For most families, the kids are getting ready to go back to school. It’s also football season here in Pittsburgh, and it’s a time when things start to change. We look forward to Thursday nights and weekends even more. I am more of a college football fan than an NFL fan, though I do follow the NFL. Being a West Virginia fan, I know my support of the West Virginia team is not a popular choice around Pittsburgh. I am excited about West Virginia and Penn State playing against each other this year, so in the spirit of the football season starting, I’m going to talk about avoiding the interception.
When I ask my clients what they want to accomplish with their estate plans, everybody has different goals and desires. Some clients talk about their concerns over losing money to long term care expenses or taxes. Others talk about wanting to keep the family dynamics intact, and they don’t want to burden their family. They tell me that after working really hard to save money to build a nest egg and enjoy their retirement, they want to leave any leftovers for their family when they pass away.
Most of if not all clients tell me they don’t want any interference with how their stuff gets to their family. These interferences include avoiding nursing home care costs, taxes, probate or lawyers which can get in the way. Using the analogy of football, let’s assume we’re trying to score a touchdown. We want to get the ball to the receiver, which in this case would be our kids who catch the ball, to score. We want to have a win, or a good end result to the game. What are the things that can get in our way, and who is trying to intercept the pass? Who’s trying to tackle the quarterback, and how can we avoid some of these issues?
It is preferable in most situations to avoid the probate process. Probate is like handing the ball to the referee and letting them decide who wins. In the legal sense, it is the administration of the estate through the courthouse, when you use a will as your primary estate planning document. In Pennsylvania, it’s not uncommon for this process to take 14-16 months to get your stuff to your kids. There are a number of reasons why it is a lengthy process, including the fact that Pennsylvania has an inheritance tax. The inheritance tax return isn’t due until month nine. In addition, it takes the state of Pennsylvania six months to look at the documentation, before they decide whether to accept or decline the tax return.
The other reason that probate takes forever is because in Pennsylvania, we have to put notices in the paper to notify any of your would-be creditors, so they can make a claim if you owe them money. Creditors can get paid from the estate, and in Pennsylvania they have 12 months to file a claim after it’s been published in the newspaper. It seems to be such an antiquated system, especially when nobody is looking at newspapers much anymore. Only after the creditors have been paid and everything else is settled, can the distributions to family members be done.
Trusts Are Not Only for Wealthy People
Estate administration is a complicated process, which is why our law firm helps executors administer estates. This is also why we recommend avoiding probate, to alleviate the headache and stress. When our clients talk about not wanting to be a burden and keeping the family peace, avoiding probate helps to accomplish this goal. This is why we recommend using an irrevocable trust, particularly the asset protection trust, to protect assets from potential future creditors.
Many people think that you have to be wealthy to use a trust, but many middle-class clients use this asset protection trust to avoid losing all they have worked hard for to creditors, taxes, probate and long term care costs. Because creditors can’t have access to the money which is in the trust, it is often possible for us to distribute the inheritance to your kids faster, as there is no waiting period for the creditors to file a claim, which is the case with Wills.
Why We Recommend Using an Asset Protection Trust
Another concern is that many clients want to avoid going broke in the nursing home. I have had people in my family, some of our clients and people we’ve met, who have gone broke due to long term care costs. It is not the care providers fault – nursing homes are providing care which is expensive. This is because caregivers are hard to find since the COVID pandemic. This means that wages for care providers, as well as the cost of care, is increasing. Most people rely on Medicaid benefits to pay for care, given the cost of care in a nursing home. Unfortunately the Medicaid rules require you to go broke before they will pay.
Having an Asset Protection Trust is a great way to avoid losing your assets if you need care in a nursing home in later years. It is important to understand how trusts work, and to know that they are not only for wealthy people. Read this blog article to find out more about Asset Protection Trusts.
Don’t Believe The Lie – You Need More Than a Simple Will
It is unfortunate when lawyers tell people that since they are not rich, they only need a simple Will. This is misleading and assumes that estate planning is only about planning for who gets the stuff when you pass away. So many people believe that using a Will means they have an estate plan. However, we need to plan for today’s and tomorrow’s issues, and not use yesterday’s tools to do so. Estate Planning is complicated, but we make it easy for you.
This is why we hold our estate planning workshops to teach you all about the different estate planning ‘tools’. Known as the ‘Three Secrets’ Workshop, we tell you the 3 Secrets to Protect Your Legacy. Register for a Workshop on sechlerlawfirm.com/workhops. See you there!