As a service to Aging Options blog readers, we’re always on the lookout for helpful articles from a variety of sources. The following column comes from Missouri-based Rudy Beck, Attorney and Founder of Beck and Lenox Estate Planning & Elder Law, LLC.
Nearly half of American adults over the age of 55 do not have a will, according to a 2019 study by Merrill Lynch. These stories make headlines when a public figure such as Aretha Franklin, Prince or Kurt Cobain passes away without a will — but the truth is that failing to prepare an estate plan can have devastating consequences for any family.
Long ago, a person could handwrite their own will without consulting an attorney, and that will was honored. As taxes and financial tools have continued to evolve, Estate Planning is no longer the “D-I-Y project” it once was. The consequences of drafting a will or trust incorrectly can be disastrous and create long-lasting problems for your heirs.
Stick to basic house projects for your D-I-Y talents, and read three real-life scenarios to help you better understand why Estate Planning is a job best left to will and trust attorneys.
The Top Three Reasons to Consult an Estate Planning Attorney for Your Will
Many people assume they do not need more than a simple will if they do not have a rock star’s massive, wealthy estate. They may even try to save time and money on attorney fees by purchasing a template for a will or buying their will online.
We have learned these individuals usually undervalue the size of their estate, or that their wishes are often more complicated than they realize.
Three of the most important reasons to consult with an attorney for your Estate Planning needs are:
- Simple solutions are not always the result of a simple plan.
- Attorneys offer an unbiased voice to ask personal, potentially difficult questions.
- An Estate Planning attorney can help you plan for the cost of long-term care.
The below lessons are based on real-life scenarios involving clients of our law firm.
Scenario #1: Your Simple Estate Planning Solutions Are Often Not Simple.
Doris came to our firm to discuss her will and how to prepare it for her three children. She owns a home worth approximately $180,000 and has investments totaling approximately $450,000. Doris explained that she wants to leave her house — or really, the proceeds from its sale after her death — to her children equally.
When asked about the plan for her investments, Doris said, “Don’t worry, I’ve taken care of it.”
Doris had her investments in three laddered Certificates of Deposit (CDs), each one Payable on Death (POD) to a different child. By Doris’s calculations, each child would receive $150,000 when she passed away. But we posed several scenarios under which that would not happen.
For example, Doris assumed the amount of money she has and where she has it will remain unchanged, which is very unlikely. When a CD matures, she may roll it over to a new one or decide to invest elsewhere. And if Doris passed away suddenly, the funds intended for one of her children could be stuck in her checking account.
Unfortunately, Doris’s child couldn’t receive that money unless their name was also on the checking account — which is not what Doris wants or what her children expect.
Scenario #2: An Estate Planning Attorney Will Ask Tough, Unbiased Questions.
Jennifer and her husband wanted to set up a trust that would provide income to their adult child, solely through investments in that trust. They were concerned their daughter would spend the principal funds quickly and foolishly, and not have any money left to fund her future retirement.
On the surface, this sounded like a good idea — but when our attorney asked more questions about their objectives for this inheritance, the plan this couple envisioned had some significant shortfalls, including:
- Changing Interest Rates.
Their daughter’s inheritance was expected to be around $250,000. If the interest income is 4%, or $10,000 per year, it seems to be a reasonable amount. But what if an economic boom (or recession) caused today’s interest rate to change?
- Unpredictable Life Circumstances.
In the future, their daughter could lose her job or face a sudden medical crisis. The way the inheritance was structured, she could not access any part of the principal, even if she needed it to pay her mortgage or medical bills.
Our clients were so focused on the prospect of their daughter purchasing a sports car and a boat, they had not considered other realistic life events — and realized their trust needed to reflect some important changes.
Scenario #3: Asset Protection Strategies Can Help Fund Future Long-Term Care.
Georgia came to see us after her husband, Henry, suffered a stroke. He was in the hospital, and doctors had already told Georgia he was not going to be able to return home. Instead, he would need to live in a skilled nursing facility.
Did You Know: Long-term care is a big concern for many of our clients. Statistics from an AARP report show that 52% of people turning 65 will need long-term care services at some point in their lives, whether at home, or in an assisted living or skilled nursing facility. If they have not planned for the expense, these seniors will need to spend a significant amount of their savings to receive essential care.
Georgia was concerned about how they would pay for the high cost of this facility without spending everything they had — including their home and $500,000 in savings and investments. She was quite healthy and had every reason to expect to live another 20 years or more. They needed to make their hard-earned money last.
With our Estate Planning knowledge and expertise, our attorneys recommended putting their funds into Medicaid-compliant annuities, to pay Georgia as the “community spouse.” After their affairs were sorted, we were able to obtain Medicaid to pay for Henry’s care and preserve funds for Georgia’s future needs.
(originally reported at www.beckelderlaw.com)