A lot of people think estate planning boils down to the creation of a simple will. You explain who gets what, and that’s the end of the story. There are no nuances or tailored solutions to address specific circumstances.
In fact, this is not the case at all. Your estate plan should be carefully prepared based on your objectives and the needs of the people on your inheritance list. Let’s look at the details.
Simple Will Drawbacks and Limitations
If you use a will as the centerpiece of your estate plan, the people that are named in it receive lump-sum inheritances. There is no asset protection, and there are no spending safeguards going forward.
Plus, the will would be admitted to probate after your passing. This is a time-consuming and costly process that is supervised by a court. It is public, so interested parties can access the records to find out how you decided to plan your estate.
Other Options
One of the major misconceptions in the realm of estate planning is the idea that trusts are only for the super wealthy. Granted, high-net-worth individuals do use trusts to gain estate tax efficiency.
At the same time, there are other types of trusts that can be useful for those that are not among the financial elite. When you work with our firm to develop a plan, we will make sure that you are apprised of your options, and here are some of them.
Revocable Living Trust
The most commonly used type of trust is the revocable living trust. You would be the trustee while you are living if you establish this type of trust. As a result, you would have complete control of the assets every step of the way, and you retain the right of revocation.
After your passing, the successor trustee that you designate will manage the trust. Probate would not be a factor, and you can dictate the terms of the distributions in the trust declaration. If you want the beneficiaries to receive limited payouts over time, you can make this happen.
In addition, the trust would become irrevocable after your death. As a result, the assets that are held by the trust would be out of the reach of the beneficiaries’ creditors.
Supplemental Needs Trust
People with disabilities typically rely on Medicaid for health insurance, and they receive Supplemental Security Income. These are need-based programs, so a windfall of money can cause a loss of eligibility.
This is a key consideration if you are leaving an inheritance to someone who is in this position. As a response, you could create and fund a supplemental needs trust.
The beneficiary that you want to provide for would not be the owner of the assets, so the creation of the trust would not impact eligibility for the benefits. However, the trustee would be able to use the assets to enhance the beneficiary’s quality of life in many ways.
Incentive Trust
An incentive trust is somewhat self-explanatory. The beneficiary must satisfy an incentive or incentives as a condition that must be met before distributions are made. For example, you can require someone with a substance abuse problem to complete a rehabilitation program.
Take Action Today!
These are just a handful of the different scenarios that can be addressed through the utilization of the proper tools. When you choose our firm, we will learn about your situation and your legacy goals and help you devise a plan that is tailor-made for you and your family.
To get started, call our Phoenix, AZ estate planning office at 888-222-1328 or send us a message through our contact form and we will get back in touch with you ASAP.
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