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The Five Key Documents to Estate Planning
WILL
A will is a simple document that merely
provides instructions for distributing your assets to your family, loved
ones, and other beneficiaries upon your death. You appoint a
personal representative (also called and "executor") to
distribute your assets.
Unfortunately, A WILL
REQUIRES PROBATE. This will generally require hiring an
attorney and the fees are statutory based on the value of the complete
estate. This also places all of your assets, liabilities and
beneficiaries as part of the public record of the Court system.
Additionally, a will only
becomes effective at the creator's death, it does not help when there is
an incapacity or another inability to manage one's assets or make
decisions for themselves.
DURABLE POWER OF
ATTORNEY
This is a legal document where you name someone else to act as
your representative. This person is called your attorney-in-fact
(also called an "agent" for the creator). You
can give this person broad or limited powers. This is an important
document because once it becomes effective, usually at the creators
incapacity, the attorney-in-fact has the authority to sell, invest
and/or spend your assets.
The Durable Power of
Attorney terminates at the passing of its creator.
LIVING WILL
This document is the combination of the Durable Power of
Healthcare and an Advanced Healthcare Directive. This
document expresses the creator's intentions for when they become
incapacitated. This can include everything from the use of
life-sustaining measures in the event of a terminal illness to organ
donation, to the use of pain-medication to desired funeral and burial
arrangements. This document helps to avoid the "Terry
Schiavo" problem.
DURABLE POWER OF
ASSET MANAGEMENT
This document is used to 'pull into' the trust those assets that
are not titled in the name of the trust. This usually includes
personal checking and savings accounts as well as personal and
recreational vehicles.
REVOCABLE LIVING
TRUST
There are several different types of trusts, one of which is the
revocable living trust. This is the type most often used when
forming an estate plan. When someone transfers their assets into a
living trust, the trust can assist with the management of the settlor's
assets during their lifetime, during incapacitation, and after their
passing, often for generations to come.
A Revocable Living Trust
AVOIDS PROBATE and reduces the chance that personal information will
become part of public records.
Components of a
Trust:
-
Grantor (also
called "Settlor") is the person who creates the
trust
-
Beneficiaries
is/are the person or people designated to receive the income and/or
principal; according to the terms of the trust.
-
Trustee is the
person who is designated to manage the trust assets. This is
usually a family member or close friend. These also tend to
have a corporate trustee (such as a bank) as a final trustee in case
the other designated trustees do not survive the Settlor or all
decline to serve as trustee.
OTHER TYPES OF
TRUSTS:
There are several different types of trusts, each can be tailor-made to
be to most effectively produce the Settlor's intent. These can
include Special Needs Trust, where there may be a
beneficiary that is unable to manage their assets or care for
themselves, such as a child with severe autism. These also include
a Qualified Personal Residence Trust (a QPRT for short)
that allows the Settlor to live in a residence and then have it removed
from their estate at the time of their passing. A QPRT may serve a
useful purpose when the Settlor wishes to transfer his or her personal
residence to family members (usually children) at some time in the
future, and to reduce the overall transfer tax cost, namely the estate
and gift tax cost, of the transfer. Another type of trust that is
gaining in popularity is the Pet Trust in which the
Settlor makes special arrangements for a beloved pet to be cared for
after their passing.
LEARN MORE
ABOUT PROTECTING YOUR ASSETS BY CONTACTING US NOW
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