Don’t Stop Thinking About Tomorrow: What You Need To Know About The Basic Estate Planning Documents

by Matthew B. Dopkin, Esq.

Everyone, regardless of the size of their estate, should have an estate plan consisting of at least four basic documents. These four documents — a will or trust, a financial power of attorney, a health care power of attorney and a living will — form the minimum foundation of all estate plans.

1. Will or Trust

The most important reason for creating a will or trust is to provide control over who will receive assets, what assets they will receive, when they will receive the assets and how those assets are transferred. These documents are important tools for avoiding intestate succession. Without a will or trust, the decedent’s assets will pass according to the laws of intestate succession of the state in which the decedent resides or in which his or her property is located. The principle of the intestate succession laws is to distribute the decedent’s assets as the government believes the decedent would have wanted had a will or trust been executed. The government’s plan is often significantly different from an individual’s actual wishes.

WILL

A will is a legal expression of one’s wishes that provides for the transfer of assets in an estate, and provides instructions for the care of dependents and for the administrative settlement of the estate. Without a will, a person is unable to do things such as leave property to selected heirs, name an executor, name a guardian of minor children, provide direction regarding payment of debts and expenses or make certain decisions regarding taxes.

A will does not and cannot direct the transfer of certain assets that pass outside of the probate process. Among these non-probate assets are things that pass at death by contract or by operation of law. Examples of some typical non-probate assets are life insurance policies, retirement accounts and jointly held property.

A will can be changed or revoked at any time prior to death. It becomes legally operative only upon death and applies only to the probate assets and situation that exist at that time. Many individuals conclude they do not need a will based upon the amount of probate assets in their estate. However, there are many non-financial reasons to incorporate a will into an estate plan, because wills have many benefits and are inexpensive relative to the tasks they can accomplish.

TRUST

A trust is often used as a will substitute. A trust is a legal relationship that allows one to separate the legal ownership of assets from the beneficial ownership. The person responsible for the investments and management of the trust property is the trustee and the persons who receive the benefits of the trust are the beneficiaries. The property held by the trustee in trust is the corpus or principal.

A person creates a trust by transferring money or property to the trustee. This person is known as the grantor or settler. The terms and conditions governing the trust are set forth in a written document called a trust document or agreement of trust. It is generally possible for the grantor to be the trustee, for the grantor to be a beneficiary and for a beneficiary to be a trustee.

There are many types and uses of trusts in estate planning. Trusts are flexible and can be customized to meet specific goals and objectives. Depending upon the goals and objectives, trusts are structured as revocable (can be changed so you can undo the trust, take back what you have transferred to it, alter it, amend it or terminate it) or irrevocable (cannot be changed, so once the trust is signed the provisions are fixed). In addition, trusts can be established for purposes that occur during one’s lifetime (inter vivos or living trusts) or after death (testamentary trusts).

2. Power of Attorney

A power of attorney is a tool used during one’s lifetime that enables an individual to designate someone to act on his or her behalf. The person granting the power of attorney is the principal and the person empowered to act on his or her behalf is the agent or attorney in fact. The scope of the power of attorney can be severely limited or quite broad, depending on the language in the document. Once the principal has passed away, the power of attorney has no legal effect

A “durable” power of attorney is a power of attorney that will not terminate because of a subsequent disability or the incapacity of the principal, and is used as a component of both the financial and health care power of attorney. All states have recognized and adopted some form of a durable power of attorney.

FINANCIAL POWER OF ATTORNEY

If you become incapacitated and are unable to make decisions for yourself, this power of attorney grants rights and powers to your chosen agent to make financial decisions on your behalf. A court would need to appoint a guardian — someone to act on your behalf — without this document.

HEALTH CARE POWER OF ATTORNEY

If you become incapacitated and are unable to make decisions for yourself, this power of attorney grants rights and powers to your chosen agent to make medical decisions on your behalf. A court would need to appoint a guardian — someone to act on your behalf — without this document.

3. Living will

A living will is a document that sets forth the instructions with respect to the type and extent of health care measures desired in the event of disability, incapacity or other catastrophic medical event. A living will sets forth a set of instructions for your doctors, hospitals (and other facilities) and the person named in the health care power of attorney to follow in the event of a terminal accident, illness or a permanent coma.

If your estate plan lacks any of these documents, you should carefully consider updating your plan. The Dopkin Law Firm works with its clients to advise them on the intricacies of preparing for the future and guide them to estate and asset preservation. To discuss these or other issues with attorney and CPA Matt Dopkin, “contact us at 856-685-4415 or 215-519-4269, or via .

This Alert is published by Dopkin Law Firm. It is provided solely as legal information, not legal advice. Legal advice depends, to a large extent, upon the particular facts of a matter. For legal advice, contact your legal advisor.