Q: What is included in a typical Estate Plan?
A typical Estate Plan includes a Will, a Revocable Trust, a Durable Power of Attorney for Property Management (“DPA”) and an Advance Health Care Directive (“HCD”). The rationale for this collection of documents is as follows:
A Will is the only document recognized by the court whose sole purpose is to determine the passage of property at death. A Will is not valid until death has happened.
A Revocable Trust is a legal structure that provides for property to be owned by three fictional persons: a settlor who makes the rules, a trustee who is the legal owner and carries out the rules, and a beneficiary or beneficiaries, who benefit from the rules and the property. All three of these “persons” can be the same person, but do not have to be. In this type of trust, the three usually are all the same person while the settlor is living, but sometimes the trustee will be a different person. The settlor never changes once the rules have been made, though the settlor can change the rules while he or she is living. When the settlor dies, the beneficiary changes, and the trust then becomes irrevocable. Some Revocable Trusts created by married couples can result in part of the trust becoming irrevocable after the first death, with the other part of the trust remaining revocable by the surviving settlor. Such marital trusts are popularly known as “A-B” trusts.
A Durable Power of Attorney for Property Management (“DPA”) is a document that appoints a substitute, the “agent”, for the individual, called the “principal” who signs the document in the event that the principal becomes incapacitated and unable to manage his or her financial affairs. This document is very powerful, as it allows someone else to have control over your finances, but it is essential as a way to avoid a court conservatorship of the estate in case of your temporary or permanent incapacity.
An Advance Health Care Directive (“HCD”) is a special power of attorney document that appoints an agent who can make health care decisions for you if you are unconscious or are otherwise unable to make decisions for yourself about your physical welfare. It is necessary because of the many regulations and precautions that abound in our modern health care delivery system. Without such a document, your family and estate may be drained by the cost of providing unnecessarily robust care to preserve your life regardless of the pain and suffering you are in and/or in spite of the unlikelihood of your recovery. A conservatorship of the person, obtained only through a lengthy and expensive court action, is the only alternative to such a document.
In summary, A DPA is for the purpose of caring for your real and personal property rights for your benefit while you are living, and a HCD is a provision for the care of your physical, mental and emotional needs and wishes while you are living.
Examples of Ancillary Estate Plan Documents are: Assignment of personal property to the trust; Assignment of business interests to the trust; Titling of real property in the trust; Titling of financial instruments in the trust; Certification of Trust; HIPAA documents for access to your health care records for your loved ones; Synopses of the terms of your Will and your Revocable Trust.
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