Legal Preparation in Caregiving – Wills & Trusts

Wills and Trusts are an Important Part of End of Life Preparation

As we continue the conversation about legal preparations that come to light when we enter into a caregiving situation with a loved one, Wills and Trusts should be part of the plan. I’m drawing on my informative conversation with attorney Rebecca Braun of Mobile Legal Services to review this aspect of estate planning.

If you’re like me, you think of a Will as a document to give away your assets when you’re gone and to designate a guardian for your children. It is; but a Will may not be enough. You may need a trust to assure the proper distribution of your assets or to allow for the distribution of assets while you’re still alive.

Let’s look at what each of these documents provides:

Last Will and Testament

Write a Will to direct your assets where you want them to go.

Will:  A Will is the document that designates who will receive your property after you die. It is also used to designate guardianship of minor children and pets. In it, you name a legal representative (a.k.a., “Executor”) who will execute the will. (This person may or may not be different from the named guardians of minors.)

A Will must go through probate, which means that a court oversees the execution of the will. If you do not have a will, property may still go through probate, where an administrator will be assigned. The administrator becomes the “executor.”

Some states have a less expensive process that does not require probate. If assets are below a defined amount, the requirement for probate (and therefore the costs associated with them) can be avoided. For example, in Michigan, assets less than $14,000 can go through an affidavit process. (The asset amount is often adjusted for inflation.)

Keep in mind that assets with named beneficiaries do not require probate, such as retirement accounts (401Ks) and trusts.

A Living Will is a document that identifies your wishes while you’re still alive. It is an important document if you become incapacitated and have specific preferences regarding your medical end-of-life choices. These wishes may be stated in the Patient Advocate Document, discussed on our last blog post under Medical Power of Attorney.

Trust: A Trust is a powerful document that designates how your assets will be distributed and goes into effect when it is created. In other words, a Trust allows for distribution of assets before your death. Therefore, it is necessary to indicate when the assets will be distributed.

The named Trustee will distribute the assets to the beneficiaries. The Trustee and the Beneficiary can be the same person, and there can be more than one Trustee and more than one Beneficiary.  It gives you control over how things are sold, when/how property is distributed, etc. It does not go through probate, but immediately goes to the beneficiary(ies), via the Trustee(s),  which saves time, money, and attorney’s fees.

A Trust can protect assets from estate taxes, which is why some people create a Pour-Over Will, which is when you move all the assets from your estate into a trust after you die.

Retirement accounts can get complicated if they go into trusts. Because they have designated beneficiaries, they are best left alone because they do not require probate for distribution.

Consider also the option of a Lady Bird deed, also known as an enhanced life estate deed. It allows you to maintain control over your property while you are living, but will transfer to a designated person when you die. Though not legal in all states, property under a Lady Bird deed does not go through probate and allows you to pass your property to someone else if you need to apply for Medicaid and can help you avoid Medicaid recovery. (More on Medicaid long term care in our next blog.)

Assets to consider: You need to consider all your assets when preparing a Will and/or a Trust:
  • Bank Accounts
  • Retirement Accounts
  • Pensions
  • Life Insurance
  • Home
  • Vehicle
  • Stocks/Bonds
  • Belongings: Furniture, Jewelry, Rugs, etc.

Preparing a Will and a Trust can be a complicated process. This blog is intended to get you thinking about the process. We encourage you to consult with an attorney to find the best solutions for your personal assets. Consider an attorney like Rebecca Braun of Mobile Legal Services who provides the added service of coming to you to prepare your Estate Plan. If you are in Southeast Michigan, you will find her at www.mobileLegalServices.com.

And remember, it’s all about preparation. Just like how we encourage you to wear a Cravaat® dining scarf while dining to avoid stains, we encourage you to prepare the important legal documents before you need long term care. An adult bib will protect against stains. Legal documents will protect your assets and your family against unnecessary costs and problems.

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