You are looking into getting an estate plan, great! Estate planning can be a little tricky, since there are a lot of ways you can go about it. Here are the minimum four components we recommend you get in your estate plan.
Revocable Living Trust
A revocable living trust is a legal document set up to hold title to assets. The Trustor, creator of the Trust, appoints a trustee to control and manage said assets. This can be the Trustor who creates the trust, or they could appoint a third party. Typically, the person creating the Trust will name themselves as the trustee.
After the living trust is established, the Trustor transfers title of the assets to the Trust. The Trustee, pursuant to the trust document, must follow the specific instructions which allow the trustee to invest the trust property and to spend trust assets throughout the Trustor’s lifetime. The trustee maintains full control of the assets, meaning they can reclaim an asset placed into the trust and reassign a beneficiary.
The trust should also include instruction in the event the trustee becomes mentally incompetent, or is unable to carry out their duties as the trustee. In this case, the trust should name a successor trustee, someone who will step in and take responsibility for the assets placed in the trust. Once the Trustor passes away, this revocable living trust then becomes irrevocable, such that no changes can be made, even by the successor trustee. The successor trustee will complete a trust administration including paying the Trustor’s final debts and bills (which also includes their taxes) and will distribute the assets in the trust to the listed beneficiaries. A revocable living trust helps avoid probate, since assets are placed in the trust during the Trustor’s lifetime and are no longer in the Trustor’s name upon their passing. This allows the successor trustee to distribute the assets in the trust in a timely manner without any supervision from the court.
Pour-Over Will
While many people are familiar with Wills, when you create a living trust, the Will really serves two purposes. First, the Will is the document in the estate plan where you name the guardians of your minor children. If you do not state your intentions in a Will, the court will decide who should have custody of your children.
When an estate plan is created with a Trust, the Will is referred to as a pour-over will. One of our attorneys, Kimberly Barrot, often explains to clients that the document serves as an “oops” document because the pour-over will transfers any assets not listed in the trust at the Trustor’s death into the trust. The pour-over will should be a precaution only and it should not preclude a Trustor from properly funding their trust. However, if you don’t put an asset into the trust, you have assurance that the asset will end up there. Despite the pour-over will stating the assets go into the trust, this process is not automatic, and filing a petition in probate court will still be required. That being said, the full probate process will not be necessary, such as appointing an executor, and taking months if not years to complete.
Durable Power of Attorney
There may come a time in your life, be it by accident or illness, or just old age, when you become incapable of making financial decisions. Since these things do happen, it’s important to be protected. The durable power of attorney is a document that that gives a person of your choosing the ability to act on your behalf if you become mentally incompetent. Your durable financial power of attorney can have as much or as little legal authority as you want. This could be something as simple as depositing paychecks into an account or as complex and important as filing taxes and watching over investments and retirement accounts. They don’t necessarily have to be an expert in finances, just someone you trust to make good decisions with your assets. If needed, the financial power of attorney can hire someone to help them out, who will be paid out of your assets. If you do not have a power of attorney and you become incompetent, then the court will have to appoint a conservator of your estate.
Advance Health Care Directive
You have the right to give instruction about your own healthcare, as well as the right to appoint someone to act on your behalf to make those decisions. This allows you to do either or both of those things. In executing an Advance Health Care Directive, you give instructions to your agent to carry out your wishes when it comes to things like personal care decision (i.e. where you would live, what you would wear, caring for pets, etc.), end of life decisions (i.e. pain relief, hospice care, etc.), donation of organs, burial instructions, and much more. Your healthcare agent will be bound to the specifications you have made in the directive and will work with the medical staff to ensure your wishes are followed as outlined by you in your health care directive.
Estate planning can be complicated. It is of utmost importance that you find a law firm that is educated in estate planning so they can help you understand your options and guide you to make the best decisions for you and your family. We invite you to give us a call at (408) 463-1550 and speak with one of our attorneys for any questions you might have about the process.
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