With this in mind, we are going to look at some commonly made estate planning mistakes in this post.
Expecting Too Much From Medicare
If you know that you are going to qualify for Medicare when you are 65, you will naturally have a certain sense of security. Yes, there are out-of-pocket expenses, but the program is set up to make them manageable for the majority of benefit recipients.
It’s hard to wrap your head around this reality when you have always been fully capable of handling your own responsibilities, but most seniors will need living assistance. Many older folks can get the help that they need in their own homes from family members and friends for a while.
However, at some point, nursing home care is the only option for more than one third of elders. These facilities are very costly, and Medicare does not pay for long-term care. A significant portion of your legacy could wind up in the coffers of a nursing home if you have to pay out-of-pocket.
Fortunately, there is a solution in the form of the Medicaid program. It will pay for the custodial care that nursing homes provide. The problem is that there is a low $2000 asset limit.
You could set up a Medicaid trust to protect your assets over $2000. Though you would not have access to the principal, you would be able to receive income that is generated by the assets.
There is a five-year Medicaid look back period. The transfers to the Medicaid trust must be completed at least 60 months before you submit your application for Medicaid coverage, so advance planning is key.
Failure to Consider Estate Administration
Many people have no understanding of the estate administration process, so they make uninformed decisions that yield negative consequences. Contrary to popular belief, in many instances, if you use a Will to state your final wishes, your heirs may not receive their inheritance in a timely manner.
The Will may be admitted to probate, which is a long and costly legal procedure. It will usually take about eight months to a year or more, and inheritances are usually not distributed until the estate has been closed by the court.
Anyone that wants to challenge the Will can come forward during probate, and it is a public proceeding. Interested parties can access your private documents to find out how the assets were distributed.
If you use a living trust as your primary estate planning document instead of a Will, you would act as the trustee while you are living. After your passing, the successor trustee that you designate would distribute assets to the beneficiaries in accordance with your wishes. The probate court would not be involved, so the process would be streamlined and simplified. This is one of the benefits that living trusts provide, but there are other benefits that we will cover in future blog posts.
No Incapacity Plan
Some people do not consider the importance of incapacity planning. You should definitely include advance directives for health care to assert medical choices that will be honored in the event of your incapacity.
There can be situations that arise when you are incapable of communicating your wishes regarding health care. To account for this, your plan should include a durable power of attorney for health care. The individual you name as the agent would make health care decisions for you if it ever becomes necessary.
Another health care directive that can be part of the plan is a living will. This document allows you to state your preferences with regard to the use of life-sustaining measures like artificial nutrition and hydration, resuscitation, and mechanical respiration.
Because of provisions contained within the Health Insurance Portability and Accountability Act (HIPAA), doctors cannot share medical information with anyone other than the patient. As a response, you should name your agent in a HIPAA release form.
When it comes to financial decision-making, you can empower a disability trustee if you are using a living trust. To account for property that is not in a trust, you can add a durable power of attorney for property.
Schedule a Consultation Right Now!
The best way to avoid mistakes is to work with our estate planning attorney to put your plan in place. If you are ready to get started, you can send us a message to request a consultation, and we can be reached by phone at 630-568-8611.
- Four Documents That Should Be Part of Your Estate Plan - March 2, 2021
- Can You Dissolve a Trust? - February 25, 2021
- Illinois Medicaid Eligibility: Key Figures for 2021 - February 22, 2021