A lot of people think estate planning equals the creation of a will, and that’s the long and short of it. Why would you need anything else when a simple will can be used to express the way that you want the slices of your pie to be distributed after you are gone?
This logic may make sense to someone that is not in the estate planning field, but in reality, there is a lot more to think about. In fact, you may be surprised to hear that a will is not the best asset transfer vehicle to use in many cases.
Simple Will Alternatives
If you are going to utilize a simple will as the centerpiece of your estate plan, you name an executor when you are drawing up document. This is the estate administrator, and your loved ones that are going to receive inheritances would be the beneficiaries.
The executor would be required to admit the will to probate after your death. This is a legal process, and there is a proving of the will when probate is underway. The court will examine the document to determine its validity, and will contests can be presented.
Creditors are notified your death, and they are given time to make claims. The executor of the estate will open an estate bank account, and final debts will be paid, including taxes.
When the estate has been probated, the assets will be distributed to the beneficiaries in lump sums. There will be no asset protection or spending safeguards when the estate has been closed.
This can be disconcerting if you are leaving money to people that are not ready to handle it, and there is also a waiting game. It will take about eight months at minimum, and no inheritances are distributed while the estate is bogged down in probate.
If the drawbacks are not very appealing, you can use a revocable living trust as an alternative. You would be the trustee, so you would not lose control of the assets. In the trust declaration, you name a successor trustee, and once again, your heirs would be the beneficiaries.
A spendthrift clause can be included, and the trust will become irrevocable after your passing. Creditors of the beneficiaries would not be able to reach the principal, and you can dictate the distribution terms.
For example, you can instruct the trustee to add a portion of the principal to the trust’s earnings to provide a certain dollar amount each month for a number of years. Ultimately, you could allow for lump sum distributions of the principal when the beneficiaries reach a certain age.
This is just one possibility, but you would have the power to decide on the distribution terms that you are comfortable with when you are establishing the trust.
Another major benefit is the avoidance of probate. After you are gone, the trustee would distribute assets to the beneficiaries in accordance with your wishes outside of probate. There would be no court involvement, so the drawbacks that we looked at would never enter the picture.
The living trust is the will alternative that is right for most people, but there are other possibilities. When you work with our firm, we will gain an understanding of your situation and your objectives and explain your options so you can make informed decisions.
There is an element that many people overlook, but it is very important. Your life expectancy is into your mid-to-late 80s once you reach the age of 67. Unfortunately, over 30 percent of people that are 85 years of age and older contract Alzheimer’s disease.
This is not the only cause of cognitive impairment, and some people become incapacitated due to medical conditions that are not cognitive in nature. If you do nothing to prepare for this possibility, you could become a ward of the state.
You can and should take the matter into your own hands in advance. Your incapacity plan will include advance directives for health care, and one of them is a living will. This device is used to state your life support utilization preferences.
To address medical scenarios that are not related to life-support, you can name a decision-maker in a durable power of attorney for health care. A HIPAA release should be included to give your health care agent the legal right to access your medical records.
A durable power of attorney for property should be added to name a financial representative. If you have a living trust, you can name a disability trustee to administer the trust in the event of your incapacity.
We Are Here to Help!
If you are ready to work with a Glastonbury, CT estate planning attorney to put a custom crafted plan in place, you can call us at 860-548-1000 to schedule a consultation appointment. There is also a contact form on this site you can use to send us a message.