You can sometimes learn from mistakes that are made by others. With this in mind, we will look at some of the common estate planning errors that are made so you can steer clear of them.
Failure to Consider Long-Term Care Costs
When you have been fully capable all of your life, it can be hard to envision a time when you will need help with your activities of daily living. This is understandable, but if you visit the LongTermCare.gov website, you will see that 70 percent of seniors will need living assistance.
You can expect to pay over a hundred thousand dollars for a year in a nursing home in our area, and 12 months is the average length of stay. The median cost for a home health aide in 2019 was just under $63,000 a year.
Medicare does not pay for this type of care, so the expenses could put a major dent in your legacy, and they can be doubled if you are married.
Medi-Cal does pay for custodial care, but you can’t qualify if you have significant assets in your own name. It is possible to establish a Medi-Cal trust to create the right financial profile, but you have to act in advance, because there is a 30-month look back period in California.
Failure to Update Your Plan
Statistics show that most adults do not have estate plans in place, and this includes individuals that are 50 years of age and older. Since so many people procrastinate, once they finally take action, they often tuck away the documents somewhere and forget about the matter.
Invariably, life changes can call for estate plan updates. Many of the procrastinators that finally take action allow inertia to set in once again when they know that they should make revisions.
Unfortunately, some of these people never get around to it until it’s too late. This is a mistake that you should certainly avoid.
Estate planning should be viewed as an ongoing process from the outset. You should understand the fact that revisions or adjustments will probably be needed over the years and act accordingly.
Settling for a Simple DIY Will
The websites that sell boilerplate, fill in the blanks legal documents contend that anyone can plan their own estate using generic worksheets and downloads. In fairness, a layperson can execute a legally binding simple will, but this is usually not going to be the best choice.
A will must be admitted to probate, which is a time-consuming and expensive legal process. Probate records are available to the general public, so there is also a loss of privacy.
Generally speaking, transfers through the terms of a will would be distributed in lump sums all at once, and many people would prefer to attach some strings.
If you use a living trust instead of a will as the centerpiece of your estate plan, the trustee that you name in the document would be able to distribute assets outside of probate.
You would dictate the nature of the distributions when you establish the trust declaration. If you want to allow for limited distributions over time, you have that ability. It is also possible to protect the principal from the beneficiary’s creditors.
In addition to the revocable living trust, there are other types of trusts that can be used to satisfy specific objectives. There are many tools in the estate planning tool kit, and there is no reason to settle for an approach that is less than ideal.
Attend a Free Webinar!
We are conducting webinars on an ongoing basis to provide educational opportunities to members of our community. There is no charge to attend these sessions, and you don’t have to leave your home to join us, so this is a great way to invest a little bit of your spare time.
Though there is no admission charge, we ask that you register in advance so we can reserve your spot. You can see the schedule and obtain registration information if you head over to our estate planning webinar page.