Estate planning involves the drafting and finalizing of documents that pertain to a person's property, which is typically done with the help of an estate planning attorney. There are many different aspects to planning an estate, like wills, trusts, and health care wishes and proxies. A lawyer can explain the ramifications of each estate planning instrument and advise you how best to proceed.
Estate planning largely focuses on how property will be handled after the person's death. However, planning an estate can also concern how property is handled during a person's lifetime.
Last Will and Testament
The cornerstone of many estate plans is the last will and testament. This document details how a person wants his or her property managed or inherited after his or her death. The testator is the person to whom the will belongs. Most states require that the testator be at least 18 years old and of sound mind at the time that he or she creates the will. An estate planning lawyer can listen to the testator's preferences and draft a last will and testament according to his or her instructions.
A testator can appoint a person to manage property after his or her death, called an executor. This person is responsible for complying with state laws regarding probate and distributing property. He or she follows the directions in the will, pays off creditors and then disburses the remaining property to the beneficiaries. A testator can also appoint a guardian for his or her minor children in a will.
If a person does not have a will, state law dictates how property will be handled and who will inherit it. If a person wishes to change his or her will, an estate planning attorney can draft a codicil to the will, which amends its terms without having to create an entirely new will.
A lawyer can also create a trust. A trust is a tool that allows another person, called the trustee, to hold assets that have been placed into the trust by the grantor on behalf of a beneficiary.
The trust document states when disbursements should be made to the beneficiaries. This legal tool is sometimes used alone or in addition to a will. In fact, some states allow for a testamentary trust that only goes into effect when the testator dies. However, living trusts can also be created that provide periodic distributions or distributions at appointed times, such as when the beneficiary reaches a certain age or graduates from college.
Power of Attorney
A power of attorney allows one person, the agent, to act on behalf of the other person, the principal. This type of legal document allows the agent to handle legal and financial affairs of the principal. It can be broad in nature, providing for an agent to exercise all legal rights on behalf of the principal. In contrast, the power of attorney can provide for only very specific powers, such as selling a piece of real property.
The principal can decide when a power of attorney goes into effect. The power of attorney can include a set period of dates. Alternatively, it can spring into effect later at the time of an event decided by the principal. If he or she wants the power of attorney to remain in effect even if he or she becomes incapacitated, the power of attorney must be designated as durable.
Health Care Documents
There are a number of wills and estates documents that pertain to medical information and directives. A power of attorney for health care or health care proxy allows the principal to appoint someone else to make health care decisions on his or her behalf if the principal is not able to make these decisions. This document sets out the scope of the power, such as stating that the power of attorney can access the principal's medical records and talk to health care personnel in order to make decisions on behalf of the principal.
A living will is a document that may supplement the power of attorney document. It allows the principal to give instructions regarding the type of life-sustaining treatment they should receive if unconscious for a prolonged period or incapacitated. These instructions include whether the principal will receive sustenance and hydration, or the use of breathing machines or feeding tubes.
The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.
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Additional Estate Planning Articles
- What Is Estate Planning?
- What Happens When a Person Dies Without a Will?
- Protect Your Children With Your Last Will and Testament
- What are Some Typical Estate Planning Documents?
- Naming a Guardian for Your Children
- Power of Attorney, Durable Power of Attorney & Health Care Directives: What Is the Difference?
- The Uniform Transfers to Minors Act: An Overview
- Naming Children as Life Insurance Beneficiaries
- Is There Any Way To Avoid Probate?
- What rights do I have in planning a funeral?
- How to Prove and Recover Damages for Trust Mismanagement
- How to Decide if You Need a Trust and Estates Attorney
- What is a variable annuity, and how does it work for estate planning purposes?
- Estate Planning: The Advantages of Annuities
- What are the differences between annuities, IRAs, and 401(k) plans, and how do they fit into my estate plan?
- What are the tax advantages and/or implications of annuities?
- What are the potential pitfalls of annuities?
- Family Limited Partnerships
- When Is the Right Time to Start Your Estate Plan?