What is Estate Planning?
Estate planning is the process of anticipating and arranging during a person’s life, for the management and disposal of that person’s estate during the person’s life and after death, while minimizing gift, estate, generation skipping transfer and income tax.
How Can the Alvarez Law Firm Help?
We can help navigate our clients through the legal steps it takes to preserve their wishes. Often times we find that client’s assume they are powerless when it comes to what happens to their estate after they pass away. That simply is not true. In fact, we assist our clients in carrying out their wishes. We remind our clients if you fail to plan for the future then the government may decide who is in charge of your estate and handling your matter.
Is a living will and a last will and testament the same thing?
Often times we find that individuals will confuse the difference between a last will and testament and a living will.
Simply put a will is a document that sates your final wishes. It is read by a county court after your death, and the court makes sure that your final wishes are carried out. Ironically, a last will and testament only comes “alive” upon your passing.
A living will, despite its name, is not at all like the wills that people use to leave property at their death. A living will, also called a directive to physicians or advance directive, is a document that lets people state their wishes for end-of-life medical care, in case they become unable to communicate their decisions. It has no power after death.
To be valid, a living will must meet state requirements regarding notarization or witnesses. A living will can be revoked at any time. The document can take effect as soon as it is signed, or only when it’s determined that the person can no longer communicate his or her wishes about treatment. Even if it takes effect immediately, doctors will rely on personal communication, not a document, as long as possible.
If you are helping someone with their estate planning (or doing your own), don’t overlook a living will. It can give invaluable guidance to family members and healthcare professionals if a person cannot express his or her wishes. Without a document expressing those wishes, family members and doctors are left to guess what a seriously ill person would prefer in terms of treatment. They may end up in painful disputes, which occasionally make it all the way to a courtroom. A great example of the types of dispute you are avoiding is the case of Terri Schiavo.
What is a Power of Attorney and are they all the same?
The Answer is No. Not all every power of attorney is the same.
A power of attorney (POA) is a document that allows you to appoint a person or organization to manage your affairs if you become unable to do so. However, not all POAs are created equal. Each type gives your attorney-in-fact (the person who will be making decisions on your behalf) a different level of control.
General Power of Attorney
A general power of attorney gives broad powers to a person or organization (known as an agent or attorney-in-fact) to act in your behalf. These powers include handling financial and business transactions, buying life insurance, settling claims, operating business interests, making gifts, and employing professional help. General power of attorney is an effective tool if you will be out of the country and need someone to handle certain matters, or when you are physically or mentally incapable of managing your affairs. A general power of attorney is often included in an estate plan to make sure someone can handle financial matters.
Special Power of Attorney
You can specify exactly what powers an agent may exercise by signing a special power of attorney. This is often used when one cannot handle certain affairs due to other commitments or health reasons. Selling property (personal and real), managing real estate, collecting debts, and handling business transactions are some of the common matters specified in a special power of attorney document.
Health Care Power of Attorney
A health care power of attorney grants your agent authority to make medical decisions for you if you are unconscious, mentally incompetent, or otherwise unable to make decisions on your own. While not the same thing as a living will many states allow you to include your preference about being kept on life support. Some states will allow you to combine parts of the health care POA and living will into an advanced health care directive.
Durable Power of Attorney
Suppose you become mentally incompetent due to illness or accident while you have a power of attorney in effect. Will the document remain valid? To safeguard against any problems, you can sign a durable power of attorney. This is simply a general, special, or health care POA that has a durability provision to keep the current power of attorney in effect.
You might also sign a durable power of attorney to prepare for the possibility that you may become mentally incompetent due to illness or injury. Specify in the power of attorney that it cannot go into effect until a doctor certifies you as mentally incompetent. You may name a specific doctor who you wish to determine your competency, or require that two licensed physicians agree on your mental state.
Each power of attorney has specific language for its own specific purpose and it is important that you understand what powers you are granting any individual.
What is a trust?
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.
Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Other benefits of trusts include:
Control of your wealth. You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.
Protection of your legacy. A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.
Privacy and probate savings. Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.
Estate planning is an important step to take in your life.
There are so many different types of documents you may need. It is important to choose the ones that best suits your wishes.