Read more about the article What Is Upstream Planning? – Annapolis and Towson Estate Planning

What Is Upstream Planning? – Annapolis and Towson Estate Planning

Estate planning with an eye to a future inheritance, known as “upstream planning,” can be especially important where families pass significant wealth from generation to generation. Knowing these details in advance can have a big impact on deciding on how to manage the heir’s own assets, as explained in the article “Expecting an Inheritance? Consider Coordinating Your Estate Plan with Your Parents’” from Kiplinger.

What happens when information is kept private? In one example, a patriarch refused to share any details, despite having children who had succeeded on their own and didn’t really need their inheritances. The family was left with an eight-figure estate tax bill.

Clear and open discussions make sense. If a person has an estate large enough to need to pay federal estate taxes, inheriting more will add to their heir’s tax burdens. Parents may choose to leave assets to heirs through a trust. Money in a trust belongs to the trust, so in addition to tax benefits, the trust is a good way to protect assets from creditors, litigation, or divorce.

Trusts are also used to take advantage of the GST—generation skipping tax exemption. The executor of the parents’ estates can apply their GST exemption to the trust, which will not be taxed when they are distributed or passed to grandchildren, even if the grandchild is a beneficiary of the trust.

Business considerations also come into play. If a couple built and grew a business now being run by their granddaughter, and the grandsons have had little or no involvement, their wishes should be clarified: do they want their granddaughter to be the sole heir? Or do they want the grandsons to receive cash or other assets or any shares of the business?

Talking about multigenerational wealth early and often provides benefits to all concerned. The more money a family has, the more it makes sense to have those conversations and not only from an estate tax perspective. Those who created the wealth can use upstream planning as a way to start conversations about their success, family values and hopes for how heirs and future generations will benefit.

In some families, these conversations won’t happen because they think it’s too private or don’t want their children and grandchildren to feel they don’t need to work hard to become responsible citizens.

Communicating and coordinating are vital to success. Your estate planning attorney will be able to provide guidance, having seen what happens when upstream planning occurs and when it does not.

Reference: Kiplinger (Oct. 4, 2022) “Expecting an Inheritance? Consider Coordinating Your Estate Plan with Your Parents’”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Another Reason Why You Need an Estate Planning Attorney – Annapolis and Towson Estate Planning

The saying ‘you don’t know what you don’t know’ is most apt in estate planning. A well-meaning person may create a will with the goal of leaving property to grandchildren, only for the children or their parents to learn after the grandparent’s passing the law does not permit property to be transferred. A recent article titled “The Arcane Law That Could Derail Your Inheritance Plans” from yahoo! entertainment is a good example of the importance of estate planning attorneys to create effective estate plans.

The rule against perpetuities may prevent a property from remaining in the family, if it takes too long for the will’s conditions to be met.

The rule against perpetuities creates a standard for when an interest in land or property must vest. The rule against perpetuities stipulates that a will, estate plan or other legal documents intending to transfer property ownership more than twenty-one years after the death of the primary (decedent) becomes void.

This rule means a person can’t legally guarantee their grandchildren, great-grandchildren or other heirs in the future may retain ownership of the grantor’s property. This may be an obscure law. However, the problem becomes real if and when someone should challenge the will, as this is a legitimate legal argument to be made.

This is an old law dating back to 17th century England, when courts wanted heirs and descendants to be able to buy and sell land without the influence of ancestors who tried to control property over many generations. The United States adopted this law and while many legal authorities see it as being outdated, only some states have drafted modifications or new laws to change it.

In 1986, thirty-one states addressed the problem by drafting a “wait and see” approach, meaning an interest in the property must vest within ninety years of the implementation of a will or life estate. This has alleviated the limit, meaning a will or other transfer of property has nine decades to vest before it becomes void.

If your estate plan includes leaving assets for grandchildren, including real estate property, contact us to speak with one of our experienced estate planning attorneys about this admittedly arcane law. If your state is one that has not adopted the “wait and see” approach, you will be glad you prepared.

Reference: yahoo! entertainment (Aug. 20, 2022) “The Arcane Law That Could Derail Your Inheritance Plans”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys