Modern estate planning is more flexible that you might think. For example:
Help if you are unable to manage your financial affairs.
A financial power of attorney allows you to choose a trusted person when you need assistance in handling your financial affairs. The power of attorney does not operate or "spring into action" until you need it but can be created ahead of time in the event you need it.
Help if you are unable to manage your medical affairs.
You can designate a trusted person as your decision maker, where certain medical conditions are met, to make your predesignated medical decisions for you if you are unable to communicate effectively with your doctors.
Flexibility for how your loved ones or beneficiaries can receive money and property.
- Outright distribution. The terms of your estate plan can instruct the distribution of money or property to your loves ones at any time.
- At a certain age. You can state in the terms of your estate planning that a certain percentage of your estate be distributed to your loved ones at certain ages, which often vary by child or the situation.
- After reaching certain milestones. If there are certain things you want your loved ones or beneficiaries to attain before receiving access to money and property, you can instruct the trustee to distribute a certain percentage or amount once that milestone has been reached.
- Leave it up to the trustee or personal representative. If you are concerned about what your loved one or beneficiary may do with the money or if there are creditor issues, an unhealthy marriage, or an addiction, allowing distributions to be made at the trustee's discretion may be a good way to protect the money.
Sometimes, a combination of the options listed above may be the way to address the unique elements of your plan.
Keeping your plan current.
Here are some examples of changes that affect your estate plan: additional children, changed relationship with a child, changing who should be named as successor trustee, and change in assets. A child or other beneficiary could encounter difficulties that change the way you may wish the assets to go to that beneficiary, or the suitability of that beneficiary to receive assets or to act as trustee. Sometimes a trustee passes away.
Other updates are beneficiary designation updates on life insurance, 401ks, bank accounts or other investment accounts. Keep in mind that your will or trust does not direct what happens at your death with beneficiary designations. It is amazing how often I see an ex-spouse or a deceased person listed as the beneficiary and sometimes even after the person has remarried.
There are multiple legislative proposals that may impact your estate planning. The most notable now is the American Families Plan Act, which includes proposals to increase the ordinary income tax rate and capital gains taxes. Updates as that legislation progresses will be provided on this website.
Some of the changes might cause review or change in your estate planning. One strategy might be to try to hold assets until death instead of selling them while alive, in hopes that heirs will get a step up in basis at death. Business owners might want to sell businesses faster, realize gains year to year or engage in installment sales rather than single year sale of the business. In general, the step up rules state that property that usually has appreciated, passes to your heirs at the value it is worth at death, not your basis. That means that many stocks and other properties can appreciate during left and get left to family at death without there being capital gain tax on the growth. This could change which assets you want to leave to heirs and which you wish to spend down in retirement.
Review your beneficiary designations and who gets which assets. It's good to do a beneficiary review every few years to make sure these are still in line with your goals. Leaving assets equally to all children isn't always the most effective way to plan your estate. If you leave ordinary income producing property like an IRA to a high income earning heir, but leave a Roth IRA to a lower income earning heir, you may create additional taxes and less wealth actually passing to your heirs. When doing estate planning it is important to consider the tax consequences both for yourself and your potential heirs.
Make sure your estate has the right amount of liquidity. An issue can arise with a business or estate if there are not sufficient liquid assets which might cause the estate or heirs to have to sell property they would otherwise like to hold onto or to pay estate costs or income taxes. Life insurance can be an effective way to create tax free death benefits and cash to the estate for liquidity.
Provisions crucial to your Wyoming will or trust:
1. State this is your will or trust
2. Revoke prior wills
3. State to whom you are leaving your estate
4. Distinguish after born or adopted children
5. Specify bequests to step children
6. Make provisions for pets
7. Specific bequest for your home
8. Direct whether bequests made outright or in trust
9. If married whether specific distribution to be made on death, whether spouse is surviving or note
10. Determine to whom non titled personal items are bequested
11. Direct special needs trust where there are government benefits
12. Specify whether death taxes are apportioned to recipient or paid by estate
13. Direct that debts will be paid
14. Make charitable bequests from general funds or from IRA based on tax circumstances
15. Provide for contingent beneficiaries (if for example, your spouse predeceases you)
16. Ensure there is a simultaneous death provision (what happens if you and your spouse pass away at the same time)
17. Designate your executor and alternates
18. Consider a statement in your will allowing your personal representative to act under informal probate, which requires the approval of the judge
19. Provide there is no bond requirement for your personal representative to act
20. Name guardian for minor children
a. appoint fiduciaries to handle financial aspects of your estate, separate from your personal representative or trustee
b. appoint individuals as power of attorney to make medical decisions if you are incapacitated
c. check your beneficiary designations to make sure the beneficiaries are updated and correct
d. create statement to physicians, HIPAA authorization, disposition of last remains
I would be pleased to review your plan and goals will you. Please call 307.200.1914 for a free consultation.