This is an article from the Law Offices of Cheryl David (cheryldavid.com) in Greensboro, North Carolina, that we thought others may find helpful.
Over half of all Americans do not have an estate plan in place, despite understanding the importance of having one. One of the most common reasons people give for putting off the creation of an estate plan is that the entire concept of estate planning is intimidating. Basically, they are unsure where to start because they are unfamiliar with the terms, strategies, and techniques used in estate planning. We don’t want you to avoid getting started on your estate plan for any of those reasons. With that in mind, we have put together a list of the “Top 10 Estate Planning Techniques” along with a brief explanation for each one. Our hope is that by familiarizing yourself with these techniques the concept of estate planning will feel less intimidating.
- Incapacity planning – incapacity planning is not only for the elderly. On the contrary, incapacity planning is even more important for their younger counterparts. If you were incapacitated as a result of a tragic accident or debilitating illness, who would care for your children? Who would make medical and personal decisions for you? Who would take control of your assets and finances? Incapacity planning techniques allow you to rest easy, knowing that these questions have been answered.
- Advanced directives – many people have very strong feelings with regard to end of life medical treatment. If you are one of them, executing an advanced directive is one estate planning technique that ensures your end of life treatment wishes will be honored. You also have the opportunity to appoint an Agent to make healthcare decisions for you if you cannot make them when the time comes.
- Probate avoidance – probate is the legal process that is usually required following the death of an individual. Even a modest estate can take months to probate and may cost the estate a significant amount of money. By incorporating probate avoidance techniques into your estate plan, such as transferring major assets into a trust, you can save your loved ones both time and money when it comes time to probate your estate.
- Parents with minor children – if you are the parent of a minor child or you plan to have children in the future, estate planning is even more important for you. Moreover, there are estate planning techniques aimed specifically at issues faced by the parents of a minor child that address issues such as the fact that your minor child cannot inherit directly from your estate. Instead, you will likely need to establish a trust to manage your child’s inheritance until he/she reaches the age of maturity.
- Medicaid planning – regardless of your age, Medicaid planning techniques should be incorporated into your estate plan unless you can afford to pay the high cost of long-term care out of pocket. Failing to include Medicaid planning in your estate plan could ultimately put your assets at risk if you ever do need to qualify for Medicaid to help cover those costs.
- Asset protection – asset protection techniques have a place in every estate plan because everyone’s assets are at risk from one threat or another. Your own divorce, business liabilities, or even a spendthrift beneficiary could all threaten your assets.
- Business succession planning – if you own a small business, business succession planning techniques are a must to ensure that your business makes a successful transition to the next generation. It also ensures that your loved ones will receive the full value of your interest in the business should you become incapacitated or die.
- Pet planning – if you have a family pet that you consider part of the family, pet planning techniques in your estate plan can ensure that your family pet is well cared for according to your wishes when you are gone.
- Special needs planning – are you the parent or grandparent of a child with special needs? If so, it is imperative that you include special needs planning in your estate plan if you wish to leave assets to your child/grandchild. Gifting assets directly could result in your child/grandchild losing eligibility for much-needed assistance programs such as Medicaid or SSI. Often, a special needs trust is the solution.
- Tax avoidance – federal gift and estate taxes are levied at the rate of 40 percent on estates that incur the tax. Clearly, you do not want to lose almost half of your estate’s value to Uncle Sam. To avoid this possibility, tax avoidance techniques can be included in your comprehensive estate plan, resulting in a larger estate left over to hand down to loved ones.