A lot of people wonder why legal counsel is necessary when you are planning your estate. There are a number of different reasons, but there is one that stands above the rest: understanding your options. Asset transfers can be facilitated in different ways, and specific concerns can be addressed on a case-by-case basis.
With this in mind, we will look at a few scenarios that can be addressed through the utilization of targeted estate planning approaches.
Provide Motivation
When you know you have a significant trust fund from an early age, it could actually do more harm than good in some ways. Yes, there are people that are driven to achieve their full potential regardless of their underlying wealth. Others are not as motivated, and their development may actually be impeded by the dynamic on easy street.
Under the circumstances, you could establish an incentive trust. When you are drawing up the trust, you set terms that apply to the distributions. For example, a college-aged beneficiary can receive distributions for living expenses while they remain a student in good standing.
Tuition would be paid by the trustee as well, and there could be an added monetary incentive to attend graduate school. Subsequently, the trust could match the income that is brought in by the beneficiary when they are working. This is an example, but you can in fact attach strings to an inheritance.
Is it a good idea in all cases? That is something that you have to ask yourself, because resentment could set in. At the same time, this is an option that you have at your disposal.
Government Benefit Preservation
Let’s say that you have someone with a disability on your inheritance list. They are relying on Medicaid for health insurance, and they receive income through the Supplemental Security Income program. These are need-based benefits, so a windfall can cause a loss of eligibility.
As a response, you could make the person in question the beneficiary of a supplemental needs trust. The trustee that you name would be able to use assets in the trust to provide a wide range of goods and services for the beneficiary.
Since the trust would be the owner of the assets, benefit eligibility would not be negatively impacted. After the passing of the beneficiary, a secondary beneficiary that you name in the trust declaration would become the primary beneficiary.
Inheritance Protection
If you have children and you are getting remarried, you may have concerns about the inheritances that you intend to leave your children. How can you be sure that your new spouse will pass along the assets to the children if you die first?
This question is particularly profound if you are a person of means that is marrying someone that is quite a bit younger than you. In a situation like this, you can utilize a device called a qualified terminable interest property (QTIP) trust.
The way that it works is you fund the trust and designate a trustee. You name your spouse as the initial beneficiary, and your children would be the successor beneficiaries of the trust.
When you are choosing a trustee, you should consider the fact your spouse and your children may have competing interests. As a result, the trustee should be capable of handling a potentially delicate situation without the appearance of favoritism.
If you predecease your spouse, the trustee will distribute the trust’s earnings to your surviving spouse throughout their life. They could potentially receive portions of the principal if you include this stipulation in the trust declaration.
In addition, they could benefit from property that is technically owned by the trust. After their passing, your children would become the beneficiaries of the trust.
This can be a logical way to go. However, the vibe can be a bit uncomfortable when people are waiting for you to die to receive their inheritances. With this in mind, you could devise your plan in a way that provides your children with some of their inheritances immediately after your passing.
Let’s Get Started!
Today is the day to end the procrastination if you are going through life without a plan. You can schedule a consultation at our Westport or Glastonbury, CT estate planning offices if you call us at 860-548-1000. There is also a contact form on this site you can use to send us a message and you will receive a prompt response.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.