People sometimes pass around information about estate planning that is incomplete or distorted, and they take action that is based on these misguided notions. In this post, we will look at three of these misconceptions to help you avoid mistakes that may yield negative consequences.
#1-You can plan your estate yourself with generic documents that you can get online.
If you search for information about estate planning on the internet, you will run across ads that are placed by companies that sell boilerplate legal documents. They contend that you can simply fill in the blanks and you have an estate plan that will hold up in court. We are not going to say that it is impossible to use a do-it-yourself kit to plan your estate, but we do assert it is an iffy proposition.
When you are developing your estate plan, you are arranging for the transfer of everything that you have accumulated during your life to the people that you love the most. There is a great deal at stake, and state laws that must be followed when an estate is being administered. Plus, are you aware of all the different ways that assets can be transferred after someone passes away? Do you know why you should use one method instead of another? There are definitely some types of DIY projects that a layperson can take up on their own, but complicated legal matters do not fall into this category.
#2-A will is all you need if you are not extremely wealthy.
This is probably the most commonly embraced misconception about estate planning. Indeed, multimillionaires that are exposed to the federal estate tax use trusts to mitigate their liability. These are complicated irrevocable trusts that would not be useful for most people. However, there are other types of trusts that can be the ideal choice for individuals that are not extraordinarily wealthy. For example, most people with disabilities rely on Medicaid for health insurance, and they can also receive Supplemental Security Income (“SSI”). If you leave someone that is in this position a direct inheritance through the terms of a will, benefit eligibility could be lost. On the other hand, if you establish and fund a supplemental needs trust, the trustee could use the assets to provide goods and services for the beneficiary. Eligibility for the need-based government benefits would not be negatively impacted.
Most seniors will need long-term care, and 35 percent will reside in nursing homes eventually. Medicare will not pay for a stay in a nursing home, and it doesn’t cover in-home care. You can expect to pay over $60,000 for a year in a nursing home in the Oklahoma City area. This is a lot of money to come up with late in your life. Medicaid will provide a solution if you can gain eligibility because it does cover custodial care. If you convey assets into an irrevocable trust, they would not count if you apply for Medicaid. You would be able to receive income that is generated by the trust’s assets while you are living independently, so this can be the ideal solution. These are just two of a number of different reasons why a person of relatively ordinary means would use a trust instead of a will.
#3-Estate planning is confined to financial matters.
A properly constructed estate plan includes “lifecare” as well. That means your plan will address issues that may come up during your lifetime and end-of-life issues along with the financial part of the equation. You should record your preferences regarding the utilization of life-support in a living will. That document also allows you to indicate if you would like to make organ and tissue donations. To account for medical decision-making scenarios that are not related to life-support, you can name an agent in a durable power of attorney for health care. The Health Insurance Portability and Accountability Act (HIPAA) was enacted to protect patient privacy. A provision contained within it prevents doctors from sharing medical information with anyone other than the patient unless a HIPAA release is signed. Your plan should include a HIPAA authorization to give your health care decision-maker the ability to access your medical records.
We Are Here to Help!
If you are ready to work with an Oklahoma City estate planning lawyer to put a custom-crafted plan in place, our doors are open. You can send us a message to set up a consultation appointment, and we can be reached by phone at 405-843-6100.