Estate planning isn’t a one-size-fits-all endeavor. There is an arsenal of tools at your disposal to address your unique situation, whether it’s planning for a special needs loved one, minimizing estate taxes, incentivizing beneficiaries, or securing the future of a beloved pet. Let’s delve into these specific estate planning instruments that cater to different scenarios.
Planning for Special Needs Loved Ones
Navigating the landscape of Medicaid and Supplemental Security Income (SSI) can be a maze. If you have a family member with special needs, you might worry about leaving them an inheritance that jeopardizes their benefits. Enter the supplemental needs trust.
This specialized trust allows a trustee to use the assets to provide for the beneficiary’s unmet needs, without affecting their eligibility for public benefits.
If you fund this trust with your own assets, it becomes a third-party supplemental needs trust. This type of trust offers an added advantage: after the death of the first beneficiary, the remaining assets pass to a successor without Medicaid laying claim to them.
Navigating the Estate Tax Maze
If you’ve amassed significant wealth, you’ve got the estate tax to think about. With a maximum rate of 40%, it can take a hefty chunk out of your estate. The current estate tax exclusion is set at $12.92 million, but that will revert to $5.49 indexed for inflation after 2025.
There are myriad trusts available to help you dodge this tax bullet. These include qualified personal residence trusts, charitable lead trusts, and irrevocable life insurance trusts, among others. Each has its own set of rules and benefits, and the best choice for you depends on your unique financial landscape.
The Power of Incentive Trusts
If you are concerned about the behavior or responsibility level of your beneficiaries, you might consider an incentive trust. This estate planning tool allows you to set conditions that the beneficiary must meet to gain access to the assets.
For example, you might stipulate that the trust will only disburse funds for education if the beneficiary maintains good academic standing. You could also offer to match their employment income dollar for dollar. The key is to set conditions that are both beneficial and realistic for the beneficiary.
Don’t Forget About Fido
Pets bring immense joy and companionship, particularly for seniors who may struggle with loneliness. But what happens to your four-legged friend when you’re no longer around? Pet trusts come to the rescue.
A pet trust provides legally enforceable instructions for your pet’s care. From diet and medical care to their daily walk schedule, you can lay it all out in this document. This trust ensures that your furry friend continues to live a happy and healthy life even after your demise.
If you have passed the learning stage and are ready to work with a Phoenix, AZ estate planning lawyer to develop a plan, we can help. You can send us a message to request an appointment, and we can be reached by phone at 888-222-1328.