Getting started on estate planning can be both a scary and daunting task, both for you and for your senior citizen clients. With the Baby Boomers on the precipice of retirement, the demand for planning advice in this area should begin to take off. When advising seniors on how to best plan for both themselves and their loved ones, there are definitely some sure-fire approaches to take --as well as some serious pitfalls to avoid. 1. PUT ASSETS IN TRUST
When taking control of their estate planning, most seniors think a will is the way to go. Often your clients won't understand the probate process, and since they are unfamiliar with trusts, they fall back on wills, which are familiar. They don't understand that a lengthy probate process can hold up the disposition of their assets for an indefinite amount of time while their wills are validated.
However, if you explain the benefits of trusts to a client, they may come to see the benefits of having one. Your clients' assets pass into a trust while they're still living and, since they no longer own the assets, they escape probate. Also, trusts allow for control over who gets what--including specific circumstances--and for private disposition, your clients may come to understand the advantage that a trust offers. Finally, since there are two types of trust, revocable and irrevocable, senior citizens can customize their trusts to meet their own specific needs. Irrevocable trusts also present opportunities for asset management and annual tax accounting.
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2. THE MEDICAID FIVE-YEAR LOOK-BACK
Most senior citizens are familiar with Medicaid, a government program that pays for nursing home care. But what many of them don't know is that if they exceed the Medicaid eligibility limits in savings and property, Medicaid will seize money and property from them in order to cover the cost of the care.
In order to avoid this, you can advise your clients to put their assets in an irrevocable trust as soon as possible. They will still be able to receive income through the trust, but they will avoid Medicaid's five-year look-back--a federal law that means any assets transferred into a trust within five years of your client entering a nursing home will be used to evaluate their eligibility. If your clients make the transfer now, they will avoid having to use those assets to pay for nursing home care. You can also assist them with other long-term planning options such as outright gifts or annuities.
3. REAL ESTATE VALUES ARE DECLINING
We've all heard that the real estate market is terrible right now and there's no exception for your senior citizen clients. Because the interest rates for adjustable rate mortgages were reset higher in 2006, people with these mortgages are more likely to default, leading to an increase in foreclosures. Now that many of these folks are attempting to sell their properties in order to avoid defaulting on their loans, the price of real estate is being driven down further and further, making it a bad time for your clients to sell if they can afford to hold on to their property.
