Long-Term Planning is another specialty of the firm. We work with individuals and families to plan and create strategy – not for death – but for long life. The strategy includes coordination of a plan for preserving and protecting assets, providing for the family, protection of resources or a business, and methods for paying for long-term care, whether that is in the home or in some other setting.
Asset planning may include a variety of tools, including wills, a revocable trust, irrevocable trusts, and financial products. We assist with selecting the right tools to reach your goals.
Who is going to act for you, when you cannot act for yourself? How much do you want to restrict authority for your agents? What is your definition of quality of life? We will help you work through your available options.
How are you going to pay for care, if you need it? Do you need long-term care insurance? Are there alternatives? When is it a proper time to start simplifying your planning and your finances? A Long-Term Plan includes your financial situation, both now and in the future.
WHAT TYPE OF TRUST
IS RIGHT FOR ME?
A trust is a legal arrangement through which a person enters into an agreement (the trust) with another person or institution (such as a bank), as the trustee to take possession, control, and own property that is transferred to the trust. The rules or instructions under which the trustee operates are set out in the trust instrument. Trusts have one set of beneficiaries during their lives, often donors, and another set, often their children, who begin to benefit only after the first group has passed away. The first are often called “life beneficiaries” and the second “remaindermen.”
Revocable trusts are often referred to as “living” trusts. With a revocable trust, the donor maintains complete control over the trust and may amend, revoke, or terminate the trust at any time. This means that you, the donor, can take back the funds or property you put in the trust or change the trust’s terms.
An irrevocable trust cannot be changed or amended by the donor. Any property placed into the trust may only be distributed by the trustee as provided for in the trust document itself. For instance, the donor may set up a trust under which he or she will receive income earned on the trust property, but that bars access to the trust principal. This type of irrevocable trust is a popular tool for Medicaid planning. It also avoids probate, has privacy features, and provides for asset management and tax benefits.
As noted above, a testamentary trust is a trust created by a will. Such a trust has no power or effect until the will of the donor is probated. Although a testamentary trust will not avoid the need for probate and will become a public document as it is a part of the will, it can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can be used to reduce estate taxes on the death of a spouse or provide for the care of a disabled child.
The purpose of a supplemental needs trust is to enable the donor to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust will have access to the trust assets for purposes other than those provided by public benefits programs. In this way, the beneficiary will not lose eligibility for benefits such as Supplemental Security Income, Medicaid, and low-income housing. A supplemental needs trust can be created by the donor during life or be part of a will.
Credit shelter trusts are a way to take full advantage of the estate tax exemption. The first $5 million (in 2011) of an estate are exempt from taxes, so theoretically a husband and wife would have no estate tax if their estate is less than $10 million. However, if one spouse dies and leaves everything to the surviving spouse, the surviving spouse may have an estate that is greater than $5 million. To avoid this problem, the spouses can create a credit shelter trust as part of their estate plan. When one spouse passes away, the first $4 million of that spouse’s estate is put into a trust. The surviving spouse can receive income from the trust, but as long as he or she does not control the principal, the money will not be included in the surviving spouse’s estate when he or she passes away.