Estate planning entails the orderly disposition of someone’s property in accordance with that person’s wishes. Generally, estate plans include Last Wills and Testaments, Power of Attorney, Health Care Directive and in some instances depending on the specific circumstances Trusts. Without a properly executed estate plan, the person’s property will pass by the person’s state “default” rules of intestacy. In other words, the state controls the distribution of the property over the person’s wishes. As a result, the settlement process may not produce the results that the person would prefer for his or her survivors.
LAST WILL AND TESTAMENT
A will is a document that memorializes the person’s wishes regarding the distribution of property and the care of any minor children. The will designates who will be the executor (who will carry out the provisions of the document), the beneficiaries and guardians for minor children. In addition, it provides instructions for how the probate assets will be distributed to the beneficiaries. A will does not dispose of non-probate assets. Non probate assets are assets that pass outside the probate process. Examples of non-probate assets include assets that are titled jointly with rights of survivorship and assets that are governed by a beneficiary designation form that names someone other than your estate as the beneficiary (such as life insurance and individual retirement accounts)
A trust is an arrangement between the creator of the trust (grantor) and another person (trustee), in which the grantor directs the trustee to hold, administer and distribute the property transferred to the trust for the benefit of a beneficiary. A trust can be created during the live of the grantor or at death in a will. Trusts created during the persons lifetime can be either revocable or irrevocable.
There are several types of trust that could be created as part of a sound estate plan based on the needs of the individual. Some trusts are created to avoid probate, provide to charity, supplement support of a beneficiary with special needs, restrict access to the assets of a beneficiary, and transfer of assets while minimizing tax implications.
POWERS OF ATTORNEY
Powers of Attorney can be general or special. For estate planning purposes, a power of attorney can save the person’s family time in case he or she becomes incapacitated and is unable to make decisions. Without a power of attorney, it may be necessary to go through a guardianship proceeding in court. This certainly takes more time.
A power of attorney authorizes the attorney-in-fact (the individual appointed to make decisions) to act in accordance with the document. Some of the powers granted to the attorney-in-fact may include but not limited to banking, litigation, buying and selling real estate, stock transactions, making gifts, and filing tax returns. A power of attorney is an important tool in the estate planning tool box.
LIVING WILLS/HEALTH CARE PROXY
A living wills and health care proxies are documents by which a person legally authorizes a representative to make health care decisions on his or her behalf when he or she loses decision making capabilities. This representative must abide by the terms of the document and must act in good faith. The document contains specifics on the persons wishes regarding forms of acceptable and unacceptable treatments, artificially provision of food and water, consent or refusal of CPR, etc.