Building Your Estate Plan: Wills And Living Trusts
If you have a family, you have a reason.
Everyone has an estate. You have spent a lifetime building your estate, which includes your home, the money saved and other kinds of property you own. It makes sense to protect what you have worked toward for so long – including protecting it for your loved ones after you die.
Estate planning, therefore, is how you prepare for the future of your family and your assets. It also includes planning for a variety of challenges during your lifetime, including medical care and property protection during incapacitation. At Linda Bal & Associates, we will guide you through the estate planning process and address unique matters such as long-term care, inheritance in a blended family, how a loved one uses inheritance and more.
Depending on your needs, you might only need the basics: a will and powers of attorney for health care and finances. For complex needs, you may also need a living trust or other documents.
Estate planning is not just for the elderly, wealthy or retired clients but for everyone.
What Does A Will Protect?
A will reflects your wishes about how to divide your property and care for your children after your death. You can name a guardian for any minor children as well as an executor to oversee the probate process. Other considerations that may be included in a will include specifying your funeral/burial preference.
You can update your will throughout your lifetime as your circumstances and wishes change. While there is no legal requirement to have a will, if a person dies without one, that person’s estate will be distributed according to state law.
How Does A Living Trust Work?
A living trust is an alternative to a traditional will. A living trust is a document that benefits you both during your lifetime and after your death. A living trust allows you to plan the management of your estate during your lifetime. A living trust directs how your assets should be divided at death, and the person you choose as a trustee will follow your directions.
A living trust is revocable, which means that you can change it throughout your lifetime as necessary. This trust often serves multiple purposes. First, it can help you circumvent the costs of a formal guardianship for minor children. In addition, you can set restrictions or guidelines for how beneficiaries access inheritance regardless of their age. Further planning for Medicaid eligibility or a beneficiary with special needs, for example, will require complex legal guidance.
However, there are other kinds of trusts that are irrevocable, which means that you cannot change them after creation. Usually, irrevocable trusts provide asset protection because the creator gives up personal ownership of any property they place within the trust. Both revocable and irrevocable trusts call for sophisticated legal advice.
If you become incapacitated, a living trust is written so that your successor trustee will have immediate access to the assets, which is especially important if a family business needs to be maintained. If you own property in several states but do not have a living trust, your family will have to go through the probate process in every state where you own property.
If you want to set your children and grandchildren up for success (and not spoil them with a large inheritance or have them inherit money before they are prepared), you need to have a properly structured trust.
Unlike a will, a living trust is a private document, which means it can be administered without court involvement. Therefore, you can use a living trust to keep your estate private and to minimize the costs and time that probate would otherwise require.
The benefits of a living trust include:
- Shielding your property from probate
- Determining your wishes if you become incapacitated
- Expressing your preferences regarding inheritance and donations
At first, a living trust is usually more costly to create than a will. However, the benefits over time may outweigh these initial costs.
To avoid probate, your assets must be put into your living trust. This process is called funding your living trust. Your living trust can only determine what happens to property with which you fund it. Any property that you do not place within the trust will need to enter the probate process upon death, and it will not draw from any benefits of the living trust.
Other Estate Planning Considerations
What Is A Power Of Attorney?
A power of attorney is a building block of solid, forward-looking estate planning.
You can never know when an accident or illness will put you in the hospital. At any age, it is important to take the time and create a plan in case you are put in a position where you cannot make decisions for yourself.
If you become incapacitated, you will still have bills to pay and you may need someone to make medical decisions for you regarding your care. With a power of attorney, you can appoint a person to make financial or medical decisions on your behalf. This person does not need to be a lawyer, as the name suggests, but can be anyone over the age of 18 whom you trust to make decisions for you.
The two types of power of attorney – property power of attorney and health care power of attorney – each serves a distinct purpose. However, both types protect you in the event that you become incapacitated. Without them, the court may grant a guardianship for your care without your input.
Powers of attorney only activate when you are unable to make decisions or express your wishes, which could include situations where you are rendered comatose or suffer from advanced Alzheimer’s. A health care power of attorney will designate a person of your choosing to make decisions about your medical care and treatment plans. A property power of attorney will designate a preferred person to oversee your financial affairs such as paying your bills and shopping for essential items like your groceries.
What Is Long-Term Care Planning?
With the average annual cost of nursing home care exceeding $144,000 in 2019, it is crucial that families educate themselves about the available options to them if they are possibly facing the need for such levels of care for their spouse, their parents or themselves. Otherwise, one may end up spending all of their savings accumulated over a lifetime. Our main goal is to help preserve assets for the benefit of those in need of care either in home, nursing home or assisted living facility.
There are several ways to help protect your assets and become eligible for Medicaid benefits and/or veterans aid and attendance benefits, even if you are already receiving care.
Statistics show that roughly 70% of people older than 65 will need some level of long-term care. Taking the time to ask about long-term care planning now can help in the future. For Medicaid eligibility purposes, a five-year “look-back” period applies to the transfer of assets to non-spouses for less than market value. So, the sooner families start the process, the more assets they can protect.
Linda Bal will assist clients with the drafting of wills and living trusts. The goal of our estate planning practice is to protect all of your assets and ensure the distribution to your beneficiaries pursuant to your wishes, in the most efficient, cost-effective way possible. Your will, living trust, power of attorney or another estate planning document will be unique to your specific needs. Attorney Linda Bal has dedicated her career of more than 25 years to addressing clients’ concerns. You will appreciate her comforting personal service and attention to detail.
Note: We are also glad to help update a will or trust.
To get help in deciding if a will or living trust is right for your family, call us at 630-912-5970 or email us. Your initial consultation is free.