ANSWER: You may not want to think about this, but you will die someday.
If you are lucky, it will not be for a long time, but it will happen.
Thus, you have all the same estate planning needs of a 50-year old, except that at 36, you have much broader flexibility.
Here are examples:
Long term care insurance is inexpensive when you are young and healthy.
You can start a whole life insurance policy, which will avoid inheritance tax.
Certain properties and interests are exempt under Medicaid standards. You can determine the exemptions now or plan for them to remain exempt, so you will qualify for Medicaid.
You need a well-considered and well-drafted Will and/or Trust no matter what your age because you have a family.
You also need a durable Power of Attorney with broad powers – you don’t want to be in a situation where your wife cannot make medical decision for you.
Depending on your assets, you might consider the re-titling of assets (to assure assets/interests get to whomever you choose at a lower inheritance tax or none).
QUESTION: What things can I do to reduce the value of my interest in my family business, for tax reasons, without losing control?
ANSWER: This is a good question. You might not be ready to hand over control of your business to your heirs or successors, but you would like to reduce the value of the business so that when it is inherited, estates taxes will be reduced. Here’s what I would suggest:
If incorporated, keep one share of stock as the sole voting share, and the rest would be non-voting common stock. Or, if your family business is not a corporation (it is a family limited partnership or limited liability company, for example), create minority interests in a partnership agreement.
Transfer the limited (minority) interests in your business real estate or other major assets so more people have an interest in the property, thus reducing value of the whole, by splintering the whole.
QUESTION: I am a 62 year old widow and have grown children. I see a lot of seminars for “living trusts”. What is a living trust and could it help me?
ANSWER: Be cautious. Some people selling Living Trusts say that the advantage is that at death there’s no estate to administer and no attorney to pay. Some even claim there is no estate tax to pay.
But both of these claims are usually untrue. Most revocable trusts require on-going review and of course, on-going review of the trust and its enforcement. An attorney will be required for all but very simple living trusts. As for avoiding taxes, under the United States Internal Revenue Code, a person who has the power to change their mind up to the moment of death is deemed to have died vested with the asset. Therefore, the inheritance and estate taxes will still have to be paid.
Living trust scams are widespread. The scams often operate at two levels:
The seller charges the consumer for the plan, which may be packaged well (leather-bound folder, lots of related forms, etc.) but often is inadequate, inappropriate and overpriced.
The seller uses the plan to learn about the consumer’s finances, leading to the sale of inappropriate investments or outright theft of assets.
How can you be sure you are getting good advice? Find a lawyer you can trust, and don’t be afraid to get a second opinion.
QUESTION: My father is not able to handle his own financial matters. What can I do?
ANSWER: You are concerned about your father and want to make sure he is taken care of, and gets the help he needs as he ages. To anwer your question, I would first need to know exactly what you mean by “not able to handle his own financial matters.”
We need to determine if your father still legally competent to make decisions about his legal affairs. Does he understand what is happening, but can no longer read his financial statements, write checks or get to the bank? Or is it more severe – is he unable to process the information he is given and make a reasonable judgment about what to do. You may disagree with the financial decisions your father makes, but that does not mean he is not mentally competent as defined by the law.
If your father is legally competent, and he is willing, he can sign a power of attorney giving you or someone else the power to handle his financial affairs for him. If your father has already signed a power of attorney for his finances that will go into effect if he should become incapacitated this might be an appropriate time to talk to him about relinquishing control in favor of the people he has already chosen to help him in this situation.
If your father has not planned ahead and if he is no longer competent to sign a power of attorney, then someone will have to go to court to ask for a guardianship over his estate. Your father would still be free to make his own decisions about personal things like where to live, what medical care to have, and so on. The court would appoint someone to look after his financial affairs under the supervision of the court. That person usually has to post a bond to protect your father’s estate from the effects of mismanagement.
A guardianship proceeding can be expensive, especailly if your father doesn’t agree to let someone else have control. The costs for a guardianship are taken out of your father’s assets, including any legal fees for advice needed or help preparing and submitting records to the court on a regular basis. For this reason, it’s much better for everyone to plan ahead to avoid this situation and the expenses associated with it.
QUESTION: I am divorced with 2 college-aged children and am about to remarry. How can I make sure my children inherit my assets in case of death or divorce?
ANSWER: This is a wonderful time for you! You have much to be excited about – a new life with a new partner and a second chance at love. But you are wise to think about your children and the effect this will have on them. Here’s what I suggest:
As hard as this may be, a Prenuptial Agreement in advance of the marriage should be at the top of your list. This does not mean that you do not think this marriage will not last, it only means that you are protecting your children for whatever may happen, including your sudden death.
Next, if you do not have one already, have your Will drafted to favor your children and appoint your most responsible child Executor of your Will. Depending upon the size of your estate, consider: a 529 Education Trusts and a pour over trust for them.
If your current assets will not cover the cost of their education, buy a whole life insurance policy benefiting your children; This will ensure that they have enough resources to be able to complete their education in case of your untimely death.
Depending on your age and your health, carefully consider long term care insurance to protect your children’s assets in the event you are ill for a long time and require Medicaid. (In some instances, assuming long-term illness paid by Medicaid, your state of domicile can pursue payment to your children);
Sign a well drafted Durable Power of Attorney appointing your most responsible child your Attorney-In-Fact (so that child can handle your personal matters if or when you cannot); in the Power of Attorney, give the child (or other person you trust) broad powers to use your assets to educate your children (or other loved ones) and care for them in multiple ways.