BUSINESS SUCCESSION and ASSET PROTECTION / PRESERVATION STRATEGIES 5

HCPOA avoids the delays and significant legal costs and fees associated with a court-appointed guardian.  The HCPOA could easily save your family expenses upwards of $5,000 otherwise associated with probate court guardianships.

C.        Suggestions:

1.          Coordination

It is a good idea to prepare the DFPOA, HCPA, and Living Will at the same time, perhaps with a necessary update of your LWT, in order that your attorney can make sure these legal documents are compatible with each other and your overall estate plan intentions.  All these documents should be regarded as essential components of any estate plan.

2.              Long-Term Care Policies

Look into Long-Term Care (“LTC”) policies, and particularly investigate policies that will provide coverage/benefits for in-home care, whether provided by professional care-givers or family members; assisted living facilities; and nursing homes.  Also, there are quite favorable products now available that will allow your “premium” dollar to do “double duty” for you and your family. 

These newer policies might consist of primary life insurance coverage on one or perhaps both spouses (what we typically refer to as a “second-to-die” policy) with a long-term care rider added.  If nursing or in-home care and assistance is in your future, the policy pays those needed benefits by simply reducing the otherwise available death benefit; but, if you and your spouse are continually blessed with relative good health and nursing care can be avoided, then at the death of the insured life, the surviving spouse or designated family members receive a substantial inheritance, all tax-free.  The policy has provided you and your spouse with the peace of mind that benefits for extended in-home, assisted-living, or nursing home care will be available should such need arise, while at the same time providing a sizable inheritance for your designated family members.

If you are still employed, you may wish to discuss the possibility of your employer adding LTC under an existing group plan; otherwise, if you are self-employed or retired, remember that Uncle Sam will pay a portion of the LTC premiums as they are (effective 2003) now tax deductible.

3.              Section 529 Educational Plan

Next, consider investing a lump sum amount that you are comfortable you will not need the income from, in a new Section 529 Plan.  These are tax-advantaged accounts that permit you to set aside a large sum (thereby reduce your own current income taxes) so that it might grow to provide for future educational needs for your children, grandchildren and other family members, once again, all tax-free. 

A Section 529 plan established for one’s children or grandchildren is an excellent family wealth transfer vehicle that not only allows the parent or grandparent to significantly reduce their own taxable estate (up to a maximum of $70,000 per child and grandchild), but also allows for the funding of that college and post-graduate or professional education with tax-free dollars.  Future growth and appreciation is removed from the parent or grandparent’s taxable estate, and unlike the lost of control over a custodian or minor’s account when the child reaches age 21, the Section 529 plan and its funds remain in the control of the parent or grandparent establishing the college fund. 

Also, the Section 529 plan provides greater flexibility than generally available with a custodian or minor’s account or even that under a formal trust arrangement.  Under the 529 plan, if circumstances change, the controlling parent or grandparent can change the beneficiary of the funds (a child or grandchild becomes unavailable or perhaps chooses to not avail themselves of the educational opportunities) and can even liquidate the account if they need the funds later (of course, there would be accompanying income tax consequences if the parent or grandparent takes the money back, including a 10% tax penalty; nevertheless, as a good “safety net” the account is there to be availed by you if needed).

4.         Maximize Retirement Savings

Next, if still employed, take full advantage of all possible retirement plans and “sock away” for your own future.  These are tax-deferred opportunities that of course, permit you to keep the “government’s money” working for you; you will only pay income taxes on those amounts as you begin to take distributions at retirement.  In additional to tax-deferral and the principle of compounding working for you, most retirement plans are also “creditor” or lawsuit protected.  Your creditors and potential lawsuit claims are precluded from taking your retirement funds from your account.  Of course, once you begin taking the required minimum distributions at retirement, then such amounts would then become subject to such creditor claims.

                        5.        Put Those Lazy Dollars to Work

Finally, take a “close look” at your other investments, particularly those of a liquid nature (checking account, passbook, CDs, etc.)  Are those funds working for you, keeping you ahead of inflation (after-tax dollars)?