1. Revocable Living Trust
This is the main document in every complete plan; it serves as Your Rule Book others must follow! Clients can always change their trust anytime they want to make sure it meets their needs and matches their wishes. Trusts are dealt with privately and out of the public courts.
Trusts come in many “flavors” including Irrevocable Trusts, Testamentary Trusts, Special Needs Trusts. Trusts can be simple or complex and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary).
Depending on the situation, there may be many advantages to establishing a trust, including avoiding probate court. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust-maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiary. Or they may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. If well drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated. Contact our estate planning lawyer to find out if you and your family could benefit from establishing a trust.
2. Your Last Will and Testament
Your last will and testament is just one part of a comprehensive estate plan. If a person dies without a will they are said to have died “intestate” and state laws will determine how and to whom the person’s assets will be distributed. Some things you should know about wills:
- A will has no legal authority until after death. So, a will does not help manage a person’s affairs when they are incapacitated, whether by illness or injury.
- A will does not help an estate avoid probate. A will is the legal document submitted to the probate court, so it is basically an “admission ticket” to probate.
- A will is a good place to nominate the guardians (or back-up parents) of your minor children if they are orphaned. All parents of minor children should document their choice of guardians. If you leave this to chance, you could be setting up a family battle royal, and your children could end up with the wrong guardians.
3. General Durable Power of Attorney
A power of attorney is a legal document giving another person (the attorney-in-fact) the legal right (powers) to do certain things for you. What those powers are depends on the terms of the document. A power of attorney may be very broad or very limited and specific. All powers of attorney terminate upon the death of the maker, and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. General Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.