Any person who passes away with any real property (land or house) or if the combined value of their estate is worth over $100,000.00 (and they have not done proper estate planning) their estate will have to go through probate before assets are distributed to their heirs. Probate takes time (anywhere from 4 months to several years) and money (usually 3-7% of the total estate but can cost much more). There are several ways to avoid probate, but some ways are better than others. A Will does NOT avoid probate.
2. Avoiding Guardianship Proceedings
A Guardianship is used when either both parents pass away while having one or more minor children or when a person becomes incompetent. Most people do NOT want a judge deciding who is going to raise their minor children should the worst happen (nor do they want a judge to decide who is going to take care of their own person if they become incompetent). A judge could end up giving guardianship to someone who is dishonest or unfit (the court wouldn't do it on purpose but some people can be very convincing). It can also be very expensive to have the court appoint a guardian and it takes time. Appointing a guardian in your estate plan will avoid unnecessary costs and ensure that the appropriate people will be there to take care of you or your children.
3. Wanting to Protect Hard Earned Assets
Asset protection can be accomplished through proper estate planning (make sure you use an experienced asset protection estate planning attorney because an error here can have catastrophic consequences. People need to protect their assets (including their family home) from many different sources. It could be a car accident where they were underinsured; It could be bad business deals or other creditors, etc.
However, most commonly it is the cost of long term care that people need to protect their assets from. Medicare (usually people qualify for Medicare when they turn 65) only covers a maximum of 90 days in a long-term care facility. After the 90 day period is up, the patient will need to pay for the patient's care from the patient's assets (in Utah the costs for long-term care ranges from $4,000 to $10,000 PER MONTH). Even long-term care insurance doesn't usually cover the whole cost of long-term care (and it can be very expensive). It doesn't take long for a person to use all their assets paying for long-term care leaving nothing for their heirs. However, Medicaid will cover long term care costs-if you qualify. Medicaid planning allows a person to qualify for Medicaid while protecting some of their assets for their spouse, children, or beneficiaries. If you are concerned about long-term care costs, consult an estate planning attorney experienced in Medicaid planning. There are a several different ways to preserve all or at least some of the assets while qualifying for long-term Medicaid.
4. Avoiding Estate Taxes
Although not a worry for most of us after President Trump got his tax bill passed at the end of 2017. That tax bill had a provision doubling the amount a person can pass to their heirs before paying any federal estate tax, and since Utah does not have a state estate tax, a person can pass $11.2 million to their heirs tax free. The tax rate is 40% for every dollar above that amount (which adds up quickly).
One thing to consider is that the estate tax changes constantly. In 2010 there was NO federal estate tax, in 2001 the estate tax was 55% for every dollar over $675,000. Because these laws change so often, it is important to have your estate plan reviewed every 3-5 years. An experienced estate planning attorney can eliminate all or most estate taxes should you find yourself in that position.
5. Avoiding Conservatorship Proceedings
A conservator is a someone who can act on a person's behalf using that person's assets if the person has been declared incompetent. If a durable power of attorney is set up before that person becomes incompetent, they can name the person (or people) they want to be their conservator. If they don't have a durable power of attorney, the court will appoint one. It can be an expensive and drawn out process.
6. Peace of Mind
Its hard to put a price on having the peace of mind that the things discussed above are taken care of. You can know that a proper estate plan will have covered all your concerns (and any other issues) to make things easy for your family when you pass away.
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