It is common for people to approach me and say they need to setup an “estate plan,” but when I dive a little deeper and ask what they are looking for many people don’t know where to begin. While every person’s situation is different, the most frequent estate plan I draft for people centers around four basic documents: (1) revocable living trust, (2) pour-over will, (3) durable power of attorney for property management, and (4) advance health care directive.
Revocable Living Trust
Everything centers around the trust, which acts as the backbone of the estate plan. There are three parties to a trust: settlor/trustor (the creator of the trust), trustee (the person who holds legal title), and beneficiaries (the ultimate recipients of the trust assets). A trust is a mechanism that allows for property management during life while also providing an avenue for distribution of assets upon death. The trustor will transfer assets to the trust and the trustee will manage those assets. For this type of trust, assets can easily be added to or taken out of the trust during life, and the whole trust can even be revoked.
A pour-over will is just like a normal will, with the important provision that any assets not transferred to the trust will go into the trust upon the trustor’s death. The pour-over will is essentially a safety net in the estate planning process, and should not be neglected when a living trust is also created.
Durable Power of Attorney for Property Management
The durable power of attorney is an important document that allows an agent (attorney-in-fact) to act on a principal’s behalf if something were to happen to the principal, such as incapacity. These documents can be structured in many different ways, from giving very broad powers to the agent to giving a narrow power for a specific asset. The “durable” aspect of the power of attorney means that it will remain in effect or go into effect when the principal is incapacitated.
Advance Health Care Directive
Similar to the power of attorney, the advance health care directive gives an agent the power to act on a principal’s behalf for health care decisions. There are very important choices to make when it comes to health care issues such as end-of-life decisions and independent living, so choosing the right agent is imperative.
The four tools described above are what I consider the basic estate planning package. Of course, there is no black and white when it comes to what items are needed for each person, but speaking with an estate planning attorney is the important first step.
This post is provided for informational purposes only and does not constitute legal advice. It is intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results. It is not intended to create an attorney-client relationship and is offered only for general informational and educational purposes. You should not act or rely on any information contained in this website without first seeking the advice of an attorney.