Estate Planning and Administration
What follows is some basic information about Wills, Trusts, Powers of Attorney, and Health Care Directives. I believe it is important for any estate plan to be as complete as possible, and these are some of the important tools we may discuss. When you are ready to set up an appointment, feel free to call or email me.
WILLS, TRUSTS, POWERS OF ATTORNEY, AND HEALTH CARE DIRECTIVES
WILL OR TRUST
Often one of the first questions I’m asked is to explain the difference between a will and a trust. While there is no short or simple answer to this question, there are some basic differences that I can explain here.
A will is a legal document stating how you want your affairs handled after you die. In a will, you appoint a person to be your Personal Representative (many people use the term “Executor” which means the same thing), who handles your affairs, and you name beneficiaries – who will inherit your property after your death.
A trust – in most cases called a “revocable living trust” – is a contractual relationship created by you (the “Trustor”) whereby you appoint another party (the “Trustee”) to take possession of your assets and manage them for the benefit of individuals or entities named in the trust (“Beneficiaries”). You will appoint a successor Trustee who will manage your assets after you can no longer do so. You will also name beneficiaries who will inherit your property after your death.
There are many differences between wills and trusts, but the primary differences are: with a trust, your estate remains private and your assets pass directly to your heirs or named beneficiaries. With a will, your estate must be admitted to probate whereby the probate court will supervise the transfer of those assets to your heirs or named beneficiaries. Trusts are more complex than wills and are thus more expensive to create but administering a trust after your death is usually less expensive and less time consuming than probate. Wills have the advantage of simplicity, and therefore a lower cost to create, but the cost of probate is usually higher than administering a trust.
POWERS OF ATTORNEY
With a durable power of attorney, you can authorize another person (your “agent”) to act on your behalf to perform any number of specified acts. Powers of attorney are very useful to manage your affairs if you become incapacitated or are no longer able to manage your own day to day affairs. In most cases having a power of attorney helps avoid the need for more complex and costly guardianship proceedings.
There are two types of powers of attorney: An "immediate" power of attorney is effective as soon as you sign it; whereas a "springing" power of attorney is only effective after you are no longer capable of managing your own affairs.
With a power of attorney you can grant your agent power to manage nearly all aspects of your daily life, such as: real estate transactions; banking and other financial transactions; operation of a business; insurance; government benefits; transfers into a revocable trust; and maintenance of records, reports, and statements.
You can also grant your agent authority to make certain planning decisions including long-term care planning, gift planning, and transactions involving trusts (including the creation of irrevocable trusts, or amendments to existing trusts, as may be necessary to manage long-term care needs).
HEALTH CARE DIRECTIVES
Sometimes called an “advanced directive”, health care directives serve two purposes: First, you appoint a “health care representative” who has the authority to make medical decisions for you in the event you are unable to make those decisions yourself. Your health care representative has authority to make treatment decisions, sign documents, and access medical records. Second, the health care directive includes written instructions from you to medical professionals about your wishes regarding life-prolonging medical procedures when your condition is terminal and there is no chance of medical recovery. Patients have a legal right to accept or refuse medical treatment, and health care directives allow you the opportunity to express your wishes in advance in case you are unable to make them known when it becomes necessary to do so. In my practice, health care directives are included for all my estate planning clients at no additional cost.