Essential Estate Planning Documents
Certain key estate planning documents are crucial for protecting you, your family, and your assets.
Proper estate planning measures can help eliminate, or at the very least, minimize family strife, confusion and conflict. The following is a description of essential estate planning documents you will need to cover all phases of your life: from alive and healthy, to potential physical or mental disability, and ultimately your death.
A will is simply your plan for distributing your assets to your beneficiaries upon your death. A will does not avoid probate. In fact, to be effective, a will must be filed in probate court. A judge must authenticate your will and then transfer your assets from your name over to your beneficiaries.
If you have a will-based estate plan, your Last Will and Testament should not only detail how your property is to be distributed after your death, but should also contain provisions designating a guardian for any minor children. Keep in mind that a will does not take effect until you die, and therefore, it cannot provide for management of your assets if you become incapacitated.
Your Last Will and Testament only functions as a safety net or catch-all if your estate plan includes trust instruments. Trusts may be utilized to avoid the often time-consuming, costly, and public process that probate proceedings represent. With a trust-based estate plan, your will has only minimal instructions and merely provides for the transfer into trust—after your death—of any property not already held in trust. This is commonly referred to as a Pour Over Will.
Revocable Living Trust
A revocable living trust can be used as a substitute for a will by providing for the distribution of your assets upon your death. Because the revocable living trust exists beyond your death, property titled in the trust need not pass through probate. It is a faster and less costly method for distributing your estate. Moreover, it reduces the chance that personal information will become part of the public record.
A revocable living trust is an arrangement by which you transfer ownership of your property into a trust. You are the grantor (or creator) of the trust and you can change the trust’s provisions at any time during your life. You may act as your own trustee where you continue to manage your investment and financial affairs according to the trust documents. You may, alternatively, name another individual such as a family member to act as trustee, but be sure that person has the time, knowledge, and desire to assume this role. Many people choose to designate a bank or trust company to act as trustee of the trust because of the corporate trustee’s objectivity, reliability, and experience in overseeing the administrative tasks involved.
The wealth you have accumulated can continue to grow for multiple generations. You can limit the amount of withdrawals by your beneficiaries to income only, or for specific uses such as higher education, for example. Special emergency provisions may also be written into the trust. Additionally, a revocable living trust can eliminate challenges to your estate. The terms of the trust can stipulate for the disinheritance of anyone who posts a challenge to your wishes upon your death.
Powers of Attorney
A power of attorney is a legal document in which you name another person to act on your behalf. This person is called your “attorney-in-fact.” You can appoint your attorney-in-fact to act as an agent in a particular transaction, in a series of transactions, or in a broad range of transactions. Be sure the person you choose is both trustworthy and competent as he or she will generally be able to sell, invest, and spend your assets. You should also designate a second attorney-in-fact to act on your behalf in case your first choice pre-deceases you or is unable to perform. There are many types of powers of attorney, including:
General Nondurable Power of Attorney
The agent is usually given restricted rights, and the power terminates upon your incapacity or death.
Durable Power of Attorney for Property
The durable power is effective both during the time you are legally competent and in the event you become incapacitated. Your agent may continue to act on your behalf until the time of your death. With a broadly drafted durable power, the attorney-in-fact can act to the same extent as you, including the power to make gifts, to create trusts, to buy and sell property, and to elect gift-splitting. A durable power of attorney avoids the expense of guardians and the legal fees of court supervision over your estate. Your affairs remain private and your assets remain in your name.
Durable Power of Attorney with a Springing Power
A springing power is a durable power that is activated only when a certain event takes place, such as a declaration by a doctor that you are no longer able to make financial decisions for yourself.
Durable Power of Attorney for Healthcare
A durable power of attorney for healthcare always includes springing powers. The power appoints a person to make medical decisions for you, should you become incapacitated. The power should authorize the attorney-in-fact to have access to medical records, to grant releases to medical personnel, to pay—or refuse to pay—for treatment, and to give or withhold consent for treatment.
Most states—including Illinois and Wisconsin—have enacted “living will” statutes where a person can express his or her legally binding intentions concerning the use of life-sustaining medical treatment. These laws give directions to allow you to die without pursuit of futile medical treatment or to prolong existence. You may specify the conditions and circumstances for withholding medical treatment or feeding tubes. In states that do not have a statute, living wills stand as a clear expression of the patient’s wishes. A living will expresses what you want, but does not give anyone the authority to speak for you. For many, a living will preserves personal control and eases the decision-making burden of a family.
Understanding Your Choices
No one likes to think about death or disability, but estate planning is really more about your loved ones than it is about you. Being adequately prepared will provide you with the comfort of knowing that with the proper documents in place, your beneficiaries will have the legal power to act on your behalf which will, in turn, save them from both emotional and financial battles.
Your Wintrust Wealth Management Financial Advisor can work closely with our Trust Officers to help you detail your estate planning objectives before you visit your attorney. And, if you have not already established a relationship with an estate planning attorney, we are happy to assist you in finding one.
Where will your financial journey take you? A Financial Advisor helps you navigate the terrain, avoid pitfalls, and keep you on track to achieve your financial goals.