Estate Planning Tools, Techniques & Components
Foundational
These estate planning tools are necessary to care for yourself and your loved ones and that will save time and trouble in settling your estate.
A Trust is an agreement between a creator or “grantor” of the trust and a trustee to administer assets for the benefit of beneficiaries. The variety of trust instruments is limitless based on the need for the situation at the time, but they come in two basic types.
A Will directs where your assets will go at your death, to whom, and in what amounts. It also appoints the person or professional that you want to serve as the representative of the estate. For parents of minor children, it also is a place to designate guardians for your children.
Your last will and testament is just one part of a comprehensive estate plan. If a person dies without a Will they are said to have died “intestate” and state laws will determine how and to whom the person’s assets will be distributed.
Revocable Trusts are trust agreements that can be altered and amended by the grantor.
Revocable Trusts can be joint trusts between spouses or partners, and they generally are tax-efficient because they allow any income received by the trust in the form of interest, dividends, capital gains, rents, or earnings to pass through to the grantor. These trusts often follow the social security number of the grantor.
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Irrevocable Trusts are the opposite. Even with an Irrevocable Trust, you can obtain certain controls as the grantor, however. You can appoint trust protectors to do the things that you are no longer allowed to because the trust cannot be amended by you.
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The field of Elder Law is aimed in particular at planning for the needs of the seniors of our society, especially in long-term care. This includes planning to protect assets so they do not have to be spent on your care allowing you to qualify for Medicaid to pay for a nursing home.
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Retirement Planning in the field of estate planning is about leaving IRAs and 401Ks etc. to the next generation protected from loss due to things like debt, divorce, and destructive spending while staying within the rules of ERISA and requirements for mandatory payouts.
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Income Tax Planning enters into the field of estate planning as we consider the consequences under the income tax laws for individuals and trusts. Estate planning cannot be done without consciousness of income tax consequences.
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An Irrevocable Life Insurance Trust or ILIT is designed to remove the life insurance proceeds from the taxable estate of the grantor. Typically, such proceeds are subject to Estate Tax. By making a gift of the policy and the premiums, which are treated as lifetime gifts, one can reduce the tax on the life insurance to zero potentially.
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Probate is the formal processing of your will through the courts as the official document to distribute your estate and appoint your representative. Probate is generally cumbersome, time-consuming, and expensive. “Probate” also can refer to the overall process of settling an estate.
Inheritance Trusts are structures to hold inherited assets and administer them for the beneficiaries. The advantage over a direct distribution of inheritance is that the trust protects against “Killer D’s,” those things that kill inheritances, which are divorces, debt collection, disability, destructive spending, and issues around death such as where do the assets go following the death of the child.
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Young Adult Documents refers to the basic legal instruments needed for persons as they start adulthood including power of attorney, healthcare proxy, and a HIPAA release.
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Personal Legal Documents Package contains the basic legal instruments necessary to provide assistance when a person is incapacitated and can’t make decisions for themselves. These include Power of Attorney, Health Care Proxy, HIPAA (health information privacy) Releases, and Living Will or Medical Directive.
Advanced
These techniques will demonstrate extra care to protect yourself and your family by saving taxes and protecting and preserving assets.
The field of Asset Protection is estate planning designed to shelter assets from unnecessary loss due to demands or claims against the client or their family. Placing assets in irrevocable trusts that prohibit payments to the grantor and special trusts created under laws in a few states that allow the grantor to be a beneficiary can be effective. Other protections include corporations, LLCs, insurance coverages, and residential homestead declarations.
Business Succession Planning is the field of arranging for the ownership and control of a business during the owner’s incapacity or at their death, structuring a buyout or sale to key employees, or planning against having to cash out at a time of divorce or bankruptcy.
Charitable Planning takes advantage of tax deductions both for income and in estate taxes resulting from transfers to charities. Transfers can be made currently or can be structured, such as by creating a trust that leaves the balance at death to charity while giving you lifetime income.
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Estate Tax Planning consumes a large part of traditional estate planning because of the potentially large liability for an estate. Common techniques to reduce taxes involve sheltering your exemption from being taxed in your spouse or children’s estates using trusts, LLCs, gifting to family directly or in trust, trusts for charities with income to the grantor, life insurance, and structures to discount or freeze asset values.
Generation-Skipping Planning takes into account the Generation-Skipping Transfer Tax. The GSTT is an excise on transfers such as skipping over your children to give to your grandchildren. The GSTT is a tax on top of estate taxes for the government to shut down the “trick” of not giving the inheritance to your children where it would be taxed again in their estates.
Heirloom Property is a primary or vacation home that is likely to stay in the family for another generation. It deserves special protection and rules for an effective succession.
Trustee and Fiducairy Services are an option for families who select us to give VIP service to the estate. By appointing the law firm or its sister company, Northeast Private Trustees as executor or trustee, the client takes advantage of our expertise and takes the burden off of family members to have to conduct these responsibilities themselves.
