Estate and Tax Planning Considerations
Estate planning is an important step to ensure final healthcare and property wishes are followed. It addresses questions such as ‘Who would make our medical decisions?’ and ‘What would happen to our kids?’
Although individual circumstances differ, each person should consider having the following documentation in place:
Financial Power of Attorney
A financial power of attorney grants the person of choice, an agent, the authority to handle financial affairs during incapacity. For example, this would allow an agent to make mortgage payments, operate a small business, handle bank and investment transactions, etc.
Health Care Power of Attorney
This document grants an agent the power to handle medical decisions, following instructions regarding desired medical treatment. Without this document someone you have not chosen could make your medical decisions.
Living Will / Advance Health Care Directive
The living will specifically spells out selected, or un-selected, medical treatments to sustain life. It also details preferences for other medical items, such as pain management or organ donation.
Last Will and Testament
A last will and testament provides the framework for what happens to assets after death. It generally outlines beneficiaries, assigns guardians to care for minor children if both parents cannot, and appoints an executor to carry out final wishes.
While everyone should have the above documents in place, there are additional, advanced estate planning techniques available to transfer wealth to younger generations while enhancing asset protection and minimizing estate and gift taxes. These include:
While not designed as a tax savings vehicle, living trusts, also known as revocable trusts, allow for the transfer of a settlor’s assets per their wishes while bypassing the lengthy and expensive probate process. Living trusts also preserve privacy and can be amended at any time to reflect a change of wishes.
Irrevocable trusts are generally set up for estate and tax purposes since certain assets can benefit from being placed into an irrevocable trust. An attorney will evaluate each situation and recommend a trust structure and the assets to place into the trust. Trust situs and a trustee will need to be determined as part of the process. A common misconception is that trusts cannot be setup outside of the state of residence; however, this is not always the case. For example, in many instances, by hiring a Wyoming corporate trustee and utilizing Wyoming’s trust laws, state income tax savings (Wyoming has no state income tax) and an unexpected amount of flexibility can be achieved. See our article Why Wyoming for more details regarding Wyoming as an attractive trust situs. Appealing irrevocable trust structures specific to Wyoming include:
Asset Protection Trust – the settlor can be named as a beneficiary and retain the authority to control the trust’s investments.
Directed Trust – a Wyoming directed trust allows for the appointment of an individual who directs the trustee on a specific aspect of the administration of the trust, such as investments or distributions.
Silent Trust – handled solely by the trustee without the beneficiaries’ knowledge.
In addition, looking beyond what is traditionally thought of as the only trustee options (an individual or a bank trust company) can be advantageous. Wyoming trustee options include:
State-Chartered Trust Companies
These trust companies do not take deposits, do not make loans, and are not affiliated with a bank. Stand-alone trust companies are generally less bureaucratic and offer more personalized services.
Private Trust Companies (regulated or unregulated)
Wyoming Private Trust Companies are vehicles designed to provide trust and fiduciary services to a single-family group. While several states permit private trust companies, Wyoming is one of the few states that permits both regulated and unregulated private trust companies.
After selecting a trust structure and trustee, it is time to fund the trust. The attorney and trustee will assist with the process and the trustee will continue on with safeguarding your assets and administering them in accordance with the trust agreement.
While the thoughts surrounding the development of an estate plan may be overwhelming, it should bring peace of mind to know that there will be a plan: to have assets distributed in accordance with wishes, eliminate probate costs, reduce tax burdens and plan for periods of disability while still living.
Finally, it is critical to review these documents every few years. They should always accurately reflect desired plans, and revisions should be made with any changes in law or other life changes such as marriage, birth, divorce, or death.
Two Ocean Trust provides a full range of trust and investment capabilities to high-net-worth individuals and families including the first wealth management platform to seamlessly bridge traditional securities, alternative investments, and digital assets.
Based in Jackson Hole and regulated by the Wyoming Division of Banking, Two Ocean Trust is uniquely positioned to provide access to Wyoming's low tax rates, favorable trust laws and unparalleled privacy and legal protections.
Two Ocean Trust LLC and its representatives do not provide tax or legal advice. This article was written to provide general information and for educational purposes. A qualified estate planning attorney, and possibly an accountant, should address your particular needs and specific legal and financial situations.