You’re here for some info on estate planning, right?
You’ve come to the right place! This is one in a series of posts that we’re publishing to help inform people about estate planning.
This piece is centered around five estate planning tips that will help give you a better feel for the process. Read on to find out more…
1) Know Your Options
A will is not your only option! Nor is it necessarily the best option for everyone. We’ve all heard about people who use pre-written documents from some website to create their last wills. This can be a huge mistake; let me explain why.
Firstly, a will is likely to create the need for “probate”– the court process by which assets are transferred from the deceased person to their descendants. Secondly, there are alternative options to consider that may be superior than a will for your situation. Thirdly, the quality of estate planning is only obvious after someone is dead.
I’ll try not to completely rehash our recent article about the dangers of DIY planning. Briefly, the need for probate creates an opening for delays, expense, and numerous headaches. Other planning processes may have an efficiency advantage over wills and probate.
As far as exploring your options is concerned, your optimal planning mechanism depends heavily on your specific situation. One common alternative to a last will is the revocable living trust.
How does a revocable living trust work? When you establish your trust, you name a trustee who administers the trust after your passing. In your trust declaration, you leave the trustee instructions on how to distribute your assets.
After you are gone, your trustee will follow your instructions and distribute the assets to your beneficiaries– outside of probate.
Avoidance of probate (efficiency) and the ability to consolidate assets are two typical benefits of a living trust, but there are other reasons why you may want to consider one.
There are many tools in our estate planning toolkit. We hope this section has given you a decent understanding of two of the most common options. Please keep in mind that the quality of a person’s estate plan is often not apparent on paper, and only becomes clear after they have passed away. Then quality is gauged in terms of headaches, heartache, and unnecessary expense.
2) You Are Not Too Young
Periodic studies have gauged the estate planning preparedness of American adults. These studies consistently find that the vast majority of people under the age of 62 do not have any estate planning documents in place.
Most people don’t die in their 30s, 40s, or 50s, but accidents happen. Estate planning becomes particularly relevant for younger people once children come into the picture. A solid estate plan should contain instructions about how your children are going to be cared for.
For example, income replacement should be a priority (think life insurance). You should also include the choice of a guardian to care for your child(ren) if something unfortunate should occur.
3) Consider Long-Term Care Costs
Many people dream about the golden years that they will enjoy after they retire. This can be one of the best periods of your life– if you have a sound retirement plan, that is. At the same time, you should consider the twilight years that will inevitably follow.
The majority of seniors will someday need living assistance. A significant percentage of these seniors will ultimately reside in nursing homes. Here in Austin, Texas– where we practice– the recent median annual charge for a private room in a nursing home was $84,680 per year according to Genworth Financial.
We can all imagine how quickly this can eat up most people’s savings, right? Even worse, Medicare does not pay for the custodial care that you would receive in a nursing home. Medicaid will eventually pick up the tab, but you’ll have to go through a process of divesting your assets in order to qualify!
This is something to take into consideration when you are planning your estate, and we can show you how to position your assets with future Medicaid eligibility in mind.
4) Plan for Incapacity
We’ve all heard about– or even have firsthand experience with– a formerly sound mind that has softened due to age or illness. Many people even become unable to make sound decisions on their own at some point in their lives. There are ways to plan for these outcomes. For example, you can include durable powers of attorney in your estate planning to name trustworthy people to act on your behalf in the event of your incapacitation. You can also add a living will which lays out your medical preferences.
5) Consult With an Austin, TX Estate Planning Attorney!
Our final tip is the most important one, at least in our opinion! If you are ready to get serious your estate planning efforts, our doors are open. Reach out to us, and let’s discuss your specific situation.
You can send us a message to request a consultation appointment, or you can give us a call at 512-258-9455.