Barnes Lipscomb & Stewart PLLC

Planning for Long-Term Care and Taxes

“Many families discover that trying to mitigate the cost of long-term care can conflict with another common retirement concern—reducing taxes for retirees and their heirs.”

Retirement brings about several risks including longevity, market risk and inflation, paired with two of the most common concerns of later life: the costs of long-term care and how to reduce or avoid taxes during retirement and upon transferring assets to heirs. These concerns are addressed in a recent article from Kiplinger, “Long-Term Care Planning vs. Taxes: Finding a Healthy Balance.”

Long-term Care Insurance (LTC) is recommended for individuals and families under age 65 with investable assets ranging from $1.5 million to $3 million. The limits on net worth and age are based on striking a balance between the coverage cost and what benefits would be received. The initial goal of LTC insurance to finance the cost of assisted living and skilled medical care has now become more of a hedge against the final bill for LTC than total coverage of expenses.

With the chance of needing to live in an elder care facility and the average stay of three or more years, plus the cost of skilled care, this is now a major reason for people declaring bankruptcy during retirement. LTC insurance was sold as protection, but as life expectancies with medical conditions have increased, so has the cost of care. As a result, premiums have skyrocketed, and benefits have been reduced.

Universal Life Insurance with Accelerated Benefit Riders is an option better suited for people up to age 70 with $3 million to $5 million in investable assets. The premiums are high, but the policies act as a multi-use tool, providing coverage and the opportunity for wealth leveraging for the next generation.

Accelerated Benefit Riders (ABRs) are a special kind of life insurance rider triggered by medical conditions allowing the death benefit of the policy to be advanced to the owner during their lifetime, often up to 100% of the policy’s face value, for funding an extended stay in an assisted living or skilled care facility.

Asset Protection Trust Planning is the focus for most Americans with a net worth of less than $2 million. This is where the pressure of the costs for skilled nursing care is felt more intensely. Those with fewer assets have more to lose and need protection more than the wealthy.

Self-settled wholly discretionary grantor trusts, which are irrevocable, are used to house certain assets Medicaid would expect families to liquidate or spend before approving benefits to cover the bulk of the cost. Certain provisions of irrevocable trusts can be changed depending on the state of residence, such as who the trustee is and who the beneficiaries are.

The trustee should not be one of the grantors of the trust, and there is a five-year look-back on the trust’s funding. For example, if a grantor needs long-term care five years after assets were moved into the trust’s name, other assets will be needed to pay for the care.

Families are encouraged to plan early—ideally, just before or in the early years of retirement. The needs of the family drive which assets are placed in the trust. However, not everything goes. For instance, placing IRAs or other qualified accounts into an irrevocable trust would be unwise because this would be a fully taxable event. Roth IRAs may be placed in a trust. However, then they would lose their Roth status.

Careful planning with an experienced estate planning attorney can establish a balance between maximizing protection and minimizing taxes.

Reference: Kiplinger (March 20, 2023) “Long-Term Care Planning vs. Taxes: Finding a Healthy Balance”

How Do Inheritance and Estate Taxes Work?

“Federal estate taxes were created in 1916, taxing estates valued at over $5 million. This amount changed to $50 million in 1932. In 1940, it dropped to $10 million, then $5, then $3. In 2002-2007 estates worth more than $2 million paid the tax.”

The federal estate tax has continued to increase. In 2023, the federal estate tax only applies to estates worth more than $12.92 million. For a married couple, the exemption is $25.84 million, explains a recent article from The Alliance Times-Herald, “Estate, Inheritance Taxes.” Some people believe there should not be a federal estate tax, since anyone with enough assets to pay it also has the resources to avoid paying it.

Every year, married couples can give away a large amount of tax-free gifts to other people, including family members. The annual gift tax limit is currently $17,000 per person, so a married couple may gift $34,000 in annual tax-free gifts, reducing the value of their taxable estate ad benefiting their beneficiaries.

