We’re now on Day 3 of the Three part blog where we have been sharing 12 Tips to Kickstart your Estate Planning for 2024.
Let’s look at the last 4 Tips…
#9 – Failing to Avoid Probate
Probate is the administration of an estate when you pass away and you have a Will. Sometimes people think they can avoid probate with a Will, but your Will is your admission ticket to probate court. When you pass away, your executor has to administer your estate through the courthouse. In Pennsylvania this process takes forever, with creditor rights issues, inheritance tax issues and notice issues. There are three reasons why Pennsylvania attorneys advise you to avoid probate which include the fact that it will save you time and money.
The main reason is because in Pennsylvania, if you get sick and go to a nursing home, you can become eligible for Medicaid benefits to pay the nursing home. You are still allowed to own a home to become eligible, but when you pass away, the state of Pennsylvania has a claim against your estate. This is known as the estate recovery claim. Your executor will be forced to sell the house to pay back the state of Pennsylvania for all the money spent on your care. Essentially, you will end up losing the house when you pass away. You can’t even leave it to your children. This estate recovery is limited to your probate estate, which is reason enough to not go through probate.
#10 – Most Estate Plans Fail to Protect Assets
If you’re a middle class retiree, your biggest financial threat is not taxes or probate. It’s what happens if you need long term care, given that nursing homes cost $180,000 a year. Most people are not adequately prepared to handle this huge expense. However, you can protect your resources from this government rulebook, to avoid going broke. It is not the nursing home’s fault, but the problem is that the government won’t help to pay for care until you are broke. This is why you need to have an asset protection plan as part of your estate plan. Proper estate planning is not about who gets your stuff when you pass away, but ensuring that there is some stuff left when you pass away.
#11 – Outright Distribution can be a Mistake
What often happens is when you pass away, you may I leave stuff to your kids. Your kid gets a check, which is great, except that when she gets her check she may be going through a divorce. Even if she is happily married and the money she gets she uses to buy a joint home with her husband, she could go through a divorce in later years. What will happen to the money you left for her? Fortunately, this issue is easily solved by not giving the kids their inheritance outright. Instead, we give the kids their inheritance in a trust which protects it from their future potential creditor issues, like a divorce or a lawsuit.
Unfortunately, most estate plans fail to do it this way, which is why we like to help our clients with their estate planning. When done right, we aren’t just transferring the stuff, but giving it to them in a way that will protect it. We need to understand the threats that exist in our world, and plan for them. A disabled person inheriting money, an underage person inheriting money or somebody with creditor issues inheriting money outright could be a big mistake.
#12 – Don’t Name All Your Kids as Your Decision Makers
When we’re designing an estate plan, and the family has two kids, the parents want both kids to be the agent under the power of attorney, as well as the executor. The purpose of a power of attorney, is for your agent to maintain control if you lose capacity. If you have two people who are agents, and they disagree, it is almost the same as losing control. We have not actually solved the problem. This is why I recommend that my clients have one agent rather than joint decision makers. Every family is different but that’s our recommendation.
That sums up our 12 tips to Kickstart your Estate Planning for 2024. We hope you found these articles beneficial.
If you need any assistance, please give us a call at 724 841 1393, or visit our website: sechlerlawfirm.com and send us a request to contact you.
