Self-Employed must take a Proactive Approach to Estate Planning

January 16, 2025

Freelancers and the self-employed must take a proactive approach to estate planning. These types of jobs operate without the safety nets provided by traditional employment. This independence brings freedom. However, it also adds complexity to financial and estate planning. From managing irregular income to protecting business assets, creating an estate plan ensures that your hard work is preserved and distributed according to your wishes.

Unlike salaried employees, freelancers often lack access to employer-sponsored benefits, such as life insurance, retirement plans, or disability coverage. Their business assets and personal finances are frequently intertwined, making careful planning essential to avoid unnecessary complications for heirs.

A well-crafted estate plan for freelancers addresses:

Transfer of business assets or intellectual property.
Continuity of income for dependents.
Minimization of taxes and legal hurdles.

Freelancers and the self-employed must create a plan that considers their unique financial circumstances and provides long-term security for loved ones.

Freelancers often rely on their business as their primary source of income. Without a plan, the value of that business could be lost upon their death. Key steps include:

Appointing a Successor: Identify someone to take over the business or handle its sale.
Creating a Buy-Sell Agreement: Outline how ownership interests will be transferred for partnerships or joint ventures.
Documenting Procedures: Maintain clear records and instructions to help successors understand ongoing operations or intellectual property management.

Freelancers often experience fluctuations in income, which can complicate traditional estate planning strategies. To account for this:

Establish a rainy-day fund to provide a financial buffer for your estate.
Work with an estate planning attorney to identify flexible asset protection strategies.
Consider annuities or investments that provide steady income streams for beneficiaries.

Unlike traditional employees, freelancers must set up their own retirement savings plans. Options include:

SEP IRAs or Solo 401(k)s: Tax-advantaged accounts tailored for self-employed individuals.
Roth IRAs: Flexible savings accounts that grow tax-free, offering greater liquidity for heirs.

Ensuring that retirement savings are properly designated to beneficiaries avoids complications later.

The self-employed often own valuable digital assets like intellectual property, domain names, or online portfolios. These assets must be included in your estate plan to ensure seamless transfer. Create an inventory of:

Login credentials for key accounts.
Ownership documentation for websites or digital products.
Instructions for transferring or licensing intellectual property.

Many self-employed generate income from intellectual property, such as writing, artwork, or designs. An estate plan should specify how copyrights, patents, or trademarks are managed after death. This may include:

Assigning ownership to heirs or beneficiaries.
Creating trusts to manage royalty payments.
Licensing or selling rights to preserve income streams.

The first step to creating an estate plan is drafting a will that distributes assets, business interests and personal property according to your wishes. Without one, state laws determine asset distribution, which can result in unintended consequences. However, there’s much more to an estate plan than just making a will.

Establish Powers of Attorney

Freelancers should designate a trusted person to handle financial and healthcare decisions, if they become incapacitated. Powers of attorney ensure continuity in managing personal and business affairs during emergencies.

Consider a Living Trust

A living trust can help freelancers avoid probate and ensure that assets are distributed efficiently. Trusts are beneficial for managing complex assets, like intellectual property or business income.

Secure Life Insurance

Life insurance provides a safety net for freelancers with dependents by replacing lost income and covering future expenses. Policies should be aligned with your estate plan to ensure that benefits are directed appropriately.

Reach Out to an Estate Planning Attorney

Freelancers should consult estate planning attorneys and financial/tax advisors to create a plan that addresses their unique circumstances. Regular reviews ensure that the plan evolves alongside income, assets, or family structure changes.

Freelancers and the self-employed must take a proactive approach to estate planning. You can ensure your hard-earned legacy benefits your loved ones by addressing business continuity, income fluctuations and digital assets. An estate plan tailored to your needs secures your financial future and provides peace of mind, knowing that your assets and values will be protected. If you would like to learn more about planning for the self-employed, please visit our previous posts.

Reference: American College of Trust and Estate Counsel (ACTEC) (Oct. 19, 2023) “Estate Planning for Freelancers and the Gig Economy”

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A Trust Only Works if it is Properly Funded

January 9, 2025

A revocable trust is a powerful estate planning tool that helps individuals manage their assets during their lifetime and distribute them efficiently after their death. However, a trust only works if it is properly funded. The American College of Trust and Estate Counsel explains that many individuals make the mistake of setting up a trust but fail to transfer assets into it. This leaves their estates vulnerable to probate, taxes and disputes. To fully benefit from your trust, you must ensure that it is appropriately funded with all intended assets.

