Getty Images. Art: Jillian Sellers.
As the parent or guardian of an adult dependent, estate planning can take on heightened significance. In your absence, there needs to be detailed guidance (and funding) in place to ensure your dependent is well cared for and has the resources available to maintain that care.
Putting together thoughtfully developed will and trust documents can be one of the best ways to accomplish this goal. Here's what you need to know about developing a will and/or trust with an adult dependent in mind.
Why it's important to have a will
At the risk of stating the obvious, a will is a fundamental estate planning document that every adult should have in place. Unfortunately, many Americans don't. A recent Gallup poll revealed that slightly less than half of Americans (46 percent) have a will.
Taking the time to draft a will allows you to specify what should happen after your death including with regard to your assets, says Patrick Hicks, head of legal for the online estate planning company Trust & Will.
"That includes designating where your assets should go, and identifying your final arrangements, as well as nominating guardians for your children and pets," Hicks tells Parents. "Wills handle decisions that apply to everyone, and not having a will does not mean these questions are not answered; it simply means you have no say in how they are answered."
Even those who do not have a substantial estate should take the time to craft a will. Don't make the mistake of thinking that simply because you haven't amassed a fortune, a will is unnecessary.
Creating a will that includes adult dependents
For those who have dependents, including adult dependents, a will is a particularly critical tool. This legal document allows for nominating guardians for both minor children and adult children. If you're the legal caretaker of an adult dependent, a will is used to designate who should take over that responsibility after you, explains Hicks.
"While the ultimate test is what is best for the person in need, courts are highly deferential to the nominations of parents in determining what is best," explains Hicks.
You'll want to choose guardians who can provide the often strenuous care that your adult dependent needs, but also someone who will be patient and loving, adds Mary Kate D'Souza, co-founder and the chief legal officer for gentreo.com, a boutique online estate planning software solution.
"By having a will, you're in control of your choices and can choose guardians who you know will love and care for your dependents as you would," D'Souza tells Parents.
Additionally, a will is typically used to set aside assets for the care of adult dependents. These assets can be transferred either directly to the dependent or indirectly through the custody of a guardian or caretaker. You may also create additional provisions in a will to ensure funds are made available for uses that you would approve.
"Common examples include making funds available to accommodate the degree of independence appropriate for your dependent," explains Hicks. "That may include funds to purchase a home or pay rent or funds to remodel the home to better suit your dependent's needs."
You might also use your estate plan to cover the cost of such things as in-home care and support services or residential care facilities, as well as rehabilitative therapy costs, travel costs, and education costs.
"Your plan should be tailored to meet your preferences and the needs of your dependents," says Hicks.
The difference between a will and a trust
While both a will and a trust are central to a comprehensive estate plan, and both allow you to express your wishes regarding the distribution of assets, there are a couple of primary differences between these two documents.
"A will is a legal document that can only become effective upon your death," explains D'Souza. "It is a way of controlling your assets from beyond the grave. In a will, you can nominate guardians for your children and dependents and state who gets which of your assets."
In addition, a will allows you to nominate a personal representative, (also known as an executor) to manage your estate and ensure your wishes as expressed in the will are upheld.
Hicks, of Trust & Will, adds that a will is a very basic estate planning document that handles your most essential estate planning needs.
"Every adult needs a will," he says.
A trust, on the other hand, is a more advanced estate planning document that provides additional tools for those who may need more control over their plan. A trust holds assets for the benefit of others, and the person who manages the trust is called a trustee.
"There are many different types of trusts," explains D'Souza. "You can create a trust while you are alive and not surprisingly this is called a living trust. For adult dependents, an important type of trust to be familiar with is a special needs trust. This trust protects your dependent's state benefits while also enabling your dependent to get extra support from the trust."
One final, but important point: A will must always go through the probate process so that the document can be validated by the courts after your death. A trust, however, often doesn't require probate. Avoiding probate saves time and money.
"For this reason, assets are distributed to beneficiaries far more quickly after your death if you have a trust instead of a will," says D'Souza. "Additionally, a trust offers more privacy than a will, which is made a matter of public record in the probate process."
The value of a comprehensive estate plan
Beyond finances and the identification of guardians, your estate plan can be used to cover additional important information. Even if not legally binding, these documents, when thoughtfully prepared, can be helpful to provide incredibly important information about your adult dependents.
"They can be used to cover their degree of independence, their personal preferences such as regular routines, grooming, interests, and habits, and any other information you may feel appropriate," says Hicks. "This helps provide a roadmap for others in your estate plan to ensure your dependents receive the best care possible."