We are often asked to review the wills of clients who are concerned about asset protection during life time to provide for their loved ones upon their demise.
If your will is like most seniors’ (some drafted over 20 years ago), it says that when the husband dies, he leaves everything to his sweetheart/wife; the wife’s will is vice versa. When both are gone, the estate goes to the kids. These “sweetheart” wills work fine for the first 65 years of life. After that, they don’t. Why?
What’s Wrong With The Sweetheart Will?
Here’s an example of what can go wrong with the sweetheart will:
Suppose the husband is in a nursing home or assisted living facility or on public benefits and then the wife dies. She leaves her entire estate to her sweetheart/husband. Now he will have to spend down all of the spousal estate she left before he is eligible for public benefits or Medicaid to pay for his nursing home expenses.
Such couples have unintentionally made a long term care facility the beneficiary of their wills! This result can be avoided with a properly drafted health care trust. When you reach retirement age, you need to also protect your assets from disability or catastrophic illness, in addition to the usual tax planning.
What Estate Planning Do I Need?
The term estate planning, reduced to basics, means every person needs the following documents:
- A last will and testament that addresses tax and long-term care planning
- A durable power of attorney, the MOST important document you need
- A health care directive (living will) so that you, not the medical providers, direct your health care wishes
- A financial plan to calculate the amount of your estate that can be protected/preserved/saved/sheltered from medical or tax spend-down
Depending on the amount of assets you have and your age, you may also use trusts to protect and preserve your assets.
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