Estate planning can seem like a complicated matter, and there are intricacies and some complicated devices. This being stated, there are some basic tips that you can digest to gain a fundamental understanding of the process, and we will provide three of them here.
Don’t assume a will is the appropriate asset transfer device.
A lot of people think that a will is the only estate planning document you should ever consider using unless you are extremely wealthy. In reality, there are multiple different types of trusts that can be far superior to a simple will when certain circumstances exist.
When inheritances are distributed through the terms of a will, the heirs receive lump sums all at once. This can be less than ideal if you are going to be leaving a bequest to someone that is not good with money.
The probate court provides supervision when a will is utilized, and probate is a time-consuming process. No inheritances are distributed while this procedure is underway, and the expenses that are incurred reduce the value of the estate before it is transferred to the inheritors.
If you use a living trust as your primary asset transfer vehicle, you could include a spendthrift provision. The trust would become irrevocable after your death, and creditors of the beneficiaries would not be able to reach the principal.
When you draw up the trust agreement, you can instruct the trustee to distribute a certain amount each month, or you can stipulate some other incremental distribution arrangement.
The administration of a living trust is not subject to probate, so this hurdle is removed from the equation. This is just one of the many different trusts that can be used to satisfy different respective objectives. You should understand your options so you can make informed choices.
Put a plan in place as soon as people are relying on you.
Estate planning is not something that is only important for elderly individuals. As soon as you have a partner and/or children that are relying on you, estate planning is absolutely essential.
An estate plan for a young family can revolve around the utilization of a living trust because there would be an adult trustee designated to manage assets on behalf of a child. Another option is a testamentary trust that is embedded within a simple will.
There are custodial accounts for children, and this is an additional possibility. Your estate plan should definitely designate a guardian in a will, and you can use life insurance as an income replacement vehicle.
End-of-life planning should be addressed as well. You can state your life support preferences in a living will, and a durable power of attorney can be added to name an agent to make medical decisions on your behalf. These would be choices that are not related to life-support utilization.
Brace yourself for long-term care costs.
No one wants to face six-figure bills at any time, but it can be especially devastating after you have been retired for many years. Unfortunately, this could be in your future if you do not take any steps in advance to prepare for long-term care costs.
The majority of senior citizens will need some type of paid care, and 35 percent of seniors will require nursing home care per se. Medicare does not pay for custodial care, so this is not the solution.
Medicaid will cover long-term care, but there is a $1600 asset limit here in Connecticut. You could convey assets into an irrevocable, income only Medicaid trust to gain eligibility to cover your long-term care costs.
Advance planning is the key to the successful execution of the strategy. The trust must be funded at least 60 months before you submit your application for Medicaid coverage.
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Today is the day for action if you have been going through life without an estate plan, and we can help you update your existing plan if revisions are necessary.
You can schedule a consultation at our estate planning office in Glastonbury or Westport, Connecticut if you call us at 860-548-1000.
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