When you do not know where to begin, estate planning can seem like an intimidating subject. This is understandable, because you are stepping into the great unknown as a layperson with a limited understanding of the process.
In this post, we will provide some tips that will help you understand how to take the right steps to protect your loved ones.
Don’t fall into a cycle of procrastination.
You may put estate planning on the back burner because you simply do not know where to begin, and you think you will have time to do it later on. If you fit this description, you are not alone according to a recent survey that was conducted by Caring.com.
They found that 22.5 percent of people between the ages of 35 and 54 had wills or trusts. Surprisingly, individuals that were in the 18 to 34 group were a bit more prepared with 26.8 percent of respondents stating that they had plans in place.
On the surface, you may say this is understandable because people in these age groups do not usually pass away. While this is true, you never know what the future holds, and we hear about younger people dying unexpectedly every day.
Plus, there is the responsibility factor. Relatively young adults are the parents of minor children who are relying on them for everything. As soon as you have a partner and someone is counting on you, estate planning is a must, and the stakes get higher when you have children.
You can designate a guardian to care for the children if it becomes necessary in a will, and you can use a testamentary trust, a living trust, or a custodial account to provide financial support. Even if you do not have significant resources, you can take out life insurance policies.
Your estate plan should include documents that address potential end-of-life issues. With a living will, you can state your life support choices, and you can name an agent to make medical decisions on your behalf in a durable power of attorney for health care.
Don’t assume a simple will is the best asset transfer vehicle.
There are many different ways to facilitate asset transfers, and a will is not the best choice in many if not most cases. When you use a will, you have no way to account for reckless spending, because the inheritances will be distributed in lump sums.
A will is admitted to probate, which is a legal process that takes place under the supervision of a court. It is time consuming, and no inheritances are distributed while the estate is being probated. In addition to this negative, probate expenses will consume a noticeable portion of the estate.
On the other hand, if you utilize a living trust, the assets would be distributed to the beneficiaries outside of probate. You could include a spendthrift provision that would protect the principal from creditors, and you would have latitude with regard to the nature of the distributions.
If you choose to do so, you could instruct the trustee to provide relatively modest distributions on an incremental basis to prolong the viability of the trust. A living trust is one possibility, but there are other tools in the toolkit, so you should understand all the possibilities.
Prepare for long-term care costs.
The majority of senior citizens will need some type of long-term care, and just over 50 percent will require paid living assistance. Custodial care is expensive, and Medicare does not cover it, so you have to look elsewhere for financial support.
Medicaid is the widely embraced solution, but you can’t qualify if you have more than $2000 in countable assets. You could convey resources into a Medicaid trust to develop a financial profile that will lead to future eligibility.
The “future” part is key, because you have to fund the trust at least five years before you apply for Medicaid coverage.
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If you have been thinking about working with an Essex Junction, VT estate planning lawyer to put a plan in place, there is no time like the present.