Articles
21st Century Estate Planning - It's Not As Easy As You Think
By Frederick M. Misilo, Jr. on September 12, 2019If you are a member of the Baby Boomer generation, you probably watched “Leave it to Beaver” or “Andy Griffith”. These TV programs painted an idealized view of family life, even for a single Dad such as Sheriff Taylor. The reality then and now is that such portrayals of family life were a fantasy for most Americans.
I’ve spent the last thirty years working with families in trust and estate work. From this experience, I’ve observed a multitude of stresses and concerns people confront when planning for their legal and financial future and for the orderly transfer of property upon their passing. Individuals have become increasingly aware of their own longevity and concerned about the possibility of outliving their money or of the high cost of long term care. It is common to ask, “What steps can I take to plan for the possibility of long term care?” Also, as their children have matured into adulthood, many parents are mindful of the relatively high rate of divorce in our society and wonder whether their adult children will be among the 50% whose marriages end in divorce. They wonder, “Will the inheritance I pass on to my adult children eventually be distributed to a former son-in-law or daughter-in-law?” More than any earlier generation, young adults are carrying more debt than previous generations. According to a 2018 Northwestern Mutual study,* a majority of households headed by persons ages 25 – 34 are living paycheck to paycheck and have an average of $36,000 in debt, exclusive of mortgage debt. Many parents may feel an obligation to assist their adult children financially in times of need. They wonder, “If I do assist, will I do so at my own financial peril?” Another planning challenge parents face is when a son or daughter needs financial supervision and support such as when a child has a developmental disability or mental health challenge. Parents whose children will need continued support and assistance over the course of their lifetime have multiple planning challenges. They ponder, “How will my adult child with a disability be supported when I’m no longer here?”
Fortunately, these questions and many others like them have answers. Contemporary estate planning is a collaborative process between the client with complex needs and a team of attorneys who have the knowledge and experience to craft an individualized estate plan. While many people have an estate plan, these plans were often developed many years ago when family dynamics and financial considerations were entirely different from what they are today. Relatively recent legal rulings regarding the use of trusts for asset protection purposes make a review of old estate plans a worthwhile exercise. For example, irrevocable, income-only trusts provide a viable option if one is concerned about future long-term care costs. In the context of protecting an inheritance in an adult child’s divorce, a fully discretionary trust for the benefit of that adult child may be an excellent option to consider. When faced with the challenge of planning for an adult child with a life-long disability, one needs to consider such critical issues such as selection of a Trustee of a supplemental needs trust and determining the amount of funding this type of trust should have.
Estate planning in the 21st century is not a simple process. Has your estate plan kept up with your life and the law? Reviewing your existing estate plan on a regular basis can help you answer that question.
*See news.northwesternmutual.com/planning-and-progress-2018
©2019. This material is intended to offer general information to clients, and potential clients, of the firm, which information is current to the best of our knowledge on the date indicated below. The information is general and should not be treated as specific legal advice applicable to a particular situation. Fletcher Tilton PC assumes no responsibility for any individual’s reliance on the information disseminated unless, of course, that reliance is as a result of the firm’s specific recommendation made to a client as part of our representation of the client. Please note that changes in the law occur and that information contained herein may need to be reverified from time to time to ensure it is still current. This information was last updated September 2019.
I’ve spent the last thirty years working with families in trust and estate work. From this experience, I’ve observed a multitude of stresses and concerns people confront when planning for their legal and financial future and for the orderly transfer of property upon their passing. Individuals have become increasingly aware of their own longevity and concerned about the possibility of outliving their money or of the high cost of long term care. It is common to ask, “What steps can I take to plan for the possibility of long term care?” Also, as their children have matured into adulthood, many parents are mindful of the relatively high rate of divorce in our society and wonder whether their adult children will be among the 50% whose marriages end in divorce. They wonder, “Will the inheritance I pass on to my adult children eventually be distributed to a former son-in-law or daughter-in-law?” More than any earlier generation, young adults are carrying more debt than previous generations. According to a 2018 Northwestern Mutual study,* a majority of households headed by persons ages 25 – 34 are living paycheck to paycheck and have an average of $36,000 in debt, exclusive of mortgage debt. Many parents may feel an obligation to assist their adult children financially in times of need. They wonder, “If I do assist, will I do so at my own financial peril?” Another planning challenge parents face is when a son or daughter needs financial supervision and support such as when a child has a developmental disability or mental health challenge. Parents whose children will need continued support and assistance over the course of their lifetime have multiple planning challenges. They ponder, “How will my adult child with a disability be supported when I’m no longer here?”
Fortunately, these questions and many others like them have answers. Contemporary estate planning is a collaborative process between the client with complex needs and a team of attorneys who have the knowledge and experience to craft an individualized estate plan. While many people have an estate plan, these plans were often developed many years ago when family dynamics and financial considerations were entirely different from what they are today. Relatively recent legal rulings regarding the use of trusts for asset protection purposes make a review of old estate plans a worthwhile exercise. For example, irrevocable, income-only trusts provide a viable option if one is concerned about future long-term care costs. In the context of protecting an inheritance in an adult child’s divorce, a fully discretionary trust for the benefit of that adult child may be an excellent option to consider. When faced with the challenge of planning for an adult child with a life-long disability, one needs to consider such critical issues such as selection of a Trustee of a supplemental needs trust and determining the amount of funding this type of trust should have.
Estate planning in the 21st century is not a simple process. Has your estate plan kept up with your life and the law? Reviewing your existing estate plan on a regular basis can help you answer that question.
*See news.northwesternmutual.com/planning-and-progress-2018
©2019. This material is intended to offer general information to clients, and potential clients, of the firm, which information is current to the best of our knowledge on the date indicated below. The information is general and should not be treated as specific legal advice applicable to a particular situation. Fletcher Tilton PC assumes no responsibility for any individual’s reliance on the information disseminated unless, of course, that reliance is as a result of the firm’s specific recommendation made to a client as part of our representation of the client. Please note that changes in the law occur and that information contained herein may need to be reverified from time to time to ensure it is still current. This information was last updated September 2019.
