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You know the one thing that nobody in this world can do- Predict what’s gonna happen tomorrow to you and your family.
As humans, we don’t like to think about anything bad happening to us. We wanna live forever even after knowing that the only certainty in life is death.
Estate planning is something you should not be delaying, no matter if you have $100 or $10 Million to your name.
Estate planning is as important as your health insurance or life insurance because it can save your children and upcoming generations from fighting in the courts for the assets that you’ve built over the years.
A lot of people delay it because they think it is only for the elderly, which is a huge misconception. Keeping in mind today’s scenario, you always need to be prepared for the unexpected irrespective of age.
Also, estate planning isn’t only about planning for death. It also helps you immensely in case of disability and incapacity. (more on that in later parts of the article)
Now, since the topic is related to law and this field requires some expertise, we’ll be taking the help of an estate planning attorney, Blake Harris, to tell you what estate planning is and what are the five essential estate planning tips.
What is Estate Planning
Estate planning is essentially planning for the unexpected, not just death but also incapacitation or disability.
Estate planning is the process of ensuring that your wishes regarding the management and distribution of your assets are honored if something bad happens.
It also ensures that decisions related to your healthcare, in case you can’t make them for yourself, are only made by people you love and trust.
Good estate planning will not only allow you to assure proper management of your assets but also help your future generation minimize estate taxes, which might prove a huge burden otherwise.
But, what happens if you die without an estate plan? Well, in that case, the state’s intestacy laws kick in, and they determine what happens with your assets, bank accounts, and even minor’s guardianship.
Intestacy laws are the last thing your descendants would want because they can result in long-lasting court battles and your assets potentially being given to the wrong people.
If you become incapacitated without an estate plan, then the court might have to appoint a conservator or guardian, which can be emotionally draining and financially expensive.
So, by all means, it’s in your best interest to go for estate planning as soon as possible.
5 Estate Planning Tips You Must Know
Here are the five estate planning tips that everyone should know before going about creating an estate plan.
1. Do Not Leave Money to Your Children
Do not leave money to your children. Sounds counterintuitive, right? But there are reasons behind why you should not do it.
First, your children can easily lose it. They could get sued, they could cause a car accident, they could go through a divorce, and a plethora of things can go wrong.
What you should do instead is leave the money to a trust. A trust will never lose your money, no matter what. However, it’ll keep it protected for your children, grandchildren, and generations to come.
A trust can be defined as a tool of estate planning where you use a third party, a trust, to hold, manage and distribute your assets according to your will to the beneficiaries (heirs).
There are several benefits of having a trust. For example, a trust can keep your heirs safe from probate, it can’t usually be challenged in a court, and it is activated the moment your sign it, even when you’re alive.
However, a trust can’t name guardianship of a minor child. So for that, you might need something called a Will, which is another estate planning tool.
You can have both a trust and a will together at the same time. The only difference is that your Will only comes into effect after your death.
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2. Plan For Your Incapacity
The majority of us will be incapacitated at some point. In fact, you’re ten times more likely to be incapacitated next year than you are to pass away.
That is why if you’re only planning for death, that might not be enough. You need to plan for incapacitation and disability.
By having a properly drafted medical and financial power of attorney, you can make sure that only the individuals you have selected make a medical or financial decision for you in the event of your incapacity.
In estate planning, power of attorney is another tool you can use to give a person of your choice or an agent the power to act on your behalf and make decisions for you when you can’t make them yourself.
The person given the power of attorney can make decisions regarding your property, finances, healthcare, etc., depending on the power you’ve given them.
3. Plan For Your Long-Term Care
The majority of Americans will end up on long-term care, and do you wanna guess what the average cost for a one-month stay in a nursing home is?
Well, it might come to your surprise that it usually runs between $5000-$10000 per month. Also, according to some projections, the cost of a semi-private room in a nursing home will surpass $10000 per month by 2030.
And if you’re thinking that you’ve health insurance or Medicare, then know that long-term care is not covered by any of them.
Many families will see their estate dwindle and others will see their estate completely wiped out because of the cost of long-term care.
That is why it’s essential to plan for long-term care while estate planning. By working with a professional estate planning attorney, you can reduce or eliminate the cost of your long-term care using tools like long-term care insurance.
4. Plan For The Possibility of Having a Disabled Family Member
This is becoming more and more common nowadays, with clients coming to Blake with children and grandchildren having some kind of disability.
Even if you don’t have any such cases in your family right now, it is essential that you plan for such unexpected things in advance.
When creating your revocable trust, it is imperative that you have a standby special needs trust. Your estate planner will help you with that. Blake likes to include it in almost every revocable trust plan that he creates for his client.
If you ever have a child or a grandchild that is either disabled or become disabled, the special needs trust is going to make all the difference in the world between the child being able to continue with their current standard of living or having to spin down their entire inheritance down to around two thousand dollars and then live off government benefits their entire life.
The special needs trust will allow them to enjoy those funds, but the government is not going to see that as an eligible resource which they have to use up in order to continue to receive government funds.
5. Work With a Professional
Nowadays, there are a variety of online and do-it-yourself resources available for individuals looking to create an estate plan.
However, there have been hundreds of instances with families that Blake knows where they had to spend thousands or tens of thousands of dollars cleaning up a mess that could have easily been avoided had the family just sought the proper guidance.
When it comes to creating an estate plan it’s well worth the time and money it takes to meet with a professional who can guide you through the process to make sure there’s a smooth transition of assets for your family after you pass away.
You would never want your family after you to suffer because some documents are not right. So make sure you do everything professionally.