Some people resist the idea of legal counsel as it applies estate planning. Why would you need someone to help you draw up a simple will? You just fill in the blanks on a template, get witnesses, and make sure the document is signed properly.
This may make sense on the surface, but there is a factor that people that embrace this approach are missing. A will is not the only way to facilitate postmortem asset transfers, and in many cases, it is not the best choice.
Drawbacks and Limitations
If you use a will to state your final wishes, you name an executor in the documentary to handle the administration tasks after you are gone. The executor admits the will to probate, and a court presides over the administration of the estate.
People that are named as beneficiaries will receive lump sum inheritances with no asset protection or spending safeguards. This can be a source of concern for some families.
Your loved ones do not receive their inheritances in a timely manner when probate is necessary. The exact timeframe will depend on a number of different factors, but it will usually take at least eight months to pay final debts and prepare the assets for distribution.
Do you want to share your inheritance planning decisions with anyone that is interested? If you use a will, the probate records are available to the public, so your estate is an open book.
On the other hand, if you use a living trust as the centerpiece of your plan, these negatives vanish. You can set up an incremental payout schedule that can span a number of years if you choose to do so.
The probate court would not be involved, so your privacy would be protected, and the estate administration process would be streamlined.
Special Needs Planning
A significant percentage of people with disabilities rely on Medicaid for health insurance, and they also receive Supplemental Security Income (SSI). These government benefits are only available to people with significant financial need.
If you leave a benefit recipient a substantial direct inheritance through the terms of a will, they would be in a different financial position. As a result, benefit eligibility could be lost.
Under these circumstances, a supplemental needs trust would be a better alternative. You would name a trustee to administer the trust, and this can be a professional fiduciary or someone that you know personally. The person that you are going to help out would be the beneficiary.
Medicaid does not cover every medical or therapeutic treatment, and SSI is modest. Under the benefit guidelines, the trustee would be able to purchase goods and services that satisfy the unmet needs of the beneficiary.
Eligibility for benefits would not be negatively impacted if everything is done right. After the death of the beneficiary, a successor that you name in the trust declaration would inherit the remainder.
Remarriage Inheritance Protection
Let’s say that you are a divorced parent, and you are getting remarried to someone that is quite a bit younger than you. It is likely that you will predecease your new spouse, and you have a sizable estate that you will be passing along.
You want to ensure the well-being of your spouse, but you do not want to jeopardize the inheritances that you intend to leave to your children. In a situation like this, you could establish a qualified terminable interest property (QTIP) trust.
If you do in fact die first, the trustee will distribute the trust’s earnings to your spouse for the rest of their life, and they could live in a home that is owned by the trust. Your children would be the successor beneficiaries, and they would inherit the remainder after your surviving spouse’s death.
We Are Here to Help!
Today is the day for action if you are going through life without a plan for aging that culminates in the passing of your legacy. You can schedule a consultation at our Cincinnati estate planning office if you call us at 513-721-1513, and you can use our contact form to send us a message.