We all know from firsthand experience how important it is to choose the right gift for someone. We know that the thought we put into the gift is as important as its worth. Each of us can think back to a birthday, anniversary, or holiday when someone close to us gave us something that was truly meaningful to us because of the thoughtfulness behind it. Maybe they put together a photo album of treasured moments. Maybe they gave us a trip which opened our eyes and broadened our minds.
While gifts can reflect thoughtfulness, they can also reflect carelessness or insensitivity. Each of us can probably remember thoughtless or inappropriate gifts we have received over the years. Maybe we were given woolen gloves when we never stray from warm climates. Maybe we were given a photo album with several pictures of a recently divorced spouse.
Gifts and bequests also can be made either thoughtfully or carelessly. Here are some examples of bequests which are thoughtful or careless:
- You fail to plan at all and die without a will. This is careless because it leaves your loved ones with numerous loose ends to tie up and subjects your assets to probate, lessening the amount they will receive. Further, probate subjects you and your heirs to the prying eyes of the public.
- You fail do tax planning. Again, this could cost your loved ones much of what you had intended them to have. Poor income, estate, and other tax planning could levy an unnecessary tax equal to the majority of your assets.
- You leave assets in trust when appropriate. Often the most thoughtful way for you to leave assets to loved ones is to leave those assets in trust. By leaving the assets in trust, you can help your beneficiary shield those assets from estate taxes and from their own creditors. In addition, leaving the assets in trust can help the beneficiary protect those assets from division in the event of divorce.
- You can leave assets for your beneficiaries in a way that encourages them to continue to grow. Sometimes, when beneficiaries inherit a significant sum of money, they cease to have the ambition they once had. Inheritances destroy the lives of some beneficiaries, depriving them of self esteem and sending them into a downward spiral of substance abuse and self-loathing. For beneficiaries like these, a Family Incentive Trust would provide them the benefit of the assets, without the downside. A Family Incentive Trust (“FIT”) is very flexible and can make distributions to a beneficiary based on criteria that you set. A FIT can be used to match the beneficiary’s earned salary. The match rate could be higher for low paying occupations that serve society as a whole, such as teaching.
- If one of your beneficiaries has medical needs requiring governmental assistance, now or in the future, you can leave assets in a “Special Needs Trust.” By leaving him or her the assets in a Special Needs Trust, the beneficiary will not be disqualified from receiving governmental assistance such as Medicaid. The assets in the trust may still be used for the benefit of the beneficiary’s “special needs,” essentially expenses beyond the essentials. On the other hand, if the assets are left to the beneficiary outright, they might cause a disruption of governmental benefits and the assets would need to be exhausted prior to resumption of the governmental assistance.
As with other gifts, bequests can be thoughtful or thoughtless. A qualified estate planning attorney can help you plan your estate so that you can give your children or other beneficiaries a gift of thoughtfulness that they will remember long after you are gone.
Mr. Ronald “Chip” Morrison, Jr. is a Board-Certified Specialist in Estate Planning and Administration by Louisiana Board of Legal Specialization and a member of the American Academy of Estate Planning Attorneys. He can prepare an estate plan for you that achieves your goals of passing your assets to whom you wish. The planning can even help minimize estate taxes. To learn more about how you can achieve your estate planning goals, please call our Metairie office at (504) 831-2348 or contact us through our website.