Other Estate Planning Instruments
Irrevocable Life Insurance Trust
Proceeds from a life insurance policy will not be subject to estate tax if the insured has no control over the policy at the time of his death. A life insurance trust, or “ILIT,” is created by the insured to own a policy and can provide for the insured’s spouse, children, grandchildren, domestic partner, etc., without being subjected to estate tax at the death of the insured. The insured pays the insurance premiums by making gifts to the trust, which qualify for the annual gift tax exclusion, and the Trustee then pays the premium to the insurance company. Annual notification through a “Crummey letter” is given to the beneficiaries. An ILIT cannot be amended, so the client’s specific needs and family situation should be analyzed before such a trust is created. For example, it may not be appropriate to place an insurance policy that is being acquired as a “supplemental retirement plan” into an ILIT. ILITs also offer excellent opportunities to leverage gifts to future generations utilizing the exclusion from generation-skipping transfer tax.
Family Limited Partnerships, Limited Liability Companies and Grantor Retained Annuity Trusts (“GRATS”)
These can be extremely efficient vehicles by which discounted interests in businesses, real estate holdings and other investments can be gifted to younger generations.
Revocable Living Trusts
These types of trusts are used as a substitute to a Will and are intended to avoid the process of probating a Will. This may be appropriate when immediate family members are being excluded from inheriting or in states, such as Florida and California, where the probate process can be cumbersome and costly.
Power of Attorney
This form authorizes an Agent to make financial decisions on behalf of the Principal (client).
Health Care Proxy and Living Will
These forms authorize someone to make medical decisions on behalf of the client if he or she is incapacitated and provide direction as to the client’s health care wishes, including the withholding of artificial nutrition and hydration.
Beneficiary Designation Forms
These forms must be reviewed to ensure that the client’s retirement accounts, life insurance and other assets passing outside of the Will designate the correct beneficiaries.