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Why An Estate Planning Is Needed In Utah

attorney for living will

Estate planning means preparing for the inevitabilities of life. People get sick or hurt, and you need a plan in place to determine what kind of medical care you’ll receive if this happens to you. People become incapacitated, unable to make important decisions on their own, or unable to live independently. And of course, people die. Estate planning helps to protect your family and your assets in any of these unfortunate situations. Unfortunately, far too many people don’t know what a complete estate plan includes or how to go about creating one. Making an estate plan involves way more than writing up a will, and you should ideally get legal help with it so you can use the right estate planning tools in the right way. If you’re unsure where to get started, or if you want to learn more about the most important aspects of estate planning, this guide will help.

Steps Of Estate Planning

The steps involved in making an estate plan include the following:
Identify your goals for creating an estate plan
Different people have different reasons for making an estate plan. Some of the most common reasons include the following:
• To ensure minor children are cared for if parents die before the children become adults
• To ensure pets are cared for and financially provided for if something happens to their owners
• To ensure that surviving family members are financially taken care of in the event of a death
• To ensure a family business remains operational and within the family after a death
• To control what happens to assets after a death occurs
• To protect wealth, including a family business or other assets
• To prepare for incapacity by providing instructions for medical care and specifying who should make decisions and manage the affairs of the incapacitated person
• To make a plan for charitable giving
• To make a plan to facilitate the timely and cost-effective transfer of assets outside of the probate process
• To reduce or avoid estate tax on a larger estate
• To take more control over what happens to an inheritance, such as ensuring money is used only to pay for a college education or ensuring money doesn’t go to a child until after his or her 21st birthday
• To provide for a disabled loved one who is receiving government benefits that could be lost due to an inheritance, or to provide for a disabled loved one who cannot manage an inheritance independently
You may also have other reasons to prepare for illness, injury, or death. Consider the issues most likely to affect you and your family if you get sick or pass away.

List the assets you want to include

One of the key reasons for creating an estate plan is to make sure your assets are easily transferred to the new owners you’ve designated. You’ll need to know exactly what assets you want to include in your estate plan. This will not only help to ensure that you have appropriate plans in place to transfer all of your wealth, but also help your family members see exactly what you own so that nothing falls through the cracks.
Some of the assets you’ll want to address in your estate plan include:
• Real estate you own
• Vehicles you own
• Your ownership interest in a business and its assets
• Intellectual property you own, such as valuable patents or a monetized social media account
• Investment accounts
• Personal property including jewelry, books, art, and furniture
• Life insurance policies
When you make a list of assets, it can be helpful to determine how those assets are owned and whether you have any designated beneficiaries on the accounts.
Identify the risks to your assets and make plans to protect them
Keeping your wealth safe is a key part of securing your legacy. It’s important to identify potential risks you could face during your lifetime that might lead to a loss of wealth and an inability to pass money or property on to your family members.
Some of the risks you may need to think about include:
• Losses due to claims against your business: If you own a company, your personal assets are vulnerable unless the business is properly structured. You can consider incorporating the business. Not only can this help protect personal assets, but it can also make it easier to transfer the business to loved ones.
• Losses due to nursing home costs: Nursing home care is extremely expensive. And, except in rare cases, it won’t be covered by Medicare or by any private health insurance policies you may have. You’ll need to make a plan to afford care. This could include buying long-term care insurance, or it could involve making a “Medicaid plan.” A Medicaid plan involves structuring the ownership of wealth — usually using a Medicaid asset protection trust so it doesn’t count against you when a determination is made as to whether you qualify for Medicaid, which covers long-term care. By making a Medicaid plan, you may be able to get Medicaid to pay for nursing-home or long-term care while keeping your wealth safe.
• Losses due to Medicaid estate recovery: Some of your assets, such as your primary home, receive protections during your life so that you may be able to hold on to those assets while still getting Medicaid to pay for a nursing home. However, states can make claims against your estate in a process called “Medicaid estate recovery” after your death. This could potentially lead to the loss of your home or other wealth that you owned if you qualified for Medicaid coverage after age 55 or if you received Medicaid coverage for long-term care. You can use tools such as a Medicaid asset protection trust to help you prevent this loss so that your home and other property can go to your family.
• Losses due to creditor claims: Creating an irrevocable trust could help to protect wealth so if creditors make claims against you, you won’t lose money or property that you hope to pass on to heirs. Thinking about the risks to your wealth is beneficial so you can incorporate plans for asset protection into your estate planning process.
Identify the loved ones you want to provide for and protect
You’ll need to think about everyone you want to protect and provide for if something happens to you. This could include:
• Spouses
• Children
• Pets
• Parents
• Friends
• Business partners
You need to make a list of the loved ones you want to consider in your estate planning because you may need to use special tools or take additional steps to protect certain family members or friends.
For example, if you have children who are under the age of 18, you’ll need to not only ensure that they’re financially provided for but also make certain you name a trusted person to act as guardian in case both parents pass away or become incapacitated before the children reach adulthood.

