What is the first thing that leaps to most people’s minds when they think about estate planning? A Will. We’ve 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.
In order to be effective, a will must be admitted to probate. Probate is a process to 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 clear 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. A Living Will can be used to express wishes you have regarding life-prolonging measures. Organ donation and specific religious preferences, such as a blood transfusion, can be outlined in this document.
Federal laws and regulations have created privacy protections for your medical information. These laws are known as “HIPAA” (Health Insurance Portability and Accountability Act). Now physicians, hospitals, health insurers, and other “covered entities” must comply with strict rules or face fines and potential criminal penalties. Executing a Medical Authorization Form will allow those you want to have access to your medical information.
Finally, the will disposes of any property which remains titled in your name rather than the trust. The typical will simply is a “pourover” into the trust. The most important role of the will is the appointment of guardians for minor children.
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