Frequently Asked Questions – Financial Planning Assistance

Financial planning focuses on acquiring assets and building up your estate. A comprehensive estate plan will include numerous goals, including things such as ensuring that your assets are available to provide for loved ones when you are gone and making sure your wishes are honored at the end of your life.  At some point, the goals of your financial plan will become entwined with the goals of your estate plan. For example, your financial plan will likely include retirement accounts. Those accounts could impact your eligibility for Medicaid if you need long-term care at some point. To ensure that everything works together well it is imperative that you incorporate financial planning into your estate plan.

Absolutely!  Asset protection planningshould be part of any well thought out estate plan. Creating a financial plan that helps you amass a respectable estate and an estate plan that ensures your estate assets will be distributed accordingly to your wishes when you are gone only takes care of two-thirds of the bigger plan. You also need to protect the assets to acquire so that you will still have some left to pass down to loved ones after you are gone.

The federal and state gift and estate taxis effectively a tax on the transfer of wealth. A gross estate includes anything a decedent owned at the time of death that has value.  Without any deductions or adjustments to your estate, it may lose some of its value to federal and state gift and estate taxes. Both your financial planning and estate planning goals should take into account the impact taxes will have throughout your life and at the time of your death.

An IRA is a tax–advantaged retirement account that you own and control. Earnings generated can compound on a tax–deferred basis until withdrawal. In essence, an IRA is like having your own personal pension that you and/or your employer may contribute to for your retirement years.  There are numerous different types of IRAs, the most common of which include a traditional IRA and a Roth IRA. Because each has different rules regarding taxation and withdrawals it is important to understand those rules before establishing an IRA.

When a participant in a retirement plan dies, benefits the participant would have been entitled to are usually paid to the participant’s designated beneficiary in a form provided by the terms of the plan (lump-sum distribution or an annuity). Many retirement plans require the account owner to name a spouse as the beneficiary, if you are married.  The spouse can signa form allowing the owner to name someone else as the beneficiary. The Employee Retirement Income Security Act (ERISA) protects surviving spouses of deceased participants who had earned a vested pension benefit before their death. The nature of the protection depends on the type of plan and whether the participant dies before or after payment of the pension benefit is scheduled to begin, otherwise known as the annuity starting date.  It is also important to remember that because they are non-probate assets, the assets held in a retirement account can be paid out to the beneficiary shortly after the owner’s death.

Trusts have become increasingly commonplace in estate and financial plans. A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee holds that property for the beneficiaries designated by the Settlor in the trust agreement. Assets held in an irrevocable trust are protected from creditors and other threats, In addition, they are not counted when determining your eligibility for Medicaid, making  trusts a very valuable planning.