Estate taxes can also be avoided through the use of trusts. Most trusts give the surviving spouse rights to the assets with no estate tax on the assets put into the trust. For example, the surviving spouse may draw income from the trust, live in the house, etc. When the surviving spouse dies, the trust assets are then distributed to beneficiaries.

A charitable trust names a charitable organization as the beneficiary of the trust assets. Assets in the charitable trust can include cash, stocks, real estate and other property. Extremely high-net-worth families benefit from the use of foundations to own assets.

A Family Limited Partnership (FLP) is useful, since it allows family members to pool assets and then shift them to other family members. This is commonly seen in privately held family businesses and agriculture. Assets in an FLP transferred to others are removed from the estate, with significant estate tax savings. They are also used as a strategy to transition family farms from one generation to the next. The older generation manages the operation at first, and the younger generation, over time, can take over the operation.

Six states are still collecting inheritance taxes, Pennsylvania and Nebraska among them. Inheritance taxes are not calculated on the estate’s total but on the amount paid to each person who receives something from the estate.

Inheritance taxes are levied on property inherited from parents, siblings, extended family and non-relatives. Only spouses are exempt. Tax amounts are typically based on the kinship relationship between the beneficiary and the deceased.

Families don’t have to be extremely wealthy to use trusts to protect assets from state estate taxes. They are also helpful when the family wishes to maintain their privacy, since assets held in trust do not go through probate and will not become part of the public record.

For families with privately owned businesses of any size, an experienced estate planning attorney can help create a Family Limited Partnership to work with the rest of the family’s estate plan. This will ensure the family business passes to the next generation without conflicting with the estate plan.

Reference: The Alliance Times-Herald (March 22, 2022) “Estate, Inheritance Taxes”

Estate Planning Mistakes to Avoid

“It is a common misconception that only the ‘uber rich’ need an estate plan, when in actuality, everyone should have a plan.”

If you fail to create an estate plan, your state’s laws will determine who will inherit your assets and if you have minor children, the court will appoint a guardian to raise your children. The state's laws may not be what you had in mind for your legacy. However, this happens if you fail to have an estate plan, as described in the article “AVOID THESE (estate planning) MISTAKES!” from Westchester & Fairfield County Business Journals.

Failing to have a plan or review your estate plan regularly. Failing to have a plan is the most common mistake Americans make. Unfortunately, less than half of all U.S. adults have estate planning documents in place, and only 36 percent of parents with minor children have end-of-life plans. You may feel estate planning is optional. However, everyone over 18 should have a plan.

It doesn’t have to be complicated. However, a simple will prepared by an experienced estate planning attorney indicating who should receive your assets upon death and advance directives indicating who will handle medical (health care proxy) decisions and financial power of attorney decisions in case of incapacity is a good start. Once your plan is in place, reviewing it every three to five years is a good idea.

Thinking that a trust will make things too complicated or neglecting to fund a trust. Revocable and/or irrevocable trusts are excellent ways to avoid probate, the surrogate court’s process to validate a will and executor and specify how funds will be distributed to beneficiaries. Using a revocable trust and properly funding can eliminate the need for some or all of your estate to pass through probate, depending on how the trust is structured.

Relying too heavily on beneficiary designations. Far too many people think they can avoid having an estate plan by depending on beneficiary designations on all assets. For example, let’s say you have an investment account in your name alone, with your spouse and children as beneficiaries. From a tax planning perspective, you may lose tax planning opportunities if funds are passed directly to a beneficiary spouse. If a beneficiary is a minor and receives the assets, the court must appoint a guardian. Those funds would then be held in control of the court until the minor beneficiary reaches the age of majority. A trust for a minor child is one way to solve this problem.

If a named beneficiary dies before you without a secondary or surviving beneficiary, the account will become part of the probate estate. If you have received Medicaid benefits, whether home care or nursing home care, the asset will be subject to any claims made by Medicaid or creditors.

