A lot of people think that an estate plan is a simple will, and that’s the end of the story. In fact, this is a gross oversimplification. When you create a will, there are some other documents that should go along with it. Additionally, in many (if not most) cases, a will is really not the best asset transfer choice.
Your estate plan should anticipate eventualities that may befall you toward the end of your life. Incapacity is quite common among elders, and if you do nothing to prepare in advance, the state could appoint a guardian to manage your affairs.
The individual who is chosen may not be someone who you would have selected yourself, and everyone in the family may not be on the same page. This can cause acrimony and ongoing hard feelings during a time when family members should be coming together in support of one another.
To account for the possible incapacity, you should execute a living will to state your preferences with regard to the use of life-sustaining measures. You would add a durable power of attorney for health care to empower someone to act as a representative for medical decision-making. These would be scenarios that are not covered in the living will.
Another durable power of attorney should be included to account for financial decision-making. The same person can act as the agent for medical and financial matters, but this is not required.
A Living Trust May Be Preferable
Many people find a living trust is actually a much better choice than a simple will as an estate plan centerpiece. When you establish this type of trust, you still have complete access to the resources that you convey into it. You would act as the trustee and the beneficiary throughout your life.
Getting back to the subject of incapacity planning, you could name a disability trustee to administer the trust if it ever becomes necessary. This person could be the trustee who will succeed you after your passing, but you have the freedom to name another individual or professional fiduciary.
One of the major benefits that you gain if you use a living trust is the avoidance of probate. Probate is an expensive and costly legal process that would create hassles for your loved ones after your passing.
With a living trust, you do not have to provide lump-sum inheritances. If you choose to do so, you can arrange for the trustee to distribute limited assets over an extended period of time. Plus, you can protect the principal from the beneficiary’s creditors.
The estate administration process is streamlined because the trust would be the owner of all or most of the assets. To account for resources that may still be in your direct personal possession, you can include a pour-over will that would allow the trust to absorb these assets.
Other Types of Trusts
In addition to the revocable living trust, there are various other types of trusts that can satisfy different respective aims. For example, you could put assets into a trust to make a loved one with a disability more comfortable without jeopardizing Medicaid eligibility.
There are trusts that can protect assets, and you could use a trust to protect inheritances that you want to set aside for your children if you are getting remarried. These are a handful of the situations that can call for the use of a trust, and there are others.
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We are conducting a number of workshops over the coming weeks, and can learn a great deal if you join us for one of these sessions. There is no charge, but we do ask that you register in advance so we can reserve your spot.
You can see the dates if you head over to our workshop schedule page. When you identify the session that works for you, follow the simple instructions to register.