Tax-Efficient Estate Planning: Strategies to Preserve Your Wealth
Posted on December 14, 2024 by shieldsandboris
Do you have a comprehensive estate plan in place? Many people do not. Indeed, half of U.S. adults over 50 lack a will—let alone other estate planning documents (AARP). Estate planning is a crucial step to protect yourself, your family, and your finances. At The Elder Law Offices of Shields & Boris, we are leaders in wealth preservation and asset protection. Here, our Pennsylvania estate planning and elder law attorneys provide an overview of strategies to preserve your wealth.
Strategies to Protect and Preserve Your Assets
Strategy #1: Diversify Your Assets
The old adage with investments is that you do not want to put all of your eggs in one basket. It is generally a good approach to asset protection and wealth preservation as well. Indeed, diversification is one of the cornerstones of preserving your wealth. By spreading your investments across a variety of asset classes—from cash to stocks to bonds to real estate to insurance?you can reduce the exposure to any single source of risk. For instance, if one industry encounters a downturn, other areas of your portfolio may remain stable or even grow. Diversification also allows you to take advantage of multiple growth opportunities.
Strategy #2: Identify Risks
Effective wealth preservation demands a thorough understanding of the risks that could undermine your financial security. You should comprehensively assess the potential threats to your estate—from market volatility to the risk of family disputes to things like sudden or unexpected illness or other serious medical conditions. Only when all of the potential risks are properly identified will you be in the best possible position to address them through your estate plan.
For example, long-term care costs pose a serious risk to wealth. The average cost of a nursing home in Pennsylvania can run in excess of $10,000 per month. It could quickly deplete a person’s life savings. As you age, the likelihood of needing assisted living, in-home care, or nursing home services increases. Further, neither traditional health insurance nor Medicare provides much in coverage for long-term care. A proactive plan is needed to protect your assets and preserve wealth.
Strategy #3: Use Trusts
Many people and families in Western Pennsylvania—including many who are solidly in the middle class—can benefit from setting up trusts. Trusts can be great tools for wealth preservation. They enable you to maintain control over how and when your assets are distributed. Beyond that, a proper trust can also provide some significant asset protection. Indeed, by placing your investments, property, or life insurance benefits into a trust, you can protect them from creditors, lawsuits, and costly probate proceedings. In some cases, trusts can also provide structured income streams to beneficiaries—thereby helping reduce tax burdens.
It is important to clarify that there are many different types of trusts. As different types of trusts are used for different purposes, selecting the right structure is essential. Indeed, each type of trust offers unique advantages. For example, revocable trusts provide flexibility and allow changes over time—but they offer limited asset protection. On the other hand, irrevocable trusts—including Medicaid trusts—offer far stronger asset protection. Other types of trusts, such as special needs trusts, include unique provisions that help to ensure ongoing support for beneficiaries with disabilities without undermining their eligibility for public assistance. An experienced Pennsylvania estate planning lawyer can help you put the right trust in place for your needs/goals.
Strategy #4: Plan for Tax Liability
Tax planning is an important part of wealth preservation. Estate taxes, capital gains taxes, and inheritance taxes can significantly reduce what you ultimately pass on to your beneficiaries. You should consider taking advantage of gifting strategies, setting up trusts that minimize taxable events, and using life insurance products designed for tax efficiency. An elder law attorney with experience handling tax-related matters can help you best protect your wealth.
Strategy #5: Take Advantage of Insurance When Appropriate
Insurance can be a useful tool to protect assets and preserve wealth. At its core, insurance policies exist to help reduce risks. For example, life insurance can provide beneficiaries with immediate liquidity to cover estate taxes or other expenses. Alternatively, long-term care insurance helps protect your finances from the substantial costs associated with extended medical needs later in life. Further, some people can benefit from liability insurance that provides protection against certain types of lawsuits/claims.
Strategy #6: Review and Revise Your Wealth Preservation Plan on a Regular Basis
Life brings changes. The estate plan that made sense ten years ago may not be the right solution for your current situation. With that in mind, it is useful to review and revise your wealth preservation plan on a regular basis. Marriages, divorces, births, deaths, and shifts in asset values or tax laws all impact how effectively your estate plan preserves wealth. An experienced Western Pennsylvania elder lawyer can review your estate plan and help you put the proper asset protection and wealth preservation strategies in place.
We Help Families in Western Pennsylvania Protect and Preserve their Wealth
Wealth preservation is complicated. It is crucial that families are able to develop a tax-efficient, cost-effective strategy that best protects their assets. At The Elder Law Offices of Shields & Boris, we are committed to helping families in Western Pennsylvania protect themselves from the cost of aging. You do not have to handle wealth preservation on your own. Our Pennsylvania elder lawyers are prepared to help evaluate all of the strategies to protect assets and preserve your wealth.
Contact Our Pennsylvania Elder Law and Estate Planning Lawyers Today
At The Elder Law Offices of Shields & Boris, our Pennsylvania elder law attorneys have extensive experience providing wealth preservation services. If you have any questions or concerns about the best tax strategies and elder planning strategies to protect assets, we can help. Reach out to us by phone at (724) 235-7939 or contact us online to arrange your completely confidential initial appointment. We provide estate planning services throughout Western Pennsylvania.
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