Caring.com conducts surveys on an annual basis to gauge the estate planning preparedness of people in America. The results of the survey are broken down by age group. The survey suggest that only 44 percent of people that are 55 years of age and older had an estate plan in place in 2021. This is a reduction from the 60% seen in 2019 for individuals in the same age group.
When this survey was conducted at the beginning of 2021, only 32.9 percent of all adults in the United States had estate plans. Of those who did not, the majority of them agreed that estate planning is important.
Often people do not act because they simply do not know where to begin. With this in mind, we will present some questions for you to consider, in this post and the next one, that will help you begin to shape your estate plan.
Do you have minor children?
Just under 27 percent of people between the ages of 18 and 34 have estate plans. For individuals that are between 35 and 54, the number drops to 22.5 percent. Although individuals in these age groups do not usually pass away, it does happen.
In addition, many people that are in their 20s, 30s, and 40s are the parents of dependent children. If you are in this position, estate planning is an absolute must. Life insurance can serve as the ideal income replacement vehicle.
Since children cannot handle their own money, you would need to establish a living trust. The living trust would name a successor trustee to administer the trust after your passing. While you are living, you would act as the trustee, so you would maintain control of the assets.
This type of trust can be the ideal estate planning centerpiece as circumstances change because revisions can be made. Another option is a testamentary trust, which is a trust that is contained within a will. This type of trust would be created after you pass away.
Guardianship is another factor to consider. Even if you have a trust, you should have a simple will wherein you name a guardian for your children.
How do you want your assets to be distributed?
People have many reasons why they do not want to leave a direct inheritance to a loved one. Your beneficiary may be a spendthrift. They may be a younger person that has no experience handling money. That person may also have substance abuse or gambling problems.
Fortunately, there are solutions that can be implemented to address these situations and many others.
An incentive trust is a trust that includes stipulations that must be met before assets will be distributed to the beneficiary. For beneficiaries with a harmful addiction, you can dictate distributions as long as the beneficiary remains in recovery.
Another use of incentive trusts is to guide a young family member toward positive behavior. You could instruct your trustee to pay all school and living expenses for your beneficiary as long as they are a student in good standing.
To instill a work ethic, the trust could provide a dollar-for-dollar match of the beneficiary’s earnings after they graduate and embark on a career path.
Providing for a loved one with a disability that is relying on need-based government benefits is another situation to consider.
These are just a few things to consider as you begin shaping your estate plan.
When you work with our firm, we will gain an understanding of your objectives and help you implement a plan that provides for each family member in the optimal manner.
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