When planning your estate, one of your primary goals may be including financial support for your parents or siblings. Putting your wishes in writing gives you peace of mind that your family can meet their needs, even if you cannot be there with them. There are a few different ways you can provide financial support.
Set Up a Trust
When you choose to set up a trust, you can specify how much money your parents or siblings should receive, and how often. You pick a trustee, who manages any money or property that you place in trust for the benefit of certain designated people. These beneficiaries may be able to make requests for distributions from the trust as needed, or you may set up a schedule of distributions. The trust lasts as long as you want, or as long as it has money and property that the trustee needs to manage.
If you, your trustee, or your chosen beneficiaries are not U.S. citizens or permanent residents, or if the trust will hold some non-U.S. property, talk to a lawyer before you make any firm decisions. There are specific and often very expensive tax consequences if your trust is considered “foreign” under U.S. tax laws.
If any of your beneficiaries have special needs or a disability, consider setting up a special needs trust, Special needs trusts help beneficiaries retain eligibility for income-based social services if set up properly.
Gifts During Your Lifetime or in a Will
Alternatively, or in addition to a trust, you could make gifts to your family. You could transfer money or property to them during your lifetime, or you could prepare a will that leaves your estate to them. Do not rely on verbal promises or on handwritten lists to relay your wishes to your family. If there is a dispute about distributing your estate, the probate court may not recognize the promise or lists as legally binding.
Like for trusts, gifts can have hidden tax consequences. For example, U.S. citizens and permanent residents have to pay gift tax if they make gifts of more than $15,000 in a tax year. Non-citizen non-residents have even more tax laws that affect them.
Making a beneficiary designation in your parent’s or sibling’s favor is a straightforward way to leave him or her some money. You can make a designation for your IRA or 401(k) retirement account, or you can purchase life insurance. Check your beneficiary designation regularly to make sure it still reflects your wishes. If you plan to leave your account funds to a non-U.S. citizen, check with an attorney to see if a trust or other estate planning device is a better option for tax reasons.
Do you want to make an estate plan to financially support family? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.