The
Four Pillars of Estate Planning
Having handled thousands of estate planning and elder law matters over the last dozen years, we have come to the conclusion that the majority of seniors today (and tomorrow) must address four major issues in retirement planning. At our firm, we call them The Four Pillars of Estate and Financial Planning. Moreover, based upon the hundred of seminars where we have presented these concepts to retirees, most seniors agree that the information that follows is highly valuable to them.
First, we will look at an overview of The Four Pillars of Estate and Financial Planning and then examine each pillar in more detail.
Overview
In the first pillar, Trust Planning, we examine the advantages of using
trusts, including one of the hottest topics in estate planning today
— the use of trusts to keep assets in the family for generations,
passing them by blood instead of by marriage. Second, in Long-Term Care
Protection, we’ll discuss the three options for protecting assets
from nursing home expenses and six ways for clients to reduce the cost
of long-term care insurance. Sound Financial Planning has become a key
third pillar in developing a comprehensive estate plan. With people
living ever longer, a sound financial plan ensures that the estate will
be preserved until the bequest is made. Here, we address the value of
getting a second professional opinion on the client’s
financial plan, the benefits of portfolio diversification and why seniors
should considermoving some of their assets from variable investments
(stocks, bonds, mutual funds) into fixed, guaranteed investments. Finally,
the fourth pillar is IRA and 401(k) Planning, including the new distribution
rules and the benefits of stretching out the IRA.
The First Pillar — Trust Planning
Most people today know that a revocable living trust is a substitute
for a will but, unlike a will, the trust does not need to be probated
at death, avoiding a potentially costly and/or lengthy court proceeding.
Less well known is that since the trust takes effect while you’re
living, it allows you to state who your successor or back-up trustee
will be in the event of incapacity. Since about half of all people today
are expected to have a period of disability during their lifetimes,
it is of the utmost importance to have a lifetime plan. Without a plan,
the client risks a court appointed guardian or conservator who may be
a stranger or, even though related, someone whom the client would not
have chosen to act for them. Additionally, in a long-term care situation,
a legal guardian may be required to use all of the assets for the incapacitated
person’s care instead of taking advantage of Medicaid rules allowing
significant transfers to children and other beneficiaries . The well
drafted revocable living trust provides that, in the event of incapacity,
the back-up trustee is authorized
to transfer out of the ill person’s name whatever assets the Medicaid
law allows. With the assistance of an elder law attorney, this will
allow at least one-half of the assets to be protected through a technique
known as “half-a-loaf” planning.
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