A Will (or “Last Will and Testament”) is a legal document that allows you to direct how your assets will be distributed, who will handle your final affairs, and who will care for your minor children after your death. However, a Will cannot keep your assets out of the Probate Court or reduce your estate tax liability. In fact, a Will has no legal effect unless it is probated. Like the "Do Nothing" method, a Will subjects your estate to the attorney's fees, costs, delays and lack of privacy associated with Death Probate.
A Will Based Plan is usually advisable for younger individuals who are just starting out, with little net worth and perhaps with minor children, but who cannot afford a more comprehensive Trust Based Plan. In those situations, a Will Based Plan, accompanied by Powers of Attorney and a HIPAA Authorization, would be advisable.
Over the last several decades Living Trusts (a/k/a Revocable Living Trusts) have increased in popularity and usage as an estate planning method, primarily because of the many benefits that can be realized by using them, including:
A Living Trust is a document that enables you to: 1) direct who will handle your financial affairs if you become incapacitated; and 2) control when and to whom your property will be distributed after your death – without passing through probate. In it, you name a Trustee, usually yourself, to manage assets you place in trust (stocks, bonds, real estate, personal effects, etc.). You can still buy, sell, trade, spend or do anything with these assets you choose. You can modify or revoke a Trust at any time if you are still competent.
A Living Trust enables you to:
1. direct who will handle your financial affairs if you become incapacitated
2. control when and to whom your property will be distributed after your death, without passing through probate.
If you become incapacitated, the Trust provides for the automatic appointment of a Successor Trustee you have chosen — without going through Probate. Your Successor Trustee is required to use and manage the Trust assets as you direct in the Trust.
Trust based planning enables you to control your assets after your death. Unlike a Will, you can direct not only who receives your assets, but when and under what conditions they will receive them (upon reaching a certain age, completing school, etc.). Trust assets do not pass through Death Probate, no matter where they are located. As a result, your loved ones avoid the attorney’s fees, costs, delays and loss of privacy associated with the probate process.
For an individual or a married couple having estates exceeding $5,430,000, additional Tax Planning methods can be utilized to reduce, if not eliminate, estate tax liability. In addition, if you have a substantial amount of funds held within an IRA then you may wish to consider using an IRA Trust.
A Living Trust, in combination with a properly drafted Financial Power of Attorney, can be utilized to assist you become eligible for Medicaid and other governmental programs, without losing all of your assets to long term care and nursing home costs. In the case of a married couple, for instance, this could mean being able to keep up to an additional $119,220 and still qualify for Medicaid benefits!
Determining the best elements of an estate plan to offer security and peace of mind for your family can be complex. The estate planning team at Estate Planning & Elder Law Services prides itself on compassionately and professionally guiding you through the options to protect your assets, your standard of living, and your access to healthcare.
We encourage you to contact us today to schedule a free consultation: call (888) PLAN-050 or complete our online form. We work with individuals and families throughout Southeast Michigan from our offices located in Northville and Brighton.