Decide whether you want to make charitable contributions

You’ll also have to consider whether you want charitable giving to be a part of your legacy. Consider organizations that you support and think about whether you want to donate any money or property to them. If so, you can identify the most effective way to make a gift as part of your estate planning process. You could, for example, create a charitable remainder trust, which is a tax-exempt irrevocable trust that allows beneficiaries of your choosing to receive income from the trust for a period of time before the remainder of trust assets are donated to charity. Or, of course, you could also make a direct gift to a charity upon your death, or you could even choose to create and endow your own foundation with the help of an attorney.

Determine whether your potential heirs or beneficiaries have any special needs

Perhaps your loved ones are self-sufficient, and you can provide them with an inheritance just to improve their quality of life. In other circumstances, however, they may have specific needs that you must address as part of your estate planning process. For example:
• Minor children will need a guardian to be named for them and will likely also need substantial financial support. Unfortunately, minor children cannot inherit money directly, so you’ll need to consider the use of certain legal tools, such as a trust, to provide funds for them and ensure a responsible person manages that money.
• Pets may need financial support and cannot inherit directly. If you want to ensure that your money goes toward providing the best quality of life for your pets, then creating a trust and providing specific instructions for how the funds are to be used can be a smart approach.
• One or more of your heirs may be financially irresponsible. You may be concerned that your heirs will go bankrupt, get divorced, or squander an inheritance quickly, so you may want to use special tools such as a spendthrift trust to provide an inheritance that they can’t waste. A spendthrift trust allows you to name a trustee to manage the wealth you provide. You can name the less responsible heir as the beneficiary and provide the reliable trustee with specific instructions on when and how money may be doled out to the beneficiary. Because the beneficiary can’t access the trust assets, the wealth is kept safe from loss.
• You may have a non-citizen spouse who could end up owing estate tax. While you can normally pass as much wealth as you want to your spouse without owing any estate tax, this isn’t the case if your spouse isn’t a citizen. If your estate is large enough to owe taxes on and your spouse is not a citizen, then you may need to use a Qualified Domestic Trust to claim the marital deduction and defer taxes.
• You may have a disabled heir. Your disabled heir may be receiving Medicaid or other benefits from the government. Many of these benefits are means-tested, which means people with too many financial resources lose access. Allowing a disabled heir to inherit directly could thus cause serious problems. Plus, your disabled heir may not be able to manage the money appropriately. Using a special needs trust allows you to transfer assets to the trust. A trustee manages the money for the disabled heir, while the disabled heir doesn’t own the assets and thus doesn’t lose any government benefits.
In any situation where your heirs can’t just be given money or property when you die, you’ll need to identify the right estate planning tools for transferring wealth to your loved ones.

