What is the first thing that leaps to most people’s minds when they think about estate planning? A will. We have all seen the dramatic scenes in films of yesteryear: the reading of the will. The truth of the matter is that the will is no longer the focal point of estate planning.
A well-rounded estate plan includes four documents: a revocable living trust, a general durable power of attorney, a health care power of attorney, a living will and a will. Probably the least important of these is the actual will. Why? Because a will is only effective at death, while the other three documents have an impact during your lifetime.
In order to be effective, a will must be admitted to probate. Probate is a process to transfer clear title of property from the person who died to the people designated in the will. As with most legal processes, probate can be costly, time-consuming, and public. Assets that go through this probate process are a matter of public record, open to the prying eyes of nosey neighbors and relatives, as well as con artists.
Assets which are in a trust do not have to go through the probate process. In theory, when you place your assets in your trust, the legal title is no longer vested in you as an individual, but in the trustee of the trust. As a result, when you die, no probate process is necessary to transfer title to the property. Thus, the trust bypasses the will and the probate process entirely. A “revocable living trust” is a trust, which is created while you are living, and which you can revoke or amend at any time. A well-drafted trust can be extremely flexible and can facilitate management of your assets while you are well, during a period of incapacity, and long after your death. While you are alive and well, you would be the trustee and manage the assets in your trust. Upon your incapacity or death, someone designated by you would take over as trustee and would manage the trust, making investment and distribution decisions in accordance with the instructions you set forth in the trust, providing continuity in asset management.
In a general durable power of attorney, you appoint someone to make decisions for property not controlled by the trust. For example, your “agent” could file income tax returns for you, change beneficiary designations on life insurance and retirement plans, etc. The agent can also transfer any forgotten property into the trust. Again, this provides for a smoother transition during periods of incapacity.
In a health care power of attorney, you appoint someone to make medical decisions for you in the event you can no longer do so for yourself. With a living will, you may express any wishes you have regarding life-prolonging measures.
Finally, the will disposes of any property which remains titled in your name rather than the trust. The typical will simply is a “pour over” into the trust. The most important role of the will is the appointment of guardians for minor children.
A qualified estate planning attorney can help you set up a plan that will put your mind at ease. Sinclair Prosser Gasior focuses its practice on estate planning, elder law, and estate administration. Attorneys Jon J. Gasior, Colleen Sinclair Prosser, Victor A. Lembo, Alexander M. Pagnotta and Laura T. Curry share more than 50 years of knowledge and experience in matters associated with protecting estates and families from issues arising from death, disability, and taxes. For more information visit us at www.spgasior.com.