SERVICES - Advanced Wealth Planning

ADVANCED WEALTH PLANNING AND MANAGEMENT TOOLS

The Living Trust may allow you or your loved ones to avoid cumbersome processes, such as a conservatorship, if you become incapacitated, and probate when you die. Both of these processes can be expensive, time consuming, and are open to public scrutiny. Both require strict court supervision and will drain resources from your estate. Also, your family loses control of your assets during the process. During your lifetime, the trust is revocable and your use of assets is unrestricted. Furthermore, selected asset protection measures may be available to heirs that are otherwise forfeited without appropriate planning. The living trust still provides the one of the most effective vehicle to protect your assets, enhance tax planning and facilitate wealth transfer to your heirs.

Estate taxes are assessed on the value of your assets at time of death. They can be looked at as a “one-time payment for a ticket to the great beyond.”  Your assets may be subject to estate taxes based on their values, under the current tax structure. Inherited assets may receive a step-up in basis from the cost of the original owner, providing a valuable tax shelter. If the estate tax laws are rescinded, basis adjustments may become partially or wholly unavailable. Beneficiaries of an estate may then carry forward the basis of their benefactors, against which some amount of arbitrary adjustments may be allowed. We are uncertain how the estate tax laws will change or whether they will remain. Regardless, appropriate planning may help avoid unnecessary loss of hard earned values.

How you decide to distribute your assets prior to and after you are gone are personal matters. An experienced and qualified financial advisor will advise you on efficient and effective means to carry out your wishes throughout your life. Your wishes are appropriately documented in your will and in the codicils that are incorporated in your living trust documents. Whether your legacy involves a transfer of assets to children, other family members or your favorite charities or causes, this may change over time. The condition and value of the assets will largely be determined by the stewardship applied towards your investment portfolio during your lifetime.

Risk Management

You have worked hard to acquire the assets you have. It would be cost effective to minimize unnecessary risks that may be avoided with appropriate risk transfer protective measures.

Umbrella liability coverage for your home and auto can be obtained through your property and casualty carrier at nominal cost. The costs per year for such coverage are nominal, especially when you consider the risk of losing your assets in our litigious society.

Life/Disability Insurance

There are two basic types of life insurance; policies with cash value, or permanent insurance, and Term insurance.

Cash value policies include whole life, universal life and variable universal life, to name a few types. These policies combine some form of investment with the cost of insurance and are all established to endow, or equal face value, at age 100. Typically, permanent policy coverage is used to fund substantial probable estate tax liabilities where large estates with limited liquidity will transfer upon the death of the transferor, funds to purchase business interests upon the demise of a business associate, and other legacy bequests. Since the insurance is permanent, the insured does not have to worry about health issues that may prohibit coverage later in life. The cost is much greater, and many Life Agents attempt to sell this product as an investment.

Term insurance, on the other hand, is a form of “pure insurance”, much like your auto or homeowner policies. The cost for term insurance coverage is dramatically less than cash value coverage. This is preferred for legacies where substantial estate tax liabilities or liquidity issues are not anticipated. Term insurance is a preferable vehicle to cover untimely tragedies so that your beneficiaries are not left to struggle meeting everyday living expenses, especially when young children are involved. 

Disability Insurance may be provided by your employer, and should be adequate to diminish the risk of disability until retirement. If not sufficient, then it should be supplemented either by electing additional coverage through an employer, or obtaining coverage through a third party. The balance of your retirement assets should be retained to supplement income in retirement. How much coverage is necessary is an individual matter. There are rules of thumb, but these off the cuff guidelines should be reviewed in conjunction with financial independence analyses to insure sufficiency of coverage.

Long-term Care is a matter that can drain your remaining assets. Statistics show that 1 in 3 men will require some level of care within their lifetimes, and 1 in 2 women. Average stays are less than 3 years. The two most likely alternatives are to self-insure all or a portion of the risk, or transfer the risk to an insurance carrier. This is a readily insurable risk that can be covered at an affordable cost, especially if coverage is obtained before attaining age 60, to avoid an unnecessary invasion of your assets.

Health Care during working years is customarily provided by an employer or if self-insured for this risk, is paid for with revenues from a business endeavor. It is essential to address this issue when planning for retirement to insure that any gaps are covered, especially if one elects to retire before reaching Medicare coverage eligibility.