Who Needs an Estate Plan?
Jul 23, 2021 | Written by: Share|
Often people believe that only the wealthy require an estate plan. The fallacy of this belief lies in the fact that not all that glitters is gold. Most people treasure their coveted relationships with family and friends, and those treasured relationships are the reason that everyone needs an estate plan. The people who are closest to you are the people who need consideration in your estate plan.
Following are the most common reasons why my clients prepare an estate plan:
1. For the Protection of Family and Friends. Protection generally falls into two categories: minimizing the death tax impact on those closest to you who will inherit your assets; and establishing trust arrangements for incapacitated and younger persons who require financial management and other assistance.
2. Business Succession Planning. Business succession planning is critical to ensure that the enterprise you have worked so long and hard to build will successfully continue to operate in the event of your passing. An estate plan can ensure that your estate will derive a financial benefit from the sale of the business in the most tax-efficient fashion.
3. Life Insurance Planning. Life insurance provides liquidity to your estate and can be used to pay death taxes as well as to enhance the inheritance received by your beneficiaries. By holding a life insurance policy in an Irrevocable Trust arrangement, the life insurance proceeds can be transferred to your beneficiaries free of estate tax and sheltered from the claims of creditors.
4. Special Needs Trust. Many beneficiaries need professional assistance in managing their inherited assets to maximize the benefit that they will receive in the years to come. This is particularly true for incapacitated and special needs individuals who are receiving government assistance. In many cases, the outright receipt of an inheritance will disqualify the person from continuing to receive those government benefits. By placing the inheritance in a Special Needs Trust, in most cases the beneficiary will not thereafter be disqualified from receiving government benefits.
5. Legacy Planning. Legacy planning involves the creation of a trust that will benefit children, grandchildren, and future generations. The trust assets will grow at a faster rate because they will be subject to little or no death taxes and will be sheltered from the claims of creditors for years to come. The trust can terminate when grandchildren reach a specific age of maturity, or the trust can be structured to continue to benefit future generations.
Estate planning is not just for the wealthy. Call me for an estate-planning consultation, and we can discuss how the above techniques can be used to protect and benefit the people you care about.