STEPS of Estate Planning

Steps of Estate Planning I find that the greatest obstacle that people encounter is wondering what they are getting into when they decide they would like to look into meeting with an attorney to start an estate plan. They are reluctant to initially make the call because they don't know what its going to cost in time and money. Taking the fear and confusion out of estate planing involves educating folks to know what to ask. That is also why it is also very important to always work with Legal and Insurance Advisors when it comes to estate planning. 

Steps To Estate Planning

What to Bring to Appointment

I recommend bringing any existing legal papers, wills, trust, deeds, a list of assets, if possible and also last years income tax form. These documents allow the attorney to assess the exposures and present tax situation. But Don't get overwhelmed. Just bring yourself even if you don't have the other information. The attorney will help you. 

Who Should Come

It is important to have the husband and wife present, if married. If you feel it necessary, bring any children you might want to also know about your financial and legal matters. 

Your Objectives 

The attorney will ask you personal questions about your current situation, your goals in terms of tax savings and probate avoidance and special concerns for your family, and any personal concerns. 

Your Estate Exposures Explained

Next the estate planning attorney will explain your exposures presently, in the future, and review the options you may want to consider to protect your financial security presently and plan to protect your heirs in the future. 

Legal Strategies Explained

The attorney will next tell you exactly what legal documents you need, and what kind of insurance you should consider. You may wish to have your insurance advisor with you to also give you a quote at the same time with the attorney present. Then you can respond as to if you feel it is realistic to consider insurance in your present budget as part of your estate plan. If not, than the attorney can advise you accordingly as to the options which may not protect you as well, but certainly lead to a better financially secure situation than you may be in presently. 

Legal Fees Discussed

I recommend charging folks a flat fee for legal documents instead of by the hour to take the unknown out of the way so that they can make a better decision then as to what they want to do next.  An estate planning attorney will know right away what legal work will be involved, and it should not be made into a federal case. Then the insurance agent can meet with the folks again later to review insurability, and start any insurance applications as well. 

Legal Documents Prepared

The attorney should be able to have the legal documents ready within 1-2 weeks. It is not wise to delay the legal document process, as it is not comforting to know your exposures, and leave matters undone for any length of time. I believe folks want peace of mind, and that is what estate planning is all about. Peace of mind, financial security, and the pursuit of financial liberty and happiness is the ultimate goal. 

Execution of Legal Documents

Next the couple or individual will meet again with the attorney again, and the legal documents will be executed (signed, and made alive and effective). 

Putting Assets In the Trust

The next step is the most important step when trusts are involved. The assets need to be transferred into the trust. This step is the most understood yet easiest of all. While assets are in the Trust, you totally control them. You can buy and sell anything you want. Anything new you buy will be put in the trust. If you sell something and receive cash, put the money in the bank or money market fund titled in the name of the trust. The attorney will prepare a new deed to your home and you simply file it at your county deeds office just as your current deed is. The recording fee is usually under $20. A letter of instruction is prepared for you to mail to your insurance, investment and banking institutions requesting that they transfer and change the ownership of your assets to the name of your trust for example the John and Mary Doe Revocable Living Trust. Those institutions will than either make the change and send you a letter of confirmation, or have you sign their form that they will send you in the mail. That's it. You have completed the transfer process. The whole thing from beginning to end takes about 5 working hours - less time then it takes to prepare and eat a Thanksgiving dinner. It is also imperative that if insurance is to be a part of your individualized estate plan, that you follow though as advised by the attorney as quickly as possible. You never know when the doctor can diagnose you with something as common as high blood pressure or something else which could cause your insurance to be more expensive, or worse, perhaps uninsurable. You are never as young and healthy or insurable as you are today. Don't risk time taking that away from you. 

Possible Future Exciting Steps

There are further steps for some folks which I do not recommend they get overwhelmed with until they have completed the first stage. The other steps involve tax saving strategies for estates over $300,000, and some fun and creative ways to actually create more retirement income, bail out of IRAs and other tax shelter investments tax free utilizing tax deductions created by these advanced strategies. Other advanced strategies include protecting your assets from the devastation of a nursing home stay which is rapidly crippling financially many senior generation families. Remember first things first and to wait and procrastinate, or worse, not to plan at all could result in totally wiping out even the Smallest Estate. For these people estate planning is survival planning.

Estate Planning Traps to Avoid

The stakes are too high , 37-55%+, of an estate being wiped out by estate (death) taxes, lawyers fees and probate costs. Be aware of the pitfalls and traps to properly planning your estate distribution. 

