Advanced Estate Planning

INTRODUCTION TO ADVANCED ESTATE PLANNING:

You've worked hard your whole life to provide for your family and make your loved ones more secure.  Without advanced estate planning strategies, much of the significant assets you have accumulated may end up with the IRS and state taxing authorities.

Our firm regularly assists affluent families with such sophisticated planning strategies as Family Limited Liability Companies, IRA Inheritance Trusts, Irrevocable Life Insurance Trusts, Irrevocable Income Only Trusts, and a wide range of charitable gifting techniques to reduce Federal Estate Taxes, Gift Taxes and Generation Skipping Transfer Taxes. 

Below, you will find a brief overview of several advanced estate planning techniques.

IRREVOCABLE LIFE INSURANCE TRUSTS (ILIT)

There is a common misconception that life insurance proceeds are not subject to Federal Estate Taxes.  While the proceeds are received by your loved ones free of any income taxes, they are countable as part of your taxable estate and therefore your loved ones can lose about half of its value to estate taxes. 

An Irrevocable Life Insurance Trust is created specifically for the purpose of owning your life insurance policy. A properly established and administered trust holds the policy outside of your estate and keeps the proceeds from being taxable to your estate. The proceeds from the insurance policy can then be used to provide your estate with the liquidity to pay estate taxes, pay off debts, pay final expenses and provide income to a surviving spouse or children.  The ILIT will be the policy owner and beneficiary.  Once your trust is established, you use your annual gift tax exclusion to make cash gifts to your trust. Your beneficiaries forgo the present gift (in lieu of the future proceeds) and the trustee uses the remaining gift to pay the premium on the life insurance policy.

There are many options available when setting up an ILIT.  For example, ILITs can be structured to provide income to a surviving spouse with the remainder going to your children from a previous marriage.  You can also provide for distribution of a limited amount of the insurance proceeds over a period of time to a financially irresponsible child.

FAMILY LIMITED PARTNERSHIPS

A Family Limited Partnership (FLP) is a form of a limited partnership among members of a family. The main advantages of forming and funding an FLP involve estate and gift tax savings and asset protection. An FLP also allows you to retain control over the transferred assets while enjoying these advantages.

IRA INHERITANCE TRUSTS

If you want to give your grandchild a gift for life, consider an IRA Inheritance Trust. Setting up an IRA Inheritance Trusts allows your IRA to be protected and stretched out. The “stretch” as we call it is a beautiful mechanism that allows your IRA to grow tax-deferred (or tax-free if a Roth IRA) based on the life of your child or grandchild. You should also set up an IRA Inheritance Trust if you are concerned that the beneficiary who inherits your IRA will cash it out and spend it all at once, thereby seriously reducing the potential benefits available.

IRREVOCABLE INCOME ONLY TRUSTS (IIOT) / INTENTIONALLY DEFECTIVE GRANTORS TRUSTS (IGDT)

Irrevocable trusts and grantors trusts can potentially provide major benefits to the trust-maker. Potential benefits include:

• Reducing the size of the estate
• Receiving income from the trust
• Transferring assets out of name for Medicaid benefits, Veterans benefits, etc.
• Receiving tax benefits
• Asset protection for beneficiaries

ASSET PROTECTION TECHNIQUES

More and more people are using the legal system to deprive others of their life's work.   Over 19 million new lawsuits are filed in the United States every year, many of which are frivolous or settled for sums greater than the actual liability.

Assets can be at risk due to a number of vulnerabilities, including:

• Professional malpractice liability
• Personal liability of corporate officers and directors
• Lawsuits by former business partners
• Personal injury suffered on your premises
• Personal injury resulting from a motor vehicle accident
• Liability as guarantor for the debts of another
• Liability arising from misconduct

Asset Protection is not about giving in to fear.  It is about empowering yourself in the face of it. Our firm will work with clients to implement proven, legally-sound strategies that will help preserve their wealth and safeguard their assets. 

The exact strategies employed by our firm may vary depending on the client, the nature of the assets, the country of origin, and the tax regulations that apply to those assets. The ultimate goal is to protect the status of current assets in a manner that is effective, legal and ethical.