Fairfax, VA (Law Firm Newswire) May 11, 2016 – Frequently, estate plans are created on the basis of assumptions that are no longer true. Correcting these assumptions may help estate planners modify the way in which they handle certain estate planning issues. Following are some factors that advisors can consider when drafting their clients’ estate plans.
Planning for long-term care is becoming increasingly important as people are living longer. Covering such costs should be taken into consideration prior to making gifts. One way of focusing on these expenses is through the use of long-term care insurance policies. An estate planning attorney might make the assumption that if a client has this type of coverage, then the client also has the ability to make gifts to the client’s children in order to minimize state estate tax or to realize personal objectives.
However, that is not always the case because over one-third of all long-term care policies lapse prior to the owners’ use of them. It is 32 percent probable that men age 65 will have their long-term care policies lapse, and it is 38 percent probable that women age 65 will have their long-term care policies lapse.
“Advisors need to be aware of the many aspects of a client’s life that could potentially affect the planning of the client’s estate,” said prominent Vienna, Virginia estate planning attorney Lisa McDevitt.
While one might think that lack of affordability is the reason for the lapse in the policies, there is another reason that policies are permitted to lapse. Individuals who suffer from cognitive decline are likely to let policies lapse, and yet, they are the ones most in need of such coverage. In order to guard against this eventuality, advisors should make certain that the client has a durable power of attorney granting authority to the agent to manage financial affairs if the client is unable to do so.
In addition, advisors can assist clients with charitable giving by helping them enter into donor agreements with charities. It might be beneficial for some donors to have a financial projection of the maximum amount that they can donate without sabotaging their personal financial goals. Other donors might wish to use insurance funding for some gifts.
Since the majority of clients’ estates will be unaffected by the federal estate tax, estate planners should advise clients to make such donations while they are still living, and to exclude them from wills. Another option is to have the clients gift assets to their children who are in a higher tax bracket, and have the children make the charitable gifts.
An estate planning vehicle that can be used to protect aging clients from identity theft and elder financial abuse is the revocable trust. However, in the event the trustee mismanages the trust, the heirs have no recourse. One way to remedy this problem is for the attorney to include a trust protector in the trust. This individual would have legal standing to demand an accounting and may be granted the power to remove and replace a trustee.
Lisa Lane McDevitt
2155 Bonaventure Drive
Vienna, VA 22181