Due to the uncertainty that the Covid-19 pandemic has caused, and the reminder of how unpredictable life can be, many have come to realize how vital a well-thought-out and executed estate plan is. Our lives are becoming increasingly complex, and having an estate plan to follow will make life easier for you, your executors, and beneficiaries.
The intricacies of estate planning are often complex, so let’s first get familiar with the basics of the four most essential estate documents.
The Trust: Holds, Protects, and Distributes Assets
At its simplest, a trust is an estate document in which one party (typically known as the “trustor” or “grantor”) assigns another party (typically known as the “trustee”) to hold property or assets for the benefit of a third party, the “beneficiary.” As an example, you (the grantor) may create a trust for your children (the beneficiaries) and appoint your brother (the trustee) to distribute your remaining wealth upon passing to your children when they reach a determined age.
One of the key benefits of a trust is that any asset held inside the trust will not be subject to probate upon your death. A typical probate process can last 8-12 months and be costly.
The Will: Supports the Trust & Specifies Details
Wills are relatively simple and act differently depending on whether you have a trust in place. If you do have a trust, a will typically ensures that all assets not held in the trust during your life will be included in the trust at the time of death.
If you do not have a trust, the role of the will is to hold and distribute your assets. The will allows you to specify where and to whom you would like any property or assets to go after your passing. Unlike a trust, however, a will does not protect estates from going through the drawn out and costly probate process. Dying without a will is called “intestate” and will lead the courts to distribute your assets according to state laws.
The Power of Attorney (POA): Appoints Your Financial Decision Maker
A Power of Attorney is an estate document that allows you (the “principal”) to appoint another person (the “attorney-in-fact”) the power to act on your behalf in certain legal matters and conditions. The attorney-in-fact can have broad legal authority or limited authority to make decisions regarding the principal’s property & finances.
A Power of Attorney can be implemented when signed or when a specific event or condition is met such as mental incapacitation. If you become incapacitated with no POA in place, the state courts will appoint a conservator or someone to care for your affairs.
The Health Care Directive: Appoints Your Healthcare Manager
A Health Care Directive is the final estate document we will cover, and it allows you (the “principal”) to appoint another person (the “agent”) to make medical decisions on your behalf if you become mentally or physically incapacitated. The agent’s job is to follow and execute your wishes regarding which doctors and facilities to use and which medical treatments and support measures you wish to accept.
Without a Health Care Directive in place, the state courts will appoint someone to help make your healthcare decisions. Unfortunately, these decisions may not always be consistent with your medical and end-of-life care wishes.
At Paradigm, we make it our responsibility to educate and inform you on your current estate plan to ensure you create the legacy you want. Each year, and as your situation changes, Paradigm will review your estate documents with you on a diagram specific to your estate plan. We also collaborate closely with your attorney and attend your estate meetings to ensure that your estate plan is reflective of your wishes and your desire to leave a lasting legacy.