Studies are conducted periodically to gain an understanding of the estate planning preparedness of adults in the United States. Unfortunately, the results are never encouraging. Most people that are over 65 have a will or some other estate planning document, but a significant percentage of people in this age group do not. The vast majority of Americans that are under the age of 40 are completely unprepared.
This is rather perplexing, because people routinely make plans for the future on many different levels. It is said that death and taxes are the only two certainties of life, but in spite of this, most individuals do not have an estate plan in place. While it is true that people do not usually pass away when they are in their 20s or 30s, it does happen.
If you are a young adult and you are single, you should have a will or trust, but it could be argued that it is not absolutely necessary. However, younger parents with dependent children that do not have estate plans are being completely irresponsible. An estate plan for young families should certainly include the choice of a guardian for the children, and there should be ample life insurance to serve as an income replacement vehicle.
Revocable Living Trust
In addition to the last will, another estate planning device that can be very useful is a revocable living trust. If you were to use a last will instead of a living trust, there would be drawbacks. You would not be able to dictate measured distributions over an extended period of time. This can be a source of concern if you have someone on your inheritance list that is not very good at handling money.
There is also the matter of probate. A will must be admitted to probate, and there are pitfalls that go along with it. No inheritances can be distributed while the estate is being probated by the court, and it will take eight or nine months to a year at minimum. There is a loss of privacy, because probate records are available to the general public. Thirdly, probate expenses can accumulate to consume a significant percentage of the estate.
If you use a living trust instead of a last will, you avoid all of these negatives. When it comes to spendthrift protections, you could instruct the trustee that you name in the document to distribute assets incrementally. For example, if there are income producing assets in the trust, you could have the trustee distribute a portion of the earnings every month while the principal remains intact.
Another major benefit that comes along with the creation of a revocable living trust is the avoidance of probate. After your passing, the trustee would be allowed to distribute resources in the trust in accordance with your wishes, and the probate court would not be involved. As a result, all of the drawbacks that we touched upon above would be avoided.
In addition to the inclusion of a will or trust to facilitate postmortem asset transfers, a well-constructed estate plan will also have an incapacity component. This is important, because many elders become unable to make sound decisions at some point in time. Believe it or not, Alzheimer’s disease strikes about 40 percent of people that are at least 85 years of age, and Alzheimer’s is not the only cause of incapacity.
If you do nothing to prepare for possible incapacitation, the state can be petitioned to appoint a guardian to act on your behalf. This individual may not be the person you would have chosen yourself, and people in your family may disagree with regard to the appropriate representative.
To prevent this, you could include a durable power of attorney for health care, and another durable power of attorney for financial decision-making. The agents that you name in the documents would be empowered to make decisions on your behalf if you ever become unable to make them for yourself. Your incapacity plan can also include a living will, which is a document that is used to state your preferences with regard to the utilization of life-sustaining measures.
Download Our Free Estate Planning Worksheet!
Our Clinton Township attorneys have devised a very useful estate planning worksheet that can provide you with some valuable insight. It is being offered free of charge at the present time, and you can visit this page to obtain access to your copy. And of course, if you would like to schedule a consultation, you can request an appointment through our contact page or call us at 586-493-7661.