What It Mean to Fund a Trust

Funding a trust involves transferring ownership of assets from your name into the trust’s name. This step gives the trust legal control over the assets, allowing them to be managed and distributed according to the terms of the trust. Without this transfer, your assets may remain subject to probate, and your trust could become an ineffective document.

Key asset types that can and should be transferred into a trust include:

Real estate properties
Bank and investment accounts
Tangible personal property, such as valuable jewelry, artwork, or collectibles
Business interests and intellectual property
Life insurance policies (with the trust named as the beneficiary)

By funding your trust, you ensure that these assets are managed seamlessly during your lifetime and distributed efficiently upon your death.

Why Trust Funding is Essential

Failing to fund a trust undermines its primary purpose. If assets remain outside of the trust, they may become subject to probate—the often lengthy and costly legal process of settling an estate. This can delay the distribution of assets to your heirs and increase the likelihood of disputes among family members.

A funded trust also provides benefits that unfunded trusts cannot, including:

Privacy: Unlike wills, which become public records through probate, trusts keep the details of your estate private.
Control: Funding the trust ensures assets are distributed according to your wishes without interference from courts or state laws.
Continuity: In the event of incapacity, the trust enables a successor trustee to manage your assets without court intervention.

How to Fund a Trust

Properly funding a trust requires transferring ownership of assets into the trust and ensuring that documentation is updated to reflect the change. Each asset type requires specific steps:

Real Estate

To transfer real estate, you must execute a deed transferring ownership to the trust. This often involves recording the new deed with the local land records office. Consult an estate lawyer to ensure that the transfer complies with state laws and doesn’t inadvertently trigger taxes or other issues.

Bank and Investment Accounts

Banks and financial institutions typically require documentation to retitle accounts in the name of the trust. This might involve filling out specific forms or providing a copy of the trust agreement. Failing to update account ownership could result in these assets being excluded from the trust’s control.

Tangible Personal Property

A written assignment can transfer tangible personal property to the trust, such as art, heirlooms and jewelry. The assignment lists the items being transferred and formally declares their inclusion in the trust.

Life Insurance and Retirement Accounts

While retirement accounts, like IRAs and 401(k)s, are not typically retitled to a trust for tax reasons, you can name the trust as a beneficiary. For life insurance policies, updating the beneficiary designation to the trust ensures that proceeds are directed according to the trust’s terms.

Business Interests

If you own a business, transferring shares or interests into the trust allows the trustee to manage them as needed. This requires amending operating agreements, stock certificates, or partnership documents to reflect the transfer.

Common Pitfalls to Avoid

Even with good intentions, individuals often make mistakes when funding their trusts. Common errors include:

Leaving assets out of the trust: Forgetting to transfer all intended assets undermines the trust’s effectiveness.
Failing to update beneficiary designations: Beneficiary forms conflicting with trust terms can create legal disputes.
Not reviewing the trust regularly: As assets change over time, it’s essential to revisit and update the trust to include new acquisitions.

An estate lawyer can guide you through the process and help ensure that all assets are correctly transferred and documented. Remember, a trust only works if it is properly funded. It is a living document that requires ongoing attention. Regularly reviewing and updating the trust ensures it remains aligned with your goals and includes all current assets. Properly funding your trust provides security for your loved ones, avoids unnecessary legal complications and ensures that your legacy is preserved. If you would like to learn more about funding a trust, please visit our previous posts.

References: American College of Trust and Estate Counsel (ACTEC) (Aug. 31, 2023) “Funding Your Revocable Trust and Other Critical Steps” and American College of Trust and Estate Counsel (ACTEC) (Sep 21, 2023) “Tangible Personal Property in Estate Planning”

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Navigating Estate Planning as a Military Family can be Complex

December 9, 2024

Navigating estate planning as a military family can be complex. Military families may benefit from distinct survivor benefits, VA pensions and other special programs, so they need unique estate planning solutions. While resolving VA benefits regulations can be challenging, help is available.

