Estate Planning Goals
I have handled over 5,000 estate plans matters since 1993 including very large estates and estates with special needs children. I charge a fixed fee for most estate plans, quoted in advance. Consultations, telephone calls, and e-mails are free during the estate planning process. I want you to contact me during the estate planning process, and not be worried about getting a bill in the mail because you communicated with me.
Below are goals that I have for my estate planning clients. Please review them to learn more about my legal services.
1. PASS ASSETS ON TO LOVED ONES IN THE WAY THAT YOU DESIRE
CAN USE A WILL, REVOCABLE LIVING TRUST, OR BENEFICIARY DESIGNATION:
1. Wills have to go through probate court to prove the validity of the will, and to have the executor qualify as such. A surviving spouse in a blended marriage with stepchildren should probate the will if the deceased spouse wanted the surviving spouse to inherit some or all of their property. If the surviving spouse does not probate the will, the children of the deceased spouse will inherit the deceased spouse’s property. The surviving spouse should not sit on their rights. There can be a special needs provision in the will if someone who inherits has special needs. The special needs trust provision will allow the special needs person to keep their benefits.
2. Revocable trusts do not have to go through probate, if your assets are placed in the trust. A revocable trust can make sense even for small estates if the revocable trust is priced below the cost of probate. Revocable trusts also are a much better means of managing your assets if you are mentally incompetent than just using a financial power of attorney. There can be the same special needs and estate tax provisions built into a revocable trust as can be built into a will.
3. Beneficiary Designation – Some assets, such as IRAS, 401ks and life insurance can pass without going through probate through a beneficiary designation. These beneficiary designations need to be reviewed as part of your estate plan to ensure that the beneficiary designations coordinate with the rest of your estate planning goals.
MAY WANT TO CONSIDER BUILDING IRREVOCABLE TRUSTS INTO YOUR ESTATE PLAN
Many clients are concerned about how an inheritance can impact the life of a beneficiary. You may want to have irrevocable trusts built into your revocable trust or will to put stipulations as to how an inheritance will pass to a beneficiary, to give that beneficiary some incentives to achieve goals in their life, such as attaining a college degree. An inheritance can also be held in trust for the benefit of a spendthrift beneficiary, or for the benefit of a beneficiary who has a mental illness, or drug and alcohol problems. Trusts can protect an inheritance from the creditors of the beneficiary. Trusts can also be used to maintain the separate property nature of the inheritance if the beneficiary should ever divorce. If a beneficiary is “special needs,” a special needs trust provision can be built into your plan to help preserve the inheritance and allow the special needs beneficiary to keep their government assistance.
2. ALLOW LOVED ONES TO TAKE CARE OF YOUR FINANCES AND MAKE HEALTH CARE DECISIONS FOR YOU IF YOU ARE INCAPACITATED
Goal is to avoid guardianship, which can be expensive ($3,000 – $10,000 initially, with annual accounting fees), time consuming for your relatives, and can be adverse to your portfolio in that the court will require your guardian to invest in ultra safe, low interest assets.
Manage Your Finances:
1. Financial Durable Power of Attorney – allows loved ones to handle your financial affairs, including paying your income taxes and doing your returns, talk to medicare, pay your bills and manage your investments. A financial power of attorney is time sensitive – need a new one every five years. Should be effective immediately, not upon your incapacity, to avoid your loved ones having to hunt up doctors to state in writing that you are mentally incompetent. Should not just have the provisions found in the “boilerplate” Texas financial power of attorney. Should have additional provisions for income taxes and medicare/medicaid planning. A power of attorney is not as effective as a revocable trust in managing your assets.
2. Revocable Trust – allows your loved ones as trustee to manage your financial affairs if you are incapacitated. A revocable trust is a more effective way of managing your financial affairs than just using a financial power of attorney – trusts are more accepted by banks and stock brokers than powers of attorney. Some brokerage firms require their own power of attorney to be used – these firms do not make this requirement if you have a revocable trust.
Make Health Care Decisions On Your Behalf:
1. Directive to Physicians a.k.a. Living Will – allows you to tell your doctors to take you off of life support if they determine that you are terminal and will not recover.
2. Durable Health Care Power of Attorney – allows your loved ones to make day to day health care decisions for you if you are incapacitated, such as hiring/ firing doctors, consenting to surgery, and determining were you will receive your care.
3. HIPAA Waiver – allows your loved ones to get confidential health care information from your doctors – allowing your loved ones to make informed health care decisions for you.
3. PROTECT ASSETS FROM JUDGMENTS ARISING FROM LAWSUITS
(Caveat – cannot do asset protection planning after a potential suit arises- can be deemed to be a fraudulent conveyance by a court.)
1. Limited Liability Company – Use for rental properties and other assets that are “lawsuit magnets.” Can protect you from personal liability if someone is injured on the premises. Also can protect the rental properties from seizure if you are sued for some other reason, such as an automobile accident.
2. Family Limited Partnership – use to protect stocks and brokerage accounts from lawsuits.
3. Spousal Transfers – in some situations, a spouse who is more prone to being sued may want to transfer assets to their spouse to preserve those assets from lawsuits. The assets transferred will then be the separate property of the spouse receiving the gift. While this technique is effective, the technique has pitfalls. If the husband and wife divorce, the gifting spouse can lose a large portion of their estate. The spouse receiving the gift can also distribute the property by gift or bequest to whomever that spouse desires. The technique can also have negative capital gains implications, because the gifted property is no longer community property, and will no longer get a “step up” in basis if the gifting spouse dies first. This asset protection technique obviously requires some serious and sober thought before being used.
4. REDUCE ESTATE AND INCOME TAXES
1. Family Limited Partnership – can be used to reduce estate taxes.
2. Life Insurance Trust – all large life insurance policies should be in a life insurance trust to reduce or eliminate estate taxes.
3. “Step Up” In Basis – Timing of gifts versus bequests can make a big difference in income taxes.