People may have many personal planning goals, for the protection of what they consider their "legacy". Here are some examples.
Asset Protection
Most people want to remain in control of their property while they are alive and well. Protecting what you have is fundamental. The first line of defense is proper insurance for likely risks. Other forms of protection may include the use of business entities to help shape your exposure. Certain irrevocable trusts, like domestic asset protection trusts or even offshore trusts, also may be appropriate for lifetime asset protection. Asset protection strategies, however, may be unfeasible or unlawful unless put in place well before you have known creditor problems. The key as always is to plan ahead.
Family Protection
Preservation of the family is the paramount issue for many people. Some of the concerns include:
- Protection of Minor Children. Who will raise your children if you are no longer there for them? There are many considerations in choosing a legal guardian, such as each child's particular needs, the values and child-rearing skills of the guardian, the guardian's own life situation, and ties with the child's extended family. If you do not make the choice, the court will appoint whoever volunteers, or foster care if necessary. Financial control can and often should be kept separate from your chosen guardian.
- Keeping the Family Together. You must keep in mind your particular family personalities and dynamics. This is especially true in answering the “who gets what” question and the “who’s in charge” question. Your decisions must be made thoughtfully and your wishes must be expressed with clarity and sensitivity. Careful estate planning may help avoid hurt feelings, resentment, and family conflict.
- Non-Traditional Families. The concept of "family" has expanded to embrace single parent families, grandparents raising grandchildren, same-sex marriages, domestic partners and civil unions, and others. Recognizing and planning for the distinct needs and concerns of non traditional families is essential to their plans' success.
- Pet Trusts. Many families include a canine, feline or other animal member. You may want to remember them in your estate plan, too. And it may not take a trust to see that they have a good home.
Inheritance Protection
When you leave an inheritance outright, anything can happen to it. We're told that the average inheritance is gone in eighteen months. With a trust, you can provide for protection and management of assets over time. Key concerns are:
- Protecting Beneficiaries from Themselves. You do not want to leave your estate to beneficiaries with diminished capacity, who are too young or immature, who have an alcohol or substance abuse problem, who have gambling issues, or who otherwise are not ready or able to manage money wisely. They will squander it, or worse, they will ruin themselves.
- Protecting Beneficiaries from Others. Even beneficiaries who are responsible and capable adults may need protection from others. Think about potential creditors, such as professionals or business persons subject to lawsuits. Think about predators, taking advantage of your beneficiary. And think about controlling spouses and divorcing spouses. Smart beneficiaries want to receive their inheritance in a form they can defend.
- Keeping It All in the Family. What if your surviving spouse remarries? What if your child dies and their spouse remarries? Do you want the family fortune to leave your bloodline?
Values Protection
For many people, money is not an end in itself. They want their estate to promote their values.
- Incentive Trusts. Instead of giving a beneficiary money, consider giving them an education. Or consider linking their inheritance to educational achievement, hard work, or some other worthwhile goal.
- Charitable Giving. Do you want to benefit a charitable organization or cause? Your estate plan may provide for charitable gifts during your lifetime or at your death. Your planned giving may even let you receive a stream of income for life, earn higher investment yield, or reduce your capital gains or estate taxes.
Estate Protection
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- Tax Avoidance. Taxes can take a huge bite out of a legacy. Planning strategies should address federal and state death taxes, income taxes, and capital gains taxes. There are many lawful tax avoidance or tax reduction techniques.
- Stretch That IRA. Many people today have substantial IRAs, 401(k)s, or similar retirement plans. Financial advisors tell us about the financial power of tax deferred growth of assets inside a retirement plan. We are told not to take money out of an IRA until we must. In estate planning, we can take this IRA stretch-out concept a step further and plan to stretch out IRA payments to beneficiaries after your death. Integration of IRA planning and estate planning can make these assets much more valuable in the hands of beneficiaries.
- Family Business Succession Planning. If you are a business owner, you may want to pass the family business fairly and sensibly to the next generation. Without advance planning, there may be a forced sale instead.
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