Estate Planning F.A.Q.

Questions:

a. What is Estate Planning?
b. What happens if I die without a will or estate plan?
c. What does a Will do?
d. What does a Will not do?
e. What is a Revocable Living Trust?
f. What is Power of Attorney?
g. Who should be my agent?
h. How should the agent sign if they ever need to sign on my behalf?

Q: What is Estate Planning?
A: Estate planning is a process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure.  It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker and broker..
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Q: What Happens if You Die Without A Will?
A: If you die intestate (without a will), your state's laws of descent and distribution will determine who receives your property by default.  These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none, to other family members.  A state's plan often reflects the legislature's guess as to how most people would dispose of their estates and builds in protections for certain beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting.  A will allows you to alter the state's default plan to suit your personal preferences.
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Q: What Does a Will Do?
A: A will provides for the distribution of property owned by you at the time of your death in any manner you choose (subject to the forced heirship laws of some states that prevent disinheriting a spouse and, in some cases, children).  Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain joint property, life insurance, retirement plans and employee death benefits) unless they are payable to your estate.

Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives.  If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will.  If the will establishes one or more trusts, it is often called a testamentary trust will.  Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created in your lifetime), in which case it is called a pour over will.  In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management, possible creditor protection for the surviving family members, to provide for charities, and to minimize taxes.

Aside from providing for the intended disposition of your property to a spouse, children etc., there are a number of other important objectives that may be accomplished in your will.

• You may designate a guardian for your minor child or children if you have survived the other parent and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.
• You may designate an executor of your estate in your will and eliminate the need for a bond; in some states the designation of an independent executor will eliminate the need for court supervision of the settlement of your estate.
• You may choose to acknowledge or otherwise provide for a child (e.g., stepchild, godchild, etc.) an elderly parent, or other individuals.
• If you are acting as custodian for the assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.

Good planning can also enhance your support of religious, educational, and other charitable causes.

Much has been written recently regarding the use of "living trusts" (also known as a "revocable trust" or "inter vivos trust") as a solution for a wide variety of problems associated with estate planning through wills.  Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.

This brief summary is intended to provide a framework of basic knowledge regarding "living trusts" in general, in order that you might determine whether you should pursue a discussion of this technique further with your attorney licensed to practice in the state where your estate would be administered.

The term "living trust" is generally used to describe a trust (a) which you can create during your lifetime, and (b) which you can revoke or amend whenever you wish to do so.  You can also create an "irrevocable" living trust, but that is permanent and unchangeable and is almost exclusively done to produce certain tax results beyond the scope of this summary.

A "living trust" is legally in existence during your life, has a trustee who is currently serving, and owns property which (generally) you have transferred to it during your life. While you are living, the trustee (who may be you) is generally responsible for managing the property as you direct for your benefit.  Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries.  Like a will, a living trust can provide for the distribution of property upon your death.  Unlike a will, it can also (a) provide you with a vehicle for managing your property during your life, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
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Q: What Does a Will Not Do?
A: A will does not govern the transfer of certain types of assets, called non probate property, which by operation of law or contract pass to someone else on your death. 
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Q: What is a Revocable Living Trust?
A:  Much has been written recently regarding the use of "living trusts" (also known as a "revocable trust" or "inter vivos trust") as a solution for a wide variety of problems associated with estate planning through wills.  Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.

This brief summary is intended to provide a framework of basic knowledge regarding "living trusts" in general, in order that you might determine whether you should pursue a discussion of this technique further with your attorney licensed to practice in the state where your estate would be administered.

The term "living trust" is generally used to describe a trust (a) which you can create during your lifetime, and (b) which you can revoke or amend whenever you wish to do so.  You can also create an "irrevocable" living trust, but that is permanent and unchangeable and is almost exclusively done to produce certain tax results beyond the scope of this summary.

