Everyone needs an estate plan.

A properly structured estate plan helps you accomplish your goals while you are healthy, if you are incapacitated, and after your death. Regardless of your level of wealth, the failure to establish an estate plan can cause you and your loved ones unnecessary financial and emotional hardship.

A basic estate plan consists of the following documents:

  • A revocable living trust

  • A will (often called a pour-over will)

  • A durable power of attorney

  • An advance health care directive

  • A nomination of guardian for minor children

Estate planning also includes carefully considering assets that pass by beneficiary designation, such as life insurance and retirement accounts. 

These documents are described in more detail below.


Revocable Living Trust

What is it?

A trust is a legal agreement. A revocable living trust is an agreement you make while you are alive that you are free to change during your lifetime. The trust agreement sets out specific rules you want followed during your life and after your death. While a trust is different from a will, the two documents are similar in that they are both used to pass assets to specific people or institutions on your death. A trust can only pass on assets that are titled in the name of the trust. 

Who needs one?

Anyone who wants to (a) avoid or minimize probate, which is usually costly and time consuming; (b) preserve privacy; (c) avoid a court-supervised conservatorship if the he or she becomes incapacitated; and (d) manage and transfer the his or her assets during life and after death. 

These advantages should be balanced against the disadvantages of establishing a revocable living trust. Generally, a revocable living trust is (a) more expensive during a settlor's lifetime; (b) more complex and more work for the settlor; and (c) limited to certain types of assets. 

To determine whether a revocable living trust is right for you, you should speak with an attorney about the value and nature of your assets in order to weigh the above-listed advantages and disadvantages of a revocable living trust.  


Wills

What is it?

A will states how you want certain assets distributed on your death. In a will, you can name an executor to administer the will, avoid the costs and burdens of bond and annual reporting or accounting to the court, name a guardian for your minor children, and state who you want to receive your assets and whether you want them distributed outright or in trust.

If you die without a will, your property passes as required under your state's rules of intestacy. Although the rules of intestacy are fairly intuitive, they may not lead to the distribution pattern you would choose and may expose your estate to federal estate taxes. 

A will is administered via a court process called probate, which comes from the Latin word "to prove." Essentially, your executor follows certain procedures to prove your will to the court or, in the absence of a will, that your estate is administered according to the law.

Who needs one?

Anyone who wants to control how his or her assets are distributed at death should have a will. Even people who elect to use a revocable living trust usually use a pour-over will to buttress their planning. 


Durable power of attorney

What is it?

A durable power of attorney is a document you can use to appoint another person (called an agent or attorney-in-fact) to act on your behalf during your lifetime. You may want to appoint someone only upon your incapacity (i.e., if you become unable to make decisions on your own), but you can also authorize someone to act even while you are healthy.

A power of attorney can grant an agent limited or broad powers as specified in the document.  Some powers that can be granted are as follows:

  • Buying and selling property.

  • Purchasing life insurance.

  • Filing tax returns.

  • Handling matters related to government benefits.

  • Maintaining and operating a business.

  • Making gifts.

  • Transferring property to a trust.

  • Entering a safe deposit box.

  • Managing accounts with financial institutions.

Who needs one?

Anyone who wants help managing assets during life--whether in health or upon incapacity--should have a durable power of attorney. 


Advance Health Care Directive

What is it?

An advance health care directive is a document whereby you appoint an agent to make medical decisions for you, provide specific instructions for your health care (including instructions regarding disposition of your remains), or, in most cases, both. This document is sometimes referred to as a power of attorney for health care or an individual health care instruction. Some people have two separate documents rather than one. The point is your estate plan should include an appointment of a person to make medical decisions for you if you are incapacitated and instructions regarding what kind of medical treatment you want.

Note: An advance health care directive is not a do not resuscitate form (DNR) or physician order for life-sustaining treatment (POLST). These documents are separate from an advance health care directive and involve cooperation with medical providers. 

In the absence of an appointment of a heath care agent and individual health care instructions, a person may petition the court to either become your health care surrogate or your conservator. Involving the court can add time and expense to the process of assisting you with medical decisions. 

Who needs one?

Any one who wants to name a health care agent and provide instructions for his or her health care, including instructions regarding disposition of his or her remains.


Nomination of guardian

What is it?

A nomination of guardian is a stand-alone document whereby a parent nominates a guardian to care for his or her minor children. A person can nominate a guardian in a will or in a separate document. Using a separate document decreases the complexity involved in updating or changing guardianship provisions. 

Who needs one?

Guardianship provisions usually do not come into play unless both parents of a minor child die while the child is a minor; however, they should be included in any estate plan of a person who has a minor child in the unlikely event that both parents die simultaneously or too close in time for the surviving parent to nominate a guardian. 


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