A lot of people do not address estate planning because they assume that there is really not much to do. They think that the state takes care of everything if you die without a will, but they intend to draw up a simple will at some point when they are elders.
This is a shortsighted point of view on multiple levels. In reality, planning your estate effectively takes a bit of time and effort, and there are a number of elements to address.
Appropriate Asset Transfers
Each person on your inheritance list is going to be in a different life situation. You may feel perfectly comfortable leaving a significant direct inheritance to one of your children that is a responsible money manager.
On the other hand, you may have someone in the family that is reckless when it comes to spending, and there can be a loved one that is simply inexperienced. Under these circumstances, you do not have to leave lump sum inheritances to both of them and hope for the best.
You could use a revocable living trust to protect the assets from the beneficiary’s creditors, and you can instruct the trustee to distribute limited assets on a monthly basis for an extended period of time.
Special Needs Planning
This is one example, but there are other situations that call for the utilization of a certain type of trust. One of them is benefit preservation for people with disabilities that are relying on Medicaid and Supplemental Security Income.
A windfall could cause a loss of eligibility, but you could provide for someone that is in this position safely through the utilization of a supplemental needs trust.
Diverse Array of Options
There are many tools the estate planning toolkit. When you work with an estate planning attorney to develop your plan, you will receive recommendations based on the circumstances, and you can make informed decisions.
Asset Protection
Nursing home costs can consume all or most of your legacy depending on the extent of your resources. Over 30 percent of senior citizens will eventually reside in nursing homes, and Medicare does not pay for the custodial care that they provide.
A year in a nursing home costs about $170,000 in the greater NYC area, so we are looking at big digits. One year is the average length of stay, and the overall costs can be doubled for married couples.
Medicaid will cover these costs, and you can transfer assets out of your name so you can gain eligibility if you convey them into an irrevocable trust.
You would be able to receive distributions of the trust’s earnings, but the principal would be out of your reach. The assets in the trust would not count if and when you apply for Medicaid as long as you fund the trust at least 60 months before you seek eligibility.
This is one form of asset protection, and there are asset protection structures that are important for small business owners. When you use a limited liability company or family limited partnership, there would be a shield of separation between your business and your personal property.
Estate Tax Efficiency
Taxation is not much of a factor for the most part when assets are changing hands after someone dies. There are no income taxes on inheritances with the exception of distributions of the earnings from a trust.
However, there is a federal estate tax with a 40 percent rate, so you have to take the right steps to mitigate the damage if your estate will be impacted.
Most people do not have to be concerned about it because the first $13.61 million can be transferred tax-free, but this figure is going down to $5.49 million adjusted for inflation in 2026.
There are a dozen states that have state-level estate taxes, and New York is one of them. In our state, the exclusion in 2024 is much lower than the federal-level exclusion at $6.94 million.
If your estate will be exposed to taxation, we can help you minimize the damage.
Take Action Today!
Today is the day for action if you are going through life without a plan for aging that culminates in the effective passing of your legacy. You can schedule a consultation at our Manhattan, NY estate planning office by calling us at 212-973-0100, and you can use our contact form to send us a message.
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