Estate Planning Is for Everyone

This is an article from the Vermillion Law Firm (https://www.vermillionlawfirm.com/) in Dallas, Texas, that we thought others may find helpful.

The process of estate planning is often thought of as something that is only important for people who have reached an advanced age. We all know that senior citizens are more likely to pass away than their younger counterparts, but in truth, all responsible adults should have an estate plan in place.

There have been studies conducted periodically that have turned up some rather interesting results with regard to the estate planning preparedness of American adults. Recently, there was an article published on the Forbes.com website, and it was centered on the concept that far too many Americans are taking an “ostrich” approach to estate planning. They stick their heads in the sand and they hope for the best, but negative consequences often come about as a result.

The article cited a study that found that 51 percent of people who are between the ages of 55 and 64 do not have a will or a trust. It also found that 62 percent of people who are between 45 and 54 are completely unprepared from an estate planning perspective.

You never know what the future holds, so you should certainly execute a will or trust so that you can be sure that your assets will be spread appropriately among your loved ones after you are gone.  And speaking of trusts, you should understand the fact that a trust of some kind can be a good choice for you, even if you’re not a multimillionaire.

There are wealth preservation trusts that are used by people who are exposed to the federal estate tax. This tax can be applied on transfers that exceed $5.45 million, but there are other types of trusts that can satisfy multiple different respective underlying objectives.

For example, let’s say that you decide to retain direct personal possession of your property up until the time of your death. You decide that you will draw up a will when you are a senior citizen and state your final wishes in the document toward the end of your life.

You have a granddaughter with special needs on your inheritance list. She is enrolled in the Medicaid program, and it provides a much-needed source of health insurance. When she receives this inheritance after you are gone, Medicaid eligibility could be forfeited, because the program is only available to people who can demonstrate significant financial need. There is a $2000 limit on countable assets.

This outcome could be prevented with the proper planning. Under these circumstances, you could make your granddaughter the beneficiary of a supplemental needs trust. Assets in the trust could be used by the trustee to help out your granddaughter, but benefit eligibility would not be impacted.

Let’s look at another hypothetical scenario. Once again, you retain direct personal possession of your property and you intend to arrange for its distribution through the terms of a will. You have a grandson who is a great person, but he is not good at handling money. He has come to you many times over the years for financial assistance.

If you leave your grandson a direct inheritance through the terms of a will, the money would be directly in his hands. He could burn through the inheritance quickly and later on he could suffer financial hardships when there is no one to turn to for help.

With the proper planning, you can protect someone who is not a good money manager. One option would be the creation of a revocable living trust.  You could act as the trustee while you are living if you establish this type of trust, so you would control the assets throughout your life.

In the trust declaration, you would name a successor trustee to take over the trust administration tasks after you are gone.  You could leave behind instructions in the declaration regarding the way that you want the assets to be distributed to the beneficiary. For example, you could instruct the trustee to distribute the earnings from the trust on a monthly basis and you could give the trustee the discretion to distribute portions of the principal when certain circumstances exist.

In this manner, the spendthrift loved one would not control the actions of the trust and the resources would be available over an extended period of time.

These are a couple of examples, but there are many different circumstances that can be addressed through the utilization of the appropriate estate planning techniques.