Determine whether you’ll owe estate tax

The federal government and some state governments charge taxes on assets transferred after your death. Generally, you can transfer as much money and properties as you want to your spouse without owing any estate taxes. But if you’re going to leave assets to someone other than your husband or wife, you need to know the rules on estate tax. However, some states charge estate tax on much smaller sums of money (though the thresholds are still in the millions). If it looks as though your estate will be taxed, you may be able to use estate planning tools to reduce or avoid that tax. For example, you can make inter vivos gifts, which are gifts made during your lifetime. So long as you keep those gifts to each recipient below the threshold at which you trigger gift tax, you can reduce your taxable estate without having to pay any taxes on transferred wealth. There are many creative approaches to transferring money while reducing or avoiding gift and estate tax. For example, some people create family limited liability companies, or family LLCs, and give the company investments or assets to manage. The owner of the assets is the controlling member of the LLC. Other family members are given an ownership interest in the LLC, but no control. Their interest is worth little because they don’t have control, but they get an ownership stake in the assets the LLC owns.

Decide whether avoiding probate is one of your goals

One of the key reasons many people make an estate plan is to transfer assets outside of probate. Probate is a process in which estates are settled. After almost any death, assets have to pass through probate unless the deceased had a very small estate or unless the deceased made plans to transfer assets outside of probate. When assets are passed through probate, the executor of the estate or a personal representative appointed by the court needs to file lots of paperwork with the court. An accounting of estate assets needs to be made. An opportunity is given for creditors to make claims. All potential heirs or beneficiaries have to be notified. The executor has to keep careful accounting of estate assets. The will needs to be presented for probate, and there’s an opportunity for it to be contested. The entire probate process can take months to complete and can lead to costly legal fees. And because it happens in court, court records are created that can become public record. Plainly, there are many reasons to avoid probate at all cost. That means you can’t simply transfer assets through a will. You’ll have to use other tools, such as joint ownership, pay-on-death accounts, and living trusts that allow assets to be passed through trust administration.

Think about what will happen if you become incapacitated

Estate planning involves not only making plans for your death, but also preparing for incapacity. You can address this with advanced directives, such as a living will and a healthcare power of attorney. With a living will, you either agree or decline in advance to go through certain extraordinary lifesaving measures. You can specify, for example, that you don’t want to be kept alive with a feeding tube or ventilator. If you want no extraordinary measures used to prolong your life, you can make a “do not resuscitate” order. And with a healthcare power of attorney, you name a person you trust to make decisions for you if you cannot consent due to incapacity and haven’t addressed the issue in your living will. You can use a living trust and name a backup trustee who has the right to manage trust assets if something happens to you. Alternatively, you could create a power of attorney and give a person who you choose as your agent authority to make decisions and manage your affairs. You’ll want to create a general power of attorney so the person you designate has broad authority to act on your behalf. And you’ll need to make it durable, because otherwise the grant of authority will end upon your incapacity. Some states default to your power of attorney being durable unless you say otherwise, but in others, the opposite is true, and your agent will lose the ability to act for you at the very time you need him or her most unless you’ve specified that your power of attorney must be a durable one. If you cannot live independently, you may need long-term care at home or in a nursing home. This can be costly and won’t be covered by Medicare in most circumstances unless you need skilled nursing care. A Medicaid plan, which was discussed above and which involves structuring ownership of assets so you can qualify for Medicaid when you require care, could help you ensure you don’t lose everything. A long-term care insurance plan may be a good alternative; especially if you can lock in an affordable rate by enrolling well before you’ll need coverage say, around age 50. When you name an agent using power of attorney, or when you name a backup trustee for your living trust, that person will have a fiduciary duty to act in your best interests. This is the highest duty owed under the law. It’s the same one a lawyer owes to a client.

Make sure you have the right insurance policies

Many people need to buy life insurance as part of their estate plan. You need life insurance if your death would create a financial hardship for people you care about.
For instance, you should purchase a life insurance policy if:
• Your family depends on your income
• You have business partners who would need to buy out your interest in the company after you pass on so they can continue operations
• You have a minor child and you want your child to be provided for if something happens to you.


Legal Assistance

Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.

 

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