Estate plans are important tools used to plan for retirement and end of life care. Estate plans are not just for wealthy individuals. Anyone with income or property will benefit from an estate plan. The purpose is not necessarily to distribute a large amount of assets but rather to be clear on how you wish for your assets to be distributed. This is particularly true in families where there are multiple siblings. A clear plan and explanation of the distribution of assets will go a long way to diminish the possibility of sibling litigation later. Furthermore, estate plans preserve the assets in the estate for the beneficiaries instead of owing a large portion of your estate to the I.R.S.
In addition to assets, an estate plan should include healthcare and healthcare decision-making powers. The distribution of assets and the healthcare component are interconnected because in order to pay for long-term healthcare, it may be necessary to liquidate portions of the estate. Careful estate planning will ensure that even though decision-making powers may be granted to a third party later in life, your individual will and estate plan are preserved.
Not Anticipating Disability or a Need for Long Term Care
Many people make the mistake of waiting too long to create an estate plan. Sadly, forty percent (40%) of individuals in nursing homes are not elderly but rather suffer from an illness or disability that prevents self-care. Unforeseeable events happen everyday. The very best time to plan for the future is while you are young and healthy and able to make sound decisions. An unforeseeable accident or illness that results in disability can have disastrous consequences for you and your family, if you are unprepared.
The average monthly cost of nursing home care in the United States is six thousand dollars ($6,000). This amount sounds almost prohibitively expensive but with proper legal planning, costs of long-term healthcare will be manageable. An estate planning attorney can help determine whether you are eligible for Medicaid. Medicaid planning must be done well in advance of the time at which you apply, so begin speaking with your attorney at least five years before you hope to apply for Medicaid.
Another tool for long-term care is a durable power of attorney. This document will give a trusted individual the power to make financial decisions on your behalf if you become incapacitated. Because of the nature of the power of attorney document, it is important that these documents are only crafted by experienced and trusted legal professionals. An example of the Georgia financial power of attorney form can be found here. The form is authorized by statute at O.C.G.A. § 10-6-140.
Similarly, the Georgia Advanced Directive for Healthcare form will appoint a trusted agent to make healthcare decisions on your behalf in the event of incapacity. Advanced healthcare directives are sometimes called “living wills”, not to be confused with the will that serves to distribute assets. It is important to note that if an individual has a Georgia Physicians Order for Life Sustaining Treatment (POLST) in place, the POLST order will usually trump the healthcare directive. The difference between these two forms is that the POLST form is a medical order that is filled out under the guidance of a physician, while the advanced directive for healthcare is a legal order that is completed under the guidance of an attorney. Since the POLST is a medical order, doctors feel more comfortable following this order in the event that an individual has both documents in place.
Not Informing Family Members about the Estate Plan
Discussing your death with family members can be uncomfortable and sad. However, it is an important conversation to have with loved ones because, in the event of your illness or death, administrative legal issues should not be a source of additional stress. In order for your estate plan to actually serve its purpose, family members and beneficiaries must be aware of the plan and must be able to locate the applicable documents. The estate plan is most efficient when trusted family members know where important documents are kept including: the will, life insurance policies, the power of attorney, and the healthcare directive. As an example, the power of attorney documents are usually kept with an individual’s attorney or in a safety deposit box until the time at which the documents are needed. When the power of attorney needs to be exercised, the individual granting the power has become incapacitated and may not be able to retrieve the documents. The person being granted the power will need to present the original copies of the documents anytime he or she wishes to exercise the power. Likewise, an advanced healthcare directive must be given to the doctor or hospital so it can be placed in the patient’s file. Without family members’ access to these documents, the plan is virtually worthless.
Using a Form or Website to Generate a Will
Use of a pre-printed will can lead to many problems later. First, different states have different requirements for the proper way to execute the will. If the will is not executed properly, it is ineffective. Merely filling out the form and signing it, will not make the will enforceable. Secondly, universal forms do not account for an individual’s personal circumstances which make form wills more vulnerable to litigation. Particularly when an individual as a large amount of assets or has minor children, it is imperative that the will be tailored to the needs of the individual and his or her family. Lastly, people often choose form wills to save the cost of hiring an attorney. Attorneys will usually charge a flat fee for drafting a will and an experienced attorney will be able to draft a will fairly quickly. The one-time cost of having a properly drafted will can save hundreds of thousands of dollars in estate taxes and legal fees later thus, preserving your estate for your family.
In addition to a will written will, the entire plan should be revisited every few years or after major life events occur. Situations such as births, deaths, illnesses, and other unexpected life events may change how you wish to distribute your estate or to whom you wish to grant decision-making powers. A will that is updated regularly is more likely to be fully enforced as the deceased intended.
In addition to life events, an estate plan may need to be modified to accommodate changes in the law. Tax laws are constantly changing. The best plan to preserve your estate may not remain the best plan ten years later if the tax laws change.
Not Utilizing Trust Accounts
Trust accounts are an important tool in estate planning because using a trust will avoid the probate process when assets vest to your beneficiary at the time of your death. The probate process varies in each state but can be long, expensive, and stressful. In Georgia, the probate process is quite efficient in comparison to that of other states but a trust will still save the beneficiary vast amounts of time and several hundred dollars in court and attorneys fees. There are two types of trusts, revocable and irrevocable. The major difference between the two is that a revocable trust can be modified later while an irrevocable trust cannot be modified and is essentially a transfer of ownership to the trustee. Which type of trust is right for you will depend on the goal of your estate plan. An attorney will be able to advise you on which trust is right for you.
Trusts are also utilized to avoid large estate taxes at the time of death. It is often assumed that trusts are only for wealthy people. This is just not true. Almost any asset can be placed within a trust to be protected, including real property and life insurance policies. A trust may be the best way to preserve your assets for your family.
While starting early is best, it is never too late to create a proper estate plan. The best estate plans incorporate a will and trusts with healthcare directives and power of attorney. The estate plan and the location of all relevant documents should be fully explained to family members. Your estate plan will allow you to best provide for yourself at the end of life and to continue providing for your loved ones, even after you are gone. The peace of mind gained for yourself and your family’s future is well worth the time and effort now.
If you need assistance with a will or with planning your estate, call us at 770-609-1247 to speak with one our experienced estate planning attorneys.