Incentive Trusts — Keeping a Steady Hand on the Tiller Part 2

How far can you go in using your estate to provide rewards for appropriate actions by your heirs? You’ll probably find yourself limited more by your imagination and ability to foresee circumstances than by legal constraints. Some common themes contained in incentive trusts involve education, moral and family values, business and vocational choices, charitable giving, and religious participation.

Business and vocational choices: Entrepreneurs can use trusts to provide incentives to those heirs who commit to helping carry on a family business. Trusts can be designed to encourage or discourage career choices specified by the trust creator. Trusts can also be used to offer focused financial support to those beneficiaries who opt to follow paths that are personally and socially rewarding yet generally less lucrative.

Charitable and religious opportunities: Some trusts are designed to encourage religious behavior by requiring specific observances. Some trusts provide funds for dues or other costs associated with religious participation. Some subsidize those heirs who choose missionary work or other religious vocations. Some provide matching funds for heirs’ contributions to favored organizations.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Incentive Trusts — Keeping a Steady Hand on the Tiller Part 1

A good legacy may work wonders for those left behind, but you may also believe that your heirs need more than mere financial benefit from your estate. To provide direction and help ensure that important life goals remain foremost in their heirs’ lives, many people are including incentive trusts in their estate plans.
Where You Can Focus Your Legacy
Education: Incentive trusts have been used to provide extra support to those heirs who pursue advanced degrees, focus on designated fields of study, or attend specified institutions. Some trusts are designed to reward instances of outstanding scholarship and academic achievement. Some permit withholding support from those who fail to meet minimum levels of accomplishment.
Moral and family values: Some trusts are intended to promote family life by providing income support payments to heirs who choose to stay at home with children. Some trusts offer beneficiaries bonuses for childbearing, foster care, or adoption. Some withhold benefits from those heirs who might be convicted of a crime or fail a prescribed drug or alcohol screening test.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Financing Long-Term Care

One of the biggest worries of those caring for an aging parent is how to pay for the care needed. If you provide more than half of a parent’s support and his or her gross income is less than $3,400 in 2007 ($3,500 in 2008), you can claim your parent as your dependent, giving you a tax exemption for each parent so cared for and allowing you to write off much of the medical expenses. (Note: The dependent exemption phases out at higher income levels. Check with your tax advisor.) You may also be able to claim a federal tax credit that will enable you to take up to $3,000 off the cost of in-home care or day care. Another option is the flexible spending account (FSA), which lets you pay for a certain amount of care each year with pretax dollars.

If sending your parent to a nursing home is inevitable, make sure you research each home extensively. Reservations at the home selected should be made at least a year ahead of the time that you expect your parent will need it, as waiting lists are typically long at well-respected facilities.

Keep in mind, too, that the government offers limited financial help for those families paying for nursing home care. Medicare will only pay for care on a short-term basis, and Medicaid only offers benefits to low income individuals with limited assets. And, with the average nursing home stay costing upwards of $6,266 per month, financial planning has become even more crucial to the economic well-being of adult children responsible for the care of their elderly parents. Don’t wait until the last minute — start planning now to ensure the future care of your parents.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Helping to Care for Aging Parents – Research Your Options

Many Baby Boomers are finding that their aging parents are in need of health care assistance. Luckily, there are many options available today to help your parents grow old gracefully, either in their own home or in a facility, and several ways that you can finance the costs of the care.
If your parents are healthy seniors who can look after themselves, they generally are eligible to enter a continuing-care retirement community that allows them to buy or rent an apartment and ensures them lifetime nursing care when it is necessary. Another option for healthy seniors is private long-term care insurance, which can help cover nursing-home costs or the cost of an in-home aide.

There are a wide range of services and options available if your parent needs more substantial assistance and is not eligible for the above-mentioned services. Many families opt for moving an aging parent into their own home. If you are able to peacefully coexist with your parent, this may be a good idea because the arrangement frees you from worry about the upkeep of a second home, and you and your children can have valuable time to spend with your loved one.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Estate Planning Checklist

Bring this checklist to a qualified legal professional to discuss how to make your plan comprehensive and up-to-date.

Part 1 – Communicating Your Wishes
• Do you have a will?
• Are you comfortable with the executor(s) and trustee(s) you have selected?
• Have you executed a living will or health care proxy in the event of catastrophic illness or disability?
• Have you considered a living trust to avoid probate?
• If you have a living trust, have you titled your assets in the name of the trust?
Part 2 - Protecting Your Family
• Does your will name a guardian for your children if both you and your spouse are deceased?
• If you want to limit your spouse’s flexibility regarding the inheritance, have you created a Q-TIP trust?
• Are you sure you have the right amount and type of life insurance for survivor income, loan repayment, capital needs and all estate settlement expenses?
• Have you considered an irrevocable life insurance trust to exclude the insurance proceeds from being taxed as part of your estate?
• Have you considered creating trusts for family gift giving?
Part 3 – Reducing Your Taxes
• If you are married, are you taking full advantage of the marital deduction?
• Are both your estate plan and your spouse’s plan designed to take advantage of each of your $2.0 million applicable exclusion amounts?
• Do you and your spouse each individually own enough assets for each of you to qualify for $2.0 million applicable exclusion amounts?
• Are you making gifts to family members that take advantage of the $12,000 annual gift tax exclusion?
• Have you gifted assets with a strong probability of future appreciation in order to maximize future estate tax savings?
• Have you considered charitable trusts that could provide you with both estate and income tax benefits?
Part 4 – Protecting Your Business
• If you own a business, do you have a management succession plan?
• Do you have a buy/sell agreement for your family business interests?
• Have you considered a gift program that involves your family owned business, especially in light of “estate freeze” rules? (These rules were enacted by Congress to prevent people from artificially freezing their estate values for tax purposes.)

