General Estate Planning

• What is an estate?
• What are the main reasons for estate planning?
• What types of documents can make up an estate plan?
• What is a Will?
• Why should I have a Will?
• What is a Durable General Power of Attorney?
• What is a Health Care Power of Attorney?
• What is a Living Will Declaration?
• What is a trust?
• What are the advantages of a trust?

What is an estate?

Your estate is simply everything you own -- your home, other real estate, bank accounts, investments, retirement benefits from your employer, IRAs, your insurance policies, collectibles, and personal belongings.

When you start adding it up -- especially when you add in the death benefits from your insurance policies -- you may find, like most people do, that you actually own a lot more than you think.

As you will see, the term “estate” has different meanings in different contexts.

What are the main reasons for estate planning?

• To control who will receive your assets after your death.
• To minimize legal fees and taxes.
• To protect yourself in the event you become incapacitated so that you, through the individuals you have chosen, not the courts, keep control of your assets and make decisions about your medical care when you can no longer handle your own affairs.

What types of documents can make up an estate plan?

• Last Will and Testament
• Durable General Power of Attorney
• Health Care Power of Attorney
• Living Will Declaration
• Trust
• Deed

What is a Will?

A will is a document that provides for the way in which a person’s probate property will be distributed upon death. Probate property is property that is only in one individual’s name and will not pass by title or contract to others.

Why should I have a Will?

There are a number of important reasons for preparing a Will:

• Appoint an executor and successor executor.
• Appoint guardians for minor children and adult children who are legally incompetent and successor guardians.
• Appoint guardians for property management (need not be same individuals as guardians of persons).
• Provide for property distribution.
• Provide for a trust or life estate.
• Plan for payment of debts.
• Provide a waiver of the Executor posting bond.
• Designate order of death for the purpose of distribution of property in the event of simultaneous death of parties.
• Provide for distribution of property in case of potential disclaimer by a beneficiary under the Will.
• Designate the powers granted to the Executor.
• Provide for allocation of estate taxes.
• Provide clauses to reduce risk of Will contests.

When a person dies without a will, or dies “intestate” as the law calls it, the “probate” property of the deceased is distributed according to a formula fixed by law. In other words, if you don’t make a will, you don’t have any say about how your property will be distributed. If you do not make a will, then the Probate Court will appoint someone (the administrator), whom you may or may not know, to handle your estate.

What is a Durable General Power of Attorney?

Simply stated, a power of attorney is a document in which you grant someone you select (your agent or attorney-in-fact) the ability to take certain actions in your name, just as you could act. The grant does not deprive you of the right to take those actions and it can generally be revoked at any time. The power of attorney avoids the need for guardianship over you in most instances.

What is a Health Care Power of Attorney?

A Power of Attorney for Health Care is a legal document which authorizes another person to make health care decisions for you if you lose the capacity to make informed health care decisions for yourself. The Power of Attorney for Health Care:

• Names an individual you trust to make a wide variety of health care decisions for you at any time you cannot do so for yourself, whether or not your condition is terminal;
• Becomes effective only when you are temporarily or permanently unable to make your own decisions regarding treatment;
• Requires the person you appoint to make decisions that are consistent with your wishes; and
• Will not overrule a living will in the event you have both documents.

What is a Living Will Declaration?

A living will is a binding legal document you can complete now which declares what your wishes are regarding the use of life-sustaining treatment, if you should become terminally ill or permanently unconscious. A living will:

• Becomes effective only when a patient is permanently unconscious or terminally ill and unable to communicate;
• Spells out whether or not you want life support technology used to prolong your life;
• Gives doctors the authority to follow your instructions regarding the medical treatment you want under these conditions;
• Can’t be revoked by anyone but you, and you can change it at any time;
• Will be followed for a pregnant woman only if certain conditions apply; and
• Specifies under what conditions you would want tube feeding and intravenous fluids to be withheld.
  

What is a Trust?

A trust is a useful device to manage property. This could be land, stocks, bonds, cash, etc. Of all the tools of estate planning, it is probably the least understood and appreciated. You may do an excellent job of managing your assets when you are active and alert. When your health fails you may need assistance. A trust can provide for others to step in and assist with, or fully assume, the management of your assets should you become incapable of handling your affairs. It is a flexible and practical tool that can be used to carry out your objectives. A trust is an instrument through which the owner (the settlor or grantor) transfers property to a custodian, called the trustee. The trustee manages the property for someone named in the instrument as the beneficiary. The trustee may be an individual, or an institution, such as the trust department of a bank. The beneficiary may receive current income or future income or principal. The same or a different beneficiary may receive the remainder of the trust at some future date. When an inter vivos or “living” trust is established, initially the settlor, the trustee and beneficiary may be the same person.

What are the advantages of a trust?

• Avoids all probate and related costs--both financial and emotional
• Can reduce or eliminate estate taxes
• Allows quick distribution of assets to beneficiaries. Preserves privacy--completely confidential
• Professional asset management with corporate trustee
• Very hard to contest
• Lets you keep control, even at disability and after your death
• Prevents a conservatorship/guardianship at disability or incompetency
• Minimizes emotional stress on your family
• Prevents unintentional disinheriting
• Avoids problems of joint ownership
• Inexpensive, easy to set up and maintain
• Completely flexible, a revocable trust can be changed or canceled at any time
• Protects minor children from court-imposed financial guardianships
• Can protect dependents with special needs
• Can incorporate terms of a pre-nuptial agreement
• Can provide investment management, tax, accounting, and other services for your family
• Can protect other beneficiaries against claims of creditors
• Can preserve capital for children and grandchildren
• Can provide professional management of property during your lifetime
• Avoids probate administration to distribute property at death
• Can protect against problems associated with incapacity
• Can reduce or eliminate the rights of a surviving spouse
• Can provide for people unable to own or control assets (i.e., minors or disabled family members)
• Can protect estates from divorce, lawsuits and judgments