When you plan your estate, you can look at it in a couple of different ways. You can take care of the bare minimum responsibilities, or you can take a more comprehensive approach. Legacy planning is a more complete form of estate planning, and we will look at the details here.
There are many different ways to facilitate post death asset transfers. In some cases, a legacy can vanish far too quickly when there are no safeguards in place. Poor money management by a beneficiary can be part of the equation, and there are those that simply have no experience in this area.
Plus, there are procedural realities that can result in negative consequences if they are not addressed in advance. For example, let’s say that you are leaving an inheritance to someone with a disability. They are receiving Supplemental Security Income (SSI), and they get health insurance through the Medi-Cal program.
These are need-based benefits that are only available to people with very limited resources. If a beneficiary receives a significant lump sum inheritance, benefit eligibility could be lost.
As a response, you could establish a special needs trust. The trustee you designate would be able to use the assets to provide the beneficiary with a wide range of goods and services. However, the beneficiary would never own the assets, so eligibility would not be impacted.
Getting back to the poor money manager, a revocable living trust with a spendthrift clause can be the solution. You would be the trustee while you are living, and you would name someone to assume the role after your death.
After your passing, the trust would become irrevocable. The beneficiary would not be able to access the assets directly, and their creditors would “step into their shoes.” Since the beneficiary would not be able to reach the assets, the same dynamic would apply to the creditors.
With regard to distributions, you can set the terms when you establish the trust. You can spread out the distributions over time or in any manner you desire.
There are also incentive trusts that can be used to guide the beneficiary toward a certain behavior. These are just a handful of the different methods that can be utilized. When you work with our firm, we will make sure that you are apprised of your options.
If you are so inclined, you can pass along a legacy of generosity. There are a number of different ways to set aside resources for worthy causes and institutions. A lot of people like donor advised funds because of the streamlined process.
You make a single contribution to the fund, and you get a tax deduction for that year. Subsequently, you advise the fund with regard to the way you want the assets to be distributed. Multiple charities can be supported, but you don’t have to make multiple contributions yourself.
Plus, all the people that are participating in the fund contribute toward the administration costs. This keeps the expenses to a minimum, so it is a very efficient way to provide assistance.
There are also charitable trusts that can be used, and there are tax advantages that go along with the philanthropic benefits.
Legacy preservation is another piece of the puzzle. The federal estate tax can have a major impact if your estate is very valuable. Right now, it is applicable on the portion of an estate that exceeds $12.06 million, and it carries a 40 percent top rate.
This figure is going down to $5.49 million indexed for inflation in 2026. Some states have state-level estate taxes with lower exclusions, but there is no state estate tax in California. If you own property in a state that has estate taxes, your property could be taxable after you die.
Business owners and people in some high-risk professions have to be concerned about potential legal actions. There are steps that you can take to protect your assets if you fit into this category.
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We are here to help if you are ready to work with a Burbank, CA estate planning lawyer to put a legacy plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 818-937-2335.