September 12, 2021
The Three P’s of Estate Planning
In this episode, Chris Berry discuss: The Three Important P’s of Estate Planning.
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.
Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.
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Welcome to Barry’s bites, please join our host, attorney and financial advisor Chris Berry.
There are three important piece to estate planning. first concern is probate. Most people are concerned about probate. That’s typically where people start off with, I want to avoid probate, I want to make sure if I pass everything is handled without having to go to court. And there’s really two types of probate there’s probate while you’re living and probate upon death most people are familiar about with probate upon death, they might be less familiar with probate while you’re alive. And what might happen is that your loved ones might have to go to court if you don’t have certain documents in place. And we’ll talk more about how to avoid probate generally, that’s people’s first concern. The second concern or second key that we have to worry about is people. And we’ll talk more about this, but it’s Who are we going to include in that estate plan? Where’s our stuff going to go? What are the roles and responsibilities that have to be handled, and then the third P is predators and predators can take different forms.
Predators could be the IRS. So protecting against taxes, a big one is long term care costs, protecting against devastating cost Long Term Care could be in laws, leaving things to the kids. And then what happens if there’s a divorce? So really, when it comes down to it, when we’re talking estate planning, and making sure everything is protected? It’s protecting against the three P’s. And so how do we go about doing that? When we’re talking about kind of probate? Really, there’s two aspects that have to be covered or there’s two tools that we use. And first, we need to understand the state administration. And a lot of times it’s a question of do we want a will based up state plan versus a trust based estate plan? Understand that a will does not avoid probate, what a will does is gives instructions to the probate court and how to administer your estate. So if you’re looking at avoiding probate, typically a will based estate plan isn’t the route you want to go. And then how do we avoid probate while you’re alive?
Well, this is by having what we call disability documents. This is avoiding the guardianship and conservatorship. So what is what are the disability documents, things like financial power of attorney, medical power of attorney, and sometimes a personal care plan that gives instructions to your financial medical power of attorney and how best to care for it. Now, if you have a will and a trust, and it’s funded properly, and you have a financial medical power of attorney, then you should avoid probate at the end of the day, both living as well as that. So that takes care of the first fee. Pretty straightforward. Now, this is where it gets a little more complicated. And this is where there’s different levels of planning that can be done, we have to think about people and with people, a lot of times the way that this is handled is through proper trust design. So a lot of times we do use a trust as a probate avoidance tool. But a truss can do more than avoid probate, one of the things that we have to do is think about what are the roles and responsibilities that we have to fill? So who are the beneficiaries? Who are the people? Who are the trustees? Who are the successor trustees?
Typically, you’re the initial trustee, so that’d be the role that you feel you’d be the one holding on to the suitcase, so to speak? And then who are the beneficiaries? Are they the kids? Are we leaving things to charity or carving things out for grandchildren? Do we want to include spouses? Do we not want to include spouses, but that’s all part of that trust design is making sure we have the right people sitting in the right seats, whether they’re a successor trustee, whether they’re your medical power of attorney, who are your beneficiaries. So that’s that second level, or a second p that we have to think about is the people.
And then the third thing is what do we want to protect against? Obviously, we want to avoid probate, and we want to make sure our stuff goes to the right people as efficiently and effectively as possible. But then what are the things that we’re concerned with? And depending on what we’re concerned with, that tells us what type of tools we might have to look at. But really what we’re talking about here is different forms of asset protection. How can we protect our assets from the devastating cost of long term care?
How can we protect our assets, so that whatever our beneficiaries inherit, instead of them receiving the money outright, it’s protected for their lifetime from divorces, predators, action, etc. Or if Todd were to pass away to make sure that it flows down to the grandchildren versus going out right to a spouse who might remarry. So NASA protection, we have two ways that we can go about this. One is through legal methods, and really a lot of asset protection for a lot of my clients is protecting against devastating costs or long term care, nursing home care, but one way we can do it is through legal protections.
Setting up an asset protection trust, we call it a castle trust so we can move our assets into the trust. And then once they’re in trust, immediately they’re protected from lawsuits and creditors. But then also what it does starts a five year race to protect against nursing home care. So Getting creditors, IRS long term care costs and loss. Also lawsuit creditors. And then also there’s financial strategies as well, as well as insurance strategies. For example, one of the things that we recommend if you’re concerned about like creditors or lawsuits, is looking at umbrella policies from your property and casualty agent. So wherever you get your homeowners insurance, you can get a million dollars worth of umbrella protection, which is just creditor protection for like $200 a year. So it’s super simple, but more what I’m talking about here is long term care costs. How can we protect against long term care costs? Well, we can use some financial strategies as well. estate planning, good estate planning, comes down to just having a plan for these three P’s. And it’s something that we address is part of our process, when we’re putting together a legal structure is first everyone wants to avoid probate. This is typically Goal number one. Second thing is we want to make sure things go to the right people in the right way. And then third kind of level of planning that we do for clients is look at, okay, now that we have the basics in place, what do we want to protect against we want to protect against taxes in the future, and we have different strategies for that. We want to protect against long term care costs. Do we want to make sure that money stays in the family versus going to in law who might remarry or being lost in a divorce, do want to protect against lawsuits or creditors? How can I go about doing that? So hopefully that was helpful.