A "living trust" is legally in existence during your life, has a trustee who is currently serving, and owns property which (generally) you have transferred to it during your life. While you are living, the trustee (who may be you) is generally responsible for managing the property as you direct for your benefit.  Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries.  Like a will, a living trust can provide for the distribution of property upon your death.  Unlike a will, it can also (a) provide you with a vehicle for managing your property during your life, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.

An important part of lifetime planning is the Power of Attorney.  These documents give one or more persons the power to act on your behalf.  The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations.  It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself).  The latter are "springing" Powers of Attorney.  It may give temporary or continuous, permanent authority to act on your behalf.  A Power of Attorney may be revoked, but most states require written notice of revocation to the person named to act for you.

The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact."  With a valid Power of Attorney, your agent can take any action permitted in the document.  Often your agent must present the actual document to invoke the power.  For example, if another person is acting on your behalf to sell an automobile, the motor vehicles department generally will require that the Power of Attorney be presented before your agent's authority to sign the title will be honored.  Similarly, an agent who signs documents to buy or sell real property on your behalf must present the Power of Attorney to the title company.  The same applies to sale of securities or opening and closing bank accounts.  However, your agent generally should not need to present the Power of Attorney when signing checks for you.  Why would anyone give such sweeping authority to another person?  One answer is convenience.  If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney.  Another important reason to use Powers of Attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity.  Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.  If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you.

People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law.  If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you.  With a Power of Attorney, you choose who will act and define their authority and its limits, if any.
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Q: What is Power-of-Attorney?
A:  An important part of lifetime planning is the Power of Attorney.  These documents give one or more persons the power to act on your behalf.  The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations.  It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself).  The latter are "springing" Powers of Attorney.  It may give temporary or continuous, permanent authority to act on your behalf.  A Power of Attorney may be revoked, but most states require written notice of revocation to the person named to act for you.

The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact."  With a valid Power of Attorney, your agent can take any action permitted in the document.  Often your agent must present the actual document to invoke the power.  For example, if another person is acting on your behalf to sell an automobile, the motor vehicles department generally will require that the Power of Attorney be presented before your agent's authority to sign the title will be honored.  Similarly, an agent who signs documents to buy or sell real property on your behalf must present the Power of Attorney to the title company.  The same applies to sale of securities or opening and closing bank accounts.  However, your agent generally should not need to present the Power of Attorney when signing checks for you.  Why would anyone give such sweeping authority to another person?  One answer is convenience.  If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney.  Another important reason to use Powers of Attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity.  Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.  If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you.

People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law.  If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you.  With a Power of Attorney, you choose who will act and define their authority and its limits, if any.

You may wish to choose a family member to act on your behalf.  Many people name their spouses or one or more children.  In naming more than one person to act as agent at the same time, be alert to the possibility that all may not be available to act when needed, or they may not agree.  The designation of co-agents should indicate whether you wish to have the majority act in the absence of full availability and agreement.  You should name a successor agent to address the possibility that the person you name as agent may be unavailable or unable to act when the time comes.

There are no special qualifications necessary for someone to act as an attorney-in-fact except that the person must not be a minor or otherwise incapacitated.  The best choice is someone you trust.
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Q: Who Should Be Your Agent?
A: You may wish to choose a family member to act on your behalf.  Many people name their spouses or one or more children.  In naming more than one person to act as agent at the same time, be alert to the possibility that all may not be available to act when needed, or they may not agree.  The designation of co-agents should indicate whether you wish to have the majority act in the absence of full availability and agreement.  You should name a successor agent to address the possibility that the person you name as agent may be unavailable or unable to act when the time comes.

There are no special qualifications necessary for someone to act as an attorney-in-fact except that the person must not be a minor or otherwise incapacitated.  The best choice is someone you trust. 
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Q: How The Agent Should Sign?
A: Assume Elvis Presley appoints his wife, Priscilla Beaulieu Presley, as his agent in a written power of attorney. Priscilla, as agent, must sign as follows: Priscilla Beaulieu Presley, attorney-in-fact for Elvis Presley.
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