Far too many people procrastinate when it comes to estate planning, and there are many reasons for this phenomenon. One of them is the idea that you always have time to take care of it later on, and it is really not that complicated. You just state your wishes in writing in a will, and that’s the long and short of it.
In reality, this is a gross oversimplification. When you plan your estate, you are arranging for the distribution of everything that you have accumulated throughout your life to the people that you love the most. This is a heady endeavor, and it should be undertaken with care and prudence.
Let’s look at five important factors that you should consider when you are devising your estate plan.
Asset Transfer Options
A last will is really not the best asset transfer vehicle for most people that have relatively significant resources to pass along. One of the reasons why a will can be a bad choice is because of the drawbacks of probate. In California, if an estate is worth more than $166,250, the full probate process would be necessary if a will is utilized.
Simply put, probate is costly and expensive, and it is a public proceeding. Anyone that is interested in the details can access probate records to find out how you decided to distribute your resources.
There are other options, and the ideal choice will depend upon the circumstances. This is why personalized attention is key, and this is what you receive if you decide to engage our firm.
If you have someone on your inheritance list that is not good with money, you may have concerns. What happens if they burn through their inheritance too quickly and they have no one to turn to for assistance? There are steps that you can take to protect a loved one that displays spendthrift tendencies.
One option would be to establish a revocable living trust with a spendthrift provision and make this individual the beneficiary. After you are gone, it would become irrevocable, and the trustee that you empower would administer the trust in accordance with your wishes. The beneficiary would have no direct control.
You could instruct the trustee to distribute limited assets incrementally to prolong the viability of the trust. The beneficiary’s creditors would “step into their shoes” in a legal sense. Since the beneficiary would not be able to touch the principal, they would be out of the reach of the creditors as well.
Aside from the spendthrift protections, there are other ways that you can exercise control even after your passing. With an incentive trust, you can instruct the trustee to distribute assets to the beneficiary with certain stipulations attached.
For example, you could allow for ongoing distributions as long as a young beneficiary stays in college, with a dollar-for-dollar earnings match after graduation. You can essentially include any type of stipulations as long as you are not requiring the beneficiary to do something that is illegal.
Long-Term Care Costs
When you are making projections about your financial future, you should consider the potential impact of long-term care expenses. About 35 percent of elders will eventually reside in nursing homes, and the average cost in our area is well over $100,000 per year.
This can come on the heels of an extended stay in a pricey long-term care facility, so the overall expenses can be significant. The costs can be doubled for married couples, and you can expect no help from Medicare, because this program does not pay for custodial care.
Medi-Cal is another government run health insurance program that does pay for living assistance. With the proper planning, it is possible to position your assets with future Medi-Cal eligibility in mind.
End-of-life issues should be addressed when you are planning your estate, because a significant percentage of elders become unable to make sound decisions eventually. If you have a living trust, you can name a disability trustee to act as the administrator if it ever becomes necessary.
To account for assets outside of the trust, you can execute a durable power of attorney for property. A durable power of attorney for health care can be added to name someone to make medical decisions on your behalf. You should also have a living will to state your life-support preferences.
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We are here to help if you would like to connect with a licensed estate planning attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 310-337-7696.
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