Category Archives: Asset Protection Planning
A Dynasty Trust in Roselle and Schaumburg Can Help Leave Your Assets to Your Grandchildren – Not the Government!
A lot of people complain about high taxes. Looking at what the government takes from your weekly paycheck can be frustrating. But, it could be worse. Even people who don’t complain about taxes (there are a few) and understand it takes money to run the government would complain if they understood that it is possible for the government to tax the same money over and over and over. And, it happens more than you think.
Here’s a scenario:
You and your spouse leave a very large amount of money to your daughter without a trust – or, in a poorly drafted trust (yikes!). The money is taxed when it is transferred to your daughter. Your daughter leaves money she inherited to your grandchildren without a trust. Guess what? You’ve got it – that money is taxed again!
It is upon learning this that a well-meaning grandparent suggests leaving the money to their grandchildren rather than the child to avoid one of those tax events. Not so fast! In that scenario the federal generation-skipping transfer tax could apply.
Here’s another scenario:
You and your spouse leave $10 million to your child. If her inheritance grew over time, it would be subject to the estate tax at her death. That could result in millions going to pay estate tax.
There is a solution that could be used to stop the government from double-dipping. It’s called a Dynasty Trust. Assets that you put in a dynasty trust, plus any interest earned over the years, are still subject to federal estate tax, but just once – when you transfer them into the trust. The assets will not be taxed again even though several generations can benefit from them.
It’s important to note here that income taxes are still due on any income that is generated by the assets in the trust. Therefore, most people choose to put assets that do not earn money in the trust, such as growth stocks that don’t pay dividends and life insurance policies.
Dynasty trusts are complex legal documents, so they should be prepared by experienced estate planning lawyers in Roselle and Schaumburg who have experience with trust and tax planning strategies. If you are interested in talking with an attorney with this experience, call our office at 630-908-2752 to set up a consultation.
Everything You Need to Know About Long-Term Care Insurance from a Roselle and Schaumburg Elder Law Attorney
Long-term care is one of the most common dangers to the life savings of senior citizens. The fear of losing assets, possessions, and homes drive people to search out ways to protect themselves from the enormous costs associated with long-term care.
Many seniors turn to long-term care insurance, which is supposed to cover them through expensive medical episodes and pay for life in an assisted living or nursing home. However, there is a lot that seniors need to know before buying long-term care insurance and deciding on the best plan for their individual situation. Elder law attorneys in Roselle and Schaumburg have laid out some of the issues seniors should be aware of when thinking about long-term care insurance.
One thing seniors should know when making decisions about long-term care is the average amount of time for stays in nursing homes. Typically, most seniors will not stay in a nursing home any longer than 6 months – if at all. Unfortunately, many long-term care insurance policies lapse before the beneficiary ever makes it into a nursing home, and if benefits are paid to the nursing home through the insurance policy, they’re usually much less than the actual cost of care. As an investment in your well-being, long-term care insurance may not hold up.
In some cases though, long-term care insurance may be a good decision – usually if you look at it in terms of a safety net rather than a be-all, end-all to paying for long-term care. Most experts, including Roselle and Schaumburg elder law attorneys, agree that long-term care insurance is a worthwhile investment only if the premiums amount to less than 5% of your monthly income – keeping in mind that your income will drop as you age while the premiums will rise. In addition, it is advised that you do not even consider long-term care insurance that does not cover assisted living facilities, as it is far more likely that you will stay in an assisted living facility for a greater amount of time than you would stay in a skilled nursing facility.
Once again, with all of this in mind, your individual situation is what will truly determine whether or not long-term care insurance is a sound investment for you. A Roselle and Schaumburg elder law attorney can meet with you to determine your situation and plan out your future needs in order to advise you better when you’re making a decision regarding long-term care insurance.
If you have any questions about long-term care insurance, or if you’d like to have your long-term care insurance policy reviewed to make sure it’s the correct one for your situation, please call our Roselle and Schaumburg elder law firm at 630-908-2752 to schedule a consultation.
Roselle and Schaumburg Wills and Trusts Lawyer: 5 Steps to Making a Living Trust
A living trust is a perfect document for protecting privacy, avoiding probate, and determining who can take care of your affairs while you’re incapacitated and after you’ve passed on. It’s often an essential element for estate plans in Roselle and Schaumburg as it gives an extra layer of protection to estates and gives the trust maker, also known as the Grantor, added peace of mind that their interests will be protected and their wishes will be carried out. So before you visit a Roselle and Schaumburg wills and trusts attorney to set up your living trust, there are some issues you should start thinking about in order to give yourself the best opportunity to achieve your estate planning goals:
- Pick the Goals You Want to Achieve with the Trust
Each person has different needs when it comes to estate planning, and there are many goals that a living trust can help you achieve. For instance, if you want to keep your financial and personal affairs private and avoid a long, drawn out probate proceeding, a living trust will ensure your wishes are met.
