TYPES of ESTATE PLANNING

1. WILLS:

Subject to administration by the Probate Court and your appointed executor(s)
Advantages:

• • Nominate guardians for minor children
  • Waive a bond that would otherwise be statutorily required for an executor
  • Make specific bequests and plans for property distribution
  • The Court enforces the process

Disadvantages:

• • Exposed to Creditors, including tax and Medicaid recovery
  • Requires 6-9 months of probate administration
  • Typically requires assistance from attorneys, resulting in legal fees
  • Distributions may not be managed after death

2. BENEFICIARY & JOINT DESIGNATIONS:

Directly on titled assets
Titled assets that can name beneficiaries include:

• Bank and other financial accounts ⇒ FREE
• Real estate (Transfer on Death or TOD designation) ⇒ $250 plus recording costs
• Vehicles (Exempt to surviving spouses up to $65,000) ⇒ $17 at BMV
• Life Insurance ⇒ FREE
• Retirement Plans ⇒ FREE

Advantages:

• Private
• Often cheaper, faster, easier
• No one in charge of distributions besides institutions

Disadvantages:

• Risk of beneficiary predeceasing
• Cannot manage beyond death
• Must update with changes in titled assets

3. TRUSTS:

Allows for management of assets and distribution beyond death
Trusts may be used to:

• Avoid Probate
• Protect Privacy
• Care for a surviving spouse while protecting interest for other heirs
  • Young enough that a surviving spouse may remarry
  • Spouse is not biological parent of children
• Care for minor or disabled children
• Manage assets for persons who are financially irresponsible
• Minimize estate taxes for married couples subject to federal estate tax
• Hold out of state real estate and business interests

Types of Trusts:
Revocable (also called Living and Inter Vivos) Trust

• May be amended
• Does NOT protect assets from the costs of long-term care
• Settlor(s) may also be Trustee(s)
• Settlor(s) may withdraw assets

Irrevocable (also called Medicaid-Qualified) Trust

• Cannot be amended except by Court order
• Can protect assets against the costs of long-term care
  • Long-term plan: Fund and wait five (5) years; or
  • Crisis plan: use in collaboration with an annuity for immediate protection
• Settlor(s) may NOT be Trustee(s) if Medicaid involved
• Settlor(s) may not withdraw assets without exposing them to long-term care costs