Estate planning attorneys always emphasize the fact that there is no one-size-fits-all estate plan. There are many different approaches that can be taken, and the optimal course of action will depend upon the circumstances. This being stated, there is a basic framework to follow when you are entering into the process, and we will look at it here.
Inventory Your Assets
It sounds like an overstatement of the obvious, but the first step is to inventory the assets that you expect to be able to pass along to your loved ones. When you are engaged in this exercise, the dynamic can be much more complex than the simple matter of addition and division of numbers.
While it is possible to simply instruct the estate administrator to liquidate all assets to reduce everything down to numbers on a ledger, certain property can have value that exceeds mere dollars and cents. You could spend some time deciding which person on your inheritance list is the right recipient for each respective piece of property that has value on multiple levels.
Another thing to keep in mind when you are assessing the value of your assets is potential estate tax exposure. The federal estate tax carries a $11.4 million exclusion during the current calendar year. This is the amount that can be transferred before the estate tax would kick in. The maximum rate of the tax is 40 percent.
If the value of your assets exceeds the amount of the exclusion, you should certainly discuss estate tax efficiency strategies with our firm.
Create an Inheritance List
Once you gain an understanding of what you have to pass along, you must determine who will be getting what for want of a better phrase. This speaks for itself, but there is another facet that is often overlooked.
It is important to consider the life situation of everyone that will be receiving bequests from you. There are different asset transfer methods, and the right choice for one person would not be appropriate for the next.
For example, if you have someone with special needs that is going to be receiving an inheritance, you have to consider government benefit eligibility. Most people with disabilities rely on Medicaid for health care insurance, and many people with special needs receive Supplemental Security Income (SSI).
These are need-based programs, so a sudden windfall could result in a loss of eligibility. To account for this, you could establish a supplemental needs trust for the benefit of a loved one. The assets could be used to enhance the beneficiary’s quality of life, but benefit eligibility would remain intact.
There is also the matter of spendthrift heirs. If you have someone in the family that is not good with money, you can establish a trust that includes spendthrift protections. The beneficiary would not have direct access to the assets in the trust, and you could instruct the trustee to provide measured distributions over an extended period of time.
These are couple of examples, but there are other scenarios that can be addressed through the implementation of recipient-specific transfer methods.
Consult With an Estate Planning Attorney!
After you have completed the first two steps on your own, you have the necessary information that you need to move on to step number three. Since there are so many different ways to proceed, you should certainly have a meaningful conversation with an estate planning attorney at this point.
Your attorney will gain an understanding of the circumstances and explain some nuances that you may not have had considered, like nursing home asset protection and incapacity planning. When you fully understand your options, you can go forward and execute the estate plan is optimal for you and your family.
If you are ready to do just that, our doors are wide open. You can request a consultation appointment if you send us a message through our contact page, and you can get in touch by phone at 586-493-7661.