People often make estate planning mistakes that yield negative consequences after they are gone. It is frustrating when you hear about these situations, because the errors could have been easily avoided. With this in mind, let’s look at some of the wrong turns that you should avoid.
DIY Estate Planning
There are websites that produce boilerplate, fill in the blanks legal documents including last wills and trusts. They make it sound like it is easy for anyone to plan their own estate using the worksheets and downloads that they have for sale.
On the surface, this can seem like a reasonably good way to go, but there are problems with DIY estate planning. Objective legal experts have found flaws, and a layperson would not have a thorough understanding of why you may want to use a certain type of trust instead of a will.
If you are selling your home or business, you are probably not going to download some generic documents off the Internet and hope for the best. When there is a lot at stake, you don’t hesitate to seek the appropriate legal assistance, in this certainly applies to the process of estate planning.
Harboring Misconceptions About Trusts
A lot of folks never consider using trusts because of some myths that circulate. One of them is the idea that you lose all control of assets that you convey into a trust. The other misconception is the notion that trusts are only useful for extremely wealthy people.
The trust that is the most widely used is the revocable living trust, and you maintain complete control of assets that you sign over to this type of trust. You would act as the trustee while you are living, and as the name would indicate, you can revoke the trust at any time.
When you have a living trust, the trustee that you name to succeed you would be able to distribute assets in accordance with your wishes outside of probate. This is a legal process that would be required if you use a will to state your final wishes unless it is a small estate.
You can provide spendthrift protections and allow for limited distributions over time when you have a living trust. The assets are consolidated, and this simplifies the administration process for the trustee.
A living trust is just one of many different possibilities. The right choice will depend upon the circumstances, and this is another reason why you should think twice before you decide to plan your own estate.
Failure to Address Long-Term Care Costs
Most people qualify for Medicare as a source of health insurance when they reach the age of 65. It would be logical to assume that Medicare will pay for living assistance since the majority of seniors will eventually need, but this is not the case.
Assisted living communities, in-home health aides, and nursing homes are very expensive. Here in the Rochester area, the typically cost for a year in a nursing home is over $170,000.
If you require in-home care or assisted living for a period of time, and you ultimate move into a nursing home, it could be financially devastating.
There is a solution in the form of Medicaid. This program will pay for custodial care, but since it is need-based, you cannot qualify if you have significant assets in your own name.
You can establish a special Medicaid trust with future eligibility in mind; this type of trust can allow you to retain control of your assets, and still financially benefit from your assets, but your assets are not counted in determining your eligibility for Medicaid. For best results, the trust should be funded well before you will need care.
Access Our Free Worksheet
We have developed an estate planning worksheet that you can use to gain a more thorough understanding of the process. It is free, and you can get your copy if you head over to our worksheet access page.
Need Help Now?
Action is required if you are going through life without an estate plan, and the DIY route is risky at best. If you are ready to get started, you can send us a message to request a consultation appointment, and we can be reached by phone at 585-374-5210.