Articles Posted in Estate Planning-Wealth Planning

A new year means new financial changes for many of us, and there may be challenges that come. In order to make sure your wealth is kept as secure as possible in 2019, you’ll want to implement a variety of tried and tested strategies. These will help safeguard your assets while maintaining profitability over the course of the next year.

Set a Goal

One of the first things to do in the new year to safeguard and expand your assets is to create an investment policy statement. This statement simply outlines what your investment goals are for 2019 and what methods you’ll use to achieve them. If you’re not sure where to start, consider talking to an asset protection attorney to determine where your investment portfolio’s weak points are and what you might do to improve your situation.

With any degree of wealth comes a certain amount of risk. Even if you aren’t massively wealthy, you still have assets that could come under attack, such as retirement funds, real estate, a small business, and life insurance plans. If you go through a divorce, face a civil lawsuit, declare bankruptcy, or face other scenarios in which creditors may come into play, you need to make sure you have these assets well protected.

One way to safeguard valuable assets is through a trust.

How Does a Trust Work?

Estate plans frequently have to account for minors who may not necessarily know how to handle their inheritance. One way in which this situation is handled is by creating a trust, but there are other methods as well. These methods can be quite simple, but knowledge of the laws pertaining to gifts and transfers of assets is still important.

One law, called the Uniform Transfers to Minors Act (or UTMA), provides a very simple way in which to gift assets to minors. There are just a few requirements to fulfill in order to work with this law.

The Uniform Transfers to Minors Act

Placing assets in trust is a sound strategy when it comes to asset protection and estate planning, but there are many different forms of trusts to choose from. Two of the main categories are irrevocable and revocable trusts. These each have their own advantages and drawbacks, so it’s important to make sure you choose the structure that works for your situation.

Revocable Trusts

A revocable trust is one that can be modified after it has been formed. If you need to change or retain control of the assets in the trust, add or change the designated beneficiaries or trustee, or make modifications to the distribution of assets held in the trust, then a revocable trust will allow you to do that while it’s in force.

Senior care can very quickly become expensive, especially when prolonged stays are involved. For those over 65, Medicare handles many expenses, but it is not designed to cover long-term care. If you are finding you need to plan for a nursing home stay, you’ll need to draw on other resources.

Unfortunately, without careful planning, this can mean a depletion of your estate, especially if you end up staying in a nursing home for years on end. This can cost hundreds of thousands of dollars, which will reduce the amount you can transfer to your loved ones when you pass on.

There are various strategies you can use to protect your assets from nursing home costs, and they all hinge on qualifying for Medicaid.

There are many ways to manage wealth and protect family assets, from trusts to charitable foundations to various legal entities. One method exclusive to families is a family limited partnership, or FLP. An FLP is a limited partnership in which family members pool resources for business purposes. They then reap a profit from the business in the form of dividends.

Structure of an FLP

Unlike other forms of limited partnerships, an FLP has two types of partners: general partners and limited partners.

For the most part, gifts are tax-free. You can give to your children, friends, and others without having to worry about monetary obligations to the government, all while minimizing the tax exposure of your estate after you pass on. There are certain rules that come into play when it comes to annual exclusion gifts, however. For those who transfer large amounts of wealth to others, there may be some tax implications.

Why Give Annual Exclusion Gifts?

First off, let’s look at why people give annual exclusion gifts. Aside from the desire to be generous to others, there are some financial benefits of doing so. It all comes down to estate taxes.

For wealthy individuals, the estate tax exemption is an important part of estate planning. This exemption is the amount you can transfer to your heirs without incurring estate taxes. As of 2018, the amount is $5.6 million per individual, totaling to $11.2 million for couples.

But what happens if you don’t use your full exemption? Under the 2010 Tax Act, this exemption becomes portable between spouses.

What Is Estate Tax Exemption Portability?