A fundamental goal of estate planning should be to protect your assets so they can be passed to your heirs, usually the next generation of your family.
In estate planning, asset protection takes two forms: 1) protection from estate taxes, and 2) protection from future creditors.
Protection from estate taxes — the 98% mistake.
Almost every single Utah estate plan is written to avoid estate taxes, the tax your estate pays for leaving too much money. Yet only 2% of Utah's seniors need to worry about estate tax.
A person dying this year can leave an estate up to $5.25 million ($5.4 million in 2014). Utah estate planners raise the concern that congress will begin to tax small estates, but most national commentators seem to expect the estate tax exemption to rise. Utahns are paying estate planners every day for estate tax avoidance plans they will likely never need.
Protection from financial catastrophe — what the 98% of Utahns need.
Often, estate tax planning is the wrong planning for a personal financial crisis. Consider the following situation:
Jim and his wife Della paid for what they thought was a good estate plan. Four years later, Della had a serious stroke and needed full time medical care. Within a few months, Della went into a nursing home and applied for medicaid. Jim was required to spend down about $40,000 in assets before medicaid began paying, but he was allowed to keep about $50,000 for his own use. A year later, Jim died.
A formula in their family revocable trust (it’s in virtually every Utah revocable trust) left Jim’s entire $50,000 to Della. The inheritance immediately disqualified her from medicaid and she was forced to spend the $50,000 in medical expenses.
A "special needs trust" should have been set up for Della's inheritance. This and other ideas for Utah seniors are much more important than estate tax planning for the top 2%.
At Helgesen, Waterfall & Jones, we write estate plans to meet the needs of the 98% of Utahns.
If you have questions or need advice, you can contact and meet with Jack Helgesen, our Estate Planning partner,for a free estate planning consultation at either of our two full time offices:
Call us today. We can help!