Reduced to basics, estate planning is the need for a Will, a Power of Attorney and a Health Care Directive/Living Will in order to assure that your “legal house is in order” at the time of your demise. In the event the estate is subject to either the Federal or New Jersey estate taxes, the necessary tax planning will be incorporated into the estate planning. This is the beginning, not the end, of the need for planning.
The above estate, tax and lifetime planning needs utilize specialized trusts to achieve asset preservation.
Tax/Estate Trust Planning
To avoid or minimize estate taxes, you can utilize a “qualified disclaimer” trust provisions to allow establishment of “credit shelter” and/or a “martial” trust for the benefit of the spouse and children. There may be a need for “spend thrift” trusts for potential beneficiaries who are financially irresponsible; a need for “disability trusts” for the special needs/care of disabled children or beneficiaries; “minor trusts” for under age beneficiaries to allow the money to be utilized for limited purposes until a mature age when the funds are released.
In addition to these tax trusts, there is a need for a “supplemental benefits trust” (SBT), a health care trust which pays only for the medical needs of the beneficiary which are not otherwise paid by insurance, Medicare, Medicaid or long term care insurance, i.e. it supplements, not replaces, those public benefits. Tax trusts alone are not sufficient estate planning.
Life Care Planning
Once the client’s testamentary estate is protected, trusts can/should be used for lifetime planning such a qualification for Medicaid public benefits. While transfer planning is subject to the Medicaid five year look back, the penalty need not be five years and certain “sole benefit of” (SBO) trusts are not subject to the Medicaid look back penalty, provided the funds are paid out over the beneficiaries’ lifetime.
While these trust techniques are available, they will not be found in “form books” or on the Internet. A certified elder law attorney has the knowledge and expertise to “dot the i’s and cross the t’s” necessary to do the trust right…the first time.
Don McHugh and Vince Macri are two of 425 attorneys nationwide who are certified in elder law (CELA) by the National Elder Law Foundation.
~ Don McHugh, Esq. of McHugh and Macri, Esq.