- Determine What Assets You Want Protected By the Trust
Once you’ve planned your goals, you will want to decide which assets you’d like to place in a trust. Many people will put their house in the trust since it is their most valuable asset and will likely put them over the threshold when determining whether their estate will go through a large or small probate process. In addition, you may want to consider which financial accounts should go into the trust (typically those held solely in your name) and which should stay out.
- Decide Who Will Act as Successor Trustee
A successor trustee will not only be responsible for the administration of the trust estate once you pass on, but may also be called on to handle your affairs if you become incapacitated, or possibly if you do not want the responsibility of handling your own affairs at a certain point. The successor trustee may also be in charge of managing any property or assets left to minors in your trust, so it is important that you choose someone with a keen financial acumen who you can trust to carry out your wishes.
- Choose Your Beneficiaries
It’s your decision as to whom you want to leave a financial legacy for in your living trust, and it’s something that you must think about very carefully. If you make a choice to omit a family member from your estate plan who would otherwise expect to receive an inheritance from you, it may be a good idea to leave behind an explanation of your wishes concerning the matter.
- Hire an Experienced Roselle and Schaumburg Wills and Trusts Lawyer to Draft Your Trust
There are a lot of do-it-yourself programs and cheap alternatives available for creating a living trust, but unfortunately, these documents are often inadequate and will not hold up under probate court scrutiny. That’s why it’s important to research experienced wills and trusts attorneys in Roselle and Schaumburg to draft your trust so you have peace of mind knowing that it’s done correctly and your wishes will be carried out.
If you have any questions about setting up a living trust, or if you’d like to have your existing living trust reviewed in order to make sure it is set up properly for your situation, please give our Roselle and Schaumburg wills and trusts firm, Haugh Law Group, a call at 630-908-2752 to set up a consultation.
- Major life changes
Have you had any life changes since you last updated your estate plan? Have you gotten married? Have you had a child? Have you recently moved from another state? All of these life changes may impact you estate planning which require your will or trust to be updated.
- Consider your executor and/or trustee designations
- Grandma’s wedding ring
- Financial power of attorney
- Your health
- Life insurance and retirement funds
Estate planning lawyers in DuPage County are most often considered by folks who want to put their end-of-life affairs in order. The lawyer helps them to draw up important documents such as powers of attorney and medical directives, as well as to develop a plan for how an individual’s property will be distributed upon his or her death. Wills, trusts, executors…these are all typical topics that a DuPage County estate planning lawyer will discuss with clients.
There is also a need to protect one’s assets during his or her lifetime. Not only is this important to the quality of life, but it also helps ensure that there is property that can be left behind! Asset protection is about choosing the best strategies to minimize the potential negative consequences of liability. That includes protection from claims made against an individual, as well as claims against your assets. The former would include things such as property damage or physical harm to another that was caused by you. The latter would have to do with damage caused by something you own, such as a sole proprietorship business or property.
Commonly, if a claim is made against an individual or their property, just about everything that person owns can be put at risk. For example, a judgment against you in a court of law can give creditors the ability to go after your assets in order to be compensated for damages. It can be an unpleasant eye-opening experience for a small business owner to discover that because someone was injured in their place of business, creditors may be able to take away personal assets that have nothing to do with the business itself. If someone slips and falls in your restaurant, as the owner, you could lose your home.
While estate planning focuses pretty heavily on wills and trusts to distribute assets after death, there are advantages to utilizing these tools during an individual’s lifetime, too. A trust can be especially helpful in keeping a person’s assets out of harm’s way, which is why working with DuPage County estate planning lawyers is such an important part of a solid asset protection strategy.
Using a trust for asset protection doesn’t come without its limitations, though.
- Generally, the trust should be for the benefit of the beneficiaries, rather than the person setting it up. There are, however, exceptions to this.
- While Beneficiaries cannot be involved in the management of the trust and cannot make any changes to its terms with regard to “tax purposed trusts,” different rules apply to our new breed of “asset protection” trusts that do allow for maintaining control.
There are other advantages and limitations to using a trust for asset protection during life, and a good DuPage County estate planning lawyer will be able to work with clients to determine whether it is a useful strategy based on each individual’s needs.