People often make estate planning errors that yield negative consequences. In this post, we are going to look at three of these common mistakes in an effort to raise awareness.
Do-It-Yourself Estate Planning
The websites that sell generic, boilerplate legal documents contend that you can plan your own estate using their worksheets and downloads. This can seem like a simple, affordable solution, but there are reasons why you may want to consider before you go this route.
There are various different ways to facilitate asset transfers, and a simple will is not always the best choice. As a layperson, do you know why you may want to use some type of trust instead?
You should explore all your options before you make a decision that is this important, but you don’t have to take our word for it.
A number of years ago, Consumer Reports conducted a study to determine whether they could recommend do-it-yourself estate planning documents to their readers.
They used downloads that they obtained from three of the leading legal document providers to create wills, and they engaged three prominent legal professionals to examine the documents.
The educators found flaws, and when they considered all the feedback that was provided, Consumer Reports advised their readers to steer clear of DIY estate planning notions.
At the end of the day, it’s a matter of common sense. When you are dealing with legal matters, you are taking an unnecessary risk if you try to go it alone without any professional advice.
Ignoring Potential Long-Term Care Costs
Most senior citizens will need some type of living assistance, and just over one third of elders will reside in nursing homes. You can expect to pay more than $150,000 for a year in a private room in a nursing home in our area, and the average length of stay is 12 months.
A married couple may face two different sets of nursing home bills, so the impact can be significant. Medicare does not pay for nursing home care or in-home custodial care that is provided by a professional health aide, so this is not the solution.
Medicaid covers nursing home care, but you cannot qualify if you have significant assets in your own name. However, you could fund an irrevocable income-only Medicaid trust to develop the appropriate financial profile.
Advance planning is key, because you have to divest yourself of direct personal possession of the assets at least five years before you apply for Medicaid. If you violate this rule, your eligibility is delayed.
The duration of the penalty would be tied to the amount that you gave away compared to the cost of nursing home care in Connecticut. For example, if you gave away enough to pay for two years in a nursing home, your eligibility would be delayed by two years.
Failure to Consider Estate Administration Details
Estate planning can seem like an exercise in document creation, but someone has to follow the instructions to bring your wishes to fruition. This is the process of estate administration, and you should understand the implications when you are making decisions.
If you use a will as the centerpiece of your estate plan, you name an executor to act as the administrator. After your passing, the will would be admitted to probate, which is a time consuming legal process.
No inheritances are distributed while the estate is being probated by the court, and probate expenses reduce the value of the estate. There is also loss of privacy, because probate records can be accessed by the general public.
The revocable living trust is a very effective estate planning device that you should consider as an alternative. You would act as the trustee while you are living, so you would maintain complete control of the assets.
In the trust declaration, you name a trustee to succeed you after your passing, and your heirs would be the beneficiaries. When the time comes, the trustee would follow your instructions and distribute assets to the beneficiaries, and the probate court would not be involved.
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We are here to help if you are ready to work with a licensed attorney to develop an estate plan that is ideal for you and your family. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.