The Consequences of Not Having a Thorough Estate Plan
There’s a common misconception that living trusts are only for wealthy people with lots of assets. Many people also mistakenly think a will is all they need to ensure their end-of-life wishes are satisfactorily executed. Although a will is certainly better than having no plan at all, establishing a trust can minimize the hassle your family faces following your passing.
A properly funded trust set up by an experienced estate planning attorney can help your family completely avoid the probate process and almost entirely keep the state out of your personal business. Hiring an attorney for probate court is an extra burden many grieving families would prefer to do without, and the probate process is public, meaning anyone who is inclined to do so can gain a pretty comprehensive view of what your estate entails.
People who take the step of establishing a revocable trust can avoid that process, keeping their assets private and saving their families that added cost and hassle.
Trusts Require Maintenance
One of the most common estate planning mistakes is establishing a trust and then forgetting about it. Any property you purchase or assets you gain after you’ve established the trust are technically yours, meaning they don’t enjoy the protections a trust offers. When you purchase new property, take out new life insurance policies or open new investment accounts, it’s important you retitle these assets in the name of your trust. Any assets still in your name will be subject to probate upon your passing.
The main takeaway here is that trusts are not “set it and forget it” entities. Trusts require updating if you want them to function as initially intended.
Life and Law Changes
The decisions you made in your will or trust 10 years ago may no longer be the same choices you’d make today. For example, legislators are always tinkering with the estate-tax exemption depending on who is in power and how they feel about estate taxes. The estate-tax threshold changes pretty much every year. In 2007, any estates valued at more than $2 million would be subject to an estate tax, but today, in 2017, estates must be valued at more than $5.49 million to be subject to the federal estate tax. How you structure your estate may vary depending on what the threshold is and the value of your estate for any given year.1
There are also life changes to consider. A family member who you designated a guardian when your children were born 10 years ago may no longer be a capable or ideal guardian today, necessitating a change in that aspect of your will or trust.
It may be a good idea to schedule an annual appointment with your estate planning attorney to review your documents to ensure you’re always staying on top of your assets and the details of your estate plan.
Adjust Your Children’s Inheritance Based on Their Needs and Abilities
We would all like to think that by the time our young children are in their 20s, they would be responsible enough to handle a significant inheritance, but that doesn’t always end up being the case. Keep that in mind when it comes time to decide the structure and timeline of distributing inheritance from a trust. Depending on your child, you may or may not want to delay inheritance distribution until later in life.
This can be especially true if you have a child with a disability who may have ongoing care needs long after you’re gone. Those assets may also be held against them when it comes time to calculate Social Security and Medicaid benefits.
An estate planning attorney can help you understand your options in this regard so you can rest easy knowing they will have the resources to maintain a good quality of life, even after your death.
A DIY Boilerplate Estate Plan May Not Be Adequate
Although you can find boilerplate estate planning options online where you type in a few numbers and let software do the rest of the work for you, the estate plan that results may not be as thorough or comprehensive as you’d like. You may end up losing out on benefits or overlooking contingencies and potential pitfalls an experienced estate planning attorney would spot and adjust for.
At the Law Offices of David L. Carrier, P.C., we take pride in educating our clients and suggesting options that ensure the safety and stability of their estate and their family’s financial future. If you’d like to learn more about your options, you should consider reserving a seat at one of our upcoming Free LifePlan™ Workshops or schedule an estate planning consultation at one of our West Michigan offices by calling (616) 361-8400.