A lot of people do not understand what estate planning involves. They think that you draw up a will at some point when you are old and gray, and that’s the end of the story. You can look at it this way, but negative consequences can come about if you do not act in an informed manner.
Simple Will Drawbacks and Limitations
The first order of business is to determine how you are going to transfer assets to your loved ones, and there are many possibilities. If you use a will, you would be allowing for the distribution of lump-sum inheritances immediately after your passing.
This may be disconcerting if you are leaving a bequest to someone that is not good with money. And even if you have no reason to believe an heir will squander their inheritance, you may be more comfortable providing incremental distributions over time.
A will is admitted to probate, and the court supervises while the executor is administering the estate. This is a lengthy process, and no inheritances are distributed while probate is underway. Expenses consume a portion of the estate, and the records are available to the general public.
Trusts
There are several types of trusts that can be used when you are planning your estate, and the right choice will depend on the circumstances. If you simply want to avoid probate and maintain control of your assets while you are living, you can use a revocable living trust.
You will be the trustee, and you have complete control of the assets in every way. After your death, the successor that you name in the trust agreement will take over. They will distribute the assets to the beneficiaries, and the probate court will have no role, so the drawbacks are avoided.
When you have a living trust, you dictate the terms of the distributions. For example, you can instruct the trustee to distribute a certain amount each month for a number of years.
There are trusts that satisfy specific targeted objectives. You can provide for someone with a disability that is relying on government benefits through the utilization of a special needs trust. An incentive trust can be used to steer a person toward a certain type of behavior.
If you are getting remarried as a parent, you may want to establish a qualified terminable interest property trust. This type of trust will provide for your surviving spouse adequately, but your children’s inheritances will be protected.
These are a handful of the circumstances that can be addressed through the use of a trust of some kind, and there are a number of others. When you work with our firm, we will learn about your family dynamic and your legacy goals and make the appropriate recommendations.
Nursing Home Asset Protection and Incapacity Planning
You should address the challenges that you may face toward the end of your life when you plan your estate. More than half of seniors incur long-term care expenses, and nursing homes and in-home caregivers are extremely costly. Medicare does not pay for the custodial care they provide.
Medi-Cal may be the solution, because it does cover long-term care. Of course, it is a need-based program, so you cannot qualify if you have more than a small amount in countable assets. An irrevocable trust can be the solution. Our planning includes special provisions to make it easier to do this type of planning should it become necessary in the future..
Your plan should include an incapacity planning component to prevent a conservatorship. If you have a living trust, the successor trustee can be empowered to manage the trust if you become unable to handle your own affairs.
For property that is not held by a trust, you can name a representative in a durable power of attorney for property. Your life support preferences should be asserted in a living will, and you can name a medical decision maker in a durable power of attorney for health care.
Schedule a Consultation Today!
As you can see, there are choices to be made, and we can provide the necessary guidance. If you are ready to get started, you can call us at 818-937-2335 to schedule consultation at our Burbank, CA estate planning office, and you can use our contact form to send us a message.
- Parents: Have You Considered a Guardianship Clause? - September 18, 2023
- Inheritance Planning for Minor Children - September 1, 2023
- What Is a QDOT? - August 29, 2023
