Estate Planning in 2022… It’s Definitely a Good Idea. Here’s Why.
Like 2020, 2021 has been one for the record books. For the first time ever, young Americans (aged eighteen to thirty-four) are more likely to have a will than their older counterparts (aged thirty-five to fifty-four). The COVID-19 pandemic has forced younger Americans to consider the importance of estate planning and realize that it is not just a need of the ultrawealthy.
A revocable living trust (RLT) is often a beneficial choice for the majority of estate planning clients, including those who are not among the wealthiest 1 percent of Americans. Here are some of the benefits of an RLT:
An RLT spells out how to deal with a temporary or permanent period of incapacity. It is often a better vehicle for handling incapacity than a durable power of attorney. If a client becomes incapacitated, an RLT provides instructions for a successor trustee, designated by the client, to handle the client’s finances. Without an RLT, assets may not be as easily accessible.
When the client passes away, having an RLT can lessen the burden of administration compared to the probate process in many states. Keep in mind, however, that after the client’s death, the RLT gains its own independent tax existence. Also, the RLT is part of the client’s taxable estate.
Further, an RLT or testamentary trust created under a will can prevent guardianships of minors’ estates. A guardianship terminates at age eighteen, and the remaining assets must be distributed at that point. A trust created under an RLT and a testamentary trust created under a will can provide additional flexibility, including allowing the trust payout to take place later. A trust created under an RLT is generally easier to administer and potentially more flexible.
Privacy is another advantage of an RLT, as probated wills are typically a matter of public record. In contrast, RLTs usually do not become part of the public record, which clients often prefer.
Choosing an RLT instead of a will often depends on whether the benefits of the RLT outweigh its setup and funding costs. While the client will make the final decision with your help, an RLT is the wiser choice for many clients.
Dealing with the possibility of a client’s incapacity is another aspect of estate planning that affects a large population. Incapacity does not affect senior citizens exclusively. In fact, a sudden illness or injury can strike people of any age at any time. A thirty-year-old single client who is severely injured on the job may not have a plan for who should direct his medical care and pay his bills while he recovers. Under those circumstances, friends, relatives, or an outside agency may have to petition the court to be named the client’s guardian or conservator. Regardless of the size of a client’s estate, having a plan can save family members from unnecessary stress and expense.
Working these issues out in advance by having the right documents in place is better for everyone. Depending upon the unique circumstances of your clients, planning for incapacity may include some or all of the following:
- Structuring assets with joint ownership
- Transferring assets to an RLT
- Appointing agents through a healthcare proxy and durable power of attorney
Whatever 2022 brings, Tejes Law, PLLC wishes you and your loved ones health and happiness. Never hesitate to head over to my calendar for your free consultation at www.tejeslaw.com/eve.