About one-third of American adults have estate plans in place according to recent studies. Many people that don’t have plans have been frozen with inaction because they don’t know where to begin. With this in mind, let’s look at an outline to give you a starting point.
Inventory Your Assets and Make Projections
First, you want to take stock of the estate that you will be able to pass along to your loved ones. Granted, this can be an imperfect science when you cannot accurately predict your future needs, but you can get a general idea.
Plus, once you enter into this process, your legacy goals could impact your budget along the way. In addition to liquidity and real property, you should also determine the ideal future caretakers for family heirlooms and irreplaceable items that you have acquired during your life.
Consider the Individual Inheritors
People sometimes view estate planning as an exercise in slicing a pie into different lump-sum pieces. This is one way to look at it, but a well-constructed estate plan will take the respective life situations and the proclivities of the inheritors into account.
For example, you may not feel comfortable leaving a large inheritance with no strings attached to someone that is a very poor money manager. People with disabilities usually rely on government benefits, and a windfall of money can cause a loss of eligibility.
These are a couple of the scenarios that can arise, but there are others. You do not necessarily have to provide for each person on your list in the same manner. There are many tools in the estate planning toolkit, and there is an ideal approach that can be utilized to address all circumstances.
Anticipate Long-Term Care Costs
The majority of senior citizens will need help with their activities of daily living eventually, and just over 30 percent of elders will reside in nursing homes. Medicare does not pay for the custodial care that nursing homes provide, and their rates will probably give you a case of sticker shock.
Medicaid does pay for long-term care, but it is a need-based program, so you can’t qualify if you have significant assets in your own name. It is possible to convey assets into an irrevocable trust before you apply for Medicaid so you can develop the desired financial profile.
You would be able to accept distributions of the earnings that are generated by income-producing assets in the trust, but you would not be able to touch the principal.
Advance planning is key because there is a five-year look-back period. The funding of the trust, or any direct gift giving, must be completed at least 60 months before you submit your application for Medicaid coverage.
Implement Your Estate Plan
After you have a good idea of what you want to accomplish with your estate plan, it is time to take the final step.
If you reach out to schedule a consultation, we can gain an understanding of your unique situation and make recommendations. After you make your decisions, we can apply our expertise to create a custom-crafted estate plan that is ideal for you and your family.
We know that it can be a bit disconcerting to discuss these personal matters with someone you have just met. This is actually one of the reasons why some people procrastinate, but you can rest assured that you will feel completely comfortable when you interact with anyone on our team.
You can set up a consultation at our Tulsa, OK estate planning office if you call us at 918-615-2700, and the Oklahoma City office can be reached at 405-843-6100. If you would rather send us a message, fill out our contact form and we will get back in touch promptly.
- Understanding IRA Inheritance Planning: Key Considerations - September 14, 2023
- Irrevocable Trust Decanting Provides Flexibility - September 12, 2023
- Inheritance Planning Solution for a Spendthrift Heir - September 7, 2023