Wealth Transfer Planning

You’ve successfully built your wealth and plan to enjoy it throughout your lifetime. But what will happen to it when you pass on? Including Estate and Wealth Transfer Planning into your overall financial plan will not only help to ensure your estate ends up where you want it to, but can help ensure more of the value of your estate gets passed along to your beneficiaries or perhaps even charities and less to the Internal Revenue Service.

The value of your estate can be subject to a myriad of taxes, including state inheritance taxes, state estate taxes, federal estate taxes, and possibly generation skipping taxes. Taking action early in creating an Estate Plan will help to minimize some of those excessive taxes and ensure proper transfer of assets. Including Estate and Wealth Transfer Planning into your overall financial plan can make this process more efficient, potentially tax free, and you can leverage the amount of wealth transferred to loved ones and charities.

Early planning is key. Time is necessary in order to establish gifting strategies that allow you to take advantage of annual gift limits without impacting your lifetime exclusion allowance. Additionally, trusts may need to be established. Some charitable trust strategies may also provide you with current tax year deductions.

Intentionally Defective Grantor Trusts (IDGTs)

A strategy that is becoming more popular is an Intentionally Defective Grantor Trust (IDGT). This long term strategy is becoming popular because of the phase in life that the baby boomer generation is moving into. It can allow you to remove assets from your estate and if the strategy is funded with life insurance, the death benefit will be placed outside of your estate. This strategy allows you to start moving dollars in a very strategic and planned fashion. The key is that the grantor maintains a string on their assets placed in the trust, and the grantor therefore maintains control of the assets as long as the string is still attached. Once the string to the assets is cut, the gift becomes irrevocable and permanently removed from your estate.

Using Intentionally Defective Grantor Trusts (IDGTs) is a complicated strategy that involves loans between the trust and the grantor and “interest payments” to be paid in accordance with IRS stated minimum interest rates. The complexity of the strategy is diminished significantly when the right accounting program administration software is used. Some companies offer this accounting maintenance for fees as low as $100 a year, so it need not be prohibitively expensive or only available to the ultra-wealthy.

We commonly use this strategy when we have individuals or couples that have reasonably substantial wealth and realistically more than what is needed to support their lifestyle needs until the end of their lives. It would therefore be logical to irrevocably remove the assets from their estates. Once presented with the idea, however, we shun from it because there is always the fear you may need the assets, and therefore the emotional need to maintain control. This is why gifting with a string creates the perfect solution to appease our emotions while simultaneously putting a proper wealth transfer plan in place to minimize or eliminate estate taxes.

Michelle Ford does not provide tax and/or legal advice. However, Michelle Ford will work with your attorney or independent tax or legal advisor.

Bloodline Trusts

With blended families becoming more and more common, Bloodline Trusts are becoming more relevant as well. Bloodline trusts ensure the money you leave to your beneficiaries stays with your bloodline. There are a myriad of situations in which the modern family could utilize these trusts. In cases of divorce or death of your beneficiaries, you can be assured the money will be used for the benefit of the “bloodline”.

The trusts can be structured so that remaining spouses can still enjoy income from the trust while they are alive, but we ensure that all remaining assets pass directly to your bloodline and are not commingled with any possible “new” spouse’s assets in the event of remarriage because this is when the nightmare can begin. Many may feel anxious mentioning their desire to use a trust of this kind with their lawyers or advisors, but often the reasoning behind its use is protecting our beneficiaries’ rights rather than excluding those who aren’t in the bloodline. Families use these trusts because of all the possible scenarios that could occur after we have passed that certainly are not what we intended for our beneficiaries or our assets. It doesn’t necessarily have to be ill intent or malice that we are protecting our legacy from. We are protecting our assets from being accidently passed on and enjoyed by individuals other than those in our bloodline.

Special Needs Trusts

With the heightened awareness of severe disabilities and mental illness in recent years, Special Needs Trusts (or Supplemental Needs Trusts) are being found to be more useful than ever. Caretakers for people with special needs often find taking care of this beneficiary in the event of their demise is a high priority for them. Special Needs Trusts are unique in their ability to provide assets for a person with a disability that do not exclude them from qualification for certain types of governmental benefits they would have otherwise qualified for, such as Medicaid, Supplemental Social Security Income (SSI), and subsidized housing. Its purpose is to provide supplemental income above and beyond what is given through government relief, as well as ensuring the assets are safeguarded and protected for the often particularly vulnerable beneficiary they were intended for.

When Choosing a Financial Professional

There are various types of trusts that may or may not be appropriate for your situation and a knowledgeable financial professional can help you determine what strategies are right for you. Your guide of choice should be well-versed on trust planning tactics and be able to use them appropriately in your overall financial strategy.

Did you realize that having a $1 million estate (don't forget this includes life insurance death benefits and your family home!) means you will owe over $33,000 to the state of New Jersey? Without utilizing effective legacy planning strategies, your beneficiaries could be missing out on over $33,000 you have worked hard to pass down to them!

This professional is, however, not an estate planning attorney. You will need your attorney to create and draft the trusts, but your financial professional should be able to work with your attorney to ensure your wishes are being effectively addressed and that your documents fit into your strategic plan. If you don't currently work with an estate planning attorney, your trusted professional should be able to recommend one to you that will be able to meet your needs and the needs of your strategic plan.

LifeLong Retirement Corp has the ability to meet these particular and specific coordinated needs. It is important to once again stress that we are not attorneys, however our collaborative nature combined with the knowledge and experience we bring to the table makes the entire process easier and less time consuming for you.

Choosing a well-trained and well-versed financial professional who can create a blueprint with you that incorporates your wishes for every facet of your estate's lifetime (from accumulation to distribution to wealth transfer) should be a requirement. Including all components into your strategy up front will allow all of your important details to be considered while achieving your best possible outcome.

Education Resources

Michelle Ford does not provide tax and/or legal advice. However, Michelle Ford will work with your attorney or independent tax or legal advisor.