Planning Potpourri

Letters of Instruction: Minimize family issues by writing a clear letter of instruction as to your wishes and intent. Often the fights among heirs are over what each side believes are legitimate and supportable beliefs about what the parent or other benefactor wanted. Was the loan to help sis buy a house really intended to be paid back? Who did mom really want to give that diamond necklace to? Sure, these issues can be addressed (and often should) in a formal legalistic manner to avoid issues. However, the reality is that many family disputes could be avoided if the intent were only clear. Many heirs will respect mom’s wishes, if they only really knew what they were. Write a letter and discuss it with your estate planner. Have it held in a manner that assures its privacy until needed (so you can revise it if circumstances change).

Special Needs Considerations: Undertaking specific planning to protect current/future SSI or Medicaid benefits is often the focus of planning.  However, ultra affluent clients might think that they don’t have a “need” to protect a special heir from the loss of government assistance. But qualification may not only be about money, but about entry to vital programs. For affluent clients, especially business owners facing a lack of liquidity, life insurance held in a trust (ILIT) might nicely fund a special needs trust (SNT), but then there is the issue of Crummey powers. You cannot grant the special heir the right to withdraw gifts to the trust since that may jeopardize qualification. Other approaches to consider might include: split-dollar loans to minimize gifts to the trust; judicious use of the lifetime gift exemption for gifts; GRATs and other planning technique that roll into the trust at future dates to unwind the split-dollar arrangement and fund other premiums; using the ILIT to guarantee other family loan and sale transactions for a fee; and so on. Thanks to Catherine G. Turner, CFP, Atlanta, Georgia.

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