Should I Use a DIY Will?

Sure, many of us would prefer to fill in the blanks in private, than have to talk to anyone about our questions. However, it’s better to get professional advice.

MarketWatch’s recent article, “Online wills may save you money, but they can lay these estate-planning traps,” says that if you prepare your taxes yourself and you make a mistake, you may need to meet with the IRS. However, you may never know the results of your work when it comes to a DIY will. Who will be the ones to find out if you made any mistakes, and need to pay the price? Your family.

You can find many DIY options for completing your own estate plan. With the ease and availability of these programs, along with lower prices, one would think more of us would have an up-to-date estate plan. According to the AARP article, Haven’t Done a Will Yet?, only 4 in 10 American adults have a will or living trust.

The four basic estate planning documents are a will, a trust, power of attorney for financial matters and an advance health care directive. If you try to produce any or all of them through a DIY site, expect to be offered a fill-in-the-blank approach. However, each state has its own probate code and the program you use may have different names for the documents. They also may not address state-specific questions.

Some DIY sites have all these documents, but you must buy their higher-end packages to access them. Others offer what they call a “limited attorney consultation” in the form of a drop-down menu of questions with pre-written responses, not an actual conversation with an attorney.

The range of DIY services also has a range of prices. Some claim it’s $69 for just a will, and others charge hundreds of dollars for what may be described as a “complete plan.” Some sites have more information than others about their options, so you must dig through the website to be certain you’re getting a legally binding will or other estate planning document. It is important to read the fine print with care.

Most of these websites presume you already know what you want, but most people have no idea what they want or need. When you get into the complexities of family dynamics and trust language specific to your state and situation, these DIY estate planning packages can cause more challenges than working with a qualified estate planning attorney.

Remember: you don’t know what you don’t know. You may not know the case law and legislation that have evolved into your state’s probate code.

Play it safe and use an attorney who specializes in estate planning. Your family will be grateful that you did.

Reference: MarketWatch (May 3, 2019) “Online wills may save you money, but they can lay these estate-planning traps”

Key Terms: DIY Will, Estate Planning Lawyer, Trust, Power of Attorney, Advance Health Care Directive

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What Can I Expect for Healthcare Costs in Retirement?

Although it’s expensive, the good news about retirees’ health-care costs is that they aren’t rising as fast as they were even a few years ago.

CNBC’s recent article, “Health-care costs for retirees climb to $285,000,” says that a healthy male-female couple retiring at age 65 in 2019 can expect to spend $285,000 on health-care expenses in retirement, according to Fidelity Investments’ annual analysis. When looked at by gender, the estimate is $150,000 for women and $135,000 for men.

The amount is up a bit from $280,000 in 2018. Although the annual increase slowed over the last two years—3.6% compared with 12.2% from 2015 to 2017—the amount still is a challenge for retirees who are mostly unprepared to cover the overall cost of retirement.

Since Medicare is the primary insurer for those 65-and-older, various factors have led to slower increases in older Americans’ health-care costs versus those of the general population. The national health expenditure growth is anticipated to average 5.5% annually from 2017 through 2026, but Medicare’s per-capita spending is projected to grow at an annual rate of 4.6% through 2028.

Fidelity’s analysis assumes that the two theoretical people are eligible for Medicare and includes premiums, copays and other cost-sharing expenses, as well as prescription drug costs. However, there are items that aren’t covered by Medicare, like dental, basic vision, over-the-counter medicines and long-term care. Those costs would be in addition to that $285,000 estimate.

The biggest unknown for retirees is long-term care. This can include assistance for daily living activities, such as eating and dressing. Someone turning 65 has a nearly 70% chance of needing long-term care services in the future, according to government data. There are insurance policies that cover those costs, but the premiums can be expensive. Some life insurance policies may have a rider that covers long-term-care costs.

Pre-retirees should familiarize themselves with Medicare, which isn’t free. Part A (hospital coverage) has no cost, but Part B (outpatient coverage) has an average monthly premium of $135.50 for 2019. For prescription coverage under Part D, the average premium is $32.50 this year.

We should all be saving for retirement as much as we can, and taking advantage of the tax-advantaged accounts at our disposal.

Reference: CNBC (April 2, 2019) “Health-care costs for retirees climb to $285,000”

Suggested Key Terms: Medicare, Long-Term Care Planning, Retirement Planning, Health Care Costs

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Communicate Your Wishes and Have the Documents in Place

Without a will or other estate planning documents, your property is distributed according to the law of intestate succession in the state where you live at the time of your death. That means any wishes you might have as to how your assets are distributed will not be considered, says the article “Make Your Wishes Known” from the Concord Monitor.

If you want to have a say in what happens to your property, including financial accounts and personal items, you need a will. However, that’s not the only document you need. Here’s a list of the documents that are part of an estate plan.

Last will and testament. This transfers property through the probate process. It ensures that you get to tell others how you want your assets distributed. It may include naming a guardian to be responsible for a minor or incapacitated heir’s personal care and assets.

If you have minor children, you may wish to include a testamentary trust so assets can be managed, and their distribution controlled. If your family includes an individual with special needs, you’ll want a Special Needs Trust (SNT), so they do not lose their eligibility for government benefits.

There are many different types of trusts, and they serve different purposes.

Revocable Trust. This can distribute property without going through probate. It also preserves privacy, since documents do not become public. To avoid probate, the trust must be funded during your lifetime, by changing the title on assets from your name to the name of your revocable trust. That may include bank and investment accounts, personal property and real estate. Income, dividends, gains and losses continue to be reported on your tax returns, while you are living.

If you own a business, talk with your estate planning attorney about whether the ownership of the business should be transferred to a trust.

Married couples should speak with their estate planning attorney about having a joint trust together, or if they should each have separate trusts for estate tax planning, creditor protection, protecting children from prior marriages, or ensuring the continuation of a family business.

You may need a pour-over will with your revocable trust, so assets may be transferred into the revocable trust that are outside of the trust at the time of your death. Your estate planning attorney will be able to discuss this in detail, to see if it is a good option.

Joint ownership. If assets are owned in joint tenancy, property automatically transfers upon death to the surviving joint owner. It is not affected by your will and is a way to avoid probate. However, there may be a loss of control and there may be gift, estate, or income tax consequences.

Beneficiary designations. Life insurance, retirement assets, annuities and other Pay on Death accounts all have a person named to receive the asset upon the death of the owner. Every asset you own with a beneficiary designation should be checked every few years to make sure the right person is set to receive the asset. The beneficiary designation supersedes anything written in your will. There should always be a primary and a secondary beneficiary named, just in case the primary predeceases you or does not want to accept the asset.

Power of Attorney. Everyone should have a Power of Attorney, in the event of incapacity. This permits someone to act as your agent in any financial matters. There is also the Health Care Power of Attorney, which gives another person the authority to make health care decisions on your behalf, if you are not able to communicate your wishes.

All these documents should be the foundation of your estate plan. Each person’s situation is different, but an experienced estate planning attorney will help determine what you need.

Reference: Concord Monitor (April 22, 2019) “Make Your Wishes Known”

Suggested Key Terms: Last Will and Testament, Revocable Trust, Will, Pour-Over, Power of Attorney, Health Care Power of Attorney, Beneficiary Designation, Special Needs Trust, Joint Ownership

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