There are those that simply do not understand why estate planning is important, so they do not take any action. Many 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 received no information from the decedent. Ultimately, after eight or nine months at minimum, the assets will be distributed under the Vermont 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 married with no descendants, your parents would inherit all of your property.
If you are very close with your financially strapped brother and you havenât spoken to your remarried father for years, this arrangement may be out of line with your intentions.
Correct Asset Transfer Methods
When a will is used to transfer assets, the people that 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 that 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 beneficiariesâ 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 Burlington, VT area last year was $134,320. 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 canât 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 trustâs 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.
Take Action Today!
We would be more than glad to help if you are ready to work with a Burlington, VT 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 802-879-713
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