Using online templates and forms. Estate planning attorneys devote a fair amount of time to fixing the mistakes made by people downloading online forms. They may be inexpensive initially. However, mistakes and/or omissions can’t be corrected if an individual becomes incapacitated or deceased. In addition, when the forms don’t comply with state-specific laws, they may become invalid.

Keeping estate plans and wishes a secret. If family members or trusted friends don’t know you have an estate plan or don’t know where documents are located, it makes their tasks very difficult. The person you name as your health care power of attorney, for instance, needs to know where all of your advance directives are located and be able to access them in the event you become incapacitated. Similarly, your executor needs to know where wills and trust documents can be found. Equally important is discussing your wishes for burial, funeral and other arrangements.

Having a plan for incapacity and death is a gift to those you love, ensuring they know what to do, sparing them from a frantic search for time-sensitive documents and alleviating them from guessing what you would have wanted.

Reference: Westchester & Fairfield County Business Journals (March 16, 2023) “AVOID THESE (estate planning) MISTAKES!”

Planning for Long-Term Care with Irrevocable Trusts

“With the possibility of needing long-term care in the future, many people are interested in proactive planning.”

One of the best strategies to plan for long-term care involves using an irrevocable trust. However, the word “irrevocable” makes people a little wary. It shouldn’t. The use of the Intentionally Defective Grantor Trust, a type of irrevocable trust, provides both protection and flexibility, explains the article “Despite the name, irrevocable trusts provide flexibility” from The News-Enterprise.

Trusts are created by an estate planning attorney for each individual and their circumstances. Therefore, the provisions in one kind of trust may not be appropriate for another person, even when the situation appears to be the same on the surface. The flexibility provisions explored here are commonly used in Intentionally Defective Grantor Trusts, referred to as IDGTs.

Can the grantor change beneficiaries in an IDGT? The grantor, the person setting up the trust, can reserve a testamentary power of appointment, a special right allowing grantors to change after-death beneficiaries.

This power can also hold the trust assets in the grantors’ taxable estate, allowing for the stepped-up tax basis on appreciated property.

Depending on how the trust is created, the grantor may only have the right to change beneficiaries for a portion or all of the property. If the grantor wants to change beneficiaries, they must make that change in their will.

Can money or property from the trust be removed if needed later? IDGT trusts should always include both lifetime beneficiaries and after-death beneficiaries. After death, beneficiaries receive a share of assets upon the grantor’s death when the estate is distributed. Lifetime beneficiaries have the right to receive property during the grantor’s lifetime.

While grantors may retain the right to receive income from the trust, lifetime beneficiaries can receive the principal. This is particularly important if the trust includes a liquid account that needs to be gifted to the beneficiary to assist a parent.

The most important aspect? The lifetime beneficiary may receive the property and not the grantor. The beneficiary can then use the gifted property to help a parent.

An often-asked question of estate planning attorneys concerns what would happen if tax laws changed in the future. It’s a reasonable question.

If an irrevocable trust needs a technical change, the trust must go before a court to determine if the change can be made. However, most estate planning attorneys include a trust protector clause within the trust to maintain privacy and expediency.

A trust protector is a third party who is neither related nor subordinate to the grantor, serves as a fiduciary, and can sign off on necessary changes. Trust protectors serve as “fixers” and are used to ensure that the trust can operate as the grantors intended. They are not frequently used, but they offer flexibility for legislative changes.

Irrevocable trusts are an excellent way to protect assets when drafted with both protection and flexibility in mind.

Reference: The News-Enterprise (March 18, 2023) “Despite the name, irrevocable trusts provide flexibility”

Single Parents Need Estate Planning

“Nobody likes thinking about what happens if they should become incapacitated or die. However, we all need to have a plan in place for just these possibilities.”

For single parents, estate planning is an even greater need than for married couples, advises a recent article, “Estate planning 101 for single parents,” from The Orange County Register. However, even single parents blessed with a strong support system need an estate plan to protect their children. Here’s why.

