It is estimated that nearly 70% of Americans have no plan in place for their estate when they die. There are several reasons that this number is so high, starting with the fact that many people are uncomfortable talking about death. It’s true that this can be difficult to address, especially with family members and other loved ones. Other possible factors that prevent people from planning for their estate could be that they have underestimated the value of their estate, they have a fear of expensive legal fees, or simply that they have procrastinated.
In addition to whatever reason has stopped a person from planning for their estate, many people are simply unaware of the importance and benefits of estate planning. There are plenty of myths circulating around this topic, so many people are lacking the correct information they need to make informed decisions. Here are 5 facts you may or may not have heard correctly when it comes to estate planning:
- A will isn’t necessarily the most secure form of estate planning.
Many people think wills are the be-all, end-all document when it comes to distributing their assets once they pass away. In reality, wills have several pitfalls when it comes to estate planning. The first is that a will only go into effect once a person dies, therefore it does not allow them to plan for any sort of incapacitation. Their heirs or beneficiaries will not be able to control the assets in the will while the individual to whom the will applies is still alive. The second pitfall of solely using a will is that if the language is ambiguous, disputes or disagreements among heirs may develop. This could lead to will contests which drag out the process of transferring the assets. Finally, wills do not protect your assets from probate, leading to fact #2.
- Even if you have a will, your assets are not protected from probate.
The most noteworthy pitfall of only using a will to plan your estate is that it does not protect your assets from going through the probate process. Probate is a long and complicated legal process which essentially keeps the assets locked up in court until the will can be reviewed and found legitimate. During this time, disinherited heirs or disgruntled family members may contest the validity of the will, thus delaying the resolution even more. Probate lasts for months and racks up excessive court fees – which will be paid out of the estate itself, thus depleting it. It is the last thing anyone wants to deal with while also trying to grieve their loved one. Avoiding probate is the main reason many people choose to work with their estate planning lawyer to develop a trust, which leads to fact #3.
- Wills and trusts are not the same.
While a will details how assets will be distributed upon a person’s death, a trust is a legal arrangement that transfers all the assets to a trustee who holds and distributes the assets for the benefit of the heirs. Because of this, trusts bypass the probate process in nearly every instance, thus saving an immense amount of time and money. Most trusts are also still manageable during the lifetime of the trustee, which makes them malleable plans able to be altered to fit their specific wishes.
There are different types of trusts, but many people choose to establish a living trust which, as previously stated, means that it can still be added to, taken from, and altered by the person who established it while they are still alive. This also allows them to set instructions for who should control the trust if they become incapacitated, which they would not be able to establish with a will alone. Other contributions to a trust might be a guardianship plan if you have young children, or advance medical directives.
It is also important to remember that any long-term care or nursing home costs will be paid out of your estate. So, if you have a trust, the assets in it may look vastly different than you intended if you need years of long-term care. This leads to fact #4.
- The costs of long-term care can take a major chunk out of your estate.
In Pennsylvania, nursing home costs can reach upwards of tens of thousands of dollars every month. If you come to need several years stay in a nursing home, this will significantly affect your assets. You may not be able to leave your heirs what you intended to. A way to account for this is through Medicaid planning, which is the process of working with a Medicaid planning attorney who can restructure your assets to help you qualify for government financial aid through Medicaid. The application and review process is incredibly complex and will have the government combing through your finances closely.
- Estate plans are not set in stone.
Finally, contrary to what many may believe, estate plans such as wills and trusts are not finite documents. We all know that life throws curveballs from every direction – not everything can be planned for. As your life changes, so should your estate plans change to reflect your goals and wishes. You should make a point to review your estate plans periodically and revise or update them as needed. Your estate planning lawyer can assist you in the revision process and provide the guidance you need.
Daly Law Offices Wants You To Have The Facts
At Daly Law Offices, we strive to keep our clients informed as best we can, so that they can make decisions they feel confident in. Our lead attorney, Joshua N. Daly, is committed to providing service with a high level of excellence to all clients, no matter their situation. With over 15 years of experience, he prides himself on staying up-to-date with the ever-changing state and federal laws, so you know you are receiving the most accurate and solid legal advice you can get. Call today to schedule your free consultation and learn more!