How to Choose the Right Type of Estate Plan for You

Aug 11, 2022 | Estates Planning and Asset Protection

Let’s start with the good news. A recent study found that, since the pandemic began in 2020, the number of 18-34 year-olds with estate planning documentation in place has increased…by a whopping 50%. 

But before we start celebrating too loudly, another statistic catches our attention. According to the same study, 67% percent of Americans don’t have any estate plan to protect their assets. 

There are several reasons behind this statistic. The most straightforward? Estate planning can be overwhelming, and the terminology can be confusing. Talking about emotional topics like incapacitation and death can be uncomfortable. Many people mistakenly believe they don’t need an estate plan because they don’t have significant assets. 

We’re here to dispel these concerns. Estate planning may involve a new vocabulary—that is undoubtedly true. However, the act of estate planning is an excellent opportunity to set measures in place to plan for your financial future and ensure that, if something does happen, your family will have clear guidance during a difficult time. 

An excellent place to start is by understanding how to choose the right type of estate plan for your needs. 

Consider your financial situation

Whether you possess a basic savings account or have a lucrative investment portfolio that rivals Elon Musk’s, your financial situation impacts your estate. While most people don’t have to worry about paying federal estate taxes—as of 2022, you must have $12.06 million to trigger the estate tax—you may have other assets that would be distributed to your beneficiaries. This could include:

  • Real estate properties
  • Retirement plans
  • Stocks and bonds
  • Annuities 
  • Certificates of deposit 
  • Safe deposit boxes 
  • And more

Also, consider your end-of-life finances and what you need to live as comfortably as possible. If you plan to rely on Medicaid long-term care assistance for your end-of-life needs, will you be eligible with your current income? Financial decisions you make now can have wide-ranging consequences later for you and your beneficiaries. 

Do you have a spouse or children?

Everyone’s family is unique, and there’s no singularly correct way to account for your family in an estate plan. Creating an estate plan is an opportunity to think about your relationships and how you might continue to provide for them in your absence. 

But it’s not just about leaving behind a financial legacy. Your estate plan can accomplish other goals:

  • Naming a guardian (and a backup) for your children and other legal dependents
  • Protect loved ones with special needs through careful allocation of assets
  • Expressing how your loved ones should be cared for in your absence
  • Easing the distribution of assets by naming a trustee  
  • Designating inheritance for your new spouse, step-children, or children from a previous relationship

Creating a thorough and thoughtful estate plan can help make decisions easier for your family and loved ones if something happens to you. You can have peace of mind knowing that your wishes are clearly spelled out and that your loved ones won’t have to deal with stressful processes like probate court or inheritance disputes in your absence. 

Understand the difference between revocable and irrevocable trusts

While estate planning and different types of trusts can be confusing, there are two general categories to understand: revocable living and irrevocable. These two types of trusts are the most commonly implemented in estate plans and can offer you and your beneficiaries a range of benefits and protections. 

Revocable Living Trust

A revocable trust (living trust) is a financial agreement where you entrust certain assets that a chosen trustee will manage. You always have the option to revoke it or continue funding it throughout your lifetime. You are the trustee, beneficiary, and trustmaker in this situation. 

At the law office of Shann M. Chaudhry, Esq. Attorney, PLLC, we can assist you in determining the best method to fund the trust, which could include life insurance policies, property sales, retirement accounts, and other entrusted assets.

Irrevocable Trust

Much like the name indicates, an irrevocable trust is a nearly permanent financial agreement that allows you to put assets into it but cannot be modified or revoked once created. Why would anyone want to lose control of their property? For many retirement planners, these trusts are vital in protecting their eligibility for long-term care assistance programs like Medicaid and the VA. They can also be used for Insurance Trusts to pay Estate Taxes or income taxes on inherited retirement accounts. Domestic Asset Protection trusts can be used to shield personal assets from creditors, predators, and other third parties. 

It also can prevent these agencies, nursing homes, and creditors from recovering costs from your estate. This means your beneficiaries won’t lose the financial support you worked so hard to create for them in your absence. 

Think about your health, your business, and your properties

At some point in our lives, we may be unable to make independent decisions about our health and well-being. This could be due to old age or becoming incapacitated due to illness. How will this type of life event impact your business? What quality of health care do you expect to receive or don’t want? Who will manage your finances in the meantime?

These questions are some of the most important you’ll ask yourself, and an estate plan can provide a road map for your family members or advocates to follow. A comprehensive solution to ensure your rights and wishes are respected should include the following elements:

  • Advanced Medical Directives
  • Financial Power of Attorney
  • A Medical Power of Attorney
  • A HIPAA Authorization Form 

If you own a business, creating a succession plan can handle many complicated legal issues, such as how your partnership share gets distributed among the other partners.  

When it comes to real property that you own, such as a family home or hotel, there are special deed options to ensure a smooth transition to new ownership:

  • Transfer on Death
  • Life Estate
  • Ladybird 

For families that own out-of-state property, you may need more than a durable power of attorney to manage it. In this situation, working with an estate planning attorney can help you figure out how to account for them in your estate plan. 

Our Texas Estate Planning Attorneys Can Help You Make the Right Choice for Your Future

Estate planning is a careful process. You have lots of options in front of you. But the more you understand them, the less overwhelming it becomes.  

Our team has many years of experience drawing up estate planning documents, helping you choose beneficiary designations, creating durable power of attorney paperwork, and more. Our goal is to help you achieve estate planning peace of mind so you and your loved ones won’t have to worry about the future. 

Contact the law office of Shann M. Chaudhry Esq. Attorney, PLLC, to schedule a consultation to discuss your estate planning needs further.

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