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
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.
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.
Health Care Surrogate Designation: A health care surrogate designation designates someone else to make health care decisions for you if you are unable to make those decisions yourself. The scope of a health care surrogate designation generally goes beyond that of a living will. While a living will usually is concerned with the withdrawal or withholding of life-support treatment in the event you become terminally ill, a health care surrogate designation can address nearly any health decision.
Living Trusts (Revocable Living Trust): The living trust is a vehicle for managing your property during your lifetime and passing it on to your beneficiaries at death without probate.
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.
LAST WILL AND TESTAMENT
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.
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.
Effective estate planning requires the assembly of all relevant information concerning your personal, family, and financial situation. Here is a form that has been prepared to aid you in identifying, locating, and organizing that information. Completing this form will help you properly evaluate and design your estate plan. Moreover, the information may be valuable to your family in the event of your death or disability. (download pdf file…)