Military families have access to resources and programs that can significantly impact estate planning. These benefits provide financial security and ensure that loved ones receive the support they need, even in the most challenging times. Here are some foundational elements to consider when planning for the future.

The Survivor Benefit Plan (SBP) is one of the essential estate planning tools for military families. SBP provides a monthly income to eligible survivors after a servicemember’s passing, helping to replace lost retirement income. This benefit can extend to spouses, children, and other dependents, offering long-term financial support.

Enrolling in the SBP is crucial for families who rely on a military pension. Without it, pension payments stop upon the servicemember’s death, leaving dependents without a vital income source. The cost of the SBP is typically based on a small percentage of the servicemember’s retired pay, making it an affordable option for most families.

In addition to the SBP, surviving spouses and dependents may qualify for VA pensions, which offer financial assistance to low-income family members of deceased veterans. VA pensions have income and net worth limits, and eligibility depends on the servicemember’s discharge status and active-duty service length. Surviving family members may also need to meet additional requirements.

The VA offers two primary types of survivor pensions:

Dependency and Indemnity Compensation (DIC): This tax-free monthly benefit is for surviving spouses, children, or parents of servicemembers who passed away in the line of duty or due to a service-related condition.
Survivors Pension: A need-based benefit for eligible low-income surviving spouses and children of deceased veterans who served during wartime.

These programs provide essential financial support, helping to cover daily expenses and maintain the family’s quality of life.

A will remains essential to any estate plan, allowing servicemembers to specify how assets will be distributed. For military families, it’s important to outline these details in a will to protect assets and avoid potential family disputes. Creating a living will also provide instructions regarding healthcare decisions if the servicemember becomes incapacitated, ensuring that medical treatment aligns with their wishes.

A durable power of attorney (POA) allows a trusted individual to make financial or legal decisions on behalf of a servicemember if the servicemember cannot do so. During deployments or other periods of absence, the designated person can exercise authority over financial matters such as paying bills, managing property and accessing bank accounts.

Servicemembers often have life insurance through the Servicemembers’ Group Life Insurance (SGLI) program. Designating beneficiaries for this policy and Thrift Savings Plan (TSP) accounts ensures that these assets pass to loved ones immediately. Regularly updating beneficiary designations helps prevent misunderstandings and ensures that funds go directly to the intended recipients.

Military families may also access free legal assistance and financial counseling through military legal offices and organizations, like Military OneSource. These resources can provide personalized guidance on estate planning, ensuring that families understand the legal documents needed and the benefits available to them. Seeking assistance early can simplify estate planning and reduce potential stress for loved ones.

Navigating estate planning as a military family can be complex, especially when considering specific military benefits and regulations. If you would like to learn more about planning for military families,

Reference: Military OneSource (Sept. 19, 2024) “What Is Estate Planning?”

The Difference Between an Heir and a Beneficiary

October 15, 2024

When it comes to estate planning, it’s essential to understand the difference between an heir and a beneficiary. While these terms are often used interchangeably, they have distinct meanings that can affect who receives your assets after you pass away. According to Nerd Wallet, knowing how heirs and beneficiaries work is key to ensuring that your estate plan reflects your wishes and protects your loved ones.

An heir legally inherits property from a person who dies without a will, a situation called dying intestate. When someone dies intestate, the state’s probate court follows local laws to determine who the heirs are and how the property should be distributed.

The closest relatives are usually given priority. For example, a spouse or children are often the first to inherit, followed by parents and other family members like siblings, nieces and nephews. The specifics depend on your state’s inheritance laws, so it’s always wise to understand how this works in your area.

If you have a will or trust, heirs are not automatically guaranteed to inherit your property, unless they are named beneficiaries.

A beneficiary is a person or entity specifically named in a will, trust, or other legal document to inherit assets. Unlike heirs, beneficiaries can include family members, friends, charitable organizations or even pets.

Beneficiaries are designated through estate planning tools such as wills, trusts, or life insurance policies. You can name specific people to receive certain assets and include instructions on what should happen if one of your beneficiaries cannot inherit. This flexibility allows you to customize your estate plan according to your specific wishes.

