Estate planning can be more complicated than you think. When you try to figure it out for yourself, you may make assumptions that are incorrect because of misunderstandings.
Some of this stems from the fact that there are terms that sound very similar. It is easy to assume that they are different ways to say the same thing, but this is not always the case. In this post, we will look at some of these terms.
SSI vs. SSDI
Estate planning attorneys recommend special needs planning solutions when necessary. A targeted approach is required to preserve need-based government benefits. Many people with disabilities rely on Medicaid for health insurance, and they get income through the Supplemental Security Income (SSI) program.
We will not get into the details here because we want to stick to the confusing terms. If you are disabled, you can potentially qualify for SSI even if you never worked. It is not contingent on FICA taxes that you paid when you were working.
There is a different benefit called Social Security Disability Insurance (SSDI). This benefit is reserved for people that contributed into the program while they were paying taxes. The benefit is based on your contributions, which are determined by your earnings.
In 2022, the average SSDI benefit is $1358 a month for an individual, and the maximum benefit is $3345. Since SSI payments are need-based government benefits, the payouts are much lower. This year, the maximum Supplemental Security Income benefit for an individual is $841 a month.
Simple Will, Living Will, and Living Trust
Everyone knows that a simple will is a document that is used to facilitate asset transfers. There are those that assume that a living will is an asset transfer device that goes into effect when you are living.
In fact, this is incorrect. A simple will exists while you are living, but it does not serve any purpose until you pass away. On the other hand, a living will has nothing to do with asset transfers on any level.
This type of will is an advance directive for health care. You use a living will to state your preferences regarding the use of life-sustaining measures like feeding tubes, artificial hydration, mechanical respiration, and resuscitation.
A living trust is an asset transfer vehicle, and it is more effective than a simple will in some ways. When a will is used as an asset transfer device, it is admitted to him him him him him him him him him him himprobate. This is a costly and time-consuming legal process that takes place under the supervision of a court.
Asset transfers through the terms of a living trust are not subject to probate, so the administration process is streamlined. Plus, you can include spendthrift protections when you have a living trust, and it can remain active for years.
Inheritance Tax vs. Estate Tax
It is natural to assume that the terms “inheritance tax” and “estate tax” are mutually interchangeable because they describe the same type of tax. Actually, they are two different forms of taxation that can be applicable when an estate is being administered.
An estate tax is levied on the entire taxable portion of an estate before it is distributed to the heirs. An inheritance tax is levied on each individual asset transfer to the respective inheritors.
We have a federal estate tax in the United States, and there is a state-level estate tax in New York. The exclusion is the amount that can be transferred tax-free, and the rest would be taxable. On the federal level, the 2022 exclusion is $12.06 million, and the New York state estate tax exclusion is $6.11 million.
There is no federal inheritance tax, and there are just five states that have state-level inheritance taxes. The states are New Jersey, Pennsylvania, Nebraska, Maryland, and Kentucky. Close relatives like spouses, children, parents, grandparents, and grandchildren are typically exempt from inheritance taxes.
Schedule a Consultation!
If you would like to work with Manhattan, NY estate planning attorney S.J. Khalsa to develop your plan, call us at 212-973-0100 to schedule a consultation appointment. There is also a contact form on our site or you can fill out if you would prefer to send us a message.
While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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- Everything You Need to Know About Estate Taxes - August 21, 2023
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