Estate Planning Trends

Over the last couple of decades, there has been a shift in the areas that consumers address when they engage an estate planning attorney to get and keep their estate legal program in order.

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While these are just trends - they don't apply to every family and every set of circumstances. For example, many families don't have a federal estate tax concern, but they also don't ever want or intend to qualify for Long Term Care Medicaid. Some estate planning issues are evergreen, they will be addressed regardless of the political landscape: issues like providing for minor children, providing for disable children, and providing for adults who cannot handle a lump sum inheritance the right way.

But the following are general shifts we see:

(1) Estate tax planning vs. Medicaid Eligibility planning. Few families these days need to worry about the federal estate tax. The average middle class family these days does worry about losing their home and life savings if they get sick and need long term care.

(2) The ILIT vs. the IIOT. Gone are the days where parents created an irrevocable life insurance trust in an attempt to use life insurance proceeds to pay estate tax. Here are the days where people transfer assets to a particular type of trust that enables them to retain elements of control but not lose the assets if they get sick.

(3) The $15,000 gift tax annual exclusion. Used to be, everyone and their brother would make gifts annually of $15,000 in an attempt to reduce the assets ultimately subject to the federal estate tax. Now, those gifts are useless, particularly if they are being made with some future Medicaid eligibility goal in mind.

(4) Avoid Lumping Assets in Surviving Spouse's Estate vs. The Double Step Up. Now, we want the assets of the first spouse to die to be "lumped" into the suriviving spouse's estate, for estate tax purposes. Assets in the estate of the surviving spouse get a step-up in capital gains tax when the surviving spouse dies. This "lumping" used to be a "no-no" because it cause the surviving spouse's estate to exceed the $600,000 estate tax exemption (which is now $11.4 million).

(5) Providing for a Child Predeceasing vs. Providing for a Child Divorcing. Many people now express a very clear desire that they do not want their ex-daughter-in-law, or their ex-son-in-law, ever controlling a penny of their money.

(6) Old School Will vs. New School Trust. Lawyers were taught in law school that wills and probate are the way to go. Plus, guiding a family through the intricacies and obstacles of the court-supervised probate (we call it "Succession" in Louisiana) can be easy and highly profitable work. Now, with so much information on the internet, consumers have now wised up to the concept that an estate can be set up to eliminate the court and attorney involvement of probate.

(7) Old School Probate vs. New School Trust Administration. Old School - your assets are frozen when you die, and your survivors hire lawyers to sort through the legal maze. New School - name a trusted family member as the Successor Trustee (or Co-Trustees) of your funded trust, and keep 100% of your estate in the family.

(8) Custom Will or Trust Provisions vs. Custom Beneficiary Designations. Now, many people have the majority of their financial wealth in their Individual Retirement Account (IRA). Your will or trust has nothing to do with directing where your retirement assets go when you die. With unique family circumstances, many families overlook the need to have their estate lawyers customize not only their traditional wills and trusts, but also their beneficiary designations on retirement accounts, annuities, and life insurance.

(9) Traditional vs. Blended Family. With people living longer and getting married more, the blended family estate plan can get tricky. Protections need to be in place both for the surviving spouse AND the children or heirs of the first spouse to die.

BONUS: For estate planning professionals only: Old School - the QTIP election. New School - the Portability election. This has to do with proper estate tax reporting within nine months after the first spouse dies, EVEN IF the first spouse to die's estate does not exceed the applicable estate tax exemption amount.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

Phone: (225) 329-2450