Estate planning is not a one-time event. Your initial estate plan is going to be devised based on the way that your life was at that time. It is like a snapshot, but life goes on after that day. As your life changes, your existing estate plan could become obsolete. As a result, estate planning should be viewed as an ongoing process.
If you used a will when you put an initial estate plan in place because your family was small and your life was uncomplicated, this is understandable. At the same time, there is no law stating that you must continue to use the will as your estate planning foundation. Circumstances can arise that can call for the creation of a trust that would supplant your will as your primary asset transfer vehicle.
There are numerous different scenarios that could come into play. Let’s look at a few of them.
Estate Tax Exposure
Let’s say that you created a last will when you were in your mid-twenties, right after you got married. During the ensuing years, you enjoyed a great deal of career success, and your investments provided high yields.
High net worth individuals must be concerned about the federal estate tax. If you are transferring more than $5.43 million, the estate tax is a factor for you.
If you maintain the will as your vehicle of asset transfer, the estate tax would consume 40 percent of the taxable portion of your estate after you pass away. On the other hand, if you were to use certain types of trusts, your estate tax exposure would be mitigated.
Spendthrift Protections
A will would do nothing to protect a spendthrift heir from his or her own poor money management decisions. You could utilize a trust to provide safeguards for a loved one who is not a good money manager. This is another reason why you may want to create a trust, even if you have already executed a last will.
Medicaid/Medi-Cal Planning
Medi-Cal is California’s version of the Medicaid program and is a government health insurance program that pays for long-term care. Medicare does not pay for living assistance, so many elders ultimately seek Medi-Cal coverage.
Since Medi-Cal is a need-based program, there is an asset limit of $2,000 for an individual. People who want to qualify for Medi-Cal often give gifts so that they can stay within this limit.
You could give direct gifts, but you could alternately convey assets into a Medi-Cal trust. The assets would not be counted by Medi-Cal evaluators.
Schedule a Free Consultation
We offer free consultations, and you can contact us through this page to schedule an appointment: Campbell CA Estate Planning Attorneys. We also regularly offer free workshops on Living Trust estate planning, Medi-Cal Planning, Special Needs planning and VA Planning. To view a list of upcoming seminars and workshops, follow this link: Free Workshops and Seminars.
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