Top-Rated Trusts and Estates Attorney John O. McManus Summarizes Proactive Planning That Seniors and Their Loved Ones Should Undertake Now
Unique challenges face us all as we grow older and become “seniors”, but with proper planning, you and your loved ones can be well-prepared to successfully navigate this stage of life. Top-rated estate planning law firm McManus & Associates today issued “Top 10 Dangers and Opportunities for Seniors” as part of its Educational Focus Series. During a presentation to clients, the firm’s Founding Principal and AV-rated Attorney John O. McManus outlined steps that should be taken to best position older Americans and their families to avoid pitfalls and capitalize on opportunities related to health and wealth commonly faced later in life.
To review McManus’s guidance, go to https://bit.ly/2OxaLuQ.
“Even if you’re not geographically close to your senior parents or, if you are the senior, to your children, there are several important things we can do here and now to protect seniors,” commented McManus. “Making the time to plan ahead can save you and your loved ones from headaches and regrets, in addition to preserving family wealth.”
1. Anticipate, Before It’s Too Late: As we age, there is a significantly greater risk of incapacity. The failure to prepare a Health Care Directive and Living Will, Authorization for Release of Protected Health Information, and Durable General Power of Attorney means that family members will be compelled to seek court intervention if you are ill, become unconscious, have diminished capacity, or experience some other emergency. This results in unnecessary delay and expense and will be completely inadequate if your loved ones need to make a health care decision or act on your behalf with respect to your financial, legal or personal matters. It is essential to ensure basic protections are in place so that loved ones can act immediately in the event of these issues.
2. Spend a Little Time Planning to Save a Lot of Time Doing: The need for the Court to oversee the administration of an estate can be time-consuming, costly, and frustrating. Proper planning will allow for the probate process to be completed with greater expediency. This includes the preparation of Revocable Living Trusts, the assets of which will not be subject to Court review (even if the property is owned in another state), and updates to the titling and beneficiary designation of your assets to ensure a far more efficient estate administration.
3. Take Advantage of the Opportunity of a Lifetime (Gift Tax Exemption): Dramatically reduce future potential federal estate tax by utilizing the temporary increase to the lifetime gift exemption. The Tax Reform and Jobs Act enacted at the beginning of 2018 significantly raised the Federal estate tax exemption, but the current law will expire no later than December 31, 2025. Furthermore, Congress can take action sooner to reduce the increased exemption. Therefore, high-net worth individuals and families must strongly consider leveraging the exemption while it is available in order to remove appreciating and/or discountable assets from the taxable estate.
4. Don’t Skip Over Generation-Skipping Tax: Understand the tax implications of the transfer of wealth across multiple generations to preserve your legacy for your descendants. Generation-skipping tax (GST) and the use of the GST exemption are among the most sophisticated planning concepts, but it is essential to consider this issue as part of the larger estate plan. Bequests in trust to grandchildren, the design of a dynasty trust, and the proper reporting of gifts are all connected to the deployment of the GST exemption and avoiding the imposition of additional tax when an inheritance is received by more remote descendants.
5. Decrease Your Chances of an Increase in Federal Income Taxes: Evaluate strategies to avoid a potential increase in federal income taxes due to limitations on state and local tax deductions. Different types of out-of-state Trusts (particularly those based in Delaware and Nevada) provide planning opportunities before the liquidation of an appreciated investment or business. Furthermore, life insurance, Roth IRA conversions, and contributions to charitable vehicles (including Private Foundations and Charitable Remainder Trusts) afford opportunities to mitigate state income tax exposure.
6. Step Up Your Planning with a Step-Up in Basis: Review the power of a step-up in basis upon death, reducing capital gains tax and delivering income tax savings your loved ones can enjoy. Families must consider proper planning in advance of death. Asset transfers to an ailing spouse, community property trusts, asset swaps from existing irrevocable trusts, and asset upstream gifting to parents are all options to put the surviving spouse, children, and other heirs in the best position to sell an appreciated asset tax-free.
7. Plan for Long-Term Care in Short Order: The cost of long-term health care could drastically deplete an estate, but strategies may be available to mitigate the attrition of assets. In addition to traditional long-term care policies, life insurance policies can be structured with an accelerated death benefit to cover the cost of nursing home care and/or provide wealth replacement if other resources are diminished. Medicaid Trusts and Supplemental Needs Trusts also afford the possibility that assets may be preserved for the use of a surviving spouse or provide a meaningful legacy for children without sacrificing the ability to qualify for governmental benefits.
8. Expect the Best, Plan for the Worst: Protect the inheritance of your heirs and ensure wealth is not diverted, in case a child’s marriage fails (or there is some other attack by a plaintiff’s lawyer). A properly structured trust for the benefit of a child or grandchild under a Will or Revocable Trust can serve to secure an inheritance from an estranged spouse. It is also important to evaluate how these benefits can be enhanced through a prenuptial agreement or other prenuptial planning measures. Such a trust can insulate the assets from attacks resulting from personal or professional liability, creditors, and other legal claims.
9. Pay Special Attention to Special Needs: Ensure the inheritance of your children and grandchildren can be used to enhance their standard of living, while preserving their ability to receive Social Security or Medicaid. If a child or grandchild directly receives from the estate or benefits from a conventional trust, it will likely cause him or her to disqualify for needs-based government benefits, forcing the funds to be used for basic living expenses and health care. Incorporating a Supplemental Needs Trust into the estate plan will prevent the inheritance from being treated as a resource of that child or grandchild, which will allow for the continuation of payments from these programs. The assets of the Trust can then be sheltered for uses not covered by the government, including social, cultural, entertainment activities, travel, visitation with family members, educational and vocational programs, and other quality of life considerations.
10. Prepare Your Heirs: Aid your loved ones in the effective deployment of the wealth you pass along by imparting your family mission and values, including the intrinsic benefits of philanthropy. As a first step, we encourage adopting a family mission as part of the estate plan as a means of conveying these wishes and expectations. We also recognize the importance of gradually integrating children and grandchildren into the estate plan through periodic family meetings with the family’s professional advisors, which will help them to understand the purpose of the estate plan and the various considerations that go into preserving wealth for the next generation. Finally, those families who adopt charitable giving as a core tenet of the estate plan should include children in the implementation of those activities, including the continued support of causes supported by the family, the identification of new causes that align with donative intent, and the development of relationships in the philanthropic community to ensure charitable gifts have the greatest impact.
To master end-of-life planning related to one’s healthcare and estate, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm at www.mcmanuslegal.com.
About McManus & Associates
Over twenty-five years ago, McManus & Associates was founded to deliver the highest quality estate planning services that the largest firms promise with the more intimate, personalized relationships that a sophisticated boutique law firm can offer. Since that time, some of the most prominent families in finance, media, academia and medicine — both domestic and international — have relied on McManus & Associates to serve as their advisor in wealth and family mission planning.