An estate plan names a guardian in the will. Who will raise your children and become their guardian if you unexpectedly die or become incapacitated? If the other parent is surviving and has not lost parental rights, they will have custody of the child or children as a matter of law. This is not guardianship.  They are the legal parent.

However, if the other parent is deceased or their parental rights have been terminated, the court will need to grant guardianship. You need two documents to name a person whom you would want to raise your child. One is your will. It’s a good idea to list more than one person, in case someone named cannot or doesn’t wish to serve.

For example, “My mother, Sue Sandler, and if she cannot serve, then my brother Mike Sandler, and then my friend Leslie Strong.” There’s no guarantee that the court will appoint any of these people.  However, the court may consider the parent’s preferences.

Depending upon your state, you could have a “Nomination of Guardian” document separate from your will. Remember that your will becomes effective only upon your death. If you become incapacitated, this document would be considered when determining who will be named guardian.

You’ll also want a health care directive. This document states who is authorized to make health care decisions for you, if you cannot, and provides general directions about what kind of care you want to receive.

If there are minor children, a “Nomination of Health Care Agent” should also be in place, where you nominate another person to make healthcare decisions for your children if you cannot. For example, if you and your children are in a car accident and you are incapacitated and can’t respond to authorize health care, hospitalization, or other care for your child.

A will and a trust are critical if you have minor children. The will sets forth your nomination of guardians, and a trust can hold your assets, including life insurance proceeds and any other significant assets for the benefit of your children as directed in the trust. The trust is managed by the successor trustee appointed in the trust document. Even if the other parent lives and the child lives with them, the trust is controlled by the trustee, so your ex cannot access the money and the children receive the funds according to your wishes.

If you have only a will and die, your estate will go through probate and assets will effectively be put into a trust for the child and be given to the child when they become of legal age. However, most 18 or 21-year-olds are not mature enough to manage large sums of money, so a trust managed by a responsible adult with a framework for distribution will ensure that the assets are protected.

Once a child reaches the age of legal majority, they are considered an adult. As a result, the nomination of a guardian is no longer necessary, nor is the nomination of a health care agent. However, this is when they need to execute their health care directive, power of attorney and HIPAA form. If they were to become seriously sick, even as their parent, you would not have any legal right to discuss their care or treatment with health care providers without these documents.

Reference: The Orange County Register (March 12, 2023) “Estate planning 101 for single parents”

Protecting Digital Assets in Estate Planning

“Cryptocurrency has become a new wrinkle in the development of an estate plan.”

The highly secure nature of crypto assets results largely from the lack of personally identifiable information associated with crypto accounts. Unfortunately, this makes identifying crypto assets impossible for heirs or executors, who must be made aware of their existence or provided with the information needed to access these new assets.

The only way to access crypto accounts after the original owner’s death, as reported in the recent article “Today’s Business: Cryptocurrency and estate planning” from CT Insider, is to have the password, or “private key.” Without the private key, there is no access, and the cryptocurrency is worthless. At the same time, safeguarding passwords, especially the “seed” phrases, is critical.

The key to the cryptocurrency should be more than just known to the owner. The owner must never be the only person who knows where the passwords are printed, stored on a secreted scrap of paper, on a deliberately hard-to-find thumb drive, or encrypted on a laptop with only the owner’s knowledge of how to access the information.

At the same time, this information must be kept secure to protect it from theft. How can you accomplish both?

One of the straightforward ways to store passwords and seed phrases is to write them down on a piece of paper and keep the paper in a secure location, such as a safe or safe deposit box. However, the safe deposit box may not be accessible in the event of the owner’s death.

Some people use password managers, a software tool for password storage. The information is encrypted, and a single master password is all your executor needs to gain access to secret seed phrases, passwords and other stored information. However, storing the master password in a secure location becomes challenging, as information cannot be retrieved if lost.

You should also never store seed phrases or passwords with the cryptocurrency wallet address, which makes crypto assets extremely vulnerable to theft.