If you pass away without a will, the court will decide who your heirs are based on state law. On the other hand, if you have a will or trust, you get to choose your beneficiaries. Doing this prevents you from leaving the decision to the court, ensuring that your assets are distributed the way you want.

For example, if you want your spouse to inherit most of your assets but also wish to leave a portion to a close friend or charity, you can name them as beneficiaries in your estate plan. This way, you control who inherits your estate instead of relying on default state laws.

If you don’t have a will or don’t name beneficiaries on key assets, such as life insurance policies or retirement accounts, your loved ones may have to go through the probate court process. The court will use intestacy laws to determine your heirs and distribute your assets, which might not align with your wishes.

In some cases, if no heirs can be found or named, your estate could go to the state through a process called escheat. This situation can leave your family without the inheritance you intended for them. Create a clear, legally binding estate plan that outlines who your beneficiaries are to avoid these outcomes.

Naming beneficiaries in your estate plan is straightforward but requires careful thought and organization. Here’s how you can start:

Take inventory of your assets – Make a list of everything you own, including property, investments and sentimental items.
Decide who will benefit from your estate – Consider who would benefit the most from your assets. You can choose close family members, friends, or even charitable organizations.
Name beneficiaries in a will or trust – Work with an estate planning attorney or use an online service to create a will or trust that clearly outlines your beneficiaries.
Update your beneficiary designations—Name beneficiaries directly on assets like life insurance policies or retirement accounts. This ensures that the assets pass directly to them, avoiding probate.

By understanding the difference between an heir and a beneficiary, you can use estate law to control the legacy you leave behind. If you would like to learn more about heirs and beneficiaries, please visit our previous posts.

Reference: NerdWallet (Nov. 13, 2023) “What Is an Heir? Meaning and Types”

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Safeguarding Wealth is an Essential Strategy for Senior Women

September 30, 2024

Women are living longer and facing unique financial challenges. With life expectancy for women being higher than men, senior women need their retirement savings to stretch further. According to JP Morgan, they often find themselves with less saved due to career breaks for caregiving and the persistent gender pay gap. Safeguarding wealth is an essential strategy for senior women to ensure financial security in their later years.

Retirement planning for women should consider their longer life expectancy and potential career interruptions. A well-crafted financial plan, designed with the help of knowledgeable advisors, can help address these concerns.

Women should actively participate in creating a plan that aligns with their lifestyle needs and future goals, factoring in anticipated and unplanned career breaks. It is also essential to regularly assess savings and investments to ensure that they are on track for a comfortable retirement.

Many women find themselves in the role of caregiver for aging parents. This responsibility often comes with both emotional and financial burdens. Women are more likely than men to leave their jobs to take care of aging parents, impacting their own retirement savings.

Beyond financial concerns, women should also consider the time and energy required for caregiving. Planning with family discussions about responsibilities can help ensure that these roles are agreed upon and manageable.

The American College of Trust and Estate Counsel Foundation highlighted the importance of women’s estate planning with the story of Huguette Clark, a wealthy woman who became isolated in her later years. Despite her wealth, Clark spent the last 20 years of her life alone in a hospital room, away from her multiple luxurious homes. She was fearful that everyone was after her money and chose to remain secluded.

Clark’s relatives challenged her will, claiming she was not of a sound mind when it was created. The case was settled. However, it illustrates how vital it is for senior women to protect their wealth and ensure that their wishes are respected.

Women should actively engage in estate planning to protect their wealth and ensure their financial security. This includes creating a will, setting up trusts and naming trusted individuals to manage their estate in case of incapacity. Understanding and participating in these decisions are crucial for senior women to prevent potential disputes and ensure that their assets are distributed according to their wishes.

Estate administration is another critical aspect of wealth planning for women. When a loved one passes, the burden of administering their estate often falls on women. This role includes locating assets, paying off debts and distributing inheritances, which can be a complex and time-consuming process. By planning ahead and discussing estate administration with family members, women can ensure that they are prepared to take on this role or appoint someone else who is better suited.

Safeguarding wealth is an essential strategy for senior women. If you are looking to secure their financial future, assembling a team of trusted advisors is a crucial first step. This team should include a financial advisor, an estate planning attorney and a tax professional who understand women’s unique challenges.

