For the month of February, we’re focusing on more advanced estate planning. For some, advanced planning makes them think of large estates, especially those in excess of the federal exemption amount. However, each family has a unique set of needs and will need to implement a unique set of estate planning strategies to achieve their goals.
In most cases, plans should start with a revocable living trust and aligning assets with the trust. At Family Estate Planning Law Group, we consistently discuss with our clients the importance of aligning of assets with their estate plan. Since the title on assets determines what happens to that asset after you pass, it’s important to make sure it aligns with your wishes and your estate plan.
Once aligned, you’ll still need to verify with your financial institutions that the assets have been correctly aligned—because mistakes do happen—and then you’ll need to track the changes in your assets over time. This is the biggest key to making sure your estate plan works the way you intended at your death, but it’s not something most estate planning attorneys are equipped to help with. Family Estate Planning Law Group works with all our clients, their financial professionals and their financial institutions to do everything we can to ensure your plan works the way you want it to.
But you can’t look just at assets. For some estates, there’s a concern about the liquidity of assets and whether there are enough liquid assets to pay any estate taxes. In that case, one strategy is to purchase a life insurance policy and place it into an Irrevocable Life Insurance Trust or ILIT. That would remove the insurance from the estate, (in the case of existing policies being transferred in, following three years from date of transfer of a life insurance policy into the ILIT), while still giving the family the liquid assets to pay estate taxes at the time of death.
If, however, one of your estate planning goals is to avoid paying estate taxes entirely—and doing that legally—there are several different strategies you can employ. In our opinion, as long as you’ve done the appropriate planning, estate taxes are usually voluntary. One option is to take advantage of the unlimited charitable deduction and give away enough assets outright to charities to effectively eliminate estate taxes. However, many people do estate planning so they can provide for their children, grandchildren or other family and loved ones.
For these people, other techniques such as partnerships or irrevocable trusts can provide increased asset protection, control for parents of children with drug, alcohol, substance abuse or money problems, or just an effective way to give money to the next generation.
These strategies can often feel like an alphabet soup of confusion. CLATs, CLUTs, CLTs, ILITs, CRUTS; the list goes on and on. However, these more advanced strategies can be very effective when executed properly. Certain of these techniques can provide income in addition to tax savings, but you should always work with a very experienced estate planning attorney. That can help ensure everything is done correctly and that you understand the implications of all this planning.
When determining which strategies to use, there should certainly be a balance between your goals and the effort needed to implement these techniques. But no matter what techniques you use, ongoing alignment, verification and tracking of assets is a must. That way, as the law, your life and your assets change, so can your estate plan.
To learn more about the importance of asset alignment, verification and tracking, explore our website and contact us to schedule your consultation today.