For those of us in the service industry, we tend to notice the pattern and practice of the people we serve. For estate planners, we tend to pick up on the different trends of those clients who find themselves in a variety of economic and social conditions within their families and within their businesses. I draw also from my personal experience as a Board Member of Open Door Resource Center, Inc., an area nonprofit dedicated to uplifting those in need and struggling financially to advance. (http://www.opendoorohio.org/) Open Door Resource Center periodically offers classes called “Getting Ahead”, in which clients learn about the different approaches and customs within a societal class system. I borrow that same system to tweak how individuals can fit these same examples into their estate planning needs.
I realize that breaking people down into a class or income system may be considered somewhat stereotypical and that society is much more complex in reality; I use this information here only to point out statistical, if not simply anecdotal, examples and patterns from my experience. People and clients are fluid; society remains dynamic and ever shifting. I hope this information may assist those who want to draw from my experiences and insights in order to explore their own planning opportunities.
Low to Moderate Income:
This group may consist of those who are just starting out and find ourselves working within a tight budget or with limited means; it may also include those who have found themselves in generational poverty. However you may find yourself in this category, the goal from an estate planning perspective remain the same: make sure your plans are to efficiently pass interest to your loved ones and work toward giving that next generation a leg up. This may be accomplished by use of several tools at everyone’s disposal:
- Probate avoidance- Avoiding court process avoids costs and makes the economic and records system directly accessible by and to your heirs
- Establish Authority Documents. Power(s) of Attorney may eliminate the need for a probate guardianship during your lifetime and allow you to pick who will make decisions on your behalf
- Consider Title to your assets. Use transfer on death affidavits for real estate and motor vehicles. Make financial accounts Payable on Death and or beneficiary designated. The use of these tools reduce creditor reach over your assets at death
- Don’t Ignore Traditional Foundation Pieces. Last Wills and Testaments are still helpful in order to ensure that there are guardianship provisions for minor children, but hopefully not necessary to pass interest to your assets
- Alternatives to relying on the Will to pass interests on assets—consider instead naming individuals on accounts as “custodians under the Uniform Transfers to Minors Act” (See https://codes.ohio.gov/ohio-revised-code/chapter-5814 and http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0710/Sections/0710.111.html)
- Think about long term care costs. If insurance proves too costly for long term care strategies, be aware of at home care options, particularly with family members. Apply titling techniques that avoid probate but pass equity interest leaving as little transfer costs on the table
- Plan for Funeral Costs. Ensure adequate Insurance for your funeral needs. It is important to make your burial wishes known and to provide the means for coverage in the event of your death
Moderate Income/ Middle Income:
This group may be looking to expand their wealth and invest into growth opportunities. As mentioned above, this group still has a desire to efficiently pass interests to their loved ones at death. This group may also seek to transfer their businesses, where applicable, to the next generation. In addition to those items mentioned above, this group should consider:
- Business Planning. Where just beginning, make sure that you’ve isolated your business interests from your personal interests to minimize your risks
- Set up Business Entities to hold commercial ventures
- Consider and note the up-front costs and available deductions
- Understand where specific licensing may be required for your industry
- Counsel. If not already established, now is the time to find a good tax advisor and good counsel
- Advance planning strategies. With more assets and estate complexity available, some simple tools like transfer on death strategies may not be sufficient to carry out your wishes.
- Trusts. The use of Trusts permit you to tailor how an interest may pass in the event of illness or death and not just to whom an interest may pass
- Investment Planning. Work with investment advisors in order to be aggressive in some areas and conservative balance in others
- Create a long-term care strategy. Obtain insurance for care costs; if acquired soon enough, insurance may compliment other available strategies
This group may find themselves at the top bracket for the first time or perhaps as a result of the generational passing of wealth. Here, this group prioritizes preserving wealth, avoiding tax, avoiding issues that come along with young persons having too much, too fast. The goals we focus on this category include the same as mentioned in each of the above categories. In addition to the above concerns, we may need to be address other planning strategies as set out below.
- Generation Skipping Wealth. Divide wealth and assets among multiple generations in order to benefit family in such a way as not to harm them
- Creditor protection for the next generation. Design the transfer of assets to those persons who may have their own estate tax issues and considerations. We craft your plan in such a way to ensure that your heirs:
- don’t lose their inheritance in a divorce or long-term care scenario
- maintain control and use of estate assets without direct ownership over the interest
- may appoint the property among other family members should tragedy or unexpected events occur
- Include Charitable Giving. Remember that all estate value above taxable levels will be exposed to tax at roughly forty percent (See https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax). As a charitable giver, you may consider:
- How much do you need to pass to family members? Consider instead establishing a legacy in your community for years to come
- How can you best partner with community foundations, churches, and local area nonprofits
Wherever you may find yourself, Roth Bacon Moon Attorneys will work to fit your goals into a winning strategy and plan for the future.