Advanced Estate Planning: What You Should Know

While many people think the term “estate planning” applies only to those with significant wealth, in reality, anyone with assets has an estate. Your estate consists of all the assets you’ve accumulated over your life, including savings, investments, property and any businesses you own or control, plus any debts. An advanced estate plan determines who you want to receive these assets when you’re gone.

Advanced estate planning also covers what you want to happen if you become incapacitated or too ill to communicate your wishes regarding your health, long-term care or the disposition of your estate.

Are these somewhat grim subjects? They may be, but without a plan, you run the risk of your heirs not receiving your assets as you wished and your wishes regarding medical care not being known or followed.

Laws are different depending on where you live, so if Texas is home for you, make sure you talk with a San Antonio financial group when choosing a financial advisor to work with.

At PAX Financial Group, we believe that advanced estate planning should include:

  • A will
  • A living trust
  • Power of attorney
  • Durable power of attorney
  • Healthcare/medical power of attorney

For some, estate planning can be pretty straightforward, but for others, there are a lot of questions. For example, what is Medicaid and how is a trust different than a will? At PAX Financial Group, we are passionate about educating our clients so they can worry less about their finances and the future. We host regular events, both online and in-person, and encourage anyone who has concerns to attend an event that fits their needs. You can browse our event schedule and register for all upcoming workshops here.

Confused about estate planning and what you should have in place to protect yourself and your loved ones? Register for our upcoming Advanced Estate Planning Workshop.

The Will

Your will, officially called your last will and testament, sets forth your wishes about the disposition of your assets once you pass away. It specifies who or what will inherit which assets, along with when and how the assets will be dispersed. Although wills are often associated with older people, estate planners recommend drawing up a will relatively early. In fact, the age of 18 is not too soon, especially if you have children already. A will ensures that your wishes regarding your assets are known and followed. Here’s a brief overview of what we believe everyone should have in place – just in case.

A will also specifies the arrangements for dependents. If you have minor children, for example, a will should name their guardian(s).

Wills will also name an executor, who is entrusted with carrying out the will’s directives and works with the probate process.

Once you make a will, remember to keep it updated. Why? Because any change in your assets, your life or your feelings can change what you want to happen to your estate. Consider whether your will needs to be revised after the following circumstances:

  • Significant changes to your assets
  • Significant appreciation or erosion of your assets
  • Getting married or divorced
  • Having children and grandchildren
  • Changes in retirement plans
  • Changes in business ownership that affect you
  • Personal circumstances of your beneficiaries
  • Significant health issues

It’s a good idea to review your named beneficiaries periodically. Without being named in your will, people or organizations you may wish to receive parts of your estate will not be able to.

Estate laws and rules vary by state, so make sure you work with a financial advisory firm and estate attorney that is familiar with your area and well-established in the state in which you live. For example, if you’re living in the San Antonio area, look for a San Antonio financial group that is well-versed in estate planning.

A Living Trust

A living trust, like a will, specifies where and to whom you want your assets to go. However, living trusts differ from wills in that they go into effect while you are still alive, not after your death. Your assets are placed in a trust.

There are several major advantages to this. First, it allows the disposition of your assets to avoid probate, which can be lengthy. Second, a living trust can specify how you want your financial, medical and legal affairs to be handled if you become incapacitated.

There are two types of living trusts: Revocable and irrevocable.

  • In a revocable living trust, you can revoke, or change, the trust at any point. At your death, the assets go to your beneficiaries.
  • In an irrevocable living trust, the assets go to your beneficiaries while you are living, and that can’t be changed. You no longer have control over your assets. An irrevocable living trust can reduce estate taxes.

Nondurable Power of Attorney

A nondurable power of attorney is a document that gives legal permission to a person or persons to make decisions about your estate if you become incapacitated via illness or accident. A power of attorney can make your adult children able to pay your bills while you are in the hospital, for example, or to keep up your properties. Without these powers, your financial affairs can become in arrears or very tangled if you are unable to oversee them.

Nondurable Healthcare Power of Attorney/Medical Power of Attorney

Usually, powers of attorney cover financial affairs. But a healthcare power of attorney (often called medical power of attorney) is increasingly important as life expectancy lengthens, medical options increase and healthcare expenses climb.

Healthcare power of attorney gives your designees legal rights to make decisions about your healthcare if you become incapacitated, such as extraordinary measures taken to save you, orders to resuscitate or not to resuscitate and ongoing management of your healthcare.

Durable Powers of Attorney

Nondurable powers of attorney end when people become able to make their own decisions, whether financial or medical. However, there are times when people who become injured or ill will not regain the ability to manage their estate’s affairs or their own healthcare. To take account of that possibility, it’s a good idea to have a durable power of attorney. These give legal permission to make decisions about your estate and your healthcare on a permanent basis, until your death.

How Does Medicaid Come into Play in Estate Planning?

If you are ill or need long-term care toward the end of your life, you may move to a nursing home or assisted living facility, or have home healthcare visits. All of these choices, however, have financial ramifications. Care for a lengthy period can drain your assets, because Medicare and most insurance companies offer limited or no coverage for this type of care.

As a result, Medicaid is the insurer for many long-term-care options. But Medicaid is designed for people whose income and assets are below a certain level, which can vary according to state. Obtaining Medicaid coverage can be difficult, because your application can be denied if your income and assets exceed a low threshold.

This results in a significant risk to your estate: You may have to spend out of pocket to receive care until your assets fall to the low Medicaid threshold, at which point Medicaid would kick in.

In my experience, most people would prefer to preserve their assets. While it can be a difficult and sometimes uncomfortable topic to talk about, I encourage you to discuss your estate plans with your family, a financial advisor and an estate attorney.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

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