LIFE & ESTATE PLANNING
Maintain control over your personal, health care and financial decisions.
If you want to maintain control over your personal, health care and financial decisions should you become incapacitated and over your estate when you pass on, you need a comprehensive Life and Estate Plan.
There are three main types of Life and Estate planning documents are Powers of Attorney, Wills, and Trusts. When designed correctly, these three types of documents, further described below, can provide a path to achieve the goals you set and provide a means to control your affairs in the event of incapacity.
POWERS OF ATTORNEY
Living Will:
A living will speaks for you when you are unable to do so. Usually, the purpose of a living will is to express your desire not to receive extraordinary medical treatment in the event you suffer from: 1) a terminal condition; 2) an end-stage condition; and/or 3) being in a persistent vegetative state. It allows you determine the kind of medical care you want under the circumstances you describe. You should express your wishes in as much detail as possible so that medical-care providers will be able to understand your intent clearly.
Durable Power of Attorney:
A Durable Power of Attorney (DPOA) gives financial and legal authority to the agent of your choice in the event of your incapacity. A DPOA is a substitute for a court-appointed guardianship, a time consuming and inefficient process. As the DPOA can help your family avoid a guardianship, it can be the most important estate planning document available.
Generally speaking, a DPOA delegates your financials powers to a designated agent. This grant does not limit your own ability to act and override your agent. You can authorize your agent to do almost anything that you can do yourself. Typically, your agent has a broad list of powers that enable them to sign checks, open bank accounts, sell assets, prepare tax returns, apply for loans, etc.
Durable powers of attorney are effective immediately upon execution. Sometimes, however, a principal is reluctant to delegate broad powers to anyone while he or she is still competent. Such a principal may want to place the power of attorney in escrow with instructions to deliver the power of attorney to the designated agent upon the disability of the principal and not before.
TRUSTS
Living Trusts (Revocable Living Trust):
You can be the trustee of your own living trust, keeping full control over all property held in trust. A trust also allows you to name a successor trustee to take over management of your assets in the event you become incapacitated. That way, your assets will continue to be managed as you want with no interruption.
Testamentary Trusts:
Unlike a living trust, a Testamentary Trust doesn’t go into effect until your death. Usually this type of trust is made within a will – often to create a trust for minors. When a trust is included in a will, the will goes into effect immediately, but the trust is not actually created until after the death of the will maker.
The primary purpose of most living trusts is to avoid probate. Unlike living trusts, testamentary trusts do not avoid probate. Testamentary trust created through a will must go through probate before the trust is created.
Special Needs Trusts:
Special needs trust are an essential tool to consider when you are planning to financially support a disabled family member who is currently receiving any type of government benefits. Without a special needs trust in place, the financial assistance that your loved one receives could be considered income that may affect his or her eligibility for Social Security, Medicaid and other important programs.
By establishing a special needs trust, you can ensure that your elderly parents, disabled children or other loved one continues to receive government support. The trust funds can be used to supplement these benefits and cover the costs of Transportation, supplemental therapy, education and other incidentals.
The living trust is a vehicle for managing your property during your lifetime and passing it on to your beneficiaries at death without probate.
LAST WILL AND TESTAMENT
Despite what you may have read or heard, a living trust can’t always fully replace a Will. Neither is trying to place all of your property in joint ownership with your spouse an effective replacement for a Will. You’ll find it difficult to transfer all of your property to a trust or title all of your property in both you and your spouse’s names. Any property you miss will be distributed under state intestacy law if you die without a Will..
With a clear expression of your wishes through a will, there are unlikely to be any costly, time-consuming disputes over who gets what. Every adult who owns property should have a will. If you do have a Will, you should review it regularly to make sure it is still meeting your needs. Once your Will is written, you may exercise the right to revoke and replace the document at any time, for any reason.
A Will is a legal document that allows you to direct how your estate will be administered and distributed. By exercising your privilege of making a Will, you can accomplish numerous personal and financial objectives. A will address three primary issues after your death:
Who gets your “estate” (beneficiaries);
Who administers your estate (executor), who will take your assets through probate and make final distributions to your heirs; and
Who cares for your minor children (guardian).
If you die without a Will, a state court will choose an administrator for your estate or, if needed, a guardian for your minor children. The court’s choice may or may not be individuals whom you would have selected. The court-appointed administrator will distribute your property according to the state intestacy laws, regardless of any desires you may have expressed during life. Your children, grandchildren, or other heirs who are minors at the time of your death may automatically receive their shares of your estate outright when they reach the age of majority, whether or not they are experienced enough to manage their inheritances wisely.
Life & Estate Planning FAQ
What is estate planning?
When someone passes away, his or her property must somehow pass to another person. In the United States, any competent adult has the right to choose the manner in which his or her assets are distributed after his or her passing. (The main exception to this general rule involves what is called a spousal right of election which disallows the complete disinheritance of a spouse in most states.) A proper estate plan also involves strategies to minimize potential estate taxes and settlement costs as well as to coordinate what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event of death or disability. On the personal side, a good estate plan should include directions to carry out your wishes regarding health care matters, so that if you ever are unable to give the directions yourself, someone you know and trust would do that for you, and know when you would want them to authorize extraordinary measures and when you would prefer they pull the plug.
Why is it important to establish an estate plan?
Sadly, many families don’t do proper estate planning because they don’t believe that they have “a lot of assets” or otherwise believe that their kids can just come in and divide their assets by themselves. If you don’t make proper legal arrangements for the management of your assets and affairs after your passing, the state’s intestacy laws will take over upon your death or incapacity. This often results in the wrong people getting your assets as well as higher estate taxes.
If you pass away without establishing an estate plan, your estate would undergo probate, a public, court-supervised proceeding. Probate can be expensive and tie up the assets of the deceased for a prolonged period before beneficiaries can receive them. Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs. Further, it is not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.
What is a Durable Power of Attorney?
A durable power of attorney allows you to carry on your financial affairs in the event that you become disabled. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you when you are disabled. This guardianship process is time-consuming, expensive, often costing thousands of dollars and emotionally draining.
What is a Living Trust?
A Living Trust can be used to hold legal title to your assets and provide a mechanism to manage them. You (and your spouse) are the trustee(s) and beneficiaries of your trust during your lifetime. You also designate successor trustees to carry out your instructions as you have provided in case of death or incapacity.
Unlike a Will, a Trust usually becomes effective immediately after incapacity or death. Your Living Trust is "revocable" which allows you to make changes and even to terminate it. One of the great benefits of a properly funded Living Trust is the fact that it will avoid probate and minimize the expenses and delays associated with the settlement of your estate.
What are the advantages of having a Living Trust?
Like a Will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has certain advantages when compared to a Will. A Living Trust allows for the immediate transfer of assets after death without court interference. It also allows for the management of your affairs in case of incapacity, without the need for a guardianship or conservatorship process. With a properly funded Living Trust, there is no need to undergo a potentially expensive and time-consuming public probate process. In short, a well-thought out estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.