In light of the COVID-19 pandemic, many people are now either considering putting an estate plan in place or reviewing their existing documents. Everyone should have an estate plan in place, whether there is a global pandemic or things are just fine for you now. Planning for the future just makes sense.
Once you decide that you need an estate plan, the next question, is “What documents do I need?”. Every competent adult should have a properly written Healthcare Power of Attorney document and Financial Power of Attorney document. (More on those in a separate article).
Some people wonder if they need a trust, or quickly dismiss a trust as an option – either because they don’t understand the benefits of a trust or think it is only for those with a net worth in the millions.
A trust is a legal document, created by a Grantor, and managed by the Trustee. Often, the Grantor and Trustee can be you – the person who creates the trust. There are many types of trusts and each has its own specific purpose. In general, the Trustee manages the assets in the Trust while the Grantor is alive, and transfers the trust assets to the beneficiaries upon the Grantor’s death.
Years ago, Trusts were a method to save on inheritance taxes. Unless your estate is approaching $11.5 million, this is not a concern for most people. Today trusts are used more for managing your assets while you are alive and distributing your assets the way you wish upon your death.
Trusts provide many benefits, including: 1) the ability to protect your assets while you are alive, by keeping your assets away from creditors or the nursing home, and leaving a legacy, 2) avoiding probate court and saving your heirs legal expenses and time upon your passing, 3) avoiding estate recovery if the State pays for your nursing home care, 4) providing a trust for your beneficiaries so your beneficiaries don’t lose your life savings to creditors, an ex-spouse or the nursing home, 5) the ability to more easily manage your assets if you are alive but not competent, 6) provide special needs planning if your beneficiary is not able to manage his/her assets due to a disability, and 7) a properly funded trust will avoid probate court when you die, and keep your estate private.
Selecting the right type of trust and drafting it for your own specific circumstance should be performed by an experienced Estate Planning attorney. Some people will research articles on the internet, and download a trust thinking that they will save themselves some money. Practicing Estate Planning is not something you want to risk with your life savings. The failure to have a properly drafted and funded trust can be expensive to fix later or cost you money by not properly protecting your assets for you or your beneficiaries. Some of the pitfalls are: not funding a trust, not having the right trust in place, estate recovery by the state, not protecting your beneficiaries.
Estate Planning is more complex than most people think. Don’t make the mistake of not putting a plan in place just because the thought of planning is daunting. The sooner you put an estate plan in place the sooner your life earnings will be protected, which will give you peace of mind.
Call 616-361-8400 now to schedule a free consultation with one of our experienced Estate Planning attorneys.