There is a common misconception that you must be wealthy to need advanced estate planning. This is true is some cases but not in others. While basic estate planning involves creating a plan for what happens if you become mentally disabled and a plan for what happens after you die, advanced estate planning goes beyond these basics in several ways:
- Estate Tax Planning- Finding ways to reduce or even eliminate estate and generation skipping transfer taxes;
- Asset Protection Planning - Reviewing your assets and determining which are exempt and nonexempt from the claims of creditors;
- Business Succession Planning - Addressing what will happen to you and your closely-held business if you become mentally disabled or die;
- Planning for Disabled or Problem Beneficiaries - Discussing all of the needs of your beneficiaries and then planning accordingly; and
- Creating a Family or Charitable Legacy - Working to establish a dynasty trust, one or more charitable trusts, and/or a private charitable foundation.
Estate Tax Planning and Asset Protection Planning
Working with your estate planning attorney to establish your basic foundational estate plan will allow you and your attorney to assess your need for estate tax planning and/or asset protection planning. Why? Because as part of creating your basic foundational estate plan you'll need to make a list of all of your assets and liabilities and then calculate your net worth. This, in turn, will reveal the estimated value of your taxable estate and which of your assets are exempt or nonexempt from the claims of creditors. From there, you and your estate planning attorney can develop a plan to reduce or even eliminate your estate tax and generation skipping transfer tax liabilities and restructure your assets for asset protection purposes.
Business Succession Planning
If you are part or sole owner of a closely-held business, then having a strategy to exit your business in the event of your mental incapacity or death should be a crucial part of your estate plan. You and your estate planning attorney will need to work on a plan for what will happen to your interest in the business in the event you are declared mentally incompetent or if you still own an interest in the business at the time of your death.
Planning for Disabled or Problem Beneficiaries
Creating your basic foundational estate plan will also allow you and your estate planning attorney to assess the needs of all of your beneficiaries. If a beneficiary is physically or mentally disabled and receiving government benefits, then the beneficiary won't be able to receive a direct distribution but instead will require a Special Needs Trust. Or, if a beneficiary is bad with managing money or is in a shaky marriage, then the beneficiary may require a lifetime trust instead of an outright distribution.
Creating a Family or Charitable Legacy
Finally, creating your basic foundational estate plan will reveal your desire to establish an ongoing legacy for your family through the use of generation skipping planning or lifetime trusts that preserve the stretch out of required minimum distributions from retirement assets, and/or a charitable legacy through the use of one or more charitable trusts or a private charitable foundation.