Why Phillip D. Azachi’s Admission to the Texas Bar Matters for Plano Law Clients

Individuals with valuable property and close loved ones often think carefully about the legacy they want to leave when they die. The desire to leave a meaningful legacy can be what drives an individual to establish an estate plan. People can provide specific property for particular members of their family and can even arrange for assets to pass to charitable causes as a means of having a positive impact on the world. Before the personal representative of an estate can transfer their property to specific beneficiaries, they first have to fulfill certain probate requirements. Financial obligations can consume some of the decedent’s property and reduce the impact of their legacy on their selected beneficiaries. Proper planning can diminish the negative impact of obligations on the value of an estate. For example, the following costs are likely to diminish estate resources and the legacy an individual leaves. Estate taxes For those with particularly sizable personal holdings, estate taxes are a significant concern. Those with multi-million dollar estates may have to plan for both state and federal estate taxes to optimize what their loved ones inherit. Without advanced planning, a significant portion of an individual’s property may end up filling government coffers instead of supporting their loved ones. Personal debts Generally speaking, any personal financial obligations unfulfilled at the time of an individual’s death become the responsibility of their estate after their passing. Credit card balances, student loans and medical debts are all examples of financial obligations that the personal representative of the estate must cover before distributing property to beneficiaries. Even probate costs typically require payment in full before beneficiaries receive anything from the estate. Medicaid benefit repayment Medicaid can help cover long-term care costs for those who need in-home support, extensive rehabilitation care or a room in a nursing home. Older adults may have to make certain financial adjustments to qualify for Medicaid. Property that may not prevent them from obtaining benefits when they are medically vulnerable can be at risk of claims brought by the Medicaid estate recovery program after their passing. The home where someone lives typically does not count against them for the purpose of obtaining Medicaid but can be vulnerable to repayment claims against their estate after their death. Thorough estate planning is as important for those with millions of dollars in property as it is for those with middle-class income and substantial debt. People who understand how financial obligations can diminish what their loved ones inherit might have an easier time creating estate plans that protect their legacy after they pass.

All of the property that belongs to someone who has recently died typically becomes part of their estate. However, not every asset in the estate passes to the heirs or chosen beneficiaries of that individual. The personal representative of their estate has to make an effort to pay their debts and settle their tax obligations before distributing what remains among beneficiaries. In some cases, individuals with fewer resources in their estates may not have enough to leave a meaningful legacy after fulfilling their financial obligations. Others have the exact opposite problem. Their estates are valuable enough to lead to estate taxes. Estate taxes can consume a significant portion of the property the testator wants to leave for their loved ones or charitable causes. People can potentially plan ahead of time to avoid estate taxes when they die. Only multi-million dollar estates have to pay estate taxes Most states do not impose an estate tax, but New York unfortunately does. When people die in New York, the personal representative of their estate has to review their resources and financial obligations. They may need to retain assets to cover estate taxes if the estate contains too much valuable property. Estates in New York might be responsible for both state and federal estate taxes. In 2024, the threshold for New York state estate taxes is $6.94 million. The maximum state-level estate tax rate could be as high as 16%. The estate has to be worth almost twice that much to be at risk of federal estate taxes. In 2024, the federal threshold for estate taxes is $13.61 million. The tax rate ranges between 18 and 40%. Those who have to cover the maximum federal and state estate tax rates may have to dedicate more than half of the resources in an estate toward tax obligations. Prior planning limits tax liability Those who plan carefully may be able to avoid or at least reduce estate tax obligations. Gifts made before someone died, assets transferred into a trust and ownership shared with other people can help limit the overall value event state and therefore what taxes the estate may have to pay. Those with multiple real estate holdings and/or a privately held company may need to approach estate planning particularly carefully to preserve those resources and avoid estate taxes. Integrating tax concerns into a New York estate plan can help people maximize how much their loved ones inherit after they die.

Register for a free Zoom seminar about estate planning and considerations for home owners, those looking to protect assets from tax and Medicaid, and anyone who wants more information on how estate planning can support their long-term financial goals. Attorney Phil Azachi will also discuss common concerns about probate and estate administration as well as the tools available to minimize ongoing estate issues. September 18 & 19, 2024 – 6:00-8:00PM EST Free Registration