There are different forms of Trust, such as irrevocable and revocable living trusts. Trust are used in Estate Planning to assist people with the distribution of their estate upon death. They are also used to manage the assets of persons who are disabled or otherwise cannot handle their own financial affairs.
A revocable living trust is a legal document that in most cases substitute for a will. Your assets are put into the trust, administered for your benefit during your lifetime and transferred to your beneficiaries when you die – all without the need for court involvement.
A will is a traditional legal document which:
- Names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust.
- Nominates an executor who will be appointed and supervised by the probate court to manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will.
- Nominates guardians for your minor children
Most assets in your name alone at your death will be subject to your will. Some exceptions include securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax-deferred retirement plans, and some annuities. Such assets would pass directly to the beneficiaries and would not be included in your will (In addition, certain co-owned assets would pass directly to the surviving co-owner regardless of any instructions in your will). And assets that have been transferred to a revocable living trust would be distributed through the trust-not your will.
HEALTH CARE DIRECTIVE
A Health Care Directive, also known as a durable power of attorney for health care, is a set of instructions to be followed when your health has deteriorated to a point where you cannot communicate your health care decisions. For example, if you are in a coma or you have progressed Alzheimer’s disease, these instructions about your health care would be followed by the person you appoint in your health care directive. You can appoint anyone that you trust, whether related by marriage or blood or not, to make these decisions should you no longer be incompetent. (For example, you can name a good friend, partner or companion).
POWER OF ATTORNEY
A Power of Attorney is a legal document that grants another person the right to manage someone else’s finances and assets. A Power of Attorney can be general or specific as to a certain task. A power of Attorney is an important document to allow a person’s finances to be managed when a person can no longer handle their own affairs because they have become mentally or physically challenged. For example, a parent may appoint his or her child to have power of attorney in case of future dementia or with progressing Alzheimer’s.
A person has to be competent at the time of signing the Power of Attorney. If a person becomes incompetent and does not have a Power of Attorney, a conservator can be appointed by the court to manage a person’s finances. A conservatorship is a costly proceeding which can be avoided by a properly executed Power of Attorney.
What if you fail to plan ahead?
A judge will appoint someone to handle your assets or to make care decisions.
Everything does not automatically go to the state if you die without a will. Your relatives will have priority over the state in inheritance; even if they were not your first choice due to intestate succession. If you die without a will in the states of California and Washington, your assets will go to your closest relatives under state “intestate succession” laws.
If you do not have a written health care directive, then your family must guess at your wishes in regards to your health care or your health care provider will make decisions according to medical ethics and the laws of the State.
No legal advice is intended by providing you with this GENERAL information. If you would like to be connected to trusted legal advice, give us a call 1-888-294-1488.