Before you come into our office to put a plan in place, you should formulate an outline based on your objectives. If you answer the following questions, you will be prepared to take the final step.
Do you have minor children?
The parents of minor children are typically in their 30s and 40s, and the vast majority of people in these age groups do not have estate plans in place. It is irresponsible to go through life without an estate plan when your children are relying on you for everything.
One consideration is the matter of financial management for a minor. If you have a revocable living trust, you would act as the trustee while you are living, and you would name a successor to assume the role after your death.
This would be a good choice if you have dependent children, and a living trust can be your estate plan centerpiece for the rest of your life. If circumstances change, you can easily adjust the terms.
A testamentary trust is another possibility. This is a trust that is contained in a will, and it would be created after the death of the testator.
Even if you have a trust, you should designate a guardian for your children in a simple will.
Are you okay with lump sum inheritances?
You do not necessarily have to give your heirs all of their inheritances in lump sums if this is a source of concern for some reason. If you are leaving a bequest to someone that is prone to reckless spending, you can have a living trust with a spendthrift clause.
The trustee that you name would manage the assets on behalf of the beneficiary, and the beneficiary would not have access to the principal. This would also apply to their creditors, and distributions can be spread out over a period of time.
There is also the incentive trust that includes stipulations that must be satisfied before the beneficiary would receive distributions.
For example, a trust can pay all college expenses as long as the student beneficiary remains in school. There can be a dollar-for-dollar match of money earned after graduation, and larger amounts can be distributed when the beneficiary reaches certain age thresholds.
Another consideration is government benefit eligibility. Many people with disabilities get health insurance from Medicaid, and they get a modest stream of income through the Supplemental Security Income program.
Since these are need-based benefits, a significant inheritance can cause loss of eligibility. As a response, you could establish a supplemental needs trust. The assets would be used by the trustee to enhance the beneficiary’s quality of life without impacting benefit eligibility.
Who should act as your representative if you become incapacitated?
Once you become old enough to collect your full Social Security benefit, your life expectancy will be 85 years if you are a man and 87 years if you are a woman. Over 30 percent of people that are in this age group have contracted Alzheimer’s disease.
This is an eye-opening statistic, and of course, Alzheimer’s is not the only cause of incapacity.
To prevent a potential guardianship proceeding, you can include an incapacity component in your estate plan. A living will is used to state your life support choices, and you can name someone to make medical decisions on your behalf in a durable power of attorney for health care.
The health care agent would be empowered to make decisions that are not related to the use of life-support. You should sign a HIPAA release to give your representative the legal right to access your medical records.
For financial matters, you can execute a durable power of attorney for property. If you have a living trust, you can give the successor trustee the power to step into the role in the event of your incapacity.
Are you ready to get started?
After you have considered the planning questions, it is time to take the final step. If you are ready to do just that, you can schedule a consultation at our Phoenix, AZ estate planning office if you call us at 888-222-1328, and you can use our contact form to send us a message.