The following are some of the biggest pitfalls and solutions on how to avoid them: 

  1. A Will Alone is NOT Estate Planning. A will is an invitation and a guarantee that an estate will have to be probated (if over $10,000) causing thousands of dollars and months if not years lost in settling the estate. A Revocable Living Trust, in my opinion, is a far better estate planning document than simply a Will. Also a Will only takes effect at death. It does nothing to protect your legal or health care affairs while you are alive. A Durable Power of Attorney, Health Care Power of Attorney and Living Wills are also essential but too often ignored legal documents. 
  1. Not Protecting BOTH Spouses' $675,000 Exemptions. Most spouses think they are doing adequate estate planning by simply leaving all their property to each other. Not so. This mistaken strategy could result in up to $300,000 of totally unnecessary estate taxes and probate costs. If the couple would set up a Revocable Living Trust each spouse can take advantage of their $675,000 credit with a Credit Shelter Trust. They could pass up to $1,350,000 absolutely estate tax and probate free. The survivor spouse would be entitled to all the trust income and necessary principal for as long as he or she lives. 
  1. Not Adequately Utilizing Life Insurance. Life insurance is an excellent method for building savings protecting your loved ones. It will also prepare for the possibility of paying estate taxes and/or equalizing an estate between family members all in one product. A properly written permanent life insurance policy can also protect you for possible long term care as well. Again you need to work with a specialist, when it come to these matters. The other methods of trying to obtain funds such as depleting cash from the estate, loans, forced liquidation of assets and equity loans extract too heavy a toll on the family financially not to mention the estate. I know of no better product or way to protect your family's present and future financial security, liberty and peace of mind than with life insurance. You are essentially buying discounted dollars at a fraction of its benefit face amount. Again you need to work with a team of professionals. It is also very important that the life insurance be written properly and also placed in an irrevocable trust to avoid the proceeds being included in the value of your gross estate for tax purposes. How do you think the rich and famous do it? You can take advantage of the very same strategies and tools they do. Remember not to make a decision is a decision. There is a Better Choice. That is to develop your estate plan and act on it right away. Procrastination and inaction is hazardous to your wealth. We all need to realize that no longer can we count on the government or others to take care of us. We have to have a plan. 
  1. Not planning for Other Lifetime Catastrophes. An estate will not be worth much if a major loss occurs such as an uninsured disability, nursing home stay, automobile accident or serious damage to your home. Any of these causes could wipe out a small to medium size estate. Make sure you have adequate insurance coverage for these other life crisis possibilities. 
  1. Thinking that Estate Planning is Only for the Rich. This is the worst mistake of them all. Not adequately planning for a middle to large estate will cause 37-55%+ of an estate to be lost. The entire - 100%- smaller estate can be totally wiped out by not planning. I call estate planning for the smaller estate- less than $200,000 - survival planning because of the devastation to a life's work if proper planning is not done.
Planning For Long Term Care Financing

With nursing home costs ranging from $35,000 - $90,000 and more a year, families are looking for financing solutions that won't result in the economic devastation of years of hard work. With the average nursing home stay now exceeding two years and the risk of a nursing home stay for people over age 65 and especially after age 75 over 40%, people must plan and plan quickly and soundly. The risk and cost stakes are too high not to do adequate planning. 

Possible Solutions

The solutions for covering a potentially very expensive home health care or nursing home stay are various for different families... I don't suggest Savings or Medicaid. There are much better solutions through proper planning with Family Support, Home Health Care and Nursing Home Insurance. 

Long Term Care and Savings

Based on the average stay and costs, a family must be ready to come up with $75,000 - 100,000 to cover this high risk, high cost occurrence. If a person using an IRA or other tax deferred savings vehicle saved $2,000 a year starting at age 60 and earned 8% a year, he would have $ 28,973 and at age 70, all of the distribution taxable income. Not even enough to pay one year for care. Financial experts indicate that 1/3 of the middle class would have their existing savings wiped out in 13 weeks and over 80% would be wiped out in one year. You cannot save for this catastrophe. You must find other solutions. 

Can your Family Support You?

The days of being able to depend on family support have gone into American folklore along with the old Leave it to Beaver and Walton TV shows. Most families today are either single parent or blended multi-marriage families scattered all over the country. Baby Boomers who are the children of the senior parents requiring expensive care are themselves squeezed between their needy elderly parents and their college age own children whose cost of education runs from $25,000 and up per student per year and their own inability to save adequately up to now for their own retirement. Further, the Baby Boomer children do not have the time with their own incredibly busy working lifestyle to actually provide the health care for their parents at home. Seniors are on their own. 