This information needs to be stored in a way that is secure from physical and digital threats. Consider giving your executor, a trusted friend, or relative directions on retrieving this stored information.

Another option is to provide your executor or trusted person with the passwords and seed phrases, as long as they can be trusted to safeguard the information and are not likely to share it accidentally.

Passwords and seed phrases should be regularly updated and occasionally changed to ensure that digital assets remain secure. If you’ve shared the information, share the updates as well.

A side note on digital assets: the IRS now treats cryptocurrency as personal property, not currency. The property transaction rules applying to virtual currency are generally the same as they apply to traditional types of property transfers. There may be tax consequences if there is a capital gain or loss.

Properly safeguarding seed phrases and other passwords is essential to estate planning. Include digital assets in your estate plan just as a traditional asset.

Reference: CT Insider (March 18, 2023) “Today’s Business: Cryptocurrency and estate planning”

Protecting Inheritances in a Blended Family

“As divorce and second marriages become increasingly common, more people find themselves raising children who are not biologically their own. Estate planning for blended families should address this unique situation.”

Blended families have estate planning challenges differing from traditional families, explains a recent article from The Record Courier, “Estate Planning for Blended Families.” A blended family is one where one or both partners have children from a prior marriage. The details vary, but the concern is the same: the possibility for the children to be disinherited if after one spouse dies, the surviving spouse reduces or eliminates any provisions made for the deceased spouse’s children.

A well-drafted estate plan, created by an experienced estate planning attorney, can address this issue to ensure that the deceased spouse’s children are protected and provided for after the death of their parent.

When creating the estate plan, consider what would happen if the surviving spouse remarried. This frames the drafting process in an optimal way for the children. Provisions should be made to protect them and a number of strategies may be used.

A simple last will and testament or even a revocable trust with no provisions typically won’t be enough to address the complex needs of a blended family. When the first spouse dies, the surviving spouse remains free to change the terms of their will, which could place the children of the deceased spouse at a disadvantage.

Designating an independent fiduciary can help ensure that the children of the deceased spouse have sufficient assets. The independent fiduciary can protect the children’s interests with no risk of self-dealing. An oversight by an independent fiduciary also minimizes the chances of conflict between children and stepparents.

A properly designed estate plan protects the children of both parents, regardless of which spouse dies first. One commonly-used strategy is to create a trust leaving the assets to the surviving spouse during the spouse’s lifetime but then passes the remaining assets to the children of the deceased spouse.

Another option is to divide the estate upon the death of the first spouse, with half the estate protected for the children of the deceased spouse. The surviving spouse has access to those assets for certain needs. However, limitations may be put into place. This is applicable if the two partners bring assets of equal size to the marriage.

In some cases, the strategy to ensure that children receive the assets intended for them upon their parent’s death is to leave them to the children outside of the trust, passing them directly by naming the children as designated beneficiaries on select accounts and/or life insurance policies.

If the children are minors, creating a separate trust may be an optimal means of protecting their inheritance.

A premarital or post-nuptial agreement is also used to clarify the rights and responsibilities of each spouse during the marriage and can also be used to specify the children’s living situation and expenses and require assets to be used to maintain their standard of living.

With mindful and comprehensive estate planning, couples can leave a financial legacy for all of their children, while still providing for surviving spouses.

Reference: The Record Courier (March 12, 2023) “Estate Planning for Blended Families”

Do Trusts Help with Succession Planning?

“Most estate planning starts with a will. The legal document covers what to do with your assets and provides important direction on the care for minor children.”

A will might be enough planning for simple situations. However, most people’s lives aren’t so simple anymore. You may want to consider a trust if you have a large estate, a second marriage, heirs with problems, children with special needs or charitable goals. The recent article, “Do I Need a Trust?” from Ag Web explains how this estate planning tool works.

Whether or not you need a trust is about money. However, it’s also about control, asset protection and about family relationships, especially for a family business, whether it is a farm, ranch, or privately held company.

