When you think about creating an initial estate plan, you likely focus entirely on the need to create a roadmap for the distribution of your estate assets in the event of your death. While that certainly will always remain an important estate planning goal, you will undoubtedly include additional goals into your estate plan over time. The following subjects should be at the forefront of your mind, depending on your own unique personal situation.
People typically associate the possibility of becoming incapacitated with old age, specifically with Alzheimer’s and other age-related dementia conditions. While Alzheimer’s is a leading cause of incapacity in elderly individuals, the reality is that you could suffer a period of incapacity at any age as a result of a tragic accident or debilitating illness. If that happens, who will take over control of your assets? Who will make health care decisions for you? In the absence of an incapacity planning component in your estate plan, a judge may be forced to answer those questions – and you may not like the answers. Putting a power of attorney and health care proxy into place will allow you to appoint your own agent to act in your best interests in the event of incapacity.
Probate is the legal process that is required after the death of an individual. The primary purpose of probate is to identify, value, and eventually transfer the decedent’s assets to the intended beneficiaries and/or heirs of the estate. If the estate is required to go through formal probate, it can take months, even years, to get through the process. In addition, a lengthy probate can be costly, diminishing the value of the estate that is ultimately passed down to loved ones. Probate avoidance tools and strategies can help your estate avoid the need for formal probate. The most common tool for probate avoidance is a Revocable Trust, otherwise known as a Living Trust. By working with an attorney to establish a Revocable Trust and placing your assets in the Trust, every asset that goes into the Trust will avoid the probate process.
Planning for Parents with Minor Children or Children with Special Needs
If you are the parent of a minor child, you undoubtedly want to make sure your child is provided for if something happens to you. Your minor child, however, cannot inherit directly from your estate. Simply leaving assets for your child in your Will doesn’t ensure that your child will be well cared for in your absence. Instead, most parents establish a trust to protect their child’s inheritance until the child reaches an age where the child is more mature. As the creator of the trust, you appoint someone as the Trustee to manage and invest the trust assets while your child is a minor. That same trust can then be used to stagger disbursements once your child becomes an adult, allowing your child to learn how to manage his/her inheritance before receiving it all.
In the event there are children with special needs that will inherit, a particular trust called a Supplemental (or Special) Needs Trust would need to be established. The Supplemental Needs Trust allows the child to have the benefit of their share of the parent’s estate, but not have any risk of losing any public benefits that may be subject to assets tests, like Supplemental Security Income (SSI) or Medicaid.
Long-Term Care Planning
Long before you reach retirement age, you should start thinking about the possibility that you, or a spouse, will need long-term care (“LTC”). Specifically, you need to plan for the high cost of that care. With a nationwide average of over $100,000 per year for 2020, most people cannot afford to pay for LTC out of pocket – and Medicare will not cover LTC expenses. Medicaid can help with those expenses, but you must first qualify for Medicaid benefits. Medicaid uses both an income and an asset test that could be problematic if you failed to include Medicaid Planning in your estate plan well ahead of the time you need to qualify. An experienced estate planning attorney will be able to guide you through the process of establishing certain Trusts that can help protect your assets from Medicaid.
Reaching out to an experienced estate planning attorney is the first step in helping you accomplish your estate planning goals. The sooner the process is started, the sooner you can rest assured that you and your family are taken care of.
Timothy Doolittle primarily focuses his practice on estate planning, estate administration, elder law, and special needs planning for individuals. Mr. Doolittle is a graduate of the Wake Forest School of Law and the State University of New York at Buffalo, Honors College. Mr. Doolittle is admitted to practice in New York State and is a member of the New York State Bar Association. Contact Mr. Doolittle by emailing TDoolittle@WladisLawFirm.com.