During various stages of life, we experience different life events. When we turn five or six, we start going to school. When we reach our teenage years, puberty takes over our bodies, morphing us into the next stage of life. When we transition into our 20s and 30s, we are blossoming into our work-driven selves. Life planning can help you achieve future goals by starting small and growing into future decisions. What can also help you accomplish those goals is incorporating estate planning into those life planning events. This overlap can aid in planning for the near future while also planning for your later years and end-of-life. But just how do those two intersect to your benefit? First, let’s look at some common life planning events:
- Getting Married
- Building/Owning a Home
- Starting a Business
- Saving for Loved Ones Education
Getting married, for most people, is a dream come true. Spending the rest of your life with the person you love is one of life’s greatest blessings. However, a marriage not only brings together two people, but also their belongings, assets, and family members. When you get married, it is important that you discuss how those assets and belongings will be perceived by the state. Specifically, for Louisiana, community property laws state that all debts and assets acquired during the marriage are shared property between the two parties. There are exceptions, of course, to this law, such as property acquired prior to the marriage and others. This will be a topic that should arise fairly early or prior to your marriage. Also, discussing the ramifications of a legal marriage on your tax status should also be discussed, as that status will change. Lastly, you will also want to discuss how any potential children are to be looked after in the event of one parent or both passing away prematurely. These conversations may be tough to have, but they are vital to establish.
Building/Owning a Home
Building or owning your own home is a huge financial step in your life. Not only does it provide physical stability for you and your family, but also financial stability. When you are going through this process, it is important to also look at how this home will be passed down once you are gone. In this way, the home can serve you and your family for years and generations to come. It is important to consider that your family may owe taxes, legal fees, and other fees for this home once you pass away. There also may be a “mortgage due-on-sale” clause that would require full payment of the remaining mortgage, which could possibly put a huge burden on those inheriting such. To prepare for such instances, you have many options available. You can enter into a co-ownership of the home, establish a will, form a revocable trust, establish a qualified personal residence trust (or QPRT), set a beneficiary designation with a Transfer On Death deed, and many others. These options can help you thwart the potential wave of fees that can come with your untimely passing with regard to your home.
Starting a Business
If your goal is to start your own business, there are many things to consider in order to provide continuity of your services in the event of your passing. Though this may be uncomfortable to discuss or plan for, doing so can help save your business and your net worth. First, you should definitely establish a will and estate plan to lay out your wishes in detail. Secondly, you should plan for the possibility of tax burdens upon those who inherit your business by establishing multiple trusts or other similar financial accounts. Thirdly, having a life and disability policy established can help create a stream of income to your business in your absence, listing your business or other family members as beneficiaries. Drafting a buy-sell agreement is another great idea if your business has multiple owners. With this agreement, the business will remain with the owners when one is deemed incapable or passes away. Lastly, creating a succession plan, similar to a business plan, in the event of your passing is crucial for the business to continue as you wish it to. With explanations of changes in organizational structure and employee training procedures and other details, the flow of your business can remain constant.
Saving for a Loved One’s Education
Education is a crucial part of a person’s life and can change the course of their life for years to come. If you are wanting to save money for a loved one’s education, there are a few things that you can do to make sure this money is saved securely, used properly, and taxed minimally. There are three main ways you can put money aside for such a situation:
Health and Education Exclusion Trust
- This trust is irrevocable and can be used to avoid hefty gift and GST taxes on tuition. However, this trust must benefit a relative of yours that is at least 2 generations younger than yourself, and it must list a charitable organization with significant interest as the beneficiary.
- Irrevocable Gifting TrustThis type of trust can extend beyond education but uses the annual or lifetime gift tax exclusion to hold money/property for a chosen beneficiary. In this trust, if you include what is called a “Crummey Power,” your beneficiary would receive this gift that would otherwise not be eligible for the gift tax exclusion but is so now. Though, this trust must have an option for the beneficiary to withdraw any amount gifted, but these types of trusts are usually left alone to mature and increase in value until the payments end.
Revocable Education Trust
- This trust is simply set up for education savings. In this way, you can contribute to the trust, set yourself as the trustee, and change, modify, or revoke the trust as you deem necessary.
In your 60s, most people have their eyes set on retirement. The appeal of relaxing and living out your days free of working stress is significant. This milestone can also serve as a point in which you solidify your end-of-life plans to help ease the stress in your older years about such topics. First, purchasing a life insurance policy and a long-term care insurance policy, if you have not already done so, would be a great starting point. These policies can protect not only yourself, but those that will be left to mourn your loss. Also, with regard to your health and wellness as you age, establishing a will, power of attorney, and health care proxy can keep you in control of your healthcare even when you are incapable of doing so. Latiolais Law Firm does not give out tax advice, but we can help you make an educated choice about how to plan accordingly for your future.
If you have questions on how an estate plan can help you achieve your goals in a fiscally responsible way that maximizes wealth and happiness, contact Latiolais Law Firm, serving the New Orleans and South Louisiana areas! Our experts are ready to walk through whichever stage of life you are in with you, helping you make the most financially responsible decisions along the way.