Estate Planning & Wealth Transfer
Sentry MethodSM Stage Four.
We’ll talk about Estate Planning first (Asset Protection follows).
Traditional Estate Planning, used to be simple: You need a Last Will and Testament, a Power of Attorney, and maybe a Living Trust. But the legal landscape is becoming more and more complex – and today’s entrepreneur needs the best legal strategies available at their fingertips. Traditional Estate Planning also falls short in that it adheres to the four “D’s” – “dump, divide, defer, and dissipate.”[1] As a result, most families who do manage to accumulate some wealth lose it in no less than three generations.
But there is a better way.
Protecting future generations doesn’t mean you have to engage in “paternalism” or “controlling from the grave.” But it does mean you have to have purpose in designing your estate plan for maximum benefit for yourself, for your spouse (if applicable), and for future generations.
If done properly, estate planning should align your individual and family principles with the assets, resources, and structures that you have created in order to prepare a future generation(s) for a lasting legacy.
Your WEALTH is more than the dollars and real estate that you leave behind; in fact, I believe that your accumulated knowledge and experience are in many ways just as valuable, if not more, than the actual assets. With this understanding, a Modern Estate Plan should provide your beneficiaries with two things: the means to acquire knowledge, purpose, and skills; and the capital to put them to meaningful, productive use.
So, building your estate plan should begin with designing and aligning your plan with your family or personal values. Then, you design the structures to pass all of the family wealth (full definition) to the next generation. Third, the plan should contemplate the ability of the next generation to be able to do the same.
The “tools” used for creating the estate plan are varied, but here is a list of commonly used tools we’ll discuss with you in creating your plan:
- Last Will and Testament
- Testamentary Trusts
- Powers of Attorney
- Health Care Documents
- Revocable Living Trusts
- Irrevocable Trusts
- Medicaid Protection Trusts
- Family Limited Liability Companies
- Life Estates
- Gifting Strategies
- Buy-Sell Agreements for Businesses
Problems often arise when people don’t coordinate all of these methods of passing on their estate. If you have a well-drafted estate plan in place, you will ensure that your estate passes to whom you want, when you want, and is carried out in the manner you’ve chosen. You can rest assured that your family won’t have to endure the public process and costly matter of probate. The government won’t be able to take what you’ve spent a lifetime building.
Sentry MethodSM Stage Four – Let’s Talk about Asset Protection
Asset protection can also be very simple (such as an Asset Protection Deed for a primary residence) or it can be very complex (like the diagrams listed below).
DOMESTIC ASSET PROTECTION TRUSTS (DAPTS) (NEVADA, WYOMING, ALASKA)
Asset protection is definitely NOT about hiding your assets. The crux of the strategy is in placing assets in a proper vehicle (think trust or LLC) that will ensure your assets are LEGALLY protected. NEVADA, WYOMING, ALASKAprovide some of the best jurisdictions in the United States for setting up DAPTs – although a total of seventeen (17) states now have DAPT laws.
Nevada is known for being one of the most commonly selected states for DAPTs among the elite asset protection attorneys in the United States. Nevada has a two-year statute of limitations (meaning a creditor cannot come after your assets after they have been placed in the trust for two years).
A Wyoming Qualified Spendthrift Trust (“WYQST”) is an excellent choice of asset protection vehicle in the United States. A properly drafted WYQST guards the trust’s assets from future lawsuits and other creditors, and is probably the second-most common state for asset protection trusts.
A variety of assets are protected in a DAPTs, including:
- Cash and Equivalents
- Investment Accounts (Including Gains and Appreciation)
- Investment Real Estate (Non-Income Producing)
- Income Producing Real Estate (i.e., Rentals)
- Raw Land (Non-Developed or Gas or Mineral Rights)
- Personal Property
- Closely Held Business Interests (i.e., LLCs)
FAMILY LIMITED PARTNERSHIPS
A strategy that can help you meet such diverse goals as estate planning and protection from lawsuits, the Family Limited Partnership may be something you should consider. We will help you determine if it’s right for your business and family.
LIMITED LIABILITY COMPANIES
Tax-advantaged status and liability protection are the hallmarks of this legal tool. If we determine that a Limited Liability Company is appropriate for your situation, we will ensure that you derive all the benefits this company structure offers.
Other important asset protection and estate planning information:
ESTATE AND GIFT TAX FIGURES
FEDERAL
Estate and Gift Tax Applicable Exclusion:
The amount that can be passed free of federal tax. Whatever amount is used during lifetime is no longer available for use to pass assets at death. The Estate and Gift Tax Applicable Exclusion is currently $11.58 million.
Annual Gift Tax Exclusion:
The amount that can be given to each person you want without using any Applicable Exclusion. The Annual Gift Tax Exclusion is currently $15,000.
Generation-Skipping Tax Exemption:
This allows for giving to people who are grandchildren or other “skip persons.” It may also be used as a sophisticated way of avoiding Federal estate tax at the death of a child. Each person currently has $11.58 million of Generation-Skipping Tax Exemption.
STATE
State Estate Tax:
In addition to the Federal Estate Tax, many states have a State Estate or Inheritance Tax. State Estate and Inheritance Tax may apply at a much lower level than the federal tax. It may apply when a person dies when resident in or owning property in any of the many states with such a tax.
[1]Entrusted, by David R. York and Andrew L. Howell, Copyright 2015 by YH Publishing, LLC.