The Future’s Not What It Used To Be – You Need an Estate Plan Now

It took me five years of practicing trust and estates law to develop my own estate plan. The cobbler’s children have no shoes, right? I spent my days counseling clients on the importance of having a will and advance directives, at the very least, and could not find the time over a period of years to plan for myself.

What finally triggered me to plan for myself was having my first child, Margot. I wanted to have a plan in place before she was born, to pick guardians for her if something were to happen to my spouse, Patrick, and me. I also wanted her to have a trusted person to manage our assets for her benefit if we were gone, and I didn’t want her to receive those assets outright until after college, at the very earliest.

For many people, lawyers included, estate planning is often the item on the proverbial to-do list that keeps getting pushed aside. Not because we think it is unimportant, but because we have a lot of other tasks that have higher priority. As lawyers, we spend our careers helping others navigate the legal system, and our clients rely upon our expertise and guidance. So, of course, it is hard to find time for ourselves. It really should be considered a form of self-care to take time out of our busy schedules and develop a thoughtful estate plan for ourselves with qualified professionals. I know I felt a lot better and less stressed after finalizing my own plan.

For lawyers in transition, in particular, it is important to carve out time to think about your own future. Lawyers transition their practice for a variety of reasons: retirement, career changes, family changes or emergencies, sudden illnesses, disability, death or other miscellaneous situations that can arise. Any attorney can experience a variety of transitions over their career too. A lot of times it can take events like these to initiate taking the steps to develop an estate plan. Unfortunately, sometimes that can be too late.

As a trusts and estates lawyer, I see the effects of not having a plan or an old plan that may not be what a person would have intended if there is a change in circumstances. A lack of planning can result in children having guardians appointed to manage their assets by persons whom a parent would not have chosen; in assets being inherited by distant relatives; in adverse tax consequences that could have been avoided; in businesses having to close or engage in lengthy litigation; and in costly and invasive guardianship proceedings, to name a few.

I once was involved in a guardianship proceeding for a man in his 80s who had no will, power of attorney or health care proxy. His sister asked me to assist her in getting a guardian appointed for him after the second time he was found by the police wandering outside far away from his home with no idea where he was. For most of his life he had lived alone in a small house he inherited from his parents, and he worked part-time as a janitor at General Electric. He was never formally diagnosed during his lifetime, but needed help with bill paying, grocery shopping, meal preparation, laundry and other life skills. His sister and her husband would buy him groceries each week and do his laundry and whatever else he needed help with. This went on for many years. Unfortunately, he passed away during the guardianship proceeding, and we started an administration proceeding in Surrogate’s Court. As we started developing a family tree, the family learned that a predeceased brother had a child who was alive and lived in Pennsylvania. We contacted her and confirmed her relationship to the decedent, though both parties were not interested in reconnecting as family. Once the sister was appointed as administrator, we discovered that the decedent had over $1 million in his checking account. He had accumulated his income and lived a very frugal lifestyle supplemented by his sister and brother-in-law. His sister had no idea he had such resources of his own. For example, we ended up appraising his home and selling it for approximately $8,000, due to the condition of the property and location. The long-lost and estranged niece received 50% of the net probate estate – a complete windfall for her and likely not what the decedent or his sister would have wanted.

In the changing nature of estates, it is even more important to have a plan in place (I sound like a broken record, don’t I? But you get the idea – plan, plan, plan!). We are now seeing estates with more unique assets beyond checking, savings, real property and retirement accounts. Some estates have interests in cryptocurrency, NFTs, closely held businesses and cryo-preserved embryos and oocytes. With cryptocurrency and NFTs, it is vital to provide details about the blockchain platform where the asset is located and obtain information about where the password is stored. Wills can specifically bequeath these assets, but unless the executor is able to access the assets, they may not be transferrable and could quite literally be lost forever. With closely held businesses and cryo-preserved embryos and oocytes, many times they are governed by agreements made with the shareholders or cryostorage facility, so it is important to align your estate plan with those agreements.

In addition to avoiding estranged family members from receiving a benefit from your estate, a good estate plan can protect your assets for future generations; it can reserve funds for your own retirement and long-term care needs; it can avoid ethical issues that may arise when transitioning your law practice; it can allow you to choose your preferred fiduciaries to act in your place; and it can provide you and your loved ones with a guided path that meets your goals and values, which can set you up for an enjoyable retirement or reduce the stress of transitioning your practice for other reasons.

So, where do you start?

1. Choose Your Team

Estate planning should be a team approach between an estate planning attorney, a financial advisor and an accountant. You might also include a geriatric care manager, a business attorney or a physician in some cases. Each professional, working in tandem, can help develop a tailored plan for your specific situation, which is based on your family situation, your assets, and your values and goals.

For me, it can be overwhelming to choose from a variety of options (from what accountant to do my taxes to the best camp to send my children to this summer). I have found that asking trusted friends and professionals what they would recommend generally results in a lot of great referrals. I would encourage anyone reading this to do the same. You will want to pick someone that you know has worked well for others. It may not be the right fit for you, but it is a good place to start.

