For those of you who are parents and/or grandparents, the thought of moving your wealth from one generation to another can be rather perplexing and downright thought provoking. We want our children to do and be better than us, and our darling grandchildren are... well... our darling grandchildren! Full of life, innocent to today's harms and potholes with a full life in front of them to do or be anybody they want. The thought of doing your own estate plan involves realizing your own mortality, and just as our grandchildren are just starting out and have the world of opportunity in front of them, we’re on the other side of the rainbow... but we've got the gold!
Working on your estate plan is not a path to death, regardless as it may feel. It's just about deciding how and when your wealth will pass to the next generation as smoothly, generously and efficiently as possible. In between your passing and leaving your assets to your children stands your surviving spouse (the nerve!), so the plan should include taking care of the surviving spouse as well, and then provide for a smooth transition of assets to the next generations. This is the first obstacle: making sure your wealth goes into the right hands while keeping prying eyes and hands out of it. If you have an excess of capital and can do to be without some wealth, you can start a gifting program to your kids- For 2015, you can still get in gifting to as many people as you please for up to $14,000 per person, twice that if you and your spouse both gift to that person. This accomplishes two things: reducing your overall estate for estate tax purposes and more importantly, being around and seeing the gift enhance another's life while you're still here to enjoy seeing it. As they say, you can't take it with you: if you plan to leave it to the kids and you can part with it now, do it- trust me- they can use it. Raising kids and paying for mortgages and college loans can always use a helping hand.
People are living longer than ever before- the population of the United States is rapidly expanding and growing older. The biggest challenge to estate planning in generality that I consult on regularly is how to make sure your assets eventually get passed to your children or desired beneficiary, but still is controlled by your estate to support your remaining spouse after your death. Statistically, the male of the partnership or marriage is the first to die (there are a lot of jokes here, but I will refrain as the first proof-reader of my articles is my wife) leaving the second partner or spouse sometimes years or even decades to live and be supported after the death of the first. An "income only" trust can be utilized for this ever increasing need. The concept is that once the family wealth is passed to an irrevocable trust designed to support the surviving spouse, it is then protected from being raided by litigation, cons and anyone other than who is was intended to go to. It is managed by a trustee of your choosing and the terms of the trust can be as tight or liberal as you choose, as long as they stay within the guidelines of an irrevocable trust transfer. The overall strategy is to create an entity that will protect the assets, support the remaining spouse, and then distribute the remaining assets of the trust after the death of the income beneficiary (spouse or partner) once they have passed on. The distribution schedule is outlined by you when you draft the trust: it can go to the remaindermen (ultimate beneficiaries i.e. your kids) in one lump sum, passed out monthly as an allowance, distributed at a certain age or ages, or a multiple of ways- you dictate the schedule. Thus, the trust supports your spouse for his or her remaining lifetime, and then pass the remaining asset to the next generation. Your trust- your trustee- your rules... like the Staples Button... easy.
Sooner or later, intergenerational planning and spousal support in the case of the death of the first spouse starts to cross all of our minds. The key is to sit down and logically think about who you would like to see financially taken care of, and who you would ultimately like to receive the assets- it all starts with you. If you have any questions, give me a call- I'll give you a hand and some ideas.