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Common Questions
What is estate planning?
What is a will?
What is a Trust?
Why would I need a Trust if I already have a Will?
If I have a Trust, do I still need a Will?
What is a Durable Power of Attorney for Management of Property or Personal Affairs?
What is an Advance Health Care Directive?
What is estate planning?
Estate planning is the process of determining how your assets will be managed for your
benefit should you become unable to manage them yourself as well as how your assets
will be distributed after your death. In addition, it can address your desires regarding
your finances and health care should you be unable to make decisions for yourself.
Estate planning is generally accomplished through the drafting of various estate
planning documents. Perhaps the most common estate planning document is a Will.
While a Will is necessary, it is not the only document needed to fully address your
estate planning needs. Other estate planning documents are Trusts, Durable Powers of
Attorney and Advance Health Care Directives. Each of these documents has a specific
purpose and role in a general estate plan.
What is a will?
A Will is a legal document that outlines your instructions regarding the disposition of
your estate upon your death. It generally covers the following:
- Provides for the distribution of your assets, including, but not limited to, your
house and household goods. It can provide for specific monetary gifts to persons
or institutions as well as the distribution of specific items of property.
- Nominates an executor or executors, person or persons who will ensure that your
instructions are carried out as well as ensure that all bills, taxes, or other debts of
the estate are taken care.
- Nominate a guardian for any minor children.
What is a Trust?
A trust is a legal document that allows an individual or institution, the trustee, to manage
the assets of the person creating the trust, the Settlor. The most common kind of trust
is a Revocable Living Trust. It is a trust that you create while you are living and than
can be revoked at anytime during your lifetime. In most cases, you as the Settlor of the
trust would appoint yourself as the Trustee of the Trust. This allows you to preside over
your assets and properties while you are alive . Just like a Will, a Trust outlines
distribution instructions. It also appoints a Successor Trustee, someone who will
manage your estate should you become incapacitated. Upon your death, the
Successor Trustee, much like an Executor, would be responsible for distributing the
estate pursuant to the terms of the trust as well as for paying any debts or taxes of the
estate.
Why would I need a Trust if I already have a Will?
Whether or not a Trust is necessary for your particular situation is something that an
estate planning attorney would need to determine based upon your assets and financial
situation. For individuals with very little assets, a Will may be sufficient. However if
your estate contains substantial assets and/or real property, a Trust may be a better
option.
While a Trust is not necessary for all individuals, a Trust has many benefits that a will
does not. Perhaps the most obvious is that because your Trust contains provisions
regarding the distribution of your assets upon your death, it allows your estate to avoid
Probate, assuming the trust is properly funded. Probate is a court-supervised process of transferring your assets in the
manner prescribed by your will, or, in the case that no will exists, according to state law.
Because it involves the court system, it is often a lengthy, as well as public, process.
The cost of probating an estate is often greater than that of managing and distributing
an estate under a living trust. There are can also be significant tax advantages to
having a living trust.
Another advantage of a Living Trust is that it provides for the management of your
estate should you be unable to do so, something a Will does not. If you become
incapacitated, whoever you named as Successor Trustee will assume the responsibility
of managing your assets on your behalf. In addition, your Trust can appoint someone
as conservator. This avoids the necessity of having to go through the courts to have a
conservator appointed, a process which, like probate, can be lengthy and costly.
If I have a Trust, do I still need a Will?
Yes. Your will provides for the disposition of any assets that are not held in the name of
the trust. If you have a Trust, your Will most likely will contain a "pour over" provision.
This provision specifies that any assets held in your name will be transferred, or poured
over, to your living trust.
What is a Durable Power of Attorney for Management of Property or Personal Affairs?
A Durable Power of Attorney for Management of Property or Personal Affairs, or Power
of Attorney for Financial Management is a document that appoints another individual, an
"attorney-in-fact" to make property management or financial decisions on your behalf.
This appointment can either be immediate or upon your incapacity. It is important to
note, however, that while a Durable Power of Attorney can address financial decisions
while you are alive, it cannot dispose of your assets upon your death.
What is an Advance Health Care Directive?
An Advance Health Care Directive, or Durable Power of Attorney for Health Care,
appoints an attorney-in-fact to make health care decisions for you. In addition, it can
outline your desires regarding end of life decisions, organ donation, disposition of your
remains or other health care issues and instructions.
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