Wealth Transfer Process
The wealth transfer process considers how to preserve and plan for wealth transfer between generations or individuals. First and foremost, we need to understand the clients’ goals and objectives. Only with that solid foundation can we help advise on the multitude of complex issues that are involved. Proposing any fancy techniques that may work from a tax perspective, but simply don’t feel right to the client, leaves clients cold and their most fundamental concerns unanswered. Squillace & Associates, P.C. likes to provide clients with a menu of options. But these tools are only solutions looking for a problem—so—we always harken back to the goals and objectives. Since we are attorneys (and not financial advisors or accountants), we work closely with those other professionals in formulating and implementing any strategy.
When considering how to preserve and plan for wealth transfer between generations or individuals, we first and foremost need to understand the clients’ goals and objectives. Only with that solid foundation can we help advise on the multitude of complex issues that are involved. Proposing any fancy techniques that may work from a tax perspective, but simply don’t feel right to the client, leaves clients cold and their most fundamental concerns unanswered. As with all other areas of our practice, we approach wealth transfer planning with a 3 Step Process:
Step One – Discovery & Diagnosis
Here, we first seek to understand the players: who’s who, and their individual and family goals and objectives including a comprehensive review of all assets. This may include what kind of lifestyle will be supported (now and in the future), who are the beneficiaries (family or charities) or other philanthropic interests.
Step Two – Design Options
We like to provide clients with a menu of options which can help people and families with income tax planning needs, retirement planning and ultimately estate tax planning. We always harken back to the goals and objectives. Since we are attorneys, we work closely with those other professionals in formulating and implementing any strategy. The design options, especially for tax-planning purposes, are vast and change constantly. For a comprehensive list, see InKnowVision’s Periodic Table of Estate Planning and Business Planning Elements here.
Step Three – Implementation and Maintenance
Like the other work we do, the implementation phase includes setting up entities and drafting certain vehicles, like trusts. There are transaction costs associated with the implementation and maintenance of any of these strategies, all of which are discussed openly with the client before proceeding.
Asset Protection Planning is a complex area. To begin with, we must understand the scope of the issues, concerns and assets. As we move to the next phase we create a menu of options for clients to consider that addresses their concerns. These options vary widely based on the nature and size of the assets, the clients’ tolerance for risk, tax considerations, transaction costs and, of course, requirements for legal compliance.
Asset protection plans can vary greatly. They can include, on the simple end, increased insurance coverage. More complex solutions might include a Domestic Asset Protection Trust or Offshore Asset Protection Trust. Care is taken along the way to ensure legal compliance. With each option, we will estimate the costs associated not only with implementation but also maintenance.
Once the client and attorney have agreed upon the options to pursue, we implement the plan by drafting the appropriate documents, setting up the entities and transferring the assets. Again, this can be a simple or complex process, depending on a variety of factors including tax considerations.
An irrevocable trust is a trust that cannot be modified once created. Because the trust maker has relinquished control over whatever assets may be put into these trusts, care must be taken in drafting the instructions for the Trustee and for use by the beneficiaries of the assets. There are many different types of irrevocable trusts, which depending on client objectives, we can use in addition to the Living Trust, to provide clients with a way to further maximize estate tax savings and protect and transfer wealth.
Irrevocable Trusts offer ways to reduce income and estate taxes. Moreover, the Trust can also be used to speed up the time in which the trust’s creator can receive government benefits.
Irrevocable Life Insurance Trusts
An Irrevocable Life Insurance Trust (ILIT) is often used for people who own large life insurance policies. Although the proceeds of life insurance are not subject to income tax by the beneficiaries, those proceeds may be subject to state and/or federal estate tax as the value of the policy is includable in the estate of the policyholder. One way to make sure the policy proceeds don’t receive an estate tax ‘haircut’ is to have the life insurance owned by an ILIT, and properly maintain the trust.
In addition to potential estate tax savings, ILITs can provide creditor and predator protection (including buildup of cash value) for the beneficiaries, and enhanced control around when policy proceeds are ultimately paid to the trust beneficiaries (as opposed to outright and in one lump sum). Squillace & Associates, P.C. is prepared to help you determine whether an ILIT would be a helpful tool in your estate planning, and decide who the proper Trustees should be in order to preserve and protect your assets.