While most of us are aware of the need to do at least a minimal amount of estate planning, few of us actually take the necessary steps to do so. According to Rocket Lawyers, more than 65 percent of Americans don’t even have a simple will—a number which is actually up from 2011. Even more women between the ages of 45-54 (67 percent) don’t have a simple will, let alone other estate planning documents. Perhaps even more shocking is that a full third of Americans say they would rather get a root canal, or do their taxes, than to create or update their will.
What is a Living Will?
A living will is a document which will provide specific medical instructions should you become incapacitated. Living wills include a healthcare power of attorney which allows you to appoint a healthcare agent who will make any decisions related to your health care should you be unable to make those decisions on your own. You can choose which life-sustaining treatments you might want should you be in a coma or have a terminal illness in your living will.
Even if you are a firm believer in do-it-yourself projects, you probably realize your limitations on some things, and hire a professional to do the job. While doing some things on your own can certainly save you money, when there is a chance that a mistake on the project could result in significant cost, it is usually better to allow a person who is trained, skilled and experienced to do the job.
Writing a will is one of the things that is almost always better left to a trained legal professional. You can, of course, find all sorts of DIY wills on the Internet, but guess what? You can also find out how to remove your own appendix on the Internet, yet the vast majority of people know better than to attempt that. There are any number of mistakes—some of them quite serious—which can be made on a DIY will.
Unfortunately, mistakes regarding estate planning abound, and these mistakes can cause serious issues after a person’s death. Your estate plan should be very specific to your particular situation, and should be motivated by considerations for your loved ones as well as sound legal analysis. Take a look at the following estate planning mistakes, and ensure your estate plan is free of those mistakes. Chances are, there is at least one that you may have been guilty of..
For those who are leaving behind a loved one with a disability, there are many things to think about, and estate planning must be done especially carefully. Otherwise, your loved one’s ability to receive certain governmental benefits such as SSI and Medicaid, could be significantly compromised after you are gone. You can set up a special needs trust in your will, and avoid these types of problems. While owning a home, a car, and normal personal effects does not affect SSI and Medicaid eligibility in itself, other assets, particularly cash in the bank could disqualify your loved one with special needs from receiving benefits. As an example, leaving that person as little as $10,000 in cash could potentially disqualify him or her from receiving Supplemental Security Income and Medicaid benefits.
Going through a divorce is one of life’s major events, and one that can leave you feeling battered and bruised. Because of this, the last thing on your mind during this difficult time is likely to be your estate plan. Yet this is one time when you absolutely need to address the issues associated with updating your estate plan. It is likely your divorce caused major changes in your personal finances as well as your overall planning objectives. First and foremost, it is highly likely you no longer want your ex to be the beneficiary of your life insurance or retirement pension. If you have children, it is even more important that you update your estate plan in order to provide for and protect them.
Pricewaterhouse Coopers recently surveyed 5,500 people between the ages of 23 and 35. The goal of the survey was to find out just how much this group really knew about personal finance, their savings, their debts and to find out how satisfied, overall, they were with their financial life. As it turned out, this group—known as the Millennial generation—are plagued by lots of debt, small savings accounts and little knowledge of personal finance. This could, in turn, have a significant effect on future generations. Some of the most troubling issues which came out of the study included the following:
- At least half of those surveyed said they would be unable to come up with $2,000 in the event of an emergency.
- More than half of those surveyed don’t believe they will ever be able to repay their student loans, regardless of their income bracket.
- A bit more than forty percent of those surveyed have taken advantage of some type of “alternative financial services product,” including high interest payday and auto title loans, advances on tax refunds, pawning items at a local pawnshop, and obtaining furniture and electronics at rent-to-own stores.
- Only about a third of those surveyed have a retirement account, and nearly one-sixth of those who did have a retirement account had taken out a “hardship” withdrawal within the past year.
The emotional trauma of divorce often leads spouses to overlook important financial issues as well as the long-term effects divorce can have on wills, trusts and estates. States vary on how they deal with an ex-spouse who attempts to collect on an inaccurate will. Arizona, Texas, California and some other states have laws in place which stop an ex-spouse from collecting on a will that is no longer accurate. Other states will simply cross out the name of the ex-spouse and move on to the next beneficiary in line, when the will goes through probate. When a will is dealt with privately, rather than going through probate, there are no guarantees whether the stated provisions will be honored.
Those who make very large gifts during their lifetime may end up owing federal gift tax. But generally speaking, most ordinary gifts aren’t taxed. Only two states, Connecticut and Minnesota impose a state gift tax. Gift tax applies to gifts…
Special Needs Trusts—sometimes known as a Supplemental Needs Trust—are legal documents designed to benefit those with a disability. While a Special Needs Trust is often a “stand alone” document, it could also be part of a person’s will or trust. Special Needs Trusts have been used for more than two decades, after being granted legal status by Congress in 1993. A person who has a mental or physical disability or those with a chronic illness, are allowed, under a Special Needs Trust, to have (held in trust for their benefit) unlimited assets. These assets are then not considered “countable” against qualification for specific government benefits. Subsidized housing, Medicaid, Supplemental Security Income and vocational rehab are just some of the benefits a person named in a Special Needs Trust could still remain eligible for. The idea behind the Special Needs Trust is to provide supplemental care above what government programs would provide.