Estate planning is a multifaceted endeavor, and there is no one universal plan that is perfect for every person. Different people have different estate planning objectives, and the right way to proceed will depend upon the circumstances.
Though there are different ways to proceed, there are two major issues to consider when you are devising your estate plan.
When you plan your estate, you facilitate postmortem asset transfers. There are different legal devices that can be used to accomplish this goal, and you should act in a fully informed manner.
A last will is the most commonly used vehicle of asset transfer, but there are limitations when you use a last will. Plus, a will must be admitted to probate, and the heirs cannot receive their inheritances while the estate is being probated.
If you were to use a revocable living trust instead of a last will, the trustee could distribute assets outside of probate. In addition to this benefit, you could also include spendthrift protections. You could make sure that the beneficiaries could not squander their inheritances.
A revocable living trust can be a good choice for a wide range of people, but there are other trusts that can be used to satisfy more complicated estate planning objectives. For example, some people are exposed to the federal estate tax. This tax is potentially applicable on asset transfers that exceed $5.43 million.
There are trusts that can be used to mitigate your estate tax exposure, and you can also use certain types of trusts to protect assets if you are concerned about lawsuits.
Another type of trust that can be useful for some families is a supplemental needs trust. People with disabilities are often enrolled in need-based government benefit programs. An improvement in financial status can cause a loss of eligibility.
A supplemental needs trust can be used to help out a loved one with a disability without impacting government benefit eligibility.
These are a few examples, but there are other situations that can call for more advanced estate planning techniques.
The other component that everyone should be concerned about is the incapacity planning facet. Many elders become unable to handle their own affairs late in their lives. You can account for this through the execution of legally binding documents called durable powers of attorney.
Agents that you name in the documents would be empowered to handle your decision-making in the event of your incapacitation.
Your incapacity plan could also include a living will. You would use a living will to state your preference regarding the utilization of life-sustaining measures.
We should also point out the fact that you could empower a disability trustee to administer your living trust if you decide to use a revocable living trust as an asset transfer vehicle.
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