A vehicle of asset transfer is going to be the centerpiece of your estate plan. Wills and trusts are two very commonly utilized estate planning devices. Let’s look at some commonly asked questions about these documents.
Who can execute a last will?
Any adult that is of sound mind can execute a last will. The exact legal requirements vary on a state-by-state basis. We practice law in the state of Michigan. In our state, in order for a will to be valid, you must sign your will in front of two witnesses, and the witnesses must also sign the document.
Can a will be challenged?
Yes, there are a number of different acceptable grounds for last will challenges. As we have touched upon, the person creating the last will must be fully capable of making sound decisions. Aside from incapacity, coercion, fraud, intimidation, and improper execution are other acceptable grounds.
In addition to the last will, are there any other types of wills used in the field of estate planning?
A last will is just one of a number of different types of wills that are utilized. A living will is an advance directive for health care that you use to state your final wishes with regard to the utilization of artificial life-sustaining measures. This is a document that should definitely be included within your estate plan.
There is another type of will that most people have never heard of called an ethical will. This device dates back to biblical times, and it stems from the Judaic tradition. In an ethical will, the testator writes down his or her the moral, ethical, and spiritual values in an effort to leave behind a framework for younger loved ones.
Do you lose control of assets that you convey into a trust?
It all depends on the type of trust that you create. There are irrevocable trusts, there are also revocable trusts. If you establish a revocable trust, you maintain complete control of the assets. With an irrevocable trust, you do relinquish direct personal control.
Why would you want to create a trust that you cannot revoke?
When you create an irrevocable trust, you are surrendering incidents of ownership. This can be very beneficial when certain circumstances exist. One reason to utilize this type of trust would be to reduce the taxable value of your estate. There is a federal estate tax in place that is applicable on asset transfers that exceed $11.2 million. This is the figure at the time of this writing, but there are ongoing adjustments to account for inflation.
If you were to convey assets into an irrevocable trust, they would no longer be part of your estate. Qualified personal residence trusts, grantor retained annuity trusts, generation-skipping trusts, and charitable lead trusts are some of the devices that are used to gain estate tax efficiency.
There is another reason to establish an irrevocable trust. Most senior citizens will require living assistance eventually, and many will reside in nursing homes. Medicare does not pay for nursing home care, and it is extremely expensive. Medicaid is a different government health insurance program that will pay for long-term care.
The Medicaid program is only available to people with very limited financial resources. The limit on countable assets is just $2000. To qualify for Medicaid to pay for long-term care, you could convey assets into an irrevocable Medicaid trust. You could never touch the principal, but you could continue to receive income from the trust’s earnings until you apply for Medicaid.
What is the value of a revocable trust?
A revocable living trust can be a very good alternative to a last will, and you do not have to be wealthy to reap the benefits. When a last will is used as a vehicle of asset transfer, it must be admitted to probate. This process is costly and time-consuming, and privacy is lost, because probate records are available to the general public.
If you were to use a revocable living trust as your primary asset transfer vehicle, the trustee that you name in the document would be able to follow your instructions and distribute assets to the beneficiaries outside of probate. You can also include spendthrift protections if you have concerns about the spending habits of a loved one. All of your assets will be consolidated, so the process of estate administration will be streamlined.
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We are here to help if you are ready to put a solid estate plan in place to preserve your legacy for the benefit of the people that you love. You can schedule a no obligation consultation right now if you call us at 586-493-7661.