In all too many instances, people come to us seeking damage control solutions. They find themselves in difficult situations because of estate planning mistakes that were made by loved ones. We do what we can, but it is frustrating when you know that negative outcomes could have been avoided.
With this in mind, let’s look at a few common estate planning mistakes that you should definitely avoid.
Embracing DIY Solutions
There are websites that sell template, boilerplate legal documents, including last wills. The idea is that anyone can create an estate plan using these downloads and worksheets.
In fairness, there is no law against a layperson creating a will. This being stated, arranging for the transfer of everything that you have accumulated to the people you love the most is a profound endeavor.
Ask yourself this question: do you draw up your own contract when you buy a car or a house?
The execution of legally binding documents is something that should be left to the professionals, and you do not have to take our word for it. A number of years ago, Consumer Reports study the DIY estate planning phenomenon, and they advised against it.
You may want to heed their advice.
Harboring Misconceptions About Trusts
A lot of people embrace common myths about trusts. They assume that a last will is the right estate planning document to use unless you are a multimillionaire. These folks are under the impression that trust are only useful for extremely high net worth individuals.
In fact, this is not the case at all. The idea that a last will can facilitate quick, easy, and efficient asset transfers is patently false. A will must be admitted to probate, which is a time consuming and expensive legal process. The inheritors do not receive anything while the estate is being probated by the court.
Another misconception about trusts is the idea that you surrender control of all assets that you convey into any trust. There are actually two different classes of trusts: revocable trusts, and the irrevocable variety.
If you create an irrevocable trust, you do relinquish direct ownership of the assets. This is the type of trust that wealthy people used to avoid estate taxes.
However, a revocable living trust is in another category. As the name would indicate, you can revoke this type of trust at any time and take back direct personal possession of the property. If you are the grantor of a living trust, you could act as the trustee and the beneficiary throughout your life.
You retain total control, and the successor trustee that you name in the document would be empowered to distribute assets in accordance with your wishes outside of probate. The avoidance of probate is one major advantage, but there are several others.
Failure to Prepare for Long-Term Care Costs
Perhaps the most common mistake that people make is a failure to think about how they are going to pay for long-term care. If you think that you will never need it, you should understand some basic facts of life.
According to the United States Department of Health and Human Services, seven out of 10 seniors will eventually need living assistance. About 35 percent of them will ultimately reside in nursing homes with an average stay of one year.
These facilities are extremely expensive, and Medicare does not pay for long-term care. Medicaid is the commonly embraced solution, but it is a need-based program. As such, the limit on countable assets is just $2000.
The qualifier “countable” is operative, because some things don’t count, including your home. If you take the right steps in advance, you can position your assets intelligently with future Medicaid eligibility in mind.
Schedule a Consultation!
During these uncertain times, estate planning is more important than ever. If you are going through life without a plan, now is the time to take action.
We can provide a remote consultation, so you can get the help that you need in a completely safe manner. To set the wheels in motion, send us a message through our contact page or call us at 219-865-2285.
- Key Facts About IRAs and Estate Planning - September 21, 2020
- Nursing Home Costs Can Be Devastating - September 18, 2020
- When Should You Apply for Social Security? - September 16, 2020
