One of the considerations you should think about when creating an estate plan is how you are going to provide for your minor children in the case of your death as well as the best way to save estate taxes so that your children can inherit more of your assets. Careful thought should be made to how and when the children will receive their inheritances. There are a number of ways to do this such as establishing an irrevocable trust for a large or mid size estate or providing for a 529 college account for a smaller estate.
Assets transferred to an irrevocable trust for the benefit of minor children are exempt from New York probate. Using a trust is one of the best ways to protect your Long Island estate from creditors, lawsuits and other outside influences. A trust may save you money on estate taxes and ensures that your family does not have to spend extra costs probating your estate. Also, when assets are placed in a trust, your beneficiaries receive the assets quickly because assets in a trust pass automatically to the beneficiaries.
Another advantage of using a trust is that the assets can be disbursed in stages when your child reaches different ages. For instance, it is common for a larger majority of assets to be distributed by the trustee of the trust when the child reaches 18 so that they can use the funds for college or other schooling. Or many parents may provide that 50% or more of funds be released when the child reaches 25 with the remainder of assets being released at age 35.
Still another popular way to disburse assets to minor children is to provide for a life-long trust. Not only are assets shielded from the child making a bad business investment or business decision, but the assets are also protected in case the child marries later and then divorces. However, there are also some disadvantages to leaving funds in stages or in a life-long trust such as higher accounting fees to maintain the trust.
When making a decision on whether to leave a lump sum payment or staggered disbursements to your minor children, the type of assets, size of the estate and the child’s personal needs should be considered.
A New York 529 college account can be established for a minor child to pay for college expenses. Parents, grandparents or others may take advantage of the federal gift tax exemption laws by contributing the maximum federal estate tax gift exemption amount. Currently that amount is $13,000 and increases to $14,000 as of January 1, 2013. For 2012, you and a spouse could contribute a total of $26,000 to the account. Currently, there is a maximum $65,000 or $130,000 for married couple’s contribution over a five year period. Any amounts contributed in excess of the federal gift tax exemption are taxable. The disadvantage of a 529 college account is that the funds can only be used for qualified education expenses.
Hiring a Long Island Probate and Estate Attorney
A Long Island probate and estate attorney can advise you of the best way to leave your assets to your minor children as well as help you with preparing all the necessary documents needed to complete your estate plan. If you wish to speak to a Long Island estate attorney, call the Law Offices of Albert Gurevich at (516) 777-0647.