These advisors can help develop a comprehensive plan that aligns with a woman’s financial goals, family responsibilities and long-term needs. Regular communication with this team ensures that the plan adapts to changing circumstances, providing peace of mind and financial security. If you would like to learn more about planning for women, please visit our previous posts.

References: J.P. Morgan (Mar. 20, 2024) “Wealth Planning Is a Women’s Issue” and The American College of Trust and Estate Counsel (ACTEC) Foundation (Mar. 20, 2024) “Balancing Independence and Vulnerability of Older Adults: What if Granny Wants to Gamble?”

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Women should Plan for a Second Retirement

September 23, 2024

Many spouses design their retirement finances and estate plans with their spouses. However, planning for the second phase of retirement and estate plans also needs to be done. Women should plan for a second retirement. When the first spouse dies, the surviving spouse would be well served by a plan for the “second retirement,” as explored in a recent article from Nasdaq, “I’m a Financial Expert: 7 Ways Ever Woman Can Prepare for a ‘Second Retirement.’”

In 2021, data from the U.S. Census Bureau shows that 30% of all older women were widows. There were also more than three times as many widows as widowers.

How do you plan? It depends on your age and financial situation. For instance, becoming a widow in your 60s is very different from becoming widowed in your 80s. If your network of friends and family was through your spouse, this may also change dramatically after their death.

The most important question is what the household income will be upon losing the first spouse. This must be considered if the decedent had a pension, annuity, or other income source that stopped upon their death. A surviving spouse can’t claim a deceased spouse’s Social Security benefits in addition to their own. You can only receive one of two benefits—either your retirement or survivor benefit.

Some pensions end upon the account owner’s death, while some allow for survivor benefits. These are usually a percentage of the original amount, or they may offer a lump sum payment.

Living costs will change when the first spouse dies. The surviving spouse may be able to move to a smaller home or sell a second car. However, certain costs will go away. Meanwhile, other costs may occur, like one-time taxes on inherited IRAs and taxes on the sale of property and vehicles. Losing the spouse might mean some services, like home maintenance, will need to be paid for.

The death of a spouse will incur certain legal and administrative costs. If there was no will, probate is expensive and will be necessary. An estate planning attorney may be needed to help settle an estate if there was no will, while costs will be less if a will and trusts were created before the spouse died.

Major changes in circumstances like the death of a spouse can throw even the highest functioning people into a difficult emotional state. Women should plan for a second retirement that will help make the transition into their new life easier, or at least as easy as possible.

Speak frankly with an estate planning attorney about revising your estate planning documents and preparing for the second retirement. There will be more than enough to deal with at the time; it will be better if planning can be done in advance. If you would like to learn more about retirement planning for women, please visit our previous posts.

Reference: Nasdaq (August 17, 2024) “I’m a Financial Expert: 7 Ways Ever Woman Can Prepare for a ‘Second Retirement’”

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Planning for Retirement with a Special Needs Child

July 8, 2024

Retirement is a time to relax and enjoy life after years of hard work. However, parents of children with special needs will need to handle this transition with care. Planning for retirement with a special needs child is critical to your child’s long-term care and your own financial future.

Beginning your retirement planning early is crucial. Likewise, this process should be an extension of your existing financial planning. Starting early allows you to anticipate state and federal benefits changes and adjust your strategies accordingly.

For instance, Medicaid waivers and other support systems can be unpredictable. Just because these benefits systems can supplement your needs today doesn’t mean they’ll be able to do so tomorrow. Flexible, far-sighted financial preparation can help you absorb changes in benefits programs.

Open communication between both parents is vital. It’s common for parents to prioritize their child’s needs over their own retirement savings. However, finding a balance is key. Both parents should be on the same page regarding their goals for retirement and their child’s future. Involving a financial planner and a special needs attorney can help align these goals and create a comprehensive plan.

Two professionals with Special Needs Alliance weighed in on planning for retirement with a special needs child. One, Jeff Yussman, emphasizes the importance of honest discussions about assets, liabilities, and the desired retirement lifestyle.

