More than a Will: What Else Should Your Estate Plan Include?

A will directs how your probate assets will be distributed upon your passing, designates an executor to be in charge of your estate, and allows you to create trusts for minor grandchildren or disabled beneficiaries. However, having a will is just part of the story.

A will is the cornerstone of an estate plan, but it is by no means the only document needed to distribute assets and prepare for both incapacity and death. The Island Now reviews a number of things that an estate plan should address in the article “Five things that will impact your will.”

How are your bank accounts structured? If you have a bank account set up as “joint with right of survivorship,” when one of the owners dies, the other owner automatically inherits the whole account. Remember that this will occur, no matter what is stated in the will. If you have added a child to that account for convenience, is it your wish that the child should inherit the entire account? That’s exactly what will happen. You may be better off letting a child help you, using Power of Attorney rather than structuring the account that way.

When was the last time you reviewed beneficiary designations? Like titling bank accounts, as explained above, the beneficiary designation takes precedence over anything in your will. If you opened an IRA at your first job and now two decades—and two marriages—have passed, that IRA will still be passed on to the person who you named two decades ago, unless you have updated the beneficiary name. Accounts that often pass directly to beneficiaries include life insurance, annuities, 401(k), 403(b), brokerage accounts and some bank accounts.

Each asset that has a beneficiary, should also have a contingency beneficiary in the chance that the primary predeceases you or does not wish to receive the asset.

Are you prepared for the cost of a health crisis? The cost of a health crisis can, and often does, wipe out a family’s years of retirement savings. There are several strategies that an estate planning attorney can help you with to plan in advance for this. Long-term care insurance may be an option and placing assets in an irrevocable trust may be another, depending on your situation. There is a five-year look-back for any Medicaid benefits, so planning in advance is critical.

For many families, placing their primary residence into a trust while retaining the right to live in the home, retaining any STAR or Veteran’s exemptions and possibly even securing capital gains advantages for heirs is a possibility but requires the help of a skilled estate planning attorney.

Is gifting part of your estate plan? Most people know about the annual exclusion gift, which allows anyone to make a gift in the amount of $15,000 per year to a beneficiary with no gift tax consequences. However, if you need to apply for Medicaid coverage within a five-year period, any gift will trigger a waiting period before you can be eligible for Medicaid. Therefore, you can make a gift for tax purposes but it’s not something you can do for Medicaid planning. This is an expensive mistake. Talk with an estate planning attorney to make sure you get this one right.

Who is your Power of Attorney? Everyone should have a Power of Attorney. This is a person who is your legal representative, if you become incapacitated. The durable power of attorney gives your agent the authority to handle banking matters, real estate transactions and other financial matters. You’ll also need a health care proxy and a living will.

All these issues are part of a comprehensive estate plan, which is best created with an experienced estate planning and elder law attorney. 

Reference: The Island Now (Nov. 12, 1018) “Five things that will impact your will”

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