What Good Estate Planning Documents Do
A revocable living trust avoids probate and a conservatorship of your assets;
An Advance Health Care Directive avoids a conservatorship of your person;
A durable power of attorney for property management avoids a conservatorship of your assets;
A properly structured revocable living trust minimizes estate taxes;
A properly structured revocable living trust provides for the surviving spouse while protecting the interests of children from a prior marriage;
All of your estate planning documents should work in concert to minimize capital gains tax and other income taxes paid by the surviving spouse, children or other beneficiaries.
Revocable Living Trust
- Allows you to control your assets while you are able,
- Establishes a structure for your successor trustee to manage your assets for your benefit in the manner that you want if you become physically or mentally incapacitated,
- Ensures your assets pass at your death in the manner that you set forth, and
- Minimizes estate and gift taxes, capital gains taxes, and court procedures such as conservatorships and probates.
The trust agreement sets forth your right to control your assets for as long as you are capable, and names the person that you want to control your assets if you become incapacitated or when you die, known as your successor trustee.
The successor trustee has a lot of responsibility. He or she must manage your investments and distribute your assets according to the instructions in the trust. The successor trustee, therefore, should be someone who is organized, responsible, fair, honest, and who will be more concerned about maintaining your standard of living during your incapacity than about preserving his or her inheritance. You can choose a child, a friend, a bank or brokerage firm trust department, or a private professional fiduciary (an individual who does this for a living).
Using a revocable living trust and changing the title on all of your assets to show the ownership in the name of the trustee reduces the fees for administering a trust after your death because the court is not involved. Most of the time, however, a successor trustee will use an attorney to help them understand their role in the administration of a revocable living trust. A revocable living trust does not, therefore, completely eliminate future attorneys’ fees.
Will
A Will directs the passing of assets owned in your name when you die, through the probate process, and allows you to nominate a guardian of your minor children. The Will does not control assets with a beneficiary designation, held in joint tenancy, or held in a trust. You need to name an executor of your Will, normally the same person that you named as successor trustee of your trust. The guardian of your minor children (under age 18) will be the person with physical possession of your children, but the successor trustee (if you have a trust) will control the children’s money. Sometimes the person who is good with children is not so good with money.
Advance Health Care Directive
This is the most powerful estate planning tool. It allows you to choose someone to make health care decisions for you if you cannot make the decisions for yourself, and allows you to give instructions as to your wishes about life support, burial or cremation, organ donation, and other health care and death issues.
Authorization to Release Protected Health Information (HIPAA)
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the California Confidentiality of Medical Information Act (CMIA) prohibit doctors from sharing your medical information. Some doctors are interpreting these new laws to mean that they cannot tell anyone if you become incapacitated. This raises a significant estate planning problem because your successor trustee or agent cannot act on your behalf without a doctor verifying that you are incapacitated. This authorization resolves this issue by allowing your doctor to release such information to: an agent appointed under a durable power of attorney, a co-trustee or successor trustee of any trust of which you are the trustee, the trustee of any revocable trust of which you are a trustor, a general partner or member of a limited liability company authorized to cause your removal as a general partner or manager, your attorney for the purpose of determining your capacity in making gifts and to execute estate planning documents, and a person nominated by you to act as your conservator.
Durable Power of Attorney for Property Management
Your successor trustee can manage your assets held in the trust, but cannot manage assets not titled in the name of the trust, sign and file your income tax returns, speak on your behalf to government entities, or transfer new assets into your trust. Whether or not you have a trust, a conservator may be necessary if you do not have this document signed before you become incapacitated. Usually, you would select the same person as agent under your durable power of attorney for property management that you chose to be successor trustee.
The following is provided for informational purposes only. It is not to be construed as rendering legal advice or constituting a binding legal opinion.