Another advisor, Emily Kile, highlights the need to leave an advocate for their child in advance. It may be smart to move a child with special needs to a future housing option while parents are still alive. This can reduce the pain and uncertainty of making such moves when the parents pass away.

The first step is reviewing the titles on your accounts, beneficiary designations and estate plans. Ensuring that the chosen trustees and agents align with the goals for your child with special needs is critical. You should consider the financial security available through life insurance policies, such as second-to-die life insurance.

Parents must also plan for the long-term care of their child with special needs. This includes preparing for the potential loss of private health insurance and understanding the longevity of their financial plans. It is important to have regular estate planning meetings that account for these factors.

While well-intentioned family members might offer to care for your child, their circumstances can change. Marriages, divorces, and other life events can impact their ability to provide consistent care. Plan for these variables to ensure your child’s stability.

Planning for retirement with a special needs child can be challenging. However, you don’t have to do it alone. If you would like to learn more about special needs planning, please visit our previous posts.

Reference: Special Needs Alliance (Oct. 7, 2022) “retirement planning steps you need to take”

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Managing a Big Age Gap in Estate Planning

June 12, 2024

Even if it was never an issue in the past, managing a big age gap in your estate planning can present challenges. When one partner is ten or more years younger than the other, assets need to last longer, and the impact of poor planning or mistakes can be far more complex. The article in Barron’s “Big Age Gap With Your Spouse? What You Need to Know” explains several vital issues.

Examine healthcare coverage and income needs. Health insurance can become a significant issue, especially if one partner is old enough for Medicare and the other does not yet qualify. How will the couple ensure health insurance if the older partner retires and the younger depends on the older partner for healthcare? The younger partner must buy independent healthcare coverage, which can be a budget-buster.

Be strategic about Social Security. Experts advise having the older spouse delay taking Social Security benefits if they are the higher-income partner. If the older spouse passes, the younger spouse can get the bigger of the two Social Security benefits. Delaying benefits means the benefits will be higher.

Planning for RMDs—Required Minimum Distributions. Roth conversions may be a great option for couples with a significant age gap. Large traditional tax-deferred individual IRAs come with large RMDs. When one spouse dies, the surviving spouse is taxed as a single person, which means they’ll hit high tax brackets sooner. However, if the couple converted their IRAs to Roths, the surviving spouse could withdraw without taxes.

Estate planning becomes trickier with a significant age gap, especially if the spouses have been married before. Provisions in their estate plan need to be made for both the surviving spouse and children from prior marriages. An estate planning attorney should be consulted to discuss how trusts can protect the surviving spouse, so no one is disinherited. Beneficiary accounts also need to be checked for beneficiary designations.

Couples with a significant age gap need to address their own mortality. A younger partner who is financially dependent on an older partner needs to be involved in estate and finance planning, so they know what assets and debts exist. Life has a way of throwing curve balls, so both partners need to be prepared for incapacity and death.

Managing a big age gap in your estate planning really requires careful and consistent review of your planning. Plans should be reviewed more often than for couples in the same generation. A lot can happen in six months, especially if one or both partners have health issues. If you would like to learn more about estate planning issues for older couples, please visit our previous posts.

Reference: Barron’s (May 19, 2024) “Big Age Gap With Your Spouse? What You Need to Know.”

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Charitable Remainder Trusts may be Solution to Stretch IRA loss

June 6, 2024

For many years, the Stretch IRA was used to leave assets to heirs very tax-efficiently. Then came the SECURE Act, according to the article “Charitable Remainder Trust: The Stretch IRA Alternative” from Kiplinger. The ability for IRA beneficiaries to take the smallest of RMDs (Required Minimum Distributions) annually and leave a large sum in the IRA to grow tax-deferred over their lifetimes was over. Charitable Remainder Trusts may be solution to the loss of the Stretch IRA.

The SECURE Act in 2019 brought significant changes, taking away a valuable tool from anyone who died after Dec. 31, 2019. The new rules require the entire amount in an inherited IRA to be withdrawn by the end of the tenth year of the original account owner’s death. These withdrawals are taxable, so instead of stretching the withdrawal out over an extended period, accounts must be emptied, and taxes paid within a relatively short period. Compared to the stretch, the Ten-Year Rule is, in a word, taxing. It’s crucial to understand these changes and their implications.

