While many people have a general understanding of what a “will” is, many do not understand the benefits of having a “trust.” Together with other documents, a will and trust make up what is generally referred to as an “Estate Plan.” Other documents that are commonly prepared with an estate plan are an Advance Healthcare Directive, an Assignment of a Business Interest, Final Disposition Instructions, a General Power of Attorney, a HIPAA Waiver, Instructions for the Distribution of Personal Property, and transfer deeds, among others. This article discusses the benefits of preparing an estate plan before one’s passing, and explains the effect of the other aforementioned documents.
What is a Will?
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children. Once you pass, the Will is subjected to a court process called “Probate.” Probate occurs even if one passes “intestate,” or without a will.
During probate, the Court verifies that the will is legal and oversees the distribution process of the decedent’s assets. During probate, people can contest the validity of the will, which may result in a lengthy and costly process, as attorneys must generally be hired to defend or attack the validity of the will. The decedent’s assets are also valued at this time. This process thus exposes some of the family’s financial information.
However, having a trust skips the probate process altogether.
What is a Living Trust?
To begin, most people prepare a “revocable living trust” which after passing, becomes irrevocable. A trust is essentially an agreement between the “Trustor” and the “Trustee” to hold the trust assets for the benefit of the beneficiary of the trust. In order to avoid probate, all of your assets must be transferred to the trust. This includes any real property, bank accounts, retirement accounts, business interests, etc. In essence, when you fund your living trust (retitle your assets into the name of your trust), you have performed what some refer to as a “living probate.”
What is a Power of Attorney?
Generally, a power of attorney is intended to give your named agent the power to deal with any trust or non-trust assets in the event of your incapacity. This document gives your agent broad powers to dispose of, sell, convey and encumber your real and personal property upon the happening of some certain stated events.
What is an Advance Health Care Directive?
The Advance Health Care Directive gives your named Agents the power to make medical decisions, sign consents and/or releases with hospitals and/or doctors [it conforms to the Federal Laws (known as “HIPAA”) with regard to the releases]. It also acts as your “living will” for end-of-life decisions such as the choice to prolong life or not, donation of organs, etc.
What is a HIPAA Authorization & Waiver?
The HIPAA Authorization and Waiver is a “stand-alone” document that authorizes your health care providers to release information concerning your otherwise confidential medical information to the individuals you have designated to act on your behalf in the event of disability, and to any other individuals who you would also want to have such access.
What are Final Disposition Instructions?
These Instructions give you the opportunity to specify how you wish to have your remains be dealt with (i.e., cremation or burial); to provide details of any prior arrangements, and to designate the persons to carry out your wishes.
Therefore, estate planning holds many benefits as is allows you to designate and protect your beneficiaries, plan for the guardianship of any minor children in the event of your early passing, may reduce taxes on what property you leave behind, and minimizes the chances of legal battles that may occur during the probate process.
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