Do I Need an Estate Plan?
A common question we are asked at Phelps LaClair is, “Do I need an estate plan?” As a second generation estate planning firm with 40 years of experience in serving the Phoenix Valley, we believe, no matter how large or modest the estate, everyone can benefit from estate planning. Here are some key reasons why we recommend that you have an estate plan.
Probate is the process whereby a court determines the distribution of an estate’s assets. It is a legal process involving lawyers, powers of attorney, and much expense that can significantly reduce the value of an estate. It also takes control out of your hands and gives the decision power regarding distribution to a judge who may not know or follow your wishes.
With probate, delays in asset distribution can take years. Several high profile celebrity probate cases have occurred recently. Several years ago, Prince died without a will or trust, leaving an estate worth $200 million dollars. After many people came forward claiming to be relatives, the judge ruled that Prince’s sister and five half-siblings were the rightful heirs. After three years in the court system, the assets have yet to be distributed.
When you have minor children, you need to know they will be cared for in case you and your spouse die before your children reach adulthood. You can best do this by naming a guardian in a will or a living trust. If you have adult children, you can create a Protective Inheritance Trust that safeguards their financial security from bad life choices they might make with a windfall inheritance. A trust can also protect them from deceptive scams and from creditors who would make claims against their inheritance. In addition, a properly designed trust will protect an inheritance from divorce and claims of ex-spouses.
Protect Business and Personal Assets
If you have a business that involves partners or family members, or you’re planning to bring in partners in the future, it is a good idea to create a Limited Liability Company. Incorporating the LLC into a trust can protect the company assets by minimizing disputes and determining management stability in the event of death, divorce, disability, or bankruptcy.
With a family LLC, you control the assets and management decisions, but your children can have shares in the LLC. You can limit the selling of their shares while they are learning wise financial lessons. It is a great way to invest in your children’s financial future.
Long-Term Care Provision
Long-term care is another consideration for asset protection. With the rapid rise of long-term care costs, your bank savings and retirement accounts can quickly become depleted. Medicaid has certain financial and time limit requirements that must be followed, and often, these requirements are addressed too late to be an option. There are special types of irrevocable trusts that can be used for asset protection in long-term care situations.
Estate Tax Reduction
There is currently a large exemption from the Federal government for estate taxes. Each individual can claim an $11.4 million lifetime exclusion. For a couple, this would amount to $22.8 million. In addition, each individual can gift $15,000 to an unlimited number of people or charities without needing to pay a gift tax. This is one way to preserve the value of an estate through tax benefits. However, tax laws change frequently, and it would be wise to protect the estate assets with a revocable living trust.
Do I need an estate plan? If any of the above situations are applicable to you, the answer is YES! Nobody gets out of this life alive. And sound planning will determine ahead of time what happens to your estate when you die. At Phelps LaClair, we have helped thousands of people to develop a custom estate plan for their individual needs. Give us a call and let us help you with yours. The future depends on you!
Images used under creative commons license (Commerical Use) 05/17/19 Photo by Matthew Henry from Burst