What Estate Planning Documents Do I Need?
Estate plans are individualized for your specific scenario. Everybody's situation is different and everybody has different needs. An estate planning attorney can help you determine what estate planning documents you need.
The following documents are some common types of documents often used in estate planning:
- Revocable Living Trust
- Irrevocable Trust
- Living Will
- Healthcare Power of Attorney
- Financial Power of Attorney
- Pour-Over Will
- Personal Property Memorandum
- and more...
What is a Will?
A will is a legal document that allows an individual to specify how they would like their assets to be distributed after their death. Without a will, the state will determine how the individual's assets will be divided, which may not be in accordance with the individual's wishes. In addition to specifying how assets should be distributed, a will can also be used to appoint a guardian for minor children and to indicate funeral and burial preferences.
Wills are typically created with the assistance of an attorney, who can ensure that the document meets all legal requirements. After the individual's death, the will must be probated, which is a process through which the court verifies the validity of the document and supervises the distribution of assets.
What is Probate?
A probate is a court-supervised process for distributing a deceased person's assets. The first step in the probate process is to file a petition with the court, asking that the estate be opened and an administrator be appointed. Once the petition is approved, the administrator will gather all of the deceased person's assets and debts and begin the process of distributing them according to the terms of the will. If there is no will, the administrator will follow state law in distributing the assets.
The probate process can be time-consuming and complex. In addition, the probate process is public, so the deceased person's financial information will be available to anyone who wants to see it. For these reasons many people pre-plan to avoid probate.
How Can I Avoid Probate?
There are several methods to avoid probate, each with their own benefits and drawbacks.
- You can create and fund a trust. Property that is held in a trust does not need to go through probate.
- You can own the property in joint tenancy. If the deceased person owned any property, such as a house or land, in joint tenancy with another person, the property will automatically pass to the surviving owner without going through probate.
- You can setup Payable on Death or Transfer on Death Beneficiaries. If the deceased person had a payable-on-death account or beneficiary designation on their life insurance policy, the assets in those accounts will pass directly to the named beneficiary without going through probate.
- Have a small estate below the dollar threshold. Many states have laws that allow small estates to be settled without going through probate. These laws typically have dollar limits on the value of the estate and may require that specific documentation be filed with the court.
What is a Trust?
A trust is a legal arrangement in which one person (the trustee) holds property on behalf of another (the beneficiary). In some scenarios, the trustee and beneficiary can be the same person. Trusts can be used for a variety of purposes, including managing finances, protecting assets, and distributing property.
There are many different types of trusts, but they all have one thing in common: the trustee is responsible for managing the property for the benefit of the beneficiary. This means that the trustee must exercise a high degree of care and diligence in order to fulfill their obligations. The terms of the trust will spelled out in a written agreement, which must be signed by both the trustee and the beneficiary. If the terms of the trust are not met, the court may step in and make changes to the arrangement.
What are the Types of Trusts?
Trusts come in many forms. Here are some common type of trusts:
- Revocable Living Trust
- Irrevocable Trust
- Charitable Remainder Trust
- Special Needs Trust for a Disabled Beneficiary
- Trust for Children or Grandchildren
- Trust to Avoid Probate
- Cabin Trust
- Real Estate Trust
- Bypass or Family Trust
- Dynasty Trust (Generation Skipping)
- Grantor Retained Annuity Trust
- Qualified Personal Residence Trust
- Marital Trust
- and more...
What is a Revocable Trust?
A revocable trust is a type of trust that allows the grantor, or person creating the trust, to change the terms of the trust or revoke it entirely. This type of trust is often used in estate planning as a way to avoid probate, or the legal process of transferring assets after someone dies. When assets are held in a revocable trust, they are not considered part of the grantor's estate and do not have to go through probate. Instead, the assets are distributed according to the terms of the trust. Revocable trusts can be complex legal documents, so it's important to work with an experienced attorney when creating one.
What is an Irrevocable Trust?
An irrevocable trust is a type of trust that cannot be modified or revoked by the grantor. Once the trust is created, the grantor gives up all control over the assets in the trust and cannot make any changes to the terms of the trust.
There are many reasons why someone might create an irrevocable trust, such as asset protection or estate planning. When property is placed in an irrevocable trust, it becomes the separate property of the trust, and therefore it is not subject to probate. This can be beneficial if you want to keep your estate private or if you want to avoid lengthy and costly probate proceedings. Irrevocable trusts can also be used for tax purposes, as they can help to minimize estate taxes. However, it is important to note that once property is placed in an irrevocable trust, you will no longer have direct control over it. For this reason, it is important to choose a trustworthy trustee and to carefully consider all of your options before creating an irrevocable trust.
