By: Investor Solutions
It is debatable whether or not a person can be emotionally and spiritually prepared for death. However, it is certain that our financial state of affairs can be properly organized and our family well taken care of when our time comes. Unfortunately, however, individuals often postpone making the necessary preparations that will allow their wishes to be granted and their family looked after. At the very minimum, every individual should have the following instruments in place.
- Living Trust
- Durable Power of Attorney
- Durable Power of Attorney for Healthcare
- Guardian for Minor Children
A will is the most basic estate planning tool. It is a legal document that allows the testator to transfer his/her assets in the manner and to whom he/she desires. The advantages of a will include: naming an executor, assuring the maximum marital deduction is used, specifying how estate taxes will be paid, designating a guardian for a minor child, establishing trusts, naming charitable beneficiaries, etc. To die intestate simply means to die without a will. If this is the case, the probate court decides who gets the deceased’s property and in many cases, it is not in the manner the deceased would have chosen.
In order for a will to be valid, the maker must be 18 years old, be of sound mind and absent of undue influence and fraud. The general provisions of a will include a clause identifying the testator, establishment of domicile, declaration that the document represents the last will and testament, a revocation of all prior wills and codicils, identification of executor/executrix, clauses for payment of debts, taxes, disposition of tangible personal and real property, specific bequests of intangibles and cash, a residuary clause for the transfer of any remaining assets, a testator’s signature clause and an attestation or witness clause.
A revocable inter vivos or living trust is created by a grantor in order to transfer ownership of that person’s assets during his or her lifetime and for distribution after death. It is called a living trust because it takes effect during the grantor’s lifetime. After a grantor executes a living trust document, the assets he/she wants to transfer to the trust must be renamed to show the trust as the new owner The grantor will usually serve as trustee during his/her lifetime and control the assets even though they are in the trust’s name. The grantor, by way of the trust document, will name a successor trustee who will abide by the trust’s terms when the grantor passes. Quite possibly, the greatest advantage of a revocable trust is that, unlike a will, it avoids probate.
A durable power of attorney for property is a written document allowing the principal (creator) to designate another individual(s) to act as his attorney(s) in fact or agent(s). This is a revocable power allowing for continuity in the management of one’s affairs in the event of disability or incapacity. The principal must be 18 years of age and competent. This document may provide limited or unlimited powers. A limited power is a broad power forcing the agent to be held to an ascertainable standard (i.e. health, education, support and the like). An unlimited power is a general power giving the agent the ability to do anything the principal can do. Individuals granted these powers must, by law, act in good faith at all times on behalf of the grantor. That is, they have a fiduciary duty to the grantor to act in his/her best interest.
A durable power of attorney for healthcare or medical power of attorney is a critical document allowing an agent to make healthcare decisions on your behalf. It assists your doctors in determining when life supporting measures should be stopped. If your wish is not to be provided with life sustaining support, this document allows your agent to carry out these wishes for you. A Medical Power of Attorney allows your agent to act solely on your behalf for medical decisions not financial ones. In light of recent cases such as that of Terri Schiavo, it is a helpful tool as few hospitals want to assume the responsibility of determining your healthcare decisions when you are unable to do so for yourself.
Although appointing a guardian for a minor can be accomplished by way of a will, it is worth repeating the significance of making the important decision of who will care for minor children in the event of one’s untimely passing. The person should be carefully chosen, made aware of and agree to such an awesome responsibility.
Now that we are aware of the various and necessary legal documents that we should have prepared, it is equally as important to make sure that our loved ones know where these documents are kept and who to contact in the event they are needed. It is important to advise someone, perhaps the appointed executor/executrix, of where the documents are and who your various advisors are. It would be helpful to provide this individual with a list of the names and contact information of your accountant, attorney, financial advisors and the like so that they are made aware of exactly who to contact to get your affairs taken care of. It is an important step in ensuring that a difficult situation is alleviated by advanced planning.
Using the techniques discussed above and more sophisticated ones where appropriate, an individual can make sure that his/her wishes are carried out and their loved ones taken care of. As always, it is important to talk with your financial and legal advisors to make sure that these techniques are in place and appropriate for your particular situation. After all, your family members deserve to be taken care of. Are they?