One of the major estate planning mistakes that people make is the failure to recognize the fact that this is an ongoing process.
When you execute your initial estate plan, you are working with circumstances that are inevitably going to change if you act when you are relatively young. You should be prepared to make revisions as time goes on because they will probably become necessary.
All responsible adults should have estate plans in place, and an estate plan for most younger single people will be relatively simple. You should have an asset transfer vehicle like a will or a living trust, and you should address possible incapacity.
A living will is a document that is used to state your life-support preferences, and you should add a durable power of attorney for health care. The power of attorney will empower an agent that you choose to make medical decisions on your behalf that are not related to life-support.
If and when you get married, someone else will be relying on you, so estate planning becomes that much more important. You and your spouse could potentially create a joint living trust, and you could alternately create your own separate estate plans.
This is something that you should discuss in advance so you are both on the same page going forward.
Another dimension is added if you have children. You have to name a guardian in a simple will, and you should make sure that you carry enough life insurance.
When you have a living trust, you would act as the trustee while you are living, and you and your spouse would be would be co-trustees if you have a shared living trust. You would name a successor trustee to administer the trust after your death.
The successor would be able to manage assets on behalf of a minor beneficiary, and this would include life insurance proceeds. Another option is the utilization of a testamentary trust, which is a trust that is contained within a will.
As your family gets bigger, you will need to adjust the plan to include the newcomers. Another consideration is the potential loss of someone that may have been named as the trustee or executor.
You should take steps to preserve your legacy along the way as your situation changes and your priorities shift. Long-term care costs are a looming threat, because most seniors will need paid living assistance, and Medicare does not cover custodial care.
These expenses can be considerable, and a married couple could face two different sets of nursing home bills.
Medicaid is a federal government health insurance program that will cover long-term care. You are probably aware of the fact that it is a need-based program, so you can’t qualify if you have significant assets in your name.
You could convey resources into an irrevocable, income only Medicaid trust with future eligibility in mind. As the name would suggest, you can receive income from the trust’s earnings, but you would not have access to the principal.
The forfeiture of incidents of ownership is a good thing because the principal would not count if you apply for Medicaid, as long as you fund the trust at least five years before you seek eligibility.
The federal estate tax can also enter the picture for high net worth individuals. It carries a 40 percent top rate, and it is applicable on the portion of an estate that exceeds the exclusion.
It is $11.7 million in 2021, but the exclusion is going down to $5.49 million in 2026. There are steps that you can take to mitigate your exposure if your estate is exposed to this tax.
Schedule a Consultation Today!
Today is the day for action if it is time to revise your estate plan, and we can help you put an initial plan in place if you are ready to get started.
You can schedule a consultation at our Bluffton, South Carolina estate planning office if you call us at 843-815-8580, and you can use our contact form if you would rather send us a message.
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