Estate Planning – A Primer on Moving Forward (3 minute read)
by Matt Niedeberbaumer, Partner & Senior Wealth Advisor
Often, a client will begin with the common question, “Do I need a trust?” And, of course without knowing all the information, professionals (myself included) can’t simply determine the answer with a “yes” or “no”.
In estate planning, as with all the other financial planning we do, many tools including trusts are selectively used to customize the work for each client. To that end, trusts, wills, family limited partnerships, an s-corporation, c-corporation, LLC, or LLP can be useful in the right situation.
WHO, WHAT, WHEN: the BIG 3 when we establish specific goals for a client’s estate plan.
1. Who will receive your estate? Spouse, children, other family members, charities?
2. What are you trying to do with your assets? Continue a family farm or other business, protect children from being taken advantage of if they inherit money, leave a legacy for generations to come, and/or support your favorite charities?
3. When do you want to start some of the steps? This comes into play with family businesses turning over control and ownership, and gifting to family members while you are still alive.
The goals of each family we work with can be very different. If a family business is looking to transition to the next generation, the planning and tools used are much different than those for personal assets.
With family businesses, we still need to know the who, what and when. Are there multiple family members involved with the business? How does the ownership look now and what should it look like in the future? How do we continue to have enough income provided for the family members if they relinquish ownership?
Of course, estate planning for both personal assets or those of family businesses takes into account what happens with distribution, and to whom, when someone dies.
There is another set of 3 keys regarding ownership of the assets that we look at or plan for:
1. The asset may have a joint owner with rights of survivorship, so it would go to the survivor. Or, it may be owned by an entity such as a trust or partnership and would not change hands with a death of one party.
2. In many cases, it’s not joint ownership but rather a beneficiary is named, or a payable-on-death/transfer-on-death entity that would go through the process of having the asset transferred to them. This is common for many assets including 401ks, IRAs, life insurance, and investment accounts.
3. A will is how ownership is determined – and what happens – if there is no designated beneficiary nor any joint ownership entity. And often, we find that a person’s will often has few assets that are in need of direction.
The main point is to get started on estate planning. And recognize that plans we put into place now will probably need to be updated and adjusted in the future. Family situations change.
For my family, my wife and I developed a plan when we had an infant and a toddler. Fast forward to now, when we have three children between the ages of six and 12. And no doubt our plan will need to be adjusted in 10 or so more years that will fly by.
And, we can advise you knowing that along with death, another certainty of life is taxes. That is a factor that does come into play! Right now, we are in one of the lowest tax environments in history, but what will it look like in 5-10 years? Whether there are changes to ordinary income tax rates, estate tax rates, capital gains, or other rules, your plan will need to be updated.
My best advice: start the planning now and figure out the best tools for the future of your estate. Maybe you do need a trust. Maybe not.
The initial consultation is free, so let’s start a conversation.
Give us a call at 605-352-4124 or email email@example.com to connect with an experienced Vantage advisor.
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