3 Reasons a Last Will and Testament is obsolete for Minnesota Estate Planning

Top 3 Reasons a Will is obsolete as a SOLE method of Estate Planning

A Will is a good, and necessary, starting point for any Estate Plan. But there are many scenarios today that a Will ALONE simply cannot address.

Top 3 Reasons Wills alone are an obsolete method of Estate Planning:

TOP REASON #1:

A Will only takes effect upon your death – it has NO effect if you become disabled, incompetent or incapacitated.

So if only have a Will, you become disabled or incompetent or incapacitated, and you don’t have an adequate disability plan, what happens? The State has created a plan for you – it is called Guardianship. There will be multiple Court proceedings where a Judge certifies your inability to manage your assets, takes away your rights as to decisions which the Court feels you can no longer make for yourself, and appoint a Guardian to make those decisions for you (payment for the hearing and Guardian which will come out of your assets). The result of which will be all of your assets will then be managed by your court-appointed Guardian and under the supervision of the Court.

It is the Judge who chooses your Guardian. Furthermore, you should know that the Judge does not have to appoint your spouse, child or anyone else you think should manage your assets as your Guardian; the Judge is free to appoint anyone he/she thinks is appropriate – often a local attorney. They choose local attorneys to help ensure the numerous, and often complicated, rules and regulations the apply to Guardian are likely to be followed without further Court intervention. Your estate will be responsible for all the legal and other professional fees incurred during the management your Guardianship. HOWEVER, the proper use of Trusts and other Estate Planning tools can avoid this scenario.

RECOMMENDED Fix: YOU choose the decision-makers

  1. Add a Power of Attorney for finances to assign someone to make financial decision if you cannot
  2. Add a Minnesota Health Care Directive to assign someone to make health care decisions if you cannot
  3. Add HIPAA Authorization(s) to ensure your loved ones can receive information in case of a serious illness
  4. Add Final Instructions – your loved ones will already be grieving and under a lot of stress, don’t leave them guessing about burial vs. cremation, wake vs. Celebration of Life, etc.

TOP REASON #2:

Wills are single-generation plans.

For example: If you saved up a respectable sum of cash and/or own a home, hunting or fishing property or maybe have a coveted firearms collection, etc., that you would like to stay in your family so your kids, grandkids and their kids and grandkids can enjoy it into the future, and you only have a Will, you have little to no say as to future uses or passing of the asset(s). 

When you give an asset via Will, ownership passes to beneficiary - making them vulnerable to claims by your beneficiaries creditors and/or future ex-spouses.

Consequences of passing assets via a Will include: your beneficiary can/may be forced to sell the asset, your beneficiaries creditors put a lien on it and force it to be sold at auction to pay a debt, or maybe your beneficiary goes through a divorce and now your future ex-in-laws will be enjoying your property – at the exclusion of your own family.

Additionally, the cash you worked your whole life to save and hoped would help your family can quickly be exhausted by wasteful spending, lawsuits by others who think they should have an interest in the property, poor investments, poor decision making, or just bad luck.

However, again, the proper use of Trusts and other Estate Planning tools can prevent all those scenarios – and more – ensuring that your property stays in your family for future generations if you so wish.

RECOMMENDED Fix: place your assets into a Revocable Trust so they can be properly protected and managed for future generations

  1. Add a Revocable Living Trust that provides instructions about how/if your assets should pass
  2. Add a Power of Attorney for finances to assign someone to make financial decision if you cannot
  3. Add a Minnesota Health Care Directive to assign someone to make health care decisions if you cannot
  4. Add HIPAA Authorization(s) to ensure your loved ones can receive information in case of a serious illness
  5. Add Final Instructions – your loved ones will already be grieving and under a lot of stress, don’t leave them guessing about burial vs. cremation, wake vs. Celebration of Life, etc.

TOP REASON #3:

A Will does absolutely NOTHING to protect your assets from the high cost of nursing-home care.

In Minnesota, the 2016 average monthly cost of nursing home care was $7,361 per month for a semi-private room.

If you have Medicare and think it will cover your long-term healthcare expenses, I’m sorry to say you are mistaken… Medicare is not a long-term healthcare plan. Medicare does pay 100% of the costs of your stay in a skilled nursing facility, BUT only for the first TWENTY(20) days. Then a hefty $160.50 daily co-pay will apply until day 100 – at which point all Medicare long-term healthcare coverage ends (NOTE: if you have a Medicare Supplement Plan [aka “Medigap”], that policy will cover your daily deductible for that first 100 days – however, please know that coverage will too end at day 100). You will be responsible for 100% of your medical care from that point forward – UNLESS you can qualify for Medicaid long-term healthcare coverage…

However, please note that the allowable amount of assets and income an applicant may have in order to be eligible for Medicaid are quite low. For example, you can only qualify for Minnesota Medicaid if your have assets totaling less than $3,000 – if you are single, or $6,000 if you are married; AND you must have monthly income less than $990 per month if you are single, or $1,335 per month if you are married (there are other conditions as well, but assets and income are the main reason most do not qualify for Medicaid to cover their long-term care).

So for example, if you only have Medicare coverage and you exceed the Medicaid asset and income maximums, you will be required to pay approximately $75,000 to that nursing home/skilled nursing facility in your first year, and $88,000 every year thereafter (at 2016 rates)!

As you can see, any equity in your house, money in the bank, or any other assets you may have will quickly disappear just to pay the nursing home/skilled nursing facility for your long-term care.

However, again, the proper use of Trusts and other Estate Planning tools can avoid this scenario as well.

RECOMMENDED Fix: Plan, plan, PLAN

  1. Add an Irrevocable Trust to protect your most valuable assets from liquidation
  2. Add a Revocable Living Trust to provide instructions about how your OTHER assets should pass
  3. Add a Power of Attorney for finances to assign someone to make financial decision if you cannot
  4. Add a Minnesota Health Care Directive to assign someone to make health care decisions if you cannot
  5. Add HIPAA Authorization(s) to ensure your loved ones can receive information in case of a serious illness
  6. Add Final Instructions – your loved ones will already be grieving and under a lot of stress, don’t leave them guessing about burial vs. cremation, wake vs. Celebration of Life, etc.
Wills are obsolete as a sole method of estate planning - cassette says I'm not obsolete I'm retro
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Top 3 Reasons a Will is obsolete as a SOLE method of Estate Planning
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Top 3 Reasons a Will is obsolete as a SOLE method of Estate Planning
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A Will is a good, and necessary, starting point for your MN Estate Plan. But there are many scenarios that a Will ALONE simply cannot address. But why...?
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