Contrary to an apparent widespread belief, Medicare does not pay for nursing home costs other than on a very limited basis - up to 100 days - for approved skilled care only. Over 98% of care needed in a nursing home is only for custodial care- bathing, dressing, eating, walking and toileting, none of which is paid for by Medicare or the related Medicare Supplement policies. The fastest growing cause of nursing home stays are due to Alzheimer Disease which requires uncovered custodial care which again Medicare does not cover. 


The rules to qualify for Medicaid - the medical program for the poor - has become extremely stricter over the past few years because of the staggering cost of nursing home care on the government. Medicaid pays for a little more than 40% of nursing home care, the rest from private paying patients. The waiting list is very long for Medicaid funding care and the is a very strong likelihood that the care will have to be provided is a facility far away from the original home or visiting family. A middle class person has to spend their assets down to about $2,000 to qualify. Married couples can have somewhat more to try to protect the spouse still living at home but its financially ruinous for both single and married persons of the middle class. Further what assets they do have is subject to be recaptured later to compensate for the Medicaid payments by the state. It is so emotionally devastating for a hard working middle class family to have to spend down and become poor to qualify or worse and more tragic, some are even getting divorced to protect themselves financially. 

Legal Strategies

As of January 1997 a new law makes it a federal crime to attempt to transfer assets to qualify and apply for Medicaid. BEWARE.... this is a very serious crime with a penalty of up to 5 years in prison and up to $25,000 dollars for fines. This encompasses any persons that advised professionally such a plan to qualify for Medicaid. ... Thus be careful to seek proper legal counsel with an asset protection, estate planning expert before you decide to make large gifts to family members or otherwise. 

With the above concerns there are legal strategies to protect a family's assets against a nursing home stay. They are very strict and complicated. As I mentioned above.... You should only work an attorney who is very knowledgeable and experienced in elder law, estate planning and nursing home asset protection. The strategies involve unique strategies that are not an option for everyone. Proper use of these few legal strategies can protect a family's assets. Further, because the requirements are so strict with long waiting periods, it is highly advised that strategies be used in conjunction with long term care insurance. 

Long Term Care Insurance

The only way a family can absolutely protect itself from the staggering cost of nursing home care is with Long Term Care (LTC) insurance. You can purchase home health care and/or nursing home care. The policies will pay the daily benefit selected to cover the cost you select . Premiums are based on age, health, daily benefit, type of coverage (nursing home, home health care or both), waiting period and benefit period. These are essential but highly complex products. You need to work with a specialist that is knowledgeable in long term care. 

You need to work with legal and insurance advisors for many reasons, because while some lawyers are regrettably opposed to insurance, as an estate planning attorney and former Virginia Deputy Commissioner of Insurance, I strongly believe that insurance and estate planning go together like America and Apple Pie. 

When a person age 75 tells me the premium is to high and they just can't save for it, I advise them of the very high risk and cost of having to go to a nursing home and that even if they paid LTC premiums for 15 years until age 90 for a total $45,000 in premiums, it is still less than guessing wrong having to pay just one year's cost for a nursing home stay and that the average stay is double that with two years. 

Ball park figures for Nursing Home Insurance

Premiums of course vary as stated above but annual premium ball park estimates for basic long term care policies are as follows: 

  • $1500 at age 60 
  • $2500 at age 65 
  • $3200 at age 70 and 
  • $4000 at age 75
Rates should not increase once the policy is bought. It is also advisable to have the daily coverage benefits increase with inflation (inflation guard protection). 

A Better Choice for Long Term Care Financing

The best solution is to plan early. At least start a program by the early to mid age 60s by combining legal and insurance strategies. For example at age 60 the LTC premium can be capped at less than a $1,500 a year and the balance be used to purchase permanent life insurance that can also build towards a cash value savings each year. Meanwhile, the life insurance policy has built up a sizable cash value that could also be used for other estate planning goals and a retirement emergency fund. Waiting until a person reaches their 70s increases the cost of any insurance and risks the possibility that the long legal waiting requirements to qualify for Medicaid asset protection won't be met, and again you can lose your insurability. It is never to early or late to start planning, however just trying to save for the un-savable cost of long term care could be the worse approach. Legal strategies with Long Term Care Insurance is clearly A Better Choice. 

Back        Contact Us      Home

©2000 Stephen J. Kaufmann   All rights reserved.