Estate Planning can be an overwhelming process for everyone involved. Making sure you understand the estate planning documents available to you can make the estate planning process easier for everyone.
Effective and Efficient Estate Plans:
Having an effective and efficient estate planning process requires an understanding of the documents available as well as an understanding of which documents are right for you.
Will
A Will is a legal document that is created during an individual’s lifetime but does not take effect until that individual’s death. A Will states how that individual would like his or her property to be disbursed upon his or her death. A Will is submitted to probate upon the individual’s death in order to disburse the individual’s property in accordance with his or her Will.
Trust
A Trust is a legal document that is created during an individual’s lifetime designating how his or her property should be handled during his or her lifetime, then during his or her incapacity and then following his or her subsequent death. The difference between a Trust and a Will is that the Trust takes effect during the individual’s lifetime. The Trust is funded with the individual’s property, allowing a trustee to manage the property during the individual’s lifetime, incapacity, and death. Since a Trust takes effect during an individual’s lifetime, the Trust avoids the probate process at death. However, the individual’s assets must be titled in the name of the Trust for the probate process to be avoided. Trusts can be either Revocable or Irrevocable. There can be benefits and detriments to both kinds of Trusts. Therefore, determining what kind of Trust is right for the you should be a discussion with your estate planning attorney.
Revocable
A revocable trust gives the Trustmaker the power to eliminate or revoke the trust during his or her lifetime, among other powers.
Irrevocable
In an irrevocable trust, the Trustmaker does not have the power to eliminate or revoke his or her trust during his or her lifetime.
Power of Attorney
A General Durable Power of Attorney, sometimes called a Financial Power of Attorney, is a written legal document authorizing an individual (agent) to act on another’s (principal) behalf with regard to financial matters. A Financial Power of Attorney ends upon the death of the principal. In some states, Financial Powers of Attorney can be either effective upon signing or effective upon incapacity.
Effective Upon Signing
A power of attorney that is effective upon signing gives the agent the power to act on the principal’s behalf as soon as the document is signed by the principal. The benefit of this type of Financial Power of Attorney is that incapacity of the principal does not need to be proven for the agent to act. This type of Financial Power of Attorney can be very useful for a husband and wife, especially if one spouse travels frequently. However, this type of Financial Power of Attorney is not recommended when the agent is a family member other than the spouse, or a friend of the principal. In this situation, a Financial Power of Attorney that is only effective upon incapacity would be more appropriate.
Effective Upon Incapacity
A power of attorney that is effective only upon the incapacity of the principal gives the agent the power to act on the principal’s behalf only when the principal is proven to be incapacitated. This type of Financial Power of Attorney is primarily used when the agent of the principal is someone other than the principal’s spouse. Situations can arise where a child or friend uses the Power of Attorney, without the principal’s knowledge, for the benefit of the child or the friend and not for the benefit of the principal. Having the Financial Power of Attorney that is only effective upon incapacity can help eliminate some of those situations.
Living Will
A Living Will is a legal document that states an individual’s decisions with regard to life-sustaining treatment. In essence, this document speaks for an individual when the individual is unable to speak for himself or herself. A Living Will does not appoint anyone to be an agent of the individual. Instead, the document simply addresses life-sustaining treatment issues and decisions. In some states, a Living Will can be revoked orally. This could create a situation where an individual unintentionally revokes his or her Living Will. For example, if an individual is in pain at the hospital and makes a statement such as, “I don’t want to die,” this statement technically just revoked that individual’s Living Will depending on state law.
Health Care Power of Attorney
A Health Care Power of Attorney is similar to a Living Will in that it also is a legal document that states an individual’s decisions with regard to life-sustaining treatment. However, unlike a Living Will, a Health Care Power of Attorney appoints an agent to enforce the decisions pertaining to life-sustaining treatment the principal has made during his or her lifetime. In some states, a Health Care Power of Attorney is only revoked in writing. If this is the case, then a statement of an individual in pain such as, “I don’t want to die,” would not revoke his or her Health Care Power of Attorney.
Understand the estate planning documents that are available to you and discussing those documents with an estate planning attorney, makes the estate planning process less daunting for everyone.
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