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Category Archives: inheritance

A Trust Can Be a Flexible and Smart Legacy Solution

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Legacy Solution- Trusts

When planning your legacy and thinking about your family’s future, you may want to consider a trust. If you’ve avoided this financial tool because it seems too restrictive, it might be time to reconsider. Trusts are popular when the beneficiary is incapable of handling asset management, but they can also be fairly flexible, depending on how they’re structured. Beneficiaries can be granted a decent amount of control while still enjoying the benefits of asset protection and tax savings.

Trust Overview

Trusts can be set up during your lifetime (living trust) or in a will (testamentary). Let’s focus on living trusts, which are either revocable, where you retain control, or irrevocable, where the assets are no longer yours. With the former, you can change the terms of the trust at any time, but with the latter, only the named beneficiary can make changes.

While a lack of control might not sound appealing, irrevocable trusts have tax advantages: the appreciated assets aren’t subject to estate taxes.

There are many types of trusts — such as a qualified terminable interest property trust or a generation-skipping trust — that address specific situations. If you don’t have a blended family and don’t plan on giving to a generation younger than your children, you wouldn’t consider either option. Because of their complex nature and wide variety, it’s important to discuss your trust type(s) with a financial planner or estate attorney.

In the meantime, let’s dive into a few of the less specific and more widely used versions.

Irrevocable life insurance trusts.

If you own or plan to buy life insurance, you might consider a life insurance trust. Shifting life insurance ownership from yourself to a trust allows you to exclude it from your estate, meaning the death benefit the policy pays when you die won’t be considered part of your taxable assets. But you must live three years after the transfer. Usually the trust is also the beneficiary of the policy, which means the death benefit funds would roll into the trust, with periodic distributions to a spouse or children. This setup is particularly attractive if you’re trying to shield the money from your kids’ irresponsible spending or creditors.

Qualified personal residence trusts.

With this type of trust, you can transfer your home to the trust for a period of time, usually 10-15 years. It’s useful when you have a home (vacation or otherwise) that’s expected to appreciate significantly. That’s because when the trust ends, a home that might have been worth $250,000 when it was put into the trust could have a value of only $75,000 for tax purposes, reducing the amount of your assets subject to taxation. If it’s your primary residence, you can live in the home during the term. However, at the end, ownership is transferred to the beneficiary and you’d have to set up a rent arrangement if you remain in the home. One caveat to this plan is that it only works if you live to see the term fulfilled. If you die during, your home will be included in your estate just as if you’d never set up the trust in the first place

Credit shelter trust.

Also known as a bypass or family trust, credit shelter trusts are used to transfer assets while avoiding estate taxes. You simply specify the assets and, when you die, the beneficiary receives those assets tax-free. This is great for married couples because the spouse maintains rights to the trust assets and the income they generate during the remainder of his or her lifetime.

While trusts are a great financial planning technique, they do require the help of a professional. In preparation of trust planning, make sure to get your estate organized, with the help of LegacyShield. That way you’re familiar with all of your assets as well as where they reside, which will help you and your advisor decide which trust is most appropriate for you.

 

This entry was posted in inheritance, legacy planning, Planning and tagged trusts on February 27, 2017 by Michael Babikian.

Passing Along Values

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How to prevent

We all want what’s best for our children. But we may have different ideas of what that actually means.

For a number of wealthy Baby Boomers, passing along their values and life lessons has become more important than leaving a large inheritance. 

The most famous of these is Warren Buffett. The Omaha billionaire has been quoted as saying, “a very rich person should leave his kids enough to do anything but not enough to do nothing.”  That’s where values and life lessons come in.

A number of wealthy Baby Boomers are first-generation wealthy.  According to a U.S. Trust Wealth and Worth survey, many feel that their children should earn their own money as they did.  

In addition, this generation was an activist generation and is interested in leaving a philanthropic legacy. That means they are diverting funds from what they might normally leave to their children into funding a charity or worthy cause. 

They are also spending their money. They are using retirement as a catalyst for redefining their lives. They are traveling more, starting new businesses or pursuing dreams and goals they put off until now. 

And they are saving money toward future needs, such as medical expenses and care. They don’t want to be a burden to their families but they are living longer, which means they’re probably going to have greater health needs later on.

However, that’s not to say that they aren’t concerned about leaving a financial legacy to their children. It just may not be as large as the children expect. 

What they really hope to leave are the values and life lessons that helped them succeed and which they believe will help this next generation face the difficult times that are almost sure to come during any lifetime. 

We can all learn from how the Baby Boomers are redefining “legacy.”

One of the main priorities for any legacy should be to build a strong work ethic. That means teaching a child about dependability, respect for others and their opinions, dedication, determination and accountability. These are all qualities that can have invaluable benefits throughout a person’s lifetime.

There are also other values that shouldn’t be overlooked when thinking about your legacy. Who you are as a family, and what you stand for are important life lessons to be passed down the generations. 

How did you build what you built, whether it was a career, a business, a home, or a foundation of love and family? What are your priorities in life?  What are some of the traditions and stories that were passed down to you that you can now pass down to your children? 

There is another gift you can give your children: help them learn how to manage money. The lessons can start at a young age using an allowance to demonstrate the benefits of saving, planning and even making mistakes such as wasting money. These financial lessons learned when young will follow a child into adulthood and help them be better managers of their own finances and any inheritance that might come to them.

The financial lessons can also be taught to older or adult children.  You may already be subsidizing them by helping out with college tuition or living expenses. But one of the best gifts you can give is to not only provide high levels of love but also set limits. That may mean not jumping in and bailing them out each time they need financial help. Be there to support and advise them but let them work out a solution, experience the consequences of their decisions and let them learn from their mistakes.

Money inherited without the values and financial responsibility needed to manage it is in grave danger of being lost or squandered. Talk to your children. Let them know what your values are. Help them learn financial responsibility. And make sure you have plans in place to leave a legacy that will be meaningful to you, your children and perhaps even the next few generations to come. 

If you’re not sure how to organize your thoughts or how to protect your legacy, LegacyShieldSM may be able to help. Check the information here at LegacyShield.com to get started.

This entry was posted in blended families, inheritance, legacy planning, life stories and tagged estate planning, inheritance, legacy planning, retirement on April 21, 2016 by Michael Babikian.

About the Authors

Michael Babikian

President & Chief Executive Officer

An established innovator in the field of legacy planning, he combined tech solutions, social media, and an understanding of the complexities of legacy planning to help co-found and pioneer the easy to use, cloud based system that LegacyShieldSM is today.


About the Authors

Daniel Pierson

Founder & Chairman

Is a driven and socially conscious entrepreneur. His track record of successful businesses ventures demonstrates his dedication and a customer-focused philosophy.


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