Preservation | Family Wealth Protection & Planning

Thomson Reuters recently published its estimated figures for 2019 for estate and trust income tax brackets, as well as the exemption amounts for estate, gift and generation-skipping transfer (GST) taxes. These figures are adjusted annually for cost-of-living increases.

Pursuant to the Tax Cuts and Jobs Act, the measure of inflation has changed for these figures. Thomson Reuters warns that because of errors and ambiguities in the act, the estimates were made based upon what Thomson Reuters staff believed to be consistent with congressional intent.

A growing problem in estate planning is how to provide for special needs individuals (those who may be eligible for government benefits and programs due to a disability or otherwise) without disqualifying them from government benefits and programs they may need now or in the future. As most government benefits have a limit on the amount of assets an individual may have to qualify for such benefits, leaving assets to special needs individuals outright or in a standard trust may disqualify them from receiving those benefits.

October 16–22 is National Estate Planning Awareness Week. During this week, many people are reminded that estate planning involves the creation of documents such as trusts, wills, financial powers of attorney, and health care powers of attorney to allow for the handling of their financial and health care decisions during life and after death. There are other aspects of estate planning that deserve to be highlighted as well that are no less significant than the creation of these basic documents.

Many people may think they have the option to leave their spouse nothing when they die, but almost every state has what is commonly called an “elective share” statute. These statutes work to protect a surviving spouse from being cut out of a deceased spouse’s estate plan, permitting the disinherited spouse to elect to take a portion of the estate. This is especially helpful, for example, in a situation in which someone has decided to leave nothing to his or her spouse and instead leave everything to another romantic partner.

An often-overlooked estate planning trap involves including individuals who are not U.S. citizens as part of an estate plan.

If someone who is not a U.S. citizen or resident is given control over a trust, either as a trustee or a beneficiary, then the trust will be treated as a foreign trust and will be subject to additional income taxes.

Retirement accounts such as IRAs, 401(k) and 403(b) plans and other qualified plans or profit-sharing plan accounts may provide an opportunity for charitable giving by offering a variety of tax benefits, depending upon the structure.

MO HealthNet, the Missouri Medicaid program, covers qualified medical expenses for those who meet eligibility requirements such as being blind, disabled or over age 65 and do not exceed certain income and resource limits.

Generally, for disabled and elderly claimants to be eligible for the program in 2016, monthly income may not exceed $842 for an individual or $1,135 for a couple, and resources (checking/savings accounts, CDs, mutual funds, real estate other than a primary residence, etc.) may not exceed $999.99 for an individual or $2,000 for a couple. The income limits are adjusted each year, but the resource limits have not changed since 1967.

An often overlooked part of an estate plan relates to something most people care about deeply during life: Where will my pets go when I pass away?

Although many people consider their pets to be a part of the family, legally pets are considered personal property. They should be included in a client’s estate plan if there is concern regarding where the pet will go at the client’s death. Most people assume a family member or even a friend will step up to take care of their pets. However, to ensure that a furry friend is properly taken care of and provided for at death, a pet trust can be created.

Many people do not realize the importance of correctly designating the beneficiaries of their retirement accounts (IRAs, 401(k) plans, etc.). Because retirement accounts are funded with pretax dollars, there can be significant tax consequences when required minimum distributions are taken, depending on the beneficiary named.

Most people think once they have signed their trust, they are done with the estate planning process. However, an estate plan is not complete until the trust has been funded. Many of the goals behind creating a trust (probate avoidance, privacy, management of assets upon death or incapacity, asset protection) are only achieved to the extent a trust has been funded.