General Thoughts on Estate Planning

There are three stages to estate planning.  The first stage is the individual and/or couple that have little or no assets and no children.  That individual or family needs simple wills and the documents listed below.  If the individual or couple has issues with minor children, then the will needs to have guardianship provisions to protect their minor children.  If the spouse in a couple has nursing home issues, then the well-spouse needs to have a will that does not leave property to the institutional spouse and cause that spouse to lose government benefits.

The second stage includes people that have much larger estates, health issues, children or out-of-state property.  These people need to have a living trust and perhaps more advanced planning to reduce or eliminate federal estate taxes.

The third stage includes Medicaid planning for those individuals or couples that are facing the reality of end-of-life planning.

It is important to remember that there are, in fact, three different stages in estate planning.  It is also important to remember that during each stage that changes can and will occur from time to time.  That is why it is always necessary to review your estate plan any time that a change may occur.  Such changes include the addition of children to a family, the change in health of any family member, the change in wealth in a family, someone including you may have moved to another city and/or state and through the passing of time the laws that affect your estate plan may change.  It is best to remember that if there are no changes, then it is still best to review your plan about every 5 years to make sure that all changes have been covered and nothing is overlooked.

Some Estate Planning Specifics

Think of estate planning as the “baseball game”, itself. The living trust is the “bat”; simply one tool used during the game, but an important one.  However, it takes more than a bat to play the game.  It takes a ball, properly equipped players and a playing field.  Proper estate planning needs more than just the living trust.  The following are some of the “planning tools” that should accompany the trust so that the plan is complete and you and your loved ones will win.

First, there is a pour-over will. This allows any assets that you might forget to include when funding your trust, or that you acquire after creating your trust, to be poured over into your trust to be distributed according to your instructions.

Next, are Durable Powers of Attorney for Health Care (aka Designation of Health Care Surrogate).  These powers are given to someone you trust to follow your instruc­tions regarding life support and long term care in the event you become incapacitated.

And finally, the Durable Power of Attorney for Funding. These are durable powers given to a trusted friend or institution to transfer your assets to your trust in the event you become incapacitated.  It also allows them to pay your bills with your funds.  Lastly, the durable power of attorney can be used to help you apply for Medicaid including moving

“Durable” means that the Powers survive your incapacity, which is exactly the time you want them to be effective. “General” powers of attorney become invalid upon the incapacity of the person granting the power.

Both durable powers of attorney and powers of attorney, end at death so don’t be surprised with that fact.

Estate Planning Defined

My definition of a living trust planning is: “Giving what you have, to whom you want, the way you want, when you want and saving every attorney’s fee, court cost and tax dollar possible!”

A Bit About ILITs And YOU

When you have clients that you have identified as candidates for estate planning, and their estate exceeds $5.43 million (single person; unmarried, divorced or widowed) or $10.86 million (couples), give me a call.  Tax planning for them is critical!  I can help your clients create the Irrevocable Life Insurance Trust (ILIT) to be funded with a new life insurance policy that they will need from you. This will save their estate thousands of dollars!  They and their loved ones will WIN!  And they will love you for helping them.

Charitable Trusts

Charitable Trusts are of two types (charitable lead trusts and charitable remainder trusts).  The charitable lead trust is used to provide an income to your favorite charity for a period of yours and then after the period runs the principal goes to the heirs or beneficiaries who are named in trust.  This is used to pass large sums of money to named beneficiaries without incurring federal estate and/or gift taxes.

The second type of charitable trust is the charitable remainder trust.  The charitable remainder trust pays a lifetime income to the Trustmaker and then upon the Trustmaker’s death the principal in the trust goes to the Trustmaker’s favorite charities.  Like the charitable lead trust, there are certain federal estate and gift taxes savings available to the Trustmaker.