Some people know that estate planning is important, but they are frozen with inaction because they have no frame of reference. If this sounds familiar, you can use these questions as a starting point, and we can do the rest when you schedule a consultation.
Do you have dependent children?
Estate planning is an absolute must if you have minor children that are depending on you for everything. You should name a guardian for the children in a will, but that’s just the beginning.
A will is not going to be a suitable asset transfer vehicle because children cannot handle their own money. If you establish a revocable living trust, you can act as the trustee while you are alive, so you would still have control of the assets.
You name a successor trustee to assume the role after your death, and they would be able to manage assets on behalf of minor children. When it comes to the funding, you can carry sufficient life insurance, and the trust can be the beneficiary of the policy.
A living trust can actually be the ideal estate planning centerpiece after your children are grown, so this can be a long-term solution. We should point out the fact that a married couple can create a joint living trust.
It is also possible to use a testamentary trust, which is a trust that is embedded in a will. This type of trust would be created after you pass away.
Is everyone on your inheritance list prepared to accept a large lump sum bequest?
Some people have concerns about the way their heirs will manage significant inheritances. There are individuals that have make poor financial decisions on a consistent basis, and there are others that have no experience handling large sums of money.
A direct inheritance can create a problem for someone with a disability that is relying on Medicaid and SSI. These are need-based program, so a change in financial status can cause loss of eligibility.
If you get remarried and you leave everything to your new spouse, how can you be certain that your children from a previous marriage will receive their inheritances?
There are trusts that can be used to address all of these situations. You can explain your concerns when you work with our firm to develop your plan and we will make the appropriate recommendations.
Will estate taxes be a factor?
Many wealthy people live in the Hilton Head area, and estate taxes can be a factor for high-net-worth individuals. This tax can be levied on the portion of an estate that exceeds the exclusion, and on the federal level, the exclusion stands at $11.7 million in 2021.
The reconciliation bill that we have all heard so much about includes a provision that would reduce the exclusion to about $6 million next year. Even if this never happens, it is scheduled to go down to the 2017 level of $5.49 million with inflation adjustments in 2026.
There is no state-level estate tax in South Carolina, but if you own property in one of the 12 states with estate taxes, it would apply to your estate if its value exceeds the exclusion. The state-level exclusions are lower than the federal exclusion.
Who will manage your affairs in the event of your incapacity?
The state can appoint someone to act as your guardian if you take no action in advance, so your plan should include an incapacity component. If you have a living trust, you can empower the successor trustee to administer the trust in the event of your incapacity.
To account for assets that are not in the trust, you can name a decision-maker in a durable power of attorney for property. A durable power of attorney for health care should be added to name a medical decision-maker, and you can assert your life support preferences in a living will.
Doctors will not share medical information with anyone other than the patient because of HIPAA regulations. With this in mind, you should sign a HIPAA release to give your health care agent the ability to access your medical records and discuss your condition with your doctors.
Are you ready to schedule a consultation?
Now that you have a chance to contemplate these questions, it is time to develop a plan that will bring your wishes to fruition. You can schedule a consultation at our Bluffton, SC estate planning office if you call us at 843-815-8580, and you can use our contact form to send us a message.