When you plan your estate, you make conscious decisions about the way that your monetary assets will be transferred after you are gone. A lot of people think that estate planning boils down to the creation of a will, but there are other ways to transfer assets.
Personalized Planning
There are different approaches that can be taken, and the right way to proceed will depend on the circumstances. For example, let’s say that you have someone with a disability on your inheritance list, and they rely on Medicaid and Supplemental Security Income.
These are need-based programs, so a beneficiary can lose eligibility if they come into money. This is a very important factor to consider if you will be leaving an inheritance to someone that is in this position.
A supplemental needs trust is the solution. When this type of trust is established and funded, the trustee can use the assets to make the beneficiary more comfortable in many ways. However, if everything is done correctly, benefit eligibility will not be impacted.
Another possibility is the incentive trust. With this type of trust, you include stipulations that must be met before the beneficiary will receive distributions. You can guide a young person toward personal development or incentivize substance abuse recovery.
High net worth individuals have to be concerned about the potential impact of estate taxes. There is a federal estate tax, and here in Connecticut, we have a state-level estate tax to contend with as well.
The exclusion is an amount that cab be transferred tax-free before the rest of the estate would be subject to taxation. On the federal level, the exclusion is $12.06 million this year, and the Connecticut state estate tax exclusion is $9.1 million. There are tax efficiency strategies that can be implemented if your estate is going to be exposed to taxation.
These are a handful of the specific situations that can be addressed through the estate planning process, and there are others. In all cases, there is a suitable response.
End-of-Life Eventualities
You orchestrate events that will take place after your passing when you plan your estate, but there is another aspect. Many elders become unable to handle all of their own day-to-day needs during their twilight years. Long-term care is expensive, and Medicare does not cover it.
This is a very big deal, and you should take it quite seriously. Medicaid eligibility is the widely embraced solution, because Medicaid will pay for long-term custodial care.
Since you cannot qualify if you have significant assets in your name, you have to divest yourself of direct personal possession of resources. This can be done through the utilization of an irrevocable trust.
You can continue to accept income from the trust’s earnings when you establish a Medicaid trust, and this is key. Advance planning is important, because there is a five-year look back. The trust must be funded at least five years before you apply.
There is also the matter of incapacity planning. You should create a living will to assert your life support preferences, and a durable power of attorney for health care should be added. The power of attorney will give an agent that you choose the power to make medical decisions on your behalf.
For financial management, you can include a durable power of attorney for property. If you have a living trust, you will act as the trustee while you are living. In the trust declaration, you can empower a disability trustee to manage the trust in the event of incapacity.
Attend a Complimentary Seminar!
Since you are here, you must be interested in learning more about the estate planning process. There are some great opportunities coming up in the near future if you would like to connect with our firm and build on your knowledge.
We are going to be conducting a number of seminars, and they are being offered on a complimentary basis. You will learn a lot if you join us, and you can get all the details if you click the following link: Upcoming Estate Planning Seminars.
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.