What is Estate Planning
Estate planning is taking steps to put your affairs in order so that upon your death or your incapacity, someone is ready and able to step in and act on your behalf. It is especially important to do planning if you have a disabled spouse or child. Your failure to plan the distribution of your assets in that case could cause a disabled child or spouse to lose or fail to qualify for important public benefits.
What Kind of Documents are Involved in Estate Planning?
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Will
A will does not avoid probate. With a Will, you appoint a personal representative to pay the bills of the estate and distribute your assets; if the value of the estate is over $50,000, probate is required. A will can be used to create a special needs trust to protect your spouse or disabled child or to appoint a guardian for your minor child. Durable Power of Attorney With this document, also referred to as a power of attorney for finances, you can appoint an “agent” to take care of your financial matters should you become incapacitated during life. A properly drafted power of attorney allows your agent to manage your affairs, pay your taxes, complete a Medicaid application, transfer real estate, etc. If you become incapacitated and do not have this document, a guardianship may be required. Must be signed in front of a notary. Power of Attorney for Health Care This document allows you to appoint an agent to make your health care decisions after at least two doctors have declared you incapacitated and unable to make your own decisions. If you become incapacitated without a valid health care power of attorney, a guardianship may be required. If you have a valid power of attorney, but your agent is not authorized to place you in a long term care facility if proper care can no longer be provided at home, you may still require guardianship. |
Revocable Trust
A revocable trust can avoid probate but it is not a tax planning tool. A revocable or living trust is created during life and as long as you have transferred your assets into the trust, or provided that they be transferred to the trust upon your death, your successor trustee will be able to distribute your assets without probate. Revocable trusts are used to avoid probate; but, they do not protect your assets from estate recovery or creditors. With a revocable trust, you are the trustee and you retain control over your assets. Irrevocable Trust An irrevocable trust is used to transfer assets out of your estate and into the name of the trust. As the trustmaker, you cannot modify or revoke this trust after execution and usually, you can’t be in control of the trust. An irrevocable trust can provide increased asset protection against creditors and estate recovery; however, any transfer into an irrevocable trust is subject to the five-year look-back applied to Medicare eligibility. Special Needs or Supplemental Needs Trust (SNT) A Special Needs Trust (SNT) allows the individual to benefit from supplemental resources while still qualifying for public benefits such as Supplemental Security Income (SSI) and Medicaid. When the trust is set up by a parent, guardian or grandparent, using their funds, it is referred to as third-party SNT. When a SNT is set up with funds belonging to the individual, it is referred to as a first-party SNT. Because each case is unique, it is important to discuss special needs planning with an experienced attorney. The Greene-Gretzinger Law Office can help. |
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