Everyone makes mistakes, right? Unfortunately, some mistakes have larger consequences than others. This article lays out three common mistakes we have fixed for new clients, and how you can avoid making them:
1) DIY Danger!
We’ve all heard of DIY legal websites. Maybe you’ve even used one yourself. There are numerous websites that claim to have “do-it-yourself” legal documents, including wills and trusts. They want you to believe that anyone can plan their own estate using these boilerplate notions.
“Simple solutions” may sound great at first, but anyone who has tried to DIY a complex project knows how easy it is to get into a sticky situation. Yet, many people buy into the sales pitches without seeing the potential consequences.
We understand if you take our thoughts on the subject with a grain of salt– we’re estate planning attorneys, after all. This is our business! We create and execute these documents for clients on a daily basis. A cynic might say “well, of course an attorney would advise against DIY legal documents.”
You don’t have to take our word for it. Consumer Reports conducted an objective study some years ago. Staff members obtained last will templates from three of the most popular legal document websites, then they created wills using common hypothetical circumstances.
CR enlisted three prominent professors to examine the documents and provide feedback. The educators stated that they found flaws, and they could see how unintended consequences could come about when DIY are used by inexperienced people. After evaluating the feedback, Consumer Reports advised clients to stay away from DIY estate planning unless the situation is extremely simple and straightforward.
Also consider this: no one knows the quality of estate planning until the person who had the will or trust is dead. This means that you– and your family– are unlikely to catch any major problems until it’s too late to fix them.
There is a lot of misinformation about trusts floating around. Many of our clients start off with the belief that trusts are complicated, extremely expensive to create, and only useful for the ultra-wealthy.
The reality is that different types of trusts can be tailored to satisfy the goals of most clients. They also don’t have to be especially complicated. The choice is up to you, as the client. For example, a revocable living trust can be the estate planning anchor for a wide range of people.
So how does this work? Let’s start with the general structure of a trust. A trust consists of three parts: 1) trustor, 2) trustee, and 3) beneficiaries. As the creator of the trust, you are the trustor by default. Initially you’ll also act as the trustee. This means that you retain the right of revocation. You also retain complete control of all the assets in the trust, and you can even change the trust’s terms as you see fit at any time. You can also name a backup trustee to succeed you after your passing in the “trust declaration.”
In this simplified structure, your heirs would be the beneficiaries. When the time comes, the assets would be distributed in accordance with your wishes… and no probate is necessary (assuming all assets have been properly placed into the trust!).
Probate is both costly and time-consuming, and will become relevant to your family if you use a will to govern your final wishes. The avoidance of probate is one major positive of a trust over a will, but there are other advantages as well.
A living trust is just one option among several pathways in estate planning. It’s best to explore all the possibilities in light of your unique personal situation before you make any choices.
3) Long-Term Care Costs
Another major factor is the expense of long-term nursing care. It’s not uncommon for this cost to consume someone’s entire financial legacy. Medicare does not pay for long-term care, and nursing facilities are extremely expensive.
Medicaid will cover the custodial care that nursing homes provide, but this comes with a huge caveat– you can’t qualify if you possess too many assets. One potential solution, however, is to convey assets into an income producing Medicaid trust. This is a step in developing the right financial profile for you, and we’re happy to help you take this step.
We Are Here to Help!
Seize control of your future today! If you are going through life without a plan– specifically, an estate plan– then we can give you a hand. Call us at 512-258-9455, or fill out our contact form if you would prefer to send us a message instead.