There are those who simply do not understand why an estate plan is important, so they do not take any action. Others intend to create a simple will at some point in time, and they feel as though that is the only thing that is required.
They are not too concerned about dying without a will if it comes down to that because they assume that everything will take care of itself. In reality, this is a misguided point of view, and we will shed some light in this post.
Intestate Succession
It is true that the state will supervise the estate administration process if you die without a will. This is called the condition of intestacy, and the court would appoint a personal representative to complete the hands-on administrative tasks.
The administration is especially time-consuming when the personal representative receives no information from the decedent. Ultimately, after eight or nine months at a minimum, the assets will be distributed under the intestate succession laws.
Under these circumstances, the way that the assets are distributed may not be consistent with your wishes. For example, if you are unmarried with no descendants, your parents would inherit all of your property.
If you are very close with your financially strapped brother and you haven’t spoken to your remarried father for years, this arrangement may be out of line with your intentions.
Proper Asset Transfer Methods
When a will is used to transfer assets, the people who are named in it as inheritors receive lump sums all at once. There is no asset protection and there are no spending safeguards going forward.
This can be disconcerting if you will be leaving an inheritance to a loved one who is inexperienced or prone to poor financial decision-making. Plus, the will would be admitted to probate, and the long administration process would delay the distribution of the inheritances.
If you use a living trust instead of a will, you would maintain control of the assets because you would be the trustee. In the trust declaration, you would name a successor to administer the trust after your death, and your heirs would be the beneficiaries.
The trust would become irrevocable after you are gone, and the principal would be protected from the beneficiaries’ creditors. You can dictate the terms of the distributions, and you do not have to allow for distributions of lump sums all at once.
Probate is not a factor when a living trust is used, and this is another positive.
A living trust is the ideal asset transfer vehicle for a wide range of people, but there are other possibilities. You can use a particular type of trust to respond to certain circumstances.
Leaving an inheritance to a person with a disability that relies on Medicaid and Supplemental Security Income is one of these scenarios. A direct windfall could cause a loss of eligibility for these need-based benefits.
You could preserve benefit eligibility if you make the person in question the beneficiary of a supplemental needs trust. The assets can be used to make the beneficiary more comfortable in many ways, and there would be no loss of benefits.
Nursing Home Asset Protection
A well-constructed estate plan will address potential nursing home costs that could consume a large part of your legacy. Medicare does not pay for the custodial care that these facilities provide, and 35 percent of seniors will reside in nursing homes.
The median annual cost for a private room in a nursing home in the Hilton Head, SC area this year is $123,312. A year is the average length of stay, but more than half of people that require paid care receive the assistance for more than a year.
Medicaid will pay for long-term care, but you can’t qualify if you have significant assets in your name. In an effort to gain eligibility in the future, you could convey income-producing assets into an irrevocable trust.
You would be able to receive distributions of the trust’s earnings before you enter a nursing home, but you would not have access to the principal. If you fund the trust at least five years before you seek Medicaid eligibility, assets in the trust would not count.
Incapacity Planning
People typically think of estate planning as confined to events that will happen after your death, but this is an incomplete picture. A properly constructed estate plan will also address eventualities that you may face toward the end of your life.
According to the Alzheimer’s Association, over 30 percent of the oldest old have contracted the disease. This is just one source of cognitive impairment, and there are other types of ailments that can render someone and able to communicate their own decisions.
If you do nothing to prepare for this eventuality, the state can be petition to appoint a guardian to act on your behalf, and you would become a ward of the state. This is a necessary remedy, but most people would like to choose their own decision-makers.
You can do this in advance if you include in incapacity component in your broader estate. Durable powers of attorney remain in effect even if you become incapacitated, so you can create a durable power of attorney for financial decisions along with a durable medical power of attorney.
A living will should be added to assert your life-support preferences, and you can add organ and tissue donation and comfort care medication choices. Finally, your incapacity plan should include a HIPAA release. This will give your healthcare agent a legal right to access your medical records.
Attend a Free Seminar!
We conduct seminars on ongoing basis that cover important topics like this one. You will walk away with a great deal of useful knowledge if you join us, and you will make an initial connection with our firm to break the ice.
There is no charge to attend our events, and you can learn more if you head over to our estate planning events page.
Take Action Today!
We would be more than glad to help if you are ready to work with a Bluffton, SC estate planning lawyer to put a custom crafted plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 843-815-8580.
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