Roughly half of all Americans don’t have a will, so if you’ve already taken this vital step to protect your assets and successors, then congratulations are in order – you’re already ahead of the curve. While a will is a necessary document that every person who owns assets should have, it is still a relatively simple document that may not cover everything you want it to. You may want to consider creating an estate plan that involves the use of a living trust, plus other important documents like a power of attorney for finances and health care directives.
To over-simplify it, an estate plan is a more comprehensive way than a will to instruct how your estate is to be distributed after your death, and how your assets should be managed if you become disabled and unable to make financial or health care decisions. Estate plans can save you and your successors substantial amounts of money in court costs, legal fees, and taxes. Consider the following items when creating an estate plan:
Are you prepared for your own disability and your spouse’s? If not, please consider creating a Power of Attorney right away. A will only directs the disposition of your assets after you die — not while you are living but unable to make decisions for yourself. It is very difficult for all of us to think about the infirmities that come with aging. But if you force yourself to do so, you can create a plan that will make it much easier for your loved ones to care for you. If disaster strikes, your loved ones can be with you mentally and emotionally instead of worrying about how your bills are getting paid, or who is authorized to make medical decisions for you.
Do you know how you will pay for long-term care? About 70% of Americans aged 65 and older will need long-term care at some point in their lives, for an average of 2.5 years. Average nursing home costs are $7,500/month, with memory care topping $10,000/month. Home health care aides cost around $21/hour. Would your assets be enough to cover that type of care? If you are married, would your spouse be able to maintain his/her standard of care while paying for the care that you needed? If you are not confident in your ability to do this, explore your options now, while you are still healthy. Elder law attorneys can help, and you’ll also want to talk with your financial planner and insurance agent for suggestions.
Minimize probate and maximize privacy. An estate plan that uses a living trust will allow your heirs to move through the administration process as quickly and efficiently as possible. With only a will, a process called probate must be used at your death. Information brought forward in probate court is public knowledge and all of the terms of your will plus the assets you own will become part of the public record. Also, probate can be very expensive. Even an uncontested probate could take longer than a year to pass through probate court and attorney’s fees and court costs can start to add up. Constructing an estate plan with an attorney before probate can help avoid most of these costs and loss of privacy.
Consider your digital information. One thing that’s often forgotten, but necessary in today’s digital age, is what happens to your online information after you die? Many of our day-to-day activities are conducted online and this may present issues for your family after you die. For example, if you invest or bank online, it can be an incredible hassle for your heirs to decode your online financial life. Consider storing your passwords in a safe place and then give access through a power of attorney to someone you trust who will be able to help your family manage your digital assets.
Tax planning. The Tax Cuts and Jobs Act of 2017 doubled the size of the federal estate tax exemption to $11.2 million for a single person and more than $22 million for a married couple. This means that the vast majority of estates will not have federal estate tax concerns. There are, however, other taxes to worry about. Inheriting certain types of assets can create income and capital gains tax problems for your family. Make sure that you have discussed this possibility and options with your attorney.
There are many other factors to consider when constructing an estate plan, some of which can be complicated. Please do not hesitate to reach out to our office if you wish to meet with an estate planning attorney to discuss how best to protect your legacy.