David Lerner Associates: Women and Estate Planning Basics

David Lerner Associates: Women and Estate Planning Basics

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When it comes to estate planning, women have unique concerns.  Women live an average of 4.8 years longer than men,* so there’s a greater chance that they’ll need their assets to last longer, and they have a greater need to plan for incapacity. It also means that women need to take responsibility for their own estate planning.

What is an estate plan?

An estate plan is a map that reflects the way a person wants their personal and financial affairs to be handled in case of incapacity or death. It allows them to control what happens to their property if they die or become incapacitated.

Estate planning may be especially needed if one has:

  • minor children;
  • a net worth that exceeds the federal transfer tax exemption amount ($5,430,000 in 2015) or, if less than that, the state's exemption amount;
  • property in more than one state;
  • you own a business;
  • financial privacy concerns


Planning for incapacity

Incapacity can happen to anyone at any time, but the risk generally increases as one grows older. Failing to plan may mean a court would have to appoint a guardian who might make decisions that do not follow what was originally planned.

Health-care directives can help others make sound decisions about health issues when one is unable to. These might include:

  • Living will - a document that lists the types of medical treatment preferred in your particular circumstances.
  • Durable power of attorney for health care (health-care proxy) - lets one or more family members or other trusted individuals make the medical decisions needed at the time.
  • Do not resuscitate (DNR) order - a legal form, signed by both the individual and his or her doctor that gives hospital staff permission to carry out the desired treatment protocols.

There are also tools that help others manage property when one is unable to, including:

  • Joint ownership - allows another person to have the same access to the property as the owner. For example, if a husband and wife have a joint checking account and one spouse becomes incapacitated, the other would still be able to make mortgage payments on time.
  • Durable power of attorney – a way to name family members or other trusted individuals to make financial decisions or transact business on one’s behalf, even if one is disabled.
  • Living trust - a successor trustee can manage property in the trust if something should happen that prevents the owner from doing so.

Wills and probate

A will is quite often the cornerstone of an estate plan. It is a legal document that directs how property is to be distributed when one dies. It also names an executor to carry out the wishes as specified in the will and a guardian for any minor children. One can also create a trust in a will. The will should be written, signed and witnessed.

Most wills have to be probated. The will is filed with the probate court. The executor collects assets, pays debts and taxes owed, and distributes any remaining property to the rightful heirs. The rules vary from state to state, but in some states, smaller estates are exempt from probate or qualify for an expedited process.

Probate may be avoided by owning property jointly with rights of survivorship; by completing beneficiary designations for property such as IRAs, retirement plans, and life insurance; by putting property in an inter vivos trust; and by making lifetime gifts.

What happens if you die without a will or an estate plan?

Whether or not there is a will, some property passes automatically to a joint owner or to a designated beneficiary. For example, it is possible to transfer property such as IRAs, retirement plan benefits, and life insurance by naming a beneficiary. Property that is jointly owned with right of survivorship will automatically pass to the surviving owners. Property held in trust will pass according to the terms set out in the trust.

Property that does not pass by beneficiary designation, joint ownership, will, or trust passes according to state intestacy laws. These laws vary from state to state.

Trust basics

A trust is a versatile estate planning tool that can protect against incapacity; avoid probate; minimize taxes; allow professional management of assets; provide safeguards for minor children, elderly parents, and other beneficiaries; and protect assets from future creditors. Most importantly, trusts can provide a means to administer property on an ongoing basis according to one’s wishes, even after death.

A trust is a legal entity where one person, known as the grantor, arranges with another, known as the trustee, to hold property for the benefit of a third party, known as the beneficiary. The grantor names the beneficiary and trustee and establishes the rules the trustee must follow in a document called a trust agreement. With a trust, one can provide various interests to different beneficiaries. For example, income to children for life, with the remainder going to the grandchildren.

There are two types of trust - a living or inter vivos trust or one that goes into effect after death (a testamentary trust). A living trust can be either revocable or irrevocable. An irrevocable trust cannot be changed or revoked. A trust created at death is irrevocable.


Transfer taxes

When property is disposed of – whether during one’s lifetime or at death, transfers may be subject to federal gift tax, federal estate tax, and federal generation-skipping transfer (GST) tax. Transfers may also be subject to state taxes.

Lifetime giving

Making gifts during one's life is a common estate planning strategy that can serve to avoid probate and minimize transfer taxes. One way to do this is to take advantage of the annual gift tax exclusion.  This allows a gift of up to $14,000 (in 2015) to as many individuals as one wishes to give a gift. In addition, there are several other gift tax exclusions and deductions available that can help minimize transfer taxes. Making a gift means that one gets to see the recipient enjoying the benefit of the gift.

*NCHS Data Brief, No. 168, October 2014.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Some of this material has been provided by Broadridge Investor Communications Solutions, Inc.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: http://www.davidlerner.com

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Jake Mendlinger
Account Manager
516.829.8374 X 232

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