an effective estate plan without the need for an estate planning attorney, and without going to court.  However, be aware that these examples do not take into account tangible personal property, or future additions to the estate, such as an inheritance or a wrongful death settlement.

There circumstances where consulting an attorney will be the prudent thing to do.   For example, a Will and/or a trust will likely be needed to achieve the estate planning goals of people who have minor children, disabled adult children, or children from a previous marriage; or who wish to exclude as beneficiaries individuals who are likely to challenge their estate plan, or where it may otherwise be difficult to achieve desired equality among beneficiaries.  Also, Wills and trusts allow you to choose an executor or trustee, so you can be comfortable that the proper person is in charge of your estate.

Wills and trusts are not documents that should be prepared without the assistance of a lawyer.   So-called standard forms that can be found on the Internet are often poor – and sometimes invalid -- substitutes for a document that is created for your unique situation by an attorney.

In addition, many people fail to consider the fact that, without effective planning for health care and long-term care -- which can be ruinously expensive -- there may be no estate left to distribute to beneficiaries.   Trusts, annuities, and other agreements, that are properly prepared by Elder Law attorneys to effectuate a long-term care plan that protects and preserves assets, can ultimately be used to distribute assets to your beneficiaries after your death.

The costs of long-term care are, for most people, the greatest financial risk that they face in their later years.  Those who ignore or discount this risk are really underestimating both the chances that they will need long-term care, and the dramatic financial consequences if they do need it.  According to the U.S. Department of Health and Human Services, about 70% of our population over the age of 65 will need some long-term care services in their lifetimes, and about 35% will need nursing home care.  The costs are astronomical.  In the New York Metropolitan Area, for example, home care will currently cost about $20 per hour, and nursing homes will cost $15,000 per month or more.

A further consideration is that proper analysis and planning may be needed to take advantage of opportunities to avoid capital gains tax on appreciated assets.   Many people hold low basis property that, when sold, requires the owner to recognize a substantial capital gain and pay significant taxes.  For example, homes and other real estate – particularly if purchased many years ago – will have appreciated greatly in value.  Some people hold stocks in companies for many years, watching them grow in value.  When these appreciated assets are transferred upon death (rather than during the lifetime of the owner), the beneficiary receives a “step up” in basis, meaning that the asset in his or her hands is now valued for tax purposes at fair market value.  Then, if the asset is later sold, capital gains tax is due only upon the gain that accrued after the death of the original owner, and tax is avoided on the gain that accrued during his lifetime.

People with substantial holdings will require good legal advice regarding their estate plans, and they typically will not hesitate to retain an estate planning attorney.  

If you have a more modest estate, and are tempted to do your own estate plan in order to avoid legal fees, my suggestion is that you might still want to have a consultation with an Elder Law attorney to review your plan, and the provisions you have made for long-term care.  The consultation should not cost much, and might wind up helping you avoid costly mistakes.  Don’t forget that a consultation with an attorney is totally confidential, and does not obligate you to do anything further with that attorney.

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David Cutner is one of the founders of Lamson & Cutner, P.C., a preeminent Elder Law firm in New York City and Westchester County. Mr. Cutner is known as an experienced and compassionate advocate for the elderly and disabled. Personal attention to the financial and health care needs of each client, and accurate, individualized advice, are hallmarks of the firm. Mr. Cutner helps clients achieve their goals in a cost-effective way.

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