Some people think about estate planning, and they automatically flash upon a last will. You draw up a last will stating the way that you want your assets to be distributed after you pass away, and you have an estate plan in place.
Having a will and only a will may be better than nothing, but there is really more to the process of estate planning. First of all, even if a will is the best choice for you as an asset transfer vehicle, you should consider end-of-life issues.
People often become incapacitated late in their lives. There can be physical incapacitation, and there can also be mental incapacitation. Along these lines, Alzheimer’s disease is certainly attention-getting. This disease, which causes dementia, strikes about 45 percent of people who have reached the age of 85.
Once you attain senior citizen status, it is likely that you will live into your eighties, so this is a potential scenario that everyone should be concerned about.
You can prepare for possible incapacity through the creation of durable powers of attorney. When you create a durable power of attorney, you name an agent or attorney-in-fact. This person would act as your representative, and he or she would be empowered to act on your behalf in the event of your incapacitation.
You could name a health care decision maker through the execution of a durable power of attorney for health care, and you could execute a durable financial power of attorney to name a financial representative.
Your incapacity plan should also include a living will. This is a type of will that has nothing to do with monetary matters. Doctors can keep people alive indefinitely through the use of artificial life-sustaining measures in many instances, and you use a living will to state your preferences regarding the utilization of these measures.
When it comes to asset transfers, a last will is not always the best choice. Some people have estate tax exposure. A will does not provide estate tax efficiency, but there are trusts that could be utilized by high net worth individuals who are exposed to the estate tax.
Asset protection is another consideration. There are estate planning vehicles that protect assets, but a last will is not among them.
You can use a trust to protect a spendthrift heir from his or her own poor money management habits. If you use a will, there would be no spendthrift protection.
These are just a handful of examples, but there are other reasons why you may want to consider alternatives to a last will.
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