In our last blog post, we discussed the need to plan ahead to protect major assets, often called “Legacy Assets” that people have inherited from their parents, and wish to pass down to their children. This type of planning, which is often called “Succession Planning” is desirable as a tool to ensure that the assets seniors have inherited or have accumulated through their hard work and labor goes, at death, to their loved ones and is not eaten up during life or death by either attorneys fees, probate or taxes or the costs of long term care.
Why do Succession Planning? Most seniors are concerned with the dual goal of providing for their children, grandchildren and other loved ones while also protecting their assets from being spent down for long term care. Succession Planning gives seniors the peace of mind in knowing they can accomplish these goals.
Succession Planning is accomplished by the use of a special type of an Irrevocable Trust. The primary purpose of the trust is to help achieve the client’s estate planning objectives. Often a trust is the central mechanism required to pass your assets to the people you want, when you want and how you want – all while maintaining control and protecting assets in case of catastrophic illness or need for long term care.
After meeting with the family and determining their estate planning goals, we set up an estate plan that helps the client achieve their goals. Although all families are different, the things that most people have in common are the following:
1. They want to protect their surviving spouse (if they are still living)
2. If anything is left at the second spouse’s death, they would like everything to go to their children
3. They want to keep Legacy Assets in the family.
4. If they establish a Trust, the senior would like to (a) retain income for life; (b) establish controls over how the funds are spent; (c) choose the trustee that controls the money and property.
5. If a trust is established, they would like for the trust to avoid risks associated with the children, such as creditors, bad marriages etc.
6. They would like for their family to receive any significant tax advantages to putting the money in a trust rather than outright transfers.
7. After the 5 Year-Look-Back Rule, the senior would be eligible for Medicaid.
By following this plan, seniors position themselves to ensure that the assets they have accumulated though their hard work and labor goes, at death, to their loved ones and is not eaten up during life or death by either attorneys fees, probate or taxes or the costs of long term care.