2. Create a Will

In New York, we have a default provision for those domiciled in New York who pass without a will (EPTL 4-1.1). At times, a will may not be necessary to have if the default provision meets your intent. The problem is that life changes, and what might be your intent one day may be affected by situations outside of your control another day. A will can hedge that risk and lay out a contingency plan within the document.

Generally, a will applies to assets that are owned individually, without a beneficiary designation. However, you could establish a testamentary trust within your will for the benefit of a minor, for example, and name that trust as a beneficiary on a retirement account or life insurance policy. This will ensure that the retirement funds and/or life insurance proceeds are properly managed for the minor until they reach the age at which the funds can be distributed to them outright (if it is not a dynasty or lifetime trust).

Since the SECURE Act 1.0 and 2.0, it is important to have qualified plan language in your will if you’re intending your estate or a testamentary trust to be funded with that type of asset, as it could affect how the trust may have to distribute the account and the resulting tax consequences.

It is also important to choose an appropriate executor in your will, one who will be responsible for managing the estate and distributing assets after the attorney’s death. This should be someone (or a corporate fiduciary) that you trust and that is familiar with your family dynamics and the assets of your estate. You can also add provisions in your will to enable your executor to hire professionals, such as accountants, financial advisors, realtors and attorneys.

Most obviously, the will should outline exactly how your assets should be distributed and have back-up plans laid out clearly. Other terms of a typical will should include payment of taxes and debts; granting authority or powers to your executor and trustee, where applicable; a family statement; a provision regarding payments to minors or persons under a disability; and guidance for fiduciaries.

3. Consider Trusts

Trusts can be an excellent tool for estate planning, particularly if you have significant assets, complex family situations or wish to protect assets from the costs of long-term care. Trusts allow you to transfer assets to beneficiaries while avoiding probate, which can be costly and time-consuming. There are several types of trusts, including revocable and irrevocable trusts, and each has its own advantages and disadvantages.

There are several reasons why you may consider creating a trust as part of your estate planning strategy. There are two types of trusts to consider:

Revocable Trust

• Avoid probate.
• Increased privacy.
• Lifetime management in the event of disability.
• Enhanced protection against estate litigation.
• Efficiency in asset succession.
• Maintain control and flexibility.

Irrevocable Trust

• Asset protection.
• Tax planning.
• Avoid probate.
• Special needs planning.

 

Overall, a trust can be an effective way to manage and distribute assets, avoid probate, save or plan for the payment of estate taxes or long-term care and provide for beneficiaries in a flexible and private way.

4. Plan for Incapacity

In addition to planning for your death, it is essential to consider what will happen if you become incapacitated and unable to make decisions for yourself. At a minimum, you should have a health care proxy and living will that nominate an agent (with backups) to make health care decisions for you if you are unable to make them yourself, and general written instructions for life-sustaining treatment (or not) to your agent in the event you are in a terminal condition. You should also, at a minimum, have a power of attorney, which designates someone to make financial and legal decisions on your behalf.

For transitioning a law practice, having a business power of attorney may be a useful tool. You can limit the agent’s authority to specific powers that would enable him or her to act on your behalf regarding your firm’s business. If something happens to you suddenly, you may need someone to step in and manage your financial affairs, ensure clients will be protected and well cared for and safeguard original documents.

5. Plan for Your Law Practice

If you own a law practice, it is important to consider what will happen to your practice when you retire, transition to a different career or need to take a leave of absence:

• Develop a succession plan that outlines how ownership and management of the practice will be transferred to another attorney or to a partner and develop a clear exit plan.
• For solo practitioners, align yourself with another attorney or law firm as you approach retirement or transition to ensure that your clients will be cared for in your absence.
• Consider purchasing life insurance to finance the cost of a buyout upon transition or death of a partner.
• Develop corresponding estate planning documents to transfer your interest in the business and appoint an appropriate agent or executor to manage your estate.
• Discuss client communication and notify clients of your transition so that they can choose whom they would like to work with and be informed as to who has control of their file.
• Hire multiple generations of attorneys and support staff, which can be a long-term plan of succession to ensure that the firm will be able to sustain the retirement of one or more attorneys.
• Create checklists to assist you in working through transitions.
• ` Develop timelines for retaining files and find a custodian for original documents that cannot be destroyed after a period of time (e.g., wills, powers of attorney, health care proxies).

Taking time to work through these steps, and more, will help develop a customized plan for your own situation and hopefully alleviate some stress as you transition your practice.

6. Review and Update Your Plan Regularly

Even though it may be hard to get started, once you do, remember that this is not a “set it and forget it” type thing. I typically recommend a review of your estate plan every three to five years (and sometimes annually, depending on the client’s situation). Either way, you should review and update your estate plan regularly to ensure that it reflects your current wishes and circumstances, especially if there has been some type of event or transition in your life recently.

Estate planning is a critical step for a transitioning lawyer. By working with an experienced estate planning attorney and considering all the above factors, you can develop a comprehensive plan that meets your needs and gives you peace of mind for the future. It’s relatively painless, I swear!

Lauren E. Sharkey is a partner at Cioffi Slezak Wildgrub in Schenectady, a woman-owned and operated law firm, where she practices in the areas of estate planning, trust and estate administration, guardianships, elder law, business law and real estate law. She serves on NYSBA’s Executive Committee and is a former chair of the Young Lawyers Section.