Estate planning isn’t a particularly pleasant experience, which might explain why so many people put off doing it until it is far too late. Other people will create a basic last will but won’t go through the comprehensive process of planning their estate.
You probably don’t just want to decide who gets what for after you die. You may also want to have protections in place in the event that you experience medical incapacitation to help protect you and guide your loved ones. Even if all you wanted is to allocate certain assets to specific people, you will want to execute beneficiary designations for existing accounts.
For example, you want to have someone who is capable of making medical, financial and legal decisions if you cannot do so for yourself. Your estate plan should also address whether you will need intensive care as you get older and take steps to mitigate tax liabilities that your loved ones will have to deal with if you have a substantial estate.
Creating and funding a trust can help you and your loved ones
Even if you don’t have millions of dollars in assets that will qualify you for the federal estate tax, it may still make sense for you to create a trust as part of your estate plan. A trust does more than reduce your tax liability. It can also help you reduce your overall wealth, making it easier to qualify for Medicaid if you need it as you age.
Medicare and private insurance programs typically won’t cover nursing home costs or assisted living facilities, but Medicaid will cover those costs. In order to qualify for Medicaid, you need to have divested yourself of the majority of your assets at least five years before you need the benefits.
Creating a trust early in life and funding it with major assets such as your home will make the probate process simpler for your family members and make it easier for you to connect with state benefits if you need them as you age.
Make decisions now for your care and health as you age
If you wind up in a coma because of a car crash or with decreased mental acuity because of a degenerative medical condition, you will no longer be able to make decisions on your own. In the event that you are unconscious or otherwise unable to speak for yourself, power of attorney documents can authorize other people whom you trust to make specific medical, legal and financial decisions for you.
However, the authority of a standard power of attorney ends with someone’s legal capacity to sign a document. In other words, if the courts would rule that you are not competent to care for yourself or make decisions anymore, your power of attorney documents no longer hold any authority. A durable power of attorney will authorize people to protect you and uphold your wishes in the event that the state determines you can no longer care for yourself.