You should not settle for any limitations when you are planning your estate. There are estate planning solutions to address every imaginable circumstance. In this post, we will look a four different scenarios that call for targeted estate planning solutions.
Special Needs Planning
Most people with disabilities rely on Medicaid for health insurance, and these folks can be eligible for Supplemental Security Income (SSI). These are need-based benefits, so you cannot qualify if you have significant assets in your own name.
A windfall could cause a loss of eligibility, so you would not want to leave a direct inheritance to someone that is enrolled in these programs. However, there is a solution in the form of a supplemental needs trust.
Medicaid does not cover every medical and dental procedure that a beneficiary may want or need, and the modest SSI payouts do not go very far. When a supplemental needs trust has been established, the trustee could use assets in the trust to satisfy the unmet needs of the beneficiary.
As long as all the rules are followed correctly, benefit eligibility would remain intact.
Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away. If you establish a trust with your funds for the benefit of a person with a disability, it would be a third-party supplemental needs trust.
When you create the trust agreement, you would name a successor beneficiary. This individual would inherit the assets that remain in the trust after the death of the first beneficiary, and Medicaid would not be able to attach the funds.
It is possible for someone with a disability to fund a supplemental needs trust with their own assets. That’s the good news, but the bad news is that Medicaid would be able to reach the remainder after the death of the grantor/beneficiary.
Estate Tax Efficiency
Wealth building is always a good thing, and there are many highly successful individuals in the Hilton Head area. However, there is a challenge that can impact people that have accumulated a significant store of wealth.
The federal estate tax is a heavy hitter with a 40 percent maximum rate. It can potentially be levied on the portion of an estate exceeds $12.92 million in value. This figure is called the credit or exclusion. It is at this level because of a provision contained in the Tax Cuts and Jobs Act of 2017.
That provision is going to expire or sunset at the end of 2025. In 2026, it will go down to the 2017 level of $5.49 million indexed for inflation.
There is a federal gift tax in place to prevent people from giving large lifetime gifts to avoid the estate tax. The two taxes are unified under the tax code, so the multimillion dollar exclusion applies to your estate and significant lifetime transfers to others.
If your estate will be exposed to the estate tax, there are trusts that can be utilized to ease the burden. These would include qualified personal residence trusts, grantor retained annuity trusts, charitable lead trusts, irrevocable life insurance trusts, and generation-skipping trusts.
You can use an incentive trust that includes stipulations that must be met before the distributions to the beneficiary will be released by the trustee. To explain through the use of an example, let’s say that you are leaving a bequest to your grandchild, and you want to provide guidance.
In the trust declaration, you could instruct the trustee to pay all expenses while the beneficiary remains a student in good standing in college. You could add additional incentives to attend graduate school, and the trust could provide a dollar for dollar match of money earned on the job.
This is one possible way that an incentive trust could be constructed, but there are many possibilities. You can include any stipulations that you want to dictate as long as you are not requiring the beneficiary to do something that is illegal.
Loneliness is a big problem in the elder community, and pet ownership can provide a solution. Longevity is a source of concern, but a pet trust can create a responsible pathway to pet ownership for seniors.
These trusts are legal in all 50 states, so this is a completely legitimate option. If you create a pet trust, you name a trustee and leave instructions with regard to the way you want the pet to be cared for if you die first.
The trustee would be compelled to follow these directions, and you can address specific details. In the trust agreement, you would name a successor beneficiary, and this individual would assume ownership of the remainder after the death of the pet.
Schedule a Consultation Today!
As you can see, many different estate planning solutions exist, and the right choice will depend upon the circumstances. Personalized attention is key, and that is exactly what you will receive when you choose our firm.
We know that it can be disconcerting to discuss personal matters with an attorney you have just met. When you choose our firm, you will find that we treat people the way that we would want to be treated if we were in their position. You will feel comfortable from the start, and we will answer all your questions thoroughly.
If you are ready to get started, you can schedule a consultation at our Bluffton, SC estate planning office right now if you call us at 843-815-8580, and you can use our contact form if you would like to send us a message.
- Understanding the Federal Estate Tax: Changing Are Looming - November 29, 2023
- Estate Planning for Minors: UGMA/UTMA Accounts and More - November 15, 2023
- Seniors: A Pet Trust Can Provide Peace of Mind - November 1, 2023