When most people think of estate planning, they think of wills and trusts. While estate planning does include both of those things, estate planning also involves issues that are important to an individual’s quality of life.
One of the most important quality of life decisions is the decision to appoint a trusted individual to make financial and health care decisions for you during a period of incapacity. Without documents making these appointments, a court proceeding will be required to appoint an agent to make them. This process is the guardianship process: a lengthy, expensive and demeaning proceeding that requires yearly reporting by the guardian and court approval for every expenditure. Guardianship can be avoided by the appointment of a power of attorney for financial affairs and a health care surrogate for health care decisions. Such appointments are particularly important in the case of same-sex relationships or unmarried couples.
After quality of life decisions, the traditional areas of post-death asset distribution should be addressed. Some individuals prefer the simplicity of a will, which contains funeral and burial wishes (if desired), disposes of personal items, makes any desired gifts and provides for the distribution of the main estate. Assets that pass by will must pass through the probate process. The jointly-held assets of a married couple normally avoid this process because they pass automatically to the surviving spouse, but the assets held by unmarried couples often do not and special care should be taken in such cases.
Some people prefer to avoid having their assets pass through probate and choose to execute living trusts (not to be confused with living wills). Unlike a will that takes effect only after your death, a living trust takes effect while you are living. It will provide that you are fully in charge of your trust while you are living and competent, and will name someone to step in if you die or become incompetent. A trust is a legal being and can control only what it owns, so it is important to title everything in the name of the trust if probate is to be avoided.
There are other types of trusts and other estate planning documents that are often part of estate planning. Some of these trusts and other instruments avoid estate and gift taxes, and some can provide some creditor protection. These documents are tailored to fit a specific circumstance and are created only after full discussion with your estate planner.
The foregoing is intended to be a very simple discussion of some aspects of estate planning. Not all documents discussed are appropriate for every person. The above is not a substitute for a frank discussion with an estate planning attorney, who will explain to you the advantages and disadvantages of every document.