Documents used in Estate Planning

Estate planning is often pushed aside. Between braces for your kids, that Caribbean cruise, or a flat screen tv, I understand making other choices with your extra cash. However, planning your estate is something you need to do just once, if you do it correctly. Then you can rest as ease, knowing that you have protected your family and your legacy.

Here are some common documents used in estate planning.

A will – Often called a Last Will and Testament, this instrument becomes active upon your death and is used to distribute any assets, appoint an Executor to oversee the will, and appoint a guardian for minor children.

A Living will – While it sounds similar to a “will” this document is very different. A living will is a written statement that details a person’s wishes for medical treatment, life saving measures and end of life decisions. This document may describe treatments you do, or do not want.

Durable power of attorney for health care – This power is given to a person you trust to make medical decisions for you in an emergency. While a living will is important, if there isn’t someone appointed to make sure those wishes are carried out, it can be overlooked. This agent is someone who will ensure your wishes in your living will are followed. They also will be able to communicate with medical professionals on your behalf, and will have access to your medical records. This agent may also be called a “Health Proxy” or “Medical power of attorney”

Durable Power of Attorney for Property – This may appoint someone you trust to make financial decisions for you if you are unable.

Living trust – This trust is established and valid while you are still living. You can select a person, or appoint yourself, as Trustee of the Trust, to manage money and carry out instructions. This type of trust is effective immediately, and remains valid through any incapacitation or death. Often, this type of trust may be changed or revoked during your lifetime. (An irrevocable trust is much more difficult to change).

Testamentary Trust – This type of trust is contained in the last will and testament and it only goes into effect when the grantor (person making the trust) dies. This document is often used to create a trust for minors that will benefit from the grantors death. Often, the trust terminates when the last named beneficiary turns 25. This document may also specify how the money is to be used (i.e. for your child’s education). This document does not avoid probate, because the money is not transferred into the trust until the grantor’s death, and probate is needed to grant that transfer.

States have different requirements for what makes these documents valid, so it is recommended to work with an attorney to ensure you are covered.