Wills - Living Wills - General Power of Attorney - Living or "Inter
Vivos" Trust - Credit Shelter or Charitable Trusts - Other
Estate Planning Tools for Everyone
By Bruce Metzger
A will directs who receives your assets upon your death. It allows
a lot of flexibility in how you direct the disposition. You may leave
your assets to any person you choose, except you are required to
make certain provisions for your spouse. You are not limited to particular
members of your family. A will allows you to make special provisions
for the financial security of minor children. After your death, your
will is offered for filing with a court, who will then supervise
the collection and distribution of your assets. Any debts that you
owe at your death must first be paid before your heirs may receive
their share. The process, typically called "probate", normally
takes six to nine months to complete. (Sometimes it can be completed
in as little as four to five months.) In your will, you will name
a "personal representative", who is responsible for administering
your estate during this period.
A Living Will is a directive to your physician and other health
care providers not to take extraordinary measures to keep you alive
if your condition is terminal, and you are unable to communicate
your desires to your physician. In other words, it keeps you from "being
plugged into the machines" if it would only unnecessarily prolong
your dying. The Living Will may also be accompanied by or be a part
of a health care power of attorney. A health care power of attorney
appoints a trusted family member or friend to make medical decisions
on your behalf if you are unable to communicate with your physician.
A General Power of Attorney appoints a person, called an "attorney-in-fact",
to act as your agent for all of your financial and property affairs.
Typically, spouses appoint each other as their attorneys-in-fact,
with a trusted family member as a secondary choice. The General Power
of Attorney allows one spouse to act on behalf of another when the
other has become incapacitated, either mentally or physically. It
is also handy when one spouse may be unavailable and a signature
is needed quickly. The General Power of Attorney may prevent the
need for a guardianship when you become incapacitated. A guardianship
is an involved court proceeding, and generally should be avoided.
The Will, Living Will, and General Power of Attorney have been referred to as the three legs or triad of estate planning. A good estate plan needs all three, much as a stool needs at least three legs to be supported.
Other Estate Planning Tools
A Living Trust is an agreement in which you transfer your assets
to be managed by the trust during your lifetime, typically for your
benefit. After your death, you may provide for the trust to operate
like a will, distributing your assets to your designated beneficiaries.
Or you may provide the trust to continue after your death, with the
trustee to manage the assets for the benefit of the persons, such
as your spouse or children. The Living Trust avoids the expense and
time of probate. It is not for everyone, however. The time and expense
of administration during your lifetime may outweigh the time and
expense of probate. Contrary to popular belief, the Living Trust
does not usually avoid inheritances taxes any more than any other
estate planning tool can accomplish.
If the total assets owned by you and your spouse are more than
$2,000,000, you may be subject to Federal Estate Tax. Implementing
a Credit Shelter or Charitable Trust may help you minimize or avoid
payment of Federal Estate Tax. The estate plan with these trusts
is complicated, and should not be attempted without consulting your
attorney and tax advisor.
Joint title, pay-on-death bank accounts, and designating beneficiaries
for retirement accounts and life insurance are some other methods
of insuring the orderly transfer of your estate after your death.
There is no "one size fits all’ estate plan, and you should
not use any tool of estate planning without the advice of your attorney.