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

A Needs Evaluation

A Minnesota Financial Advisor Service

Because you’ve worked hard to create a secure and comfortable lifestyle for your family and loved ones, you’ll want to ensure that you have a sound financial plan that includes trust and estate planning. With some forethought, you may be able to minimize gift and estate taxes and preserve more of your assets for those you care about.
One of the first steps you’ll take in the estate planning process is determining how much planning you’ll need to undertake. No two situations are alike. And even individuals who don’t have a great deal of wealth require some degree of planning. On the flip side, those with substantial assets often require highly complex estate plans.
Two key components of your initial needs evaluation are an estate analysis and a settlement cost analysis. The estate analysis includes an in-depth review of your present estate-settlement arrangements. This estate analysis will also disclose potential problems in your present plan and provide facts upon which to base decisions concerning alterations in your estate plan.
An estate settlement cost analysis summarizes the costs of various estate distribution arrangements. In estimating these costs, the analysis tests the effectiveness of any proposed estate plan arrangement by varying the estate arrangement, the inflation and date of distribution assumptions, as well as specific personal and charitable bequests.
Estate planning is very complex. And while a simple will may adequately serve the estate planning needs of some people, you should meet with a qualified legal advisor to be sure you are developing a plan that is consistent with your objectives.
Finally, be sure to recognize that estate planning is also an ongoing process that may require periodic review to ensure that plans are in concert with your changing goals. In addition, because estate planning often entails many facets of your personal finances, it often involves the coordinated efforts of qualified legal, tax, insurance, and financial professionals.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Five Points to Remember – Part 5 in Our Series

Portfolio Points To Remember

1. Both a living will and a health care proxy are advance directives, allowing you to put in writing how you want medical decisions made when you are no longer able to make decisions for yourself. However, a health care proxy has the added advantage of permitting you to designate someone to make medical decisions for you when you cannot speak for yourself.
2. Legal safeguards exist to ensure that health care proxies are not misused. Hospitals and nursing homes are required to ask if you have an advance directive and you can always override, change, or cancel your proxy.
3. Having a health care proxy can be a wise step. If you do not have a health care proxy, many states will appoint a decision maker for you if you can no longer make your own medical decisions.
4. Advance directives are not financial documents. However, it is quite possible that during a visit with an attorney to discuss financial and estate planning affairs, advance directives may be packaged together with other estate planning documents.
5. Before setting up any advance directive, review your current health and future wishes in as much detail as possible with family, legal counsel, and a chosen proxy. Once a document has been executed, store the document in a safe and known place and give all involved parties a copy.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Collect Your Thoughts – Part 4 In a Financial Planning Series

Before you talk to a lawyer about what type of advance directive may be best for you, you can save substantial time by understanding the types of issues the document should cover.

Start by talking to your family, doctor(s), and potential health care proxy about your medical wishes in as much detail as possible, outlining any information about the types of medical decisions that may come up at a later time based on your current health. Then, have your attorney draw up your advance directive. You and several witnesses will need to sign it.

Once it is written, store this directive with your other important documents and make sure your family and lawyer know where to find it. Also, give copies to anyone you’ve named as health care proxy, your doctor, and health care facility (such as a nursing home). In addition, you and/or your lawyer should review this document at least once every five years, or when there is a major change in your life (such as a divorce or the death of a spouse).

Informing loved ones and doctors about the types of medical care you would choose in a wide variety of situations can bring peace of mind to those most concerned with your health. Though you cannot anticipate an unexpected health crisis, you can prepare ahead of time to ensure that you are cared for in a manner that coincides with your intentions, even if you cannot make this decision for yourself.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Know the Potential Drawbacks – Part 3

Though it is a legal document, a health care proxy cannot handle every medical situation. Here are a few key points to consider before you designate a proxy.

Some caregivers could override your document — Most states permit a doctor or health care facility to reject any advance directive for reasons of conscience. In these cases, the doctor or facility must tell you or your health care proxy about this when you are admitted to care and must offer to help transfer you to another party or facility that will comply with your wishes or the health care proxy.

The advance directive may not be followed by emergency medical services (EMS) — If EMS is summoned to treat you in case of a life-threatening situation, they are usually required to resuscitate and stabilize you until you reach the hospital, regardless of an existing advance directive.

Know state laws — Though all states accept health care proxies as legal, each varies considerably in what is required of these documents. Also, if a health care proxy is written to your state’s specification but you undergo medical treatment when visiting another state, the rules regulating health care proxies in the state in which treatment takes place will usually prevail. Also, if you don’t have a health care proxy, many states will appoint a person to make medical decisions on your behalf. Usually, this person is your closest relative, which may or may not coincide with your intentions.

Do not use a health care proxy unless you fully trust the person you have named — In the case that a health care proxy is not an appropriate choice, the ABA recommends that you use only a living will.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.