There are exceptions to the rule for certain beneficiaries, including spouses and disabled individuals, non-spouse beneficiaries no more than ten years younger than the original account owner and a biological or adopted minor until they reach age 21. On their 21^st birthday, they have ten years to empty the account.

There are alternative strategies for IRA owners to consider to help heirs enjoy more of their legacy, which an experienced estate planning attorney will know. One is the Charitable Remainder Trust (CRT), which offers both tax benefits and charitable giving.

Start by designating a CRT as the beneficiary of your IRA. When you die, the assets will pass to the CRT. Since the CRT is a tax-exempt entity, the assets in the IRA continue to grow tax deferred. The CRT’s beneficiaries receive income distributions over a specified period. At the end of the CRT, any remaining funds go to a charitable beneficiary.

CRT beneficiaries may receive distributions over a much longer period than a direct inheritance or inherited IRA, which has a mandated 10-year distribution.

If you are seeking a solution to the loss of your Stretch IRA, a Charitable Remainder Trust may be a solution. The CRT strategy is best for charitably minded people who would have donated to the charity regardless of the IRA restrictions. If this aligns with your values, it makes sense from an estate planning perspective. There are costs associated with setting up a CRT, which should be considered when considering the totality of your estate plan. Speak with your estate planning attorney to see if this makes sense for you and your family. If you would like to learn more about CRTs, please visit our previous posts.

Reference: Kiplinger (April 19, 2024) “Charitable Remainder Trust: The Stretch IRA Alternative”

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Key Estate Planning Strategies for Executives

May 23, 2024

Executives manage complex financial landscapes while striving for professional success, creating unique estate planning goals and challenges. Central Trust Company shared insights in the article “Estate Planning For Executives,” which focused on liquidity concerns, tax efficiency and beneficiaries for certain assets. This article explores key estate planning strategies for executive’s unique goals.

Executives often face liquidity challenges and may have a significant portion of their wealth tied up in company stock. Diversifying investments and implementing strategies to manage concentrated stock positions are critical to mitigate risk and enhance financial security.

Navigating tax-efficient giving strategies is essential for executives looking to give back to their communities or support charitable causes. Estate planning considerations, including lifetime gifts and the transfer of vested stock options, play a crucial role in preserving wealth and minimizing tax liabilities.

Transitioning from a successful career to retirement can be exciting and daunting for executives. Planning for retirement involves forecasting complex benefits, managing investment portfolios and ensuring a smooth transition from the accumulation phase to the distribution phase of their financial life.

Comprehensive estate planning for executives includes strategies that address their income tax bracket, estate tax rates and various types of investments. Strategies such as wills, trusts, powers of attorney (POAs) and advance directives are central to protecting an executive’s assets and support building wealth.

A knowledgeable and experienced estate planning attorney is central to a holistic plan that meets an executive’s goals, including:

Reducing taxes and taxable estate values.
Transferring stock options and other nuanced investments to heirs.
Preserving or building their wealth.

Key Estate Planning Strategies For Executives:

Address Unique Challenges: Consider liquidity, stock options, estate taxes and beneficiaries.
Maximize Tax-Efficiency: Explore tax-efficient strategies to preserve wealth.
Build a Comprehensive Plan: Include wills, trusts, and POAs to address diverse financial needs and goals.
Define Personal Objectives: Define personal philosophies and objectives to create a comprehensive plan that aligns with your vision for the future.

Given the complexities of their careers and wealth management needs, executives face unique financial and estate planning challenges. Addressing key concerns and defining personal objectives helps executives secure a financial future for themselves and their families. If you would like to learn more about estate planning for wealthy couples and families, please visit our previous posts.

Reference: Central Trust Company (July 19, 2023) “Estate Planning For Executives”

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Category: Retirement Planning

Self-Employed must take a Proactive Approach to Estate Planning

A Trust Only Works if it is Properly Funded

Navigating Estate Planning as a Military Family can be Complex

The Difference Between an Heir and a Beneficiary

Safeguarding Wealth is an Essential Strategy for Senior Women

Women should Plan for a Second Retirement

Charitable Remainder Trusts may be Solution to Stretch IRA loss

Key Estate Planning Strategies for Executives

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