Jennifer C. Rydberg, Attorney at Law
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Kent Estate Administration and Probate Law Blog

What happens if your parents with no assets?

While many Kent area residents believe their money will last way past when they die, many times their savings don't last forever. Children who are left behind after their parents die may wonder what happens if their parent dies with no assets.

Sometimes, when a person dies, they leave a financial mess behind. Children in these situations may worry that they will have to deal with the financial burdens. Almost half of senior citizens die with less than $10,000. In addition, many seniors are dying with debt, which is a relatively new phenomenon. They may still owe money on their home mortgage or they could have credit card debt.

Why a living trust may be important for your situation

"Living trusts" is an estate planning buzz word that many Kent area residents have heard of, but may not understand what they are. They can be a valuable estate planning tool for many families, but mistakes can be made with them as well.

Living trusts are established when a person's assets are transferred to a trust and the person has control over the trust as a trustee. The main advantage of establishing a living trust is that an estate can avoid probate. After the person passes away, the assets in the trust are obtained by the successor trustee and are passed to beneficiaries or distributed based on what was directed in the trust agreement. This ensures a person's estate matters remain private and the assets are not recorded. A living trust can also be to a person's advantage if they become disabled. A successor trustee would be able to take over and manage the assets.

Explaining the differences between a will and a trust

There are many estate planning terms that most people in the Kent area have heard of. Some of the more common terms are wills and trusts. Even though these are common terms, a person may not know what they mean.

First, there is a will. A will is a document that takes effect after a person dies. The will allows a person to name an executor for their estate and controls who receives assets after a person dies. These can include property, assets and financial accounts. Assets that have designated beneficiaries are not affected by a will. Even if a person has a will, their estate will need to go through probate. Probate will inventory all assets and distribute them according to the will.

As you age, make sure your estate plan is updated

Estate planning is not on the minds of most Kent area residents every day because it is not something most people want to work through, as it deals with end-of-life issues. But, regardless of a family's circumstances, estate planning is important. For those who are older, updating an estate plan may be necessary.

Although everyone can benefit from the creation of a will or trust, older people have specific issues they should address in an estate plan. One of the most important is long-term care planning. The incredible amount of money that specialized nursing care costs can be detrimental to a family's life estate. Long-term care insurance, veterans benefits and qualifying for Medicaid while preserving the family's assets are all important considerations. Older people should also have a power of attorney and healthcare power of attorney designated. If there isn't a power of attorney created, the family members will need to go to court to be appointed guardian.

Estate planning to include your business

Kent area residents who own their own businesses are proud of what they have grown and cultivated. These businesses are the result of a family's hard work, and keeping them going after the owner has passed away is important.

Planning for a business succession is important. Without a plan, the business could go into bankruptcy and never recover. Creating an estate plan for a business is a way for a business to prevent this from happening and ensure it will continue for many decades to come. A business plan can help a business transition from one generation to another. For example, an estate plan can give an option for a buy-sell agreement. This is a good strategy for those businesses that have multiple owners and can allow the other owners to buy out a deceased owner's interest. It can also prevent the beneficiaries of the deceased owner from becoming unintentional owners.

Planning ahead for long term care needs is a good idea

No matter what we do, we will all get old one day. Older people tend to need more skilled medical care, which can be expensive. Planning ahead for long-term care is often an important part of estate planning.

75 percent of older adults will require some type of long-term care when they get older. Whether as the result of age or a disease like Alzheimer's, the vast majority of us will need specialized care. When planning for these events, many like to use Medicaid to pay for care facilities. In order for this to happen, careful planning needs to occur. A person has to transfer their home and assets at least five years before using Medicaid. For many, preparing for these asset transfers long before the care is needed is a necessity.

Estate documents all Kent residents need

The importance of estate planning can never be emphasized enough. Having the necessary documents in place can ensure a person's assets, children and health care needs are protected. This is important even for "millennials."

According to a recent survey, more than half of Americans do not have essential estate planning documents in place. Many people have a problem thinking ahead, whether it be from not worrying about it or just avoiding the topic altogether. But, here are certain estate documents that are essential.

When is the best time to do estate planning?

Most Kent area residents have estate planning on their to-do list. But, like many things that should be done, it is often pushed to the side until a better time. So, when is a good time to work on estate planning?

Clearly, the best time to complete an estate plan is before a person needs it. A person never knows when their estate plan will be implemented, so everyone should have theirs completed. Life can change quickly and regardless of age, everyone needs an estate plan. A will is a basic document that can list who receives a person's assets and who is in charge of the estate. A trust is a good choice for those who have more complicated assets. Along with a will or trust, health care directives are important for everyone. A health care emergency can happen to anyone and having these directives in place before something happens can ensure a family knows what to do.

What happens to a loved one's debts when they pass away?

In many cases, when someone passes away they leave behind loans for their homes and cars. Family members who are left behind often wonder what needs to happen in these situations.

A car or home equity loan is a secured loan. This means that if the loans are not paid, the lender can foreclose on the house and use the proceeds to pay the loan. Or, they can repossess the car and sell it to use the proceeds to pay off the car loan. If the proceeds of the sales do not pay off the loan, the lender can have a claim against the other assets in the estate. Many home loans have a due-on-transfer or due-on-sale clause, where if the home is sold or transferred the entire amount of the loan is due in full. Car loans have a similar clause.

Testamentary and temporary guardianships

Kent area parents understand how important it is to care for their children. When parents make plans for their children, they should consider what would happen to the children if the parents unexpectedly pass away.

There are two main types of guardianships. A testamentary guardianship is a person who is designated in a parent's will to care for a child if the parents die. If the guardian named is unable or unwilling to take care of the child, the court will appoint a different guardian. This type of guardian has full control over the person's life, including living arrangements, medical care and financial matters.

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