First, let’s define a trust. A trust is a set of instructions for managing a legal entity owning the trust separate and apart from the individual. You could think of it as a mini corporation, a separate legal entity that owns property.

Most trusts are either revocable living trusts, irrevocable living trusts, or testamentary trusts. However, there’s more, mostly described by acronyms: CRAT, CRUT, GRIT, GRAT, IDGT, SLAT, ILIT, among others.

The basic trust is the revocable living trust. It can be controlled by the grantor and does not require a separate tax return. Upon the death of the grantor, it becomes irrevocable, and assets are transferred per its terms to beneficiaries.

Farmers and family business owners can benefit from a trust for two reasons:

• If assets are owned by the trust at death, they do not go through probate, keeping the assets and their transfer private.
• Administration of this trust moves at a faster pace than if the assets were to be included in the probate estate.

Once the trust is created, it’s very important to fund the trust. This is done by retitling assets in the proper name, which an estate planning attorney can help with. Everything needs to be retitled, but only once. If you need to make changes, depending upon the changes wished, you likely will only need to change the trust documents and not go through the retitling process again.

Trusts can be very simple, or they can be very sophisticated. It depends upon what the objectives are, the value of the assets being protected, the complexity of the business and the family dynamics.

As you go through the estate planning process, stay focused on big-picture goals, and consider the desired final results. Do you want to protect your business, so it passes easily from one generation to the next, or are you protecting assets from a litigious family member? These are all subjects to review in depth with an experienced estate planning attorney.

Reference: Ag Web (March 14, 2023) “Do I Need a Trust?”

Transfer on Death Isn’t Always a Smart Estate Planning Strategy

“A primary benefit of using TOD/POD designations is that assets held in the account will pass automatically to the beneficiary without having to go through probate.”

Transfer on-Death (TOD) and Payable-on-Death (POD) designations on financial accounts appear to be a simple way to avoid probate. However, they can still derail an estate plan if not coordinated with the overall plan, says a recent article from mondaq, “Transfer-on-Death Designations: A Word of Warning.”

Using a TOD or POD benefits the beneficiary and the account administrator, since both avoid unnecessary delays and court oversight of probate. In addition, designating a beneficiary on a TOD/POD account is usually fairly straightforward. Many financial institutions ask account owners to name a beneficiary whenever a new account is opened. However, the potential for undoing an estate plan can happen in several ways.

TOD/POD designations remove assets from the probate estate. If family members or trusts are included in an estate plan, but the TOD/POD designations direct most of the decedent’s assets to beneficiaries, the provisions of the estate plan may not be implemented. However, when thoughtfully prepared in tandem with the rest of the estate plan with an estate planning attorney, TOD/POD can be used effectively.

TOD/POD designations impact tax planning. For example, when an estate plan includes sophisticated tax planning, such as credit shelter trusts, marital trusts, or generation-skipping transfer (GST) trusts, a TOD/POD designation could prevent the implementation of these strategies.

If an estate plan provides for the creation of a GST trust, but the decedent’s financial account has a TOD/POD naming individuals, the assets will not pass to the intended trust under the terms of the estate plan. In addition to contradicting the estate plan, such a mistake can lead to unused tax exemptions.

TOD/POD designations can create liquidity problems in an estate. For example, suppose all or substantially all of an individual’s financial accounts pass by TOD/POD, leaving only illiquid assets, such as real estate or closely held business interests in the estate. In that case, the estate may not have enough cash to pay estate expenses or federal or estate taxes. If this occurs, the executor may need to recover necessary funds from the beneficiaries of TOD/POD accounts.

TOD/POD designations can undermine changes made to an estate plan. During the course of life, people’s circumstances and relationships change. It is easy to forget to update TOD/POD designations, especially if one’s estate planning attorney is not informed of assets being titled this way. An inadvertent omission increases the risk that a person’s wishes will not be fulfilled upon death.