What Is a Beneficiary?
A beneficiary is someone who is legally entitled to receive money or other property from a will, trust, insurance policy, or other asset. A beneficiary can be an individual, a group of people, or a charitable organization. The person who creates the account or plan - known as the account owner or grantor - chooses the beneficiaries. When the account owner dies, the assets in the account are distributed to the beneficiaries according to the terms of the account or plan. Beneficiaries are typically family members, close friends, or charities. In some cases, the account owner may name himself or herself as the beneficiary.
What Is a Contingent Beneficiary?
A contingent beneficiary is a person or entity that receives benefits from a trust, will, or insurance policy in the event that the primary beneficiary dies or is otherwise unable to receive them. The contingency can be anything that the grantor chooses, but it is typically something that would prevent the primary beneficiary from receiving the benefits, such as death or incapacity.
The contingent beneficiary is usually named in the documents creating the trust, will, or insurance policy. However, the grantor can also change the contingency at any time before their death. If no contingent beneficiary is named, then the assets will generally go to the grantor's estate.
What is a Living Will?
A living will is a legal document that allows you to specify your end-of-life medical care preferences in advance. These preferences can include things like whether you want to be placed on life support or receive pain medication. Oftentimes, people create living wills in order to avoid putting their loved ones in the difficult position of making these decisions on their behalf. It is important to keep your living will up to date, as your care preferences may change over time. A living will can provide valuable guidance during tough end-of-life decisions.
What is a Power of Attorney?
A power of attorney (POA) is a legal document that gives another person the authority to act on your behalf. This can include making financial decisions, signing documents, or even providing medical consent. Powers of attorney are often used when someone is unable to make their own decisions, such as in the case of a serious illness or injury. They can also be used to help manage someone's affairs if they are going to be out of the country for an extended period of time. While a power of attorney can give another person a great deal of control over your life, it is important to choose someone you trust implicitly. This person will be making decisions on your behalf, so you need to be confident that they have your best interests at heart.
What is a Durable Power of Attorney?
A durable power of attorney (DPOA) remains in effect even if you become incapacitated and unable to make decisions for yourself. If the power of attorney document does not explicitly say that it is durable, then it ends if you become incapacitated.
What is a Springing Power of Attorney?
A springing power of attorney is a type of power of attorney that springs into action and gives someone else the authority to make decisions on your behalf in the event that you become incapacitated. This could be due to an accident, illness, or cognitive decline. A Springing Power of Attorney can be used to cover financial decisions, healthcare decisions, or both.
What is a Healthcare Power of Attorney?
A healthcare power of attorney is a legal document that gives someone else the authority to make healthcare decisions on your behalf. This can be useful if you become incapacitated and are unable to communicate your wishes, or if you simply want to have someone else handle your healthcare decisions in the event that you are unable to do so yourself.
The person you appoint is known as your "agent" or "attorney-in-fact." A Healthcare Power of Attorney can give your agent authority to make a wide range of decisions, including decisions about your medical care, living arrangements, and financial affairs. Although an HPOA is not the same as a living will, the two documents often work together to provide guidance about your end-of-life care. An HPOA can be an important part of your overall estate planning and can provide peace of mind in knowing that your wishes will be respected if you become incapacitated.
What is a Financial Power of Attorney?
A financial power of attorney is a legal document that gives another person the authority to manage your finances on your behalf. This can be useful if you become incapacitated or otherwise unable to make financial decisions for yourself. The person you appoint as your financial power of attorney, also known as your "agent," will have the authority to handle tasks such as paying your bills, managing your investments, and even filing your taxes.
While you can give your agent a great deal of flexibility, you can also put limits on their powers in order to protect your interests. For example, you may only want them to have access to certain accounts or you may only want them to be able to act on your behalf in specific situations. Financial powers of attorney can be an important part of estate planning, so it's important to understand how they work and what they can do for you.
What is a Pour-Over Will?
A pour-over will is a type of last will and testament that is used to ensure that all of a person's assets are transferred to their trust upon their death. Pour-over wills are often used in conjunction with trusts, as they can help to simplify the process of transferring assets and provide additional flexibility. For example, if a person has recently established a trust but has not yet had a chance to transfer all of their assets into it, they can use a pour-over will to ensure that everything is properly transferred after their death.
In essence, a pour-over will acts as a "safety net" for trusts, making sure that nothing falls through the cracks. Pour-over wills can be an important part of an overall estate plan, and they can provide peace of mind knowing that your assets will be taken care of according to your wishes.