In the arena of estate planning, the new big areas of concern are income tax deferral planning (IRA’s), planning to ensure availability of government benefits (Medicaid), and structuring affairs to ensure assets stay in the family bloodline.
These issues are eclipsing, in most cases, any concern regarding federal estate taxes. Nowadays, most people do not have estates approaching $5 million, so quite often, the areas we can and do address are those stated above.
Retirement accounts are creatures of the law. As such, they are subject to many rules, such as when you must begin taking out distributions and how much you must take (and therefore pay tax on).
When one passes, the beneficiary designation on file with the administrator or custodian controls. The beneficiary has settlement options that they should consider before making any decisions.
It is advisable to seek professional guidance on your settlement options and which choice is best to take. We usually try to structure these assets so as to preserve income tax deferral as much as the law permits.
Government benefits are a lifeline to those in need. Planning in advance so as to qualify for needs-based programs is critical to success in this arena and can be the difference between someone who gets care and someone who does not. Making sure your agent can do this kind of planning is also critical.
If the person who needs it is disabled, nothing can be done absent express specific authority to the contrary.
Keeping your assets in the family is easy if you plan ahead. The law recognizes “future interests” so you can direct that children inherit your property for their use, and then when they pass it goes to their children, not the in-laws.
This is something most people want to do. Fortunately, it is relatively easy to do with a little bit of planning.
We can make sure the in-law will not get it in a divorce or at death and we can shelter it from estate taxes in the child’s estate and remove it from exposure to creditors’ claims.
Additionally, and very importantly, if you believe that you might be on Medicaid for your care (which happens to 7 out of 10 of us), then you can deed to your children the future interest in your home, so the state does not get it in “estate recovery.” This needs to be done far in advance and with professional assistance.
Some advance planning in the above areas is usually sufficient to substantially protect the estate. So long as intentions are clear, T’s are crossed and I’s are dotted, then all of the problems that can and do emerge in terms of family conflict can be avoided.
A good plan that will protect you and your family will address all of the issues raised above. While estate planning is about who gets what, it is also about how they get it and what that means.
Modern plans need to be flexible and need to guard against exposure to taxes and also need to account for the possibility that there could be a need or want for government benefits.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com