There is no one-size-fits-all, cookie-cutter estate plan that is right for everyone. This is why personalized attention is key, and this is exactly what you get when you engage our law firm. This being stated, there are certain rudimentary components that every estate plan will contain, and we will take a look at them from an overview in this blog post.
Asset Transfer Vehicle
The purpose of estate planning is to get your assets into the hands of your loved ones after you pass away, so an asset transfer vehicle will be at the core of the plan. Many people harbor a misconception when it comes to wills and trusts. They think that a last will is definitely the right choice unless you are very wealthy.
In fact, this is not the case at all. It is true that there are trusts that are used by high net worth individuals that are exposed to estate taxes, and they can have other more complex concerns. However, trusts can be very useful for people of relatively ordinary means when certain circumstances exist.
First, you should understand the fact that a will is not administered in a vacuum. The executor that you name in the document would be required to admit the will to probate after you are gone. This is a legal process, and in the state of New York where we practice law, it is handled by the Surrogate’s Court.
There are a number of drawbacks that go along with the probate process. Expenses accumulate, including court costs, the executor’s fee, legal expenses, and appraisal and liquidation charges. Probate is also time-consuming. It will typically take about nine months to run its course if there are no complications, and inheritances cannot be distributed while the estate is being probated.
Privacy is lost, because probate is a public proceeding, and anyone that is interested can obtain probate records to find out how you distributed your resources. This loss of privacy is disconcerting in a general sense, and the information can potentially cause hard feelings among interested parties.
There is an alternative that is the right choice for many people called a revocable living trust. As the name would imply, you can revoke the trust at any time, so there is no loss of control of the assets that you convey into it. When you establish a revocable living trust, you can act as the trustee and the beneficiary while you are alive and fully capable of making sound decisions.
In the trust declaration, you name a trustee to administer the trust after your death, and you name beneficiaries that will receive distributions from the trust. These distributions would not be subject to the probate process, so the pitfalls we looked at previously would be avoided.
This is one type of trust that someone that is not extraordinarily wealthy could benefit from, but there are others. One of them is the income-only Medicaid trust. Many seniors seek Medicaid eligibility toward the end of their lives because Medicare will not pay for a stay in a nursing home. Medicaid will pick up the tab if you can gain eligibility, but it is a need-based program, so there is a low asset limit.
To get assets out of your own name to be able to qualify for Medicaid, you could convey resources into an irrevocable Medicaid trust. You would not be able to touch the principal, but you would be able to continue to receive distributions of the earnings from the trust until you apply for Medicaid coverage.
In addition to planning for the events that will take place after your passing, you should also consider latter life issues when you are planning your estate. Unfortunately, many elders become unable to communicate sound decisions at some point in time. To account for this, you can add a living will to state your preferences with regard to the utilization of life-sustaining measures like feeding tubes and artificial respiration.
This is an advance directive for health care, and an additional directive that should be included is a durable power of attorney for medical decision-making. You can add another durable power of attorney to name someone to handle your financial affairs in the event of your incapacitation.
Download Our Free Estate Planning Worksheet!
Now that you know a little bit about the basics, you can take the next step and download our estate planning worksheet. It is being offered free of charge at the present time, and you can visit this page to obtain access to your copy.
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