Whenever considering putting a TOD/POD on a financial account, you must consider the impact doing so will have on your overall estate plan. Therefore, be sure to coordinate any such move with your estate planning attorney to be sure you are not undoing all the excellent planning that has been done to achieve your wishes.

Reference: mondaq (March 15, 2023) “Transfer-on-Death Designations: A Word of Warning”

Top 10 Estate Planning Myths

“Everyone needs to worry about estate planning. That planning doesn’t only pertain to what happens when you die but what could happen if you end up incapacitated.”

Estate planning addresses many issues, from who inherits your property or handles your finances to who takes care of you if you’re incapacitated to who manages funds for a disabled child. Unfortunately, there are many myths around estate planning, as explained in the recent article “Debunking the Top 10 estate planning myths” from Insurance News Net.

Only wealthy people need estate planning. This is easily the biggest myth of estate planning. Estate planning addresses planning for incapacity and taking care of your legal and financial affairs if you can’t. It also includes planning for end-of-life care and delineating what medical procedures you want and don’t want. Estate planning also creates a plan for families with minor children, if something should happen to parents.

Having a will means avoiding probate. Probate is the court process where the court reviews your will, establishes its validity and allows your executor to administer the estate. If your goal is minimizing or avoiding probate, talk with an estate planning attorney about retitling assets and creating trusts.

You need a trust to avoid probate. A trust is only one way to avoid probate. You could consider titling assets as joint tenants with rights of survivorship, although there are risks involved in doing so. Depending on your state of residence, you might also consider various transfer-on-death arrangements. Assets with beneficiary designations, like IRAs, 401(k)s, annuities, and other financial accounts, pass directly to beneficiaries.  You might also give away assets while you are living.

Putting a house in joint and survivorship ownership with an adult child will avoid probate. You may avoid probate. However, you create tremendous risk with this move. If your adult child becomes a half-owner, you’ll need their okay—and their spouse’s approval, too—to sell the house. You won’t qualify for the tax-free sale of your personal residence on half of the sale proceeds, unless your child also qualifies. If your child has financial problems or undergoes a divorce, their half ownership could be attached by creditors or be owned by an ex-spouse.

My will says who will inherit my IRA. The beneficiary designation on IRAs, life insurance and retirement accounts, and any account with a beneficiary designation overrides whatever your will says. The will does not control annuities, payable on death accounts, or transfer on death accounts and affidavits. You should check these forms periodically to ensure that the funds go where you want them to go.

I don’t need a will if my beneficiary forms are correct. However, you still need a will. For example, if a child dies before you, what happens to the assets if they were the beneficiaries? What happens to assets if a beneficiary is not of legal age and cannot inherit the money directly? Who makes decisions if there are multiple children and real estate decisions that need to be made? What if an adult child has a debt problem? Who will pay your final expenses? These are just a few issues that are addressed by wills.

A revocable trust will protect assets if I enter a nursing home. Totally wrong. Medicaid planning usually involves an Irrevocable Trust to protect assets. Revocable trusts will not make you eligible for nursing home care.

Trusts avoid probate. Assets in a trust don’t go through probate. However, it is only if the trust is funded. Assets must be immediately placed in the trust, usually through re-titling, or postmortem through beneficiary designations. Otherwise, the assets go through probate.

If my will says, “per stirpes,” my grandchildren will inherit assets if my adult children die first. This oversimplification of a complex issue is typical of estate planning myths. Grandchildren only inherit assets if the adult children die before the grandparent. If you want your grandchildren to inherit assets, you need a “bloodline” trust. An estate planning attorney will help you accomplish this.

I only need a will and a trust for my estate plan. This is another big mistake. An estate plan includes documents for incapacity and end-of-life, including Power of Attorney, Health Care Power of Attorney, Advanced Directives and a Living Will Declaration.

Reference: Insurance News Net (March 15, 2023) “Debunking the Top 10 estate planning myths”