Page 28 - Perry FH
P. 28
and owns her home outright and free As such, it is essential to plan as far in
of any mortgage. Her home is valued at advance of any major medical ailment
$400,000.00, but she has few other assets. as possible. It is never too soon to
Rose knows that she wants to live in her plan properly. As the above example
home until her demise, but has a history demonstrates, proper planning is
of Alzheimer’s in her family, and wants tremendously beneficial to your loved
to protect her major asset (in this case, ones, and can be the difference between
her home) so that her children will have leaving a substantial financial legacy
a nest egg, and her grandchildren will to benefit your family, or paying that
be able to go to college without taking money over to the government, or other
out student loans. Rose will nominate an unrelated third parties.
independent trustee (a trusted relative,
friend or colleague), transfer title of her Irrevocable Life Insurance Trusts
home into the Rose Smith Irrevocable The Irrevocable Life Insurance Trust
Trust, and reserve herself a little estate. (“ILIT”) is a unique instrument that serves
Rose continues to live in her home, and several important purposes, two of which
remains eligible for the same property tax we will touch on here. Many people
exemptions to which she was previously are unaware that the proceeds of life
entitled. insurance policies are considered part of
your estate for estate tax purposes. By
Six years later, Rose requires nursing home using a properly drafted ILIT, however,
care, and spends three years in a nursing you will bring the value of any life
home prior to her eventual passing. insurance polices you might hold outside
Had Rose maintained her home in her of your estate for estate tax purposes
individual name rather an transferring her on both the state and federal level. For
home to the trust, her estate would be those of you whose net worth puts them
liable to the nursing home for the cost at or near the estate tax threshold, an ILIT
of the care - at $10,000.00 per month is a necessary part of your estate plan.
for three years, $360,000.00. Her family
would inherit 10% of her estate, with the An ILIT will also permit you to direct the
nursing home taking the remainder of the disposition of your life insurance proceeds
funds. However, because Rose utilized in a more specific manner than simply
proper planning, the home passes designating a beneficiary. Frequently,
outside of her estate, and her creditors our clients have their ILIT benefit their
cannot collect against the house. spouse during the spouse’s lifetime, and
upon the death of the spouse, benefit the
Upon her passing, Rose’s life estate children of their marriage. Since an ILIT is
terminates, the house may be sold by her a trust, you can give specific directions in
trustee, and the full proceeds from the your trust instrument as to how the assets
sale - all $400,000.00 - are distributed should be used, and protect the assets
to her heirs as per the terms of Rose’s from your heirs’ potential creditors.
trust. It is important to understand that
there is a statutory “look back” period Estate Administration
which you must surpass in order for the The following documents should be
trust’s benefits to apply to your particular brought to your attorney after the demise
circumstance. At the time of writing, the of a loved one:
period is five years. Had Rose gone into
the nursing home within that window, she An original or certified copy of a death
would have been subject to a penalty. certificate (look for a raised seal)
1. The original will (if any)
Page 28 - Perry Funeral Home, Inc.
